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WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 - WorldReginfo t 30 June 2017 al repor annu ed Integrat

GROWTHPOINT INTEGRATED ANNUAL REPORT 30 June 2017 GROWTHPOINT 2017

REPORT SCOPE AND Boundary This report covers the period from 1 July 2016 to 30 June 2017 (FY17) for the financial reporting entity – Growthpoint Properties Limited. The report provides an overview of the operations and performance of all businesses, which encompass the South African businesses, including its share in the V&A Waterfront and the Healthcare Fund, as well as its non-South African interests, which include its share in Growthpoint Properties Australia (GOZ) and Globalworth Real Estate Investments (GWI). These businesses have been depicted in a simplified ownership and legal structure on page 21.

Group ANNUAL FINANCIAL INTEGRATED ANNUAL REPORT STATEMENTS (AFS) (IAR) The statutory AFS are prepared The IAR incorporates an overview in accordance with International of our organisation and its key Financial Reporting Standards strategic matters, performance (IFRS), JSE Listings Requirements and governance. and the requirements of the The IAR should be read in Companies Act, No 71 of 2008, conjunction with the AFS, which as amended. together provide a comprehensive overview of our organisation.

ANNUAL GENERAL MEETING ESG Report (AGM) NOTICE The booklet containing additional The booklet containing the AGM information relating to notice also includes the environmental, social and summarised audited AFS for governance elements. FY17, relevant extracts from the IAR supporting the notice and the report to shareholders by the Social, Ethics and Transformation Committee.

Oxford Corner, Rosebank WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 1 About this report NAVIGATING THIS REPORT

2 About this report 3 Performance highlights 4 How we create value 6 Five-year KPI review 9 Value added statement Organisational overview Organisational overview 20 Governance and 12 Business model and value creation management structure 14 Our Growthpoint story 21 Ownership and legal structure 16 Driving our strategy 22 Board of Directors 18 Stakeholder engagement 24 The Executive Committee Performance review CREATING SPACE TO THRIVE Performance review is essential in allowing us to extend our robust 28 Economic review track record with clarity, and continue on the 32 Interview with the Chairman and Chief Executive Officer path of uninterrupted growth in distributions. 38 Financial Director’s review – LN Sasse, Chief Executive Officer

Key matters Key matters 46 Treasury management Combined 70 Overview of property 49 Environmental initiatives portfolio property assets 52 Group Services R122.3bn 56 Our people 60 Remuneration Report

RSA performance RSA performance 75 Retail 96 V&A 82 Office 100 Funds management and Africa 90 Industrial 102 Trading and development International performance International performance 107 Global Worth Real Estate Investments (GWI) 109 Growthpoint Australia (GOZ)

@growthpoint.com

http://www.linkedin.com/company/

growthpointlimited CSR and governance CSR and governance http://www.youtube.com/growthpointlimited 118 Corporate social 134 Risk management and responsibility report internal audit This icon denotes cross-referencing 122 Corporate governance 138 Abbreviations and further reading between sections 140 Contact details WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 2 Integrated annual report 2017

About this Report

Integrated reporting journey Assurance third line assurance providers, as well as Growthpoint first issued an integrated Growthpoint has a combined assurance by interacting with persons acting in an annual report (IAR) in FY10. The reports model to enable its Audit Committee to ex officio capacity who attended the in subsequent years, as well as the express the view that it is satisfied that special Audit Committee meetings current year, have evolved and been suitable assurance has been obtained for convened specifically to discuss the IAR. refined to reflect developments in all material statements made in the IAR. integrated reporting, particularly those Responsibility statement advocated by the International The following lines of assurance have The Audit Committee and management Integrated Reporting Council (IIRC), been identified: acknowledge their responsibility to the most significant being the ensure the integrity of this report. The International Integrated Reporting First line of assurance Audit Committee has applied its mind to Framework. Line functions that own and manage risk the report and believes that it addresses and opportunity. all material issues and presents fairly the Guiding principles integrated performance of the Strategy Second line of assurance organisation. Governance Specialist functions that facilitate and Stakeholder responsiveness oversee risk and opportunity. This report was approved by the Audit Performance Committee on 7 September 2017 and is Prospects Third line of assurance signed on its behalf by: Internal assurance providers that provide Materiality objective assurance. Materiality is defined as those matters that substantively affect the Fourth line of assurance organisation’s ability to create value External assurance providers. over the short, medium and long term. Fifth line of assurance LA Finlay LN Sasse In applying this concept, Growthpoint Board committees. Chairman of the Chief Executive strives to bring together the material Audit Committee Officer information about its strategy, governance, While the IAR is not audited, it contains performance and prospects to reflect the information from the AFS, on which an commercial, social and environmental unmodified audit opinion has been context within which it operates. expressed. Where information has not been derived from the AFS, the Audit The determination of materiality is Committee obtained assurance with not a single event, but rather a process regard thereto by reviewing information that has evolved through formal internal from first line providers of assurance, reporting as well as continuous which had been reviewed by second and engagement with stakeholders.

Forward looking statements The IAR contains certain statements that are forward looking. By their very nature, such statements cannot be considered guarantees of future outcomes as they are dependent on events and circumstances, the predictability of which is uncertain and not necessarily within the organisation’s control.

Send us your feedback: Scan the QR code To ensure that we report on issues to gain quick that matter to our stakeholders please access to our provide any feedback and questions website. to: [email protected]. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 3 About this report

PERFORMANCE HIGHLIGHTS OUR YEAR IN NUMBERS Organisational overview 195.8 cents R5.6bn 9.8% 6.5% growth 10.4% distributable growth in gross revenue in dividend per share income growth Performance review

Largest South Market African primary capitalisation 8th listed REIT year 21st R70.7bn inclusion in FTSE/ largest company in JSE Responsible

the FTSE/JSE Top 40 Index Key matters Index

constituent of FTSE EPRA/ Top 10 NAREIT Emerging Index

Investment proposition:

Sustainable quality of earnings RSA performance 14-year track record of uninterrupted dividend growth Underpinned by high-quality physical property assets Diversified across international geographies and R3.8bn sectors average value of Dynamic and proven management track record

shares traded per Best practice corporate governance International performance month Transparent reporting Level 3 BEE contributor

4.4% vacancies 35.0% LTV CSR and governance RSA vacancies improved R122.3bn gearing levels remain from 5.7% FY16 – strong focus Group property assets conservative, increase on tenant retention from 33.7% FY16 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 4 Integrated annual report 2017

How we Create value

Our vision To be a leading international Our mission property company, We create value for all our providing space to thrive. stakeholders through innovative and sustainable property solutions. Growthpoint has operated as a Real Estate Investment Trust (REIT) from 1 July 2013. The REIT structure is a tax regime that provides “flow OWN IT through” on a pre-tax basis of the THE POWER net property income to investors OF US in the form of a taxable dividend.

It is the most prevalent structure Our BE THE for investment in property in values BEST international jurisdictions. As investment in listed property WOW THEM continues to globalise, the REIT structure has become BREAK NEW a recognised international standard. GROUND

FY17 FY16 Change REIT distribution

Interim dividend 95.0 89.5 6.1% In terms of the dividend and dividend withholding tax Final dividend 100.8 94.3 6.9% provisions of the Income Tax Act, read in conjunction with section 25BB of the Income Tax Act, distributions received Total dividend 195.8 183.8 6.5% from a REIT will be taxed in the hands of the shareholder as follows: Distributions received by resident shareholders are taxed as a dividend for income purposes, but are not exempt in terms of the usual dividend exemption For more information about our and are accordingly exempt from dividend withholding tax. The dividends shares and shareholders, please refer to represent income in the hands of the recipient. the annual financial statements Distributions received by non-resident shareholders are not taxed as a dividend for income tax purposes as the dividends are exempt in terms of the usual dividend exemptions, but are, however, subject to dividend withholding tax. Shareholders are encouraged to consult their professional tax advisers if they are in any doubt about the tax implications for distributions received from Growthpoint. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 5 About this report Organisational overview

Tangible assets (Rbillion) 150 Five-year journey of value creation 120 124.6

90 116.0 103.8

60 82.0 62.8 Property assets Market capitalisation 30 54.1 0 FY12 FY13 FY14 FY15 FY16 FY17 131% 76% Performance review R53.0bn to R122.3bn R40.1bn to R70.7bn 18.1% CAGR Distribution per share Growing a portfolio of quality 147 assets and investments 41% new properties were Increase of 7% on FY16

139.0 cents to 195.8 cents purchased and acquired Key matters since 2012 Share price (cents) 3 000 Share price 2 500 2 646 2 639

2 000 2 568 2 473 116 2 448 2 300 6% properties disposed 1 500 of since 2012 1 000 2 300 cents to 2 448 cents 500 0 FY12 FY13 FY14 FY15 FY16 FY17 RSA performance

Our earnings are generated from our property 1.3% CAGR portfolio’s rental stream. We distribute 100% of our Providing capital appreciation revenue profits twice a year in the form of dividends. over the long term These regular distributions should continue to Decrease of 5% on FY16 provide sustainable annuity income. International performance

We own a quality portfolio of Growthpoint’s 26.9% interest in Growth in distribution per 529 properties providing 6.7m m2 GWI was valued at R4.2bn linked unit/share (cents) of retail, office and industrial space 200 Growthpoint’s 50% to leading South African and

interest in the properties 150 195.8 Australian businesses 183.8 173.4

of the V&A Waterfront 161.3 149.0

Our total property assets were was valued at R8.7bn 100 139.0 valued at R122.3bn which includes The 471 properties in RSA 100% of Growthpoint Properties 50 (excluding the V&A Waterfront) Australia (GOZ), Growthpoint’s 50% 0

were valued at R76.9bn CSR and governance interest in the properties of the V&A FY12 FY13 FY14 FY15 FY16 FY17 Waterfront and 26.9% interest in During FY17, we generated ■ Interim dividend ■ Final dividend Globalworth Real Estate distributable earnings of R5.6bn ■ Special dividend Investments (GWI) We employ 630 people in three The 57 properties in GOZ were regional offices and at various valued at R32.5bn of which we properties in RSA 7.1% CAGR own 65.5% GOZ and the V&A Waterfront are Delivering sustainable growth independently managed, each Increase of 6.5% on FY16

having their own staff complement WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 6 Integrated annual report 2017

Five-YEAR KPI REVIEW

Number of properties GLA (m2)

500 6 000 000

400 5 000 000 1.9 4 000 000 1.9 300 3 000 000 200 1.3 2 000 000

100 1 000 000

0 0 Retail Office Industrial RSA total GOZ V&A Retail Office Industrial RSA total GOZ V&A ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017 ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017

Rsa Rsa Retail Office Industrial total Goz V&a Retail Office Industrial total Goz V&a

2012 47 130 226 403 41 1 2012 975 373 1 156 944 2 219 781 4 352 098 900 676 192 086 2013 43 120 230 393 44 1 2013 942 501 1 151 079 2 176 887 4 270 467 886 975 193 873 2014 41 165 230 436 51 1 2014 907 746 1 460 741 2 194 459 4 562 946 1 036 740 195 700 2015 58 184 229 471 53 1 2015 1 410 461 1 790 428 2 225 075 5 425 964 1 050 611 202 658 2016 58 182 227 467 58 1 2016 1 420 570 1 799 391 2 251 089 5 471 050 1 109 545 206 838 2017 56 182 233 471 57 1 2017 1 405 021 1 750 606 2 266 957 5 422 584 1 053 148 223 016

Vacancy (m2) Weighted average future escalations on renewals (%)

350 000 10

300 000 8

250 000 1.9

200 000 6

150 000 1.3 4 100 000 2 50 000

0 0 Retail Office Industrial RSA total GOZ V&A Retail Office Industrial RSA total GOZ V&A ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017 ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017

Rsa Rsa Retail Office Industrial total Goz V&a Retail Office Industrial total Goz V&a

2012 30 215 66 736 75 810 172 761 2 291 3 088 2012 8.1 8.6 8.6 8.1 3.6 7.6 2013 34 414 90 249 65 055 189 718 3 641 1 146 2013 8.0 8.8 8.7 8.6 – 7.5 2014 40 461 116 842 64 876 222 179 15 786 2 974 2014 7.8 8.5 8.7 8.3 3.5 7.0 2015 46 368 142 816 118 509 307 693 10 581 5 238 2015 7.7 8.7 8.5 8.3 3.7 7.6 2016 36 422 140 728 134 409 311 559 3 850 2 993 2016 7.4 8.2 8.4 7.8 4.0 8.0 2017 50 246 119 334 70 954 240 534 7 888 1 734 2017 7.3 8.2 8.1 7.8 3.3 7.9 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 7 About this report

Despite economic challenges, Growthpoint has maintained continued growth in rentals while retaining high levels of occupancy. We have also seen a steady increase in the number and value of properties. Organisational overview Valuation (Rm) Value per m2 (excluding bulk)

80 000 40 000

60 000 30 000

40 000 20 000

20 000 10 000 Performance review

0 0 Retail Office Industrial RSA total GOZ V&A Retail Office Industrial RSA total GOZ V&A ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017 ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017

Rsa Rsa Retail Office Industrial total Goz V&a Retail Office Industrial total Goz V&a

2012 13 145 14 592 7 251 34 988 13 118 4 950 2012 13 462 12 363 3 222 7 947 14 565 22 880 2013 14 915 16 211 8 042 39 168 15 063 5 549 2013 15 810 13 930 3 618 9 089 16 779 25 546 2014 15 756 24 327 9 286 49 369 20 859 5 947 2014 17 347 16 105 4 119 10 585 20 120 27 828 Key matters 2015 28 213 32 963 10 436 71 612 22 024 6 761 2015 19 996 17 562 4 589 12 875 20 963 30 840 2016 29 210 33 257 11 285 73 752 30 938 7 766 2016 20 541 17 533 4 682 13 026 27 883 34 147 2017 29 588 34 732 12 586 76 906 32 536 8 705 2017 21 036 18 454 5 068 13 529 30 894 36 810 RSA performance

Average gross rental (per m2/month) (R) Average annualised yield (%)

300 12

250 10

200 8 1.9

150 6 International performance

100 4

50 2

0 0 Retail Office Industrial RSA total GOZ (AUD) V&A Retail Office Industrial RSA total GOZ V&A ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017 ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017

Rsa Rsa Retail Office Industrial total Goz V&a Retail Office Industrial total Goz V&a CSR and governance 2012 122 115 36 76 142 152 2012 8.7 9.3 11.0 9.4 8.5 7.2 2013 133 123 38 82 161 155 2013 8.3 8.6 10.5 8.9 8.6 6.9 2014 149 132 42 91 166 172 2014 8.2 8.3 10.1 8.6 8.2 6.8 2015 156 142 43 107 188 186 2015 7.7 8.4 10.1 8.3 7.3 7.0 2016 166 139 47 108 198 214 2016 7.8 8.3 9.7 8.3 7.3 7.5 2017 176 155 50 117 257 231 2017 7.6 8.4 8.7 7.9 6.9 7.8 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 8 Integrated annual report 2017

Five-YEAR KPI

REVIEW continued

Average in-force escalations (%) Weighted average lease period (years): By gross rental

10 10

8 8

6 6

4 4

2 2

0 0 Retail Office Industrial RSA total GOZ V&A Retail Office Industrial RSA total GOZ V&A ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017 ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017

Rsa Rsa Retail Office Industrial total Goz V&a Retail Office Industrial total Goz V&a

2012 7.7 8.8 8.7 8.4 3.2 8.5 2012 3.2 4.4 3.0 3.7 7.2 5.0 2013 7.7 8.3 8.1 8.0 3.1 8.4 2013 3.1 4.2 3.2 3.6 6.8 4.8 2014 7.7 8.3 8.3 8.1 3.1 7.8 2014 3.8 4.2 2.9 3.8 6.9 8.6 2015 7.4 7.7 8.4 7.7 3.0 8.3 2015 3.8 4.2 2.8 3.8 6.7 7.8 2016 7.3 8.1 8.4 7.8 3.1 8.0 2016 3.2 3.6 3.1 3.4 6.9 8.0 2017 7.2 8.1 8.3 7.8 3.3 8.0 2017 3.3 3.8 3.1 3.6 6.1 8.0

Weighted average renewal success rate (%) Weighted average renewal growth (%)

100 10

80 5

60 0

40 (5)

20 (10)

0 (15) Retail Office Industrial RSA total GOZ V&A Retail Office Industrial RSA total GOZ V&A ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017 ■ 2012 ■ 2013 ■ 2014 ■ 2015 ■ 2016 ■ 2017

Rsa Rsa Retail Office Industrial total Goz V&a Retail Office Industrial total Goz V&a

2012 81.1 74.6 74.0 75.2 100.0 83.7 2012 6.7 (1.5) 4.0 2.7 6.1 2.7 2013 80.5 66.2 69.0 70.4 – 88.6 2013 6.1 3.6 3.6 4.2 – 7.5 2014 75.6 63.0 63.7 65.7 76.0 89.1 2014 6.9 1.6 0.6 3.0 2.7 4.9 2015 87.0 62.0 61.6 65.5 32.1 92.7 2015 6.0 1.5 4.9 4.1 (12.7) 7.1 2016 89.3 61.4 63.5 68.7 96.0 82.3 2016 5.9 (3.5) 0.5 1.1 (0.5) 6.0 2017 80.9 61.4 78.5 73.6 81.4 98.2 2017 3.2 (1.8) 2.3 1 (7.7) 7.9 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 9 About this report

Value ADDED STATEMENT Organisational overview FY17 FY16 FY15 FY14 FY13 Rm Rm Rm Rm Rm

Revenue 11 565 10 570 8 322 6 959 6 215 Property and other expenses (1 340) (1 170) (990) (853) (815) Value added 10 225 9 400 7 332 6 106 5 400 Finance and other investment income 617 816 728 546 253 Wealth created 10 842 10 216 8 060 6 652 5 653

Shareholders 5 600 5 072 4 232 3 497 2 728 Performance review Providers of debt 2 922 2 710 2 215 1 802 1 820 Government and regulatory bodies 1 016 941 747 602 469 Employees 669 625 463 418 353 Minority interest holders 471 450 329 293 248 Reinvested in the Group (GOZ) 164 418 74 40 35 Wealth distribution 10 842 10 216 8 060 6 652 5 653 Key matters Wealth created and distributed (R million) Wealth created and distributed (%) 1.5

12 000 9.4 6.2

10 000

8 000

6 000 27.0 2017

4 000 51.6

2 000 RSA performance

0 4.3

■ ■ ■ ■ ■ FY13 FY14 FY15 FY16 FY17 ■ Employees ■ Providers of debt ■ Shareholders ■ Governments – direct taxes ■ Minority interest holders ■ Reinvested in the Group International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 10 Integrated annual report 2017

Organisational OVERVIEW WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 11 About this report Organisational overview Performance review Key matters RSA performance International performance CSR and governance

Green Court A and B, Bucharest WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 12 Integrated annual report 2017

Business model And value creation

OBJECTIVES OPPORTUNITIES RISKS KPIs RISK APPETITE TARGET PERFORMANCE CAPITAL IMPACTED

Seek suitable investment opportunities both locally South Africa South Africa South Africa 60% – 70% Long term RSA INVEST and internationally which fit our business strategy Non-core properties identified for sale The continuous weakening of the economy Property assets as a % Retail 45% 69.3%

Make strategic investments Strong demand for retail, office and residential space Low economic growth of total portfolio Office 35% Retail 40% at the V&A Waterfront Sovereign credit rating downgrades and Sector diversification Industrial 20% Office 43% ▲ which improve the overall quality ▲ of the portfolio and ensure long-term Cost of occupancy below international levels political risks Industrial Negative yield spreads 17% sustainability and capital appreciation Poor business confidence Increasing supply Australia Australia International 30% – 40% Long term 30.7% Low interest rates, capitalisation rates and inflation Competitive market with limited opportunities Offshore property assets as Positive yield spreads Economy highly reliant on commodities a % of total portfolio Stable property fundamentals Availability of excess global capital Sector diversification Sound GDP growth Experience in the market Eastern Europe Eastern Europe Better growth than Western Europe The demise of the European Union High and positive yield spreads Political uncertainty Attractive to global corporates due to lower costs Regulatory environment Africa Africa East, West and Southern Africa Economies that are highly reliant Joint participation by third-party institutional investors on commodities Grow an African fund to an optimal size for a possible Political uncertainty major stock exchange listing Regulatory environment Pricing of assets attractive Poor liquidity Raising of capital difficult Maintain a limited development programme tailored External trading and development Break-even letting of developments Yield > than comparable completed 15% of RSA property Medium term 1.5% to market risks and opportunities Internal development and redevelopment not attained building portfolio Tailor-made assets to retain and attract quality clients Financial loss on external trading R1bn per project and development > 65% pre-let

Sustain a strong balance sheet through conservative Offshore investments hedged using cross-currency interest Foregoing the full benefit of aggressive gearing Loan-to-value ratio 40% loan-to-value Medium term 33.4% ▲▲ FINANCE gearing and credit metrics that are well within covenants rate swaps Breaching of loan covenants Moody’s rating Investment grade rating Baa3 Access all available sources Optimise the cost of capital by having access to all Debt capital markets Inward listing of foreign property companies Debt expiry profile Three years Medium term 3.0 of funding to minimise the cost available forms of funding Unsecured long-term funding Size of loan book Secured versus unsecured debt 70/30 57.4/42.6 of capital while maintaining Equity raising utilising the distribution reinvestment plan gearing levels Cross currency interest rate swaps Limit exposure to interest rate fluctuations by fixing Limiting the extent of interest rate increases on the cost Foregoing the full benefit of decreases Interest rate hedging A minimum rolling Medium term 85.6% rates over periods matching loan expiry profiles of finance in interest rates on the cost of finance twelve-month 3.4 Keeping finance costs predictable with high level of certainty Lifting of the US yield curve and the resultant fixed-to-floating ratio Reducing earnings volatility impact on RSA interest rates on debt of 75% > 2.0x interest cover

Maintain a sectorally and geographically diversified The design of new and refurbished office buildings to achieve Deteriorating infrastructure RSA property assets as 60% – 70% Long term 69.3%

OWN portfolio of quality properties to take advantage of a minimum GBCSA 4-Star Green Star SA rating and service delivery a % of total portfolio Retail 45% Retail 40% Own well-located investments opportunities, market conditions and user demand Sector diversification Office 35% Office 43% ▲ ▲ comprising a quality portfolio of retail, Industrial 20% Industrial office and industrial properties 17%

Optimise the letting of available space to financially Innovative and sustainable property solutions (i.e. Major tenant failure Gross revenue growth > 7% Short term 5.2% EARN RENTAL sound tenants with long leases Smartmove, UNdeposit and Green Lease Addendum) Increase in vacancies Overall vacancies < 7% 4.4%

Earn sustainable rental by providing Generate additional revenue through value-added services Increase in energy prices Total arrears (as a % of collectables) < 10% 6.5% ▲▲ quality accommodation to a large or products Downward pressure on rentals and diverse base of financially sound Facilitate an online business-to-business network for clients tenants secured by long leases

Preserve and enhance the value of properties through Improved net property income Margin pressure on net property income Property expense-to-income ratio < 27% Short term 23.5% MANAGE ongoing maintenance, upgrading, refurbishment and Preservation of property asset values Over-capitalisation of properties Operating expense-to-income ratio < 5% 2.5% ▲ ▲ Manage assets and invest enhancement the capital necessary to ensure Use and grow our skills and understanding of our Transformation through diversity and inclusiveness The loss of skills and corporate memory, Development of people, culture and values Not definable Not definable Not definable that properties are well maintained, operating environment by attracting and retaining the Internal consolidation particularly at a senior management level Compliance ▲ and operate at optimum efficiency best people through creating a working environment Foster entrepreneurial spirit B-BBEE and Property Sector Charter Overall management review that is conducive to productivity and performance Creating and driving a culture of performance requirements and targets Industry participation ▲

Provide the highest level of service to stakeholders Efficiencies in property management processes Inefficient property management processes Property expense-to-income ratio < 27% Short term 23.5% ▲▲ Vertical integration of key suppliers of business services Resistance to change Operating expense-to-income ratio < 5% Short term 2.5%

Balance the need to provide investors with growing Identifying strategic thrusts and enablers to create sustainable Failure to implement strategy Dividend growth in absolute terms > CPI + 1% Long term 6.5%

DISTRIBUTE distributions annually with the objective of delivering value Technology innovation by market disruptor RSA property distribution as a % 60% – 70% Long term 87.5% sustainable earnings in the long term, we will continue Fund management – Africa and Healthcare funds Defensive nature of portfolio limits the extent of total portfolio ▲ EARNINGS to invest in our properties, in our employees and the Diversify geographical contribution to distributable income of outperformance Offshore property distribution as a % 30% – 40% Long term 16.8% ▲ Grow income and distribute this communities in which we operate of total portfolio as dividends to shareholders WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 13 About this report

Capital impact key: ▲ Increase ▲ Decrease Organisational overview

OBJECTIVES OPPORTUNITIES RISKS KPIs RISK APPETITE TARGET PERFORMANCE CAPITAL IMPACTED

Make strategic investments Strong demand for retail, office and residential space Low economic growth of total portfolio Office 35% Retail 40% at the V&A Waterfront Sovereign credit rating downgrades and Sector diversification Industrial 20% Office 43% ▲ which improve the overall quality ▲ of the portfolio and ensure long-term Cost of occupancy below international levels political risks Industrial Negative yield spreads 17% sustainability and capital appreciation Poor business confidence Increasing supply Australia Australia International 30% – 40% Long term 30.7% Low interest rates, capitalisation rates and inflation Competitive market with limited opportunities Offshore property assets as Positive yield spreads Economy highly reliant on commodities a % of total portfolio Performance review Stable property fundamentals Availability of excess global capital Sector diversification Sound GDP growth Experience in the market Eastern Europe Eastern Europe Better growth than Western Europe The demise of the European Union High and positive yield spreads Political uncertainty Attractive to global corporates due to lower costs Regulatory environment Africa Africa East, West and Southern Africa Economies that are highly reliant Joint participation by third-party institutional investors on commodities Grow an African fund to an optimal size for a possible Political uncertainty major stock exchange listing Regulatory environment

Pricing of assets attractive Poor liquidity Key matters Raising of capital difficult Maintain a limited development programme tailored External trading and development Break-even letting of developments Yield > than comparable completed 15% of RSA property Medium term 1.5% to market risks and opportunities Internal development and redevelopment not attained building portfolio Tailor-made assets to retain and attract quality clients Financial loss on external trading R1bn per project and development > 65% pre-let

Sustain a strong balance sheet through conservative Offshore investments hedged using cross-currency interest Foregoing the full benefit of aggressive gearing Loan-to-value ratio 40% loan-to-value Medium term 33.4% ▲▲ FINANCE gearing and credit metrics that are well within covenants rate swaps Breaching of loan covenants Moody’s rating Investment grade rating Baa3 Access all available sources Optimise the cost of capital by having access to all Debt capital markets Inward listing of foreign property companies Debt expiry profile Three years Medium term 3.0 of funding to minimise the cost available forms of funding Unsecured long-term funding Size of loan book Secured versus unsecured debt 70/30 57.4/42.6 of capital while maintaining Equity raising utilising the distribution reinvestment plan gearing levels Cross currency interest rate swaps RSA performance Limit exposure to interest rate fluctuations by fixing Limiting the extent of interest rate increases on the cost Foregoing the full benefit of decreases Interest rate hedging A minimum rolling Medium term 85.6% rates over periods matching loan expiry profiles of finance in interest rates on the cost of finance twelve-month 3.4 Keeping finance costs predictable with high level of certainty Lifting of the US yield curve and the resultant fixed-to-floating ratio Reducing earnings volatility impact on RSA interest rates on debt of 75% > 2.0x interest cover

Maintain a sectorally and geographically diversified The design of new and refurbished office buildings to achieve Deteriorating infrastructure RSA property assets as 60% – 70% Long term 69.3%

Optimise the letting of available space to financially Innovative and sustainable property solutions (i.e. Major tenant failure Gross revenue growth > 7% Short term 5.2% International performance EARN RENTAL sound tenants with long leases Smartmove, UNdeposit and Green Lease Addendum) Increase in vacancies Overall vacancies < 7% 4.4%

and operate at optimum efficiency best people through creating a working environment Foster entrepreneurial spirit B-BBEE and Property Sector Charter Overall management review ▲ ▲ that is conducive to productivity and performance Creating and driving a culture of performance requirements and targets Industry participation CSR and governance

Financial Human Intellectual Manufactured Social Natural WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 14 Integrated annual report 2017

Our timeline our growthpoint story

1987 12 OCTOBER Incorporation as a public company. 27 NOVEMBER Listing as public company under the “Financial – real estate” sector of the JSE – with 17 properties valued at R90.1m.

2006 2004 FEBRUARY MARCH Growthpoint announces another “first” Growthpoint acquired the Investec Bank for the property industry by securing Limited buildings in Sandton and Cape a R500m seven-year loan facility from Town for R995m. Old Mutual Specialised Finance making 2001 substantial savings in the interest rates. AUGUST 2005 JUNE Growthpoint had a market capitalisation Acquisition of a further 23 office, of R30m and assets worth R120m. JUNE industrial and retail properties from Acquisition of a portfolio of 48 office, Tresso for a total of R1.4bn. SEPTEMBER industrial and retail properties and Mine Pension Funds (MPF) reverse their one hospital from Tresso Trading 119 Acquisition of R2.4bn industrial property listed property assets into Growthpoint (Pty) Ltd for a total of R1.16bn. fund, Metboard Properties Limited. for a total purchase of R1.5bn. AUGUST DECEMBER Growthpoint announces R900m BEE BEE Partner (Phatsima) acquires 22m 2002 deal. Broad-based BEE consortium Growthpoint linked units (R280m). acquires 14.2% shareholding in a OCTOBER non-dilutive transaction. Growthpoint acquired R650m worth of listed property stocks from MPF. NOVEMBER 2007 First issue under R5bn MAY CMBS programme. JANUARY Growthpoint merged with Primegro Acquisition of R3.4bn Paramount Properties Limited (Primegro) by way Growthpoint launches its R5bn portfolio. of acquiring all Primegro’s assets to securitisation programme with the the value of R2.5bn. largest issue to date in the property JULY sector of R805m five-year notes. Growthpoint acquires property asset management and property administration business of IPG for R1.6bn. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 15 About this report

2017 Organisational overview JUNE Growthpoint has a market capitalisation of R70.7bn and property assets worth R122.3bn. Establishment of R2.3bn Healthcare Fund. Four hospitals and one medical suite. Maiden income earned from trading and development for third parties. Performance review

2014 2010 JANUARY

2008 Key matters DECEMBER Acquisition of 100% of the issued shares First issue of long-term Corporate Bond in Abseq Properties (Pty) Ltd, owning MAY 17 properties for R360m. Launch of enterprise development – R500m. initiative – Property Point. MARCH 2011 Acquisition of 100% of the issued shares JUNE in Tiber Property Group (Pty) Ltd, owning Growthpoint acquires R3.4bn worth of JANUARY 38 properties. properties during 2007/08 financial year, Acquisition of 50% interest in the V&A taking asset value to R27bn. Waterfront for R5bn. APRIL

Acquisition, settled by issues of RSA performance NOVEMBER Growthpoint shares for an interest of Inclusion in the EPRA/NAREIT Emerging 2013 34.9% in Acucap Properties Limited Market Index. and 31.5% in Sycom Property Fund. MAY Inclusion in the MSCI Emerging Market General capital raising of R2.52bn from Index. local and foreign investors. 2015

DECEMBER JULY APRIL Inclusion in the JSE Top 40 Index. Real Estate Investment Trust (REIT) Acquisition of the remaining shares status granted by the JSE (previously in Acucap and Sycom Property Fund

2009 Property Loan Stock). Linked unit capital Managers. International performance structure converted to pure equity. JANUARY 2016 Successful rights offer of R1.742bn. DECEMBER JULY Acquired 26.9% of AIM listed Acquired 50.1% in Australian listed Globalworth Real Estate Investments Orchard industrial property fund, now (GWl) for EUR186.4m. Growthpoint Properties Australia Limited (GOZ). Included in the FTSE4Good

Emerging Index. CSR and governance SEPTEMBER Increased investment in GOZ to 76.2% – total investment R1.3bn.

Inclusion in the JSE Socially Responsible Index. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 16 Integrated annual report 2017

DRIVING OUR STRATEGY 1 2 3 Optimising and Introducing new revenue Internationalisation streamlining the streams Our three to five-year strategy is to double the 15.2% non-SA contribution existing portfolio Funds management business to distributable income that we The funds management business is essentially achieved in FY17. In line with this, Individual asset sales for the period of a “capital light” strategy for Growthpoint. It offshore now represents 16.8% of R4.9bn have either been sold or are follows a business model that is prevalent FY17 distributable income and 30% held for sale. The most noteworthy in Australia where many of the major listed of the property portfolio by value. transaction is the sale of Harrowdene funds have separate unlisted funds into which For FY17 we invested R1.6bn into Office Park in Woodmead to Huawei third parties invest. Growthpoint’s strategy is GOZ through the DRIP process and for R845.9m which we believe to be to build a R15bn funds management business by underwriting the GPT Metro office one of the country’s largest property over five years. Growthpoint aims to hold transaction. Also, we invested R2.7bn asset sale to a foreign investor. approximately 20% to 30% of each fund, with into GWI. We continue to look for

third parties investing approximately 40% and other opportunities and will support Additional properties, across all sectors, with each having gearing of up to 40%. the further growth of GOZ and GWI. have since been earmarked for sale and we are in the process of formalising Growthpoint will earn dividends and a a process to address the optimal management fee, based on gross asset value. mechanism to facilitate this sale, To date we have launched the Africa Fund which is now approximately 5% of the and Healthcare Fund. We remain optimistic value of the South African portfolio. about raising money for the Africa Fund. Currently, there are five assets with a property value of over R2.3bn in the Healthcare Fund. Growthpoint currently owns 100% of the Healthcare Fund, and we have scheduled a capital raise to third parties for HY18.

Trading and development Historically, we capped any development activity at 10% of our South African portfolio value. We have always developed to own, and our acquisitions were always part of a long-term investment strategy. Given the many opportunities that come our way, as well as the expertise within the business, we have changed our focus to now include development for third parties and trading as part of a short-term investment strategy. We have allocated an additional 5% for trading and development fees for third parties which will now be included in our revenue stream. We will designate all trading and development opportunities upfront to avoid any conflict.

For more information For more information For more information please refer to pg 74 please refer to pg 100 and 102 please refer to pg 106 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 17 About this report Organisational overview Growthpoint’s vision is “to be a leading international property company providing space to thrive.” Of Growthpoint’s strategic initiatives, internationalisation was by far the largest priority during the year, and the company made good Performance review progress in this area. Key matters RSA performance International performance CSR and governance

Anslow, Bryanston WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 18 Integrated annual report 2017

STAKEHOLDER ENGAGEMENT

Our stakeholder categories and our approach to engaging with each of them are presented below.

fy17 Stakeholder Engagement with stakeholder Stakeholder contribution Meeting of stakeholder expectation Initiatives

Investors Presentations including bi-annual results presentations The provision of financial capital to Providing growing distributions on an annual basis with Healthcare Fund of R2.3bn established. New trading and Roadshows grow the business the objective of delivering sustainable, quality earnings development business initial income of R91m Investor conferences that can be projected with a high degree of accuracy. Pre-close calls Site visits Providing investors with a secure investment underpinned JSE SENS announcements by high quality physical property assets. Media announcements Offering investors an investment opportunity with Surveys a strong management team who have a proven Webcasts track record; that adheres to high levels of corporate One-on-one meetings governance and transparent reporting Employees Electronic communication Employees form the foundation of our Using and growing the skills of employees and retaining Introducing a HR business partner model Intranet business and provide the performance the best people by appropriate reward and remuneration Performance review moderation Presentations and productivity required to grow and Induction, training and development sustain the business Wellness days Total reward statements Business partners Personal interaction and meetings The letting of available space which Providing the highest level of service to tenants which will Implementation of a customer relations management (CRM) – Tenants Information events enables Growthpoint to sustain and enable them to thrive, grow and sustain their businesses system On-site property teams grow its business Increasing uptake of UNdeposit option Operational notices Safety notices and practice drills Print communication Business partners Request for Proposals (RFPs) The provision of services which will Providing sustainable business and growth opportunities Appointment of a sourcing specialist – Suppliers Preferential payment terms preserve and enhance our properties which are mutually beneficial in a transparent and Facilities Management Centre of Excellence Forum – realising Property Point’s enterprise development programme equitable manner efficiencies through collaboration B-BBEE preferential procurement Evaluated sectoral systems and property management solutions Government and Formal responses on policy and regulation The provision of regulatory frameworks Growthpoint acts in a responsible, ethical and transparent Ongoing engagement through SA REIT Association with National regulatory bodies Joint initiatives for industry solutions which will enable Growthpoint to manner Treasury on tax-related matters B-BBEE scorecards operate in an environment which Employment equity reports provides reasonable certainty and is Tax returns fair and transparent to all competing Workplace skills development plan participants Business partners Website The letting of available space which The provision of quality properties to take advantage of Broker incentive benefits broadened and enhanced – Property brokers Incentive programmes enables Growthpoint to sustain and opportunities, market conditions and user demand Twitter and Facebook grow its business One-on-one presentations and engagement Providers of Bi-annual results presentations The provision of funding to grow the The timeous payment of interest and capital underpinned Moody’s national scale rating of Aaa.za finance Roadshows business by a strong balance sheet and credit metrics that are well Entered into net new borrowings of R4.6bn One-on-one meetings within covenants Increase in unencumbered assets JSE SENS announcements Meeting with bond holders Media announcements Website Industry and Active involvement on boards and committees The collective and consensus opinion of The sharing of experience and expertise which will A senior manager was appointed to the board of SAPOA business Presentations at conferences and congresses the participants which enables industry mutually benefit the property industry and related Ongoing engagement through SA REIT Association with National organisations Involvement in Real Estate Investment Trust (REIT) Association, and business organisations to influence organisations Treasury on tax-related matters South African Property Owners Association (SAPOA) and the and impact matters that affect them Green Building Council of South Africa (GBCSA) and their operations Member of European Public Real Estate Association (EPRA) A member of the National Business Initiative Communities CSI initiatives in general An understanding of social, economic Impacting the communities in which Growthpoint Targeted measured outcomes for CSI CSI initiatives at our properties and environmental impacts on the operates in a positive manner Community infrastructural improvement projects have been Bursaries communities in which we operate successfully delivered in partnership with Growthpoint’s strategic Environmental initiatives supply chain partners Involvement in city improvement districts WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 19 About this report Organisational overview Our stakeholder categories and our approach to engaging with each of them are presented below.

fy17 Stakeholder Engagement with stakeholder Stakeholder contribution Meeting of stakeholder expectation Initiatives

Total reward statements Key matters Business partners Personal interaction and meetings The letting of available space which Providing the highest level of service to tenants which will Implementation of a customer relations management (CRM) – Tenants Information events enables Growthpoint to sustain and enable them to thrive, grow and sustain their businesses system On-site property teams grow its business Increasing uptake of UNdeposit option Operational notices Safety notices and practice drills Print communication Business partners Request for Proposals (RFPs) The provision of services which will Providing sustainable business and growth opportunities Appointment of a sourcing specialist – Suppliers Preferential payment terms preserve and enhance our properties which are mutually beneficial in a transparent and Facilities Management Centre of Excellence Forum – realising Property Point’s enterprise development programme equitable manner efficiencies through collaboration

B-BBEE preferential procurement Evaluated sectoral systems and property management solutions RSA performance Government and Formal responses on policy and regulation The provision of regulatory frameworks Growthpoint acts in a responsible, ethical and transparent Ongoing engagement through SA REIT Association with National regulatory bodies Joint initiatives for industry solutions which will enable Growthpoint to manner Treasury on tax-related matters B-BBEE scorecards operate in an environment which Employment equity reports provides reasonable certainty and is Tax returns fair and transparent to all competing Workplace skills development plan participants Business partners Website The letting of available space which The provision of quality properties to take advantage of Broker incentive benefits broadened and enhanced – Property brokers Incentive programmes enables Growthpoint to sustain and opportunities, market conditions and user demand Twitter and Facebook grow its business One-on-one presentations and engagement International performance Providers of Bi-annual results presentations The provision of funding to grow the The timeous payment of interest and capital underpinned Moody’s national scale rating of Aaa.za finance Roadshows business by a strong balance sheet and credit metrics that are well Entered into net new borrowings of R4.6bn One-on-one meetings within covenants Increase in unencumbered assets JSE SENS announcements Meeting with bond holders Media announcements Website Industry and Active involvement on boards and committees The collective and consensus opinion of The sharing of experience and expertise which will A senior manager was appointed to the board of SAPOA business Presentations at conferences and congresses the participants which enables industry mutually benefit the property industry and related Ongoing engagement through SA REIT Association with National organisations Involvement in Real Estate Investment Trust (REIT) Association, and business organisations to influence organisations Treasury on tax-related matters South African Property Owners Association (SAPOA) and the and impact matters that affect them

Green Building Council of South Africa (GBCSA) and their operations CSR and governance Member of European Public Real Estate Association (EPRA) A member of the National Business Initiative Communities CSI initiatives in general An understanding of social, economic Impacting the communities in which Growthpoint Targeted measured outcomes for CSI CSI initiatives at our properties and environmental impacts on the operates in a positive manner Community infrastructural improvement projects have been Bursaries communities in which we operate successfully delivered in partnership with Growthpoint’s strategic Environmental initiatives supply chain partners Involvement in city improvement districts WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 20 Integrated annual report 2017 governance AND management structure

Growthpoint Properties Limited

Managed Independently managed (South African portfolio – excluding the V&A Waterfront)

BOARD

Growthpoint Properties Globalworth Real Estate V&A Waterfront Audit Committee Australia (GOZ) Investments (GWI) Nomination Committee Property Committee Remuneration Committee BOARD BOARD BOARD Risk Management Committee Social, Ethics and Transformation Committee Audit, Risk and Compliance Property Committee Audit Committee Committee Social and ethics Committee Remuneration Committee Nomination, Remuneration Human Resources and Nomination Committee Chief Executive Officer and and Human Resources Remuneration Committee Managing Director Committee Executive Committee Property Committee Chief Executive Officer and Strategic management, Chief Executive Officer Deputy CEO monitoring and review of performance Executive Management Executive Committee Managing Director Committee In-house property Deal forum Executive team In-house property management function Approval of acquisitions, Property management management function disposals and developments function outsourced In-house property management function Retail Office Industrial Group services WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 21 About this report governance AND ownership and management structure Legal structure Organisational overview

JSE

GROWTHPOINT PROPERTIES 150 properties – LIMITED R35.7bn Performance review

100%

Domestic Treasury company

Growthpoint Properties International (Pty) Ltd Key matters

65.1% 26.9% 50% 100%

ASX LSE (AIM) V&A Waterfront Holdings Management company (Pty) Ltd Growthpoint Properties Globalworth Real Estate 1 property – R8.7bn Growthpoint Management Australia Limited Investments Services (Pty) Ltd 57 properties – R32.5bn 18 properties – R4.2bn 630 employees RSA performance 100%

Property owning companies

Metboard Properties Limited Growthpoint Securitisation Warehouse Trust Growthpoint TPG (Pty) Ltd 121 properties – R4.9bn 68 properties – R10.1bn 19 properties – R3.3bn

Paramount Property Fund Limited Growthpoint ABQ (Pty) Ltd Acucap Investments (Pty) Ltd 54 properties – R5.7bn 8 properties – R1.3bn 31 properties – R10.7bn International performance

Other subsidiaries 20 properties – R5.3bn CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 22 Integrated annual report 2017

BOARD OF DIRECTORS

Francois Marais (62) NORBERT SASSE (52) ESTIENNE DE KLERK (48) Chairman Chief Executive Officer Managing Director Independent non-executive Appointed to the Board in 2003 Appointed to the Board in 2008 Appointed to the Board in 2003 BCom (Hons) (Acc), CA(SA) BCom (Industrial Psych), BCom (Hons) BCom, LLB, H Dip (Company Law) Committees: Participates in all committee (Marketing), BCom (Hons) (Acc), CA(SA) Committees: Nomination (Chairman), meetings by standing invitation Committees: Participates in all committee Remuneration, standing invitation to Risk Career: Experience in corporate finance meetings by standing invitation meetings dealing with listings, delistings, mergers, Career: Extensive experience in listed Career: A founding member and partner acquisitions and capital raising. Director property, involved in BEE transactions, mergers of Glyn Marais Inc., although no longer of major Group subsidiaries, Growthpoint and acquisitions. Director of major Group responsible for directing the firm, a director Properties Australia Limited, V&A Waterfront subsidiaries, Growthpoint Properties Australia of Growthpoint Properties Australia Limited Holdings (Pty) Ltd and subsidiaries, African Limited and V&A Waterfront Holdings and V&A Waterfront Holdings (Pty) Limited Real Estate Management Company Limited (Pty) Ltd and subsidiaries. Past President of Skills and expertise: Legal as applies to and Growthpoint Investec Africa Property SAPOA and Chairman of SA REIT Association corporate finance in general and dispute Management Limited and Globalworth Real Regulatory and Tax Committee resolution, particularly alternative dispute Estate Investments Limited Skills and expertise: Financial, general resolution Skills and expertise: Experience in corporate management and property finance, property and general management

GERALD VöLKEL (56) MZOLISI DILIZA (68) PETER FECHTER (71) Financial Director Non-executive, BEE structure stakeholder Independent non-executive Appointed to the Board in 2013 Appointed to the Board in 2001 Appointed to the Board in 2003 BAcc, CA(SA) BCom, BBus and BAdmin (Hons) BSc (Eng) Committees: Participates in committee Committees: Property, Social, Ethics and Committees: Audit, Property (Chairman) and meetings other than Remuneration by Transformation (Chairman) and Nomination Nomination standing invitation Career: Executive Chairman of Strategic Career: Lifelong management and direction Career: Ended 15 years in the auditing Partnership Group (Pty) Ltd, Director of of businesses in the building construction, profession as an audit partner with the former Bombela Concession Company, Director commercial and industrial property Ernst & Young before joining the JD Group of Bombela Operating Company (Pty) Ltd, development arena, resulting in broader Limited in November 1995, where he was Chairman of Mega Express (Pty) Ltd, Chairman direction of associated investment companies. appointed to its Board in April 2001 as the of Teba Fund Trust, Board member of NWU- non-executive director of Globalworth Real Chief Financial Officer having fulfilled that Potchefstroom Business School, former Chief Estate Investments Limited role for 12 years. Director of major Group Executive of the Chamber of Mines of South Skills and expertise: Lifelong expertise in the subsidiaries Africa building construction, property development Skills and expertise: Financial, tax and Skills and expertise: Expertise in the mining, and investment arena general management investments, consulting, engineering and property and infrastructural development sectors WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 23 About this report

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For detailed biographies of the Board go to www.growthpoint.co.za Organisational overview

LYNETTE FINLAY (57) JOHN HAYWARD (66) HUGH HERMAN (76) PATRICK Performance review Independent non-executive Lead Independent Director Independent non-executive MNGCONKOLA (55) Appointed to the Board in 2009 Independent non-executive Appointed to the Board in 1995 Non-executive BCompt (Hons), CA(SA) Appointed to the Board in 2001 BA, LLB Appointed to the Board in 2012 Committees: Audit (Chairman), BSc (Hons), Fellow of the Institute Committees: Property, BTech (Business Administration), Social, Ethics and Transformation of Actuaries and Actuarial Society Remuneration BA (Human Resources Management), of South Africa National Diploma Police Administration, and Nomination Career: Chairman of Investec Committees: Audit, Risk Certificate: Forensic Investigative Career: Director of Emerging Asset Management Limited and Auditing (Unisa) African Property Holdings (Chairman) and Nomination Investec Asset Management (Pty) Ltd, first female President of Career: Actuary and consultant, Holdings Limited. Former Chairman Committees: Risk and Social, Ethics South African Property Owners mainly in the investment and of Investec Bank (UK) Limited, and Transformation Association (SAPOA) and Trustee retirement fund fields Investec plc and Investec Limited. Career: Former non-executive Key matters of Noah Sustainability Trust Skills and expertise: Finance and Director of Investec USA Holdings director of the PIC and former trustee Skills and expertise: Property risk Corp, Investec Securities (US) of the Government Employees’ portfolio investments and LLC, Pick n Pay Holdings Limited, Pension Fund, director of V&A all aspects of commercial Pick n Pay Stores Limited, Freddy Waterfront Holdings (Pty) Ltd and its property including management, Hirsch Group (Pty) Ltd and Melbro subsidiaries development and leasing Wholesale (Pty) Ltd Skills and expertise: Broad Skills and expertise: Broad legal experience with numerous years of and business experience, including studies in business oversight and as property development civil servant, particularly in finance and people management skills RSA performance International performance RAGAVAN MOONSAMY (53) MPUME NKABINDE (57) ERIC VISSER (65) Independent non-executive Independent non-executive Independent non-executive Appointed to the Board in 2005 Appointed to the Board in 2009 Appointed to the Board in 2001 Committees: Property and Social, Ethics and MBA, Honours in HRD, Diploma in Adult BCom (Hons) Transformation Education, Postgraduate Diploma in Property Committees: Risk, Remuneration (Chairman) Development and Management Career: Founder of Kascara Financial Services Career: Chief Executive Officer of the Sentinel (Pty) Ltd, Managing Director of UniPalm Committees: Risk and Social, Ethics and Retirement Fund Investment Holdings (Pty) Ltd and Director Transformation Skills and expertise: Has been in the asset of Qmuzik Technologies (Pty) Ltd Career: Co-founder and Managing Director management industry for the past 20 years, Skills and expertise: Over 30 years of of Sigma Lifts and Escalators (Pty) Ltd and with large investments, among others, in experience in investments and finance and founder of the Engineering Partner’s Group. development, direct and listed property both CSR and governance has successfully applied his abilities to drive Held senior management positions in the field locally and offshore (including Africa) significant value in the corporate landscape of business development, human resources, communication, as well as training and development with reputable organisations including PG Bison and Otis (Pty) Ltd Skills and expertise: Expertise in human resources, business development and general management, which have been acquired over a 20-year period in local and international companies WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 24 Integrated annual report 2017

THE EXECUTIVE COMMITTEE (EXCO)

Norbert Sasse (52) Estienne de Klerk (48) Gerald Völkel (56) Chief Executive Officer Managing Director Financial Director BCom (Hons) (Acc), CA(SA) BCom (Industrial Psych), BCom (Hons) BAcc, CA(SA) Eighteen years’ experience in listed property (Marketing), BCom (Hons) (Acc), CA(SA) Thirty-two years’ experience in finance Seventeen years’ experience in listed property management

Engelbert Binedell (47) Dirkje Bouma (45) Olive Chauke (44) Divisional Director – Corporate Treasurer Head of Human Resources industrial sector MSc Finance, CFA Bachelor of Social Sciences, Advanced BA (Ed), MBL Twenty-one years’ financial and treasury Programme in Management from Henley Twenty years’ experience in listed property experience Business School Twenty years’ HR experience gained in both private and public companies

Alec Davis (52) Greg de Klerk (61) Nadine Kuzmanich (46) Chief Information Officer Regional Head – Durban Head of Marketing and Communication BCom (Hons) (Acc), CA(SA) FCIS Marketing career spans twenty-five years Twenty-five years’ IT and financial experience Twenty-six years’ experience in the property and 21 years’ experience in the property industry industry WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 25 About this report Organisational overview Performance review Stephan le Roux (59) George Muchanya (45) Rudolf Pienaar (57) Divisional Director – retail sector Executive: Corporate Finance Divisional Director – office sector BCom (Acc), BArch Studies Bsc Eng, MBA, ACFP (London Business School), Thirty-one years’ experience in the property Thirty-one years’ experience in the property LDP (Harvard Business School) industry industry Twenty-two years’ experience spanning engineering, management, consulting and the property industry Key matters

David Stoll (58) Shawn Theunissen (38) Lauren Turner (41) RSA performance Regional Head – Cape Town Head of Corporate Social Responsibility (CSR) Head of Investor Relations BCom (Hons) (Acc), CA(SA) BCom (Industrial Pysch), Masters in Concept BCompt (Hons) Twenty-eight years’ property-related Marketing and Innovation Sixteen years’ financial markets experience experience Fifteen years of organisational development and socioeconomic development experience International performance

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For contact details of the Exco go to www.growthpoint.co.za CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 26 Integrated annual report 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 27 About this report Organisational overview Performance review Key matters RSA performance International performance

Performance CSR and governance review Discovery, Sandton WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 28 Integrated annual report 2017

Economic Review

Following the cabinet reshuffle in macroeconomic environment, is likely The outlook for business and consumer March 2017, two of the three major to see returns continue to deteriorate. sentiment remains negative. Business rating agencies, Standard & Poor’s (S&P) Occupancies have been on a steady confidence fell by 11 points to 29 index and Fitch, downgraded South Africa’s decline and, in the next few years, may points in Q2:17, which is close to the long-term foreign currency (FC) ratings. start testing levels last seen in the early level reached in 2009 when South Africa Notably, Fitch also downgraded South 2000s if the current political and was facing similar economic headwinds. Africa’s local currency (LC) rating to economic decline is not arrested. Corporates remain reluctant to commit non-investment grade (or junk). On 9 June, Moody’s also resolved its negative outlook on South Africa’s GDP growth rate 2009 to 2016 (annual GDP growth %) FC rating and downgraded both the FC and LC to one notch above junk. Its 4

decision was based on a deterioration 3 3.3 of fiscal strength, together with weak 3.0 2 2.5 growth and policy uncertainty. S&P has 2.2 1 1.7 not yet resolved its negative outlook on 1.3 0.3 South Africa and will do so only after 0

December. Thus we expect increased (1.5) (1) nervousness about South Africa’s ratings outlook as we lead up to the ruling (2) party’s (ANC) elective conference in ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 December. Further downgrades of the Sources: Stats SA, SBG Securities FC ratings will put South Africa’s LC at non-investment grade, which could Occupancy rate (%) versus GDP growth (%) well lead to capital outflows and Rand weakness. 100 6 98 5 4 A combination of the ratings changes 96 and structural economic challenges 3 94 saw South Africa enter a technical 2 92 recession in the first quarter of 2017, 1 90 following stagnation in 2016 and six 0 years of low and declining growth before 88 (1) that. The last time this happened was 86 (2) during the 2008/09 global financial crisis ’95 ’97 ’99 ’01 ’03 ’05 ’07 ’09 ’11 ’13 ’15 when South Africa’s real GDP growth ■ Occupancy rate (%) – all property ■ Real GDP growth (%) – RHS Sources: IPD, Stats SA, SBG Securities posted three successive quarters of ’09 negative growth and annual real GDP averaged – 1.5% in 2009. About one Total returns versus GDP growth (%) million job losses were recorded at the time. 35 6 30 5 4 Four years after recovering from the 25 spill over effects of the 2008/09 global 3 20 crisis, the South African Reserve Bank 2 15 (SARB) announced that the downward 1 10 phase of the business cycle had again 0 started in December 2013. Since then, 5 (1) annual real GDP growth has trended 0 (2) lower averaging 0.3% in 2016. Property, ’95 ’97 ’99 ’01 ’03 ’05 ’07 ’09 ’11 ’13 ’15 being a real asset largely driven by the ■ SA all property total return (%) ■ Real GDP growth (%) – RHS Sources: IPD, Stats SA, SBG Securities WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 29 About this report Organisational overview capital due to socioeconomic uncertainty. If anything, with businesses focused on cutting costs to extract any remaining profits, consolidation of space remains a strong theme across all property segments. Over a four-year horizon (2017 to 2020), real GDP growth is expected to average only 1.0% year on year. With a population growth of 1.6% to 1.7%, this implies that the real per capita GDP growth trend remains negative and the risk of fiscal slippage and further ratings downgrades, therefore, remains significantly high. Exacerbated by structurally high unemployment (27.7% in Q1:17), which is at its highest level since the quarterly labour force survey was initiated in 2008, office occupancy levels (88.2% in Q2:17) are likely to continue their gradual decline in the short to medium term, with some 672 000m2 of space still in the pipeline.

Depressed business and consumer confidence Performance review

40 100 30 90 80 20 70 10 60 0 50 (10) 40 30 (20) 20 (30)

10 Key matters (40) 0 ’82 ’84 ’86 ’89 ’91 ’93 ’95 ’98 ’00 ’02 ’04 ’07 ’09 ’11 ’13 ’16

■ BER consumer confidence ■ BER business confidence (RHS) Sources: Stats SA, SBG Securities

In addition to subdued employment The recent 25 basis point cut to the repo either S&P or Moody’s or both. The listed growth, the combined effects of tight rate, in what looks like the beginning of property sector will need to keep an credit conditions, personal tax bracket monetary easing by the SARB now that especially close eye on South Africa’s creep, fuel levy and Road accident Fund inflation is within the 3% to 6% target LC ratings because long-term LC debt (RAF) increases announced in the range, may provide mild relief. However, makes up around 78% of the country’s RSA performance February budget has worsened the strain while we expect headline inflation to total debt holdings. Further, foreign on the consumer, exerting further remain within the target range, the SARB ownership of South Africa’s LC debt downward pressure on expenditure and is likely to take a cautious approach to is around 40% and downgrades to retail turnover. Retail sales were up a easing given certain idiosyncratic risks non-investment grade would see the mere 1.7% year on year in May and such as the political landscape, questions country start falling out of major bond this was largely driven by food (up around its constitutional independence indices leading, in turn, to forced selling 14.5% year on year) and the decline in and the risk of an LC downgrade by of South African government bonds and discretionary spend has in fact already a negative impact on SA REIT yields. claimed a few casualties in the South Medium-term GDP growth forecast (year on year %) African retail landscape. A number of big box local and international brands such International performance as Edcon, Stuttafords, River Island, Nine 2.5 West and Mango have reduced footprint 2.0 by cutting store sizes or completely 1.9 1.9 closing stores. Furthermore, the effects 1.5 of e-commerce and a potentially 1.4 oversupplied South African retail 1.0 1.3 1.1 landscape is likely to diminish landlords’ 1.0 bargaining power rapidly, and will 0.5 0.5 undoubtedly continue to put upward 0.5 0.3 0.3 pressure on occupancy costs as vacancies 0 CSR and governance 2016 2017F 2018F 2019F 2020F gradually creep up and turnover growth ■ GDP growth (old) ■ GDP growth (new) remains muted. Sources: Stats SA, SBG Securities WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 30 Integrated annual report 2017

Economic

Review continued

Globally, growth continues to improve modestly, inflation is closer to central bank targets, and financial stability seems much improved. These conditions are prompting other central banks to look at normalising monetary policy in the same way that we have seen the Federal Reserve (Fed) begin to do in the US. The US economy is expected to grow by between 2% and 2.5% in 2017, driven by expansionary fiscal policy. The Fed has increased rates twice this year and is likely to deliver a third 25 basis points increase.

Economic recovery also seems pretty durable in the Eurozone. Sentiment surveys, such as the one produced by the European Commission, put business sentiment close to the best levels seen since the European Economic and Monetary Union (EMU) began in 1999. The European Central Bank (ECB) is likely to significantly scale back its bond purchases next year; if not eliminate them altogether. Official rate hikes may, however, have to wait until the second half of 2018 at the earliest, with 2019 looking more likely if economic momentum flattens out and core inflation remains well short of the ECB’s 2% target for the headline CPI rate.

Sentiments close to the highs

125

115

105

65 ’99 ’04 ’09 ’14

■ Economic sentiment indicator Sources: Stats SA, SBG Securities

The UK remains challenged on many basis. Steady growth has closed the in the past, the BoJ will probably prove levels: growth is weak, inflation is above output gap (see graph above), but the too presumptuous in assuming inflation target, Brexit looms and, most recently, relationship between the output gap and can reach the target within this the government has seen its position in inflation is poor – just as it is in other timeframe. parliament weakened by the result of the major nations. The Bank of Japan (BoJ) general election. The Japanese economy certainly thinks that CPI inflation will not Bandi Zondo is experiencing relatively stable growth reach the 2% target until FY18, starting Sector Analyst rates of 1.0% to 1.5% on an annualised in April 2018, but, as has often happened SBG Securities

Output gap closed (%)

(2)

(4)

(6)

(8) Q1 1980 Q1 1990 Q1 2000 Q1 2010

■ Output gap (%) Sources: Stats SA, SBG Securities WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 31 About this report Organisational overview Performance review Key matters RSA performance International performance CSR and governance

Greenfield Industrial Park, Cape Town WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 32 Integrated annual report 2017

INTERVIEW WITH THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Questions for...

FRANCOIS MARAIS Chairman

While our new strategic direction and initiatives will see Growthpoint moving into new markets and geographies, it will not see us move significantly higher on the risk curve.

What were Growthpoint’s most through our quality property portfolio. Embarking on our new strategic Q important strategic achievements However, we cannot be compared with direction, we bedded down some of our during the year? other players in our market that have strategic initiatives and put structures in significantly higher risk profiles. place around our strategic objectives. Agreeing on the new strategic direction Growthpoint has conservative policies for the Group was by far our most for managing, funding and doing The company’s strategic initiatives – important achievement of the year. Key developments, and a portfolio that internationalisation, funds management, to this is the internationalisation of our generates quality, sustainable income and trading and development – were key business. streams, with very few one-off additions. focuses this year. They all reinforced Growthpoint is also more liquid than any Growthpoint’s emergence as a leading Growthpoint’s new strategic direction other SA REIT. international property company and positions it as an international property added new, low-risk income streams business. We first invested offshore in With this in mind, we have started to the business. Australia as early as 2009, and now we measuring ourselves against the best have made a conscious decision to grow global property businesses. We want our international income streams. to behave like a leading international company and compete like one. We plan Growthpoint is different from other to do this without moving up the SA REITs. Yes, we receive our income risk curve. through rentals, which we achieve WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 33 About this report Organisational overview

We are derisking our

South African business by Performance review Questions for... growing conservative income streams FRANCOIS MARAIS Chairman from Australia and Europe

NORBERT SASSE Key matters Chief executive officer

What were the key performance portfolio. It opens up opportunities We see company performance declining RSA performance Q achievements? while laying off risk by using our capital across the board in South Africa. Growth together with that of partners. It is an has become the exception, not the norm. Driving our internationalisation during excellent balance of entrepreneurial the year, Growthpoint made its debut investment and managed risk. We focused on the repositioning of our investment in Europe with Globalworth South African portfolio, enhancing it with Real Estate Investments (GWI). This is We made good progress building our quality developments and derisking it our first investment in European markets, Funds Management business, which we with strategic asset disposals. Our and it certainly will not be our last. It plan to grow to R15bn over the next five biggest development is the new boosted Growthpoint’s international years, and advanced both our Healthcare corporate headquarters for Discovery International performance exposure to 30.0% of our R122.3bn Fund and African Fund. in Sandton, which is the biggest asset value. single-phase office development in Growthpoint’s South African portfolio Africa. Discovery is expected to start Our new trading and development performed admirably, considering the taking occupation from the end of 2017, business for third parties contributed to fiercely competitive and weak domestic which will contribute positively to our income streams for the first time market. We have done well. Vacancies Growthpoint’s rental income in the this year. in the portfolio improved and arrears second half of FY18. The Discovery remain low. All our key metrics and ratios building is the largest in South Africa The Fund Management business is have remained stable at the very least, to receive a 5 Star Green Star SA

prevalent in Australia, and Growthpoint which is a positive achievement. Any certification from the GBCSA, and will CSR and governance has become the first REIT in South Africa growth is good growth in our market. enhance our sector-leading portfolio of to introduce this model to our business green office assets. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 34 Integrated annual report 2017

INTERVIEW WITH THE CHAIRMAN

AND CHIEF EXECUTIVE OFFICER CONTINUED

When it comes to streamlining our Where are your biggest living wage. We want children to do portfolio, we have not quite perfected Q challenges? better than their parents through the our disposal strategy, yet. However, we generations. did successfully dispose of 17 assets. We Growthpoint has a truly diversified continue to investigate and innovate portfolio of businesses. We are not The only way that we can solve new approaches to asset disposal. focused on any one sector or one inequality, which is the biggest problem geographic area. Our South African South Africa faces at all levels, is to Growthpoint continued its positive business is a microcosm of the local create employment for the country expansion of and investment into the economy. We have clients across all as a whole and close the wage gap. At V&A Waterfront, which delivered a sectors of the economy and, as they Growthpoint, we are serious about number of key projects during the year. are being constrained, so are we. playing our part. We seek to make a Development was mainly centred in the difference in communities and people’s Silo precinct, which will be complete in For our South African portfolio, the major lives on a broad basis, not only for the September. Building also moved to the challenge is certainly the economic and benefit of a select few. Canal precinct where there is already political environment in which we significant progress on the development operate domestically. With economic Growthpoint takes a leading role in of Waterway House and the start of a growth absent, the property sector is training previously disadvantaged people. new parkade. feeling the pinch. Rentals and renewals We do it for the benefit of the entire remain under pressure. Even blue-chip industry. We also give SMEs the Growthpoint Properties Australia (GOZ) businesses are scaling back on their opportunity to be part of our had a great year. It delivered the highest offices. Consumers do not have the procurement system and give them distribution per share growth it has income to support retail. Key trends work to help get them off the ground. achieved since Growthpoint took continued unabated, including the Property Point, Growthpoint’s enterprise control of the company in 2009. GOZ continuous increase in the supply of and supplier development programme, outperformed its benchmarks and retail and office space, and pressure on and our internal bursary scheme (GEMS), became the best performing A-REIT over rentals and vacancies, as well as rental contribute positively in these areas. one year, three years and five years. growth rates on renewal. This is However, the Rand’s improved strength unsurprising in an economy that has The positive results of our commitment against the Australian Dollar, and shown less-than-pedestrian growth to transformation can be seen in our higher-than-expected withholding tax, over the past four years. current level 3 B-BBEE rating. All saw its contribution to Growthpoint’s property companies are likely to drop total distributable income remain stable. “Short-termism” is getting worse with a level or two under the new codes. We a lack of confidence in South Africa’s are making every effort to ensure that It was a year full of highlights for the economy. Uncertainty abounds about Growthpoint will be rated at least Australian business. These include the the country’s regulations, rules and at a level 4 according to the recently successful takeover of GPT Metro Fund policies. Certainty has been replaced with amended Property Sector Charter. At this (GMF), the strategic sale of industrial unhealthy opportunism in the interest of level, our clients will be able to utilise assets to derisk its portfolio, a significant a few individuals. 100% of their rental procurement spend reduction in gearing, diversification of its for B-BBEE purposes. We are determined sources of debt and the successful issue Growthpoint faces the challenge of to ensure that this is our minimum rating of its inaugural US private placement transformation throughout its South and have set our sights on working our (USPP) market transaction. During the African business. We have always way up to higher levels. year, GOZ also reweighted its portfolio believed in bringing black, coloured geographically into the growth states on and indian employees into the business We have identified the opportunity to Australia’s eastern seaboard, and and upskilling them to make a real enhance our B-BBEE credentials through sectorally into offices. contribution. It is also our philosophy our programme of strategic disposals, that all our employees should earn a which is part of restructuring our South WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 35 About this report

To watch the results presentation, please go to: https://www.youtube.com/c/growthpointbroadcast Organisational overview African portfolio. We believe some of our We are also rationalising our South Yes, the size of our top quality portfolio properties held for sale can be used as a African portfolio, and finding ways to be limits our ability to increase distributions catalyst for B-BBEE. better and more efficient while being for the business easily, but it also derisks extremely sensitive to our portfolio the business during a significant Looking ahead to the medium management and the needs of our downturn. Q term, what are the key clients. opportunities for Growthpoint? On a risk-weighted basis, Growthpoint Anyone who thinks that property is way ahead of its sector peers. The

With our South African portfolio comes investment is as simple as buying a quality and diversity of our portfolio and Performance review the drive to re-engineer our business building and collecting rent is deeply our tenants protect us in the current practices so that we have the best misguided. They are discounting vital tough South African market. We have no property practices and can empower aspects such as financing a property, intention of changing our risk-averse way staff members to enhance letting and enhancing it, growing its users, adding of doing business in pursuit of yield. give a better service to customers. technology and introducing innovation. Growthpoint has identified technology Growthpoint has a 14-year track record We have now achieved enough critical as a way of differentiating ourselves of uninterrupted dividend growth. This mass for investment in our offshore to compete in the marketplace. It is shows that our growth is sustainable. holdings to be funded internationally. important for our buildings and valuable Our experienced, skilled and Key matters There are several interesting initiatives to our clients. knowledgeable team also benefits from being considered to grow GOZ. The an entrepreneurial outlook and an way we went into Europe, in the first There is disruption taking place in inherent ability to innovate. instance, was a different approach to the property sector globally, and the basic acquisition and management Growthpoint plans to lead this disruption Even as we emerge as an international of properties. We elected to back a in its markets. To take the lead, we are property company, we remain true to our successful entrepreneur and support him establishing an innovation hub where, prudent, risk-averse nature. We also in growing the business. We want to do with strategic partners, we intend to remain entrepreneurial, while carefully the same in different areas of Europe. leverage technology with the potential choosing where to spend our energy. Our

Our investment in Romania is the start to define the future of our industry. strategic focus remains on increasing our RSA performance of growing a good understanding of how internationalisation, building our Funds European property markets work. The Growthpoint’s sustainable Management business and unlocking Growthpoint management team have Q business model delivered a solid new opportunities through trading and already gained a deep understanding set of results that continued development for third parties. of the Australian market. We want to do the company’s track record this wherever we invest, with a team of dividend growth. What lies Our new strategies, income streams, of people who can grow the business. behind this performance? investment territories, green buildings, partnerships and technologies all extend

Managing risk is fundamental to our Our business model is defined by the strong foundation of our sustainable International performance business and has always been key to conservative financial management business model. They equip us with our approach. While our new strategic and investment. strategic competitive advantages and direction and initiatives will see support the lettability and profitability Growthpoint moving into new markets We have invested huge effort in building of our properties. and geographies, it will not see us a large, diverse, quality portfolio that moving significantly higher on the risk mitigates risk and gives us the size to The quality of Growthpoint’s portfolio of curve. In fact, we are derisking our South compete with other international businesses – V&A Waterfront, GOZ and African business by growing conservative players. GWI – makes them all leading players income streams from Australia and and shows our discipline in growing CSR and governance Europe. quality, predictable income streams. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 36 Integrated annual report 2017

INTERVIEW WITH THE CHAIRMAN

AND CHIEF EXECUTIVE OFFICER CONTINUED

In South Africa, we have downside access to debt and pricing. This is a Besides being included in proofed our business even more than it challenge for a business embarking on Q the FTSE/JSE Responsible already was. Our partnership with OPEN an internationalisation strategy. Investment Index for eight takes us beyond the traditional office years running, Growthpoint is marketplace. We recognise that the While Growthpoint’s international rating now also a constituent of the needs of office clients, especially, are is pegged to the sovereign rating, our FTSE4Good Emerging Index. going to change and become much more local rating remains unchanged. How do you keep ahead of flexible. In addition to our UNdeposit Growthpoint is one of only a handful the environmental, social and initiative, we are adding innovation to of AAA-rated South African businesses. governance (ESG) trends that the marketplace and enhancing our impact your business? business by making it more flexible Our prudent financial practices are all and agile. aimed at derisking our R29bn treasury The importance of environmental, social so any risk beyond pure property risk is and governance issues cannot be Growthpoint is the most liquid marginal and managed. stressed too strongly. Our drive for Q and tradeable way to own sustainability and getting our commercial property in South By nature, Growthpoint has always been programme of green initiatives off the Africa. What is the impact of a low risk, predictable business. Our ground has been an imperative for us, these high liquidity levels? treasury management is disciplined including energy saving, renewable and conservative. Some 85.6% of energy, green building, water saving and Being the most liquid REIT stock on the Growthpoint’s debt is fixed for 3.9 years waste management. It is what our clients JSE makes Growthpoint a compelling on average. We are focused on want and what our country needs. investment proposition, and our size optimising the cost of our funding makes us a participant in many of the relative to the duration of the loan book, Growthpoint believes in good indices that invest in our markets, and this year we decreased the weighted governance, not ticking boxes or window including being a top 10 constituent of average cost of debt slightly to 9.2%. dressing. We value substance and doing the FTSE EPRA/NAREIT Emerging Index. the right thing in the interest of all our Investors are willing to pay for liquidity, Growthpoint enjoys good access to stakeholders, including our employees, and this makes us attractive. It also, funding across multiple sources. We clients, partners, country and community however, makes Growthpoint the first refinanced a significant amount of debt at large. We are committed to achieving stock to rise or fall, in line with the during the year and increased our the principles we espouse in this markets. exposure to the bond market, relative to document and to truly implementing traditional bank debt. Debt markets were our intent. Growthpoint issued 102m new shares conducive for capital raises, and there during the year and raised R2.5bn in was a good appetite for Growthpoint Closing the wage gap and growing small equity through its distribution paper. We maintained the average length businesses that create jobs are the areas reinvestment programme. of the debt facilities on our book. Banks of priority on our transformation journey. also continue to hold Growthpoint paper They are how we measure our success. Your balance sheet is as high-quality liquid assets because of Q exceptionally strong with good our national scale AAA Moody’s rating. Green building, energy, water and waste access to capital. How did Most of our refinancing took place are all part of our environmental focus. South Africa’s credit ratings before the country’s credit downgrade, We aim to be leaders in this area. For downgrades impact your so pricing levels remained in line with instance, the V&A Waterfront is treasury management? previous issues. investigating the possibility of investing in a desalination plant, which would South Africa’s credit ratings downgrades This year, we continued to use the ultimately make it independent of make South Africa’s listed property positive financial impact of cross- municipal water supply. sector less competitive internationally currency interest rate swaps to finance because of the negative impact on offshore investment activities. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 37 About this report Organisational overview What is your outlook downgrade. The office sector will With the combined effects of its Q for FY18? continue to come under pressure as will investments and strategies, Growthpoint retail because of more competition. expects to achieve dividend growth for In the coming year, we will continue our Retaining clients and attracting new the coming year at a similar level to strategic drives and build on progress ones will come at an increased cost. FY17. made. In all things we do, we will seek ways to enhance the business and derisk Derisking further, we are considering the We will continue to add value for our it even more. To achieve our strategies, best ways to dispose of about 5% of our stakeholders with predictable and

we will also ensure that the necessary South African portfolio. We will also transparent income streams. Performance review management structures are in place. This continue to identify opportunities to will ensure that our strategic initiatives, grow internationally. in particular our internationalisation, There are many people and become embedded in our core focus. V&A Waterfront has a healthy and Q partners who have contributed They will be driven by dedicated teams strong core market supplemented by to the company’s performance responsible for achieving each strategy, tourism, and we expect good growth this year, but none more in the same way as our South African and demand. More developments are important than the Growthpoint business. expected to come on stream, adding team. What would you like them to its base. to know? Key matters Our strategies position us strongly to take up key opportunities for investment GOZ will continue to pursue growth The Board of Directors has a deep offshore and locally, grow our Funds opportunities in the office sector, in appreciation for the innovative and Management platform with our Africa Sydney and Melbourne specifically, dedicated way that the management and Fund and Healthcare Fund, and introduce to take advantage of the declining staff of Growthpoint have contributed other products to this platform. Also, we vacancies, growing population, significant throughout this difficult period in the are building a pipeline of opportunities infrastructure spending and gross GDP company’s history to ensure the for our trading and development growth in the states of New South Wales continued success and growth of its business. and Victoria. It will take advantage of business.

development opportunities, as well as RSA performance Our offshore expansion plays a key role further merger and acquisition prospects. in diversifying our portfolio and income streams across more markets. For GWI, Romania is performing well, with strong demand for offices from In the South African market, we expect global corporates. It will explore weakening property fundamentals opportunities in the central and eastern because there is insufficient economic Europe (CEE) region for office and growth to repair them. We are alert to industrial acquisitions.

the potential of a further debt International performance

JF Marais LN Sasse Chairman Chief Executive Officer CSR and governance 7 September 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 38 Integrated annual report 2017

FINANCIAL DIRECTOR’S review

Looking BEYOND our own borders

GERALD VÖLKEL, Financial Director

Growthpoint’s distributions are based on sustainable income generated from rentals.

Growthpoint delivered growth in and Globalworth Real Estate Investments The larger of these investments is the distributions per share for FY17 of 6.5% (GWI) are distributed to shareholders V&A Waterfront where our 50% share of and has declared a final dividend of bi-annually. properties is valued at R8.7bn. The other 100.8 cents per share for the six months equity-accounted investment is London ended 30 June 2017. This growth is in In Rand terms, total distributable Stock Exchange (AIM)-listed Globalworth excess of the guidance given to the income increased by R528m or 10.4% Real Estate Investments (GWI). market in the FY16 results of between and was supported by a solid Growthpoint acquired a 26.9% stake 5.0% and 6.0% and is 6.9% greater than performance from the South African in GWI during FY17 and its share of the FY16 final dividend of 94.3 cents portfolio, the V&A Waterfront and GOZ. properties is valued at R4.2bn. In per share. Globalworth and the Healthcare Fund addition, Growthpoint’s interest in GOZ, made their maiden contributions. is valued at R32.5bn. Growthpoint’s distributions are based on sustainable income generated from Growthpoint is the largest South African Equity raised rentals. Effectively, all rental income primary listed REIT, with total group During the period under review, received by the company and its 65.1% property assets valued at R122.3bn, of Growthpoint issued 102.4m shares held subsidiary, Growthpoint Properties which 30% is situated offshore. It has a and raised R2.5bn through the DRIP Australia (GOZ), less operating costs quality portfolio of 471 directly owned programmes. The equity raised from and interest on debt, including interest properties in South Africa valued at the DRIPs was utilised to finance received and distributable income R76.9bn, as well as two material Growthpoint’s investment activities. received from our equity-accounted equity-accounted investments in which investments in the V&A Waterfront its share of properties is valued at a total of R12.9bn. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 39 About this report

To watch the results presentation, please go to: https://www.youtube.com/c/growthpointbroadcast Organisational overview The company had 2.9bn shares in issue reconciled to the figures as reported in revenues by 21.2%. The ratio of property at end FY17 and the authorised capital terms of IFRS. We have referred to the expenses to revenue for the Group is 4.0bn shares. Growthpoint held statement of profit or loss and other decreased to 21.0% at FY17 from 21.8% 27 759 987 treasury shares at FY17 comprehensive income as the income at FY16. For RSA the ratio decreased to (FY16: 28 529 523). statement, and to the statement of 23.5% from 24.5% at FY16. financial position as the balance sheet Simplified financial statements for ease of understanding. Best practice recommendations were We have included a simplified issued by the SA REIT Association

distribution income statement and The Group’s accounting policies applied outlining the need to provide consistent Performance review balance sheet in this report. This has in the preparation of the audited presentation and disclosure of relevant been done in order to make the financial financial statements are consistent with ratios in the SA REIT sector. This will statements easier to understand, to those applied in the previous financial ensure information and definitions are reflect the cash-based operating results statements. clearly presented, enhancing as used by management and the Board, comparability and consistency across and to eliminate fair value and other Net property income the sector. Below are the Group cost to non-cash flow adjustments required in Gross revenue increased by 9.8% for income ratios, set out in terms of the the statutory financial statements in FY17 compared to FY16. The South three different definitions to comply terms of International Financial African operations increased revenues with these best practice Key matters Reporting Standards (IFRS). The by 6.5% compared to FY16. In Rand recommendations. management figures have been terms the GOZ operations increased

2017 2016 % % Property cost to income ratio Gross cost to income ratio 30.42 31.66 Net cost to income ratio 16.56 17.32 Cost to income ratio based on IFRS reported figures 20.95 21.77 RSA performance Operating cost to income ratio Gross cost to income ratio 4.15 3.49 Net cost to income ratio 3.88 3.15 Cost to income ratio based on IFRS reported figures 3.88 3.15 Total cost to income ratio Gross cost to income ratio 34.00 34.61 Net cost to income ratio 20.66 20.65 Cost to income ratio based on IFRS reported figures 24.83 24.93 International performance Finance income by Growthpoint. The weighted average Property asset acquisitions Finance income increased by 0.3% to interest rate for RSA borrowings was Growthpoint acquired three industrial R692m (FY16: R690m). This relates 9.2% or 7.4% including cross currency properties for R188m, five office mainly to the interest received on the interest rate swaps (CCIRS) (FY16: 9.3% properties for R191m and three debentures held in the V&A Waterfront or 8.5%). The weighted average maturity healthcare properties for R1.5bn during and other long-term loans of R709m of debt remained at 3.0 years. Finance the period. Development and capital that have been granted. costs for GOZ increased by 18.7% from expenditure for RSA amounting to R477m in FY16 to R566m in FY17 as a R2.1bn (FY16: R2.4bn) relates to various

Finance costs result of the GPT Metropolitan Office projects undertaken during FY17 with CSR and governance Finance costs increased by 1.8% to Fund (GMF) acquisition. The interest the Discovery Head Office accounting R2 510m (FY16: R2 466m). These cover ratio, whereby the income from for R669m (FY16: R497m). outflows were somewhat negated the equity-accounted investments and by the proceeds from the distribution listed investments are included in the GOZ acquired six office properties for reinvestment plans (DRIPs) offered operating profit, increased to 3.5 times R5.0bn (AUD480.3m) and incurred at FY17 (FY16: 3.3 times). development expenditure amounting to WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 40 Integrated annual report 2017

FINANCIAL DIRECTOR’S

REVIEW CONTINUED

R473.0m (AUD47.0m) of which R319.0m V&A Waterfront and other equity- Acquisition of GWI (AUD29.5m) was in respect of an office accounted investments On 20 December 2016, Growthpoint property development situated at The investments in the V&A Waterfront RSA acquired a 26.9% stake in the Wellington Road, Mulgrave, Victoria. and the other joint ventures have been London Stock Exchange (AIM)-listed GOZ has commitments of R150.5m accounted for in terms of IFRS 11 Joint GWI, which is classified as an associate, (AUD15.0m) which includes a commitment arrangements. The equity-accounting for a consideration of R2.7bn (€186.4m). method was used to account for the GWI owns a €1bn property portfolio to fund the development of 1 Charles Group’s share of the profit or loss and consisting of mostly modern A-grade Street, Parramatta, New South Wales for other comprehensive income of these offices, industrial properties, a residential an amount of R59.4m (AUD6.0m). investments. property complex as well as developments. Its portfolio is Development and capital expenditure Retail sales continued to grow on the concentrated in Bucharest and one in at the V&A Waterfront amounted to back of the increase in international Timisoara, Romania and is underpinned R557.6m in FY17 (FY16: R420m). tourists albeit that spending power was by Euro denominated leases with many reduced due to a stronger Rand. The multinational business brands. Disposals and held for sale assets V&A Waterfront hotels trade on average Transaction costs to date have been Growthpoint RSA disposed of at 63% more revenue per available room treated as part of the investment in the 17 properties in the current period than Cape Town city hotels. Included in the associate. A notional bargain purchase of (FY16: 16) for R1.8bn (FY16: R1.1bn) FY17 finance income is R524m income R78.0m has been identified as a result of from the V&A Waterfront, compared to this investment, and is included in fair with a collective R401m (FY16: R220m) distributable income for FY16 of R479m. value adjustments, capital items and profit on cost achieved. other charges. The investments in the V&A Waterfront GOZ disposed of seven properties in and the other joint ventures have been Other matters the current period (FY16: none) for accounted for in the statement of financial We remain aware of the impact of a R1.7bn (FY16: Rnil). position as the fair value of Growthpoint’s possible carbon tax on our RSA business. 50% interest in the net asset value For Growthpoint’s direct emissions the Fair value adjustments amounting to R7.1bn (FY16: R6.7bn) for cost is low, but we are cognisant of the The revaluation of properties in South the V&A Waterfront and R2.8bn possible impact on our tenants. Africa and GOZ resulted in an upward (FY16: R417m) for the other joint ventures. revision of R1.9bn (1.8%) in the value of investment property to a total of Investment in GOZ R109.4bn. This included investment Growthpoint increased its investment in GOZ from R6.3bn in FY16 to R7.9bn in properties classified as held for sale. FY17. This further investment of R1.6bn G Völkel Interest-bearing borrowings and related to DRIPs, where Growthpoint Financial Director derivatives were fair valued using the elected not to receive the distributions in swap curve, resulting in an increase of August 2016 and February 2017, but to R493m in the overall liability. In addition, reinvest the distributions in GOZ, as well losses of R288m and R140m were as a capital raise in November 2016. realised in FY17 on the settlement of an interest rate swap by the South African The total amount invested at year end operations and GOZ respectively. by Growthpoint for its 65.1% interest amounts to R7.9bn, the market value of These fair value adjustments, together which was R13.6bn at 30 June 2017. with the other non-distributable items Included in normal tax in the statement such as capital items, non-cash charges, of profit or loss and other comprehensive deferred taxation and the net effect of the income is R96m (FY16: R72m) that non-controlling interest’s portion of the relates to withholding tax paid on the non-distributable items, were transferred distributions received from GOZ. to the non-distributable reserve. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 41 About this report Organisational overview Simplified Distribution Income Statement For the year ended 30 June Total Group FY17 FY16 Notes Rm Rm Revenue 1 10 716 9 764 Property expenses (2 245) (2 126) Net property income 8 471 7 638

Asset management costs (314) (232) Performance review Other operating expenses (102) (76) Finance and other investment income 6 789 760 Interest paid (2 510) (2 466) Profit before taxation 6 334 5 624 Taxation 7 (98) (76) Profit before dividends and debenture interest 6 236 5 548 Minorities’ share of profit, realised foreign exchange loss and profit on sale of Stor-Age (636) (476) Dividends (including dividends on treasury shares) (5 600) (5 072)

Number of shares in issue (including treasury shares) 2 888 462 582 2 786 093 366 Key matters Dividend per share (cents) 195.8 183.8 RSA performance International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 42 Integrated annual report 2017

FINANCIAL DIRECTOR’S

REVIEW CONTINUED Simplified Balance Sheet At 30 June Total Group FY17 FY16 Notes Rm Rm ASSETS Property assets 8 109 442 104 690 Equity-accounted investments 9 920 6 821 Intangible assets 9 2 220 2 291 Derivative assets 356 107 Long-term loans granted 709 605 Listed investments 226 440 Equipment 15 6 Current assets 3 827 3 397 Cash and cash equivalents 613 901 Other current assets 3 214 2 496 Total assets 126 715 118 357 EQUITY AND LIABILITIES Shareholders’ interest 72 045 68 295 Non-controlling interest 6 709 5 871 Interest-bearing borrowings 42 568 38 580 Derivative liabilities 587 1 094 Deferred taxation 10 2 190 2 212 Current liabilities 2 616 2 305 Trade and other payables 2 572 2 276 Taxation payable 44 29 Total equity and liabilities 126 715 118 357 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 43 About this report Organisational overview Reconciliation between Statutory and Simplified Financial Statements for the year ended 30 June Total Group FY17 FY16 Notes Rm Rm

1. Revenue as stated 10 755 10 219 Less: Straight-line lease income adjustment (39) (455)

10 716 9 764 Performance review 2. Fair value adjustments as stated 1 954 409 Less: fair value adjustments reversed (1 954) (409) – – 3. Equity-accounted investment profit 369 543 Less: equity-accounted investment profit reversed (369) (543) – – 4. Non-cash charges as stated 133 121 Less: non-cash charges reversed (133) (121) Key matters – – 5. Capital items as stated 29 (32) Less: capital items reversed (29) 32 – – 6. Finance and other investment income as stated 692 690 Add: Dividends received on treasury shares 52 39 Add: Antecedent dividend received 45 31 789 760

7. Taxation as stated (48) (841) RSA performance Add: deferred taxation (50) 765 (98) (76) 8. Property assets as stated 108 201 102 752 Add: investment property reclassified as held for sale 1 241 1 938 109 442 104 690 9. Intangible assets as stated 2 362 2 461 Reversal of additional goodwill raised on deferred taxation liability* (142) (170) 2 220 2 291 International performance 10. Deferred taxation as stated 2 332 2 382 Reversal of additional deferred tax liability on intangible asset (142) (170) 2 190 2 212

* In terms of IFRS 3 Business combinations, goodwill was created as a result of the deferred tax liability that was raised on initial recognition of the property services businesses acquired. CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 44 Integrated annual report 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 45 About this report Organisational overview Performance review

Key Key matters matters RSA performance International performance CSR and governance

Green Square Close, Fortitude Valley, QLD WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 46 Integrated annual report 2017

Treasury MANAGEMENT This report pertains to the South African operations.

Capital flows this window of opportunity, as the bond market became less liquid Investment activities were mainly financed from property after Pravin Gordhan was recalled as the Minister of Finance at the disposals of R2.0bn, equity via DRIP proceeds of R2.5bn and end of March 2017. However, from about June 2017, the debt additional borrowings totalling R4.6bn. The investment activities capital markets seemed to become conducive again. Liquidity in consisted mainly of property acquisitions for both the South the capital markets is supported by the banks’ requirements for African portfolio and the Healthcare Fund, capital expenditure, high-quality liquid assets (HQLA), as well as the search for yield by additional investment in the V&A Waterfront and GOZ, and our international investors. Assuming the political landscape in South debut investment into GWI. Africa does not derail the bond market, we anticipate that the local debt capital markets will continue to support our funding Interest-bearing liabilities requirements. % of % of FY17 total FY16 total We view cross-currency interest rate swaps as synthetic foreign Rm debt Rm debt denominated debt. These swaps are used to fund foreign investments, as they are efficient instruments from a pricing point South Africa of view. At year end, cross-currency interest rate swaps of Secured debt: 16 816 57.4 16 683 67.7 AUD700m were entered into for Growthpoint’s investment in Bank debt 15 276 52.1 14 880 60.4 GOZ. This represents 76% of the historical cost of GOZ and 52% Institutional financiers 1 540 5.3 1 803 7.3 of the market value of GOZ. Unsecured debt: 12 472 42.6 7 970 32.3 Bank debt/institutional In December 2016, Growthpoint invested EUR186.4m in GWI. financiers 5 248 17.9 4 286 17.4 The investment was entirely funded locally by EUR100m loans Corporate bonds 6 824 23.3 3 284 13.3 and EUR86.4m cross-currency interest rate swaps. The weighted Commercial paper 400 1.4 400 1.6 average term of the Euro debt is 4.2 years and the weighted average interest rate on the total funding package was 2.6%. Total South African debt 29 288 100.0 24 653 100.0 Fair value on debt 119 2 The ratio of secured loans to total property value for the Deferred payment – South African operations is 19% as at 30 June 2017. Due to Samrand 85 165 the refinancing of existing debt, a number of properties Australia became unencumbered, resulting in total unencumbered Secured debt: assets (including the equity-accounted investments and listed Bank debt and loan note 13 076 13 760 investments but excluding the investment in GOZ) of R34.1bn. Consolidated debt 42 568 38 580 A larger pool of unencumbered assets allows for additional unsecured funding and it results in operational flexibility around disposal decisions. Growthpoint’s total South African debt increased by R4.6bn to fund our investment activities. The additional funding was FY17 debt expiry profile (RSA) (R million) obtained mainly through unsecured funding in the bond market, which now constitutes close to 25% of the total debt. It is 8 000 encouraging that several banks have become more inclined to provide unsecured funding. 6 000 747 6 122

Growthpoint undertook 17 new bond issues, which were both 5 391

4 000 747 4 659

publicly and privately placed for terms of between three and 4 460 seven years, at margins of between 140 and 185 basis points. 3 833 2 000

Interestingly, the REIT sector now constitutes about a quarter of 2 528 the outstanding R120bn worth of corporate bonds in South Africa. 0 800 Debt capital markets showed significant liquidity after the rating FY18 FY19 FY20 FY21 FY22 FY23 FY24 agencies decided to leave South Africa’s investment ratings ■ ZAR loans ■ EUR loans unchanged in December 2016. Growthpoint took advantage of WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 47 About this report Organisational overview Cost of funding In various discussions, financial institutions have indicated their The cost of funding of ZAR debt decreased slightly over the commitment to Growthpoint and we are confident that we will financial year, from 9.3% to 9.2%. If the cross-currency interest be able to raise sufficient funding from the banking sector and rate swaps and the Euro debt are included in the calculation, the debt capital markets for our ongoing investment programme as weighted average cost of funding reduces to 7.4% (FY16: 8.5%). well as the refinancing of maturing loans.

Growthpoint observed a contraction in the credit spreads in the Credit ratings and covenants bond market, mainly due to our Aaa.za national scale rating Following the cabinet reshuffle in March 2017, the rating from Moody’s as well as the demand for HQLA bonds by the agencies took action on South Africa’s sovereign debt ratings. banks and the surplus liquidity in the bond market. Pressure This impacted Growthpoint’s credit ratings as well, due to our Performance review remains on the funding spreads of the banks due to the Basel III operational concentration in South Africa. regulations. On 19 June 2017, Moody’s confirmed Growthpoint’s ratings at: The weighted average term of the liabilities remained stable Global scale rating – issuer Baa3 at 3.0 years for FY17 compared to FY16. From a strategic Global scale rating – short term (P)P-3 viewpoint, the intention is to lengthen the debt maturity profile National scale rating – long-term issuer Aaa.za gradually over time. National scale rating – short-term issuer P-1.za Growthpoint has total undrawn facilities of R4.5bn, which covers the debt that is maturing within the next 12 months. The Growthpoint’s current Baa3 rating and the negative outlook is at Key matters undrawn facilities are spread across a number of different the same level as South Africa’s long-term bond rating. financiers and terms. Growthpoint was also assigned the highest possible national FY17 debt expiry profile RSA – detail (R million) scale credit rating of Aaa.za by Moody’s, which indicates that the agency views Growthpoint as having a very strong credit profile 8 000 compared to other South African corporates. The rating upgrade 310 followed Moody’s recalibration of its National Scale Ratings 1 504 1 229 6 000 methodology for South Africa in June 2016. 1 301 1 533 2 148 835 3262 115 500 594 1 618 According to Moody’s, any future upward or downward pressure 4 000 400 950 RSA performance 800 3 560 3 493 262 on Growthpoint’s ratings and outlook will have to be considered 3 058 3 115 875 1 350 in the context of the South African sovereign rating position and 2 000 2 087 outlook at the time. The current negative outlook to the ratings 475 800 703 0 is also linked to the outlook on South Africa’s sovereign credit FY18 FY19 FY20 FY21 FY22 FY23 FY24 ratings. ■ Undrawn facilities ■ Corporate bonds ■ Commercial paper ■ Unsecured loans ■ Secured loans

Growthpoint’s strictest loan covenants are recorded in the table: FY17 FY16 International performance Including Excluding Including Excluding Limit GOZ GOZ GOZ GOZ Covenants Loan to value [nominal debt (net of cash)/property fair value plus equity accounted and listed investment] ≤50% 35.0% 33.4% 33.7% 30.5% Interest cover [net property income/net interest expense] ≥2.0x 3.5x 3.4x 3.3x 3.2x

Growthpoint is well within its covenant requirements and targets to maintain its loan to value ratio below 40%. CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 48 Integrated annual report 2017

Treasury

MANAGEMENT continued

Interest rate risk management Exchange rate risk management FY17 five-year swap rate (%) FY17 AUD/ZAR

8.4 11.5 8.2 11.0 8.0 7.8 10.5 7.6 10.0 7.4 7.2 9.5 7.0 9.0 6.8 6.6 8.5 Jul Sep Nov Jan Mar May Jul Sep Nov Jan Apr May 2016 2016 2016 2017 2017 2017 2016 2016 2016 2017 2017 2017

Growthpoint’s earnings are exposed to changes in interest rate The volatility of the Rand can be viewed in the above graph and risk because a portion of its properties are funded by liabilities. was exacerbated by the recalling of the Minister of Finance in However, we have a policy of hedging at least 75% of all our March 2017. liabilities at a fixed interest rate, which reduces the earnings volatility. At year end, 85.6% of Growthpoint’s liabilities were From a balance sheet perspective, our GOZ investment is now hedged at a fixed interest rate, a marginal decrease from partially hedged via the cross-currency interest rate swaps. These 86.6% in FY16. The weighted average term of the fixed interest ensure that Growthpoint is still able to obtain a positive margin rate profile reduced slightly from 3.4 years in FY16 to 3.3 years between the yield received on GOZ and the interest rate implied in FY17. However, if the relevant AUD cross-currency interest in the swaps. rate swaps and the EUR vanilla interest rate swaps are included, the weighted average term increases to 3.9 years. Growthpoint’s earnings are also subject to exchange rate movements, largely due to the dividend receipts from GOZ, FY17 fixed interest rate expiry profile RSA (%) which are subject to volatility in the AUD/ZAR exchange rate.

25 At 30 June 2017, only 29% of the expected dividends for FY18 were hedged either via forward exchange contracts or

20 21 cross-currency interest rate swaps. This implies that for a

15 17 R1 change in the AUD/ZAR exchange rate, Growthpoint’s

14 earnings would be impacted by 2.1 cents in distribution per 10 11 share for FY18. Following year end, the ZAR has weakened 9 9 against the AUD and Growthpoint has gradually entered into

5 6 more forward exchange contracts. 3 3 3 2 2 0 0 Floating FY19 FY21 FY23 FY25 FY27 FY29 Since our investment in GWI, Growthpoint’s earnings have also been affected by changes in the EUR/ZAR exchange rate. At year end, 71% of the expected dividends from GWI for FY18 were Should interest rates increase by 1%, Growthpoint would pay an hedged either via forward exchange contracts or Euro interest additional R42.2m in interest, which would translate to 1.5 cents obligations under various financial instruments. This implies that in distribution per share. Growthpoint, therefore, believes that for a R1 change in the EUR/ZAR exchange rate, Growthpoint’s our interest rate risk is well contained. earnings would be minimally impacted by 0.1 cents in distribution per share for FY18. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 49 About this report

ENVIRONMENTAL INITIATIVES Organisational overview We strive to reduce our consumption and have a greater positive impact on these and other environmental considerations, wherever possible. We do this through effective environmental management, stakeholder engagement and education.

Growthpoint is committed to responsible Our sustainable development journey and the increasing inclusion of environmental environmental conduct that goes well considerations in our operations helps us to do business better. As a prominent owner Performance review beyond our legal and regulatory and manager of properties in South Africa, we are unrelenting in our efforts to provide requirements. The Board, management leadership for green property development because it better accommodates the needs and staff of Growthpoint are dedicated of our clients and ensures the long-term sustainability of our business. This is in line to reducing the company’s with our strategy. environmental impact and continually improving our environmental We have developed a strategic sustainability framework to highlight five key focus areas performance as an integral part of for Growthpoint. More details about this are available in our 2017 ESG report. our business strategy. Each sector in our South African business – retail, industrial, office – has a different Growthpoint constantly monitors and degree of focus on environmental sustainability. Key matters advances environmental performance as our business grows and evolves. Our Office Retail Industrial environmental policy focuses on climate Solar Solar Solar change, carbon emissions, energy, water, waste and biodiversity. We strive to GBCSA Green Star GBCSA Green Star reduce our consumption and have a SA certification SA certification greater positive impact on these and Water reduction Water reduction Water reduction other environmental considerations, Green addendum wherever possible. We do this through effective environmental management, Smart utility meter installations Electric vehicle charging stations RSA performance stakeholder engagement and education. GreenX5.0 campaign (energy and water) We work with staff, tenants, suppliers Energy reduction Energy reduction Energy reduction and others to find the best possible Waste management Waste management Waste management solutions within our business limits. Our efforts are multifaceted and ongoing. Greenovate Awards Greenovate Awards Greenovate Awards They address issues that span across the business as well as more focused Target setting is challenging because our Throughout the business, there is a projects. baselines change from year to year when growing awareness from our employees, we acquire and sell buildings in the tenants, supply chain and other International performance We want to make a constructive ordinary course of our business. Despite stakeholders about environmental contribution to national environmental this, we have worked hard to strengthen considerations. We are committed to objectives and carry out local and our understanding of the various working with a variety of partners, and international best practices for our elements and the risks and opportunities explore initiatives that will benefit our business, where they are suitable. they pose to the sustainability of our business and community. Growthpoint actively addresses business. environmental issues as part of various Energy national, local and international During the year, we committed to setting Growthpoint’s efforts to achieve energy platforms as a representative of the scientific based targets (SBTs) for our Scope efficiency and our investments in

property sector and a responsible CSR and governance 1 and 2 carbon emissions, expanded our renewable energy show our commitment business. We are recognised as a leader internal assessment on water, continued to optimising our operations. We are and a catalyst for a more sustainable our drive to increase the number of investigating new and better ways to property sector. buildings with GBCSA Green Star SA ratings, incorporate renewable energy as part investing in solar power plants and of the energy mix for our buildings. We developed a waste strategy. We also worked have invested more than R102m in solar tirelessly to ensure the integrity of our data energy so far. Additional funding of monitoring and collection. R27.2m has been contributed by co-owners and grants. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 50 Integrated annual report 2017

ENVIRONMENTAL

INITIATIVES continued

FY17 FY16 FY15 Energy produced by solar (kWh) 7 037 336 2 559 482 941 834

Emissions saved (tCO2e) 7 037.33 2 559.48 951.25 Annual saving (R) 8 029 105 1 928 607 1 480 663 Note: This information relates to all projects but excludes the V&A.

We want all our office buildings to use an energy water performance tool (EWP) Growthpoint recently embarked on a less than our internally set benchmark developed by GBCSA and co-sponsored waste management and analysis process. of 200kWh/m2 a year by 2020. All new by Growthpoint and retail with a tool To reduce the amount of waste sent to office developments should achieve a developed by one of our utility landfill, and to mitigate the risk from minimum 4 Star Green Star SA rating. As management companies. potential legislation against wet waste part of our commitment to reducing (organic waste) dumping, Growthpoint carbon emissions, Growthpoint made a We are still in the early stages of partnered with Life and Earth to create COP 21 commitment to have the entire assessing our retail and industrial a wet waste diversion trial project. office portfolio of 184 buildings spanning portfolios. Meanwhile, we are addressing 1 790 428m2 at FY15 certified with a quick wins. We should have more detail Carbon emissions minimum of a 4 Star Green Star SA on our efforts in next year’s report. Reducing carbon emissions remains a rating by 2020. The gross lettable area focus for Growthpoint. We audit our (GLA) at FY17 is 1 750 606m2. Our immediate focus included extensive carbon footprint yearly. We continue to property audits, fixing leaks and installing work towards reducing our carbon More solar installations were approved water meters: emissions impact further and ensuring during the year and will be completed just under 25 000 kilolitres of water that we contribute positively to both in FY18. They will produce a further saved in FY17 national and international carbon 1 755.8MWh per annum. 97 office buildings audited reduction objectives. Early in FY18, we submitted our commitment to SBTs, and Water The drastic decrease of water we have started our carbon emissions Water is the most basic natural resource consumption in the office portfolio is assessment. we have. South Africa is a semi-arid shown in the graph on page 51. country and the drought experienced Our carbon footprint includes all across the country in the past two years Waste properties owned and managed by has placed water scarcity under the We developed a new process to collect Growthpoint, where we have operational spotlight. data about the waste generated by our control. Our targets were revised with buildings. With a better understanding our FY15 carbon footprint as the new We want all our office buildings to of the types of waste collected, base year. Our current intensity per consume less water than our internally Growthpoint is in a better position to square metre is 0.16tCO2e and we aim set benchmark of 0.88kℓ/m2 a year by develop a comprehensive waste to reduce this by 5% over the next five 2020. To achieve this, we undertook an management and recycling strategy. years. initial in-house water risk review of We are reducing waste going to landfill, Growthpoint’s entire portfolio. We and improving recycling at more benchmark our office buildings with buildings.

Carbon emissions FY17 FY16 FY15

Total Scope 1 and 2 (tCO2e) 1 947.30 2 130.29 2 209.10 Scope 1 and 2 GLA (m2) 13 823 13 328 12 378 Intensity GLA 0.14 0.16 0.13 Intensity revenue 0.24 0.27 0.26 Intensity per full-time employees (FTE) 3.09 3.24 2.73 GLA under review m2 4 771 572 4 844 719 4 180 333 Number of buildings reviewed 386 390 363

Total Scope 1, 2 and 3 (tCO2e) 785 532.81 834 196.42 644 351.05

With the looming implementation of a carbon tax in RSA, the possible risk to the business was assessed and considered to be relatively small, based on current legislation. This could, however, have a big impact on some of our clients and, if their financial stability is called into question, it could impact Growthpoint. To manage risk, we are introducing more energy-efficient systems across our portfolio. We have renewable solar power at some properties and the Green Addendum to our leases helps to change tenant behaviour for our mutual benefit. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 51 About this report Organisational overview Biodiversity and collective action programmes and Financial impact of environmental Growthpoint’s buildings are primarily projects. Growthpoint takes part in many events in urban areas, so our impact on initiatives run by the NBI, including the The impact of changing weather biodiversity is limited. CEO Initiative. conditions has financial implications. We have started to track this data and The main area of our business that Growthpoint and Green Building Council the cost of various incidents. This informs could influence biodiversity is property South Africa (GBCSA) jointly developed our risk strategy. Below is an account of development. For all developments we the Greenovate Awards. This partnership the cost of weather-related damage to undertake, there is rigorous engagement introduces university students to green our properties. Please note, costs relating with local councils, and we adhere to all building thinking and recognises to the year under review could be Performance review necessary legislative and regulatory excellence in its application. Our projects, restated if there is a case that has not requirements. Environmental impact such as the waste pilot, ebike pilot, been concluded at the time of reporting. assessments consider biodiversity when electronic vehicle charging stations and Costs are allocated according to the year a project is reviewed. Growthpoint green addendum, are all made possible in which the event takes place. undertakes to ensure that all through collaboration with various environmental legislation is adhered to partners. in line with national building regulations. Cost of environmental events (Rand) We also engage extensively with local Rain/ authorities to ensure that all social Earthquake flooding Hail Wind Lightning Total concerns are addressed. Key matters 2017 4 152 841 371 372 4 277 166 172 4 694 662 External and internal stakeholder 2016 3 185 897 233 761 32 834 386 82 300 36 336 344 engagement 2015 414 821 856 731 69 750 1 341 302 Growthpoint is represented on the South African Property Owners Association 414 821 7 338 738 1 461 864 32 908 413 248 472 42 372 308 (SAPOA) sustainability committee. We also participate in initiatives led by the More details about Growthpoint’s Major project for FY18 Department of Energy, especially environmental achievements and its Green building certification providing input in the Energy major projects for FY17 can be found Water efficiency

Performance Certification programme RSA performance in the 2017 ESG report. Energy efficiency and establishing energy reduction targets Thrive portfolio launch (combination in the commercial property industry. Major projects and achievements of SAPOA and GBCSA data) for the year under review Disclosure of our energy and water As a member of the National Business Solar plant investment data for office with a digital platform, Initiative (NBI), Growthpoint works Water efficiency namely the Growthpoint app towards sustainable growth and Waste management Greenovate (engineering stream) development in South Africa and shapes Green addendum Smart utility meter roll out a sustainable future through responsible Green building certification Further renewable energy business action. The NBI’s strategy Greenovate Awards investigations. addresses issues of economic transition Ebikes pilot project International performance and social transformation through Electric vehicle charging station. thought leadership, capacity building

Monthly water savings (FY17) (volume of water saved (kℓ))

35 000

30 000

25 000 CSR and governance

20 000 31 976.37 30 232.88 29 500.71 15 000 22 490 23 579.78 10 000 19 628 21 423.12 7 983.61 22 296.744 7 873.42

5 000 4 995.61

0 12 826.114 Jul 16 Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 52 Integrated annual report 2017

GROUP SERVICES

ESTIENNE DE KLERK, Managing Director

Growthpoint featured in Brand Finance’s list of South Africa’s 50 most valuable brands for the first time.

Our Group Services focus purely on our more focused approach in both areas already seen positive results because of South African business. We review them to improve efficiencies. Both divisions the change. for opportunities to evolve, refine and influence our compliance in key areas improve support performance. such as transformation and We appointed a new head of Human empowerment, health and safety, and Resources (HR) and advances in our HR Several highlights and milestones were resource efficiency and environmental service resulted in significant changes achieved within the different services impacts. We consulted internally and to our employee benefit suppliers and during the year. Notably, Growthpoint externally for best-of-breed practices, providers so that we can offer our featured in Brand Finance’s list of South processes and operating procedures to employees quality retirement benefits Africa’s 50 most valuable brands for the optimise efficiencies of scale. In line while preserving acceptable levels of life first time. We became the only SA REIT with these findings, we adopted new cover. You can find more detail on this to be included in this prestigious index. management structures and appointed in the HR and remuneration report on dedicated skills in various areas of pages 56 to 69. We are also adopting job Motivated by our growing business and expertise. We also set up a facilities grading and formalising our HR advancing industry, we separated our management centre of excellence to structures to ensure improved facilities management and procurement improve and standardise our services employment practices. Attracting and divisions. We identified the need for a across the South African group. We have WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 53 About this report Organisational overview retaining skilled people remains a focus Addressing 80% of high spend Providing operational touch points or area. It is key for Growthpoint’s success. suppliers interfaces for developments, Improving Growthpoint’s B-BBEE sustainability and other infrastructure We completed groundwork preparations scorecard by 10% programmes for future information technology in our Ensuring contract compliance Investing in and researching enabling Compiling quarterly reports. technology solutions to streamline business. We reviewed all our business service delivery and automate processes and system requirements and Highlights for FY17 integrated processes followed a request for proposal (RFP) Our new management and restructured Maximising B-BBEE spend on services

process, which should result in acquiring Performance review team improved efficiencies and service procured for operating and and implementing new property delivery. We appointed a strategic maintaining properties administration and asset management Continuously researching and sourcing specialist, strengthened systems. This will provide worthwhile benchmarking expenses and facilities interdepartmental collaboration and improvements in our efficiency and management best practices to create reviewed our RFP process, for which client experience. value for all stakeholders. we have a new approach. Strategic Procure to pay procurement changes shifted our focus Highlights for FY17 Objectives to procuring at source and fit for Growthpoint is a proud, active Platinum Our procure to pay division creates purpose. We also identified key member of SAFMA (South African seamless processes for the way in which procurement areas and improved our Facilities Management Association and Key matters we work by collaborating with various efforts to engage with stakeholders GBCSA. During the year, our team internal and external stakeholders. This particularly on issues such as B-BBEE, embarked on the SAFMA Professional division drives value in the focus areas of cost efficiencies, and improved service Accreditation programme and the cost efficiencies, requests for proposals delivery from suppliers. In a major GBCSA Green Star SA Accredited (RFPs), projects, supplier negotiation, project, we undertook a detailed analysis Professional programme for existing measuring supplier performance, and of suppliers to highlight risks and and new buildings. The Growthpoint B-BBEE supplier development. It ensures improvements. We plan to introduce a Maintenance Service Desk has proven that key spend goes through the supplier scorecard for assessing key extremely successful since launching indicators and compliance issues. procurement division, and is involved in in May 2015. It provides us with trends RSA performance the development phase of stakeholder that help us proactively add value and Facilities management projects. It is also responsible for improve services for our clients. A Objectives achieving compliance through best Strategic Facilities Management System/ Our facilities management division is practice processes and policies. This Standard (SANS 1752:2017 Edition 1) responsible for fostering a culture of service leads stakeholder engagement to was approved for publication in March collaboration to support the delivery consolidate and leverage our company- 2017. Growthpoint is working closely of maintenance solutions, value-adding wide spending power. Similarly, it with the Compliance Working Group to client experiences and quality facilities manages supplier numbers to leverage secure our compliance and certification throughout the asset lifecycle. It is meaningful supplier relationships. It to this standard. We enhanced our Risk guided by best practice and legislation. International performance optimises our use of working capital. Improvement Management System Procure to pay makes sure that contracts (RIMS) by adding a policy-tracking Key performance indicators module, which supports corporate and service level agreements are in place Improving customer experience with with suppliers. knowledge sharing, standardisation governance, policy and procedure and consistency of the facilities management, compliance and risk Key performance indicators management function across the management programmes as well as Achieving total cost savings from organisation mandates and regulations such as OHSA, approved projects, RFPs, and Maintaining all mechanical, electrical, as it applies to the property industry. We negotiations structural and civil aspects of each launched our facilities management Ensuring quality service delivery asset under management within the Centre of Excellence (CoE) to drive CSR and governance through a regimented and fair process official investment strategy synergies and best practices and to of supplier selection and award of Ensuring that all assets comply with improve collaboration between business and are maintained within Growthpoint’s retail, industrial and Implementing and recording of cost Occupational Health and Safety Act office sectors. savings and cost avoidance (OHSA Act) requirements, local Reducing lead time with suppliers and by-laws and SABS/SANS standards service providers WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 54 Integrated annual report 2017

GROUP

SERVICES continued

Legal manage conveyancers on the panel. We Highlights for FY17 Objective also provided ongoing assistance with Media coverage for the Growthpoint Our legal team supports the South finance agreements with our financiers brand was valued at more than R34m African sectors of the business across all and helped to implement with OPEN for the year under review. The team geographic regions, as well as the Group collaborative workspace initiative. successfully executed 154 events for Service divisions, by providing legal clients and staff. Digital communication services and support. Corporate marketing and continued to be a key focus, in line with communication the changing media consumption habits Key performance indicators Objective of our target markets as well as Implementing standard Our corporate marketing and according to the green philosophy we documentation within the business communication team is responsible follow. We were proud to receive a to identify, monitor and manage risk for establishing and increasing positive commendation from SAPOA for Implementing and improving engagement with the Growthpoint innovation in the property sector for procedures to ensure compliance with brand for all our stakeholders. our newly developed Growthpoint app, legislation which was received very favourably by Providing solutions to legal challenges Key performance indicators that are practical, innovative and brokers and clients. The Growthpoint Maintaining and upholding the website was revamped and updated to enhance business Growthpoint brand and corporate be mobile friendly and interactive. Its Monitoring ongoing projects/ identity transactions to ensure risks are Identifying marketing opportunities content was also modified in line with managed, deadlines are met, and costs in line with the sector’s strategic the ever-changing communication needs reduced objectives to promote Growthpoint’s of our office, industrial and investor Keeping employees abreast of new activities and projects, and executing relations divisions. Growthpoint’s legislation and amendments to these creatively and cost effectively quarterly digital newsletter Touchpoint existing legislation Integrating and promoting the continues to gain traction with our Ensuring employees are regularly Growthpoint culture and values clients. We have changed its content trained and assisted with the legal among all staff nationally, in aspects of our day-to-day business. focus to make it more global and collaboration with HR introduced new sections based on what Driving and measuring research and has been popular. Readership is still Highlights for FY17 other initiatives to improve tenant growing, and our international readers We have redrafted our office lease attraction and retention agreement in line with current industry Continuing to effectively engage our are mostly from the UK, Russia and the trends and legislation and have reviewed clients through all communication USA. Currently, almost 30% of readers and updated our retail hybrid lease platforms with emphasis on “green” are return readers. With our increasing agreements with major retailers. We media (very limited print) digital communication and strategic use fulfilled compliance with the Community Enhancing client and supplier of social media, we saw a significant Schemes Ombud Service Act (CSOS), relationships through clear, regular jump in engagement in the second half communication, as well as providing which requires us to register all sectional of the year. Facebook and LinkedIn often opportunities for face-to-face title schemes and park owners garner thousands of views for each interaction associations with the Ombud. Our team post. We committed to a two-year Supporting the property industry with sponsorship with Tennis SA, where we contributed to the legal due diligence for strategic sponsorships and gatherings can make a real contribution to the GWI transaction. We also managed Supporting our vision by providing and ensured the successful transfer of information to stakeholders that is developing the sport in South Africa, as 37 properties, and drafted 78 disposal relevant, substantial, understandable well as enjoying strong brand exposure. and acquisition agreements. We and factual. We also recently announced a two-year implemented processes to monitor and WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 55 About this report Organisational overview sponsorship of three key tournaments line with the strategy, and we have Implementing a formal investor for Squash SA. decided there should be minimal relations strategy modification and no customisation of Taking a proactive approach to Information technology (IT) these systems. As always, during the year investor relations by planning the Objective we made general improvements to our calendar a year in advance Setting disclosure policy and adhering Our IT service supports the South African IT, efficiencies and optimisation. sectors of the businesses across all to it Analysing and understanding our geographic regions by providing Our successful projects include: shareholder base information technology services and Successful move of the Cape Town Targeting specifically identified Performance review support. office investors Development and standardisation of Upgrading the investor relations Key performance indicators Exco pack and sector reporting section of the website Effective use of outsourced Launch of the new Growthpoint Appointing and managing service operations and internally focusing on leasing app, which received a providers for the results cycle. enhancing IT value to the business commendation from SAPOA for innovation Optimising performance of the IT Highlights for FY17 infrastructure and the deployment Revamped the Growthpoint website. We increased Growthpoint’s exposure of human resources to foreign investors through non-deal Identifying, assessing, mitigating and Investor relations Key matters monitoring IT risks Objectives roadshows in the USA (New York, Boston Securing the IT environment and Our investor relations team is and Chicago) and the UK (London). We reducing vulnerabilities affecting responsible for creating better awareness also undertook a site visit in Bucharest operations and the business and understanding of Growthpoint in the to showcase the properties of GWI. As Complying with the King IV IT investment community in order to gain well as attending four local and two governance principles access to capital and achieve liquidity as international investor conferences, we Successful disaster recovery testing well as a fair valuation of its shares. This held more than 50 one-on-one investor Monitoring IT spend versus budget includes ensuring that Growthpoint’s meetings. Coverage of the sector and Devising IT strategy Growthpoint was initiated by prestigious Business continuity. strategy is clearly defined and well explained and that its investment global property investors. RSA performance Highlights for FY17 proposition is well set out. The investor Overall winner of the Investment Analyst This year, we shifted from King III to relations division is also tasked with Society (IAS) excellence in financial King IV and, thus, introduced a new IT attracting a diversified shareholder base reporting and communication awards governance framework. We also set up across investor type, investment style 2016. Recipient of IAS best reporting and a new business continuity framework, and geography. communication in the property sector including successful disaster recovery for four consecutive years. testing. Completing our new IT strategy Key performance indicators was a major project and, as part of this, Diversifying the shareholder base further geographically we evolved new mapping of all business International performance Attracting large, prestigious processes with Deloitte, and subsequent international investors to the standardisation and optimisation. Our shareholder register new strategy also required issuing an RFP to evaluate several systems and property management solutions. A review of our shelf solutions was also undertaken in CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 56 Integrated annual report 2017

Our People In line with our HR strategy and in partnership with our business units, we will develop an integrated talent management strategy and plan for each functional area.

The most important assets in our Recruitment have invested in employee development organisation are our people – our human Learning and development with the aims of strengthening our capital – and any plans to move our Work environment business performance, while business forward and realise shareholder Staff relations emphasising: value start by focusing on them. Overall improved operational employee performance management efficiencies. development plans During FY17, Human Resources (HR) internal talent management, and achieved progress in the areas of: Employee development continues to leadership development for managers. Strategic workforce planning be our key strategy in driving a high- Talent attraction and management. performance culture. Over the years, we

Staff profile FY17 FY16 Employee statistics Number of employees 630 657 Net property income per employee (R) 9 806 349 8 713 851 Average tenure of employees (years) 7 7 Annualised attrition rate (%) 11.2 8.4 Average age of employees (years) 44 42 Minimum CTC – lowest level of employee (R pa) 96 600 95 000 Direct investment in employee training (Rm) 5.8 4.7 Total cost of employee training (Rm) 8.6 6.1 Number of employees trained 606 456 Hours of training per employee 6 6 Total number of sick days 2 011 1 951 Weighted average number of sick days per employee 3.9 2.9 Number of physical injuries 7 4 Days lost to incidents 27 6 Serious occupational injuries nil nil

In FY17 we realised a 3% increase in female employee numbers compared to last year. During the year, there were 28 employees on fixed temporary contracts, ranging from six-month to long-term contracts. HR dealt with 23 industrial relations cases this year. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 57 About this report Organisational overview

Employees by gender (%) Employee race profile (%)

50 2017 50 44 2017 Performance review

14 7

■ Male ■ African ■ Female ■ Coloured ■ Indian ■ White Key matters Self-review (%) Manager reviews (%)

9 2

2017 2017 RSA performance

■ Completed ■ Completed ■ Incomplete ■ Incomplete

Learning and development – allowing We ensure that our people get the Highlights achieved for the year International performance Introducing an HR business partner our employees to thrive support and resources they need to learn model In FY17, our development approach and thrive in their careers. This model has ensured that the HR comprised: department continues to participate in training and development programmes During the year, 606 employees took strategic planning to help the business bursaries part in various development initiatives. meet current and future goals as well on-the-job learning Of the 606, 259 were women and as performing duties such as benefits, management development 347 were men. 314 were black and payroll and employee relations. HR will coaching and mentoring, and 292 were white. add value to the company by overseeing change management sessions. the recruiting, training, advancing and CSR and governance placing of new and current employees. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 58 Integrated annual report 2017

Our

People continued

Learning and development highlights: Employee Assistance Programme (EAP) the group life cover to place more Real estate learnership: We We are proud of our EAP, a voluntary, financial value in the employees’ successfully implemented the real confidential programme that helps our retirement benefit than in theg roup life estate learnership programme to ensure employees (including management) cover, while still giving those employees continued skills development for the work through various life challenges that who wish to have higher life cover an industry. Growthpoint will benefit from may adversely affect job performance opportunity to do so. a sector regulation (Estate Agency health, and personal wellbeing. This helps Affairs Board) and B-BBEE perspective. our employees and optimises our Growthpoint GEMS However, the major beneficiaries of this success. This programme launched in 2016 to initiative will be employees, who will be provide educational grants for equipped with a recognised qualification EAP services include assessments, dependants of qualifying employees, upon completion of the programme. In counselling, and referrals for added and it now benefits 35 learners. More total 20 employees took part in the services to employees with personal information can be found in the programme, of whom 85% (17) were and/or work-related concerns, such as corporate social responsibility report from designated groups, i.e. african, stress, financial issues, legal issues, family on page 119. indian and coloured. problems, office conflicts, and alcohol Academy of excellence: This is an and substance use disorders. Grievance procedure internal knowledge sharing programme Employees with a grievance can address which draws on expertise from field Our programme often works with their concern directly with their manager specialists and disseminates it to management and supervisors providing or engage with the HR department. participants. The programme was advanced planning for situations, such successfully implemented and took as organisational changes, legal We have a whistle-blowing hotline and place over an eight-week period, with considerations, emergency planning, and encourage employees to raise concerns 39 participants. response to unique traumatic events. about workplace malpractice without Young talent programme: Piloted in fear of victimisation or reprisal. 2016, the programme was a success HIV and Aids focus and continued in 2017 with a 45% Growthpoint strengthened its HIV Labour and employment practices increase in the number of graduates and Aids awareness and education Growthpoint is not a unionised taking part, which grew from five to programmes through voluntary testing, environment but places no restrictions nine. employee education and providing prohibiting employees from freedom of access to counselling for affected association. Performance development employees and their families. Considering Performance review moderation the profile of our employees, who are Staff volunteerism To ensure objectivity in the final service, administrative, management and Our year-round staff volunteerism performance reviews, we implemented professional staff of an average age of initiative, GSquared, is an action a moderation process, where managers 44 years, there is likely to be HIV orientated community engagement participated in the moderation of prevalence of 3% to 6%. initiative for staff. During the year, performance against: Growthpoint gave every one of its staff Company performance Compensation and benefits members eight hours to take part in Business units objectives Retirement benefits community development work. Peers. To ensure that our employees are taken care of in their retirement, we reviewed WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 59 About this report Organisational overview Human rights department and work environment. This dictate the transformation agenda for Growthpoint is committed to upholding will be achieved through functional the company, which will include human rights, including freedom from HR leadership and advice, HR policy developing and promoting women into discrimination of any kind. In line with framework and quality HR services senior roles. Growthpoint will focus on our country’s Constitution, we do not through which Growthpoint’s people are its five-year employment equity plan. support any form of hate speech, and we catalysed to deliver shareholder value. Its Diversity and Inclusion forums, believe every individual has the right to established in 2016, will play a pivotal live the way they choose. Furthermore, Integrated talent management plan role in drafting and implementing the our commitment to human rights In line with our HR strategy, and in plan. includes indigenous rights. We uphold partnership with our business units, Performance review the principles of freedom from child we will develop an integrated talent Strategic learning and leadership labour and forced labour. We do not management strategy and plan for each development prohibit employees from freedom of functional area. This will encompass We will continue to develop the association. strategic recruitment, succession knowledge and skills to enable planning, forecasting and the Growthpoint employees to meet the Future focus development of internal and external organisation’s main objective of To ensure that we continue to create a talent pools. delivering shareholder value, and grow space for our employees to thrive and the requisite skills for our industry. deliver shareholder value, the following Transformation will be our focus areas for FY18: While the company has made strides in Job design Key matters its junior employee levels, we recognise We will undertake job evaluation and a Create a world-class HR service and that we need to focus our energies on pay scale design to support HR planning work environment transforming the organisation from and will set up both staffing and In line with international best practice, supervisory levels right to executive level. organisational structures. An integrated and to align to the company’s strategy Transformation cannot be viewed in job design will enable us to make for regional and global growth, we will isolation from succession management. informed decisions about recruitment aim to create a world-class HR The employees that we recruit will and staff development and promotion. RSA performance International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 60 Integrated annual report 2017

Remuneration Report To ensure that all our staff members are engaged and motivated, we continue to make awards of zero cost options to all staff.

Part 1: Background We strive to maintain transparent and reduced accordingly. In order to prevent statement active communication channels with our giving additional benefits to executives, The Board of Growthpoint Properties shareholders and as such, management the suggested timing for the initial LTI Limited (the company) and the value all input received from our awards, under the new proposed LTI Remuneration Committee (the shareholders on our remuneration scheme, would be from FY18 going committee) have pleasure in submitting structures. Following feedback received forward, with the first vesting in FY21 the remuneration report for the financial from shareholders on the FY16 which is the suggested timing for the year ended 30 June 2017. This report remuneration report in relation to the pay mix to change. Other suggested sets out the company’s current Executive Retention Scheme (ERS), the amendments to Growthpoint’s remuneration policy and strategy, and lack of stretch targets in the key remuneration policy include the the detailed implementation and performance indicators (KPIs), and the introduction of minimum shareholding disclosure of remuneration for executive perception that the existing KPIs were requirements (MSR) for the executives. directors, Executive Committee members easily achievable, as well as the lack of a The Board believes that this introduction and non-executive directors. It also performance-based long-term incentive will further align our executives’ interests highlights some suggested changes to (LTI) scheme, we have engaged with the to those of our shareholders, and the current remuneration policy, and sets majority of our major shareholders in demonstrate their commitment to out the remuneration policy and strategy order to address these issues and long-term growth. for all other employees. The information perceptions. We have initiated provided in this report has been conceptual discussions on proposed Retention of executive directors and approved by the Board on the changes to the existing remuneration executive management remains a crucial recommendation of the committee. policy and structure. The proposed focus area within the current and changes to both the short-term incentive proposed remuneration structure. We Growthpoint has a vision to be a leading (STI) and LTI schemes include new believe that the accumulation of deferred international property company. To make performance targets which need to be short-term incentive and the potential for this vision a reality, the committee takes aligned with appropriate yield and superior vesting from the performance a long-term view on growth and success growth expectations in the context of shares in the proposed LTI scheme, for and strives to incorporate this vision into Growthpoint’s size and risk appetite. premium performance, will drive retention. the company’s remuneration policies and For the STI, we are also proposing a link The second vesting of ERS awards took practices, focusing on the retention of to our newly articulated strategies of place on 1 April 2017, and we have key talent and a continued commitment internationalisation, funds management indicated the detail of the vesting value to fair remuneration practices and ethical and trading and development as detailed for all executive directors in the total pay, both major themes within King IV, on page 16. It is intended to introduce remuneration table on page 67. and has made great strides towards levels for threshold, target and stretch achieving this. The committee has performance, with downside risk if To ensure that all our staff members are worked closely with its independent threshold targets are not achieved and engaged and motivated we continue to advisers, PwC, in this regard and has commensurate upside if the stretch make awards of zero cost options to all considered the implications of King IV on performance target is achieved. staff (excluding the executive directors Growthpoint’s remuneration reporting, and the other Executive Committee and is committed to full compliance with By April 2020, 80% of the 2014 ERS members) under the Growthpoint Staff this standard of disclosure. award will have vested. As the ERS rolls Incentive Scheme (GSIS). off, we remain conscious of the Growthpoint continues to make strides distinction between retention and the We are encouraged by our recent in ensuring that our total rewards make need for a performance based LTI interaction with our major shareholders a significant impact on the quality of life scheme. Even though new awards may in relation to remuneration matters and of our employees, especially those at be granted in exceptional circumstances, we are optimistic that we can achieve an lower levels, who also have access to the ERS will phase out over time, and the outcome that rewards management for our GEMS programme, which is an new LTI scheme will phase in. In respect performance while being aligned to innovative project which aims to provide of proposed pay mix changes, and in shareholders. Further engagement is increased opportunities, to our order to accommodate the proposed LTI anticipated in the first half of FY18. employees and their families, by scheme, the STI as a percentage of total awarding bursaries to a number of remuneration, for executive directors and qualifying employees’ children. executive management, will need to be WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 61 About this report Organisational overview Part 2: FY18 Remuneration formally four times during the FY17 as Share incentive plan awards to all policy Overview well as meeting informally on a number eligible employees and approval of The committee of occasions. The Chief Executive Officer, vesting of awards Role of the committee Managing Director and Head of Human The annual salary review for executive The committee assists the board in Resources attended the committee directors and executive committee setting the company’s remuneration meetings by invitation and assisted the members policy and executive as well as non- committee in its deliberations, except The mandate for salary increases for executive directors’ and executive when issues relating to their own all other employees management’s remuneration. The remuneration were discussed. PwC Non-executive director fee committee’s terms of reference are set attended the meetings in their capacity benchmarking Performance review out in the corporate governance section as independent advisers to the The company’s remuneration policy of the integrated annual report. committee. and suggestions to enhance it The implementation of formal job Members of the committee Summary of remuneration activities/ evaluation processes for staff. Details of the members of the decisions undertaken during the year committee can be found in the corporate The main issues considered and approved Remuneration policy summary governance section of the integrated by the committee during FY17 were as Organisation-wide remuneration policy annual report on page 128. follows: structure The remuneration report The current organisation-wide

All the current members of the Short-term incentives for executive remuneration structure is made up Key matters committee are independent non- directors and executive committee of executive remuneration and executive directors. The committee met members remuneration of all other employees. The structure on an organisational level is depicted below:

Organisation-wide remuneration policy structure RSA performance

Fixed Variable

Short-term Long-term incentive incentive (STI) (LTI) International performance

All employees Executives Growthpoint Staff Incentive Scheme (GSIS)

Cash bonus Cash bonus All employees Executives

Zero cost options Executive Retention CSR and governance Scheme (ERS) = Deferred STI Reducing strike price using GSIS options (zero cost + options) Zero cost options as deferred STI WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 62 Integrated annual report 2017

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General staff remuneration policy Growthpoint values all staff, and strives to ensure that remuneration below executive level is structured fairly, and all Attract Reward Retain staff members are rewarded for superior performance. We recognise that remuneration forms an integral part of Qualified, skilled staff Drive performance by Staff overtime the employment offering that enables with experience and/or rewarding exceptional (particularly key us to attract, reward and retain the staff good potential in the performance. staff and staff with we require, to manage the company marketplace. potential). effectively and efficiently. We are Short-term incentive Market-related GCTC (amounts paid typically Long-term incentive particularly proud of our Growthpoint salary (median for vary between amounts (all staff can become Staff Incentive Scheme (GSIS), and general skills ranging equivalent to one and shareholders in the believe that the participation of all to upper quartile for six months’ salary). company through GSIS employees in the GSIS helps us to create critical skills or key – fostering a culture of a culture of ownership, which contributes staff). ownership in all staff towards employees that are satisfied and and supporting one engaged, and motivated to perform to of Growthpoint’s core values of being “owners the best of their ability. and managers” of our property portfolio).

Executive Committee remuneration policy The tables below summarise the individual elements of the total remuneration package offered to executive directors and executive committee members.

Fixed remuneration Fixed (GCTC and benefits) The fixed remuneration ensures that each individual’s role is compensated at market- related levels which recognises the individual’s skill and experience

Guaranteed cost to company (GCTC) Total fixed remuneration paid in cash Benefits

GCTC is set to be competitive and is set at the median of the comparator Benefits include: group. For key employees, GCTC may be set at the upper quartile to ensure GCTC inclusion retention. Contributions to a defined contribution retirement plan GCTC is reviewed annually and the committee considers the following in Contributions to a medical aid scheme its review: Company paid: Company and individual performance Personal accident, dread disease and AdmedGap Affordability (hospitalisation gap cover) insurance policies Changes in responsibilities Internal and external benchmarks Average salary increases for the entire Growthpoint workforce WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 63 About this report Organisational overview Variable remuneration Variable remuneration can take the form of either short-term or long-term incentives.

Short-term incentive (STI) Detail and design principles

The STI is determined by the committee on a discretionary basis, with the maximum STI for executives being 200% of the total fixed remuneration (TFR) at the time of making the STI award.

Actual company performance is measured against a scorecard of key performance areas (KPAs), as set out in part three of this report. Performance review Performance achievement against the KPAs and key performance indicators (KPIs) is benchmarked against a regularly reviewed peer group of companies in the property sector, currently Redefine, Emira, Hyprop, and SA Corporate. In exceptional cases, the committee has the discretion to make ex gratia payments, where considerable value has been added to shareholders.

The targets set out in the KPA scorecard translate to a maximum STI achievable, and the committee then applies its discretion to determine an appropriate STI for each executive director, and member of the Executive Committee.

For executive directors and executive management, 50% of the STI is paid upfront in cash, and the remaining 50% is delivered on a deferred basis in zero cost options, vesting over a three-year period of one-third each, following the award date. Key matters Long-term incentive (LTI) Detail and design principles

The purpose of the LTIs is to drive and reward long term, sustained performance measured against metrics which are strongly aligned with the interests of shareholders. The current LTIs under the GSIS consist of the ERS for the executive directors, and executive management (executives) and zero-cost options for all other staff.

The aggregate number of options/shares that may be awarded to participants in the duration of the GSIS is currently 75m, representing around 2.6% of the issued shares of the company. RSA performance In the case of termination of employment, the GSIS provides for forfeiture of all unvested options, except for certain instances where, at the discretion of the committee, pro rata future vesting may be allowed (for instance in the case of “good leavers”) or death in service.

Each of these is explained in more detail below:

Zero cost options under GSIS Detail and design principles

One of Growthpoint’s core philosophies is that “we own and manage” our property portfolio. Through the GSIS we achieve the International performance ownership component of this value, as all of Growthpoint’s staff members (excluding executive directors and certain Executive Committee members) are awarded zero cost options which vest over a five-year period.

Zero cost options (all staff excluding executives): Zero cost options are awarded annually where the quantum of options awarded to each eligible employee is based on a target multiple of their respective annual GCTC. Target multiples are linked to market benchmarks and can be increased by approval of the committee for critical skills and individual retention. The vesting profile allows 25% to vest in each successive year after year two with the last vesting of each award taking place after year five. CSR and governance

Zero cost options are awarded to executives as a mechanism to defer a portion of their cash STI. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 64 Integrated annual report 2017

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ERS under the GSIS

Executive directors, certain Executive Committee members and a limited number of key staff participate in the ERS as part of the GSIS. The ERS is a notional share purchase scheme and is designed to retain executive directors and senior management over the longer term. The option simulates a share purchase scheme that is half funded with debt. The ERS is not awarded on a regular basis, with a significant initial award having been made in 2014. At present, no further regular annual awards are contemplated under the ERS to existing participants under the scheme. New issues will, however, be made in exceptional circumstances where the need to attract and retain key executives is identified.

The initial options granted on 1 April 2014 had an initial strike price of R11.43 based on a 50% discount to the Growthpoint 30-day clean volume weighted average price (VWAP) price as traded on the JSE on the day of granting of the initial options.

Each option’s strike price will be adjusted on a notional basis by: increasing the strike price by 8.25% per annum compounding on the distribution payment date, representing interest on the notional debt decreasing the strike price by the actual distribution per share, declared and paid by the company.

The characteristics of the ERS provide for alignment between management and shareholders in that the eventual value that an executive will receive under the ERS is driven by the distribution per share, the growth in the distribution per share and the share price.

These options vest on 1 April each year over eight years and give the option holder the right to acquire one Growthpoint share at the variable strike price at the vesting date. An illustrative vesting schedule is as follows: 1 April 2015 0% 1 April 2016 and 1 April 2017 10% pa 1 April 2018, 1 April 2019 and 1 April 2020 20% pa 1 April 2021 and 1 April 2022 10% pa

Packages are designed to provide the appropriate balance between fixed remuneration and variable “at risk” remuneration. Fixed remuneration is benchmarked against the same comparator groups used to benchmark remuneration for non-executive directors as set out below. Variable pay will, depending on the role, function and responsibility of the executive director, or executive committee member constitute between 40% and 75% of the total remuneration of that executive director or Executive Committee member. The average on-target package for the executive directors is depicted above.

The actual package outcomes are depicted in Part 3 of this report.

Illustration of the pay-mix for executive directors

Average on target package for executive directors (%)

33 33

2017

■ TFR ■ Cash STI ■ Deferred STI WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 65 About this report Organisational overview Service contracts The group was selected on the basis Earnings from independent The CEO and Managing Director have of JSE companies of similar size, subsidiary and associated company service contracts with Growthpoint measured by market capitalisation. appointments with reciprocal six months’ notice of It is the same as that used for the Executive and non-executive directors of termination provisions. The Financial executive directors Growthpoint may be, and are from time Director is on a standard employment The remuneration of non-executive to time, appointed to serve on boards contract with a six-month reciprocal directors is targeted between the of independent companies in which notice of termination provision. median and the upper quartile of the Growthpoint has acquired controlling comparator group. Attendance at or strategic shareholdings. Such

The service contracts provide for the meetings of any ad hoc sub- appointments are made with the Performance review following: committee, established for special approval of Growthpoint’s Board. An indefinite period of service, subject purposes, shall be remunerated on the to the normal retirement age of the basis applicable to the established Non-executive directors of Growthpoint company, with a six-month reciprocal sub-committees. Where required who hold such tenures are permitted to notice of termination provision non-executive directors may attend receive and retain directors’ fees paid to The termination provisions provide for at least two ad hoc meetings a year them by such subsidiaries or associated paid “garden leave” for the executives without being paid. Payment for the companies. at the company’s election ad hoc Board and committee meetings In addition to “garden leave” there will be determined on a case-by-case Executive directors or other executives of

are also restraints, in relation to the basis by the committee Growthpoint so appointed shall fulfil their Key matters company’s clients, staff and corporate Non-executive directors are roles on the boards of such subsidiaries or opportunities compensated for travel and associated companies as part of their KPAs and KPIs have been identified in subsistence on official business where executive responsibilities towards the contracts, which the executives necessary and to attend meetings; Growthpoint and any directors’ fees are measured against Non-executive directors do not earned by them from such companies Loss of office under certain participate in the company’s annual shall be payable to Growthpoint. This circumstances. bonus plan or in any of its long-term policy will be reviewed by the committee incentive plans on a case-by-case basis. Remuneration of non-executive None of the non-executive directors

directors has a contract of employment with Details of the remuneration earned RSA performance The following principles apply to the the company. Their appointments are and/or received by executive directors, remuneration of non-executive directors: made in terms of the company’s non-executive directors and other Fees are structured as an annual Memorandum of Incorporation and are executives for services rendered to retainer component and an confirmed at the first annual general independent subsidiaries and associated attendance fee for scheduled meetings meeting of shareholders following companies are reflected in note 19 to Fees are reviewed annually and their appointment, and thereafter the FY17 annual financial statements proposed at annual general meetings at three-yearly intervals when they (page 44). for approval retire by rotation in terms of the The comparator group comprises the Memorandum of Incorporation External appointments following companies: Annual assessments of independence Executive directors and other senior International performance ••Tiger Brands Limited and performance are conducted in executives are not permitted to hold ••MMI Holdings Limited respect of the non-executive directors. external directorships in publicly trading ••Netcare Limited entities without the approval of ••Mr Price Group Limited Growthpoint’s Board. ••Discovery Limited ••Woolworths Holdings Limited Non-binding advisory vote ••Redefine Properties Limited Shareholders are requested to cast ••Sanlam Group Limited a non-binding advisory vote on the ••The Bidvest Group Limited aforementioned Part 2 of this report. ••Aspen Pharmacare Holdings Limited CSR and governance ••Vodacom Group Limited WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 66 Integrated annual report 2017

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PART 3: Disclosure of the the outcome of the benchmarking FY17 STI outcomes (cash and implementation of the exercise, while the average rate of deferred STI into zero cost options) policies for the financial increase of GCTC for executive directors The target performance set out in the year and Executive Committee members was table below indicates the maximum Guaranteed pay adjustments 7.41% which included a number of possible STI pay-out, and committee In determining the GCTC increases for benchmark adjustments. The salary discretion is then applied to determine executive directors, the committee increases for staff below executive level the final STI amounts paid. considered relevant comparator group were concluded in July 2017 with an market data, using the same comparator overall increase in the salary costs of group used for the non-executive 6.82%. The increases were effective on directors, listed on page 65. The average 1 July 2017 and are applicable for the rate of GCTC increase for executive period July 2017 to June 2018. directors was 6.97% taking into account

Performance outcomes Actual performance in respect of the five KPIs, compared to the target performance, is set out and illustrated in the table below. Growthpoint aims to set targets which include stretch within the targets, and accordingly does not have a concept of “stretch” performance, as strong performance is required to meet the targets set:

Performance KPI Weighting Actual Target achievement (a) Growth in dividend per share: 60% 51% Internal benchmark 30% 6.5% 5% 30% Peer group benchmark 30% 9.4% 10% 21% (b) Business growth: 10% 10% Gross asset base (R122.3bn versus R112.5bn) 8.7% >5% Gross revenue growth (R10.7bn versus R9.8bn) 9.8% >7% Dividend growth in absolute terms (R5.6bn versus R5.1bn) 10.4% >5% (c) Operational metrics: 15% 15% Property expense ratio 23.5% <27% Operating expense ratio 3.6% <5% Overall vacancies 4.4% <7% Total arrears (as % of collectables) 6.5% <10% (d) Qualitative factors: 5% 5% Compliance √ Development of people/culture/values √ Overall management review √ Industry participation √ (e) Financial management: 10% 10% Loan to value ratio 33.4% <45% Debt expiry profile 3.0 years >3 years Interest rate hedging 85.6% >75% Secured versus unsecured debt (longer term 50/50) 57/43 70/30 Moody’s Rating yes Investment grade Total 91% WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 67 About this report Organisational overview Notwithstanding the achievement, or otherwise, of these KPIs, ultimate discretion in respect of the payment of cash STI, or award of deferred STI, remains with the committee and the Board of Directors.

The composition of remuneration outcomes in FY17 for the CEO, Managing Director and Financial Director is presented in the table below.

Executive directors’ remuneration In the table below, the cash STI and deferred STI earned in the year under review is disclosed. The deferred STI will be paid in FY18, FY19 and FY20. ERS awards and GSIS awards which vested in FY17 are also disclosed. Performance review ERS and Cash STI GSIS and TFR TFR Cash Deferred vesting deferred TR TR FY17 FY18 STI(1) STI(2) FY17(3) STI as % FY17 FY16 Name R R R R R of TFR(4) R R % change Norbert Sasse 6 175 000 6 560 000 5 969 600 5 969 000 8 469 700 182% 26 583 900 31 854 938 (16.55) Estienne de Klerk 4 650 000 4 940 000 4 495 400 4 495 400 4 857 316 182% 18 498 116 20 473 123 (9.64) Gerald Völkel 3 100 000 3 400 000 2 011 100 2 011 100 nil 118% 7 124 700 5 428 150 31.25 (1) Based on the FY17 performance and paid in cash in FY18 (2) Deferred STI earned for FY17, is vesting in FY19, FY20 and FY21 (3) ERS awards and GSIS awards from prior years vesting in FY17. Excludes deferred STI awards from prior periods vesting in FY17 Key matters (4) Expressed as a percentage of TFR for FY18, being the TFR applicable at the time the STI awards were approved by the Board TR – total remuneration TFR – total fixed remuneration

ERS awards granted in FY17 ERS awards amounting to 700 000 options were awarded to Gerald Völkel in FY17.

Disclosure of the vesting outcomes in respect of deferred STI and ERS vesting in FY17 The value attributable to the ERS awards that vested in FY17 are disclosed in the table above.

The actual remuneration outcomes paid to executive directors are graphically illustrated as follows: RSA performance

Actual remuneration outcomes paid to executive directors (%)

N Sasse E de Klerk G Völkel

23 26 25 28 32

44 2017 2017 2017 International performance

22 24 24 22 28

■ TFR ■ Cash bonus ■ Deferred STI ■ GSIS and ERS vesting CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 68 Integrated annual report 2017

Remuneration

Report continued

Non-executive directors’ fees Proposed non-executive directors’ fees for FY18 The following fees are proposed for FY18. The increase in the proposed non-executive directors’ fees for FY18 are based on the outcome of the benchmarking exercise concluded in FY17.

Schedule of retainer fees and fees payable per meeting: FY17 FY18* R Increase % R Basic fee (pa) Chairman 1 171 300 5.99 1 241 500 Lead Independent Director n/a n/a 159 900 Director 56 200 5.87 59 500 Attendance fee – per meeting Board Chairman 196 600 6.00 208 400 Lead Independent Director n/a n/a Director 63 100 6.02 66 900 Audit Committee Chairman 58 900 5.94 62 400 Member 41 900 5.96 44 400 Risk Management Committee Chairman 52 200 5.94 55 300 Members 35 200 5.97 37 300 Property Committee Chairman 58 900 5.94 62 400 Members 41 900 5.96 44 400 Social, Ethics and Transformation Committee Chairman 45 600 5.92 48 300 Members 29 200 5.82 30 900 Remuneration Committee Chairman 52 200 5.94 55 300 Members 35 200 5.97 37 300 Nomination Committee Chairman 45 600 5.92 48 300 Members 29 200 5.82 30 900 * Refer to special resolution 2.1 on page 5 of the separate notice of annual general meeting for approval of the directors’ fees by shareholders in terms of section 66 of the Companies Act

Policy statements on non-executive director fees: 1. The attendance fees for scheduled meeting shall be as agreed by shareholders on the Board’s recommendation, at annual general meetings (November each year). 2. Each director will be obliged to attend, without compensation, the first two unscheduled meetings in any financial year, whether Board meetings or committee meetings. 3. The Board’s annual strategy off-site conference, whether spanning one or more days, will be regarded as one Board meeting and will be remunerated on that basis. 4. The Audit Committee meeting each year to review and approve the company’s annual integrated report, whether scheduled or not, shall be regarded as a scheduled meeting and committee members in attendance shall be remunerated accordingly. 5. Subject to point 2 hereof, for an unscheduled meeting involving the Board or any committee for more than one consecutive day, the respective attendance fees shall be paid for each day. 6. Subject to points 2 and 5 hereof, attendance at meetings of any special purpose committee appointed by the Board, ad hoc, shall be remunerated on the basis applicable to an existing committee whose purpose most closely relates to that of the special purpose committee. 7. Fees for special assignment of one or more tasked members of the Board or of any committee, which may also include travel on business locally or abroad, are to be agreed upfront with the Chairman of the Board. Travel and fares and reasonable subsistence shall be in line with Growthpoint’s relevant policies as they apply to executive directors. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 69 About this report Organisational overview Actual fees paid to non-executive directors for FY17 The fees paid to non-executive directors for FY17 were paid on the basis presented in the tables in the annual financial statements on page 45, as approved by the committee and by the Board, on authority granted by shareholders at the annual general meeting held on 15 November 2016.

Directors’ Directors’ fees FY17 fees FY16 R R MG Diliza (Social, Ethics and Transformation Committee Chairman and Property Committee) 814 000 621 400 Performance review PH Fechter (Property Committee and Audit Committee)* 909 100 770 900 LA Finlay (Audit Committee Chairman and Social, Ethics and Transformation Committee) 875 300 596 300 JC Hayward (Risk Management Committee Chairman, and Audit Committee)* 819 200 761 400 HS Herman (Remuneration Committee Chairman and Property Committee) 654 000 705 800 JF Marais (Board Chairman and Remuneration Committee) 2 537 300 2 165 300 HSP Mashaba (Board Deputy Chairman and Remuneration Committee) (resigned 27 July 2016) nil 404 167 PS Mngconkola (Social, Ethics and Transformation Committee and Risk Management Committee) 692 400 593 800

R Moonsamy (Social, Ethics and Transformation Committee and Property Committee) 719 200 559 400 Key matters NBP Nkabinde (Social, Ethics and Transformation Committee and Risk Management Committee) 692 400 593 800 FJ Visser (Remuneration Committee and Risk Management Committee)* 745 600 616 600 Total(1) 9 458 500 8 388 867 Notes: (1) Increase in fees paid to non-executive directors for FY17 versus FY16 is as a result of the higher meeting attendance rate in FY17,one separate Nomination Committee meeting in FY17 and two Board offsite meetings in the FY17. * In addition to fees for services as directors Mr Fechter received R150 000 in consultation fees relating to Growthpoint’s investment in GWI. Messrs Hayward and Visser received R150 000 each in consultation fees relating to Growthpoint’s IT governance review. RSA performance Non-binding advisory vote Shareholders are requested to cast a non-binding advisory vote on the aforementioned Part 3 of this report.

Approval This remuneration report was recommended by the committee on 22 August 2017 for approval by the Board of directors of Growthpoint Properties Limited which approval was granted on 29 August 2017.

Signed on behalf of the Board of directors International performance

Eric Visser Remuneration Committee Chairman CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 70 Integrated annual report 2017

OVERVIEW OF PROPERTY PORTFOLIO

Geographical spread by value (%) Contribution to net property income (%)

3.4 1.0 7.1 5.7

33.9 25.3 26.6 2017 2017

68.0

0.2 13.9 1.6 2.6 6.0 4.7

■ Greater Johannesburg ■ North West ■ RSA ■ Western Cape ■ Other – RSA ■ GOZ ■ Pretoria ■ Australia ■ V&A Waterfront ■ KwaZulu-Natal ■ V&A Waterfront ■ GWI ■ Eastern Cape ■ Romania

Retail Office Industrial Total GOZ(1), (3) V&A(1)

Asset value (R million) 29 588 34 732 12 586 76 906 32 536 8 705 Number of properties 56 182 233 471 57 1 Gross lettable area (GLA) (m²) 1 405 021 1 750 606 2 266 957 5 422 584 1 053 148 223 016 GLA as a % of total portfolio 21.0 26.1 33.8 80.9 15.7 3.3 Net property income as a % of total portfolio 25.3 30.9 11.8 68.0 26.3 5.7 Value per m² (R) 21 059 19 840 5 552 14 183 30 894 39 033 Value per m² (excluding bulk) (R) 21 036 18 454 5 068 13 529 30 894 36 810 Average gross rental (per m²/month) (R) 176 155 50 117 AUD248(2) 231.1 Forward yield (%) 7.6 8.4 8.7 7.9 6.9 7.8 Average in force escalations (%) 7.2 8.1 8.3 7.8 3.3 8.0 Weighted average renewal lease period (years) 4.3 3.4 2.9 3.3 6.1 3.0 Property expense ratio (%) 25.6 22.5 21.5 23.5 13.0 28.1 Drivers Demand for Changing business Distribution Industrial: Retail and retail needs, business and Distribution and office space driven growth and warehousing warehousing drivers, by retailer international requirements, demand driven international expansion company import by activity in and local strategies operations and export the retail, tourism and underpinned in South Africa demands, manufacturing, residential by population manufacturing import and property growth, activity, export market wealth motor trade markets, and demand creation and dynamics, and changing dynamics consumer infrastructure business spend spend needs and dynamics operations of corporate Australia Office: Changing business needs and business growth

(¹) V&A is included reflecting Growthpoint’s 50% interest, GOZ is reflected at 100%. (²) Based on net rental per annum. (3) Measurements and ratios are measured based on income and not GLA (when compared to RSA). Note: Information in respect of GWI has not been included above since our investment was only made during FY17. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 71 About this report Organisational overview Performance review Key matters RSA performance International performance CSR and governance

1 Charles Street, Parramatta, NSW WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 72 Integrated annual report 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 73 About this report

RSA Organisational overview PERFORMANCE Performance review Key matters RSA performance International performance CSR and governance

The Silos, V&A Waterfront, Cape Town WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 74 Integrated annual report 2017

RSA Performance

Our South African business Adding to our industry-leading With our drive for innovation gaining In our South African business, retail and UNdeposit and Smartmove initiatives, traction and momentum, we plan to office portfolios are the largest of their we made headway with several other establish a formal innovation hub. By kind and our industrial business is among new projects across different facets investing in new concepts in this way, we the country’s largest portfolio of of our business during the year, all of are ensuring that our business is flexible, industrial assets. them focused on efficiency and client versatile and agile for market adaptation. experience. For the past 12 months it has been This year, we also continued to identify a tough market, as detailed in the Meeting the working needs of modern and introduce complementary new economic overview of this review on businesses, professionals and revenue streams to our business which page 28. The negative impacts of the entrepreneurs, Growthpoint has increase our revenue diversification and South African operating environment are partnered with local co-working space maintain our risk profile. no longer limited to offices but are also trailblazers OPEN in a 50/50 joint prevalent in the retail sector. With these venture. Responding to the rise of this Our selective, low-risk approach to dynamics and pressures, we focused on new trend in working, together we will earning development fees and trading optimising and streamlining our South grow an exciting network of co-working profits leverages our excellent in-house African portfolio in FY17. spaces across South Africa. expertise and enables us to offer more solutions to our clients. While it is a With the sheer size of our business, and Our newly developed Growthpoint app small area of our business, it adds the economic constraints it faces, a scooped a prestigious commendation for another source of sustainable income multifaceted approach is essential to its innovation in the property sector for Growthpoint. drive growing performance and unlock from SAPOA. It is much more than a potential. standard leasing app and also offers an We have made further progress in exciting and unique feature that gives creating a funds management business In this fiercely competitive environment, users the ability to access their total cost similar to that adopted by Australia we recognise how important it is to be of occupation with information on water REITS, where they have separate, unlisted innovative, keep up with global trends and electricity savings for each of our funds into which third parties invest. and operate smartly. buildings. Growthpoint aims to earn asset management fees as well as distributable income. The capital raised for the already launched Healthcare Fund is planned for Q4:17. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 75 About this report

Retail Organisational overview Performance review

STEPHAN LE ROUX, Divisional Director Key matters

On a like-for-like basis, our portfolio is achieving both top line and bottom line growth. RSA performance

Market environment to show as early as 12 to 18 months Considering the delicate equilibrium There was a significant decline in before a competing centre opens. between major retailers and landlords, shopping centre trading densities Retailers start negotiating shorter leases, there is a fine line between growing or because of the general oversupply of lower rentals, or both, as they positioning maintaining rental levels. Retailers have retail space that exists nationally. for the opening of the other centre. overcommitted to space on the back of

Except in a few rural and secondary flawed measurements. The two biggest International performance towns, retail centres are generally facing The only centres that enjoy some expenses for retailers are wages and rent. some form of new competition. Our top defensiveness in this market are the likes Industrial action often follows when they 16 shopping centres are, to a greater or of V&A Waterfront, Sandton City and attempt to contain their wage bills, lesser extent, fighting to maintain their Gateway. Super-regional shopping leaving rent as the only big cost they can market shares. centres, with their comprehensive reasonably attempt to manage. The only line-up of brands, have been most meaningful way for retailers to lower When a new centre opens with a full resilient in South Africa historically. In their occupancy cost ratios is to take an offering that includes food, fashion and the current climate, regional and small aggressive approach to rentals when restaurant retailers, the resulting decline regional shopping centres have some renewals come up. CSR and governance in trading densities at an existing centre advantage with a greater pool of national is between 10% and 20% overall, and it retailers available to add to their tenant is difficult to contract out of the direct mix. link between trading densities and rental levels. We have noted that stress starts WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 76 Integrated annual report 2017

Retail continued

Previously, retailers were protective of competition quickly follows suit. What The recent interest rate cut – with the their market positions. Now, they are was once unique rapidly becomes the possibility of more to come – has rationalising their space. Some have said norm. It has become crucial to find and brought some relief to these consumers. this may even include closing profitable fund the growth of independent retailers stores to help improve the trading that offer concepts outside those Without overall growth, however, densities and costs across their provided by national retailers. Shopping consumers are trading down. Globally, portfolios. centres have an important role to play in the consumer is value-proposition based, helping to grow successful small retail and South Africans are no different. National retailers are not expanding as businesses. there is no new demand. International In South Africa, 20% of the market drives retailers, such as Zara and some smaller South African consumers are constrained. 60% of consumer spending. Grocery brands have found that the market Unemployment is increasing. Social grant retailers are competing for this market opportunity is smaller than originally amounts remain stagnant even though spend more intensely than ever before. thought. H&M and Cotton On, meanwhile, there are more people receiving them. Pricing has become the differentiator for have a different view and are trying There is very little credit extension fashion retailers. Providing credit is no different models and experimenting in following an extreme tightening of credit longer a competitive edge. People are lower LSM and second-tier markets. We criteria on the back of new regulations. still treating themselves although with are only willing to create new space for Disposable income is under pressure and cheaper indulgences, such as replacing international retailers where it is defensive consumer confidence is lower than it has a restaurant meal with fast food. for our portfolio. We will also consider been in a decade. accommodating these internationals Footcounts at larger malls have been where we have existing vacancies which In past reports, we noted the upper end declining marginally for almost a decade we calculate to be a good trade-off given of the market was fairly immune to the now. The shift to convenience is driving an expected positive impact on overall weakening economy. Consumers across this trend, which is now entrenched and centre trading. the board are now under stress. The past likely to continue. It applies to both year has also seen people in upper upper end (time saving) and lower end Differentiation of shopping centres in income brackets come under increasing (cost saving) consumers. South Africa is a short-term play. The pressure.

Key performance indicators FY17 FY16 Gross property revenue (R million) 3 099 2 953 Property expenses (R million) (792) (814) Net property income (R million) 2 307 2 139 Property expense ratio (%) 25.6 27.6 Vacancies (%) 3.6 2.6 Arrears (R million) 35.2 37.5 Bad debt provisions (R million) 12.5 15.1 Average gross rental (R per m2/month) 176.0 166.0 Forward yield (%) 7.6 7.8 Average in force escalations (%) 7.2 7.3 Weighted average lease period (years) 3.3 3.2 Asset value (R billion) 29.5 29.2 Number of properties 56 58 GLA (m2) 1 405 021 1 420 570 Value (excluding bulk) per m2 (R) 21 036.0 20 541 Capital expenditure (R million) 504.0 549.0 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 77 About this report Organisational overview Online shopping is a growing global trend. to just over 80%. This places pressure on goods. Staying in front of this trend, we The transition to e-commerce has been the top line. Every lease not renewed are repositioning the food offerings at massive in the US and other developed results in three to six months’ loss of some of our malls to provide indoor and markets. South Africa has been income from that space. outdoor dining and leisure settings. We significantly slower to adopt this new are evaluating opportunities across our way of shopping. We have very different Although we are still achieving positive portfolio, where centres serve the right demographics and infrastructure rent renewal rates, the rental growth shopper market. compared with developed markets. Our trend is declining, and this was

national retailers have deep footprints, accelerated during the year. Achieving To be a leader in our highly competitive Performance review making it as convenient to go to the higher levels of renewals comes at a cost, market, a mall’s bricks and mortar must shops as it is to buy online. Omni-channel which has included giving rent reductions compare with new centre designs. We shopping, including online shopping, to certain tenants on renewal. are giving two of our malls on Gauteng’s will continue to grow in South Africa. East Rand – Lakeside Mall and Festival We always strive to uphold good Mall – facelifts for a combined R90m. We Performance relations with the retailers in our centres. are also reconfiguring the food offerings Portfolio vacancies deteriorated The link between retailers and malls is at Waterfall Mall and Kolonnade somewhat during the year, moving from symbiotic; when sales come under specifically to enhance the quality and 2.6% to 3.6%. Of the 50 000m2 of pressure so does our performance. experience of visitors. The upgrading of Key matters vacant retail space, around 20 000m2 By focusing on both parties sales the East Rand centres will be completed relates to offices attached to retail, performance, both protect our bottom in the next financial year but the space under development and areas lines. reconfiguration and improvement of considered unlettable. Our core retail restaurant offerings will be subject to vacancy is thus 2.1%. Vacancy in our top Cape Town retail fundamentals remain securing suitable operators. 10 centres is 2%. This remains pleasingly more resilient than the rest of the low, although it was slightly better last country on the back of specific drivers, During the year we disposed of two year. including the growing trend of properties: Picbel and Grayston. We have semigration. This resilience is evident also identified 10 shopping centres that

Edcon has stated that its strategy is to across market segments and can be are small or located in secondary nodes RSA performance reduce its space and close some of its seen in our shopping centres from and now hold them for sale. Our stores, and we remain alert to the Golden Acre right through to the long-term strategy is to own larger situation. We were only exposed to Constantia Village. However, the centres and to consolidate our portfolio Stuttafords at Brooklyn Mall, and we absence of rain in the province is a within major metropolitan areas. should fill this space easily. However, risk for agribusiness which, in turn, churn in tenancies always results in poses a risk for retail. Continuing to contribute to Growthpoint’s some loss of rental income. environmental, social and economic We also see little pockets of positive sustainability, we invested in several

On the positive side, on a like-for-like trading, such as Village Square in rooftop solar photovoltaic (PV) International performance basis, our portfolio is still achieving both Randfontein. This community centre, installations during the year. While this top line and bottom-line growth. which serves lower-income consumers, comes at a cost, all installations were at is displaying good trading performance. an acceptable yield. It also reduces Top-line growth depends heavily on our non-renewable electricity consumption successful renewal of existing leases. Portfolio arrears remain static, with no and expenses over the long term and, We need a 90% renewal success rate at a marked deterioration, which is a pleasing more importantly, compensates for the level similar to the portfolio’s underlying anomaly in this market. possible failure in infrastructure. We have escalation rate of 7.5% to achieve the also focused on rainwater harvesting and required growth of around 7% to 8%. We There is a permanent shift in consumer providing backup power. Our approach CSR and governance achieved 89% renewal rate last year. We behaviour, especially in younger to waste is to sort refuse on site at our targeted 95% this year, but, unfortunately, generations, who value and are prepared shopping centres so that we can there was a significant decline in the rate to spend more on experiences than contribute positively to the environment WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 78 Integrated annual report 2017

Retail continued

and divert waste from landfills. One of our Any uptick will be from a low base and Omni-channel retail, which allows retail properties is part of a pilot waste we hope it will be amplified by fewer customers to experience, interact and project to convert wet waste to compost. developments coming to market in the buy across several channels, has become We will replace all our shopping centre retail space. Encouraging signs that we the retail buzzword. We are starting to landscaping with indigenous, irrigation- will be looking for from retailers will see more of this style of retail emerging free plants over time. include store growth on a like-for-like in South Africa. There is a growing basis. interface, for example, between physical Prospects and digital retail, dubbed “phygital” All cycles have to turn, and we feel that We do expect a peak in our portfolio retail. For our shopping centres, this we are close to the bottom of the general vacancy in the short term, which should creates opportunities to offer space for economy. However, the ability of the recover during the coming financial year innovative retailers to showroom, economy to shift depends on the country and settle at levels similar to those of transact, and offer click and collect moving towards GDP growth. FY17. points. It provides exciting opportunities to use unproductive space in our portfolio.

Geographical split by value (%) Geographical split by GLA (%)

10.4 0.3 9.3 0.8 22.2 20.0

5.9 6.8 2017 2017

10.1 53.9 8.9 51.4

■ Eastern Cape ■ Eastern Cape ■ Free State ■ Free State ■ Gauteng ■ Gauteng ■ KwaZulu-Natal ■ KwaZulu-Natal ■ North West ■ North West ■ Western Cape ■ Western Cape

Segmentation split by value (%) Segmentation split by GLA (%)

0.1 0.3 2.9 3.1 3.7 5.4

1.2 20.5 1.6

23.5 2017 2017

65.5 72.2

■ Regional shopping centres ■ Speciality centres ■ Regional shopping centres ■ Speciality centres ■ Community shopping ■ Small regional ■ Community shopping ■ Small regional centres shopping centres centres shopping centres ■ Neighbourhood shopping ■ Retail warehouse ■ Neighbourhood shopping ■ Retail warehouse centres centres WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 79 About this report Organisational overview

Retail LSM by value (%)

17 22

2017 Performance review

■ LSM 9 + ■ LSM 7 – 9 ■ LSM 5 – 6 Key matters Top retail tenants in the order of gross rental contribution as at 30 June 2017 Tenants GLA m² 1 Edcon holdings Ltd 124 097 2 The Foschini group Ltd 57 321 3 Shoprite holdings Ltd 139 060 4 Pepkor holdings ltd 56 896 5 Pick n pay stores Ltd 118 256

6 Mr price group Ltd 55 780 RSA performance 7 Truworths international Ltd 32 688 8 Massmart holdings Ltd 66 589 9 Woolworths holdings Ltd 87 127 10 Clicks group Ltd 28 140 Sub-total 765 954 Balance of the sector 588 821 Total for the retail (excluding vacancies) 1 354 775 International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 80 Integrated annual report 2017

Retail properties top 10 By value 1. 2. 3. 4. 5. Brooklyn Mall and Festival Greenacres Waterfall Lakeside Design Square (75%) Mall Mall Mall

Location: Location: Location: Location: Location: Pretoria Kempton Park Port Elizabeth Rustenburg Benoni

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: R2 247m R1 610m R1 514m R1 490m R1 447m

% of total retail portfolio: % of total retail portfolio: % of total retail portfolio: % of total retail portfolio: % of total retail portfolio: 7.6 5.4 5.1 5.0 4.9

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 55 968m2 83 387m2 46 968m2 49 234m2 65 364m2

% of total retail GLA: % of total retail GLA: % of total retail GLA: % of total retail GLA: % of total retail GLA: 4.0 5.9 3.3 3.5 4.7

Brooklyn Mall is nestled in the affluent suburb of Pretoria’s cosmopolitan area of Brooklyn, surrounded Brooklyn Brooklyn Mall by established upmarket residential homes, corporate measures offices and a large number of embassies and Mall and diplomatic properties. Brooklyn Mall, is the premier 55 968m² (75%), Design Square shopping destination in Pretoria. It offers shoppers and is valued at a full complement of national retailers, specialist (75%) Pretoria R2 247m boutiques, restaurants and coffee bars and the best of home and décor shops.

Festival Mall Festival This regional centre is close to the CBD and near the measures Mall residential areas of Kempton Park. Due to the mall’s 83 387m², close proximity to public transport, the centre also and is valued at Kempton Park benefits from strong support from the Tembisa area. R1 610m The tenant mix covers a wide range of categories, with a strong national representation. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 81 About this report Organisational overview 6. 7. 8. 9. 10. Vaal Mall La Lucia Kolonnade Bayside The Constantia (66.6%) Mall (50%) Mall Village

Location: Location: Location: Location: Location: Vanderbijlpark Durban Pretoria Cape Town Cape Town

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: Performance review R1 272m R1 247m R1 184m R1 126m R1 088m

% of total retail portfolio: % of total retail portfolio: % of total retail portfolio: % of total retail portfolio: % of total retail portfolio: 4.3 4.2 4.0 3.8 3.7

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 44 172m2 37 296m2 38 100m2 45 216m2 20 391m2

% of total retail GLA: % of total retail GLA: % of total retail GLA: % of total retail GLA: % of total retail GLA: 3.1 2.7 2.7 3.2 1.5 Key matters

Greenacres Greenacres Shopping Centre Greenacres Shopping Centre draws shoppers from across the Eastern Cape. Located just five minutes from Port Elizabeth RSA performance measures 46 968m², Port Elizabeth’s CBD, it is in close proximity to all major and is valued at arterial roads and the N2 freeway. The newly revamped R1 514m centre has over 122 tenants.

4. International performance

Waterfall Mall draws shoppers from as far afield as Waterfall Mall Botswana. Located in the upmarket suburbs of Waterfall measures Rustenburg, the centre has easy access from the R24 Mall and N4 highways. The size of the centre allows for an 49 234m², extensive representative tenant mix which includes Rustenburg and is valued at most national retailers as well as a variety of R1 490m specialised retailers. CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 82 Integrated annual report 2017

Office

RUDOLF PIENAAR, Divisional Director

In an economy where the office sector’s economic drivers still indicate that it is a sector under pressure, Growthpoint’s office portfolio is outperforming the MSCI benchmark.

Market environment response, Growthpoint introduced Our main nodal exposure is in Sandton FY17 was defined by low-business Thriving Workspaces, which enables us central, which is still regarded as the confidence. Firms remained reluctant to offer our clients workplace strategies financial capital of South Africa, if to make long-term commitments. that have a positive effect on their key not Africa. It has an unmatched Employment figures dropped further, business outcomes, such as productivity, concentration of major corporations and showing that companies are shrinking. staff churn rates, customer satisfaction multinational firms. Other office nodes Capital investment decreased. The and even profit. performing well include Cape Town and combined effects of these factors was Rosebank. In Cape Town, demand that office vacancy and rental levels Another growing trend in offices is continues to be driven by the growing came under increased pressure across co-working or collaborative working. trend of semigration from other the board. Staying ahead of this trend, Growthpoint provinces. In Rosebank, the Gautrain entered a joint venture with OPEN, the station has proven to be a positive The market was dominated by country’s leaders in co-working spaces, influence and increased the popularity of companies seeking to consolidate their and together we will grow an exciting the area. Other solid office nodes include workspace into sizes they could better network of these vibrant office spaces Menlyn in Pretoria and Umhlanga in afford, and adopting working styles like in select Growthpoint properties across KwaZulu-Natal. hot-desking to ensure more efficient use South Africa. of their space, without growing it. In WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 83 About this report Organisational overview

With several large companies GLA by building grade (%) consolidating into newly developed corporate headquarters, there is backfill 11.0 1.5 risk in the market. However, Growthpoint has gained from this trend so far.

Performance 28.3 2017 Growthpoint’s office portfolio 59.2

outperformed the overall sector’s key Performance review metrics and delivered results in line with our expectations for the year.

One factor contributing to this above- ■ P benchmark performance is that we stay ■ A ■ B as positive as we possibly can and ■ C constantly look for new ways and strategies to overcome challenges. Key matters We are proud of our vacancy rate of MSCI benchmark of R143/m2 based on the quality of our portfolio and the way we manage 6.8%, which improved slightly over the our properties (31 December 2016). course of the year from a start rate of 7.8% and is significantly better than The table below provides a comprehensive view of our key performance indicators as at the latest MSCI benchmark of 9.7% December 2016 relative to the MSCI all office benchmarks. (31 December 2016). MSCI Growthpoint: benchmark: This achievement was driven by our Key performance indicators Dec 2016 % Dec 2016 % team and our innovative Smartmove leasing initiative, which delivered Total return (past 12 months) 8.2 8.0 RSA performance excellent results. We launched Capital growth (three years) 2.3 1.2 Smartmove to reduce persistent Basic rental growth (three years) 3.5 3.3 vacancies at several properties and, at Vacancy 6.9 9.7 2 the same time, distinguish Growthpoint Net income per m /month (past 12 months) 128.8 113.2 from our competitors in a difficult market. Smartmove promises clients Our management philosophy is to give we are confident that we are not they will “receive 100% of their first our clients a better service which attracts overcapitalising, over the long term. year’s rental in benefits” for a five-year a premium and leads to higher net lease. The campaign was positively income. When considering Growthpoint’s We fine tune our portfolio composition International performance received by the market and so far, has office portfolio composition split by by buying correctly, doing the right resulted in leases concluded for over grade compared with MSCI benchmarks, developments and undertaking tail-end 2 60 000m of offices with a cumulative it becomes clear that our portfolio is disposals. deal value of more than R450m. As performing well beyond its inherent vacancies at properties are filled, these potential. There were very few good acquisition addresses are removed from the opportunities in the market. Our strategy campaign. Further buildings are then Portfolio arrears were also lower than in is to only buy properties that are added periodically and where it is FY16, which can be attributed to our accretive or purchase land that will worthwhile.

proactive credit control and the quality facilitate our development strategy in a CSR and governance of our tenants and leases. During the particular node. This year, we acquired We have increased the income from our year, we continued to scrutinise all our five office properties for R191m and core portfolio to the best of our ability, operational costs and expenses and four land parcels earmarked for future and tightly managed expenses. We kept tight control of them. Capital development with a total combined achieved an average gross rental of expenditure allocation between value of R215.1m. 2 R155/m , which is also above the latest properties is carefully considered and WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 84 Integrated annual report 2017

Office continued

Our focus has remained firmly on our The biggest of these developments is We also began excavation at our portfolio and finding ways to create and the new corporate headquarters for 36 000m2 hotel and P-grade office unlock value within it. Each year, we Discovery in Sandton central, which development in Rosebank, named review our portfolio and analyse its Growthpoint is developing in partnership 144 Oxford. The R1.2bn development composite assets. Based on these with Zenprop. We jointly own the includes a 144 room business hotel findings, we identify opportunities development with them and hold a and two P-grade office towers of some to unlock value, put each property to 55% stake. The 110 000m2 building is 15 000m2 each. Situated at the gateway its best use, repurpose it or earmark it resource efficient, cost-effective and to Rosebank, it provides a prominent for sale. This year we repositioned environmentally innovative – and the Oxford Road address with unrivalled Growthpoint Business Park which was largest ever single phase commercial exposure. Its planned completion date transferred to the industrial portfolio office development in Africa. It is on the is 30 June 2019. An operator for the from 1 July 2016. Two properties, corner of Rivonia Road and Katherine hotel has been secured and agreements N1 City Hospital and N1 Medical Street, diagonally opposite Sandton City are being finalised. Chambers, have been earmarked for and two blocks from the Sandton transfer to the new Growthpoint Gautrain Station. It comprises three Our office sector is a recognised leader Healthcare Fund. linked office towers, each with a ground in green building and environmental floor, eight office floors and a roof level sustainability. Our pioneering approach We sold Harrowdene Office Park, which that accommodates Discovery sports to limiting environmental impacts has is set to become the new Huawei office facilities. It will also offer nine basement not only influenced our own portfolio campus, in one of the largest property levels with over 5 000 parking bays. but also South African business in sales to a foreign buyer. A Fortune Discovery will start taking occupation general, through the positive green 500 company committing to before the end of 2017. ripples that have spread to our client Woodmead is also a positive base. endorsement for this node. In FY17 we also began the R571m development of a 21 550m2 new head Growthpoint owns and co-owns the We have identified non-core office office for Exxaro. This project makes up biggest portfolio of green-certified office properties for sale, either as a portfolio the second phase of our redevelopment buildings of any company in South Africa, or as individual assets, and are of the prime Lakeside office site in by far. Around 40% of our office portfolio formulating a strategy to achieve the Centurion, directly opposite the valued at almost R13bn is certified by best disposal results. When an asset Centurion Gautrain Station. the GBCSA. is assessed as non-core, we apply Growthpoint’s highly skilled innovative thinking aligned with our development and workspace design Many environmental innovations that skillsets to obtain maximum benefit team is delivering an innovative green were born and nurtured in the office from any disposing. building, integrating P-grade aesthetics sector have grown to become stand- and finishes with high-performance alone or business-wide programmes. During the year, we had R4.3bn worth workspace. The development broke Some now even have countrywide of development under way for office ground in February 2017 and impacts. It gives us great pleasure to properties that Growthpoint will hold. construction is scheduled to begin in witness the growth of these initiatives This translated into almost 136 000m2 September 2017. The Exxaro lease and their positive impacts. Growthpoint’s of space of which 79% of GLA has commences on 1 April 2019. focus on PV solar power, which we been pre-let. piloted in our office portfolio, has been WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 85 About this report Organisational overview expanded to our other sectors and We have achieved a drastic decrease Unlocking value from a letting altogether we have now installed nearly in electricity and water consumption in perspective is a continued priority for us, 14 681.6 MWh per annum of solar our office portfolio. Water consumption but we also see opportunities to create electricity generation. increased in prominence as a key focus sustainable value through strategic area for us, and interventions carried out trading and development. We are Igniting green building thinking in from February 2016 have resulted in optimistic from a development tomorrow’s property professionals, the significantly lower consumption this perspective because of our excellent Greenovate Student Awards programme financial year. understanding of creating high-

launched jointly by Growthpoint and the performance workspaces and sustainable Performance review GBCSA grew significantly this year. More Prospects office buildings. There is a demand for and more people also participated in We expect businesses to become even these properties, notwithstanding the our innovative, ecofriendly e-bike pilot more conservative in their office space economic climate, from businesses that project, riding to and from office requirements and more cost sensitive want to position themselves optimally buildings in Sandton central. More details in the coming year. We believe the best for productivity and staff retention. about these and other environmental approach in this environment is to focus initiatives appear in our 2017 ESG report. on our relationship with clients and The lease for the first phase of the ensure that we innovate to give them spectacular new Discovery headquarters We remain as deeply committed as the most productive spaces. We will commences on 1 January 2018 and will Key matters ever to minimising our environmental intensify our drive to create high- contribute positively to our performance impacts and finding new and better performance workspaces, and capitalise from the second half of the coming ways of achieving this goal. on the substantial green portfolio we financial year. The lease for the second have built up. phase of the development begins on This year, we created even more 1 April 2018 and its benefits will also add transparency about the resource We anticipate maintaining similar to our income streams for the final three efficiency of our office buildings by portfolio occupancy levels with our best months of FY18. introducing the Growthpoint app. It gives endeavours to retain our current low users the ability to access information vacancy percentage. Rental levels will on water and electricity savings on a remain under pressure. Smartmove will RSA performance building-by-building basis, as well as continue to help with this. providing comprehensive leasing features, all at the touch of a button. International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 86 Integrated annual report 2017

Office continued

Key performance indicators FY17 FY16 Gross property revenue (R million) 3 632 3 428 Property expenses (R million) (819) (794) Net property income (R million) 2 813 2 634 Property expense ratio (%) 22.5 23.1 Vacancies (%) 6.8 7.8 Arrears (R million) 12.8 15.3 Bad debt provisions (R million) 5.2 7.8 Average gross rental (R per m2/month) 155.2 139.0 Forward yield (%) 8.4 8.3 Average in force escalations (%) 8.1 8.1 Weighted average lease period (years) 3.8 3.6 Asset value (R billion) 34.7 33.3 Number of properties 182 182 GLA (m2) 1 750 606 1 799 391 Value (excluding bulk) per m2 (R) 18 454 17 533 Capital expenditure (R million) 1 160 1 302.0

Top office tenants in order of gross rental contribution as at 30 June 2017 Tenants GLA m² 1 Investec bank Ltd 83 781 2 Deloitte (south Africa) 46 145 3 Absa bank Ltd 25 509 4 Transnet 33 066 5 Business connexion (Pty) Ltd 34 454 6 Anglogold ashanti Ltd 19 381 7 Eoh mthombo (Pty) Ltd 33 660 8 Firstrand bank Ltd 17 372 9 Edward nathan sonnenbergs inc 14 889 10 Nestlé south Africa (pty) ltd 11 986 Sub-total 320 243 Balance of the sector 1 311 029 Total for the office (excluding vacancies) 1 631 272 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 87 About this report Organisational overview

Geographical split by value (%) Geographical split by GLA (%)

21.5 21.5

4.5 2017 4.7 2017

73.8 Performance review 74.0

■ Gauteng ■ Gauteng ■ KwaZulu-Natal ■ KwaZulu-Natal ■ Western Cape ■ Western Cape

Segmentation split by value (%) Segmentation split by GLA (%) Key matters

6.1 8.0 5.0

12.0 12.0

44.0 34.8 2017 2017

36.2 36.4 RSA performance

2.7 2.8

■ High-rise offices – Investec ■ Mixed use ■ High-rise offices – Investec ■ Mixed use ■ High-rise offices ■ Office parks ■ High-rise offices ■ Office parks ■ Low-rise offices ■ Vacant land ■ Low-rise offices International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 88 Integrated annual report 2017

OFFICE properties top 10 By value 1. 2. 3. 4. 5. Investec The Woodlands Constantia Inanda Greens The place 100 Grayston Drive Office Park

Location: Location: Location: Location: Location: Sandton Woodmead Roodepoort Sandton Sandton

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: R2 204m R1 707m R1 075m R971m R954m

% of total office portfolio: % of total office portfolio: % of total office portfolio: % of total office portfolio: % of total office portfolio: 6.3 4.9 3.1 2.8 2.7

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 70 945m2 124 122m2 72 834m2 40 774m2 34 682m2

% of total office GLA: % of total office GLA: % of total office GLA: % of total office GLA: % of total office GLA: 4.1 7.1 4.2 2.3 2.0

Investec 100 Grayston Drive This iconic P-grade office building is a landmark 100 Grayston measures at the gateway to the central Sandton banking hub. 70 945m², It is fully let to a single tenant, Investec, Drive and is valued at on a long-term lease. Sandton R2 204m

This office park consists of a number of buildings. The The Woodlands The buildings are situated in a low density, game park measures Woodlands environment with free roaming blesbok, impala, 124 122m², springbok, and other smaller animals and bird life. The and is valued at Woodmead Woodlands boasts amenities such as a restaurant, a R1 707m gym, a nursery school, hairdresser and dry cleaner. The park is on a Gautrain shuttle route and is known in the area for hosting the park run. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 89 About this report Organisational overview 6. 7. 8. 9. 10. MontClare Place Inyanda 1, 3 and 4 Country Club Estate Golf Park, Mowbray The Towers (50%)

Location: Location: Location: Location: Location: Cape Town Johannesburg Johannesburg Cape Town Sandton

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: Performance review R629m R487m R486m R460m R443m

% of total office portfolio: % of total office portfolio: % of total office portfolio: % of total office portfolio: % of total office portfolio: 1.8 1.4 1.4 1.3 1.3

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 29 645m2 23 196m2 33 142m2 28 263m2 12 913

% of total office GLA: % of total office GLA: % of total office GLA: % of total office GLA: % of total office GLA: 1.7 1.3 1.9 1.6 0.7 Key matters

Constantia Office With a superb location benefiting from excellent Constantia N1 highway visibility and accessibility, together with Park measures RSA performance Office Park amenities including a Virgin Active Gym, Spur family 72 834m², restaurant and a Protea Express Hotel, it offers a and is valued at Roodepoort combination of A and B-grade office space to R1 075m 90 tenants, set in a lush park environment. It is let to major tenants like MTN, Afrisam and Primedia.

4 International performance

Inanda Inanda Greens The office park offers easy access to major public measures transport routes. The park is a mix of modern and Greens contemporary buildings that allows natural light to flow 40 774m², through. It is home to 27 tenants including Bell Dewar Sandton and is valued at and Advtech. R971m CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 90 Integrated annual report 2017

INDUSTRIAL

ENGELBERT BINEDELL, Divisional Director

Industrial property as an asset class has come into its own over the past three years, despite a challenging economic backdrop.

Market environment It is important not to underestimate We have also seen an increase in the Compared with the other property sectors, the emergence of online shopping in ratio of offices to warehouses within industrial property is proving remarkably South Africa. It is here, and it is real. industrial premises. It was about 10% to resilient and attracting more and new We are seeing property users and clients 15% historically. Now, it can be anything investors. As an asset class, it is also expanding into this area, which is up to 25% or 30%. Traditional office relatively easy and cheap to manage, and creating opportunities in the industrial users are getting closer to their product it offers a diversity of clientele across property sector. During the year, a large in decentralised areas at rentals that are different economic sectors. warehouse for the exclusive use of the a fraction of traditional office nodes. Pick n Pay home delivery service was Even with South Africa’s poor economic completed at Growthpoint Industrial Gauteng remains the biggest economic indicators, we have seen significant Estate in Meadowdale, Germiston. It is node in the country. Unlike South Africa’s investment into industrial property, one of several examples that can be other big cities, it does not have a sea with the development of warehousing found in our portfolio, including Takealot port. The inefficiency of rail freight and logistics parks responding to which occupies over 30 000m2 at means the province’s road infrastructure consumption demand that is not Montague Business Park. plays an essential role for transport and being serviced by the South African logistics. Locations next to major manufacturing sector. This may seem We have seen an emergence of value- roadways are thus a key success factor counter-intuitive in the current operating retail tenants in industrial spaces. Many and we have invested in nodes that cater environment, but it is as a result of clients, which are retail in nature, are now for this. pent-up demand which has built up over occupying industrial space and selling the past three years. Tenants of industrial directly to the public at a fraction of retail Looking at the cities of Cape Town property are looking for consolidation rental levels. We are of the opinion that and Durban, the industrial property opportunities to cut costs and leverage this trend will continue in future as both fundamentals are different from off functionality, which is resulting in the tenants and their customers are seeking Gauteng. The two coastal cities take up of new developments. value opportunities. are attracting more growth and WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 91 About this report Organisational overview

Segmentation split by value (%) Segmentation split by GLA (%)

5.9 12.8

17.1 6.8

36.5 5.9 45.7 2017 2017 0.6 9.5 3.5

5.7 Performance review 4.1

0.6 2.9 1.6 4.3 5.5 10.7 2.5 4.7 13.1

■ Warehousing ■ Maxi units ■ Warehousing ■ Midi units ■ Industrial parks ■ Low-grade industrial ■ Industrial parks ■ Maxi units ■ Retail warehousing ■ High-tech industrial ■ Retail warehousing ■ Low-grade industrial ■ Motor-related outlets ■ High-grade industrial ■ Motor-related outlets ■ High-tech industrial ■ Mini units ■ Vacant land ■ Mini units ■ High-grade industrial ■ Midi units development. Portfolio vacancy rates owners and international clients. We see Our portfolio comprises a mix of Key matters are below 1% in these nodes. Both this as a positive development as it different types of industrial properties. have access to sea ports. In Cape Town, promotes appropriate services that are Ultimately, when we invest in an asset, demand is driven by consumption transparent, fair and reasonable. These we are investing in the property’s user. growth. Both cities are subject to defined advisers are entrepreneurial and their So, our investments back an industry or geographic barriers resulting in a lack of businesses are fee driven. Growthpoint economic sector. Over time, we have land supply that is driving up values on is a good match on both fronts, and we reduced our exposure to manufacturing existing assets. Users in these areas do believe it is important to recognise the property, and with the country’s not have the choice of space that exists role they play in our deal making. manufacturing output falling and its in Gauteng. outlook remaining weak, this strategy

Performance has paid off. Our diverse portfolio stood RSA performance Technology is playing a more significant Growthpoint’s industrial portfolio us in good stead again this year and will role in both our building users’ has achieved a pleasing reduction in continue to do so in the future. businesses and our own. The science of vacancies, decreasing meaningfully from logistics and supply has evolved over the 6.0% to 3.1%. Our letting success rate Our client-centric approach to doing years, leading to significant cost-cutting and new letting success rate are up from business is very important, as is our exercises by our tenants. This had a 84.9% to 91.5% and from 72.1% to drive to vertically integrate our clients’ positive impact on our development 80.2% respectively. products and services into our supply pipeline and the emergence of the chain, which we consider to be a key asset class. We have retained our tenants but this performance area. Understanding our has come at a cost as our renewal rental clients’ businesses continues to be a

For the past two years, we have seen growth averaged out at 2.3%. priority for us. We are fortunate that, International performance significant compression in the with the tangible nature of these capitalisation rates for industrial assets, We have managed to have almost halved businesses, staying close to our clients making it difficult to acquire any our commencement vacancy and provides a good sense of where they are immediately yield-enhancing properties retained almost our entire client base. in the economic cycle. In this way, we that are functional and in desirable This is a testament to our team and their can be proactive in managing both our nodes. In the final quarter of the financial excellent relationships with members of and their expectations about renewals, year, however, market dynamics began the broking community who enjoy doing expansions and contractions. changing. Some deal flow is now coming business with us. through and we are keeping a close eye Capital values of the properties in on opportunities. Specifically, we have Lease lengths decreased slightly, which our portfolio have grown over several identified yield-enhancing prospects reflects the market’s lack of business years, but these increases are still below CSR and governance among developments that are around confidence. Many companies are taking average, which underlines our five years old and going into their first a wait-and-see approach. This puts conservative approach to valuations. It renewal cycles. pressure on renewals but, at the same stands us in good stead for continuous time, when the economy does pick up, it capital growth in the future. Even when South Africa is seeing the emergence of creates an opportunity to extract income we develop and value our properties, we global real estate advisers who act as growth in future. aim to establish and maintain a portfolio intermediaries between local property WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 92 Integrated annual report 2017

Industrial continued

that will show smooth rental growth in alert for low-risk opportunities to portfolio. Water supply is becoming the future. redevelop our properties. increasingly concerning, specifically in the Western Cape. We are looking into Owning well-located industrial land Setting new benchmarks for new ways to address this in both our has been a critical success factor for sustainability in the industrial property developments and existing portfolios. Growthpoint’s industrial division. For the sector, Growthpoint’s Greenfield past three years, we have implemented Industrial Park in Cape Town was Prospects our strategy to “convert the dirt” with awarded South Africa’s first ever Green It is going to get even tougher out there, success. We undertake very little Star SA rating for an industrial property but with our carefully compiled portfolio speculative development. Typically, we in November 2016. In a milestone and conservative view on rentals and develop once end-users are secured. achievement for green building in values, we should still be able to extract Where we have invested in land, we South Africa, Greenfield received a 4 Star value going forward. have started to convert it into income- Custom Industrial As-Built Green Star SA producing assets, but it has been certification from the GBCSA. Given the economic backdrop, we have imperative for us to have an exit upfront found ourselves in somewhat of a and maintain a low-risk approach to We are proud to be part of creating holding pattern, which presents us with development. a greener, more sustainable built an excellent opportunity to focus on environment for South Africa. Our consolidating our portfolio and ensuring The logistics sector has performed commitment to sustainability and we do the basics right. We have a skilled well but it is currently experiencing an resource efficiency has introduced and experienced property management oversupply of space, specifically big box innovation to the sector. In collaboration team, which stands us in good stead assets in certain nodes in Gauteng. with our partners and the GBCSA, we during this period. We are also well Developing big box assets is a very jointly developed a custom new build positioned for opportunities that could competitive environment with low certification for the industrial asset class, come with economic growth, which we margins. Growthpoint is taking a which is a progressive approach to hope will happen in the near future. different approach to the market and ensuring the GBCSA can certify more focusing on smaller 5 000m2 to building types. From an asset management perspective, 10 000m2 facilities. We are enjoying we continue to build our own pipeline. success in this area because there is less Aligned with Growthpoint’s Growing by acquisition remains difficult, competition, and it caters to client needs. environmental commitment, we strive given the capitalisation rates for to strengthen our portfolio by industrial assets. We continue to evaluate We have also kept a sharp eye on our retrofitting and creating buildings that our portfolio in line with our investment existing portfolio and continue to are more economical, sustainable and criteria and market forces, and have identify opportunities to extract value attractive to clients. Growthpoint earmarked over 30 properties for sale. from our assets. It is cheaper to convert recognises the significant benefits of With investors seeking to enter the asset an existing asset than to undertake a green buildings. We are committed to greenfields development, so we remain driving these forward in our own

Geographical split by value (%) Geographical split by GLA (%)

0.8 1.2 19.0 20.1

2017 2017 16.1 15.9 64.1 62.8

■ Eastern Cape ■ Eastern Cape ■ Gauteng ■ Gauteng ■ KwaZulu-Natal ■ KwaZulu-Natal ■ Western Cape ■ Western Cape WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 93 About this report Organisational overview class, it is an opportune time to proactive in dealing with both risk and We are cautiously optimistic for the year dispose of non-core assets, especially legislative requirements. ahead. We have the product, the brand, manufacturing properties. In this cycle, the strategies and the people to make strategic disposals have the potential to We are seeing evidence of the influence our industrial portfolio work well for deliver good results and attractive of technology on our industrial users. Growthpoint. capital profits. Like the disruptive impacts of Airbnb, Uber, online shopping and flexible Legislation is becoming onerous workspace, we expect technology to for property owners from a capital influence shifts in industrial property deployment point of view. Fortunately, occupation trends. Working with Performance review Growthpoint aligned itself with this partners, we are exploring solutions that legislation several years ago. We expect not only respond to but lead innovation capital expenditure on this to slow down in areas such as flexible, shared in coming years because we have been warehousing and other new concepts.

Key performance indicators FY17 FY16 Gross property revenue (R million) 1 348 1 208 Property expenses (R million) (290) (256)

Net property income (R million) 1 058 952 Key matters Property expense ratio (%) 21.5 21.2 Vacancies (%) 3.1 6.0 Arrears (R million) 12.4 11.5 Bad debt provisions (R million) 8.4 6.9 Average gross rental (R per m2/month) 50.0 47.0 Forward yield (%) 8.7 9.7 Average in force escalations (%) 8.3 8.4 Weighted average lease period (years) 3.1 3.1 Asset value (R billion) 12.6 11.3

Number of properties 233 227 RSA performance GLA (m2) 2 266 957 2 251 089 Value (excluding bulk) per m2 (R) 5 068 4 682 Capital expenditure (R million) 473 543

Top industrial tenants in order of gross rental contribution as at 30 June 2017 Tenants GLA m² 1 The Bidvest Group Ltd 58 590 2 Adcock Ingram Holdings Ltd 27 280 International performance 3 Scania SA (Pty) Ltd 23 513 4 Consolidated Steel Industries (Pty) Ltd 55 640 5 Allied Electronic Corporation Ltd 30 413 6 Distell Ltd 45 636 7 Pioneer Foods Ltd 20 122 8 Barloworld SA Ltd 18 516 9 Continuity SA (Pty) Ltd 11 407

10 DCD Group (Pty) Ltd 77 239 CSR and governance Sub-total 368 356 Balance of the sector 1 827 647 Total for the industrial (excluding vacancies) 2 196 003 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 94 Integrated annual report 2017

Industrial properties top 10 By value 1. 2. 3. 4. 5. Growthpoint Montague Hilltop Isobar Central Business Park Business Park (25%) Industrial Park Park

Location: Location: Location: Location: Location: Midrand Cape Town Elandsfontein Kempton Park Cape Town

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: R644m R345m R333m R222m R205m

% of total industrial portfolio: % of total industrial portfolio: % of total industrial portfolio: % of total industrial portfolio: % of total industrial portfolio: 5.1 2.7 2.6 1.8 1.6

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 68 685m2 30 885m2 76 283m2 47 195m2 49 135m2

% of total industrial GLA: % of total industrial GLA: % of total industrial GLA: % of total industrial GLA: % of total industrial GLA: 3.0 1.4 3.4 2.1 2.2

Growthpoint Growthpoint Growthpoint Business Park is a mixed use facility in Business Park central Midrand with highway exposure to the N1. Business measures Set in a tranquil estate with a number of national and Park international clients. There is some bulk available for 68 685m², future development. Midrand and is valued at R644m

Montague Business Montague Growthpoint has 25% joint ownership of this newly Park measures Business Park developed A-grade industrial park in the sought 30 885m² (25%), after Montague node. It is home to 18 businesses, (25%) which include leading brands such as Takealot.com, and is valued at Supergroup, ABB SA and The Radiant Group. There is R345m Cape Town high demand for further development of the park’s available bulk. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 95 About this report Organisational overview 6. 7. 8. 9. 10. Adcock Omni Park Rivonia Crossing 2 N1 Business Park Greenfield Ingram (20%) Industrial Park

Location: Location: Location: Location: Location: Midrand Johannesburg Sandton Midrand Cape Town

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: Performance review R202m R190m R187m R172m R160m

% of total industrial portfolio: % of total industrial portfolio: % of total industrial portfolio: % of total industrial portfolio: % of total industrial portfolio: 1.6 1.5 1.5 1.4 1.3

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 21 536m2 41 331m2 19 778m2 21 567m2 21 815m2

% of total industrial GLA: % of total industrial GLA: % of total industrial GLA: % of total industrial GLA: % of total industrial GLA: 0.9 1.8 0.9 1.0 1.0 Key matters

Hilltop Industrial Hilltop With superb highway frontage and access, Hilltop Park measures Industrial Park encompasses some of the most Industrial functional industrial premises in South Africa. 76 283m², Park This B-grade industrial park is currently undergoing RSA performance and is valued at a major upgrade. It comprises 19 businesses R333m Elandsfontein and its tenants include Scania, Cartoon Candy, Capital Africa Steel, MAN Diesel and Turbo SA.

4. International performance

Isobar Isobar measures This single tenanted, large industrial facility is (formerly 47 195m², situated in the prominent industrial node of Isando, and is valued at with a lettable area of 47 195m² under roof, gantries Kulungile) R222m and cranes in all bays and large yard areas. Kempton Park CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 96 Integrated annual report 2017

V&A WATERFRONT

DAVID GREEN, CEO

Our market is still relatively strong, with significant demand across all sectors.

Market environment The V&A Waterfront continues to show Performance V&A Waterfront is the most recognised a significant economic disconnect with V&A Waterfront’s net property income and visited private property in Africa. The the rest of the country, and is enjoying grew by 13.0%. Like-for-like growth in investment in this asset remains strategic strong demand across all its property distributable income was 7.3%. We kept for Growthpoint. It meets the goals and sectors. our property expenses contained, at objectives that we identified when first 28.1% of revenue. Overall vacancy levels committing to this property, which It develops at a strong pace and with our remained stable at a low 0.8%. includes having exposure to a unique investment partner, we continued to asset in the Western Cape with support its growth during the year. All in Retail sustainable growth prospects, security of all, we invested and committed to invest Following two years of very strong retail revenue and development opportunities. R4.4bn in the development of the new sales growth of 20% plus, this dropped Silo and Canal districts. We continue to to single-digit growth, mainly driven by Growthpoint has a 50% interest in the pursue more opportunities to develop foreign currency exchange rates. Tourists V&A Waterfront. Our investment is the available bulk into income- are visiting the V&A Waterfront in valued at R7.1bn. In FY17, V&A generating assets. greater numbers and are spending similar Waterfront delivered a pleasing amounts as in previous years, but their performance, supporting our growth in Growthpoint will support the growth of USD, Pound, and Euro are worth less in distributable earnings. Distributions from the V&A Waterfront. It makes financial ZAR terms, down around 20% from last Growthpoint’s 50% stake in the V&A sense for us. During the year, we year. Local spend, however, is also Waterfront increased by 11.7% and optimised efficiencies within the holding up well and has resulted in contributed 8.6% to Growthpoint’s total investment that result in even better increased growth. It is important to note distributable income. growth. Should it become possible, we that the slowing of growth in retail would also support the increase of its spend comes off a very strong base. developable bulk. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 97 About this report Organisational overview

Property portfolio by value (%) Property portfolio GLA (%)

7 22 12 24

6 2017 51 2017 Performance review 28 24 26

■ Retail ■ Retail ■ Office ■ Office ■ Fishing and industrial ■ Fishing and industrial ■ Hotel and residential ■ Hotel and residential ■ Bulk Key matters Vacancies in our retail portfolio are Workshop17, our co-working and Fishing and industrial almost zero, and there is robust demand innovation space owned by Open, is Rental and vacancy levels in this for retail space at the V&A Waterfront. two years old now and has 350 members portfolio remain stable. We opened up a reasonable quantity of and 90 businesses trading from it. It is at new retail space, which is all fully let. full occupancy with a waiting list. The We continue to invest in the Dockside businesses in this space are truly District, which is home to our cruise Offices inspirational. One company started there terminal. Working with the city and A significant amount of new office space with two employees and has plans to tourism authorities, as part of the first was introduced to the V&A Waterfront grow to 45 employees. phase of this development, we have 2

during the year. Of this 28 000m of added facilities such as fibre to allow the RSA performance offices, all of it is let except for 800m2 With strong demand across the office faster processing of passenger handling. in No 5 Silo. sector, we are already negotiating the Some 68 000 passengers moved through further development of office space. the terminal this year compared to A big feature of our performance this 30 000 last year. We have now entered year is the increase in the number of Hotels and residential property to let our second phase of refurbishing and blue-chip businesses taking office Our hotel sector is trading with strong investing in the cruise terminal, which accommodation at the V&A Waterfront. double-digit growth in occupancies and will bring offices, retail spaces and New developments came on stream for revenue per available room. Some 75% restaurants to the district. British American Tobacco (BAT), PwC, of our hotel occupancies are

Werksmans and EY. international tourist driven and, with Rental growth in the fishing sector was International performance tourism growing, they have been doing 8%. At 1.4% our office vacancies are lower well. than last year’s 1.7%. There is buoyant The film studios are in a positive demand for space in this sector across We have 259 residential apartments position, and there is solid interest the board from large corporate to let, and have moved their vacancies for studios from the film and post- headquarters right down to smaller down to below one month, or below production industries for letting on a spaces of between 120m2 and 225m2. 10%, which is a big improvement and much more sustainable, long-term basis. Our renewal success rate is over 90%, better than industry benchmarks. and we are achieving good rental escalations of 8%. Strong demand is CSR and governance evident for smaller spaces, and we are exploring options to cater for this. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 98 Integrated annual report 2017

V&A

WATERFRONT continued

Development This district’s development stretches We expect FY18 to be a continuum of Silo District over Dock Road and includes the this year’s performance with an added The development of the 110 000m2 of redevelopment of the existing Caltex boost from our development, which will space in this district will be complete in and Audi premises, which will be result in above average growth in the September 2017. We are excited about predominantly office accommodation. It office sector as new projects come on the opening of the Zeitz Museum of also extends to Amway House, where we stream. Contemporary Art Africa (Zeitz MOCAA), plan to redevelop the entrance road to which will be the biggest museum of the district. The opening of the Radisson Red will contemporary art in Africa with have a positive impact on revenues in 80 galleries and more than 8 000m2 Socioeconomic and environmental the hotels sector, where we anticipate of exhibition space. commitment good performance. Over the past five years, we have In addition we will open No 6 Silo, which reduced our water consumption per We are expecting a more muted houses the 250 room Radisson Red hotel. square metre by 25% through a series performance from our retail portfolio, The Virgin Active Classic Club opened in of measures and initiatives such as but still at levels that outperform the October 2016 and Silo Hotel, a boutique seawater cooling, grey water harvesting economy. hotel operated by the Royal Portfolio, and drip irrigation systems. We also have opened on time in March. PwC and two boreholes for irrigation. We hope to Performance from property occupied by Werksmans are operating from their new convert the entire site from water cooled the fishing industry and the residential offices in the district. All its retail space is air-conditioning to seawater cooling in property to let should remain stable. let and, at year end, retailers had started future. The entire Silo and Canal districts opening for trade. have systems that use non-potable CNN has called the opening of the water. Given our location and proximity Zeitz MOCAA the biggest art opening in Of the 79 residential units for sale at to the sea, we are also exploring the the world this year, which has led to the No 3 Silo, only one penthouse remained possibility of using desalination as a V&A Waterfront being included among for purchase at the close of the year. The water supply. TripAdvisor’s Top 10 destinations in the first transfers have gone through, and world to visit. Our ambition is for the residents have started moving in. An additional 403MWh per annum of museum to become one of the top three solar power came on stream this year, must-visit attractions in Cape Town. Canal District taking our total installed PV capacity When complete, this development will to 2 247.5MWh per annum, and this Granger Bay is the next development add around 120 000m2 of space in total system is operating successfully, having area at the V&A Waterfront. We intend to the V&A Waterfront. It is anchored by reduced our consumption of electricity to submit an application for land the opening of the offices of BAT and from non-renewable resources as well reclamation and enhanced coastal EY at Waterway House. The retail as our costs. protection in this area and we are component is fully let and features carrying out the necessary luxury motor brands, including Ferrari, We have managed to divert 42% of our environmental impact studies. This Ducati and Rolls Royce. waste from landfill, and in some months is a five-year process. we are now even surpassing this. We have commenced construction of The City of Cape Town asked for a large 1 200 bay car park and storage The development of No 5 Silo, which assistance with its traffic congestion and space, on top of which we will restore has a GBCSA 6 Star Green Star SA rating, affordable housing problems in exchange the original form of the historic won the overall green award in the for bulk development rights – the Amsterdam Defence Battery and create SAPOA Innovative Excellence in Property “Foreshore Freeway Project” – and V&A a three acre public park, including stairs Development awards. It also won the Waterfront responded to this call by and access down to the canal. We are award for best commercial office submitting a bid in January 2017. We also adding two new walkways to the development. await the result of this process. V&A Waterfront alongside the canal. The Canal District will be mixed-use, so will Prospects include a combination of residential The nature of the V&A Waterfront, accommodation for sale and for rent, with its strong core local market offices, as well as assets for other uses. supplemented by tourism, means that we can expect continued strong growth and demand, despite the national economy. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 99 About this report Organisational overview

Key performance indicators – V&A (50%) FY17 FY16

Gross property revenue (R million) 726 639 Property expenses (R million) (204) (177) Net property income (R million) 522 462 Property expense ratio (%) 28.1 27.7 Vacancies (%) 0.8 1.4 Arrears (R million) 17.7 14.0 Bad debt provisions (R million) 2.8 0.7 Average gross rental (R per m2/month) 231.1 214.0 Performance review Forward yield (%) 7.8 7.5 Average in force escalations (%) 8.0 8.0 Weighted average lease period (years) 8.0 8.0 Asset value (R billion) 8.7 7.8 GLA (m2) 223 016 206 838 Value (excluding bulk) per m2 (R) 36 810 34 147 Capital expenditure (R million) 557.6 420.0

Top 10 V&A Waterfront tenants in order of gross monthly rental (100%) Key matters Tenants GLA m² 1 Allan Gray (Pty) Ltd 18 520 2 Nedbank Group Ltd 25 432 3 Legacy Hotels 16 226 4 Edcon Holdings Ltd 7 518 5 Tourvest Holdings Ltd 3 052 6 Sun International Hotels 17 100

7 Newmark Hotels 7 564 RSA performance 8 Woolworths Holdings Ltd 7 682 9 The Foschini Group Ltd 3 014 10 National Department of Public Works 17 324 Total of top 10 123 432 Balance of V&A 319 132 Total for the V&A (excluding vacancies) 442 564 International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 100 Integrated annual report 2017

FUNDS Management

GEORGE MUCHANYA, Executive: Corporate Finance

We have identified new opportunities to pursue within our business by adopting similar business models to those of other leading international property companies. Funds management is one such opportunity.

Overview up to 40% with Growthpoint managing The funds will respond to capital Growthpoint’s balance sheet has grown the underlying fund. available in the market. Each fund will in recent years. At this size, we recognise remain unlisted until it reaches a suitable that no single initiative will move the We believe this business will add depth scale. needle for growth, so we are taking a to the real estate market for the broader multifaceted approach. Besides growing investment community, because SA REITs This low risk, low-capital approach to the assets on our balance sheet, we have focus mainly on the three traditional investment leverages off the skills of identified the opportunity to co-invest property asset classes: office, retail and Growthpoint’s management, provides with others in the unlisted and co- industrial. the benefit of immediate returns and invested environment, where there is a adds value for our stakeholders. differentiation from our core business. We have already launched an Africa Fund and a Healthcare Fund, and identified Growthpoint will earn asset Our new funds management business is more opportunities in specialist management fees, based on each “capital light” and low risk. The strategy investment areas such as education, fund’s gross asset value, and receive is to build a R15bn funds management retirement living and mezzanine debt distributable income from its investment. business over five years. Growthpoint funding as potential future funds for the aims to hold between 20% and 30% of business. Importantly, each fund will be each fund with third parties investing differentiated from Growthpoint by its 70% to 85%. Each fund have gearing of asset class, investor type or geography. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 101 About this report Organisational overview Africa Fund identified as target territories for One of the assets that formed the basis The first fund we identified is opportunity-driven investments. These for this fund’s portfolio was already part differentiated from Growthpoint by countries include Namibia, Botswana, of Growthpoint’s portfolio, making this a its geography. Mozambique, Zambia, Uganda, Tanzania, natural seeding point for the fund. Also, Kenya, Nigeria, Ghana and Morocco. it is easier to raise capital when investors The Africa Fund is promoted by Investec are presented with the fund’s assets. Asset Management and Growthpoint. The fund’s first close was planned for the The fund benefits from the International end of 2016, but the emerging markets The timing of this fund is opportune

Finance Corporation’s (IFC) African crisis negatively impacted our ability to as the Department of Health is issuing Performance review presence. It will invest in real estate raise capital, and it is taking longer than new licences and many of the parties in several African markets to establish initially expected. The fund is most receiving these permits do not have and grow a significant, diversified, suitable for speculative investors as access to capital. We identified the pan-African (excluding South Africa), it has no assets yet, which also makes opportunity to own their properties, third-party institutional real estate attracting funding more difficult. allowing healthcare players to use their investment vehicle. capital resources to focus on their new We remain optimistic about raising opportunities. The venture also leverages the extensive capital for the Africa Fund. We believe there is still an opportunity and that Considering the cost of capital, there is industry, geographic and investment Key matters expertise of its partners. the economic crises have tempered the an opportunity for established players in expectations of potential property the healthcare field to deleverage their sellers. More realistic views now prevail balance sheets by selling all or part of Investec Asset Management is one of the about the different African markets. their existing portfolios to the largest specialist third-party investors in Healthcare Fund. private equity, credit, public equity and Taking a long-term view, though, there sovereign debt across the African is still interest in real estate investment We believe there is investor appetite and continent. IFC, a member of the World in Africa. Many developers also want to a good market for this type of specialist Bank Group, is the largest global recycle capital and are looking for an exit, fund. development institution focused creating further buying opportunities for RSA performance exclusively on the private sector in the fund. Prospects developing countries. With Our immediate focus is raising the knowledgeable local teams and offices in Healthcare Fund capital for the Healthcare Fund, which 22 African countries, IFC will also provide This fund is differentiated from we anticipate will be completed during valuable on-the-ground advisory services Growthpoint by asset class. the first half of the coming financial as a local partner for the vehicle, in line year. Once this fundraising process is with its mandate. Growthpoint brings We have added five assets with a complete, we will consider other property knowledge and management property value of over R2.3bn to the prospects in the fund management skills to the deal.

Healthcare Fund. Our aim is to grow space. These funds will be opportunity International performance its assets to R10bn over the next seven driven and we will continue to seek In addition to our direct stake in the years. Growthpoint owned 100% of the innovative partnerships and ways to manager, Growthpoint will invest an Healthcare Fund as at 30 June 2017, and invest in them. initial USD50m into the vehicle, with we expect to make the fund available to IFC also providing a USD40m the institutional market before the end investment. The fund is in discussion of Q4:2017. with some of the largest local and international investors and it is envisaged Lettable that a total of USD500m will be raised Hospital area before listing. Existing assets beds (total) m2 CSR and governance Netcare N1 City 214 18 471 Taking a conservative and low-risk Busamed Hillcrest 200 17 495 approach, capital will be raised for the Busamed Gateway 165 13 843 fund before assets are purchased. Specific Mediclinic Louis Leipoldt 188 22 311 cities in certain east, west and southern Total/average 754 72 120 African countries have nevertheless been WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 102 Integrated annual report 2017

Trading and Development Over the years, we have built strong development skills and capacity within our team and grown a respected reputation for delivering prestigious, award-winning, green buildings and other quality and custom-built developments.

Fee-earning development and We do not intend for this income to be properties. There is a natural synergy trading profits a material component of our profits. We between these activities and Growthpoint has always grown by will earmark all trading and development Growthpoint’s long-established business developing new assets to hold. We opportunities upfront. We have always undertakings. have also redeveloped, refurbished capped development for our own and expanded assets within our core balance sheet at a maximum of 10% Performance portfolio. We have developed for of our South African portfolio value and In FY17 we finalised our first two major ourselves and our clients on a demand have allocated an additional 5% projects in this new business. We traded basis and, to a significantly lesser exclusively for trading and development Hatfield Festival in Pretoria and extent, on a speculative basis. These for third parties. completed the third-party development development projects have provided of new offices for Absa in Umhlanga. good long-term investments which With this low-risk approach, we are Together, these transactions contributed attract clients. confident that revenue from this R90m to Growthpoint’s income streams. new business will become part of Over the years, we have built strong Growthpoint’s predictable, sustainable Prospects development skills and capacity within income streams. We are committed to pursuing further our team and grown a respected projects in FY18. So far, Growthpoint reputation for delivering prestigious, By taking active positions in assets has, subject to Competition Commission award-winning, green buildings and with the intent to trade them or by approval, acquired Exxaro Corporate other quality and custom-built developing properties for sale to third Centre and a parcel of vacant land in developments. parties, we become a more agile partner Pretoria as part of our Exxaro transaction, for our clients. We assist them in in terms of which we are also developing In the current market, and given the realising their real estate strategies, a new corporate head office in Centurion many opportunities that come our whatever they may be. We can now, for for occupation from early 2019. We way, we have identified the prospect example, offer solutions to clients that believe this represents a good trading of leveraging these skills to earn are leaving our portfolio and want to and development opportunity for development fees and trading profits. become owner-occupiers of their own Growthpoint. We have also identified several further opportunities that could lead to more commitments. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 103 About this report Organisational overview Performance review Key matters RSA performance International performance CSR and governance

Willowbridge Place, Cape Town WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 104 Integrated annual report 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 105 About this report Organisational overview International PERFORMANCE Performance review Key matters RSA performance International performance CSR and governance

Globalworth Tower, Bucharest WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 106 Integrated annual report 2017

Our Internationalisation

The weak South African market is During the year, we grew our foreign We have valuable skills to offer on an struggling to grow and our international income from 15.2% of total income to international scale, as proven with GOZ strategy targets markets that show real 16.8%. We invested R1.6bn into GOZ and GWI. We contribute: growth. through the reinvestment of our our good institutional governance distributions into the company and by framework, which makes a vehicle We have adopted a prudent, low-risk underwriting the offer for GPT Metro investable for institutions approach to internationalisation that Office Fund. We also invested R2.7bn supportive capital over the long term further diversifies our exposure to into GWI. We continue to look for other the capability to attract better- markets, currencies and clients. opportunities and will support the structured debt funding at a lower further growth of GOZ and GWI. We aim price Our strategy considers multiple factors, to grow our foreign income to around our physical property, corporate as opposed to a specific territory, and 30% over the next four years. finance and merger and acquisition where these factors align we will execute expertise investment. We target growing Growthpoint will remain committed to the capacity for companies to grow economies and then invest in smart finding the right opportunities and doing significantly faster than they would platforms for growth by partnering with the right deals over the long term. Our alone. skilled local teams that are well versed in objective is to achieve relevant the dynamics of their specific markets international growth by focusing on We invest internationally when and aligned with our strategic views everything we do in our local market conditions are opportune. We made our and skill sets. Funding dynamics play a and consistently applying all the lessons first investment in GOZ in 2009 when key role in accretive acquisitions we have learned, while being flexible and there was no funding available for listed internationally, where assets can be adaptable to conditions in specific property investment in the Australian acquired at a yield higher than debt markets. Value is achieved differently market. In GWI’s market, big pension funding costs. in these markets, so it is important to funds do not yet invest in physical real choose partners suited to these estate or support the listed real estate While expanding our international conditions. market. In both cases, Growthpoint’s horizons, we always keep a sharp eye on support has made these funds more minimising risks in the ordinary course of investable. Over time, we intend to grow our businesses, including managing our both in liquidity and increase their debt-to-asset value, currency and tradeability to better access capital, interest rate exposure. albeit as a big cornerstone investor. Already, the liquidity of the GOZ shares has grown exponentially in free float. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 107 About this report

GLOBALWORTH Organisational overview During the year, Growthpoint made further substantial strides in achieving internationalisation. We launched our Central and Eastern European investment strategy with an initial 26.9% stake in London Stock Exchange Alternative Investment Market-listed Globalworth Real Estate Investments Limited (GWI).

Our investment in GWI concentrated in Bucharest, Romania, GWI is also benefiting from

Our investment in the Romanian-based and underpinned by Euro-denominated Growthpoint’s significant institutional Performance review real estate developer, owner and leases with many multinational investor following and large and manager launched Growthpoint’s Central business brands. diversified shareholder base. and Eastern European (CEE) strategy with a conservative market entry point It is internally managed by a 70 strong Furthermore, with access to and a high-growth investment platform. professional team led by the CEO, major Growthpoint’s institutional knowledge, shareholder and founder, Ioannis GWI is introducing enhanced governance Growthpoint acquired 24.3m shares for Papalekas, who established a respected and an active dividend policy while EUR186.4m, which was funded through 15-year track record in all aspects of building its institutional investment debt with a weighted average interest property in Romania. Following appeal with the prospect of greater Key matters rate of 2.62%. The transaction was Growthpoint’s initial subscription, liquidity for GWI shares. effective from 20 December 2016. Mr Papalekas continues to own 25.7% of the enlarged GWI. From its already solid foundation, GWI The transaction is accretive to our is being transformed into one of the distributions and advances our With its subscription for new shares, leading institutional real estate investors international strategy. Key to our Growthpoint’s significant capital in the region. internationalisation strategy is making injection into the company provided the yield-enhancing investments that are key to unlocking exciting new growth, In FY17, our 26.9% stake in GWI backed by skilled and experienced local strategies and prospects for GWI. It was contributed R78m, or 1.4%, to management teams. The partnership immediately enabled, for example, to Growthpoint’s distributable income. RSA performance with GWI leverages the extensive fully develop and lease up its excellently industry, geographic and investment located Globalworth Campus, an Market environment expertise that the company enjoys. 87 800m2, A-grade office project in There are good opportunities in CEE northern Bucharest. It was also able markets, with their relatively high real The initial yield of 6% is accretive to to pursue attractive pre-identified estate yields compared to the cost of Growthpoint’s shareholders from day investment opportunities in Romania funding. Further, the region’s strong one. Further upside from GWI can be and the broader CEE region. macro-growth story is supporting expected over the next three to five demand for quality, modern commercial years on a like-for-like basis as its The transaction has also created a property. International performance property portfolio stabilises. platform for further growth through quality developments and accretive The region represents the world’s 11th GWI is the largest owner of office space acquisitions. Also, it has enabled GWI largest economy. It achieved 3.1% real in Romania. Its EUR1bn portfolio of to draw on a deeper pool of equity GDP growth in 2015, nearly double that 18 properties includes mostly modern and access alternative and more of the Euro area at 1.6%. What is more, premium-grade offices, industrial cost-effective sources of funding, its growth is expected to exceed 3% properties and a residential complex, including from international debt capital over the next five years. This presents a as well as a EUR100m pipeline of markets, to support its future growth. compelling proposition in contrast developments. Its portfolio is to South Africa’s low growth. CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 108 Integrated annual report 2017

GLOBALWORTH continued

The CEE region’s growth is being driven the time of due diligence. It refinanced tenants, partners and the people who by a young, skilled and cost-effective its debt through a EUR550m Eurobond, work in or live close to its buildings. labour market, competitive industries, which took its cost of debt down from GWI’s existing portfolio includes eight EU-funded investment in infrastructure, 5% to 3%, with a BB+ rating from class A office properties with Leadership greenfield foreign direct investment in S&P and a Ba2 rating from Moody’s. in Energy and Environmental Design manufacturing, and business process (LEED) Gold or Building Research outsourcing from multinational After our investment in GWI, it also Establishment Environmental Assessment corporations. completed three key acquisitions. These Method (BREEAM) very good or higher include the 57 000m2 development certifications. It is certifying more of its There are not enough assets in the property for Groupe Renault’s Romanian properties. In 2016, its Green Court B market that currently meet the firm headquarters, the 16 300m3 Building C was awarded LEED Gold and Gara demand for quality, investment grade Green Court, which is let to global Herastrau awarded BREEAM excellent offices. This presents exciting corporates including General Motors, and in 2017, Globalworth Tower became development opportunities in these Orange and Merck, and the 68 000m2 the very first office building to be jurisdictions, especially as multinational Dacia Distribution facility. awarded a LEED Platinum in the corporates are committing on long-term Southeast Europe (SEE) region. contracts. This is why Growthpoint GWI also concluded substantial leasing sought a partner with an established with global corporates. Its new Prospects property portfolio as well as developments are on track and Romania’s economy is positive and there development acumen. management has been able to secure is strong demand from global corporates pre-lets. for office space. EU funding of EUR43bn Romania itself is performing well, with has been approved for 2014 to 2020, and one of the highest European GDP growth Aligned with Growthpoint’s commitment is expected to flow into the country. rates, which is expected to grow at 6% to environmental, social and economic for 2017. sustainability, GWI’s key objective is Romanian capitalisation rates are higher to create value for its shareholders by than in other prime markets in the CEE Performance acting consistently in an ethical and region, but we expect further capital rate GWI made a positive contribution to socially responsible manner. Its social compression as the property market Growthpoint’s distributable income in and charitable initiatives respond to the continues to evolve. FY17 and delivered dividends of 22 EUR needs of its community and focus on cents per share. education, social assistance, childcare With the GWI team, we will continue to and healthcare, including hospitals and explore opportunities in CEE for both GWI has surpassed our due diligence hospices. office and industrial asset acquisitions. expectations and delivered on its distribution guidance. It achieved letting Like Growthpoint, GWI also invests in uptake faster than anticipated and it green, environmentally friendly and undertook its bond issue sooner and on energy-efficient properties to give back better terms than were anticipated at to its local communities, investors, WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 109 About this report

GROWTHPOINT Australia (GOZ) Organisational overview Performance review

TIMOTHY COLLYER, Managing Director Key matters

GOZ outperformed industry benchmarks and its market in FY17. It is well placed to RSA performance achieve growth in distributions in FY18 with a stronger portfolio and lower gearing.

GOZ – then and now significantly lower than net asset values. issue at AU16 cents a unit, which closed Not often does a deal with this level of At the same time, the ZAR was relatively on 15 September 2009 and which was success form part of a corporate’s DNA. strong against the AUD. These two underwritten by Growthpoint. Through For Growthpoint, acquiring GOZ back factors presented a unique opportunity this rights issue, Growthpoint invested in 2009 certainly qualifies as a unicorn for Growthpoint to make an investment a further AUD139m and increased its deal, whichever key metric you use to in a quality property portfolio in a holding from 50.1% of OIF to 76.2%. International performance measure its growth and performance developed economy, at a yield that OIF was renamed Growthpoint since. Perhaps the most impressive figure was at least as attractive as similar Properties Australia and trades on the to consider is our investment market investments in South Africa at the time. ASX under the share code GOZ. value in ZAR, which has increased nearly 1 000% since 2009. On 30 July 2009, Growthpoint acquired Growthpoint has continued to support a 50.1% controlling shareholding in the the growth of GOZ by investing around As a result of the global recession Australian Stock Exchange (ASX)-listed R8bn over the past eight years. It has and scarcity of funding in 2009, the Orchard Industrial Property Fund (OIF) received distributions from GOZ of some Australian-listed property market for a cash consideration of AUD56m. OIF R3.3bn over the same period. suffered major write-downs, with most unitholders also approved a 13:10 rights CSR and governance stocks trading at market values WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 110 Integrated annual report 2017

GROWTHPOINT

Australia (GOZ) continued

From starting out as a pure industrial fund with 23 properties valued at around The investment in GOZ AUD600m, GOZ is now a diversified property company with 57 properties valued at Growthpoint’s stake in GOZ remained AUD3.3bn. Some 66% of the portfolio is made up of office properties, and 89% of relatively the same at 65.1% (FY16: properties by value are located in the growth states on Australia’s eastern seaboard. 65.5%). During the year, we also strongly supported the growth of GOZ As a highlight in GOZ’s evolution to a large and liquid security, GOZ was included in and the steps it took to raise capital, the S&P/ASX 200 Index in June 2015. Its AUD market capitalisation has grown by an including its DRIP. astounding 724% since our initial investment. GOZ continued to grow during FY17 and GOZ has grown to become the 10th largest A-REIT, which places it solidly in the midcap Growthpoint is encouraging this because stable. It has become an entity of substance that is well regarded and it has, in recent increased exposure to the Australian years, proved its ability to execute a variety of transactions with success and creativity. market is in line with our strategic objectives on our journey towards As part of Growthpoint’s internationalisation, we will continue to support the growth increased internationalisation. of GOZ, which currently contributes 15.4% to distributable income. There is still more value to be had from Comparing its metrics from 2009 to 2017, GOZ’s investment case and the value it has growth in the Australian market than contributed to Growthpoint speaks for itself. in South Africa, where Growthpoint is competing against a plethora of other Then Now listed property companies and where Key metrics then and now 30 July 09 30 June 17 Growth suitable acquisition opportunities are % shareholding 76.20% 65.12% scarce. Gearing 66.20% 39.40% A major factor in GOZ’s growth this Net tangible asset value per security AUD 0.55 2.88 424% year was its successful takeover of the Share price AUD 1.6 3.14 96% GPT Metro Office Fund (GMF). Physical Market capitalisation AUD 255m 2.1bn 724% property prices in the Australian Market value of investment AUD 195m 1.4bn 618% market are high, making mergers and Market value of investment ZAR 1.3bn 13.6bn 946% acquisitions a better way to grow right now. However, this space is more Total number of properties 23 57 148% complicated and comes with more Property value AUD 643m 3.3bn 413% competition from foreign and local Closing AUD/ZAR exchange rate 6.46 10.04 institutional investors. Total amount invested since inception ZAR 7.9bn Total amount invested since inception AUD 916m In Australia’s very strong physical office and industrial markets, there are also Average exchange rate of investments 8.65 attractive opportunities to dispose of Total distributions received since inception assets. This created an excellent ZAR 3.3bn opportunity for GOZ to better align Total distributions received since inception its portfolio. AUD 356m Average exchange rate for distributions With GOZ’s yield compressing, which is received 9.38 indicative of its success, Growthpoint’s use of South African sources of capital to invest into GOZ has become suboptimal. Instead, we made use of Australian funding or cross-currency swaps to fund our investments into GOZ effectively. We will continue to do this as long as it makes sense. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 111 About this report Organisational overview

GOZ value by geographical diversity (%) GOZ GLA by geographical diversity (%)

1 5 1 2 5 8

29 14

26 45 2017 2017

12 Performance review

6 28 18

■ Victoria ■ Western Australia ■ Victoria ■ Western Australia ■ Queensland ■ Australian capital territory ■ Queensland ■ Australian capital territory ■ South Australia ■ Tasmania ■ South Australia ■ Tasmania ■ New South Wales ■ New South Wales

Growthpoint has an active strategy in We still see a good growth path for GOZ. lower vacancy rates although Perth and Key matters place to hedge its distributions coming From a valuation perspective, as the Brisbane are still struggling to reduce from Australia, but it is becoming company grows and matures it should vacancies following the mining boom. increasingly difficult with the rerate in line with other comparable Generally speaking, there is positive strengthening ZAR, which rallied around A-REITs, which should increase its office demand. 10% against the AUD over the past year. share price. We will continue to follow our strategy The industrial market remains reasonably of hedging distributions from GOZ for In FY17, GOZ delivered 4.9% growth in robust with good demand from the upcoming distribution period. After its distributions. Next year’s growth is third-party logistics providers and that, we will hedge them on a rolling forecast at 2.3% and, using prudent internet retail providers, which are new RSA performance basis to ensure certainty for investors hedging and funding strategies, entrants to the market. and the company about the distributions Growthpoint will strive to grow this received after translation into ZAR. contribution to distributions. The retail sector has come under a bit of a cloud, and there might be some GOZ distributions have also been subject Market environment weakness in this market going forward. to an increase in withholding tax, which The Australian domestic market was Australians have high levels of household was impacted by the decision to sell characterised by reasonable economic indebtedness, which lowers their certain properties at attractive profits. activity and growth, with low disposable incomes, and low levels of Over time, withholding tax will grow as unemployment and low inflation. The savings, so people are holding back on International performance allowances in the company decrease. commercial property market was very consumption. There is also stress on the While this should not exceed 10%, it competitive. Many foreign investors retail sector from the likes of Amazon will impact like-for-like growth on this are entering the market in the office, coming to Australia. investment. industrial and retail sectors, and the competition for assets to purchase is More recently, listed property market There are opportunities for consolidation strong. prices have revived somewhat, primarily in GOZ’s market, and it is in a good because of concerns about the rising position to gain from this. It is a On the tenancy and demand side, office bond rates. There is a divergence substantial and respected player in its sector vacancies are coming down. between the listed and physical property market and ranks highly among midcap Melbourne and Sydney are showing market. CSR and governance A-REITs. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 112 Integrated annual report 2017

GROWTHPOINT

Australia (GOZ) continued

Performance In a market coup, GOZ secured a lease expiry (WALE) of 6.1 years and GOZ outperformed benchmarks and 14.5 year lease for the new national good quality tenants. Its rental comes beat the index over one year, three years head offices for David Jones and Country from a good base. There are no issues and five years. Road Group, owned by South Africa’s with arrears. All this equates to a very Woolworths Holdings Limited. In one of solid, stable property portfolio. GOZ’s distributable income was the year’s largest leasing deals for GOZ, 24.0 AU cents per security, 9.6% more the new 23 156m2 headquarters for The Australian market may be more than in FY16. This enabled GOZ to meet David Jones and Country Road comprises difficult in the coming year, but this is its distribution guidance of 21.5 AU cents two buildings in Swan Street, Richmond, no different from elsewhere in the world per security on a payout ratio of 84.3%. Victoria. Both brands have relocated where bond rates continue to rise. from Sydney to Melbourne. However, if the trend continues, it Like-for-like, net property income will affect rent prices. increased by 1.3% for the portfolio, a During the year, GOZ diversified its significant improvement from last year’s sources of debt and issued its inaugural There are buying opportunities for GOZ 1.1% decrease. US private placement (USPP) market in this market. Post-year end, it took an transaction, which raised the equivalent 18.2% stake in another A-REIT, Industria One of the most significant highlights of AUD208m over 10 and 12-year REIT (IDR), which holds complementary of this year is GOZ’s reweighting towards tranches (averaging 10.9 years) with assets. This is an accretive standalone the office sector. GOZ’s biggest fully fixed interest costs of 5.4%. It also investment for GOZ. transaction during the year was the extended its debt maturity profile to a successful takeover of GMF. This added weighted average debt term of five years In FY18, internal development and six A-grade office assets valued at over and an all-in cost of debt of 4.3%. More value-add opportunities within the AUD440m to the portfolio. These than 75% of GOZ’s debt is fixed. portfolio will be a focus area, including properties are in good locations and several expansions. increased our office exposure in GOZ reduced its gearing significantly New South Wales. The transaction was during the year, to 39.0%, which is at GOZ is also excited to be developing a structured to acquire only the properties the low end of its target range. new office property in Richmond, which of the fund. The takeover went smoothly is in Melbourne, Victoria. The project will and we are pleased with the results. GOZ’s main sustainability focus this year create a Property Council of Australia was environmental sustainability as this (PCA) A-grade innovative office block GOZ also derisked its portfolio with is where it can have the biggest impact of 20 000m2 with a forecast value of AUD259.1m worth of strategic asset in line with its business. Most efforts AUD140m on completion, at a 7% to sales over FY17. These included four were on increasing the National 9% yield. GOZ is targeting five star green industrial assets in Victoria that sold for Australian Built Environment Rating tool credentials and a five star NABERS AUD142.2m in a single transaction and (NABERS) energy rating across the office energy and water rating. achieved an ungeared internal rate of portfolio. It improved from 4.2 Stars to return (IRR) of just over 10%. 4.5 Stars. GOZ submitted to Carbon Where the underlying use of a property Disclosure Project (CDP) and Global Real in the portfolio, be it office or industrial, In March, the terms of sale were also Estate Sustainability Benchmark (GRESB) is not its best use, GOZ will consider agreed for 1231 – 1241 Sandgate Road, benchmarking this year. It also won the opportunities to maximise its value by Nundah, Queensland, for AUD103.5m, Private Sector Communication Award in converting it to residential use, where with an IRR of around 15%. the 2017 Australasian Reporting Awards suitable, over the next 12 months. for improved investor communications. GOZ now owns a AUD3.2bn portfolio of GOZ became part of the GRI Gold The prospects for GOZ are good. It is modern, well-leased and well-located Community for annual reporting in line well placed and well capitalised, with an properties, split between offices (66%) with the Global Reporting Initiative (GRI) excellent portfolio, skilled management and industrial (34%). Its reweighting G4 reporting standards. team and good access to funding from a strategy also targeted the country’s variety of sources, including markets in growth and increased exposure to New Prospects the US and Asia. South Wales from 20% to 26% over the GOZ and its portfolio are in good shape year. Currently, 88% of the portfolio is with high occupancies of almost 99%. The directors of GOZ have confirmed concentrated on Australia’s eastern It has low lease expiries (below 4%) their guidance for FY18 of 22.0 AU cents seaboard. coming up in FY18 and FY19. The per security, which is 2.3% higher than portfolio has a long weighted average FY17. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 113 About this report Organisational overview

Key performance indicators FY17 FY16 Gross property revenue (R million) 2 637 2 175 Property expenses (R million) (344) (262) Net property income (R million) 2 293 1 913 Property expense ratio (%) 13.0 12.0 Vacancies (%)* 1.3 1.0 Arrears (R million) 3.4 4.7 Performance review Bad debt provisions (R million) – – Average gross rental (AUD per m2/annum) 237 198 Forward yield (%) 6.9 7.3 Average in force escalations (%) 3.3 3.1 Weighted average lease period (years) 6.1 6.9 Asset value (R billion) 32 31 Number of properties 57 58

GLA (m ) 1 053 148 1 109 545 Key matters Value (excluding bulk) per m2 (R) 30 894 27 883 Capital expenditure (R million) 473 441 * Measurements and ratios are based on income and not GLA (when compared to RSA).

Top 10 GOZ tenants in order of gross monthly rental Tenants GLA m² 1 Woolworths 350 185 2 NSW Police Department 32 356 RSA performance 3 Commonwealth of Australia 24 370 4 Linfox 58 077 5 GE Capital Finance Australasia** 15 957 6 Samsung Electronics Australia 13 423 7 Lion 12 317 8 Energex 8 754 9 Australia and New Zealand Banking Group 13 744 10 Jacobs Group 8 207 International performance Total of top 10 537 390 Balance of GOZ 507 870 Total for GOZ (excluding vacancies) 1 045 260 ** Leases to Country Road/David Jones, with a weighted average lease term commencement of 14.5 years, will replace the existing lease to GE Capital Finance Australasia upon lease expiry. CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 114 Integrated annual report 2017

Top 10 GOZ PROPERTIES by value 1. 2. 3. 4. 5. 1 Charles Street, 70 Distribution 75 Dorcas Street, 20 Colquhoun Road, Optus Centre, Parramatta Street, Larapinta South Melbourne Perth Airport 15 Green Square Close

Location: Location: Location: Location: Location: New South Queensland Victoria Western Queensland Wales Australia

Sector: Sector: Sector: Sector: Sector: Office Industrial Office Industrial Office

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: R3 046m R2 057m R1 806m R1 533m R1 385m

% of total GOZ portfolio: % of total GOZ portfolio: % of total GOZ portfolio: % of total GOZ portfolio: % of total GOZ portfolio: 9.4 6.3 5.6 4.7 4.3

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 32 356m2 76 109m2 23 811m2 80 374m2 16 442m2

% of total GOZ GLA: % of total GOZ GLA: % of total GOZ GLA: % of total GOZ GLA: % of total GOZ GLA: 3.1 7.2 2.3 7.6 1.6

1 Charles Charles Street Street, measures A 5 star NABERS energy rated, A-grade office 32 356m², building constructed in 2003, which is fully Parramatta, leased to NSW Police. and is valued at NSW R3 046m

Distribution Street 70 measures Distribution Woolworths major distribution centre for SE Qld, 76 109m², purpose-built in 2007, comprises temp-controlled/ and is valued at Street, part-ambient warehousing, hardstand, loading facilities R2 057m Larapinta, and two-level office. QLD WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 115 About this report Organisational overview 6. 7. 8. 9. 10. 333 Ann Street, Building C, 219 – 247 1231 – 1241 Sandgate 3 Murray Rose 5 Murray Rose Brisbane Pacific Highway, Road, Nundah Avenue, Sydney Avenue, Sydney Artarmon Olympic Park Olympic Park

Location: Location: Location: Location: Location: Queensland New South Queensland New South New South Wales Wales Wales Performance review Sector: Sector: Sector: Sector: Sector: Office Office Office Office Office

Value Rm: Value Rm: Value Rm: Value Rm: Value Rm: R1 162m R1 151m R1 039m R973m R973m

% of total GOZ portfolio: % of total GOZ portfolio: % of total GOZ portfolio: % of total GOZ portfolio: % of total GOZ portfolio: 3.6 3.5 3.2 3.0 3.0

GLA m2: GLA m2: GLA m2: GLA m2: GLA m2: 16 369m2 14 496m2 12 980m2 13 423m2 12 386m2 Key matters

% of total GOZ GLA: % of total GOZ GLA: % of total GOZ GLA: % of total GOZ GLA: % of total GOZ GLA: 1.6 1.4 1.2 1.3 1.2

Dorcas Street 75 Dorcas RSA performance measures Street, South A 3.5 star NABERS energy rated, 11 level A-grade 23 811m², office, showroom and car park building with and is valued at Melbourne, 690 parking bays. The building was constructed in R1 806m VIC 2002 and partly refurbished in 2015. International performance 4.

20 Colquhoun Colquhoun Road Road, Perth measures This property is a Woolworths regional distribution 80 374m², centre, constructed circa 2007 and Airport, WA expanded in 2009. and is valued at

R1 533m CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 116 Integrated annual report 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 117 About this report Organisational overview CSR AND Governance Performance review Key matters RSA performance International performance CSR and governance

Brooklyn Mall, Pretoria WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 118 Integrated annual report 2017

CORPORATE SOCIAL RESPONSIBILITY report

Our team is excited about the launch of Growthpoint GEMS, a scholarship programme targeted at the children of our staff.

SHAWN THEUNISSEN, Head of Corporate Social Responsibility

Over the past nine years Growthpoint has focused on delivering social value through corporate social investments. This year we have invested R23.6m (FY16: R21.8m) across the country in community development programmes.

Our programmes are developed and implemented through partnerships with a diverse range of stakeholders who play a key role in addressing our materiality issues. Material to our social responsibility are the macroeconomic environment, economic value creation, community investment, employee engagement and sustainable impact considerations.

Local communities Macroeconomic environment: SA economy, sustainable Customers development goals Education

Economic value Tenants creation: business performance and job creation Skills Suppliers development Community development through Investors social investment Enterprise and Stakeholder Government and Material Pillars supplier engagement industry bodies issues of investment development Sustainable impact

Employees WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 119 About this report Organisational overview How we deliver value to local communities Our approach We focus on utilising our existing resources and working with historically disadvantaged communities to create a more inclusive society. This is achieved by empowering communities through education, skills development and job creation.

6 746 Building long-term value through R23.6m beneficiaries partnerships, community asset

invested ownership and full-time jobs Performance review impacted Our commitment

Education Skills development Job creation

In line with our business strategy of Growsmart has focused on increasing literacy and optimising and streamlining the existing The provision of quality education numeracy performance and we recently property portfolio, FY17 offered remains critical in South Africa’s journey incorporated story writing and a science opportunities for us to strengthen our towards development. Our Growsmart competition. For the year under review support in the specified pillars of social programme continues to demonstrate an 150 schools participated with the overall Key matters investment. We retained our investment effective way of creating social capital winner being Levana Primary School partnerships with 70% of the FY16 for our business and stakeholders alike. from Lavender Hill, which received an beneficiaries. For the past eight years the programme iPad Learning Lab as their prize.

Our progress The business has made significant progress towards the delivery of social Advancing social impact through partnerships value from strategic programmes, impacting over 6 000 beneficiaries with Thandulwazi Maths and Science Academy skills, jobs and economic opportunities. We are cognisant of the socioeconomic climate that exists in our country. Our We monitor the socioeconomic impact partnership with Thandulwazi started in 2014 and to date we have invested RSA performance through constant engagement with our R1.1m in various programmes facilitated by the organisation. Thandulwazi implementation partners, by conducting adopts a multifaceted approach towards improving the quality of maths and site visits and the completion of science teaching in schools in previously disadvantaged areas. We have monitoring and evaluation reports. Our Thandulwazi as a partner of choice because of their diverse programmes and impact data is internally verified. level of expertise. In our journey we have built strong knowledge relationships that have realised impact. Growthpoint acknowledges the challenges currently facing the country’s education system with regard to the

Growthpoint GEMS International performance delivery of desired skills for learners, Growthpoint GEMS stemmed out of the need not just to invest in the communities teachers and school leavers. We continue in which we operate, but to also be able to invest in the immediate families of to focus our investments on education- Growthpoint staff. The programme was launched in 2016 with the aim to support related programmes and are mindful that lower-earning employees and their immediate families by providing educational grants achieving a broader impact will require to their children at primary, secondary and tertiary level. There were 35 learners in the long-term and sustained interventions 2017 intake with 40% being primary school learners. throughout the education value chain. Our efforts through Growsmart and partnerships with organisations such The GEMS programme is more than a financial aid and an educational support as Thandulwazi Maths and Science system. It has boosted my daughter’s confidence and her determination to Academy, contribute towards this. Our CSR and governance team is excited about the launch of work towards a better education… [and life]. This incredible initiative has also Growthpoint GEMS, a scholarship taught her the values of “giving back”. Megan Dyce, Growthpoint employee. programme targeted at the children of our staff. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 120 Integrated annual report 2017

CORPORATE SOCIAL

RESPONSIBILITY report continued

Growthpoint bursary programme Our bursary programme enables the development of professionals within the property sector. We have supported eight students directly and one student via the SAPOA bursary programme in this financial year. Upon graduation students become eligible for Growthpoint’s graduate training programme.

Summary of social value created Targeted level/area Our investment Pillar of impact and focus Outputs Outcomes Future focus

Education Early Childhood R3.3m 77 qualified and Safe and healthy Our target is to Development (ECD) Teacher training and competent teachers learning get at least three Beneficiary example: infrastructure environment that ECD centres 1 636 children in ASHA Trust, Gauteng improved learning in “Department of improved learning 20 ECD centres Social Development environments subsidy ready” per year Primary school R3.7m 3 382 beneficiaries Improved literacy System-level Beneficiary example: Literacy and from various and numeracy rates changes through primary science numeracy programmes at four schools by input on policy programme, Eastern performance 16.3% development Cape Secondary school R0.4m 43 beneficiaries Improvement in the Implementation Beneficiary example: Maths and science reached average maths and of STEM-related Go for Gold, performance and science pass rate by programme in Gauteng career exposure 23% Limpopo Skills Youth development R0.9m 56 beneficiaries 82% of beneficiaries Partnering with development Beneficiary example: Formal qualification reached realised full-time suppliers as part Learn to Earn, and economic economic activity of employment Western Cape activity rate rate programmes for learnership graduates Employability R1.3m 17 university One graduate in Absorption of three Beneficiary example: Professional skills students pursuing full-time graduates from SAPOA bursary development qualifications employment bursary programme student, Gauteng Staff Staff volunteerism R1.4m Engaged staff 418 staff members Continued engagement through our volunteering in their volunteered for engagement with GSquared initiative communities various initiatives staff Enterprise and SME development R11.9m 35 SME beneficiaries 47.8% revenue Supplier supplier Beneficiary example: growth and R249m development development Property Point SME, worth of market programme roll out Gauteng and linkages realised in Western Cape Western Cape Job creation 360 Annual job creation target of 20% WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Local communities

Customers

Macroeconomic environment: SA Tenants economy, sustainable development goals Education Economic value creation: business Skills Suppliers performance development and job creation Enterprise and Community supplier development Investors development through social investment Stakeholder Material SustainableGrowthpointPillars Properties of Limited engagement Government and issues impact investment industry bodies Integrated annual report 2017 121 About this report Employees

Building long-term value through R23,6m invested 6 746 bene ciaries impacted partnerships, community asset Our ownership and commitment full-time jobs.

Education Skills development Job creation Organisational overview In 2018 we look forward to working on Property Point impact creating opportunities for people living with disabilities. We will continue our partnership with iSchool Africa on Financial Human Social delivering literacy outcomes by supporting Inyamazwe Full Service School and Woodford Primary school in KwaZulu-Natal. Furthermore, we will be working with The Living Link to roll out six learnership opportunities for youth R702.3m 1 669 full-time 2 951 in Gauteng. market linkages jobs created entrepreneurs Performance review attending “Growthpoint is 47.8% revenue 124 bene ciary seminars and workshops pioneering in many growth SMEs regards with an innovative and collaborative approach that shows the Above are cumulative figures from 2008 authentic intent of its Key matters Broad-based black economic empowerment and transformation social development Growthpoint aligns all its broad-based black economic empowerment reporting to the Property Sector Charter. This year the business achieved a level 3 rating on the scorecard, engagements.” an improvement from a level 4 in the previous year. Growthpoint has submitted its annual B-BBEE compliance report to the B-BBEE Commission and the JSE in terms of the B-BBEE Keri-Leigh Paschal, CEO Act and the report is also available on the company’s website. NationBuilder Maximum Previous FY17 Staff volunteerism Element points score score Opportunities By giving our people the time and RSA performance opportunities to volunteer, we further Ownership 20 19.06 19.47 B-BBEE disposal strategy our common goal of supporting positive Establishment of a broad-based change in our communities. Our scheme year-round staff volunteerism initiative, GSquared, is an action-orientated Management 10 4.17 3.69 Increase black female community engagement initiative for control representation at board level staff. On an annual basis Growthpoint Employment 15 4.95 5.38 Align employment equity allocates each staff member eight hours equity targets for inclusive gender to participate in community diversity among senior and development work. To date 418 staff middle management. have volunteered representing 66% Recruitment strategy to be of our employees. aligned to the disability policy International performance Skills 15 9.90 11.81 Align talent management Enterprise and supplier development strategy to our succession plan. development Learnerships focusing on The strategic focus of our enterprise unemployed youth and supplier development programme, Property Point, is to create sustainable Preferential 20 17.34 19.30 Focus on procurement from small businesses. For the year under procurement black women-owned entities review 850 entrepreneurs attended our Enterprise 10 10 10 Focus on graduation of “To The Point” sessions, 35 new development suppliers from enterprise businesses participated in our enterprise development to supplier and supplier development programme development CSR and governance and the total value of linkages accessed Socioeconomic 2 2 2 Collaboration with our by beneficiary businesses was close development suppliers and shareholders to R250m. Through our programme, Economic 15 9.75 9.03 Align with Growthpoint’s businesses were able to create the development strategy to invest in under- equivalent of 360 full-time jobs for resourced areas. the period. Level 4 3

WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 122 Integrated annual report 2017

CORPORATE GOVERNANCE

The Board is guided in all matters by the Board Charter which sets out its RESPONSIBILITY. ROLAND KRABBENHÖFT, Company Secretary

Growthpoint upholds and applies the provisions and principles of the King Report on Corporate Governance for South Africa and Code (King IV), which are also followed for purposes of annual reporting. Governance criteria advocated by institutional investors are also considered and applied where they have merit and are in the company’s best interests. These include the Code for Responsible Investment in South Africa (CRISA).

Philosophy The company has remained compliant Through the governance structures As part of the commitment to sound with the Companies Act, No 71 of 2008, and processes in place, Growthpoint’s governance, the Board endeavours to as amended (the Act). The Board Charter financial and other controls and ensure that the business is conducted and the Terms of Reference of Board supervisory oversight exercised in with integrity and accountability, in line committees are aligned with relevant the organisation are appropriate and with the Code of Ethics incorporated in provisions of the Act and King IV, as are adequate. the Board Charter. This entails ongoing Growthpoint’s own statutes and those reviews of structures, policies and of its subsidiaries. practices to enhance governance for the ultimate benefit of all stakeholders.

WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 123 About this report Organisational overview 2017 corporate governance assessment The company has completed its annual governance self-assessment by applying an accredited governance assessment tool, with a very satisfactory outcome (overall rating: AAA – highest accreditation), as reflected in the table below:

King IV governance register at 30 June 2017 Applied/ not applied/

Growthpoint Properties Limited – 1987/004988/06 not applicable Performance review + Principle 1 The governing body should lead ethically and effectively Applied + Principle 2 The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture Applied + Principle 3 The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen Applied + Principle 4 The governing body should appreciate that the organisation's core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process Applied + Principle 5 The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation's performance, and its short, medium and Key matters long-term prospects Applied + Principle 6 The governing body should serve as the focal point and custodian of corporate governance in the organisation Applied + Principle 7 The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively Applied + Principle 8 The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties Applied

+ Principle 9 The governing body should ensure that the evaluation of its own performance and that of its RSA performance committees, its chair and its individual members, support continued improvement in its performance and effectiveness Applied + Principle 10 The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities Applied + Principle 11 The governing body should govern risk in a way that supports the organisation in setting and achieving strategic objectives Applied + Principle 12 The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives Applied + Principle 13 The governing body should govern compliance with applicable laws and adopted non-binding rules,

codes and standards in a way that supports the organisation being ethical and a good corporate citizen Applied International performance + Principle 14 The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term Applied + Principle 15 The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision making and of the organisation's external reports Applied + Principle 16 In the execution of its governance role and responsibilities, the governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time Applied CSR and governance Fully complied/ Growthpoint Properties Limited – 1987/004988/06 reviewed + JSE Corporate Governance Listings Requirements Fully complied

The full register of the company’s application of the King IV principles can be found on the company’s website www.growthpoint.co.za. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 124 Integrated annual report 2017

CORPORATE GOVERNANCE continued

Governance element 1. Ethical leadership and corporate citizenship

Brief summary of the application of King IV principles The Board: provides effective supervision and leadership based on ethical imperatives directs strategy and operations for sustainable business annually reviews Group strategy ensures Growthpoint is a responsible corporate citizen ensures company ethics are managed effectively, under the auspices of the Social, Ethics and Transformation Committee in terms of the Act tracks measurements and key performance indicators for effective corporate social responsibility, green initiatives and programmers dealing with environmental sustainability monitors ethical risks and opportunities.

Governance element 2. Boards and directors

Brief summary of the application of King IV principles The Board: ensures that it acts in the best interests of the company acts as the focal point for, and custodian of, corporate governance and the governance of risk including information technology risk recognises that strategy, risk, performance and sustainability are inseparable endeavours to ensure that the Audit Committee and the internal audit function remain effective and independent ensures that Growthpoint complies with applicable laws and considers adherence to non-binding rules, codes and standards ensures that the roles of Board Chairman and the company’s Chief Executive Officer are separated maintains a balance of power, with a majority of independent non-executive directors ensures the Chairman is an independent, non-executive director whose role is defined in the Board Charter annually elects the Chairmen of the Board and committees (save for the Audit Committee whose members and Chairman are elected at AGMs) appoints the Chief Executive Officer includes a Financial Director in an executive capacity, in accordance with the JSE Listings Requirements implements and periodically reviews an effective succession plan for senior management via the Remuneration Committee, which process is monitored by the Risk Management Committee works within an established framework for effective and controlled delegation of authority appoints directors by involving the whole Board, on recommendation of the Nomination Committee, through a formal process governed by the Nomination Committee’s Terms of Reference and by the company’s MOI (the removal of a director without shareholder approval, in terms of section 71(3) of the Act, is incorporated into the company’s MOI) ensures bespoke induction and development of new directors is assisted by a competent, suitably qualified and experienced Company Secretary who is not a director and who maintains an arm’s length relationship with the Board (formal assessment completed by the Board in August 2017) performs self-evaluation of the Board and its committees annually, with formal feedback. Directors are not individually assessed but the Board and committee self-assessment gives members the opportunity to comment on the performance and contribution of their colleagues annually assesses and has, during June to July 2017, assessed the independence (or not) of every non-executive director including those with tenures exceeding nine years delegates to well-structured, appropriately constituted committees without abdicating its own responsibilities applies the governance framework to Group subsidiaries and its Boards ensures, on the Remuneration Committee’s recommendations (based on expert outside opinion), that directors and executives are remunerated fairly and responsibly ensures that remuneration of the directors is disclosed fully and individually obtains approval from the shareholders at each AGM for non-executive directors’ fees in respect of the ensuing financial year seeks approval by shareholders at the AGM of Growthpoint’s remuneration policy (currently a non-binding vote in South Africa). WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 125 About this report Organisational overview

Governance element 3. Audit committee

Brief summary of the application of King IV principles The Audit Committee: is effective and independent, and ensures that its members, including the Chairman, are suitably skilled and experienced non- executive directors oversees the Group’s integrated reporting and reviews the disclosure of sustainability issues satisfies itself annually of the expertise, resources and experience of the company’s finance function and of the Financial Director’s suitability Performance review oversees the internal audit function, receives internal audit reports at each of its quarterly meetings and approves the annual internal audit plans plays an integral role in the Group’s overall risk management process specifically oversees financial reporting risks, internal financial controls, fraud risk as it relates to financial reporting, and IT risk as it relates to financial reporting recommends the appointment of the external auditor and oversees external audits approves, implements and monitors a policy for non-audit services provided by the external auditor engages external specialists on material sustainability and integrated reporting aspects reports quarterly to the Board and annually to shareholders annually assesses its effectiveness as a committee. Key matters

Governance element 4. The governance of risk

Brief summary of the application of King IV principles The Board is responsible for the governance of risk, which it manages through an independent Risk Management Committee. This committee also monitors the company’s compliance with the qualifying REIT criteria laid down by the JSE Listings Requirements (section 13), which it may delegate to the Audit Committee. The governance of risk is covered later in this report.

5. The governance of information technology (IT) financial

Governance element reporting risk via the Audit Committee RSA performance

Brief summary of the application of King IV principles The Board is responsible for the governance of IT risk via the Risk Management Committee, and in respect of financial reporting risk, under the auspices of the Financial Director, via the Audit Committee The Chief Information Officer, who attends the Risk Management Committee meetings and is an Exco member, is responsible for the IT governance framework The external auditors will periodically assess IT governance against King IV IT strategy is part of the Group’s strategic plan and business processes The Board tracks and evaluates material IT investments and expenditure to ensure IT infrastructure is managed efficiently

IT forms an integral part of the company’s risk management and IT internal audits are performed periodically by qualified International performance and experienced outside parties. CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 126 Integrated annual report 2017

CORPORATE GOVERNANCE continued

Governance element 6. compliance with laws, rules, codes and standards

Brief summary of the application of King IV principles The Board: ensures that the company complies with applicable laws and considers adherence to non-binding rules and codes makes compliance a standing item on the Risk Management Committee agenda recognises that compliance is an ethical imperative acknowledges that compliance risk is an integral part of Growthpoint’s risk management process ensures effective compliance frameworks and processes are in place ensures that compliance officers are well qualified, and have ongoing interaction with the Risk Management Committee and/or executive management on compliance matters has a working knowledge of applicable laws, rules, codes and standards, as well as the potential impact on the company and its business.

Governance element 7. Internal audit

Brief summary of the application of King IV principles The Board, via the Audit Committee, ensures that internal audits are effective and risk based The internal audit charter is approved and periodically reviewed by the Audit Committee The Head of Internal Audit and Risk Management reports to the Audit Committee quarterly, on the design and operating effectiveness of the company’s internal controls and on internal audits or reviews Internal audit is strategically positioned to achieve its goals The internal audit function is appropriately resourced for the complexity and volume of work required.

Governance element 8. Governing stakeholder relationships and dispute resolution

Brief summary of the application of King IV principles The company has an Investor Relations Officer and formal investor relations policy The Board recognises that stakeholder perceptions can affect the company’s reputation and seeks to ensure the equitable treatment of all stakeholders Management proactively deals with stakeholder relationships by balancing various stakeholder interests appropriately and in the company’s best interests The Board ensures that disputes are resolved as effectively, efficiently and expeditiously as possible Where necessary, resolution of both internal and external disputes would rely on the Association of Arbitrators of SA. Employees involved in any such process will be assisted by the company’s legal advisers Communication processes and policy for interaction with the media and stakeholders are ultimately approved by the Board.

Governance element 9. Integrated reporting and disclosure

Brief summary of the application of King IV principles The Board is responsible for the integrity of the company’s integrated annual report, with the assistance of the Audit Committee Annual sustainability reporting and disclosure is overseen by the Audit Committee Compliance with the Global Reporting Initiative, as well as the formal guidelines on reporting by the Integrated Reporting Committee (IRC) of South Africa, is assessed internally and externally. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 127 About this report Organisational overview The Board of Directors shares as at 30 June 2017 are set out in management, external auditors and the During the year under review and as the annual financial statements (AFS) internal auditor to be held after every at the date of issue of this report, note 19 (related-party transactions). meeting as and when necessary. Growthpoint had a unitary Board comprising 13 directors in total: three The expertise and business experience of The Board has adopted a Board level executive directors and 10 non-executive each of the executive and non-executive gender diversification policy with a directors, eight of whom are regarded by directors enables them individually, and voluntary 30% target for female the Board as independent. as a Board, to evaluate strategy, assess representation. Currently, the two female the company’s performance and at all directors represent 15.4% of the total

The Board provides strategic direction times act in Growthpoint’s best interests. number of directors (20% of the Performance review and leadership, promotes shareholder non-executive directors). value and enhances the sustainability Non-executive directors have of the business, to the benefit of the unrestricted access to company The Board Charter was amended in June company and all its stakeholders. To information and members of 2017 to include a policy statement on ensure that they act with independence management besides the executive racial diversification, in terms of which of mind and integrity, directors are directors. To help them fulfil their the Board will strive to meet legislated required to abide by Growthpoint’s Code responsibilities effectively, non-executive and/or regulated employment equity of Ethics and policies promoting ethical directors may also seek independent targets applicable from time to time behaviour. professional advice, paid for by the at Board level.

company. The Audit Committee provides, Key matters The directors annually declare their as a standing item on the agenda of Mr SP Mngconkola’s tenure with the financial interests, as per the Act. regular meetings, for combined or Public Investment Corporation (a major Directors’ interests in the company’s separate closed sessions with shareholder) ended during the year and he is now regarded as independent.

Directors with tenures in excess of nine years Name of director Year of appointment Number of years in service Status

MG Diliza* 2001 16 years Not independent RSA performance PH Fechter 2003 14 years Independent JC Hayward 2001 16 years Independent HS Herman 1995 22 years Independent JF Marais 2003 14 years Independent R Moonsamy 2005 12 years Independent FJ Visser 2001 16 years Independent * B-BBEE partnership International performance CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 128 Integrated annual report 2017

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Growthpoint Properties Australia Re-election of directors and new Executive directors are, in terms of Limited (GOZ) appointments Growthpoint’s MOI, not subject to GOZ reports to Growthpoint’s Risk Directors who retire by rotation or retirement by rotation at the AGM. This Management Committee annually on otherwise at AGMs are those longest in is in line with recommended best the applicability of the King IV principles office since their last re-election and practice and is supported by the JSE, to its governance policy, as well as those appointed by the Board since the for South African-listed companies. additional parameters required by last AGM. Retiring directors are named Australian law. GOZ’s governance in the directors’ report and AGM notice Attendance at meetings conforms to or exceeds the principles included with the notice and proxy The Board meets quarterly and on an of the King IV Code. of AGM and summarised financial ad hoc basis, if required. The quorum statements. The Board, through the requirements of Growthpoint’s MOI Growthpoint directors hold positions on Nomination Committee, recommends are always considered when scheduled, GOZ’s Board and committees as follows: (or not, as the case might be), retiring ad hoc or special meetings are convened. Board: LN Sasse, EK de Klerk and non-executive directors for re-election Due regard is given to recusal of directors JF Marais or election at the AGM. where conflicts of interest or related- Audit, Risk and Compliance party positions exist or could arise. Committee: EK de Klerk Nomination, Appointments of new directors are Remuneration and HR Committee: handled by the full Board on the Details of attendance at Board and LN Sasse (Chairman) and JF Marais recommendation of the Nomination committee meetings in FY17 are set out Committee. New directors are below. Board members are encouraged to Globalworth Real Estate adequately informed about serve on at least two Board committees. Investments Limited (GWI) Growthpoint’s business and policies, as As GWI is not a subsidiary, it is not well as meeting dates and procedures. Six scheduled Board meetings were held expected to report to Growthpoint’s Risk All directors receive the Board Charter during FY17. In all cases in FY17 where Management Committee in respect of during induction and once a year for directors or committee members were corporate governance. review at the appointed Board meeting. unable to attend a meeting, the Board or respective committee accepted their Growthpoint directors and officials hold One-third or nearest that number of the substantiated leave of absence. positions on GWI’s Board and non-executive directors are subject to committees, as follows: retirement by rotation and re-election Board: LN Sasse, PH Fechter, by shareholders at the AGM each year. G Muchanya Remuneration Committee: PH Fechter, and attendance by LN Sasse as observer Audit Committee: attendance by G Muchanya as observer

Attendance at meetings Social, Risk Ethics and Board Audit Management Property Transformation Remuneration Nomination JF Marais 6/6 3/4* 4/4 1/1 EK de Klerk 6/6 4/5 4/4 4/4 4/4 MG Diliza 6/6 4/4 4/4 1/1 PH Fechter 6/6 5/5 4/4 1/1 LA Finlay 6/6 5/5 4/4 1/1 JC Hayward 5/6 5/5 4/4 1/1 HS Herman 5/6# 3/4# 3/4# 0/1 SP Mngconkola 6/6 4/4 4/4 R Moonsamy 6/6 4/4 4/4 NBP Nkabinde 6/6 4/4 4/4 LN Sasse 6/6 4/4 4/4 4/4 1/1 G Völkel 6/6 5/5 4/4 4/4 4/4 FJ Visser 6/6 4/4 4/4 1/1 * By invitation # Leave of absence due to ill health WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 129 About this report Organisational overview Dealings in the company’s shares The Chairman accountable to the company, but is In terms of both Group policy and the The roles of the Chairman and CEO are always cognisant of stakeholder Listings Requirements of the JSE Limited, separate and they operate independently expectations and interests. In its decision directors of both the Group and its major of each other. making, the Board adopts an inclusive subsidiaries, as well as directors’ approach to governance. associates, Exco members and the The Chairman, Mr JF Marais, is an Company Secretary must obtain prior independent, non-executive director. In July 2017, the Board, along with the written clearance from the CEO and/or His responsibilities are contained in, Remuneration, Audit, Property, Risk Chairman if they intend to deal in but are not limited to, the Chairman’s Management and Social, Ethics and

Growthpoint shares, whether directly Charter. They include: Transformation committees, conducted Performance review or indirectly. This policy also applies providing overall leadership of the a formal self-assessment process. The to certain other members of senior Board and its committees overall outcome was positive, and management who are from time to time leading and managing the business of feedback was provided to the Board privy to price-sensitive information. the Board, without limiting the Board’s and the respective committees at their collective responsibility meetings held in August 2017. Closed periods are imposed on directors serving as the link between the Board and staff in relation to interim and and management of Growthpoint The Company Secretary annual financial results and from time with Remco’s involvement, assessing The Company Secretary, to time in respect of specific corporate the performance of the CEO Mr RA Krabbenhöft, was formally actions. in liaison with the CEO, assessing the evaluated by the directors in July 2017 Key matters performance of the other executive and has been found to be suitably Directors’ remuneration directors at least annually. competent, experienced and qualified for Directors’ remuneration is subject to his position. He holds a Fellowship with annual review by Remco, and subsequent Board responsibilities and Chartered Secretaries Southern Africa approval by the Board of the proposed accountability (1993) and the Chartered Institute of fees to be submitted for approval at the The Board is guided in all matters by Business Management (1993), a Diploma AGM. The fees for FY17 were approved the Board Charter which sets out its in Corporate Governance (RAU – 1997), at the AGM held on 15 November 2016. responsibilities. These include: and has been involved as a Company governing, directing and monitoring Secretary and Group Company Secretary

The most recent review of non-executive the performance of the business as of JSE-listed companies since 1987. He is RSA performance directors’ remuneration included a going concern and presiding over not a director of any Group company but benchmarking by Remco’s independent material business decisions a full-time employee and maintains an advisers. The Remco proposals for approving the company’s strategic arm’s length relationship with the Board. FY18 were approved by the Board on plans and objectives 29 August 2017. These recommendations managing risks to the business, mainly Code of Ethics and Business will be presented at the AGM to be held through the Risk Management and Conduct on 14 November 2017. At the same Audit committees The Code of Ethics aims to ensure that time, shareholders will be asked to providing direction to management. Growthpoint conducts its business in approve, by way of non-binding votes, line with the highest ethical standards. the company’s overall remuneration The Board (either itself or through the The code in particular seeks to ensure International performance policy and implementation for 2018. Nomination Committee) periodically compliance with relevant legislation and The remuneration report containing reviews its composition relative to the regulation, in a manner that is beyond this information is included in the “key skills, expertise and experience needed reproach. The code is available to matters” section of this report. to provide strategic direction and employees and other stakeholders, leadership, and representivity in terms as are Growthpoint’s mission and value Directors’ remuneration is disclosed of gender and race. statements. The Code of Ethics and in the AFS in line with the Listings Growthpoint’s mission and value Requirements of the JSE Limited. The The non-executive directors are statements are posted on the company key performance aspects linked to independent of management and are website (www.growthpoint.co.za). remuneration of executive directors free from relationships that could affect and management are described in the their judgement as directors. The Board is CSR and governance remuneration report.

WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 130 Integrated annual report 2017

CORPORATE GOVERNANCE continued

The outcome of Growthpoint’s Compliance with the Code of Ethics is their responsibilities, including governance structures, covered as monitored directly and indirectly. The professional advice which is paid for follows, are dealt with extensively in Group has in place a formal mandatory by the company. other sections of this integrated annual authorisation process for dealings in the report. company’s shares, formal policies and Every Board committee has Board- procedures for accepting and granting approved Terms of Reference which are Policies promoting ethical conduct gifts and inducements, disclosure of periodically reviewed and are aligned, to Growthpoint has various policies in place conflicts of interest, anti-corruption as the extent applicable and possible, with to promote and safeguard ethical well as formal levels of authority and King IV, the Listings Requirements of the behaviour and integrity among delegated signing authorities for business JSE Limited and the Act. management and employees. transactions. The Board determines and amends, as These policies include: During FY17, Growthpoint had no necessary, the scope and responsibilities the company’s mission and value incidents of major non-compliance, fines of the committees, as well as the statements or prosecutions linked, for example, to appointment of new committee employee integrity, to encourage anti-competitive practices or other members. employee compliance with policies governance and economic issues, or and standards of best practice non-compliance with its Code of Ethics. To promote sound corporate governance an anti-corruption policy and and optimise the sharing of information, guidelines regarding gifts, Internal audit the executive directors and other senior entertainment and inducements The internal audit function, with executives are present at selected Board whistle-blowing and protected the exception of internal audit for committee meetings either ad hoc or disclosures, to encourage employees information technology (IT), is provided by standing invitation. The Company to raise concerns about workplace in-house by the Head of Internal Audit Secretary attends all Board committee malpractice without fear of and Risk Management. Its scope and meetings. victimisation or reprisal functions are covered in the internal substance abuse and sexual audit section of this report. All of the committees have satisfied harassment, forbidding these practices themselves that they have fulfilled their in the organisation. External audit responsibilities in accordance with their KPMG Inc. acts as external auditor for respective Terms of Reference during Compliance framework Growthpoint and its subsidiaries. The FY17. Statutory and regulatory compliance is independence of the external auditor a standing item on every agenda for the is reviewed every year by the Audit Chairmen’s Committee Risk Management Committee and is Committee with the auditors. The A Chairmen’s Committee comprising addressed by the Head of Internal Audit external auditors attend all Audit the Board’s Chairman (as committee and Risk Management in quarterly Committee and Risk Management Chairman) and the chairmen of the reports to the committee. Compliance Committee meetings and have Board’s committees meets on an ad hoc with accounting standards and financial unrestricted access to the chairmen basis and serves as a forum for: reporting requirements is overseen by of both committees. chairmen of the committees to raise the Audit Committee. matters which they or their Board committees committees feel need to be raised Compliance officers are decentralised The committees established by the with the Board throughout Group operations based on Board assist it in the discharge of its executive directors to raise matters their expertise. duties and the overall governance of or emerging issues that are sensitive the organisation. discussion of aspects of governance The Board receives feedback quarterly that might require attention from from the chairmen of all Board The Board committees have unrestricted time to time. committees, in addition to the minutes access to company information and any of the preceding committee meetings. resources required to help them fulfil

WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 131 About this report Organisational overview The committee will also consider AFS are reviewed, prior to The committee, which meets at least appropriate and effective approaches recommendation to the Board for quarterly, oversees management to matters to enhance the Board’s approval compliance with risk management efficiency, oversight and guidance. an external auditor is appointed at all policies and procedures, and reviews times to determine the scope for each the adequacy of the risk management Audit Committee external audit. framework relative to risks and The Audit Committee comprised three opportunities identified. independent non-executive directors The committee reviews and sets the during the period under review, one of external auditor’s fees for annual audits. The Risk Management Committee is whom is the Chairman of the Risk assisted by internal audit and risk Performance review Management Committee. The Managing The committee is satisfied that the management for its reviews of risk Director, Financial Director, external external auditor is independent and that management controls and procedures. auditor, Financial Manager and Head the FY17 audit has been carried out The Risk Management Committee of Internal Audit and Risk Management without any restriction of the audit’s reports quarterly to the Board. are present at meetings, by standing scope. invitation. The main objective of the committee The financial expertise of the members is to protect the quality, integrity and The committee maintains an effective of the Audit Committee is reflected on reliability of the Group’s risk working relationship with the Board, pages 22 and 33 of this IAR. management by:

management and other Board assisting the Board in matters of Key matters committees, notably the Risk Key focus areas for the committee during corporate accountability and Management Committee, whose minutes FY17 have been: associated risks are noted at Audit Committee meetings. to obtain an understanding of the ensuring risk policies and strategies This ensures that risk management requirements of external auditors are effectively managed controls and the status of specific risk to report on significant matters monitoring external developments issues dealt with by the Risk impacting on their review that could affect corporate Management Committee are noted. King IV requirements and auditor accountability independence and the presence and reviewing and assessing the integrity The committee has five scheduled the prospect of mandatory audit firm of risk control systems – defining risk

meetings a year with one meeting rotation management policies and the risk RSA performance dedicated to the review of the the potential impacts of IFRS 16 to management function, as well as the company’s IAR. the extent applicable to the company. scope of enterprise risk management (ERM) To assist the Board in its supervisory The committee satisfies itself annually of ensuring independent and objective and governance responsibilities, the the expertise, resources and experience oversight and review of information committee ensures that: of the company’s finance function and provided by management on corporate adequate processes are in place to of the Financial Director’s suitability. accountability and associated risks. safeguard the company’s assets adequate accounting records are The report of the Audit Committee to Key focus areas for the committee in maintained shareholders on how it carried out its FY17 included: International performance design effectiveness of internal obligations is presented in the AFS. the consideration of a new IT controls is regularly reviewed and operating system for the business effective systems of internal control Risk Management Committee and, in view thereof, the revision and are maintained The Risk Management Committee adoption of a new IT governance an open channel of communication comprises four independent non- framework is maintained between directors, executive directors. Its Chairman is King IV approach to risk and management and accounting staff, also a member of the Audit Committee. opportunity management. as well as both internal and external The Board’s Chairman, the CEO, Financial auditors Director, Corporate Treasurer, Head of Risk management is covered in the risk financial information is reviewed Internal Audit and Risk Management, management section of this report. at least quarterly Head of Human Resources, Chief CSR and governance Information Officer and external auditor are present at meetings, by standing invitation.

WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 132 Integrated annual report 2017

CORPORATE GOVERNANCE continued

Property Committee Remuneration Committee makes recommendations to the Board The Property Committee comprises four The Remuneration Committee consists regarding the remuneration of non-executive directors. It assists the of the Board’s Chairman and two non-executive directors, which is Board with decisions regarding independent non-executive directors. The periodically benchmarked Growthpoint’s property portfolio, as well CEO, Managing Director and the Head of co-ordinates its activities with the as review and approval of property Human Resources attend meetings by Chairman of the Board and CEO, and budgets and valuations. invitation. consults them both in formulating remuneration policy and when The CEO, Managing Director, Financial The committee, which meets at least determining specific remuneration Director, Fund Directors and the Valuer quarterly, assists the Board by ensuring packages are present at meetings, by standing that: reviews and approves the succession invitation. a formal and transparent policy and plan for executive management, which procedures for executive and senior activity is monitored by the Risk The committee schedules four meetings management remuneration is Management Committee. a year. Its role is to: established and maintained consider and decide on proposed remuneration for executive directors, Key focus areas of the committee in acquisitions and disposals in terms senior management and staff FY17 were: of the levels of authority (including incentives, grants and other job grading and wage benchmarking consider and decide on proposed benefits) is set at the correct level to executive remuneration restructuring capital expenditure attract and retain people of the succession planning periodically review due diligence required calibre. workforce transformation processes for acquisitions remuneration policy and review and make recommendations The committee furthermore helps implementation reporting. to the Board regarding Growthpoint’s determine the key components of annual budgets, including capital remuneration, in conjunction with Nomination Committee expenditure budgets performance review criteria for executive The Nomination Committee consists provide a high-level review of directors and senior management. To this of the members of the Chairmen’s bi-annual property valuations prior end, the committee: Committee and is chaired by the Board’s to their submission to the Board and determines specific remuneration Chairman. Audit Committee packages for executive directors of the periodically review and assess the company taking into account relevant The committee meets on an ad hoc basis company’s approach to investment in benchmarking and is responsible for: physical property assets and letting periodically reviews the terms and making recommendations to the enterprises. conditions of executive directors’ Board on non-executive and executive service agreements director appointments as well as the Key focus areas of the committee in determines criteria for measuring the Board’s composition as a whole, after FY17 included: performance of executive directors identifying and screening candidates investment and development and linking it to remuneration for Board approval and appointment guidelines for property trading and approves proposed allocations to reviewing, and making development eligible participants in the company’s recommendations on, the Board’s internationalisation and new staff incentive scheme structure, size, and the balance acquisitions off-shore establishes remuneration credibility between executive and non-executive challenges facing the property industry with shareholders and other directors in the current economic climate. stakeholders succession planning for the Chairman.

WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 133 About this report Organisational overview The committee had the need to meet periodic reviews of Growthpoint’s Deal Forum only once in FY17 to discuss the transformation philosophy and The Deal Forum comprises the Exco composition of the Board and Board strategy members and is chaired by the committees as well as the appointment environmental, social and governance CEO. Its primary purpose is to discuss, of a Lead Independent Director. matters, including carbon emissions consider and, if appropriate, approve: and climate change. potential acquisitions or disposals Social, Ethics and Transformation from R20m upwards Committee Key focus areas of the committee in all developments or substantial This committee’s scope includes the FY17 included: redevelopments statutory duties of a social and ethics Growthpoint GEMS, a bursary scheme due diligence reports for proposed Performance review committee in accordance with the Act. for children of employees in the transactions previously disadvantaged categories completed deals as necessary. The committee comprises five non- corporate social investment initiative executive directors. The Managing and transformation more fully The Deal Forum makes Director, Financial Director, Head of reported upon in the relevant sections recommendations to the Property Human Resources, Head of Corporate of this report. Committee and/or the Board regarding Social Responsibility, National Facilities proposed acquisitions and disposals of Head and National Developments Head Executive Management Committee physical property assets and letting attend meetings of the committee. (Exco) enterprises that exceed its level of

Exco comprises the executive directors, authority. Key matters The committee meets four times a year. fund directors, Executive Corporate Besides the statutory duties of this Finance, Head of Human Resources, Investor relations and access to committee, it also evaluates, monitors Head of Marketing, the heads of the information and makes recommendations to the company’s regional offices, the Chief The Board is committed to transparency Board regarding: Information Officer, the Corporate and disclosure of relevant information to broad-based black economic Treasurer, the Head of Corporate Social all stakeholders. empowerment (B-BBEE) initiatives Responsibility and the Head of Investor and opportunities Relations. The CEO chairs the committee Such disclosure includes communicating enterprise development and related and the Company Secretary and information on:

training initiatives Assistant Company Secretary attend all company strategy and performance RSA performance the company’s B-BBEE equity meetings. The committee meets monthly Board practice ownership arrangements, funding and reviews operations, quarterly results the company’s Code of Ethics structures and, from time to time, (actual versus budget and projections), Growthpoint’s indirect impacts potential new B-BBEE equity company policy and strategic issues. A business value and risk management. ownership participants sub-committee of Exco (StratCo) also corporate social responsibility reviews the Group’s strategy and initiatives and investment and strategic initiatives before these are respective annual budgets submitted to the Board and its the company’s preferential responsible committees for approval. procurement spend International performance property sector transformation charter compliance employment equity

CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 134 Integrated annual report 2017

RISK MANAGEMENT and internal audit

The manner in which the Board and management choose to respond to STRATEGIC RISKS establishes the organisation’s risk management PHILOSOPHY and CULTURE. STEFFEN NIZETICH, Head of Internal and Risk Management

RISK FRAMEWORK The Board has overall responsibility for the adoption, oversight and reporting of Growthpoint’s risk management framework. The Board is assisted by the Risk Management Committee, which meets quarterly. Growthpoint’s risk framework encompasses four distinct categories:

Strategic risk Operational risk Reporting risk Compliance risk

RISK MANAGEMENT STRUCTURE

RISK SECTOR BOARD OF EXECUTIVE PROPERTY 1 2 MANAGEMENT 3 4 5 BUSINESS DIRECTORS MANAGEMENT SECTORS COMMITTEE UNITS (SBUs)

Internal audit and risk Fund management management WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 135 About this report Organisational overview Strategic risk The key operational risks identified are Furthermore, internal audit assists Risk is an event that could inhibit an assessed in terms of their probability, as management in assessing whether or not organisation’s ability to achieve its well as their impact on the organisation. systems of internal control are adequate strategic objectives. The manner in which and effective. the Board and management choose to Strategies are pinpointed to mitigate the respond to strategic risks establishes impact of the risks, if and when they Reporting risk the organisation’s risk management arise. Risk management strategies focus Reporting risk is the risk that financial- philosophy and culture. on one of four approaches: related information is unintentionally

Control altered or deliberately manipulated. Performance review The risk philosophy and culture adopted Transfer is influenced by Growthpoint’s vision, Tolerate Executive and financial management mission, objectives and values, which Terminate. have established systems of internal likewise define the company’s risk control to provide reasonable assurance appetite (the extent of risk that the Where management opts to control of the validity, accuracy, completeness Board and management are willing to an operational risk, the relevant and timely accumulation of financial accept in pursuit of value) and risk management control is identified, as is data. Such internal controls are subject tolerance (the acceptable level of the governance oversight, the monitoring to independent assessment by internal deviation from that risk). frequency and the key performance audit when performing regular business Key matters indicator. process reviews. These reviews typically Strategic and operational risks are assess the adequacy and effectiveness identified annually by Growthpoint’s Risk information needs to be processed of controls for financial data at general Chief Executive Officer in consultation and communicated promptly to ensure ledger and management reporting level. with certain members of executive an appropriate response. At Growthpoint, management. property information is generated Reliance is placed on external auditors monthly by key business processes and is to ensure the fair presentation of the Nonetheless, given that strategic risk accessible at numerous levels, from data financial information at a statutory assessment is an ongoing process on individual buildings to sector business reporting level. Controls in the form of throughout the financial year, the Risk units and sectors. This excludes the V&A analytical reviews and reconciliations to RSA performance Management Committee can add Waterfront, GOZ, and GWI, which each sources, independent of the financial additional risks, reassess existing risks, have their own risk management system, are performed by the Group or remove risks as required. approach. Fund-related information is finance function. These controls are generated by the Group finance function subject to review and assessment by A key outcome of this process is that an either monthly or quarterly. internal audit. appropriate response is determined for each strategic risk. A pivotal role of Growthpoint’s Risk Compliance risk Management Committee is to ensure Primary legislation affecting Growthpoint

The strategic risks identified for FY17 are that the controls implemented by is identified and documented by the International performance reflected in the organisational overview management are effective. While company secretarial function in section of this report. executive management identifies the conjunction with the in-house legal team metrics used to monitor such controls, and external legal advisers. The purpose Operational risk it is the internal audit and risk of the exercise is to determine Operational risks are identified in the management function that collates responsibility for the legislation that same manner as strategic risks. However, the results and presents a quarterly impacts on Growthpoint operations. due to the nature of operational risks, report to the Risk Management they are managed in a more intense Committee. manner. CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 136 Integrated annual report 2017

RISK MANAGEMENT and internal audit continued

Where necessary, or if prescribed by Facilities management personnel The work of the Risk Officer is legislation, compliance officers are complete an electronic checklist for each complemented by Growthpoint’s appointed to oversee adherence to building, every quarter. The results independent insurers, who undertake the relevant Acts. thereof can be analysed on a building, inspections of buildings on a regular sector business unit, sector and/or basis to ensure the insurable cover is Growthpoint appoints employees to geographic basis. This readily facilitates commensurate with the insurable risk positions based on their expertise and the identification of common issues that that they have underwritten. experience. Employees are expected require management’s attention. to keep abreast of legislation and Other examples of how Growthpoint compliance requirements that affect Compliance with the aforementioned actively manages compliance issues their particular area of responsibility. legislation is the responsibility of a include: dedicated Risk Officer who: the in-house Legal Department, which Take the example of Growthpoint’s Risk performs independent visits to is expected to remain abreast of new Information Management System buildings on a regular basis and/or amended legislation and, where (RIMS), the software program focused liaises with tenants when conducting applicable, bring such legislation to on the company’s property operations building inspections the attention of the Risk Management which encompasses the following liaises with both facilities Committee and the Board legislation: management and property the Company Secretary, who is Building regulations management personnel responsible for compliance with the The Occupational Health and Safety/ liaises with insurers Companies Act and JSE Listings Compensation for Occupational initiates training interventions, where Requirements. Injuries and Diseases acts required. Fire compliance regulations.

INTERNAL AUDIT

Growthpoint’s policy is to provide and support an internal audit function that acts as an independent, objective assurance and consulting activity. The activity assists the organisation to accomplish its objectives through a systematic, disciplined approach that enables it to evaluate and improve the effectiveness of risk management and governance processes.

The Board has assumed responsibility for remuneration and removal is done in Authority internal audit by setting the direction for consultation with the chairmen of both The internal audit function derives its the internal audit arrangements and has the Audit and Risk Management authority from the Audit Committee to delegated oversight of internal audit to committees. The Head of Internal Audit which it reports on a quarterly basis. The the Audit Committee. and Risk Management is a member of committee is guided by its Terms of the Institute of Internal Auditors and an Reference. The objectives, authority and The internal audit function is provided associate member of the South African responsibility of the internal audit in-house and is the responsibility of Institute of Chartered Accountants and function are governed by a formal the Head of Internal Audit and Risk as such is subject to the codes of ethics internal audit charter. The personnel of Management, whose appointment, of both professional bodies. the internal audit function are authorised WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 137 About this report

INTERNAL AUDIT continued Organisational overview to review all areas of the operations and ••internal audit findings, Establishing and maintaining the systems have complete and unrestricted access recommendations and of internal control necessary to provide to all activities, records, property and management’s action plans the directors of Growthpoint with personnel. Furthermore, the Head of ••the progress against the internal reasonable assurance that business Internal Audit and Risk Management has audit plan and reasons for objectives are attained rests with both unrestricted access to the Chairman deviations executive and operational management. of the Audit Committee, as well as co-ordinating audit efforts with those Internal Audit’s role is to assist committee members in the absence of the external auditor management in establishing whether of management at quarterly meetings, overseeing the performance and or not the systems of internal control Performance review if required. reporting of information technology- are both adequate and effective. related internal audit reviews, which Responsibilities are outsourced to external parties Adequacy is defined as whether or not The responsibilities of the internal audit that have the requisite technical the key controls address the related function include: proficiency and experience to conduct significant inherent risks. Effectiveness submitting an annual internal audit such reviews is defined as whether or not the key plan to the Audit Committee that addressing the matters brought to the controls are operating as intended. indicates the extent and frequency attention of the organisation through of the work to be conducted, which the Tip-offs Anonymous Helpline The Head of Internal Audit and Risk

enables the committee to establish operated by Deloitte, and reporting Management reports quarterly to the Key matters whether or not internal audit the nature of the incidents and the Audit Committee as to the adequacy of resources, as well as the allocation resulting actions that may be required the internal control environment and any thereof, are appropriate to its by executive management to the significant breakdown in internal control, requirements Audit Committee. as well as to the Risk Management conducting reviews of the key business Committee as to the adequacy and processes to ensure the: Internal audit processes effectiveness of risk management ••reliability and integrity of financial The scope of the internal audit activity processes. and operational information and the assignments planned for the ••adherence to policies, plans, ensuing financial year are presented, RSA performance procedures, laws, regulations discussed and approved at the last Audit and contracts Committee meeting of the financial year. ••safeguarding of assets The internal audit plan is based on an ••economical and efficient assessment of Growthpoint’s key areas employment of resources of operational risk with regard to its ••achievement of established current operations, and the key risks as ••objectives and goals identified and assessed as part of the risk reporting the results of reviews, management process. together with opinions and

recommendations to management The internal audit plan is, however, International performance of sufficient authority, to ensure that subject to change during the financial appropriate action is taken when year depending on: required unforeseen circumstances within the quarterly reporting to the Audit organisation Committee on: any specific requirements of executive ••the adequacy or design management effectiveness and the operating any specific requirements of the Audit effectiveness of the systems of Committee. internal control CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 138 Integrated annual report 2017 abbreviations

ABET Adult basic education and training EBP Existing Building Performance Acucap Acucap Properties Limited ECD Early childhood development AdmedGap Hospitalisation Gap Cover EPRA European Public Real Estate Association AFS Annual financial statements ERM Enterprise risk management AGM Annual general meeting ERS Executive retention scheme Alsi 40 JSE/Actuaries All Share Top 40 Companies Index ESG Environmental, social and governance A-REIT Australian REIT EUR Euro ASX Australian Stock Exchange Exco Executive Management Committee AUD Australian Dollar FCTR Foreign currency translation reserve B-BBEE Broad-based black economic empowerment FY Financial year CAGR Compound annual growth rate G2 Growthpoint gives CCI FNB/BER Consumer Confidence Index GAI Governance assessment instrument CDLI JSE100 Carbon Disclosure Leadership Index GBCSA Green Building Council of South Africa CDP Carbon Disclosure Project GCTC Guaranteed cost to company CEE Central and eastern Europe GDP Gross domestic product CEO Chief Executive Officer GEPF Government Employees Pension Fund CGU Cash-generating unit GLA Gross lettable area CIPC Companies and Intellectual Property Commission GMF GPT Metropolitan Office Fund CO Carbon dioxide GOZ Growthpoint Properties Australia Companies Act Companies Act 2008 GRI Global Reporting Initiative COSO Committee of Sponsoring Organisations Growthpoint Growthpoint Properties Limited CPI Consumer price index GSIS Growthpoint Staff Incentive Scheme CPLI JES 100 Carbon Performance Leadership Index GWI Globalworth Real Estate Investments CRISA Code for Responsible Investment in South Africa IAR Integrated annual report CSI Corporate social investment IAS Investment Analysts Society CSR Corporate social responsibility IASB International Accounting Standards Board DJSI Dow Jones Sustainability World Index IFRS International Financial Reporting Standards DRIP Distribution reinvestment plan IIRC International Integrated Reporting Council EAAB Estate Agency Affairs Board Income Tax Act Income Tax Act, No 58 of 1962 EAP Growthpoint Employee Assistance Programme IoD Institute of Directors WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 139 About this report Organisational overview

IT Information technology PV Photovoltaic JSE JSE Limited RBA Reserve Bank Australia JSE Listings Listings Requirements of JSE Limited REIT Real Estate Investment Trust Requirements Remco Remuneration Committee JV Joint venture RFP Request for proposal King IV King Report and Code of Governance for South Africa 2016 RSA Republic of South Africa Performance review KPA Key performance area SA REIT South African Real Estate Investment Trust KPI Key performance indicator SAPOA South African Property Owners Association kWh Kilowatt hours SENS Securities Exchange News Service LTI Long-term incentive SESCF Stenham European Shopping Centre Fund LTV Loan to value ratio SME Small medium enterprises MER Managed expense ratio SRI JSE Socially Responsible Investment Index

MOCAA Zeitz Museum of Contemporary Art Africa STI Short-term incentive Key matters MOI Memorandum of Incorporation Sycom Sycom Property Fund Moody’s Moody’s Investor Services Tiber Tiber group of companies MSCI Morgan Stanley Capital International TFR Total fixed remuneration NABERS National Australian Built Environment Rating tool TR Total remuneration NDR Non-distributable reserve The Board The Board of Directors of Growthpoint Properties Limited NGO Non-government organisation The company Growthpoint Properties Limited RSA performance NPI Net Property Income The Group Growthpoint Properties Limited Group OCI Other comprehensive income VWAP Volume weighted average price OHS Act Occupational Health and Safety Act No. 85 of 1993 WALE Weighted average lease expiry pa Per annum WAN Wide area network PAC Property Council of Australia WCDE Western Cape Department of Education WTTC World Travel and Tourism Council

PIC Public Investment Corporation (SOC) Limited International performance PMS Performance Management System ZAR South African Rand CSR and governance WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 140 Integrated annual report 2017

Contact details

Johannesburg office Physical address: The Place, 1 Sandton Drive, Sandton, 2196 Postal address: PO Box 78949, Sandton, 2146 Switchboard tel: +27 (0) 11 944 6000 General fax: +27 (0) 11 944 6005

Durban office Physical address: 4th Floor, Lincoln On The Lake, 2 The High Street, Umhlanga Ridge, KwaZulu-Natal, 4319 Postal address: PO Box 1330, Umhlanga Rocks, 4320 Switchboard tel: +27 (0) 31 584 5100 General fax: +27 (0) 31 584 5110

Cape Town office Physical address: 2nd Floor, MontClare Place, Main Road, Claremont, 7700 Postal address: PO Box 44392, Claremont, 7735 Switchboard tel: +27 (0) 21 673 8400 General fax: +27 (0) 21 679 8405/06

Growthpoint Australia office Physical address: Level 22, 357 Collins Street, Melbourne, VIC, Australia, 3000 Switchboard tel: +61 (0) 3 8681 2900 General fax: +61 (0) 3 8681 2910 Email: [email protected]

twitter.com/growthpoint [email protected] facebook.com/growthpoint www.growthpoint.co.za WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 The Place, 1 Sandton Drive, Sandton Gauteng, 2196, South Africa Tel: +27 (0) 11 944 6000, Fax: +27 (0) 11 944 6005 PO Box 78949, Sandton, 2146, South Africa Docex: 48 Sandton Square [email protected] www.growthpoint.co.za GROWTHPOINT INTEGRATED ANNUAL REPORT 30 J une 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 PROPERTIES

Group annual financial statements 30 June 2017 GROWTHPOINT GROUP ANNUAL FINANCIAL STATEMENTS 30 J une 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 GROWTHPOINT 2017

ABOUT THE GROWTHPOINT REPORTING In preparing these reports we have endeavoured to present a holistic and integrated representation of the company’s performance in terms of both its profitability and its long-term sustainability. These reports aim to inform our stakeholders about the objectives and strategies of the company, as well as its performance with regard to financial, human and environmental issues.

Growthpoint’s reporting consists of the following:

INTEGRATED ANNUAL REPORT group ANNUAL FINANCIAL (IAR) STATEMENTS (AFS) Incorporating an overview of our The statutory AFS prepared in organisation, key operational accordance with International matters, our strategic intent, Financial Reporting Standards (IFRS), performance reviews including the SAICA Financial Reporting Guides reports from our Chairman, Chief as issued by the Accounting Practices Executive Officer and Financial Committee, the Financial Reporting Director, sectoral reviews, corporate Pronouncements as issued by the social responsibility, corporate Financial Reporting Council, the JSE governance and risk management. Listings Requirements and the requirements of the Companies Act The IAR should be read together 2008, as amended. (This document) with the statutory annual financial statements, which combined provide a complete overview of Growthpoint’s performance and prospects.

ANNUAL GENERAL MEETING ESG Report (AGM) NOTICE The booklet containing The booklet containing the AGM additional information relating notice also includes the summarised to environmental, social and audited AFS for FY17, relevant governance elements. extracts from the IAR supporting the notice and the report to shareholders by the Social, Ethics and Transformation Committee. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 1

NAVIGATING THIS REPORT

About the Growthpoint reporting About the Growthpoint reporting IFC About this report

Group annual financial statements Annual financial statements CREATING SPACE TO 4 Preparation of financial statements 13 Statement of financial position 5 Certificate by Company Secretary 14 Statement of changes in equity THRIVE is essential in allowing us 6 Report of the Audit Committee 16 Statement of cash flows to extend our robust track record with 7 Directors’ report 17 Segmental analysis clarity, and continue on the path of 9 Independent auditor’s report 23 Notes to the financial statements 12 Statement of profit or loss and 58 Significant accounting policies uninterrupted growth in distributions. other comprehensive income – LN Sasse, Chief Executive Officer

Property portfolio portfolio Property 72 Property portfolio summary Group property 74 Property portfolio detail assets R122.3bn

General information General information @growthpoint.com 92 Shareholders’ analysis http://www.linkedin.com/company/ 95 Shareholders’ information growthpointlimited 96 Directorate and administration 98 Abbreviations http://www.youtube.com/growthpointlimited 100 Contact details

This icon denotes cross-referencing and further reading between sections WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 2 Group annual financial statements 30 June 2017

For the year ended 30 June 2017

Picture caption to come. Bridge Park, Cape Town. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 3 About the Growthpoint reporting Annual financial statements Property portfolio Property General information

GROUP ANNUAL FINANCIAL STATEMENTS WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 4 Group annual financial statements 30 June 2017

Preparation of financial statements

These Group annual financial statements have been audited by KPMG Inc. in compliance with section 30 of the Companies Act 2008, as amended, and the preparation of the Group annual financial statements has been supervised by Gerald Völkel CA(SA), Growthpoint’s Financial Director. These Group financial statements are published on 30 August 2017.

The complete annual financial statements of the Group for the financial years ended 30 June 2017 and 2016 may be obtained: from the transfer secretaries, Computershare Investor Services (Pty) Ltd, Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, or from the company’s website at: www.growthpoint.co.za, or by request from the company.

Gerald Völkel CA(SA) Financial Director

30 August 2017 Sandton WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 5

Certificate by Company secretary About the Growthpoint reporting

In terms of section 88(2)(e) of the Companies Act 2008, as amended (the Act), I hereby certify that the company has filed the required returns and notices in terms of the Act in respect of the financial year ended 30 June 2017 and that, to the best of my knowledge and belief, all such returns and notices are true, correct and up to date.

RA Krabbenhöft Company Secretary Annual financial statements

30 August 2017 Sandton Property portfolio Property General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 6 Group annual financial statements 30 June 2017

Report of the audit committee

The activities of the Audit Committee (the committee) are with the company’s continuing viability as a going concern, determined by its terms of reference. The committee considers which it has reported to the Board for its deliberation that it has adequately performed its functions in terms of its that the company’s Financial Director had the necessary mandate, the King IV Report on Corporate Governance for South expertise and experience to carry out his duties Africa 2016, and the Companies Act, No 71 of 2008, as amended. with the effectiveness of the Head of Internal Audit and Risk The committee carried out its duties by reviewing the following Management and the arrangements for internal audit on a quarterly basis: with the effectiveness of collaboration between the external internal audit reports auditor and internal audit. financial management reports dashboard reflecting key financial, property and operational No concerns and complaints were received from within or information/indicators outside the Group relating to accounting practices and internal information technology reports pertaining specifically to financial controls, and the content or auditing of the company’s financial reporting related matters financial statements. annual returns and tax status reports external audit reports The committee assesses its performance on an annual basis Risk Management Committee minutes. to determine whether or not it had delivered on its mandate and continuously enhanced its contribution to the Board. The The aforementioned information, together with the interactions assessment takes the form of a questionnaire, which is with persons attending the meetings in an ex officio capacity, independently completed by each member of the committee. collectively enabled the committee to conclude that the The composition of the self-assessment questionnaire, as well as systems of internal financial control had been designed effectively the consolidation of the related results, is the responsibility of the and were operating effectively during the financial period Company Secretary. under review.

Furthermore, the committee is satisfied: with the independence of the external auditor, including the provision of non-audit services and compliance with the company policy in this regard. The external auditor attended all LA Finlay meetings of the committee Audit Committee Chairman with the terms, nature, scope, quality and proposed fee of the external auditor for the financial year ended 30 June 2017 30 August 2017 with the annual financial statements and the accounting Sandton practices utilised, as well as the significant matters considered in the preparation thereof and have recommended the financial statements for approval to the Board WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 7

Directors’ report About the Growthpoint reporting

The directors are pleased to present their 29th annual report that forms part of the Group annual financial statements for the year ended 30 June 2017.

MAIN BUSINESS AND OPERATIONS Growthpoint is a Real Estate Investment Trust (REIT) company and is the largest South African listed property company. It owns a property portfolio of 471 directly-owned properties in South Africa valued at R76.9bn, 57 properties valued at R32.5bn through its 65.1% investment in Growthpoint Properties Australia (GOZ), a 50% interest in the properties of the V&A Waterfront, valued at R8.7bn and a 26.9% interest in the properties of Globalworth, valued at R4.2bn.

FINANCIAL RESULTS % change Annual financial statements Year on year year on year 2017 2016 movement % Net property income (Rm) 8 471 7 638 833 10.9 Dividends (cents) 195.8 183.8 12.0 6.5 Interim dividend (six months ended 31 December) 95.0 89.5 5.5 6.1 Final dividend (six months ended 30 June) 100.8 94.3 6.5 6.9 The interim dividends have been declared from distributable earnings. In line with IAS 10 Events after the reporting period, the declaration of the final dividend occurred after the end of the reporting period, resulting in a

non-adjusting event that is not recognised in the financial statements. portfolio Property The dividends meet the requirements of a REIT “qualifying distribution” for purposes of section 25BB of the Income Tax Act, No 58 of 1962, as amended. Investment property at fair value (Rm) 109 442 104 690 4 752 4.5

ACQUISITION OF GLOBALWORTH On 20 December 2016, Growthpoint RSA acquired a 26.9% stake in the London Stock Exchange (Alternative Investment Market (AIM))- listed Globalworth, which is classified as an associate, for a consideration of R2.7bn (EUR186.4m). Globalworth owns a EUR1bn property portfolio consisting of mostly modern A-grade offices, industrial properties, a residential property complex as well as developments. Its portfolio is concentrated in Bucharest and one in Timisoara, Romania and is underpinned by Euro denominated leases with many multinational business brands. This acquisition was funded by loans of EUR100.0m and the remaining portion by Rand loans with cross- currency interest rate swaps (CCIRS) of EUR86.4m at a weighted average term of 4.2 years. The Euro-based interest rates are fixed for a General information weighted average term of 9.9 years at a weighted average all-in cost of 2.6%.

EQUITY RAISED During FY17, Growthpoint issued 102.4m shares and raised R2.5bn through the DRIP programme. The equity raised from the DRIP was utilised to finance Growthpoint’s investment activities.

INVESTMENT IN GROWTHPOINT PROPERTIES AUSTRALIA (GOZ) Growthpoint made further investments in its subsidiary GOZ during FY17 as follows:

Date Nature Shares Rm September 2016 DRIP 11 864 290 401 November 2016 Capital Raise 18 847 559 624 February 2017 DRIP 18 150 158 580 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 8 Group annual financial statements 30 June 2017

Directors’ report continued

SUBSEQUENT EVENTS Information on material events that occurred after 30 June 2017 is included in note 23 of these group annual financial statements.

DIRECTORS AND Secretary Brief curricula vitae of the directors and the Company Secretary have been included in the FY17 integrated annual report.

Growthpoint’s Financial Director was assessed by the Audit Committee (as is done annually) to be appropriately qualified and experienced for the position.

The Board recommends Ms LA Finlay for re-election as Chairman of the Audit Committee.

The directors to retire by rotation and, being eligible, hold themselves available for re-election at the annual general meeting to be held on 14 November 2017 are as follows: Mr JF Marais Mr R Moonsamy Mr FJ Visser

Mr HS Herman will not hold himself available for re-election and will retire from the Board after close to 23 years of distinguished service.

APPROVAL OF GROUP ANNUAL FINANCIAL STATEMENTS The Group annual financial statements of Growthpoint Properties Limited, as described in the first paragraph of this statement, were approved by the Board of Directors on 29 August 2017 and are signed by:

LN Sasse JF Marais Chief Executive Officer Chairman Authorised Director Authorised Director

30 August 2017 30 August 2017 Sandton Sandton WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 9

Independent auditor’s report To the shareholders of Growthpoint Properties Limited About the Growthpoint reporting

Report on the Audit of the Consolidated Financial Independent Regulatory Board for Auditors’ Code of Professional Statements Conduct for Registered Auditors (IRBA Code) and other Opinion independence requirements applicable to performing audits of We have audited the consolidated financial statements of financial statements in South Africa. We have fulfilled our other Growthpoint Properties Limited and its subsidiaries (the Group) ethical responsibilities in accordance with the IRBA Code and in set out on pages 12 to 89, which comprise the statement of accordance with other ethical requirements applicable to financial position as at 30 June 2017, the statement of profit or performing audits in South Africa. The IRBA Code is consistent loss and other comprehensive income, the statement of changes with the International Ethics Standards Board for Accountants’ in equity, the statement of cash flows, the segmental analysis for Code of Ethics for Professional Accountants (Parts A and B). We the year then ended, and the notes to the financial statements, believe that the audit evidence we have obtained is sufficient and the significant accounting policies and the property portfolio. appropriate to provide a basis for our opinion. Annual financial statements

In our opinion, the consolidated financial statements present Key audit matters fairly, in all material respects, the consolidated financial position Key audit matters are those matters that, in our professional of Growthpoint Properties Limited as at 30 June 2017, and its judgement, were of most significance in our audit of the consolidated financial performance and consolidated cash flows consolidated financial statements of the current period. This for the year then ended in accordance with International Financial matter was addressed in the context of our audit of the Reporting Standards and the requirements of the Companies Act consolidated financial statements as a whole, and in forming our of South Africa. opinion thereon, and we do not provide a separate opinion on these matters. Basis for opinion

We conducted our audit in accordance with International Valuation of property assets portfolio Property Standards on Auditing (ISAs). Our responsibilities under those Refer to notes 7 and 21 in the Notes to the financial statements, standards are further described in the Auditor’s Responsibilities for and the Critical accounting estimates, assumptions and the Audit of the Consolidated Financial Statements section of our judgements and Investment property accounting policy contained report. We are independent of the Group in accordance with the in the Significant accounting policies section.

The key audit matter How the matter was addressed in our audit Property assets are the Group’s most significant assets. The Our audit procedures performed included the following: Group’s accounting policy is to measure investment properties at We included our own valuation specialists as part of our audit fair value. team to assess the Group’s valuation processes and to assist us in performing certain procedures set out below, based on their General information Independent valuations are obtained on a rotational basis, detailed market knowledge. ensuring that every property is valued at least once every three In respect of the external independent valuations: years by an external independent valuer. The directors use – We assessed the competence, independence and experience qualified internal valuers to value the remaining properties of the external independent valuers used and considered the annually on an open-market basis. extent of management influence over the external valuers. – For properties valued by the external independent valuers, The fair value calculations are prepared by considering the we agreed the property values in the property portfolio to aggregate of the net annual rent receivable from the properties the underlying valuation reports obtained from the valuers. and, where relevant, associated costs, using the discounted cash In respect of properties valued internally: flow method. This method takes projected cash flows and – We used our valuation specialists to assist in our assessment discounts them at a rate which is consistent with comparable of the reasonableness of the valuation methodologies and market transactions. The discount rates reflect the risks inherent assumptions used, based on our knowledge of the industry in the net cash flows and are constantly monitored by reference and the markets in which the Group operates. to comparable market transactions. Significant judgements are – We assessed the key valuation inputs against market made in the application of this method, particularly in relation to benchmarks to ensure that they are within a reasonable the unobservable inputs into the calculation as disclosed in range for the respective market, sector and asset. note 21. We assessed the reasonability of the valuation method used and the historical accuracy of that method by comparing the Our audit focused on this fair value measurement of the property sale values of properties disposed of during the financial year assets due to its impact on the Group’s financial statements and to fair values previously determined for those properties. the significance of the judgements involved in the determination We assessed the adequacy of the disclosures in the financial of the fair value. statements in relation to the requirements of the financial reporting framework. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 10 Group annual financial statements 30 June 2017

Independent auditor’s report continued

Other information Auditor’s responsibilities for the audit of the consolidated The directors are responsible for the other information. The other financial statements information comprises the Certificate by Company Secretary, the Our objectives are to obtain reasonable assurance about whether Report of the Audit Committee and the directors’ report as the consolidated financial statements as a whole are free from required by the Companies Act of South Africa, and the rest of the material misstatement, whether due to fraud or error, and to information contained in the Group annual financial statements, issue an auditor’s report that includes our opinion. Reasonable which we obtained prior to the date of this report, and the assurance is a high level of assurance, but is not a guarantee that integrated annual report, which is expected to be made available an audit conducted in accordance with ISAs will always detect a to us after that date. Other information does not include the material misstatement when it exists. Misstatements can arise consolidated financial statements and our auditor’s report from fraud or error and are considered material if, individually or thereon. in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Our opinion on the consolidated financial statements does not consolidated financial statements. cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism In connection with our audit of the consolidated financial throughout the audit. We also: statements, our responsibility is to read the other information Identify and assess the risks of material misstatement of the and, in doing so, consider whether the other information is consolidated financial statements, whether due to fraud or materially inconsistent with the consolidated financial error, design and perform audit procedures responsive to those statements or our knowledge obtained in the audit, or otherwise risks, and obtain audit evidence that is sufficient and appropriate appears to be materially misstated. If, based on the work we have to provide a basis for our opinion. The risk of not detecting a performed on the other information obtained prior to the date material misstatement resulting from fraud is higher than for of this auditor’s report, we conclude that there is a material one resulting from error, as fraud may involve collusion, forgery, misstatement of this other information, we are required to intentional omissions, misrepresentations, or the override of report that fact. We have nothing to report in this regard. internal control. Obtain an understanding of internal control relevant to the Responsibilities of the directors for the consolidated financial audit in order to design audit procedures that are appropriate statements in the circumstances, but not for the purpose of expressing an The directors are responsible for the preparation and fair opinion on the effectiveness of the Group’s internal control. presentation of the consolidated financial statements in Evaluate the appropriateness of accounting policies used and accordance with International Financial Reporting Standards and the reasonableness of accounting estimates and related the requirements of the Companies Act of South Africa, and for disclosures made by the directors. such internal control as the directors determine is necessary to Conclude on the appropriateness of the directors’ use of the enable the preparation of consolidated financial statements that going concern basis of accounting and based on the audit are free from material misstatement, whether due to fraud or evidence obtained, whether a material uncertainty exists error. related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we In preparing the consolidated financial statements, the directors conclude that a material uncertainty exists, we are required to are responsible for assessing the Group’s ability to continue as a draw attention in our auditor’s report to the related disclosures going concern, disclosing, as applicable, matters related to going in the consolidated financial statements or, if such disclosures concern and using the going concern basis of accounting unless are inadequate, to modify our opinion. Our conclusions are the directors either intend to liquidate the Group or to cease based on the audit evidence obtained up to the date of our operations, or have no realistic alternative but to do so. auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 11 About the Growthpoint reporting

Evaluate the overall presentation, structure and content of the Report on other legal and regulatory requirements consolidated financial statements, including the disclosures, In terms of the IRBA Rule published in Government Gazette and whether the consolidated financial statements represent Number 39475 dated 4 December 2015, we report that KPMG the underlying transactions and events in a manner that Inc. has been the auditor of Growthpoint Properties Limited for achieves fair presentation. 16 years. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities KPMG Inc. within the Group to express an opinion on the consolidated Registered Auditor financial statements. We are responsible for the direction,

supervision and performance of the Group audit. We remain Annual financial statements solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal Per GL de Lange control that we identify during our audit. Chartered Accountant (SA) Registered Auditor We also provide the directors with a statement that we have Director complied with relevant ethical requirements regarding 30 August 2017

independence, and to communicate with them all relationships portfolio Property and other matters that may reasonably be thought to bear on our KPMG Crescent independence, and where applicable, related safeguards. 85 Empire Road Parktown From the matters communicated with the directors, we determine 2193 those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences General information of doing so would reasonably be expected to outweigh the public interest benefits of such communication. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 12 Group annual financial statements 30 June 2017

Statement of profit or loss and other comprehensive income For the year ended 30 June 2017

2017 2016 Notes Rm Rm Revenue, excluding straight-line lease income adjustment 1 10 716 9 764 Straight-line lease income adjustment 7.2 39 455 Total revenue 10 755 10 219 Property-related expenses 2 (2 245) (2 126) Net property income 8 510 8 093 Other administrative and operating overheads 3 (416) (308) Operating profit 8 094 7 785 Equity-accounted investment profit – net of tax 8.1 369 543 Fair value adjustments, capital items and other charges 4 1 850 256 Finance and other investment income 5 692 690 Finance expense 5 (2 510) (2 466) Profit before taxation 8 495 6 808 Taxation 17 (48) (841) Profit for the year 8 447 5 967 Other comprehensive income Items that may subsequently be reclassified to profit or loss Translation of foreign operations (1 571) 2 282 Total comprehensive income for the year 6 876 8 249

Profit attributable to: 8 447 5 967 Owners of the company 7 524 5 159 Non-controlling interest 923 808 Total comprehensive income attributable to: 6 876 8 249 Owners of the company 6 507 6 653 Non-controlling interests 369 1 596

Cents Cents Basic earnings per share 6 267.72 190.29 Diluted earnings per share 6 266.21 189.53 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 13

Statement of financial position As at 30 June 2017 About the Growthpoint reporting

2017 2016 Notes Rm Rm Assets Cash and cash equivalents 613 901 Trade and other receivables 11 3 214 2 496 Investment property classified as held for sale 7.3 1 241 1 938 Derivative assets 356 107 Listed investments 226 440 Fair value of property assets 108 201 102 752

Fair value of investment property for accounting purposes 7.1 105 641 100 274 Annual financial statements Straight-line lease income adjustment 7.2 2 560 2 478 Long-term loans granted 10 709 605 Equity-accounted investments 8 9 920 6 821 Equipment 15 6 Intangible assets 9 2 362 2 461 Total assets 126 857 118 527 Liabilities and Equity Liabilities Trade and other payables 18 2 572 2 276

Derivative liabilities 15 587 1 094 portfolio Property Taxation payable 44 29 Interest-bearing borrowings 15 42 568 38 580 Deferred tax liability 17 2 332 2 382 Total liabilities 48 103 44 361 Shareholders’ interest 72 045 68 295 Share capital 12, 13 44 876 42 329 Retained income 2 886 2 628 Other reserves 24 283 23 338 Non-controlling interest 14 6 709 5 871

Total liabilities and equity 126 857 118 527 General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 14 Group annual financial statements 30 June 2017

Statement of changes in equity For the year ended 30 June 2017

Non-distributable reserves (NDR) Non-distributable reserves (NDR) Other fair Fair value Fair value adjust- value Share Foreign adjustments and adjust- capital currency ment on non- Share- ment Total Non- net of translation Amortisation invest- distri- based on listed non- Retained Share- controlling treasury reserve of intangible Bargain ment butable payments Reserves invest- distributable earnings holders’ interest Total shares (FCTR) assets purchase property items reserve with NCI ments reserves (RE) interest (NCI) equity Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Balance at 30 June 2015 40 486 1 072 935 230 21 341 (2 077) 160 13 2 21 676 1 207 63 369 4 713 68 082 Total comprehensive income: – Profit after taxation – – – – – – – – – – 5 159 5 159 808 5 967 – Other comprehensive income – 1 494 – – – – – – – 1 494 – 1 494 788 2 282 Transactions with owners recognised directly in equity: Contributions by and distributions to owners: Shares issued 1 797 – – – – – – – – – – 1 797 – 1 797 Transfer non-distributable items to NDR – – (72) 6 833 (678) 3 – 58 150 (150) – – – Share-based payment transactions 46 – – – – – 7 – – 7 – 53 – 53 Transfer to NDR with NCI – – – – – – – (25) – (25) 25 – – – Dividends declared – – – – – – – – – – (3 613) (3 613) (439) (4 052) Changes in ownership interest: Rights issue and acquisitions – GOZ – 36 – – – – – – – 36 – 36 66 102 Acquisitions of NCI without a change in control – – – – – – – – – – – – (65) (65) Balance at 30 June 2016 42 329 2 602 863 236 22 174 (2 755) 170 (12) 60 23 338 2 628 68 295 5 871 74 166 Total comprehensive income: – Profit after taxation – – – – – – – – – – 7 524 7 524 923 8 447 – Other comprehensive income – (1 017) – – – – – – – (1 017) – (1 017) (554) (1 571) Transactions with owners recognised directly in equity: Contributions by and distributions to owners: Shares issued 2 533 – – – – – – – – – – 2 533 – 2 533 Transfer non-distributable items to NDR – – (71) 78 1 855 326 28 – (214) 2 002 (2 002) – – – Share-based payment transactions 14 – – – – – (27) – – (27) – (13) – (13) Dividends declared – – – – – – – – – – (5 264) (5 264) (502) (5 766) Changes in ownership interest: Rights issue and acquisitions – GOZ – (13) – – – – – – – (13) – (13) 971 958 Balance at 30 June 2017 44 876 1 572 792 314 24 029 (2 429) 171 (12) (154) 24 283 2 886 72 045 6 709 78 754

2017 2016 Cents Cents Dividend per share 195.8 183.8 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 15 About the Growthpoint reporting

shares (FCTR) assets purchase property items reserve with NCI ments reserves (RE) interest (NCI) equity Annual financial statements Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Balance at 30 June 2015 40 486 1 072 935 230 21 341 (2 077) 160 13 2 21 676 1 207 63 369 4 713 68 082 Total comprehensive income: – Profit after taxation – – – – – – – – – – 5 159 5 159 808 5 967 – Other comprehensive income – 1 494 – – – – – – – 1 494 – 1 494 788 2 282 Transactions with owners recognised directly in equity: Contributions by and distributions to owners: Shares issued 1 797 – – – – – – – – – – 1 797 – 1 797 Property portfolio Property Transfer non-distributable items to NDR – – (72) 6 833 (678) 3 – 58 150 (150) – – – Share-based payment transactions 46 – – – – – 7 – – 7 – 53 – 53 Transfer to NDR with NCI – – – – – – – (25) – (25) 25 – – – Dividends declared – – – – – – – – – – (3 613) (3 613) (439) (4 052) Changes in ownership interest: Rights issue and acquisitions – GOZ – 36 – – – – – – – 36 – 36 66 102 Acquisitions of NCI without a change in control – – – – – – – – – – – – (65) (65) Balance at 30 June 2016 42 329 2 602 863 236 22 174 (2 755) 170 (12) 60 23 338 2 628 68 295 5 871 74 166 Total comprehensive income:

– Profit after taxation – – – – – – – – – – 7 524 7 524 923 8 447 General information – Other comprehensive income – (1 017) – – – – – – – (1 017) – (1 017) (554) (1 571) Transactions with owners recognised directly in equity: Contributions by and distributions to owners: Shares issued 2 533 – – – – – – – – – – 2 533 – 2 533 Transfer non-distributable items to NDR – – (71) 78 1 855 326 28 – (214) 2 002 (2 002) – – – Share-based payment transactions 14 – – – – – (27) – – (27) – (13) – (13) Dividends declared – – – – – – – – – – (5 264) (5 264) (502) (5 766) Changes in ownership interest: Rights issue and acquisitions – GOZ – (13) – – – – – – – (13) – (13) 971 958 Balance at 30 June 2017 44 876 1 572 792 314 24 029 (2 429) 171 (12) (154) 24 283 2 886 72 045 6 709 78 754

2017 2016 Cents Cents Dividend per share 195.8 183.8 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 16 Group annual financial statements 30 June 2017

Statement of cash flows For the year ended 30 June 2017

2017 2016 Note Rm Rm Cash generated from operating activities Cash received from tenants 10 766 9 205 Cash paid to suppliers and employees (3 271) (1 813) Interest paid (2 438) (2 538) Interest received 105 51 Taxation paid (84) (78) Distribution to shareholders (5 766) (4 073) Cash flow from operating activities before changes in operating assets and liabilities (688) 754 Changes in: 85 (70) Trade and other receivables (211) (232) Trade and other payables 296 162 Net cash from operating activities (603) 684 Cash flows from investing activities Investments in: (12 901) (7 126) Investment property (9 522) (6 799) Investment property held for sale (7) (85) Intangible assets – (3) Equity-accounted investments (2 798) – Equipment (9) – Subsidiaries – (172) Long-term loans (516) (35) Capital costs incurred on business acquisitions (49) (32) Proceeds from: 4 264 1 860 Disposal of investment property 1 746 505 Disposal of investment property held for sale 1 945 624 Repayment or settlement of long-term loans granted 412 544 Disposal of equity-accounted investment 161 187 Net cash from investing activities (8 637) (5 266) Cash flows from financing activities Proceeds from: 24 419 10 375 Borrowings raised 20 901 8 575 Distribution re-investment 2 547 1 734 Rights issues to non-controlling interest of GOZ 971 66 Repayments of borrowings 15 (15 426) (5 427) Acquisition of treasury shares – (25) Net cash from financing activities 8 993 4 923

Effect of exchange rate changes on cash and cash equivalents (41) 55 Movement in cash and cash equivalents (288) 396 Cash and cash equivalents at beginning of year 901 505 Cash and cash equivalents at end of year 613 901 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 17

Segmental analysis For the year ended 30 June 2017 About the Growthpoint reporting

Segment Analysis The group determines and presents operating segments based on the information that is provided internally to the Executive Management Committee (Exco), the group’s operating decision-making forum. The group comprises six segments, namely Retail, Office, Industrial, Growthpoint Australia, V&A Waterfront and Globalworth. An operating segment’s operating results are reviewed regularly by Exco to assess its performance and to make decisions about resources to be allocated to the segment for which separate financial information is available.

Segment Brief description of segment Retail The Growthpoint retail portfolio consists of 56 properties, comprising shopping centres with the balance being

vacant land or standalone single-tenanted properties. It includes regional, community, neighbourhood, speciality Annual financial statements and small regional shopping centres as well as retail warehouses. Office The Growthpoint office portfolio consists of 182 properties which includes high rise and low rise offices, office parks, office warehouses, hospitals as well as mixed-use properties comprising both office and retail. Industrial The Growthpoint industrial portfolio consists of 233 properties which includes warehousing, industrial parks, retail warehousing, motor-related outlets, low and high grade industrial, high-tech industrial as well as mini, midi and maxi units. Growthpoint The GOZ portfolio consists of 57 properties which includes both industrial and office properties, all situated in Australia Australia. V&A Waterfront The V&A Waterfront is a 122 hectare mixed-use property development situated in and around the historic

Victoria and Alfred Basin, which formed Cape Town’s original harbour, with Table Mountain as its backdrop. Its portfolio Property properties includes retail, office, fishing and industrial, hotel and residential as well as undeveloped bulk. Globalworth The Globalworth portfolio consists of 18 properties which includes mostly modern A-grade office properties, industrial properties as well as a residential property complex concentrated in Bucharest and one in Timisoara, Romania.

Geographic segments In addition to the main reportable segments, the group also includes a geographical analysis of net property income, excluding straight- line lease income adjustment and investment property. The following geographic segments have been identified: South Africa Australia General information Eastern Europe v&A Waterfront WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 18 Group annual financial statements 30 June 2017

Segmental analysis continued For the year ended 30 June 2017

Profit or loss and assets and liabilities disclosure 2017 2016 Total Total South Total as V&A South Total as V&A Retail Office Industrial Africa Australia reported Waterfront Globalworth Total Retail Office Industrial Africa Australia reported Waterfront Total Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Profit or loss disclosures Revenue excluding straight-line lease adjustment 3 099 3 632 1 348 8 079 2 637 10 716 726 140 11 582 2 953 3 428 1 208 7 589 2 175 9 764 639 10 403 Property-related expenses (792) (819) (290) (1 901) (344) (2 245) (204) (52) (2 501) (814) (794) (256) (1 864) (262) (2 126) (177) (2 303) Net property income 2 307 2 813 1 058 6 178 2 293 8 471 522 88 9 081 2 139 2 634 952 5 725 1 913 7 638 462 8 100 Other administrative and operating overheads (289) (127) (416) (24) (16) (456) (204) (104) (308) (20) (328) Equity-accounted investment profit – net of tax 369 – 369 – – 369 543 – 543 – 543 Fair value adjustment on investment property 481 293 332 1 106 848 1 954 492 4 2 450 448 (457) 106 97 1 115 1 212 585 1 797 Fair value adjustments (other than investment property) 35 4 39 – – 39 (321) (27) (348) – (803) Capital items and other charges (91) (13) (104) (1) 8 (97) (151) (2) (153) (153) Finance and investment income 1 521 (829) 692 28 4 724 684 6 690 69 759 Finance expense (1 944) (566) (2 510) – (108) (2 618) (1 989) (477) (2 466) (30) (2 496) Consolidated profit before taxation 6 885 1 610 8 495 1 017 (20) 9 492 4 384 2 424 6 808 1 066 7 874 Assets Cash and cash equivalents 298 315 613 81 1 139 1 833 121 780 901 28 929 Trade and other receivables 2 649 565 3 214 73 46 3 333 2 008 488 2 496 48 2 544 Investment property classified as held for sale 173 – 29 202 1 039 1 241 – – 1 241 – 145 119 264 1 674 1 938 – 1 938 Derivative assets 356 – 356 – – 356 107 – 107 – 107 Listed investments 226 – 226 – – 226 440 – 440 – 440 Fair value of property assets Acquisitions made during the year – 1 758 116 1 874 5 047 6 921 – 192 7 113 – 398 442 840 3 410 4 250 – 4 250 Balance at year end 29 415 34 732 12 557 76 704 31 497 108 201 8 705 4 200 121 106 29 210 33 112 11 166 73 488 29 264 102 752 7 766 110 518 Long-term loans granted 709 – 709 – – 709 605 – 605 – 605 Equity-accounted investments 9 920 – 9 920 – 8 9 928 6 821 – 6 821 – 6 821 Equipment 3 12 15 – – 15 4 2 6 – 6 Intangible assets 2 362 – 2 362 – 52 2 414 2 461 – 2 461 – 2 461 Total assets 93 429 33 428 126 857 8 859 5 445 141 161 86 319 32 208 118 527 7 842 126 369 Liabilities Trade and other payables 1 829 743 2 572 111 51 2 734 1 837 439 2 276 84 2 360 Derivative liabilities 523 64 587 – – 587 925 169 1 094 – 1 094 Taxation payable (4) 48 44 6 – 50 – 29 29 – 29 Interest-bearing borrowings 29 492 13 076 42 568 195 559 43 322 24 820 13 760 38 580 306 38 886 Deferred tax liability 2 332 – 2 332 – 74 2 406 2 382 – 2 382 – 2 382 Total liabilities 34 172 13 931 48 103 312 684 49 099 29 964 14 397 44 361 390 44 751 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 19 About the Growthpoint reporting

Profit or loss disclosures Revenue excluding straight-line lease adjustment 3 099 3 632 1 348 8 079 2 637 10 716 726 140 11 582 2 953 3 428 1 208 7 589 2 175 9 764 639 10 403

Property-related expenses (792) (819) (290) (1 901) (344) (2 245) (204) (52) (2 501) (814) (794) (256) (1 864) (262) (2 126) (177) (2 303) Annual financial statements Net property income 2 307 2 813 1 058 6 178 2 293 8 471 522 88 9 081 2 139 2 634 952 5 725 1 913 7 638 462 8 100 Other administrative and operating overheads (289) (127) (416) (24) (16) (456) (204) (104) (308) (20) (328) Equity-accounted investment profit – net of tax 369 – 369 – – 369 543 – 543 – 543 Fair value adjustment on investment property 481 293 332 1 106 848 1 954 492 4 2 450 448 (457) 106 97 1 115 1 212 585 1 797 Fair value adjustments (other than investment property) 35 4 39 – – 39 (321) (27) (348) – (803) Capital items and other charges (91) (13) (104) (1) 8 (97) (151) (2) (153) (153) Finance and investment income 1 521 (829) 692 28 4 724 684 6 690 69 759 portfolio Property Finance expense (1 944) (566) (2 510) – (108) (2 618) (1 989) (477) (2 466) (30) (2 496) Consolidated profit before taxation 6 885 1 610 8 495 1 017 (20) 9 492 4 384 2 424 6 808 1 066 7 874 Assets Cash and cash equivalents 298 315 613 81 1 139 1 833 121 780 901 28 929 Trade and other receivables 2 649 565 3 214 73 46 3 333 2 008 488 2 496 48 2 544 Investment property classified as held for sale 173 – 29 202 1 039 1 241 – – 1 241 – 145 119 264 1 674 1 938 – 1 938 Derivative assets 356 – 356 – – 356 107 – 107 – 107

Listed investments 226 – 226 – – 226 440 – 440 – 440 General information Fair value of property assets Acquisitions made during the year – 1 758 116 1 874 5 047 6 921 – 192 7 113 – 398 442 840 3 410 4 250 – 4 250 Balance at year end 29 415 34 732 12 557 76 704 31 497 108 201 8 705 4 200 121 106 29 210 33 112 11 166 73 488 29 264 102 752 7 766 110 518 Long-term loans granted 709 – 709 – – 709 605 – 605 – 605 Equity-accounted investments 9 920 – 9 920 – 8 9 928 6 821 – 6 821 – 6 821 Equipment 3 12 15 – – 15 4 2 6 – 6 Intangible assets 2 362 – 2 362 – 52 2 414 2 461 – 2 461 – 2 461 Total assets 93 429 33 428 126 857 8 859 5 445 141 161 86 319 32 208 118 527 7 842 126 369 Liabilities Trade and other payables 1 829 743 2 572 111 51 2 734 1 837 439 2 276 84 2 360 Derivative liabilities 523 64 587 – – 587 925 169 1 094 – 1 094 Taxation payable (4) 48 44 6 – 50 – 29 29 – 29 Interest-bearing borrowings 29 492 13 076 42 568 195 559 43 322 24 820 13 760 38 580 306 38 886 Deferred tax liability 2 332 – 2 332 – 74 2 406 2 382 – 2 382 – 2 382 Total liabilities 34 172 13 931 48 103 312 684 49 099 29 964 14 397 44 361 390 44 751 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 20 Group annual financial statements 30 June 2017

Segmental analysis continued For the year ended 30 June 2017

Distributable earnings reconciliation 2017 2016 Rm Rm Revenue, excluding straight-line lease income adjustment 10 716 9 764 Property-related expenses (2 245) (2 126) Other administrative and operating overheads (416) (308) Net interest (1 818) (1 776) Finance and other investment income 692 690 Interest paid (2 510) (2 466) Profit on the sale of RSI 1 (Stor-Age) – 51 Antecedent dividends 45 31 Non-controlling portion of distribution (excluding fair value adjustments) – GOZ (502) (439) Distributable income from GOZ retained (including NCI’s portion) (165) (79) Realised foreign exchange gain/(loss) 31 (9) Current normal taxation (98) (76) Distributable earnings 5 548 5 033

Distributions 2017 2016 Total dividend Distributable earnings Rm 5 548 5 033 Actual net number of shares in issue 2 860 702 595 2 757 563 843 Distribution per share 195.8 183.8 Interim taxable dividend Cents 95.0 89.5 Final taxable dividend Cents 100.8 94.3

Number of shares 2017 2016 Shares issued during the year Issued ordinary shares at beginning of year 2 786 093 366 2 711 056 264 Effect of shares issued 102 369 216 75 037 102 Shares in issue at end of year 2 888 462 582 2 786 093 366 Effect of treasury shares held (27 759 987) (28 529 523) Net shares in issue at end of year 2 860 702 595 2 757 563 843 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 21 About the Growthpoint reporting

2017 2016 Cents Cents Net asset value* Net asset value per share 2 518 2 477 Tangible net asset value per share 2 517 2 474 Net asset value per share is reconciled to tangible net asset value per share as follows: Rm Rm Net asset value attributable to shareholders 72 045 68 295

Less: Net effect of business acquisitions and other intangibles (30) (79) Annual financial statements Intangible assets (2 362) (2 461) Deferred tax liability 2 332 2 382

Tangible net asset value 72 015 68 216

Key reporting ratios* Best practice recommendations were issued by the SA REIT Association outlining the need to provide consistent presentation and disclosure of relevant ratios in the SA REIT sector. This will ensure information and definitions are clearly presented, enhancing comparability and consistency across the sector. Group

2017 2016 portfolio Property % %

Property cost-to-income ratio Gross 30.42 31.66 Net 16.56 17.32 Based on IFRS reported figures 20.95 21.77 Property cost-to-income ratio is based on total property-related expenses divided by revenue, excluding straight-line lease income adjustments. The figures are adjusted for gross, net and IFRS reported expense. Operating cost-to-income ratio Gross 4.15 3.49 Net 3.88 3.15 General information Based on IFRS reported figures 3.88 3.15 Operating cost-to-income ratio is based on total operating expenses divided by revenue, excluding straight-line lease income adjustments. The figures are adjusted for gross, net and IFRS reported expense. Total cost-to-income ratio Gross 34.00 34.61 Net 20.66 20.65 Based on IFRS reported figures 24.83 24.93 Total cost-to-income ratio is based on total expenses divided by revenue, excluding straight-line lease income adjustments. The figures are adjusted for gross, net and IFRS reported expense. Interest cover ratio 3.51 3.30 Interest cover ratio (excluding GOZ) 3.43 3.20 Interest cover ratio for Growthpoint is based on operating profit excluding straight-line lease income adjustment plus investment income from equity-accounted investments, divided by finance costs, after deducting finance income from banks and long-term loans. Loan to value ratio 34.98 33.70 Loan to value ratio (excluding GOZ) 33.40 30.50 Loan to value ratio for Growthpoint is based on the nominal value of debt (net of cash), divided by the fair value of property assets, including investment property held for sale, equity-accounted investments and listed investments. * This information has not been audited by Growthpoint’s independent external auditors. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 22 Group annual financial statements 30 June 2017

Segmental analysis continued For the year ended 30 June 2017

Geographical split by revenue (%) Geographical split by fair value of property assets (%)

1 6 7 3

23 27 2017 2017

■ South Africa ■ South Africa ■ Australia ■ Australia ■ Europe ■ Europe ■ V&A Waterfront ■ V&A Waterfront

Geographical split by net property income (%) Number of properties (%)

1 6 18 1 57

2017 2017

471

■ South Africa ■ South Africa ■ Australia ■ Australia ■ Europe ■ Europe ■ V&A Waterfront ■ V&A Waterfront WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 23

Notes to the financial statements For the year ended 30 June 2017 About the Growthpoint reporting

2017 2016 Rm Rm 1. Revenue Contracted rental income 9 179 8 429 Assessment rates recovered 564 526 Casual parking 77 86 Contracted operating cost recoveries 631 562 Development fees earned 91 – Other income 108 91 Property management income 19 16 Annual financial statements Turnover rental 47 54 Total revenue, excluding straight-line lease income adjustment 10 716 9 764 2. Property-related expenses Electricity, water and other recoverable charges 28 (13) Cost 1 486 1 399 Recovery (1 458) (1 412) Assessment rates 843 796 Bad debts 13 16 Cleaning 127 122 Consulting fees 87 73 portfolio Property Insurance 61 57 Letting commissions 43 44 Other property expenses 210 227 Property management expenses 86 69 Repairs and maintenance 206 187 Salaries, bonuses and other employee-related costs 200 236 Security 238 223 Tenant installation costs 103 89 2 245 2 126

3. Other administrative and operating overheads General information Administration costs 68 51 Auditors’ remuneration – Audit fee 13 13 – Other non-audit services 1 2 Development fees earned (30) (34) Directors’ fees 35 33 Legal fees 3 2 Other fund expenses 12 9 Salaries, bonuses and other employee-related costs 314 232 416 308 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 24 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

2017 2016 Rm Rm

4. FAIR VALUE ADJUSTMENTS, CAPITAL ITEMS AND OTHER CHARGES 4.1 Fair value adjustments Net investment property revaluation 1 915 757 Gross investment property fair value adjustment 1 954 1 212 Straight-line lease income adjustment (39) (455) Other gains or losses 39 (348) Interest-bearing borrowings 49 144 Derivatives 622 (298) Derivatives (realised) (428) (249) Fair value of listed investment (214) 60 Long-term loans granted 10 (5) 1 954 409 4.2 Capital items Capital costs incurred on business acquisitions (49) (38) Bargain purchase 78 6 29 (32) 4.3 Non-cash charges Amortisation of intangible assets (99) (99) Increase in Staff Incentive Scheme cost (34) (22) (133) (121) Total fair value adjustments, capital items and non-cash charges 1 850 256

5. Net finance expense and other investment income 5.1 Finance expense Interest paid on financial liabilities 2 804 2 690 Less: Borrowing cost capitalised to investment property developments (at prime less 0.5%) (294) (224) 2 510 2 466 5.2 Finance income Banks 23 43 Listed investments – 22 Long-term loans 19 45 42 110 5.3 Investment income Dividends received from equity-accounted investments 605 500 Other 45 80 650 580 Total finance and investment income 692 690 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 25 About the Growthpoint reporting

6. BASIC AND HEADLINE EARNINGS PER SHARE 6.1 Summary of earnings per share (EPS), headline earnings per share (HEPS) and dividends per share (DPS)

Earnings Weighted average attributable (Rm) number of shares Cents per share 2017 2016 2017 2016 2017 2016 Total operations EPS Basic 7 524 5 159 2 810 365 608 2 711 111 433 267.72 190.29 EPS Diluted 7 524 5 159 2 826 291 481 2 721 978 579 266.21 189.53 HEPS Basic 5 049 3 811 2 810 365 608 2 711 111 433 179.66 140.57 Annual financial statements HEPS Diluted 5 049 3 811 2 826 291 481 2 721 978 579 178.64 140.01

Actual number of shares DPS 5 548 5 033 2 860 702 595 2 757 563 843 195.80 183.80 6.2 Reconciliation between basic earnings, diluted earnings and headline earnings Gross Total 2017 2016 2017 2016 Rm Rm Rm Rm Profit for the year 7 524 5 159

Bargain purchase 1 850* 256 (78) (6) portfolio Property Fair value adjustments on investment property 1 850* 256 (2 397) (1 342) Fair value adjustment: Net of straight-lining lease adjustment (1 993) (957) NCI portion of fair value adjustments (404) (385) Headline basic and diluted earnings 5 049 3 811 6.3 Reconciliation of weighted average number of shares Weighted number of shares 2017 2016 Weighted average number of shares 2 810 365 608 2 711 111 433

Number of shares as at 1 July 2 786 093 366 2 711 056 264 General information Shares issued during the year 52 790 664 29 129 570 Effect of treasury shares held (28 518 422) (29 074 401) Effect of share option in issue 15 925 873 10 867 146 Diluted average number of shares 2 826 291 481 2 721 978 579 * Both the bargain purchase and fair value adjustment on investment property are included in the “fair value adjustment, capital items and other charges” line item on the face of the statement of profit or loss and other comprehensive income. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 26 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

2017 2016 Rm Rm 7. Property assets 7.1 Fair value of property assets Opening fair value of property assets 102 752 93 035 Additions at cost Acquisitions 6 921 4 072 Acquisitions – Pinmill – 178 Development expenditure 2 524 1 798 Capital expenditure 77 952 Disposal at fair value (1 746) (505) Transferred to investment property classified as held for sale (1 241) (1 938) Foreign exchange (loss)/gain (3 040) 3 948 Gross fair value adjustment on investment property 1 954 1 212 Less: Straight-line lease income adjustment (2 560) (2 478) Fair value of investment property for accounting purposes 105 641 100 274 Straight-line lease income adjustment 2 560 2 478 Closing fair value of property assets 108 201 102 752 Cost 87 034 82 064 Cumulative fair value surplus 21 167 20 688 7.2 Straight-line lease income adjustment Opening balance 2 478 2 118 Arising during the year 39 455 Foreign exchange gain/(loss) 43 (95) Closing balance 2 560 2 478 7.3 Investment property classified as held for sale Opening fair value of property assets 1 938 539 Transferred from investment property 1 241 1 938 Additions at cost – capital expenditure 7 85 Disposal at fair value (1 945) (624) Closing fair value of property assets 1 241 1 938 Cost 883 1 864 Cumulative fair value surplus 358 74

The investment property classified as property held for sale are properties that the directors have decided will be recovered through sale rather than through use. The opening balance relates to three investment properties in the office sector, three investment properties in the industrial sector and five Australian properties in the industrial sector. In the current year, all six of the South African investment properties were disposed of for R305m (FY16: R624m) and all five Australian properties for R1 674m (AUD152m). Sale agreements have been entered into for a further three South African properties, one in the retail sector and two in the industrial sector, with a fair value of R202m at year end, and one Australian property in the office sector, with a fair value of R1 039m (AUD104m). WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 27 About the Growthpoint reporting

7. Property assets (continued) 7.4 Capital commitments and guarantees 2017 2016 More More Within than Within than 12 months 12 months Total 12 months 12 months Total Rm Rm Rm Rm Rm Rm

Capital commitments 2 644 790 3 434 483 2 194 2 677 South Africa 2 424 639 3 063 – 1 697 1 697

GOZ – 151 151 497 497 Annual financial statements V&A Waterfront 220 – 220 483 – 483 Acucap Investments (Pty) Ltd, a wholly owned subsidiary of Acucap Properties Limited, has provided a suretyship in favour of Nedbank Limited as security for the loan facilities granted to Roeland Street Investment 2 (Pty) Ltd (RSI2) for R499m and a guarantee limited to an amount of R217m in favour of Standard Bank as security for loan facilities granted to RSI2 as well as Roeland Street Investment 3 (Pty) Ltd (RSI3). In addition to the suretyship, Acucap Investments (Pty) Ltd has provided Nedbank with an undertaking to fund any shortfall in instalments due by RSI2 to Nedbank in terms of these loan facilities. In addition to the guarantee, Acucap Investments (Pty) Ltd has provided Standard Bank with an undertaking to fund any shortfall in instalments due by RSI2 and RSI3 to Standard Bank in terms of these loan facilities. Property portfolio Property 7.5 Minimum contracted rental Minimum contracted rental income The group leases a number of retail, office and industrial properties under operating leases. Leases typically run for a period of three to five years for the South African portfolio. The leases for GOZ, on average, run for a period of eight to 10 years. Average lease terms South Africa 3 – 5 years Australia (GOZ) 8 – 10 years Contracted rental amounts receivable at year end Between More Less than one and than

one year five years five years General information South Africa 7 267 16 127 5 544 Australia (GOZ) 2 292 8 222 4 777 9 559 24 349 10 321 Minimum contracted rental expense The Group is party to leasing contracts as the lessee with numerous properties under operating leases. Included in the minimum contracted rental expenses are obligations payable in Australia relating to 10 land leases for buildings owned by GOZ. These land leases generally expire in 2047 and 2048 and are common in the Australian property industry. Future land lease payments in Australia are contingent on a number of variable factors, such as whether the building is tenanted or not and market rent reviews which can take place during or after the expiration of the building occupancy lease. The net carrying amount at the end of the reporting period is R123m. Contracted rental amounts payable at year end Between More Less than one and than one year five years five years South Africa 9 40 578 Australia (GOZ) 23 47 4 32 87 582 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 28 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

8. Equity-accounted investments The V&A Waterfront is the owner of the developed and undeveloped land, which is held to earn rental income and for capital appreciation. Globalworth is a London Stock Exchange (AIM)-listed real estate company that focuses primarily on Romania’s commercial real estate market. 8.1 Reconciliation of equity-accounted investments 2017 2016 Rm Rm Opening balance 6 821 6 464 Share in equity-accounted results 384 543 Disposal of equity-accounted interest – (51) Acquisition of equity-accounted interest 2 798 – Bargain purchase 78 – Loans to equity-accounted investments – 89 Loans to equity-accounted investments settled (161) (224) Closing balance 9 920 6 821 Profit from equity-accounted investments 369 543

8.2 Summarised financial information for material joint ventures and associates V&A Waterfront Globalworth* Joint venture Associate 2017 2016 2017 2016 Primary place of business South Africa South Africa Romania – Proportion of ownership interest 50.0% 50.0% 26.9% – Quoted fair value per share – – EUR7.57 –

Statement of financial position Rm Rm Rm Rm ASSETS Non-current assets Closing fair value of property assets 17 410 15 532 15 660 – Opening balance of property assets 15 532 13 522 – – Additions – 15 376 – Capital expenditure 1 114 840 329 – Disposals (226) – (60) – Gross fair value adjustment on investment property 990 1 170 15 – Straight-line lease income adjustment (296) (281) – – Fair value of investment properties for accounting purposes 17 114 15 251 15 660 – Straight-line lease income adjustment 296 281 – – Other assets 553 322 416

Current assets Other current assets (excluding cash and cash equivalents) 609 415 171 – Cash and cash equivalents 161 56 4 248 – Total assets 18 733 16 325 20 495 – * This information has not been reviewed or audited by Growthpoint’s independent external auditors. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 29 About the Growthpoint reporting

8. Equity-accounted investments (continued) 8.2 Summarised financial information for material joint ventures and associates (continued) V&A Waterfront Globalworth* Joint venture Associate 2017 2016 2017 2016 Rm Rm Rm Rm EQUITY AND LIABILITIES Equity

Owners’ equity 4 219 3 232 10 293 – Annual financial statements Shareholders’ debentures 10 000 10 000 – – Total unitholders’/shareholders’ interest 14 219 13 232 10 293 – Non-controlling interest 24 22 – – Total equity 14 243 13 254 10 293 – Non-current liabilities Non-current financial liabilities (excluding trade and other payables and provisions) 352 569 9 489 – Current liabilities Trade and other payables (including current loan account with Growthpoint) 3 812 2 410 290 – Property portfolio Property Financial liabilities (excluding trade and other payables and provisions) 39 42 107 – Other current liabilities 287 50 316 – Total equity and liabilities 18 733 16 325 20 495 – Growthpoint’s share in total unitholders’/ shareholders’ interest 7 110 6 616 2 769 –

Statement of comprehensive income Revenue 1 466 1 265 523 – Property-related expenses (408) (354) (194) –

Net property income 1 058 911 329 – General information Fair value adjustments 975 1 183 15 Capital items (3) (33) (15) – Interest income 55 78 15 – Interest expense – – (403) – Other costs (48) (40) (45) – Profit from continued operations 2 037 2 099 (104) – Income tax expense – – – – Post-tax profit from continued operations 2 037 2 099 (104) – Other comprehensive income – – – – Total comprehensive income 2 037 2 099 (104) – Non-controlling interest (2) (3) – Equity-accounted profit before interest paid to shareholders 2 035 2 096 (104) – Interest paid to shareholders (1 048) (958) – – Total equity-accounted profit 987 1 138 (104) – Growthpoint’s share in equity-accounted interest 494 569 (28) – Interest received 524 479 78 – The financial year end of the V&A Waterfront is 31 March while Globalworth is 31 December. The financial information as at 30 June is used in applying the equity method. * This information has not been reviewed or audited by Growthpoint’s independent external auditors. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 30 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

8. Equity-accounted investments (continued) 8.3 Acquisition of Globalworth 2017 2016 Acquisition date 20 Dec 2016 – Interest acquired (%) 26.9% – Total consideration transferred (discharged by cash) (Rm) 2 704 – On 20 December 2016, Growthpoint RSA acquired a 26.9% stake in the London Stock Exchange (Alternative Investment Market (AIM))-listed Globalworth, which is classified as an associate, for a consideration of R2.7bn (EUR186.4m). Globalworth owns a EUR1bn property portfolio consisting of mostly modern A-grade offices, industrial properties, a residential property complex as well as developments. Its portfolio is concentrated in Bucharest and one in Timisoara, Romania and is underpinned by Euro-denominated leases with many multinational business brands. This acquisition was funded by loans of EUR100.0m and the remaining portion by Rand loans with cross currency interest rate swaps (CCIRS) of EUR86.4m at a weighted average term of 4.2 years. The Euro-based interest rates are fixed for a weighted average term of 9.9 years at a weighted average all-in cost of 2.6%. Rm Rm 8.4 Summarised financial information for non-material joint ventures Loss from continued operations (15) (21) Post-tax loss from continued operations (15) (22) Total comprehensive income (15) (22)

9. Intangible assets Rights to manage Goodwill property Total Rm Rm Rm Cost 3 426 1 513 4 939 Opening balance 3 426 1 513 4 939 Accumulated amortisation and impairment losses (1 558) (1 019) (2 577) Opening balance (1 558) (920) (2 478) Amortisation for the year – (99) (99) Carrying value at 30 June 2017 1 868 494 2 362 Cost 3 426 1 513 4 939 Opening balance 3 426 1 510 4 936 Additions during the year – software development – 3 3 Accumulated amortisation and impairment losses (1 558) (920) (2 478) Opening balance (1 558) (798) (2 356) Impairment loss – (23) (23) Amortisation for the year – (99) (99) Carrying value at 30 June 2016 1 868 593 2 461 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 31 About the Growthpoint reporting

9. Intangible assets (continued) Carrying amount of goodwill allocated to the different cash-generating units are as follows: Accumulated impairment Initial loss Goodwill goodwill recognised 30 June 2017 Rm Rm Rm Acucap Retail (note 9.1) 1 815 (949) 866 Acucap Office (note 9.1) 1 087 (569) 518

Acucap Industrial (note 9.1) 76 (40) 36 Annual financial statements Growthpoint Management Services (note 9.2) 448 – 448 Carrying value at 30 June 2017 3 426 (1 558) 1 868

9.1 Goodwill acquired as part of the Acucap business combination Growthpoint Properties Limited carries on the business of a property holding company through the ownership of investment properties by its wholly owned subsidiaries. Acucap has three cash-generating units: retail, office and industrial. Goodwill on the acquisition of Acucap Properties Limited has been allocated for impairment testing purposes to these individual cash-generating units (CGUs). Retail, office and industrial each represent the lowest level at which the goodwill is monitored for internal management purposes. The recoverable amounts of all these CGUs for the Acucap acquisition were based on fair value less costs of disposal, estimated using the average difference between the net asset value and the market capitalisation of Growthpoint over a period of five years. portfolio Property This indicates that a third party will be prepared to pay a premium over the net asset value for Growthpoint shares. The future expectations of the CGUs were considered by estimating the premium a third party is prepared to pay for Growthpoint’s own shares as the properties form part of the Growthpoint portfolio. Growthpoint’s net asset value and share price, together with Acucap’s historical net asset value has been considered to provide an indication of how the portfolio is expected to perform in the future. The fair value measurement was categorised as a level 3 fair value based on the inputs in the valuation techniques used. The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent the quoted share price of Growthpoint at 30 June from FY13 until FY17, as well as the net asset value per share per the published results of the Group.

FY13 FY14 FY15 FY16 FY17 General information Growthpoint (share price in cents) 2 639 2 473 2 646 2 568 2 448 Growthpoint (net asset value per share in cents) 1 937 2 223 2 328 2 474 2 517 Growthpoint (market capitalisation versus net asset value) 36.24% 11.25% 13.66% 3.80% (2.74%) The average net asset value versus market capitalisation for the Group for the previous five years (ie 12.44%) was used in the calculation of the fair value less costs of disposal of the Acucap CGUs. The recoverable amounts were calculated as follows: Rm Acucap Retail 12 Acucap Office 66 Acucap Industrial 230 308 No impairment loss has therefore been recognised during the current year, as the recoverable amount exceeds the carrying amount. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 32 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

9. Intangible assets (continued) 9.2 Goodwill acquired – Growthpoint Management Services For the purpose of impairment testing, goodwill, other than goodwill relating to the acquisition of Acucap, is allocated to the Group’s historical management services entity. This represents the property administration and management business within the Group where goodwill allocated is monitored for internal management purposes. The recoverable amount of the cash-generating unit was based on its value in use. It was determined that the recoverable amount was higher than the carrying amount and therefore no impairment loss was recognised. The recoverable amount was calculated by discounting the future cash flows generated from the continuing use of the unit and was based on the following key assumptions from discussions with management of Growthpoint Management Services (Pty) Ltd, and past experience: (a) The management contract will continue on similar terms to the agreement that was in place before the acquisition transaction, which had the following terms: Asset management fee was calculated at 0.50% of the “enterprise value” Enterprise value was measured by taking the sum of the nominal value of external debt plus market capitalisation (b) Letting commission on new deals was calculated at 100% of recommended South African Property Owners Association (SAPOA) tariffs while letting commission on renewals was calculated at 50% of recommended SAPOA tariffs (c) Collection fees range from 1% to 4% of cash collected on a property-by-property basis (d) Salaries are in respect of functions that relate to property management (e) Operating expenditure was based on discussions with the previous property managers and after consideration of historic costs, which included rental of premises, IT systems and support, marketing and other expenses necessary for operating a listed company (f) A discount rate of 10% (FY16: 10%) was applied in determining the recoverable amount of the unit. The discount rate was estimated based on the Group’s weighted average cost of debt. There are no expected significant changes to the assumptions. The discounted cash flow was performed over a six-year period (FY16: seven-year period), which took into account the remaining period of the contract that existed and that the contract would be renewed for another 10-year period. 9.3 Amortisation The amortisation is recognised as a non-cash item and is excluded from the shareholders’ distribution calculation. The remaining amortisation period of the rights to manage the property is six years. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 33 About the Growthpoint reporting

2017 2016 Rm Rm

10. Long-term loans granted 10.1 Summary of loan balances Amount advanced 653 565 Opening balance 565 1 064 Advanced during the year 463 45 Repaid during the year (375) (544) Accrued interest 91 50 Annual financial statements Opening balance 50 21 Settled during the year (37) (54) Arising during the year 78 83 Nominal value of long-term loans 744 615 Fair value and equity-accounted adjustment (35) (10) Fair value of long-term loans 709 605

Portion repayable within the next 12 months 13 16 Portion repayable after the next 12 months 696 589 The long-term loans granted were advanced to the following entities: 2017 2016 portfolio Property Entity Interest rate Latest repayment date Rm Rm Rabie Property Group (Pty) Ltd Prime minus 1% 31 January 2019 173 172 Acucap Unit Purchase Scheme 6.19% – 9.8% 17 January 2023 116 175 V&A Waterfront Prime 18 July 2018 190 – Roeland Street Investment 2 (Pty) Ltd Prime 1 March 2019 215 – Non-material loans advanced Prime to prime +2% 30 November 2027 15 – 323 Festival Street (Pty) Ltd 9.69% 1 March 2017 – 258 709 605

Significant terms and conditions General information The loan will be utilised for the completion of Bridgepark in Century City On completion of the building, Century City Trust is committed to pay for the Rabie Property Group (Pty) Ltd development project expenditure in order to obtain 50% ownership in Bridgepark. This loan will therefore convert to a term loan with Century City Trust. Acucap linked units were issued on loan account to Acucap employees as part of a share purchase scheme The employees carry the risk of non-performance and have no restrictions placed Acucap Unit Purchase scheme upon them As a result of the business combination, the Acucap employees received Growthpoint shares in the same ratio as the other shareholders for each Acucap share held. The loan is used for the funding of capital expenditure by the V&A Waterfront as approved by the property committee of the V&A Waterfront – the Government V&A Waterfront Employees Pension Fund (GEPF) has lent the same amount to the V&A Waterfront. The proceeds from the Silo 3 residential units will be utilised to repay both loans from Growthpoint and GEPF. The loan is used for the development and/or construction of self-storage facilities and for any cash flow shortfalls until such facilities are cash flow positive Roeland Street Investment 2 (Pty) Ltd The intention is to sell the self-storage facilities to Stor-Age Property REIT Limited once they are cash flow positive. The proceeds of the sale will be utilised to redeem the loans. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 34 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

2017 2016 Rm Rm

11. Trade and other receivables Rental debtors 71 83 Impairment of debtors (26) (30) Prepaid expenses 58 64 Deferred expenditure (including letting commissions and tenant installations) 788 684 Sundry debtors 320 245 Loans to joint ventures 1 714 1 207 Accrued recoveries 209 243 Distribution receivable from Globalworth 80 – 3 214 2 496 12. Ordinary share capital Number of shares Amount 2017 2016 2017 2016 Rm Rm Authorised Ordinary shares with no par value 4 000 000 000 4 000 000 000 Issued Ordinary shares Issued at beginning of year 2 786 093 366 2 711 056 264 42 929 41 132 Issued during year 102 369 216 75 037 102 2 533 1 797 In issue at end of year 2 888 462 582 2 786 093 366 45 462 42 929 13. Treasury shares Number of shares Amount 2017 2016 2017 2016 Rm Rm

Opening balance 28 529 523 30 631 827 600 646 Acquired during the year 2 111 679 1 087 650 53 25 Vested/exercised during year (2 881 215) (3 189 954) (67) (71) Closing balance 27 759 987 28 529 523 586 600 Net share capital 44 876 42 329 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 35 About the Growthpoint reporting

14. Non-controlling interest Extracts from financial information for material non-controlling interest GOZ Primary place of business Australia Australia Proportion of ownership interest 65.1% 65.5% 2017 2016 Rm Rm Statement of financial position

Non-current assets 31 497 22 564 Annual financial statements Non-current liabilities (13 140) (13 928) Total non-current net assets 18 357 8 636 Current assets 1 931 2 942 Current liabilities (791) (705) Total current net assets 1 140 2 237 Net assets 19 497 10 873 Net assets attributable to NCIs 6 709 5 871 Statement of profit or loss and other comprehensive income

Revenue, excluding straight-line lease income adjustment 2 637 2 175 portfolio Property Profit after taxation from continuing operations 1 514 1 618 Other comprehensive income (1 571) 2 282 Total comprehensive income (57) 3 900 Dividends paid to non-controlling interest (502) (436) Statement of cash flows Cash flows from operating activities 1 747 (47) Cash flows from investing activities (725) (3 734) Cash flows from financing activities (1 446) 4 255 Translation effect on cash and cash equivalents of foreign operations (41) 55

Net movement in cash and cash equivalents (465) 529 General information The information above is the amount before intercompany eliminations and has been adjusted for fair value adjustments on acquisition and differences in the Group’s accounting policies. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 36 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

2017 2016 Rm Rm

15. Financial Liabilities Summary of financial liabilities Interest-bearing borrowings 42 449 38 578 Fair value adjustment on interest-bearing borrowings 119 2 Fair value of interest-bearing borrowings 42 568 38 580 Derivatives 587 1 094 43 155 39 674

15.1 Interest-bearing borrowings Growthpoint has the following interest-bearing loans outstanding at year end: Secured variable rate loans by investment property 21 329 23 248 South Africa 14 848 14 449 Australia 6 481 8 799 Unsecured variable rate loans 12 002 7 970 Secured fixed rate loans by investment property 8 563 7 360 South Africa 1 968 2 400 Australia 6 595 4 960 Unsecured fixed rate loans 555 – Fair value adjustments 119 2 42 568 38 580 Reconciliation of interest-bearing borrowings Opening balance 38 580 33 909 Proceeds from borrowings raised 20 901 8 575 Repayment of borrowings (15 426) (5 427) Fair value adjustments 119 2 Foreign exchange differences (1 606) 1 521 Closing balance 42 568 38 580 Portion repayable within the next 12 months 4 460 4 491 Portion repayable after the next 12 months 38 108 34 089 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 37 About the Growthpoint reporting

15.1 Financial Liabilities (continued) 15.1 Interest-bearing borrowings (continued) Latest repayment Interest rate dates Significant terms and conditions Secured variable rate borrowings Jibar+1.25% to February 2024 All the above loans were utilised to – South Africa Jibar+2.25%; purchase properties or to invest in Prime-1.80% to shares of property-owning entities Prime-1.45% Nearly all loans have a bullet Secured variable rate borrowings BBSW+1.00% to September 2020 repayment profile Annual financial statements – Australia BBSW+1.60% Due to the nature of a REIT, the loans will typically be refinanced Unsecured variable rate borrowings Jibar+0.77% to April 2024 with new funding at expiry Jibar+1.90% The secured loans are secured with Secured fixed rate borrowings 9.63% to 10.38% January 2022 mortgage bonds registered over properties. 2017 2016 15.2 Derivatives Rm Rm Forward exchange derivatives 2 23 Interest rate derivatives 461 552

Cross currency interest rate derivatives 124 519 portfolio Property 587 1 094

Derivative Risk mitigation Forward exchange derivative The Group enters into forward exchange derivatives to manage its exposure to foreign exchange risk by forward selling foreign currency at predetermined prices. Interest rate derivative The Group enters into derivative financial instruments to manage its exposure to interest rates by fixing floating rate interest rates on loans. Cross currency interest rate Rand denominated loans are obtained for certain foreign acquisitions and the Group then

derivative enters into cross currency interest rate derivatives to swap the Rand loan for a foreign General information currency loan. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 38 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

Total 2017 2016 Rm Rm

16. Employee benefits 16.1 Equity-settled share-based payments Opening balance 170 160 Expense recognised for equity-settled share-based payment plan Personnel expense 13 20 Asset management cost and directors’ fees 41 30 Non-cash charge 35 22 Units vested (88) (62) Closing balance 171 170 Zero strike price share scheme 59 83 Retention scheme 112 87

Zero strike price share scheme Share incentive schemes were introduced for employees that were employed after the management "buy-in" transaction, as well as a scheme to replace the initial scheme after the last vesting in September 2011. The shares allocated will vest with the beneficiaries over a maximum period of five years, in tranches of 0% in year one and 25% per year thereafter. The share awards granted to employees have been valued using an intrinsic option valuation model, based on the market price of Growthpoint’s shares at measurement date, adjusted for the present value of future distributions not receivable by employees before the vesting date. Retention scheme It was essential for Growthpoint to ensure the retention of its key staff and the alignment of management’s interests with that of Growthpoint shareholders. To meet the retention objective, Growthpoint has implemented an option award under its existing scheme rules that offers participants retention value from the award date and provides alignment with the interests of shareholders over a relatively long period. Growthpoint issued reducing strike price options for the retention of key staff. Each option gives the option holder the right to acquire one Growthpoint share at the strike price at the vesting date. Each option’s strike price will, on a material basis, be adjusted by: increasing the strike price by 8.25% per annum compounding on each distribution payment date decreasing the strike price by the actual distribution per share. The options simulate a share purchase scheme that is funded by 50% debt. These options vest over the remainder of the eight years as follows: 2016 – 2017: 10% per annum 2018 – 2020: 20% per annum 2021 – 2022: 10% per annum. The share awards granted to employees have been valued using an intrinsic option valuation model, based on 50% of the 30-day clean volume weighted average price of Growthpoint’s shares at measurement date, adjusted for the present value of future distributions not receivable by employees before the vesting date. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 39 About the Growthpoint reporting

16. Employee benefits (continued) 16.2 Inputs for fair value measurement Zero strike price scheme Retention scheme 2017 2016 2017 2016 Maximum term 5 years 5 years 8 years 8 years Weighted average expected life 3.1 years 2.8 years 3.0 years 3.3 years Expected dividend growth rate 6.00% 6.00% 6.00% 6.00% Interest Interest Interest Interest Discount rate rate curve rate curve rate curve rate curve Interest rate on strike price 8.42% 8.42% Annual financial statements Fair value of options granted 15.24 – 25.86 15.24 – 25.86 R10.85 – R12.02 R11.40 – R11.74 Share price at grant date 24.21 – 28.66 24.41 – 28.66 R22.85 – R27.12 R22.85 Strike price at grant date R13.43 – R11.43 R13.56 – R11.43 Zero strike price share scheme The probability of staff leaving was estimated as 5% in the first year and 10% in subsequent years. Retention scheme The probability of staff leaving was estimated at 5% in the first year and an additional 5% in every second subsequent year. 16.3 Reconciliation of shares

Number of shares portfolio Property 2017 2016 Cumulative shares issued, acquired and held by Growthpoint for the purpose of share-based payments Cumulative shares issued and acquired 47 467 880 45 356 201 Opening balance 45 356 201 44 268 551 Shares acquired during the year 2 111 679 1 087 650 Cumulative shares vested and exercised (19 707 893) (16 826 678) Shares available to the share scheme 27 759 987 28 529 523 Outstanding share options granted to employees

Opening balance 21 549 017 22 952 790 General information Granted to employees 3 093 945 3 181 529 Forfeited by employees (923 099) (1 395 349) Vested and exercised by employees (2 881 215) (3 189 953) Outstanding share options granted to employees 20 838 648 21 549 017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 40 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

Zero strike price scheme Retention scheme 2017 2016 2017 2016

16. Employee benefits (continued) 16.3 Reconciliation of shares (continued) Weighted average exercise prices Share options outstanding at beginning of year R26.18 R25.79 Share options outstanding at end of year R26.46 R26.18 Options granted during the year R26.60 R26.86 Options forfeited during the year R26.54 R26.33 Options exercised during the year R25.83 R25.83 Options outstanding during the year R26.46 R26.18 Weighted average price of shares exercised R12.76 R12.74 Range of exercise prices R11.78 – R13.23 R11.81 – R13.01 Maximum remaining term 8 years 6 years 17. Taxation and deferred taxation 17.1 Taxation 17.1.1 Taxation expense South African normal taxation Foreign taxation Total 2017 2016 2017 2016 2017 2016 Rm Rm Rm Rm Rm Rm Current tax expense (2) (4) (96) (72) (98) (76) Current year (2) (4) (96) (72) (98) (76) Deferred tax expense 50 (765) – – 50 (765) Current year Amortisation of intangible asset 22 22 – – 22 22 Capital gains tax on the sale of GOZ shares 28 (858) – – 28 (858) Other – 71 – – – 71 Total income tax expense 48 (769) (96) (72) (48) (841) 17.1.2 Reconciliation of effective taxation charge 2017 2016 Rm Rm Statutory taxation charge at 28% 2 379 1 906 Non-deductible expenses 52 (74) Tax-exempt income (776) (430) Exempt income (77) 1 Deferred tax on assessed loss (1) (36) Fair value adjustments not taxable due to reit status (698) (395) Capitalised interest (87) – Tax rate difference and withholding tax on GOZ (144) 766 Qualifying distribution (1 376) (1 327) Effective taxation charge 48 841 Effective taxation rate 0.56% 12.35% WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 41 About the Growthpoint reporting

2017 2016 Rm Rm

17. Taxation and deferred taxation (continued) 17.2 Deferred taxation 17.2.1 Reconciliation of net deferred tax liability Opening balance 2 382 1 617 Current year charge through profit or loss (50) 765 Closing balance 2 332 2 382

17.2.2 Deferred taxation liability Annual financial statements Tax effect of temporary differences between tax and book value for: Deferred taxation liability 2 509 2 557 Investment in GOZ 2 114 2 137 Amortisation of intangible asset 142 170 Investment property – allowances 253 250

Deferred taxation asset (177) (175) Share-based payments (66) (64) Tax losses carried forward (82) (83) Other (29) (28) Property portfolio Property Net deferred taxation liability 2 332 2 382 Section 25BB of the Income Tax Act allows for the deduction of the qualifying distribution paid to shareholders, but the deduction is limited to taxable income. To the extent that no tax will be payable in future as a result of the qualifying distribution, no deferred tax was raised on items such as the straight-line lease income adjustment and the fair valuation of non-current financial liabilities. IAS 12 Income Taxes (amended) requires the sale rate to be applied, unless rebutted, when calculating deferred taxation on the fair value adjustments on investment property. Capital gains taxation is not applicable on the sale of investment property in terms of section 25BB of the Income Tax Act. The deferred taxation rate applied to investment property at the sale rate is therefore 0%. Consequently, no deferred taxation was raised on the fair value adjustments on investment property.

Allowances relating to immovable property cannot be claimed and if a REIT sells immovable property, the allowances claimed in General information previous years will be recouped. A deferred taxation liability was raised in this respect. The deferred taxation liability on the intangible asset relates to the right to manage the property assets. The deferred taxation on the investment in GOZ is based on the presumption that the investment will be realised through sale and capital gains tax will be payable in Australia. 18. Trade and other payables 2017 2016 Rm Rm Accrued expenses 1 049 997 Accrued interest 274 202 Tenant deposits 259 259 Trade creditors 464 311 Value added tax 40 51 Income received in advance 230 225 Linked unitholders for distribution 256 231 2 572 2 276 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 42 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

19. Related-party transactions 19.1 Simplifiedg roup organogram ownership and legal structure

JSE

GROWTHPOINT PROPERTIES 150 properties – LIMITED R35.7bn

100%

Domestic Treasury company

Growthpoint Properties International (Pty) Ltd

65.1% 26.9% 50% 100%

100%

Property owning companies

Metboard Properties Limited Growthpoint Securitisation Warehouse Trust Growthpoint TPG (Pty) Ltd 121 properties – R4.9bn 68 properties – R10.1bn 19 properties – R3.3bn

Paramount Property Fund Limited Growthpoint ABQ (Pty) Ltd Acucap Investments (Pty) Ltd 54 properties – R5.7bn 8 properties – R1.3bn 31 properties – R10.7bn

Other subsidiaries 20 properties – R5.3bn

The above organogram includes only material subsidiaries, joint ventures and associates. A full list of Growthpoint Properties Limited subsidiaries, joint ventures and associates, is available on request. The interest in joint operations refers to buildings in which the group has an undivided interest. The Group has joint control over the properties and the joint arrangements are not structured through separate legal entities. Therefore the group recognises its share of the assets and liabilities and income and expenses. South Africa is the principal place of business for all joint operations. All subsidiaries are wholly owned (either directly or indirectly) by Growthpoint Properties Limited except for Growthpoint Properties Australia (65.1%). Growthpoint Management Services (Pty) Ltd provides property management services for the group companies. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 43 About the Growthpoint reporting

19. Related-party transactions (continued) 19.2 Related-party transactions Various transactions were entered into between related parties. These transactions were entered into at market-related terms. 2017 2016 Income Receivables Income Receivables Rm Rm Rm Rm V&A Waterfront (Pty) Ltd 524 1 714 479 1 205 The income received is interest received by the V&A Waterfront for the year. The receivables relate to Annual financial statements all previous declared dividends that are still outstanding. Globalworth 78 80 – – The income received is dividend declared by Globalworth for the year. The receivables relate to all previous declared dividends that are still outstanding. Roeland Street Investment 2 (Pty) Ltd – 215 – 152 The receivable relates to funds borrowed by the joint venture. Roeland Street Investment 3 (Pty) Ltd – 3 – 6 The receivable relates to funds borrowed by the joint venture. Property portfolio Property Growthpoint owns 33% of Roeland Street Investment 2 (Pty) Ltd and 50% of Roeland Street Investment 3 (Pty) Ltd. Both these entities are equity-accounted in the Group. 19.3 Key management personnel The Group’s key management personnel, and persons connected with them, are also considered to be related parties for disclosure purposes. Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of Growthpoint Properties Limited (directly or indirectly) and comprise of the board of directors and the heads of the major business units and functions. 2017 2016 Rm Rm

Key management personnel compensation General information Short-term employee benefits 26 24 Share-based payments 27 30 53 54 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 44 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

19. Related-party transactions (continued) 19.4 Directors’ remuneration Accounting IFRS charge in Contribution respect of to defined staff incentive Total Basic contribution Annual scheme IFRS salary plan bonus Total awards remuneration R R R R R R Executive directors – 2017 LN Sasse 5 396 611 774 789 5 969 600 12 141 000 14 287 270 26 428 270 EK de Klerk 4 174 458 475 542 4 495 400 9 145 400 11 010 125 20 155 525 G Völkel 2 395 481 707 019 2 011 100 5 113 600 1 805 450 6 919 050 11 966 550 1 957 350 12 476 100 26 400 000 27 102 845 53 502 845 Executive directors – 2016 LN Sasse 4 907 671 969 779 5 434 000 11 311 450 17 172 472 28 483 922 EK de Klerk 3 747 436 502 964 4 092 000 8 342 400 11 849 340 20 191 740 G Völkel 2 281 627 418 523 1 364 000 4 064 150 770 272 4 834 422 10 936 734 1 891 266 10 890 000 23 718 000 29 792 084 53 510 084 The table above provides an indication of the total cost to company in relation to executive directors’ remuneration, which was paid by Growthpoint Management Services. The IFRS accounting charge reflects the cost that has been expensed by the company in profit or loss in the relevant year in relation to long-term incentive awards that have been granted to executive directors. The IFRS charge is a calculation based on the fair value of the awards made to employees, measured at the grant date, compared to the amount calculated in the prior year, arriving at the expense accounted for in profit or loss. It should be noted that the amount estimated here will differ significantly from the actual expense in the current and future years, which isbasedon the number of shares that vested, calculated at the price at which they were exercised. No attrition is taken into account and the calculation is based on the principal assumptions as set out in the employee benefits note 16. Service contracts are in place between Growthpoint Management Services (Pty) Ltd and Messrs LN Sasse, EK de Klerk and G Völkel, all of which provide for a six-month reciprocal notice period. Following a review of the definition of a prescribed officer in terms of the Companies Act, in the context of decision-making processes within the Group, executive management and the Board have concluded that no member of the Executive Committee can be regarded as a "prescribed officer". Growthpoint Australia (GOZ) V&A Waterfront 2017 2016 2017 2016 AUD ZAR AUD ZAR ZAR ZAR Fees paid LN Sasse 112 600 1 155 134 106 000 1 120 193 – – EK de Klerk 109 000 1 118 203 103 500 1 093 774 – – JF Marais 107 700 1 104 866 101 000 1 067 354 – – Services rendered by Growthpoint Board members paid to Growthpoint – – – – 1 054 350 990 000 329 300 3 378 203 310 500 3 281 321 1 054 350 990 000 LN Sasse, EK de Klerk and JF Marais are directors of Growthpoint Properties Limited, the ultimate controlling entity of GOZ. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 45 About the Growthpoint reporting

Directors’ fees 2017 2016 R R

19. Related-party transactions (continued) 19.4 Directors’ remuneration (continued) Non-executive directors MG Diliza 814 000 621 400 PH Fechter 909 100 770 900 LA Finlay 875 300 596 300 JC Hayward 819 200 761 400 Annual financial statements HS Herman 654 000 705 800 JF Marais 2 537 300 2 165 300 HSP Mashaba – 404 167 SP Mngconkola 692 400 593 800 R Moonsamy 719 200 559 400 NBP Nkabinde 692 400 593 800 FJ Visser 745 600 616 600 9 458 500 8 388 867 Notes: (1)

The increase in fees paid to non-executive directors for FY17 versus FY16 is as a result of the higher meeting attendance rate in FY17, one separate Nomination portfolio Property Committee meeting in FY17 and two Board offsite meetings in the FY17. * In addition to fees for services as directors Mr Fechter received R150 000 in consultation fees relating to Growthpoint’s investment in GWI. Messrs Hayward and Visser received R150 000 each in consultation fees relating to Growthpoint’s IT governance review.

19.5 Directors’ interests in ordinary shares 2017 2016 Direct Indirect Non- Direct Indirect Non- beneficial beneficial beneficial Total beneficial beneficial beneficial Total

Executive directors

LN Sasse 2 536 413 – – 2 536 413 2 365 051 – – 2 365 051 General information EK de Klerk 303 139 1 658 623* – 1 961 762 326 444 1 433 614* – 1 760 058 G Völkel 116 540 – – 116 540 75 196 – – 75 196 Non-executive directors MG Diliza (BEE interest) – – 39 550 333# 39 550 333 – – 36 100 637# 36 100 637 MG Diliza (associate) – – 2 746 236* 2 746 236 – – 2 548 074* 2 548 074 PH Fechter 800 000 148 039 3 500 000* 4 448 039 800 000 148 039 3 500 000* 4 448 039 LA Finlay 98 432 – – 98 432 91 284 – – 91 284 JC Hayward 90 190 – – 90 190 83 640 – – 83 640 HS Herman – 188 705* – 188 705 – 175 000* – 175 000 JF Marais – 123 948* – 123 948 – 114 947* – 114 947 R Moonsamy – 1 330 881 – 1 330 881 – 1 287 347 – 1 287 347 NBP Nkabinde – 4 000^ – 4 000 – 4 000^ – 4 000

# BEE interest * Associates: Family trust ^ Associates: Spouse WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 46 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

19. Related-party transactions (continued) 19.6 Unvested options for executive directors – Zero strike price share scheme Number of unvested options Total 30 June 2018 30 June 2019 30 June 2020 2014 options LN Sasse 73 630 73 630 EK de Klerk 51 077 51 077 G Völkel 6 635 6 635 2015 options LN Sasse 135 821 67 911 67 910 EK de Klerk 98 170 49 085 49 085 G Völkel 31 183 15 592 15 591 2016 options LN Sasse 204 362 68 120 68 121 68 121 EK de Klerk 153 892 51 296 51 296 51 300 G Völkel 51 297 17 099 17 099 17 099

19.7 Key staff retention scheme notional awards Opening Vested Closing Strike balance options balance price Key staff retention scheme award 2014 LN Sasse 3 600 000 (400 000) 3 200 000 11.43 EK de Klerk 2 160 000 (240 000) 1 920 000 11.43 Key staff retention scheme award 2016 EK de Klerk 600 000 600 000 13.56 Key staff retention scheme award 2017 G Völkel 700 000 13.43

Unvested options for executive directors – Retention scheme 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June Total 2018 2019 2020 2021 2022 2023 2024 2025 Key staff retention scheme award 2014 LN Sasse 3 200 000 800 000 800 000 800 000 400 000 400 000 EK de Klerk 1 920 000 480 000 480 000 480 000 240 000 240 000 Key staff retention scheme award 2016 EK de Klerk 600 000 60 000 60 000 120 000 120 000 120 000 60 000 60 000 Key staff retention scheme award 2017 G Völkel 700 000 – 70 000 70 000 140 000 140 000 140 000 70 000 70 000 19.8 Other related-party transactions The group uses various legal services provided by Glyn Marais Inc. The founding partner, JF Marais, who is no longer responsible for directing the firm, is the Chairman and non-executive director of Growthpoint Properties Limited. Glyn Marais Inc. is a tenant in a Growthpoint building and pays rent. 2017 2016 Rm Rm Glyn Marais – legal fees paid 7 8 Glyn Marais – rent received (5) (5) WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 47 About the Growthpoint reporting

20. Classification of financial assets and liabilities Designated Loans and Outside Held for at fair other scope of trading value receivables IAS 39 Total Rm Rm Rm Rm Rm 20.1 Assets 2017 Cash and cash equivalents – – 613 – 613 Trade and other receivables – – 2 426 788 3 214

Derivative assets 356 – – – 356 Annual financial statements Listed investments – 226 – – 226 Long-term loans granted – 709 – – 709 2016 Cash and cash equivalents – – 901 – 901 Trade and other receivables – – 1 812 684 2 496 Derivative assets 107 – – – 107 Listed investments – 440 – – 440 Long-term loans granted – 605 – – 605

20.2 Liabilities Property portfolio Property 2017 Trade and other payables – – 2 302 270 2 572 Derivative liabilities 587 – – – 587 Taxation payable – – – 44 44 Interest-bearing borrowings – 42 568 – – 42 568 Deferred tax liability – – – 2 332 2 332 2016 Trade and other payables – – 2 000 276 2 276 Derivative liabilities 1 094 – – – 1 094 Taxation payable – – – 29 29

Interest-bearing borrowings – 38 580 – – 38 580 General information Deferred tax liability – – – 2 382 2 382 21. Fair value estimation 21.1 Fair value measurement of assets and liabilities The below table includes only those assets and liabilities that are measured at fair value including non-recurring items measured at fair value: 2017 2016 Fair value Level 2 Level 3 Fair value Level 2 Level 3 Rm Rm Rm Rm Rm Rm Assets Recurring fair value measurement Fair value of property assets 108 201 – 108 201 102 752 – 102 752 Listed investments 226 – 226 440 – 440 Long-term loans granted 709 – 709 605 – 605 Derivative assets 356 249 107 107 107 – Non-recurring fair value measurement Non-current assets held for sale 1 241 – 1 241 1 938 – 1 938 Total assets measured at fair value 110 733 249 110 484 105 842 107 105 735 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 48 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

21. Fair value estimation (continued) 21.1 Fair value measurement of assets and liabilities (continued) 2017 2016 Fair value Level 2 Level 3 Fair value Level 2 Level 3 Rm Rm Rm Rm Rm Rm Liabilities Recurring fair value measurement Interest-bearing borrowings 42 568 42 568 – 38 580 38 580 – Derivative liabilities 587 556 31 1 094 1 094 – Total liabilities measured at fair value 43 155 43 124 31 39 674 39 674 – The carrying amount of assets and liabilities that are not measured at fair value reasonably approximate their fair value due to their short-term nature. These include trade and other receivables, cash and cash equivalents and trade and other payables. 21.2 Movement in level 3 instruments 2017 2016 Long-term Long-term Property Listed loans Derivative Derivative Property Listed loans assets investments granted assets liabilities assets investments granted Rm Rm Rm Rm Rm Rm Rm Rm Opening balance 104 690 440 605 – – 93 574 380 1 081 (loss)/gain from fair value adjustments and translation of foreign operations (1 086) (214) (25) 107 (31) 5 160 60 (6) Accrued interest – – 78 – – – – 83 Acquisitions 9 529 – – – – 7 085 – – Disposals (3 691) – – – – (1 129) – – Advancements – – 463 – – – – 45 Settlements – – (412) – – – – (598) Closing balance 109 442 226 709 107 (31) 104 690 440 605

21.3 Valuation process A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non- financial assets and liabilities. The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including level 3 fair values, and reports directly to the Financial Director. The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third-party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are reported to the Group’s Audit Committee. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Valuation techniques using observable inputs – level 2 Fair values classified as level 2 have been determined using models for which inputs are observable in an active market. A valuation input is considered observable if it is obtained directly, such as quoted prices, or indirectly, such as those derived from quoted prices. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 49 About the Growthpoint reporting

21. Fair value estimation (continued) 21.3 Valuation process (continued) Valuation technique using significant unobservable inputs – level 3 Fair values are classified at level 3 if their determination incorporates significant inputs that are not based onobservable market data. Valuation techniques and significant unobservable inputs Level 2 instruments Interest-bearing borrowings Significant observable Description Valuation technique inputs Annual financial statements Interest-bearing borrowings Valued by discounting future cash flows using the South Credit margins: 0.43% to African swap curve plus an appropriate credit margin at 3.60% (FY16: 0.45% to the dates when the cash flows will take place. 3.60%) The estimated fair value would increase/(decrease) if the credit margin were lower/(higher).

Derivative instruments Description Valuation technique Significant observable inputs

Forward exchange contracts Valued by discounting the forward rates applied at year Interest rate swap curve portfolio Property end to the open positions. Interest rate swaps Valued by discounting the future cash flows using the Interest rate swap curve South African swap curve at the dates when the cash flows will take place. Cross currency interest rate swaps Valued by discounting the future cash flows using the Interest rate swap curve basis swap curve of the respective currencies at the dates when the cash flows will take place. Level 3 instruments Investment property In terms of the Group’s accounting policy, independent valuations are obtained on a rotational basis, ensuring that every property is valued at least once every three years by an external, independent property valuer, having appropriate recognised professional General information qualifications and recent experience in the location and category of the property being valued. The balance of the South African portfolio is valued by Growthpoint’s qualified internal valuers. The South African properties were valued at FY17 using the discounted cash flow of future income streams method by the following valuers who are all registered valuers in terms of section 19 of the Property Valuers Professional Act, No 47 of 2000: Mills Fitchet PWV PG Mitchell NDip (Prop Val), MIV (SA), CIEA, professional valuer Mills Fitchet KZN T Bates MSc, BSc Land Econ (UK), MRICS, MIV (SA), professional valuer ERIS C Everatt BSc (Hons) Estate management, MRICS, MIV (SA), professional valuer Jones Lang LaSalle J Karg BSc, MRICS, MIV (SA), professional valuer Rode and Associates K Scott BCom (Hons), professional valuer PropVal Assist C van Rooyen NDip (Prop Val), MIV (SA), professional valuer Spectrum PL O’Connell NDip (Prop Val), professional valuer Wolffs Valuation Services (Pty) Ltd S Wolffs NDip (Prop Val), professional associate valuer The Australian properties were valued at FY17 using the discounted cash flow of future income streams method by Savills, Jones Lang LaSalle, Urbis, Knight Frank, Colliers, M3property and LMW that are all members of the Australian Property Institute and certified practising valuers. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 50 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

21. Fair value estimation (continued) 21.3 Valuation process (continued) Valuation techniques and significant unobservable inputs (continued) At the reporting date, the key assumptions and unobservable inputs used by the Group in determining fair value of investment property were in the following ranges for the Group’s portfolio of properties: Significant unobservable inputs and range of estimates used Discount rate Exit capitalisation rate Capitalisation rate Description Valuation technique (%) (%) (%) Retail sector 12.3 – 17.0 6.8 – 11.0 6.8 – 11.0 Office sector 13.3 – 15.8 7.5 – 10.0 7.5 – 10.0 Discounted cash flow Industrial sector model 13.8 – 19.0 8.0 – 13.5 8.0 – 13.5 GOZ office 6.8 – 10.0 6.3 – 11.8 6.0 – 11.8 GOZ industrial 7.5 – 9.8 6.8 – 11.5 6.0 – 9.5 The estimated fair value would increase/(decrease) if the expected market rental growth was higher/(lower), expected expense growth was lower/(higher), the vacant periods were shorter/(longer), the occupancy rate was higher/(lower), the rent-free periods were shorter/(longer), the discount rate was lower/(higher) and/or the reversionary capitalisation rate was lower/(higher). Listed investments Description Valuation technique Significant unobservable inputs Stenham European Valued by discounting future cash flows using a floating rate Not applicable Shopping Centre Fund that is applicable to this loan including an estimated counterparty (SESCF) credit spread. Long-term loans granted Description Valuation technique Significant unobservable inputs Rabie Property Group Valued by discounting future cash flows using a floating rate Not applicable (Pty) Ltd that is applicable to this loan including an estimated counterparty credit spread. Acucap Unit Purchase Valued by discounting future cash flows using a floating rate Not applicable Scheme that is applicable to this loan including an estimated counterparty credit spread. V&A Waterfront Valued by discounting future cash flows using a floating rate Not applicable that is applicable to this loan including an estimated counterparty credit spread. Roeland Street Valued by discounting future cash flows using a floating rate Not applicable Investment 2 (Pty) Ltd that is applicable to this loan including an estimated counterparty credit spread. Derivative assets and liabilities Description Valuation technique Significant unobservable inputs Cross currency interest Valued by discounting the future cash flows using the basis swap Credit curve rate swaps curve of the respective currencies at the dates when the cash will take place. 22. Financial risk management The board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework. The board established the Risk Management Committee, which is responsible for developing and monitoring the group’s risk management policies. The Risk Management Committee reports regularly to the board of directors on its activities. The group’s risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and theg roup’s activities. The Risk Management Committee oversees how management monitors compliance with the group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the group. The Risk Management Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to both the Audit Committee and the Risk Management Committee. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 51 About the Growthpoint reporting

22. Financial risk management (continued) The financial instruments of the group consist mainly of cash and cash equivalents, including deposits with banks, long-term borrowings, derivative instruments, trade and other receivables, trade and other payables, long-term loans granted and linked unitholders for distribution. The group purchases or issues financial instruments in order to finance operations and to manage the market risks that arise from these operations and the source of funding. The group has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk (interest rate risk, foreign currency risk and market price risk).

22.1 Capital risk management Annual financial statements In terms of its Memorandum of Incorporation, Growthpoint has unlimited borrowing capacity. Growthpoint is funded partly by owners’ capital and partly by external borrowings. In terms of various covenants that Growthpoint is committed to in terms of its external borrowings, the maximum value of external borrowings as a percentage of the value of property assets is 50%. This percentage includes the investment in the V&A Waterfront, other equity accounted investments and listed investments. In practice, Growthpoint aims to keep gearing levels between 30% and 40% over the long term. Nominal value of borrowings, net of cash GOZ RSA Total 2017 2016 2017 2016 2017 2016 Rm Rm Rm Rm Rm Rm

Total borrowings 13 076 13 760 29 373 24 818 42 449 38 578 portfolio Property Less: Cash and cash equivalents – net of bank overdraft (298) (780) (315) (121) (613) (901) Net borrowings 12 778 12 980 29 058 24 697 41 836 37 677 Total property assets 32 536 30 938 76 906 73 752 109 442 104 690 Net borrowings/total property assets 39.3% 42.0% 37.8% 33.5% 38.2% 36.0% The group complied fully with the covenants in respect of all loan facilities during the year. The Board’s policy is to maintain a strong capital base, comprising its shareholders’ interest, so as to maintain investor, creditor and market confidence and to sustain future development of the business. It is theg roup’s stated purpose to deliver long-term sustainable growth in dividends per share. The Board monitors the level of dividends to shareholders and ensures compliance with General information the Income Tax Act and the JSE Listings Requirements. There were no changes in the group’s approach to capital management during the year. Neither the company nor any of its subsidiaries are subject to externally imposed capital requirements. Dividend growth Interim dividend Total dividend 2017 2016 2017 2016 % % % % Year-on-year growth 6.1 6.0 6.5 6.0 Security on property assets Mortgage bonds have been registered over South African investment property, including investment property classified as held for sale, with a fair value of R42 852m (FY16: R43 652m) as security for long-term interest-bearing liabilities and facilities at a nominal value of R19 166m (FY16: R20 312m). First mortgage bonds have been registered over Australian investment property, with a fair value of AUD3 180m or R31 914m (FY16: AUD2 744m or R30 292m). Additional security was also provided in the form of other assets to a value of AUD148m or R1 484m (FY16: AUD170m or R1 874m). WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 52 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

22. Financial risk management (continued) 22.1 Capital risk management (continued) Covenants In terms of covenants with certain banks, the nominal value of long-term interest-bearing borrowings may not exceed 50% of the value of investment property. This includes investment property reclassified as held for sale, equity-accounted investments and listed and unlisted investments. 2017 2016 Rm Rm Value of investment property 108 201 102 752 Investment property classified as held for sale 1 241 1 938 Total investment property 109 442 104 690 Equity-accounted investment 9 920 6 821 Listed investment 226 440 Total 119 588 111 951 50% of total 59 794 55 976 Nominal value of long-term interest-bearing borrowings utilised at year end 42 449 38 578 Percentage of nominal value long-term interest-bearing borrowings to total investment property 35% 34% Potential borrowing capacity 17 345 17 398 Facilities available in terms of existing agreements at year end 6 150 7 294 22.2 Credit risk Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from long-term loans granted, derivative assets, cash and cash equivalents and trade receivables. Credit risk is managed on a group basis. Long-term loans granted The Group provided loans to: Rabie Property Group (Pty) Ltd Acucap Purchase Scheme participants V&A Waterfront Roeland Street Investment 2 (Pty) Ltd. Rabie Property Group (Pty) Ltd The credit risk of this loan is mitigated by the security that is provided to Growthpoint: a cession of security agreement, in terms of which the borrower cedes the insurances and all of its rights under the building contract, including guarantees a continuing covering mortgage bond a suretyship by Century City Trust for the obligations of the borrower. Acucap Unit Purchase Scheme The credit risk of these loans are mitigated by the security that is provided to Growthpoint: a pledge and cession of the shares by the Acucap Unit Purchase Scheme participants. V&A Waterfront The credit risk of this loan is mitigated by the security that is provided to Growthpoint: a cession and pledge of 50% of the proceeds of the sale of the Silo 3 residential units. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 53 About the Growthpoint reporting

22. Financial risk management (continued) 22.2 Credit risk (continued) Roeland Street Investment 2 (Pty) Ltd The credit risk of this loan is mitigated by the following conditions: upon disposal of a self-storage facility, the proceeds will first be used to settle any third-party borrowings related to that facility and then to settle the shareholders’ loans no distributions will be made to the shareholders until such time as the shareholders’ loans have been repaid in full. Derivative assets and cash and cash equivalents Exposure to credit risk is limited by investing in liquid funds and entering into derivative financial instruments with counterparties

that have a high percentage tier-one capital and strong credit ratings assigned by international credit rating agencies. Cash and Annual financial statements cash equivalents includes R50.1m cash held on call account as security for municipal and other guarantees whose amounts are not available for use by the group. Trade receivables The group’s exposure to credit risk is mainly in respect of tenants and is influenced by the individual characteristics of each tenant. The group’s widespread tenant base reduces credit risk. Management has established a credit policy under which each new tenant is analysed individually for creditworthiness before the group’s standard payment terms and conditions are offered which include, in the majority of cases, the provision of a deposit of at lease one month’s rental. When available, the group’s credit review includes external ratings. The UNdeposit campaign, which was launched in FY13, is a campaign whereby tenants pay a non-refundable fee at the inception

of a lease period instead of the normal tenant deposit. Tenants are analysed individually for creditworthiness to determine if they portfolio Property are eligible for the UNdeposit facility fee and this also determines the exact extent of the non-refundable fee payable by them. The group’s trade debtors are mainly listed and multinational companies which reduces the credit risk. The Group is not materially exposed to credit risk. Trade receivables were impaired with R26m (FY16: R30m). 22.3 Liquidity risk Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. Theg roup’s policy is to seek to minimise its exposure to liquidity risk by balancing its exposure to interest rate risk and to refinance risk. In effect the group seeks to borrow for as long as possible at the lowest acceptable cost. The group regularly reviews the maturity profile of its financial liabilities and seeks to avoid concentration of maturities through regular replacement of facilities, and by using a selection of maturity dates. Cash flows are monitored on a regular basis to ensure that cash resources are adequate to meet the

funding requirements of the group. General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 54 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

22. Financial risk management (continued) 22.3 Liquidity risk (continued) The major sources of funding for the group are long-term interest-bearing borrowings. The tables below set out the maturity analysis of the group’s financial liabilities based on the undiscounted contractual cash flows.

Carrying 0 – 3 4 – 12 amount months months 1 – 5 years >5 years Total Rm Rm Rm Rm Rm Rm 2017 Long-term borrowings, including derivative financial liabilities and assets 30 079 6 333 6 966 19 854 4 148 37 301 GOZ liabilities 13 076 184 526 1 822 11 771 14 303 Trade and other payables 2 302 2 302 – – – 2 302 2016 Long-term borrowings, including derivative financial liabilities and assets 25 914 6 203 5 978 15 523 4 904 32 608 GOZ liabilities 13 760 3 883 323 1 311 12 477 17 994 Trade and other payables 1 003 1 003 – – – 1 003 22.4 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the group’s income, cash flows or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. (i) interest rate risk The group is exposed to interest rate risk and adopts a policy of ensuring that at least 75% of its exposure to changes in interest rates on borrowings is on a fixed rate basis. This is achieved by entering into “pay fixed and receive variable” interest rate swaps. All such transactions are carried out within the guidelines set by the Risk Management Committee. As a consequence, the group is exposed to fair value interest rate risk in respect of the fair value of its fixed rate financial instruments, which will not have an impact on distributions. Short-term receivables and payables and investments are not directly exposed to interest rate risk. The below table depicts the percentage of long-term interest-bearing borrowings that were fixed. 2017 2016 Weighted Weighted average % average % fixed period fixed period

South African operations 85.6 3.9 years 86.6 3.4 years Group 82.3 4.6 years 78.9 4.1 years WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 55 About the Growthpoint reporting

22. Financial risk management (continued) 22.4 Market risk (continued) Sensitivity analysis The following table demonstrates the sensitivity of profit before taxation to a reasonable possible change in interest rate, with all other variables held constant. 2017 2016 Increase/decrease Increase/decrease Change in Interest Profit and Change in Interest Profit and base points expense equity base points expense equity Rm Rm Rm Rm Rm Rm Annual financial statements South African operations 100 42.2 42.2 100 33.1 33.1 Group 100 74.9 74.9 100 81.4 81.4 The interest rate profile of interest-bearing financial instruments as reported by the management of theg roup is as follows: Variable rate instruments Fixed rate instruments 2017 2016 2017 2016 Rm Rm Rm Rm Financial assets 1 206 1 073 472 540 Cash and cash equivalents 613 901 – – Long-term loans granted 593 172 116 433 Property portfolio Property Derivative assets – – 356 107 Financial liabilities 33 382 31 218 9 654 8 454 Derivative liabilities 51 – 536 1 094 Interest-bearing borrowings 33 331 31 218 9 118 7 360

The below table depicts the expiry dates of the fixed rate loans and the expiry dates of the interest rate swaps. South Africa Australia Expiry of Expiry of Expiry of Expiry of fixed rate interest rate fixed rate interest rate loans swaps loans swaps

Rm Rm Rm Rm General information 2018 1 415 1 335 – – 2019 – 2 605 – – 2020 53 3 267 – 50 2021 – 6 342 – 100 2022 500 4 350 – 175 2023 – 750 250 – 2024 470 1 199 – – 2025 – 746 200 – 2027 – 648 130 – 2028 – 642 – – 2029 – 746 78 – WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 56 Group annual financial statements 30 June 2017

Notes to the financial statements continued For the year ended 30 June 2017

22. Financial risk management (continued) 22.4 Market risk (continued) (ii) foreign currency risk The group’s exposure to foreign currency risk relates to the investments in GOZ, the group’s Australian subsidiary and Globalworth, the Group's Romanian associate. The investments in GOZ and Globalworth are denominated in Australian dollar (AUD) and Euro (EUR) respectively. Forward exchange contract derivatives are acquired to limit exposure to currency fluctuations with respect to future dividends receivable on investments. Growthpoint held the following open forward exchange contracts at year end: Amount sold Average exchange rate Maturity date Purpose AUD21.0m R11.22/AUD1 September 2017 GOZ final FY17 distribution AUD5.0m R10.70/AUD1 September 2018 GOZ final FY18 distribution EUR2.3m R15.42/EUR1 September 2017 Globalworth interim FY17 distribution EUR2.0m R16.17/EUR1 March 2018 Globalworth final FY17 distribution EUR2.0m R16.87/EUR1 September 2018 Globalworth interim FY18 distribution EUR2.0m R17.57/EUR1 March 2019 Globalworth final FY18 distribution EUR2.0m R18.29/EUR1 September 2019 Globalworth interim FY18 distribution EUR2.0m R19.05/EUR1 March 2020 Globalworth final FY18 distribution

Growthpoint has entered into cross currency interest rate swaps where Growthpoint pays AUD fixed interest and receives ZAR fixed or floating interest. These swaps are effectively AUD loans with a ZAR deposit and partially fund the investment in GOZ. It means that Growthpoint's investment in GOZ is partially immunised against the AUD/ZAR currency risk movements. Furthermore there is a positive yield spread between the investment in GOZ and the implied interest cost on the AUD funding. The cross currency interest rate swaps total AUD700m and mature between September 2018 and March 2022. Growthpoint entered into EUR100m loans (maturing between December 2019 and December 2021), EUR186m interest rate swaps (maturing between September 2024 and September 2028) and EUR86m cross currency interest rate swaps for the investment in Globalworth. The cross currency interest rate swaps mature between March 2021 and September 2021. The Euro interest obligations will be serviced from the dividends received from the investment in Globalworth. Sensitivity analysis 2017 2016 Change Profit % of Profit % of in spot before tax anticipated Change before tax anticipated rate increase/ distribution in spot rate increase/ distribution ZAR/AUD decrease that is ZAR/AUD decrease that is or EUR Rm hedged or EUR Rm hedged Final annual distribution from GOZ FY17 1 12.4 71.0 1 30.2 60.1 Annual distribution from GOZ FY18 1 60.8 29.0 Annual distribution from Globalworth FY18 1 3.6 71.0 Foreign currency exposure at the end of the reporting period: 2017 2016 AUD EUR AUD EUR Foreign denominated loan – 100 – – Linked unitholder for distribution 26 – 21 – Net statement of financial position exposure 26 100 21 – Derivative financial instruments – (7) – – Net exposure 26 93 21 – WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 57 About the Growthpoint reporting

23. EVENTS AFTER REPORTING PERIOD Assets held for sale On 7 July 2017, GOZ transacted and settled Sandgate Road, Nundah, QLD, at a sale price of AUD106.2 million with the net proceeds used to pay down existing debt.

Purchase of stake in Industria REIT (IDR) On 11 July 2017, GOZ acquired an 18.2% interest in IDR for approximately AUD68.1 million, representing AUD2.30 per IDR security. The acquisition was funded from undrawn debt facilities.

Acquisition of industrial portfolio On 13 July 2017, GOZ announced that it has exchanged contracts for the acquisition of four adjoining, modern industrial Annual financial statements warehouses at Lot 11 and Lot 1, Part Lot 9, Tarlton Crescent and Lot 6 and Lot 7, Hugh Edwards Drive, Perth Airport, WA for AUD46.0 million, providing an initial passing yield of 8.13%. The acquisition was funded from undrawn debt facilities.

Declaration of dividend after reporting period In line with IAS 10 Events after reporting period, the declaration of the dividend occurred after the end of the reporting period, resulting in a non-adjusting event that is not recognised in the financial statements. Property portfolio Property General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 58 Group annual financial statements 30 June 2017

SIGNIFICANT Accounting policies

Included below is a summary of the significant accounting policies applicable to the Group financial statements. These accounting policies include only the areas in IFRS where elections have been made or policy choices exercised (including the choice or election made) as well as measurement criteria applied. The accounting policies also include information where it will assist users in understanding how transactions, other events and conditions are reflected in reported financial performance and financial position and was included based on the materiality as determined by management.

Corporate Information Reporting entity Growthpoint Properties Limited (Growthpoint) is a company domiciled in South Africa. The physical address of the company’s registered office is The Place, 1 Sandton Drive, Sandton. Reporting period end Financial year ending 30 June

Basis of preparation The financial statements have been prepared on the historical cost basis except for investment property and financial instruments which are stated at fair value.

Materiality IFRS is only applicable to material items. Management applies judgement and considers both qualitative and quantitative factors in determining materiality applied in preparing these financial statements.

Prepared in accordance with International Financial Reporting Standards The JSE listings Requirements The principle of going The historical cost and fair (IFRS), SAICA Financial Reporting Guides as and the Companies Act, concern value basis of accounting, issued by the Accounting Practices Committee No 71 of 2008 where applicable and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council

These financial statements have been prepared on a basis consistent with that of the prior year, unless otherwise indicated.

Functional and presentation currency South African Rand

Rounding policy All amounts are presented in Rand millions (Rm) The Group has a policy of rounding in increments of R1m – amounts less than R1m will therefore be rounded down to Rnil and are presented as a dash.

CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures and the disclosure of contingent liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations and future events are believed to be reasonable under the circumstances. Actual results may differ from the estimates made by management from time to time.

In the process of applying the Group’s accounting policies, the directors have made the following estimates and judgements that have the most significant affects on the amounts recognised and disclosed in the annual financial statements. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 59 About the Growthpoint reporting

Fair value accounting of property assets Independent valuations are obtained on a rotational basis, ensuring that every property is valued at least once every three years by an external independent valuer. The directors value the remaining properties annually on an open-market basis. The calculations are prepared by considering the aggregate of the net annual rent receivable from the properties and, where relevant, associated costs, using the discounted cash flow method. This method takes projected cash flows and discounts them at a rate which is consistent with comparable market transactions. The discount rates reflect the risks inherent in the net cash flows and are constantly monitored by reference to comparable market transactions. Undeveloped land is valued in terms of the internationally accepted and preferred method of comparison. By obtaining external valuations from registered valuators, in terms of section 19 of the Property Valuers Professional Act, No 47 of 2000, for the majority of the portfolio, management is of the opinion that the risk relating to estimation uncertainty has been mitigated.

For the valuation policy, refer to note 21.3, Investment property. Annual financial statements

Group accounting Basis of consolidation and equity accounting Typical Subsidiaries and other shareholding in the structured entities Joint ventures Associates Joint operations assessment of Greater than 50% Between 20% and 50% Between 20% and Proportionate share of entities that are not 50% assets and liabilities structured entities Nature of the Subsidiaries are those A joint venture is an An associate is an A joint operation is

relationship entities controlled by the arrangement in which the entity over which the a joint arrangement portfolio Property between the Group Group. The financial Group has joint control, Group has significant whereby the parties and the investee results of subsidiaries and whereby the Group has influence. that have joint control controlled trusts are rights to the net assets of of the arrangement included in the Group the arrangement, rather have rights to the financial statements from than rights to its assets and assets, and obligations the date that control obligations for its liabilities. to the liabilities, relating commences until the date to the arrangement. that control ceases.

Determining control

The existence and effect of potential voting rights are considered when assessing whether the Group controls an entity to the extent that General information those rights are substantive. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another.

Initial and subsequent measurement of subsidiaries The Group accounts for business combinations by applying the acquisition method as at the acquisition date and measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, plus the fair value of any existing equity interest, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date. If this amount is negative, the Group recognises a gain on bargain purchase in profit or loss.

Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration. If a business combination results in the termination of pre-existing relationships between the Group and the acquiree, then the lower of the termination amount, as contained in the agreement, and the value of the off-market element is deducted from the consideration transferred and recognised in other expenses.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably.

Acquisitions of non-controlling interests that do not result in a change in control are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 60 Group annual financial statements 30 June 2017

SIGNIFICANT Accounting policies continued

Common control transactions Transactions in which combining entities are controlled by the same party or parties before and after the transaction, and that control is not transitory, are referred to as common control transactions. Where there are common control transactions in the Group, predecessor accounting is applied with no gain or loss recognised in profit or loss.

Consolidation Equity accounting Joint arrangement Initial and The Group accounts for business Interests in joint ventures and Joint operations are accounted for subsequent combinations by applying the associates are accounted for using the by including the Group’s share of recognition in acquisition method as discussed equity method. They are recognised joint assets, liabilities, income, the consolidated above. Subsidiaries are accounted initially at cost, which includes expenses and cash flows on a line- financial for by including 100% of the assets, transaction costs. Subsequent to by-line basis in the financial statements liabilities, income, expenses and initial recognition, the consolidated statements from the date that cash flows on a line-by-line basis in financial statements include the joint control commences until the the financial statements from the Group’s share of profit or loss and date that joint control ceases. date that control commences until other comprehensive income of the date that joint control ceases. equity-accounted investees, until the The portion attributable to non- date on which the Group loses joint controlling interest is recognised in control or significant influence. the statement of profit or loss and Dividends and interest received from other comprehensive income and equity-accounted investments are transferred to a non-distributable accounted for as investment income reserve. on the statement of profit or loss and other comprehensive income. Inter-company Intra-group balances, transactions Unrealised gains arising from transactions with joint operations and equity- transactions and and any unrealised gains and accounted investees are eliminated to the extent of the Group’s interest in balances losses arising from intra-group the joint operations and investees. Unrealised losses are eliminated in the transactions are eliminated in same way as unrealised gains, but only to the extent that there is no evidence preparing the consolidated financial of impairment. statements.

Assets Investment property Classification Investment property consists of land and buildings, installed equipment and undeveloped land held to earn rental income for the long term and subsequent capital appreciation. When properties comprise a portion that is held to earn rental or for capital appreciation, and another portion that is held for use in the production or supply of goods or services or for administrative purposes, then these portions are accounted for separately only if these portions could be sold separately. If they cannot be sold separately, the entire property is accounted for as an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Investment property held under an operating lease relates to long-term land leases and is recognised in the Group’s statement of financial position at its fair value. This accounting treatment is consistently applied for all such long- term land leases. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 61 About the Growthpoint reporting

Measurement Initial Properties are initially recognised at cost on acquisition, including all costs directly attributable to the acquisition. measurement Subsequent additions that will result in future economic benefits of which the cost can be measured reliably are capitalised. Investment property under construction is valued at fair value. Direct costs relating to major capital projects are capitalised until the properties are brought into commercial operation. Subsequent Subsequent to initial recognition, investment properties are measured at their fair value. Investment property is measurement maintained, upgraded and refurbished where necessary in order to preserve or improve the capital value as far as it is possible to do so. Maintenance and repairs which neither materially add to the value of the properties nor prolong their useful lives are charged against profit or loss. Annual financial statements Gains or losses on subsequent measurement or disposals of investment properties are recognised in profit or loss. Such gains or losses are excluded from the calculation of distributable earnings.

Valuation of investment property Valuation Independent valuations are obtained on a rotational basis, ensuring that every property is valued at least once frequency every three years by an external independent valuer. The directors value the remaining properties annually on an open-market basis. Valuation The calculations are prepared by considering the aggregate of the net annual rent receivable from the properties

method and, where relevant, associated costs, using the discounted cash flow method. This method takes projected cash portfolio Property flows and discounts them at a rate which is consistent with comparable market transactions. The discount rates reflect the risks inherent in the net cash flows and are constantly monitored by reference to comparable market transactions. Undeveloped land is valued in terms of the internationally accepted and preferred method of comparison.

Non-current assets held for sale Classification and Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily measurement through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the measurement of assets (and all assets and liabilities in a disposal group) is brought up to date in accordance with applicable IFRS. Then, on initial classification as held for sale, non-current assets and disposal groups are recognised at the lower of the carrying amount and fair value less costs to sell. Investment properties General information classified as held for sale are measured in accordance with IAS 40 Investment property at fair value with gains and losses on subsequent measurement being recognised in profit or loss.

Leases Group company is the lessor Group company is the lessee Operating leases The Group is party to numerous leasing contracts as the The Group is party to leasing contracts as the lessee of lessor of property. All leases are operating leases, which some property and equipment. Leases are classified as are those leases where the Group retains a significant operating leases where substantially all the risks and portion of the risks and rewards of ownership. rewards associated with ownership of the asset are not Rental income is recognised on a straight-line basis over transferred from the lessor to the lessee. Operating the period of the lease term. lease rentals with fixed escalation clauses are recognised in profit or loss on a straight-line basis over the lease The Group provides certain incentives for the lessee to term. The resulting difference arising from the straight- enter into lease agreements. Initial periods of the lease line basis and contractual cash flows is recognised as an term may be agreed to be rent-free or at a reduced rent. operating lease asset or operating lease liability. All incentives are recognised as an integral part of the net consideration agreed for the use of the leased asset, Investment property held under an operating lease irrespective of the incentive’s nature or form or the relates to long-term land leases and is recognised in the timing of payments. The Group recognises the aggregate Group’s statement of financial position at its fair value. cost of incentives as a reduction of rental income over This accounting treatment is consistently applied for all the lease term, on a straight-line basis. such long-term land leases. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 62 Group annual financial statements 30 June 2017

SIGNIFICANT Accounting policies continued

Property letting commissions and tenant installations Measurement Initial measurement When considered material, letting commissions incurred and tenant installation costs are capitalised and recognised in trade and other receivables. Subsequent Letting commissions incurred and tenant installation costs are measured at cost minus amortisation written off measurement over the period of the lease.

Intangible assets Goodwill Other intangible assets Initial Goodwill that arises upon the acquisition of subsidiaries is Other intangible assets that are acquired by measurement included in intangible assets. the entity, which have finite useful lives, are recognised initially at cost. Subsequent Subsequent to initial recognition, goodwill is measured at cost Subsequent to initial recognition, other measurement less accumulated impairment losses. intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits of the asset to which it relates. Impairment The recoverable amount is estimated at each reporting date. Other intangible assets are tested for For the purpose of impairment testing, assets are grouped impairment when there is an indication that together into the smaller group of assets that generate cash the asset may be impaired. inflows from continuing use that are largely independent of the cash inflows of the other assets or groups of assets (the cash- generating unit). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present values using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of the cash- generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. Impairment losses in respect of goodwill are not reversed. Amortisation Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The residual value of the intangible asset is assessed as Rnil and the estimated total useful lives for the current and comparative periods are as follows: Rights to manage investment property 15 years WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 63 About the Growthpoint reporting

Deferred tax Classification and Deferred tax is recognised for temporary differences between the carrying amounts of assets and liabilities for measurement financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit Goodwill that arises on initial recognition Differences relating to investments in subsidiaries and jointly controlled entities to the extent that the Group is able to control the reversal of the temporary differences and it is probable that they will not reverse in the

foreseeable future. Annual financial statements No deferred tax was recognised on the fair value of investment property as capital gains tax on investment property is not applicable to REITs in terms of section 25BB of the Income Tax Act. The amount of deferred tax recognised is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates expected to be applied to temporary differences when they reverse, based on tax laws enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to either settle current tax liabilities and assets on a net basis or realise the assets and settle the liabilities simultaneously.

A deferred tax asset is recognised for deductible temporary differences and unused tax losses to the extent that portfolio Property it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Financial instruments Classification Financial assets are classified into the following categories: financial assets at fair value through profit or loss and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

A financial asset is classified at fair value through profit or loss if it is classified as held-for-trading or designated as such on initial recognition. Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement General information recognised in profit or loss.

Loans and receivables are subsequently measured at amortised cost using the effective interest method, less accumulated impairments.

Debt and equity instruments issued are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is a contract that evidences a residual interest in the assets of an entity after deducting liabilities.

Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. The classification depends on the nature and purpose of the financial liabilities and is determined at the time of initial recognition.

Listed investment The listed investment in the Stenham European Shopping Centre Fund (SESCF) is designated as at fair value through profit or loss upon initial recognition as such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise. The underlying investment in SESCF is property and therefore it would give greater meaning to the financial statements if this was treated in the same way as the other property investment, ie at fair value through profit or loss. Financial assets at fair value through profit or loss are measured at fair value, with any resultant gain or loss recognised in profit or loss. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 64 Group annual financial statements 30 June 2017

SIGNIFICANT Accounting policies continued

Long-term loans The long-term loans are designated as at fair value through profit or loss upon initial recognition as such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise. The underlying investments are property and therefore it would give greater meaning to the financial statements if this was treated in the same way as the other property investment, ie at fair value through profit or loss. Financial assets at fair value through profit or loss are measured at fair value, with any resultant gain or loss recognised in profit or loss.

Derivative financial instruments Derivative assets comprising interest rate swaps, forward exchange contracts and cross currency swaps are classified at fair value through profit or loss.

Non-derivative financial liabilities Non-derivative financial liabilities comprising interest-bearing borrowings are classified as at fair value through profit or loss as such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise. The interest- bearing borrowings are used to fund property and/or property fund acquisitions. Investment properties are recognised as fair value through profit or loss and therefore it would give greater meaning to the financial statements if interest-bearing borrowings are treated in the same way.

Trade and other receivables Trade and other receivables are classified as loans and receivables.

Trade and other payables Trade and other payables are classified as other financial liabilities.

Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date and are classified as loans and receivables.

Measurement Initial measurement Financial assets and liabilities are initially measured at fair value plus any transaction costs (other than financial instruments classified as fair value through profit or loss where the transaction costs incurred are immediately expensed in profit or loss). Subsequent Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on measurement remeasurement recognised in profit or loss. Loans and receivables and other financial liabilities are subsequently measured at amortised cost using the effective interest method, less accumulated impairments.

Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expires, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the entity is recognised as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 65 About the Growthpoint reporting

Equity Capital and reserves Type Description of reserve Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity. Treasury shares Shares in the company held by Growthpoint Management Services (Pty) Ltd and unvested restricted shares held for employee participants in the Staff Incentive Scheme Trust are classified as treasury shares. The cost price of these shares, together with related transaction costs, is deducted from equity, but disclosed separately in the

statement of changes in equity. The issued and weighted average number of shares is reduced by the treasury Annual financial statements shares for the purposes of the basic and headline earnings per share calculations. The issued number of shares is reduced by the treasury shares for the purpose of the dividend per share calculations. When treasury shares held for employee participants vest in such participants, the shares will no longer be classified as treasury shares, but included as part of issued share capital and will be taken into account for the purposes of basic and headline earnings per share calculations. Foreign currency The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, translation reserve are translated to the Group’s presentation currency (Rand) at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Rand at exchange rates at the dates of the transactions (an average rate per month is used). Foreign currency differences are recognised in OCI and accumulated in the foreign currency translation reserve, except to the extent that the translation difference is allocated to NCI. When the Group disposes of only part of its interest in a subsidiary that includes foreign operations while portfolio Property retaining control, the relevant proportion of the cumulative amount is re-attributed to non-controlling interests. If control is not retained, the cumulative amount is reclassified from equity to profit or loss as a reclassification adjustment.

Non-distributable reserves Type Description of reserve Overall description The non-distributable reserves relates to items that are not distributable to shareholders, such as fair value of non-distributable adjustments on the revaluation of investment property, long-term loans, borrowings and derivatives, the reserves amortisation of intangible assets, share-based payment transactions, the straight-line lease income adjustment, non-cash charges, capital items, deferred taxation, bargain purchases and reserves with the non-controlling General information interest. Amortisation of The amortisation of intangible assets reserve relates to the right to manage property intangible assets. intangible assets Bargain purchase Where the net recognised amount of the identifiable assets acquired and liabilities assumed exceeds the fair value of the consideration transferred (including the recognised amount of any non-controlling interest in the acquiree and the fair value of any existing equity interest), this excess is recognised immediately in profit or loss as a gain on bargain purchase. The bargain purchase reserve relates to the cumulative gain on bargain purchase. Fair value The fair value adjustments on investment properties reserve related to the fair value movement on the investment adjustments on properties. investment properties Other fair value The other fair value adjustments and non-distributable reserves relates to all non-distributable items accounted adjustments and for in profit or loss, such as the fair value adjustments (excluding the NCI portion of the fair value adjustments), non-distributable straight-line lease income adjustments, non-cash charges, capital items and deferred taxation were transferred reserves to the non-distributable reserve in the current year. Share-based The share-based payment reserve relates to the grant date fair value of share-based payment awards granted to payment reserve employees. Reserves in non- The reserves with NCI relate to further acquisitions of GOZ made by Growthpoint. controlling interest WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 66 Group annual financial statements 30 June 2017

SIGNIFICANT Accounting policies continued

Non-distributable reserves (continued) Type Description of reserve Fair value The movement in fair value of the listed investment is accounted for in profit or loss and transferred to the non- adjustments on distributable reserve. The movement relates to the increase in the fair value of the listed investments. listed investments

Non-controlling interest Type Description of reserve Non-controlling The non-controlling interest reserve relates to the portion of equity ownership in a subsidiary not attributable to interest the parent company. The Group elects on each acquisition to initially measure non-controlling interest on the acquisition date at either fair value or at the non-controlling interest’s proportionate share of the investees’ identifiable net assets.

Dividends Type and description Classification and measurement Dividends or other distributions to the holders of equity instruments, in their capacity as owners, are recognised Dividends directly in equity on the date of declaration.

Income and expenses Income Type and description Classification and measurement Revenue Revenue from the letting of investment property comprises gross rental income and recoveries of fixed operating recognition costs, net of value added tax. Rental income is recognised in profit or loss on a straight-line basis over the term of the lease. Recoveries of costs from lessees, where the entity merely acts as an agent and makes payment of these costs on behalf of lessees, are offset against the relevant costs. The Group recognises the aggregate cost of incentives as a reduction of rental income over the lease term, on a straight-line basis. Finance income Interest earned on amounts invested is recognised on an accrual basis using the effective interest method. and gains from Dividends from listed investments are recognised in profit or loss when declared. investing activities WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 67 About the Growthpoint reporting

Expenses Type and description Classification and measurement Capital items and Costs incurred on business acquisitions and items reclassified from other comprehensive income to profit or loss other charges are classified as capital items. Amortisation of intangible assets, as well as expenses relating to the Staff Incentive Scheme are recurring expenses and are classified as other charges. Impairment of goodwill, although not recurring, is also classified as other charges as the expense relates to intangible assets.

Share-based The Group only has equity-settled share-based payment schemes. Annual financial statements payment The equity-settled schemes (zero strike price share scheme and retention scheme) allows certain employees the transactions option or rights to acquire ordinary shares in the company. Such equity-settled share-based payments are (employee measured at fair value at the date of the grant. The fair value determined at grant date of the equity-settled benefits) share-based payment is charged as employee costs, with a corresponding increase in equity, on a straight-line basis over the period that the employee becomes unconditionally entitled to the options, rights or shares, based on management’s estimate of the shares that will vest and adjusted for the effect of non-market-vesting conditions. These share options and rights are not subsequently revalued. Finance cost Finance costs incurred on qualifying investment property assets are capitalised until such time as the assets are substantially ready for their intended use. Qualifying assets are those that necessarily take a substantial period of time to prepare for their intended use. Capitalisation is suspended during extended periods in which active development is interrupted. portfolio Property All other finance costs are expensed in profit or loss in the period in which they are incurred using the effective interest method. Taxation Income tax for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable on the taxable income, after deducting the qualifying distribution for that year of assessment, using tax rates enacted or substantively enacted at the reporting date, and any adjustments to tax payable in respect of previous years. In accordance with the status as a REIT, dividends declared meet the requirements of a qualifying distribution for the purposes of section 25BB of the Income Tax Act, No 58 of 1962, as amended (Income Tax Act).

Withholding tax relating to foreign distributions received is recognised as part of the tax expense, and the General information financial results are reflected at the gross amounts, before withholding tax.

Estimates and judgements involved for taxation The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group’s tax charge and provision for income taxes necessarily involves a degree of estimation and judgement. There are transactions and tax computations for which the ultimate tax treatment or result is uncertain, or in respect of which the relevant tax authorities may or could indicate disagreement with the Group’s treatment and accordingly the final tax charge cannot be determined until resolution has been reached with the relevant tax authority.

Operating profit Operating profit included in profit or loss represents the net property income earned from investment property, adjusted for other operating expenses and income. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 68 Group annual financial statements 30 June 2017

SIGNIFICANT Accounting policies continued

Standards and interpretations issued and not yet effective The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group’s accounting periods beginning on or after 1 January 2018 or later periods.

Accounting standard or interpretation Nature of change Impact on the financial statements IFRS 9 Financial Classification and measurement of financial assets The group has limited exposure to instruments – Effective all financial assets are initially measured at fair value financial assets, more specifically to loan for the financial debt instruments are subsequently measured at fair value receivables. While IFRS 9 is anticipated to reporting period through profit or loss accelerate the impairment provision on ending 30 June 2019 equity instruments are measured at fair value through profit these, it is not expected to have a material or loss. impact. Classification and measurement of financial liabilities The Group classify its interest-bearing For liabilities measured at fair value through profit or loss, the borrowings and derivative liability at fair change in the fair value of the liability attributable to changes value through profit or loss and all in credit risk is presented in other comprehensive income. The changes in fair value due to credit risk will remainder of the change in fair value is presented in profit or therefore be presented in other loss; and all other classification and measurement requirements comprehensive income. in IAS 39 have been carried forward into IFRS 9. Impairment Impairment requirement might result in The impairment requirements are based on an expected credit earlier recognition of credit losses. loss (ECL) model. Entities are generally required to recognise 12-month ECL on initial recognition and thereafter, as long as there is no significant deterioration in credit risk. However, if there has been a significant increase in credit risk on an individual or collective basis, then entities are required to recognise lifetime ECL. Hedge accounting The group does not apply hedge Hedge effectiveness testing is prospective and depending on accounting, therefore no expected effect. the hedge complexity, can be qualitative. A risk component of a financial or non-financial instrument may be designated as the hedge item if the risk component is separately identifiable and reliably measurable. More designations of groups of items as the hedged item are possible, including layer designations and some net positions. IFRS 15 Revenue from New standard that requires entities to recognise revenue to The majority of revenue earned relates to contracts with depict the transfer of promised goods or services to customers rental revenues, which are to be customers – Effective in an amount that reflects the consideration to which the accounted for under IFRS 16. The Group is for the financial entity expects to be entitled in exchange for those goods or currently assessing the impact of IFRS 15, reporting period services. This core principle is achieved through a five step however, in light of the above, a significant ending 30 June 2019 methodology that is required to be applied to all contracts impact is not anticipated, as the majority with customers. of the revenue is accounted for under IFRS 16 which largely doesn’t impact lessors. Further disclosures may be required. IFRS 16 Leases – New standard that introduces a single lessee accounting As the Group is the lessor, no material Effective for the model and requires a lessee to recognise assets and liabilities changes are expected. financial reporting for all leases with a term of more than 12 months, unless the period ending underlying asset is of low value. A lessee is required to recognise 30 June 2020 a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 69 About the Growthpoint reporting

IAS 1 (amended) adoption The group adopted the amendment which clarified that materiality applies to the whole set of financial statements and the inclusion of immaterial information can inhibit the usefulness of financial disclosures. As a consequence of adopting the amendment, the group undertook a project to assess the effectiveness of disclosures in the annual financial statements and, where necessary, removed immaterial and unnecessary information.

The following key enhancements resulted in a more streamlined and concise set of annual financial statements: the application of materiality to items resulting in the aggregation or deletion of immaterial items the removal of duplicated information and disclosures an updated sequence of information presented in the financial statements an updated format of notes and disclosures so as to make these clearer, more concise and easier to understand to the user Annual financial statements Aggregating/disaggregating the following items: ••Long-term loans granted were aggregated under the new order of liquidity method and presented as one line item ••Non-current financial liabilities were aggregated under the new order of liquidity method and presented as one line item The previous statement of financial position was restructured from non-current/current split to order of liquidity Various lines in the income statement were disaggregated to display their constituent parts to better reflect the underlying cost drivers of the business The method used to prepare the cash flow statement was changed to the direct method. Property portfolio Property General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 70 Group annual financial statements 30 June 2017

1 Charles Street, Parramatta, NSW, Australia WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 71 About the Growthpoint reporting PROPERTY PORTFOLIO Annual financial statements Property portfolio Property General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 72 Group annual financial statements 30 June 2017

Property portfolio summary At 30 June 2017

Value/m² Gross (excluding rental Average Number additional (month/ annualised of GLA Vacancy Vacancy Value bulk) m²) yield properties m² m² % Rm Rand Rand % RETAIL PORTFOLIO Regional shopping centres 20 919 703 30 402 3.3 21 375 23 233 189 7.4 Community shopping centres 17 330 757 14 904 4.5 6 072 18 319 163 7.9 Neighbourhood shopping centres 11 75 326 2 337 3.1 846 11 199 117 9.4 Retail warehouses 1 3 914 – – 26 6 617 * 10.2 Speciality centres 4 52 602 2 531 4.8 913 17 353 145 8.1 Small regional shopping centre 1 22 719 72 0.3 347 15 261 129 7.7 Vacant land (including house) 2 – – – 9 – – – Total retail 56 1 405 021 50 246 3.6 29 588 21 036 176 7.6 OFFICE PORTFOLIO High-rise offices: Investec 2 83 781 – – 2 582 30 823 * 10.2 High-rise offices 15 191 244 15 259 8.0 3 526 18 504 151 7.6 Low-rise offices 84 623 429 46 925 7.5 11 905 19 031 154 8.2 Office parks 63 739 050 54 954 7.4 11 253 15 208 134 8.6 Mixed-use: office and retail 3 43 404 2 640 6.1 805 18 547 150 7.4 Hospitals 5 72 120 – – 2 367 32 173 246 9.0 Vacant land 11 – – – 2 343 – – – Total office 183 1 753 028 119 778 6.8 34 781 18 454 155 8.4 INDUSTRIAL PORTFOLIO Warehousing 100 1 035 143 34 001 3.3 4 584 4 428 43 9.3 Industrial parks 9 296 570 10 371 3.5 1 349 4 295 43 9.2 Retail warehousing 8 96 650 5 358 5.5 594 6 139 58 7.5 Motor-related outlets 9 35 362 – – 311 8 800 92 11.7 Mini units 17 130 420 3 423 2.6 690 5 297 57 9.1 Midi units 8 80 167 853 1.1 376 4 610 49 9.5 Maxi units 1 14 466 – – 75 5 191 55 9.3 Low-grade industrial 23 134 405 5 141 3.8 519 3 840 42 9.7 High-tech industrial 15 153 414 565 0.4 1 195 6 026 67 10.9 High-grade industrial 26 290 360 11 242 3.9 2 149 7 398 67 5.9 Vacant land 17 – – – 744 – – – Total industrial 233 2 266 957 70 954 3.1 12 586 5 068 50 8.7 Total Growthpoint (RSA excluding V&A Waterfront) 472 5 425 006 240 978 4.4 76 955 13 529 117 7.9 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 73 About the Growthpoint reporting

Value/m² Gross (excluding rental Average Number additional (month/ annualised of GLA Vacancy Vacancy Value bulk) m²) yield properties m² m² % Rm Rand Rand % V&A WATERFRONT Retail property 48 117 – – 4 394 91 325 546 6.8 Office property 64 738 911 1.4 2 135 32 976 196 8.9 Fishing and industrial property 57 461 – – 591 10 290 66 8.8

Hotel and residential 52 700 823 1.6 1 089 20 664 168 10.1 Annual financial statements Undeveloped bulk – – – 496 – – – Total V&A Waterfront 1 223 016 1 734 0.8 8 705 36 810 231 7.8 Total Growthpoint (RSA) 473 5 648 022 242 712 4.3 85 660 14 448 121 8.1 GROWTHPOINT AUSTRALIA Industrial 31 753 193 3 506 0.5 11 056 14 679 125** 7.3 Office 26 299 955 4 382 1.5 21 480 71 611 523** 6.7 Total Australia 57 1 053 148 7 888 0.7 32 536 30 894 237** 6.9 Total Growthpoint 530 6 701 170 250 600 3.7 118 196 17 033 135 7.7

2 Gross rental/m per month is the weighted average actual gross rental, consisting of net rental, operating cost recoveries and recovery portfolio Property of assessment rates. Notes to the property portfolio summary and details by sector (page 72 to 89): * Single tenanted properties. ** Based on rental per annum in AUD. *** Equity-accounted buildings. General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 74 Group annual financial statements 30 June 2017

Property portfolio detail – South Africa At 30 June 2017

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand RETAIL PORTFOLIO Regional shopping centres 919 703 3.3 21 375 23 233 189 1 Alberton City Alberton 46 842 5.5 1 065 22 765 193 2 Bayside Mall Table View 45 216 0.4 1 125 24 900 208 3 Brooklyn Mall and Design Square (75%) Brooklyn, Pretoria 55 968 8.2 2 247 40 162 284 4 City View Greyville, Durban 39 954 0.1 317 7 952 90 5 Festival Mall Kempton Park 83 387 0.1 1 610 19 172 142 6 Greenacres Greenacres, Port Elizabeth 46 968 3.3 1 514 32 228 268 7 Key West Shopping Centre Krugersdorp 52 875 0.7 1 026 19 399 164 8 Kolonnade (50%) Montana Park, Pretoria 38 100 1.2 1 184 31 066 221 9 La Lucia Mall La Lucia, Durban 37 296 0.4 1 247 33 422 253 10 Lakeside Mall Benoni 65 364 4.5 1 447 22 141 187 11 Longbeach Mall Noordhoek, Cape Town 31 871 2.0 531 16 661 153 12 N1 City Mall (42%) Goodwood 26 968 1.7 701 25 975 189 13 Northgate (50%) North Riding, Johannesburg 44 560 4.0 845 18 972 168 14 Paarl Mall Paarl 38 959 0.3 853 21 905 166 15 River Square Shopping Centre Three Rivers, Vereeniging 38 912 9.9 598 15 378 141 16 The Avenues Springs 34 721 24.8 390 11 241 110 17 Vaal Mall (66.6%) Vanderbijlpark 44 172 0.4 1 272 28 792 229 18 Walmer Park Shopping Centre Walmer, Port Elizabeth 43 233 1.6 1 000 23 135 203 19 Waterfall Mall Rustenburg 49 234 2.1 1 490 30 271 244 20 Woodmead Retail Park Woodmead 55 103 0.1 913 16 569 156 Community shopping centres 330 757 4.5 6 072 18 319 163 1 14th Avenue Hyper Roodepoort 24 897 – 247 9 732 95 2 Beacon Bay Retail Park Beacon Bay, East London 27 298 0.2 409 14 994 139 3 City Mall Klerksdorp 22 565 20.7 344 15 227 166 4 Gardens Centre Gardens, Cape Town 14 709 1.1 610 41 458 292 5 Golden Acre CBD, Cape Town 33 591 8.2 614 18 285 190 6 Hatfield Plaza Hatfield, Pretoria 19 334 5.1 285 14 757 181 7 Helderberg Centre Somerset West, Cape Town 21 205 0.5 194 9 144 79 8 Hillcrest Corner (50%) Durban 11 813 2.4 192 16 245 158 9 Howard Centre Pinelands, Cape Town 14 601 – 351 24 053 187 10 Mark Park Vereeniging 20 355 1.8 275 13 510 125 11 Meadowdale Value Centre Germiston 18 017 3.1 126 6 988 75 12 Middestad Mall Bellville, Cape Town 19 949 13.9 339 16 999 193 13 Sunward Park Boksburg 15 025 5.5 153 10 176 94 14 The Bridge (27.5%) Greenacres, Port Elizabeth 12 550 9.4 162 12 932 127 15 The Constantia Village Constantia, Cape Town 20 391 – 1 088 53 337 331 16 Village Square Randfontein 20 816 0.7 371 17 430 167 17 Westville Mall Durban 13 641 0.3 312 22 865 181 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 75 About the Growthpoint reporting

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Neighbourhood shopping centres 75 326 3.1 846 11 199 117 1 Campus Building Hatfield, Pretoria 3 179 39.1 41 12 896 193 2 Edgars – Bloemfontein Bloemfontein 5 985 – 52 8 605 * 3 Grand Parade Centre CBD, Cape Town 10 475 0.3 131 12 525 118 4 Hatfield Mall Hatfield, Pretoria 6 332 0.7 65 10 186 113 Annual financial statements 5 Jet – Bloemfontein Bloemfontein 5 516 – 35 6 400 * 6 Norkem Mall Norkem Park, Kempton Park 9 591 6.4 104 10 823 127 7 OK Empangeni Empangeni, Durban 13 660 – 173 12 628 120 8 Palm Springs Springs 11 164 2.8 126 11 278 117 9 Sportsmans Warehouse Bellville, Cape Town 3 503 – 44 12 418 127 10 Standard Plaza Hatfield, Pretoria 2 732 3.3 34 12 333 151 11 Stanger Stanger, Durban 3 189 – 41 12 763 142 Retail warehouses 3 914 – 26 6 617 * 1 Amrel Alberton Alberton 3 914 – 26 6 617 * Property portfolio Property Speciality centres 52 602 4.8 913 17 353 145 1 East Rand Value Mall Boksburg 13 858 12.0 189 13 638 135 2 Fourways Crossing (50%) Fourways, Johannesburg 25 193 0.8 523 20 768 158 3 Virgin Active Three Rivers, Vereeniging 3 250 – 42 12 831 * 4 Waterfall Mall Value Centre Rustenburg 10 301 6.3 159 15 426 138 Small regional shopping centre 22 719 0.3 347 15 261 129 1 Watercrest Mall (50%) Durban 22 719 0.3 347 15 261 129 Vacant land – – 9 – * 1 River House Three Rivers, Vereeniging – – 3 – *

2 Waterfall Cashan Rustenburg – – 6 – * General information 56 TOTAL RETAIL 1 405 021 3.6 29 588 21 036 176 OFFICE PORTFOLIO High-rise offices: Investec 83 781 – 2 582 30 823 * 1 Investec Cape Town CBD, Cape Town 12 836 – 378 29 448 * 2 Investec Sandton Sandton 70 945 – 2 204 31 072 * High-rise offices 191 244 8.0 3 526 18 504 151 1 11 Adderley CBD, Cape Town 21 981 29.5 267 12 192 121 2 33 Bree Street and 30 Waterkant CBD, Cape Town 12 705 0.1 282 22 241 119 3 44 on Grand Central Midrand 7 448 1.9 130 17 573 172 4 ENS House Foreshore, Cape Town 16 960 – 322 19 063 161 5 Fredman Towers Sandton 14 862 15.7 308 20 791 173 6 Infotech Building Hatfield, Pretoria 10 333 4.9 108 10 578 128 7 Menlyn Corner Menlyn, Pretoria 10 058 9.6 198 19 736 142 8 Newlands on Main Claremont, Cape Town 13 046 0.4 283 21 785 152 9 Paramount Place Claremont, Cape Town 12 506 – 206 16 560 121 10 Roggebaai Place Foreshore, Cape Town 13 048 – 260 19 972 171 11 Salga House Cape Town 6 411 11.2 87 13 679 102 12 Sanofi House Midrand 8 040 21.2 100 12 550 105 13 The District Woodstock, Cape Town 18 715 10.0 329 17 627 134 14 The Terraces CBD, Cape Town 12 218 3.9 203 16 681 129 15 The Towers (50%) Sandton 12 913 – 443 34 310 294 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 76 Group annual financial statements 30 June 2017

Property portfolio detail – South Africa continued At 30 June 2017

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Low-rise offices 623 429 7.5 11 905 19 031 154 1 1 Sixty Jan Smuts Avenue Rosebank, Johannesburg 16 544 12.5 271 16 380 133 2 100 West Street Sandton 3 850 – 85 22 026 * 3 103 Central Street Houghton, Johannesburg 2 338 – 35 15 056 137 4 12 Alice (50%) Sandton 8 772 – 233 26 518 * 5 138 West Sandown 10 710 10.2 205 19 122 192 6 15 Georgian Crescent Bryanston, Sandton 6 369 2.4 100 15 701 124 7 151 on 5th Sandton 12 531 31.1 158 12 609 * 8 200 on Main Claremont, Cape Town 4 619 – 82 17 796 149 9 24 Flanders Drive Mount Edgecombe, Durban 6 725 14.4 109 16 134 * 10 25 Rudd Road Illovo, Sandton 3 157 – 52 16 471 133 11 271 Veale Street Brooklyn, Pretoria 4 614 – 71 15 476 * 12 28 Fricker Road Illovo, Sandton 6 406 10.7 126 19 622 150 13 3 The Terrace Westville, Durban 3 051 – 56 18 289 * 14 3021 William Nicol Bryanston, Sandton 6 646 – 114 17 153 127 15 34 and 36 Fricker Road Illovo, Sandton 4 844 – 98 20 190 144 16 36 Wierda Road West Wierda Valley, Sandton 2 938 23.2 44 14 808 125 17 4 Fricker Road Illovo, Sandton 4 788 8.2 97 20 196 144 18 4 Pencarrow Umhlanga Ridge, Durban 2 392 – 42 17 726 212 19 50 Wierda Road Wierda Valley, Sandton 2 362 – 44 18 459 * 20 68 Oak Avenue Centurion, Pretoria 4 454 71.9 27 5 949 109 21 7 Wessels Road Rivonia, Sandton 2 374 – 34 14 323 * 22 70 Grayston Sandton 4 146 50.7 60 14 494 118 23 8 Rivonia Road Illovo, Sandton 5 329 – 110 20 623 * 24 82 Grayston Drive Bryanston, Sandton 7 358 9.0 107 14 487 151 25 ADT House Goodwood, Cape Town 4 797 – 59 12 321 * 26 Advocates Chambers Sandton 7 278 – 144 19 744 150 27 Albion Springs Rondebosch, Cape Town 3 710 12.0 62 16 712 133 28 Anslow Park (Nestlé) Bryanston 11 986 – 323 26 965 * 29 Anslow Phase 2 Bryanston 10 713 – 211 19 733 142 30 Autopage Midrand 8 676 – 136 15 722 * 31 Autumn Road Rivonia, Sandton 10 005 – 116 11 604 106 32 BCX – Faerie Glen Faerie Glen, Pretoria 5 178 – 79 15 160 * 33 Boundary Place Illovo, Sandton 3 654 10.8 67 18 420 152 34 Bridgeway Park Milnerton, Cape Town 9 050 – 236 26 090 145 35 Brookfield Office Park Brooklyn, Pretoria 7 598 8.3 117 15 385 150 36 Deloitte & Touche La Lucia Ridge, Durban 6 313 – 134 21 194 * 37 Devcon Place Rivonia, Sandton 3 680 – 40 10 869 103 38 Eastgate 20 Kramerville, Sandton 4 556 – 118 25 812 * 39 Engen House Parktown, Johannesburg 7 501 – 124 16 571 160 40 Eton Road Sandhurst, Sandton 1 338 – 25 18 909 158 41 Grayston Place Sandton 5 184 – 105 20 177 * 42 Grosvenor Corner Parktown North, Johannesburg 13 874 6.7 229 16 484 140 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 77 About the Growthpoint reporting

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Low-rise offices continued 43 Homestead Place Rivonia, Sandton 5 496 – 71 12 882 108 44 Honeywell Midrand 3 817 – 56 14 673 * 45 Hunts End Wierda Valley, Sandton 10 183 49.4 150 14 701 131 46 Inanda Greens Wierda Valley, Sandton 40 774 1.3 971 23 363 173 Annual financial statements 47 Inyanda 1, 3 and 4 Parktown North, Johannesburg 23 196 – 487 20 986 188 48 Inyanda 2 Parktown North, Johannesburg 10 401 – 193 18 594 * 49 Lincoln on the Lake Umhlanga Ridge, Durban 6 395 – 111 17 295 144 50 Longkloof Studios Gardens, Cape Town 11 844 0.2 198 16 700 108 51 Lumley House Parktown North, Johannesburg 2 742 13.3 46 16 850 138 52 Mayfair on the Lake Umhlanga Ridge, Durban 6 171 6.4 104 16 887 157 53 Merck Longmeadow 2 Edenvale 4 163 – 58 13 956 * 54 Microsoft Office Park Bryanston, Sandton 9 414 6.3 181 19 237 154 55 MLT House Gardens, Cape Town 1 393 – 16 11 127 84 Property portfolio Property 56 Morningside 1331 Morningside, Sandton 3 492 – 61 17 440 140 57 Nautica Granger Bay 5 791 – 105 18 148 149 58 Oxford Corner Rosebank, Sandton 8 803 – 288 32 737 230 59 Peter Place 24 Lyme Park, Sandton 4 192 – 56 13 453 120 60 Pharos House Westville, Durban 5 616 12.6 90 16 097 152 61 Piazzas Illovo Illovo, Sandton 497 – 7 14 889 132 62 PwC Paarl 1 720 – 22 12 965 * 63 Ricoh Bedfordview 4 438 100.0 60 13 429 * 64 Ridgeview Umhlanga Ridge, Durban 6 659 – 161 24 148 146

65 SA Weather Erasmusrand, Pretoria 4 270 – 72 16 768 * General information 66 Sandown Erf 169 Sandhurst, Sandton 2 069 – 42 20 349 137 67 Sandown Erven 159 – 162 Sandhurst, Sandton 2 514 – 54 21 321 * 68 Sandown Mews Sandown, Sandton 21 176 32.7 354 16 712 141 69 Senderwood Bedfordview 3 480 58.4 24 6 897 101 70 Sovereign Quay Greenpoint, Cape Town 8 699 5.3 147 16 933 151 71 St Davids Park Parktown, Johannesburg 12 147 12.5 136 11 196 109 72 Strathavon 11 Strathavon, Sandton 9 156 0.8 164 17 901 174 73 Summit Place Gardens, Cape Town 1 869 – 23 12 306 * 74 Tata 1 and 2 (50%)*** Illovo, Sandton 2 422 18.3 49 20 355 169 75 The Annex (50%) Sandton 10 132 – 338 33 388 241 76 The Boulevard Westville, Durban 5 516 10.9 165 26 722 143 77 The Place Sandton 34 682 6.2 954 27 515 212 78 Tiger II Bryanston, Sandton 7 282 – 137 18 745 * 79 Tsebo House Rosebank, Johannesburg 2 035 – 42 20 393 168 80 Turbine Square Hall Newton, Johannesburg 22 796 – 431 18 916 * 81 Tyger Hills Investments Plattekloof, Cape Town 17 806 – 342 19 185 158 82 Tyger Hills Office Park Plattekloof, Cape Town 11 368 19.6 182 15 983 139 83 Wierda Court Wierda Valley, Sandton 2 232 4.7 37 16 574 139 84 Wierda Gables Wierda Valley, Sandton 2 173 – 35 15 921 133 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 78 Group annual financial statements 30 June 2017

Property portfolio detail – South Africa continued At 30 June 2017

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Office parks 739 050 7.4 11 253 15 208 134 1 1 Montgomery Mount Edgecombe, Durban 10 376 77.7 115 11 035 103 2 10 Riviera Road Killarney, Johannesburg 1 296 – 21 16 440 130 3 19 Impala Road Chislehurston 2 781 24.8 48 17 335 135 4 22 Impala Road Chislehurston 1 092 – 17 15 752 * 5 23 Impala Road Chislehurston 1 825 – 29 15 832 138 6 257 Oxford Road Illovo, Sandton 3 142 18.7 47 13 942 134 7 29 Impala Road Chislehurston 1 376 – 22 16 282 135 8 31 Impala Road Sandton 959 – 20 21 168 138 9 33 Fricker Road Illovo, Sandton 6 353 – 138 21 661 152 10 35 and 37 Wierda Road West Sandton 4 321 40.4 36 8 331 98 11 35 Impala Road Sandton 1 400 – 25 17 929 * 12 9 Frosterley Crescent La Lucia, Durban 1 138 – 19 16 702 142 13 Absa Frosterley Umhlanga, Durban 3 167 – 58 18 251 * 14 BCX – Durban 1 La Lucia Ridge, Durban 2 509 5.5 38 15 027 136 15 BCX – Durban 2 La Lucia Ridge, Durban 4 906 – 83 16 857 * 16 BCX – Durban 3 La Lucia Ridge, Durban 939 – 15 15 868 * 17 BCX – Midrand ABC Midrand 5 746 – 55 9 589 * 18 BCX – Midrand DQE Midrand 13 800 – 121 8 739 * 19 Belmont Office Park Rondebosch, Cape Town 14 759 – 253 17 148 141 20 Belvedere Office Park Bellville, Cape Town 5 996 0.7 99 16 461 125 21 Bogare Menlyn, Pretoria 6 301 – 118 18 695 151 22 British Consol General Dunkeld West, Johannesburg 1 048 – 22 21 183 * 23 Centennial Place Milnerton, Cape Town 12 014 10.5 207 17 238 136 24 Central Park Midrand 34 191 14.2 420 12 287 112 25 Chislehurston Chislehurston 2 169 – 37 17 105 168 26 Constantia Office Park Roodepoort 72 834 8.4 1 075 14 758 122 27 Country Club Estate Woodmead 33 142 12.2 486 14 661 123 28 Ditsela Place Hatfield, Pretoria 3 025 65.1 39 12 927 * 29 Dunkeld Office Park Dunkeld West, Johannesburg 2 242 – 35 15 430 * 30 Edgecombe Office Park La Lucia, Durban 4 554 2.5 67 14 777 135 31 EOH Business Park Bedfordview 20 150 5.6 330 16 357 119 32 Equity House Dunkeld West, Johannesburg 1 643 48.0 27 16 187 147 33 Eton Office Park Bryanston, Sandton 8 846 – 118 13 317 124 34 Freestone Park Kramerville, Sandton 5 468 6.5 97 17 739 112 35 Golf Park Mowbray, Cape Town 28 263 0.4 460 16 081 125 36 Grayston Office Park Sandton 13 632 8.7 241 17 649 134 37 Hatfield Gardens Hatfield, Pretoria 25 926 5.9 417 16 100 136 38 Healthcare Park Woodmead 13 694 – 234 17 102 146 39 Homestead Park Rivonia, Sandton 10 717 13.8 95 8 827 87 40 Illovo Corner Illovo, Sandton 9 985 – 229 22 924 190 41 Kirstenhof Office Park Sunninghill, Sandton 3 837 – 49 12 639 94 42 Lakeside 3 Centurion, Pretoria 6 428 – 145 22 526 * 43 Morningside Close Morningside, Sandton 4 419 8.7 62 14 054 90 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 79 About the Growthpoint reporting

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Office parks continued 44 Ogilvy Building Bryanston, Sandton 9 155 – 152 16 636 * 45 Pavilion Office Park Rivonia, Sandton 3 700 – 34 9 299 100 46 Peter Place Office Park Bryanston, Sandton 8 521 6.5 149 17 451 145 47 Pinewood Office Park Woodmead 7 140 19.2 82 11 512 115 Annual financial statements 48 Pinmill Farm – 100% Kramerville, Sandton 22 774 1.3 347 15 228 148 49 River Park Mowbray, Cape Town 13 378 2.6 268 20 003 137 50 Riverwoods Bedfordview 10 750 – 165 15 321 144 51 Riviera Road Office Park Killarney, Johannesburg 4 857 7.5 82 16 883 145 52 Rosebank Office Park Parktown North, Johannesburg 4 226 – 65 15 335 129 53 Sandton Close 2 Sandton 12 484 – 187 14 956 116 54 Standard Bank Umhlanga Umhlanga Ridge, Durban 3 215 – 42 13 158 133 55 Sunnyside Office Park Parktown, Johannesburg 29 829 8.4 429 14 369 122 56 The Estuaries Montague Gardens, Cape Town 11 768 – 233 19 757 154 Property portfolio Property 57 The Oval Bryanston, Sandton 10 952 12.9 131 11 980 114 58 The Oval (Newlands) Newlands, Cape Town 8 579 – 270 31 497 200 59 The Village Faerie Glen, Pretoria 6 285 4.9 79 12 538 116 60 The Woodlands Woodmead 124 122 8.6 1 707 13 751 168 61 Waterfall Park Midrand 8 103 – 140 17 216 * 62 Willowbridge Place Bellville, Cape Town 6 626 – 141 21 219 145 63 Woodmead Estate Woodmead 20 177 2.6 281 13 947 138 Mixed-use: office and retail 43 404 6.1 805 18 547 150 1 De Waterkant Centre Greenpoint, Cape Town 6 655 6.6 100 15 027 138

2 Menlyn Piazza Menlyn, Pretoria 7 104 30.6 76 10 671 129 General information 3 MontClare Place Claremont, Cape Town 29 645 0.1 629 21 224 155 Hospitals 72 120 – 2 367 32 173 246 1 Gateway Private Hospital Umhlanga Ridge, Durban 13 843 – 621 44 846 330 2 Hillcrest Private Hospital Hillcrest, Durban 17 495 – 644 34 865 249 3 Louis Leipoldt Hospital Bellville, Cape Town 22 311 – 435 19 479 125 4 N1 City Hospital Goodwood, Cape Town 14 022 – 558 38 931 272 5 N1 Medical Chambers Goodwood, Cape Town 4 449 – 109 24 520 183 Vacant land/land under development – – 2 343 – – 1 144 Oxford Road Rosebank, Johannesburg – – 157 – – 2 29 Richefont Umhlanga Ridge, Durban – – 13 – – 3 32 on Kloof Gardens, Cape Town – – 29 – – 4 Discovery – Phase 1 Sandhurst, Sandton – – 1 555 – – 5 Draper on Main Claremont, Cape Town – – 34 – – 6 IBM Sandton – – 282 – – 7 Lakeside 1 Centurion, Pretoria – – 66 – – 8 Lakeside 2 Centurion, Pretoria – – 17 – – 9 Ncondo Place Umhlanga Ridge, Durban – – 44 – – 10 Quarry Hill Tyger Valley – – 57 – – 11 Site B, Foreshore Foreshore, Cape Town – – 89 – – 183 TOTAL OFFICE 1 753 028 6.8 34 781 18 454 155 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 80 Group annual financial statements 30 June 2017

Property portfolio detail – South Africa continued At 30 June 2017

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand INDUSTRIAL PORTFOLIO Warehousing 1 035 143 3.3 4 584 4 428 43 1 10 Richard Carte Road Mobeni, Durban 20 143 – 126 6 280 64 2 116 Teakwood Road Umbilo, Durban 4 949 – 28 5 841 * 3 131 Bofors Epping, Cape Town 7 072 – 30 4 342 * 4 20 Rustic Close Westmead, Durban 16 301 – 96 5 951 59 5 23 Herman Road Meadowdale, Germiston 3 514 – 20 5 891 * 6 28 Sacks Circle Bellville, Cape Town 24 273 – 103 4 293 * 7 3 Spartan Crescent Eastgate, Sandton 4 741 – 24 5 273 * 8 57 Mobile Road Airport Industria, Cape Town 2 940 – 17 5 918 * 9 57 on Gibson Aeroton, Johannesburg 4 512 – 15 3 258 * 10 Aeroton 7 of 17 Aeroton, Johannesburg 3 263 – 12 3 770 * 11 African Gabions Mahogany Ridge, Durban 5 314 – 29 5 532 * 12 Afship Isando, Kempton Park 2 120 – 10 4 622 * 13 Alrode 706 Alrode, Alberton 7 045 – 28 3 903 * 14 Alrode Erf 34 Alrode, Alberton 7 491 – 20 2 616 * 15 Alternator Montague Gardens, Cape Town 8 752 – 49 5 599 * 16 Astron Denver, Johannesburg 14 325 – 61 4 237 * 17 Belgrade Aeroport, Kempton Park 6 988 – 42 6 067 * 18 Bunkers Hill Isipingo, Durban 10 303 – 58 5 659 59 19 Cempark Industria, Boksburg 36 455 4.0 107 2 935 30 20 Chain Avenue Montague Gardens, Cape Town 12 698 – 65 5 103 44 21 Chemserve Randjespark, Midrand 9 834 – 55 5 633 * 22 Coldcem Industria, Boksburg 6 770 – 42 6 233 * 23 Commerce Corner Kramerville, Sandton 3 605 – 30 8 210 82 24 Covora Jet Park, Boksburg 6 055 – 36 5 929 * 25 DCD Dorbyl – Boksburg Boksburg 45 181 – 74 1 638 * 26 DCD Dorbyl – Duncanville Vereeniging 32 059 – 21 639 * 27 Dominic Corner Boksburg 7 478 – 38 5 135 * 28 Elvan Fishers Hill, Germiston 17 688 – 75 4 223 * 29 Engine Avenue Montague Gardens, Cape Town 1 730 – 9 5 434 * 30 Epping 1 Epping Industria, Cape Town 1 913 – 7 3 764 * 31 Epping 2 Epping Industria, Cape Town 7 104 – 28 3 956 39 32 Epping 3 Epping Industria, Cape Town 2 962 – 12 4 152 * 33 Epping 4 Epping Industria, Cape Town 2 345 – 10 4 179 39 34 Epping 5 Epping Industria, Cape Town 2 594 – 11 4 163 40 35 Epping 6 Epping Industria, Cape Town 1 317 – 6 4 176 * 36 Equitable Dev Co Florida, Roodepoort 2 273 – 5 2 332 * 37 Eskom Road New Germany 6 651 – 39 5 864 55 38 Fitzmaurice Epping, Cape Town 25 970 – 78 2 984 28 39 Flemming Meadowdale, Germiston 1 390 – 7 5 324 * 40 Foreshore Maydon Wharf, Durban 9 247 – 22 2 379 * 41 Fourwinds Montague Gardens, Cape Town 4 618 – 29 6 236 * 42 Gemini Frankenwald, Sandton 1 300 – 9 7 153 * WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 81 About the Growthpoint reporting

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Warehousing continued 43 Gewel Isando, Kempton Park 2 203 – 10 4 448 * 44 GIE 4 Erf 307(JV) Meadowdale, Germiston 3 734 – 29 7 660 * 45 GIE Portion 3 of Erf 306 Meadowdale, Germiston 13 869 – 98 7 081 * 46 GIE Remainder of Erf 306 Meadowdale, Germiston 6 523 – 39 6 040 * Annual financial statements 47 Gillitts Road Industrial Park Pinetown 16 888 – 70 4 163 52 48 Global Isando, Kempton Park 8 261 – 61 7 336 * 49 Goodenough Epping, Cape Town 8 526 – 38 4 433 * 50 Goodrich Prospecton, Durban 5 857 – 36 6 078 * 51 Greenbushes Port Elizabeth Port Elizabeth 13 539 – 70 5 155 * 52 Greenfield Industrial Park Airport Industrial, Cape Town 21 815 – 160 7 330 55 53 Grenville Epping, Cape Town 16 220 – 99 6 116 * 54 Greystones Factory Glen Anil, Durban 1 985 – 29 14 610 * 55 Greystones Heliport Glen Anil, Durban 2 427 – 19 7 911 79 Property portfolio Property 56 Growthpoint Industrial Estate Meadowdale, Germiston 23 448 – 137 5 830 59 57 Hawland Midrand 5 223 – 29 5 629 * 58 Hewett Epping, Cape Town 7 031 – 26 3 669 * 59 Hulley Isando, Kempton Park 3 415 – 17 5 066 * 60 Independence Square Ottery, Cape Town 7 923 – 42 5 263 48 61 Isobar Isando, Kempton Park 47 195 – 222 4 710 * 62 Isowrench Isando, Kempton Park 5 932 – 28 4 703 * 63 Laser Commercial Erf 2 and 3 Clayville, Midrand 2 406 100.0 9 3 866 – 64 Laser Commercial Erf 64 Clayville, Midrand 4 929 – 19 3 896 *

65 Laser Commercial Erf 65 Clayville, Midrand 4 672 100.0 17 3 574 – General information 66 Low Cost Marketing Sunnyrock ext 4, Germiston 3 052 – 17 5 700 * 67 Mandy Road Reuven, Johannesburg 12 700 – 38 3 016 * 68 Meadowbrook Meadowbrook, Germiston 13 204 – 38 2 870 32 69 Meadowbrook Estate (Gundle Site) Meadowbrook, Germiston 17 103 – 152 8 887 73 70 Metkor Umbilo, Durban 20 767 – 116 5 576 54 71 Metprop Cape Epping, Cape Town 12 541 – 19 1 507 34 72 Midrand Central Business Park Midrand 5 892 – 39 6 670 72 73 Midrand Central Business Park 518 Midrand 6 802 – 56 8 159 68 74 Montani Wynberg, Johannesburg 12 722 – 42 3 333 * 75 Monte Carlo New Germany 8 914 – 59 6 630 38 76 Moorsom Epping, Cape Town 16 808 – 56 3 338 * 77 Neon Fulcom Park, Springs 10 927 – 29 2 636 * 78 Newmarket Industrial Estate Alrode, Alberton 36 514 – 126 3 311 37 79 Novex Kramerville, Sandton 3 560 – 17 4 748 * 80 Nuffield Nuffield, Springs 10 514 – 25 2 368 * 81 Paul Smit Anderbolt Boksburg 23 176 82.5 60 2 576 15 82 Penraz Industria, Johannesburg 20 708 – 74 3 569 * 83 Pick n Pay Pinetown Mahogany Ridge, Durban 10 559 – 67 6 383 * 84 Portion 35 Alrode Alrode, Alberton 10 333 – 26 2 516 * 85 Premier Equipment Boksburg 13 634 – 67 4 929 * 86 Prolecon Prolecon, Johannesburg 20 763 – 67 3 246 37 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 82 Group annual financial statements 30 June 2017

Property portfolio detail – South Africa continued At 30 June 2017

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Warehousing continued 87 Propower Parow, Cape Town 6 417 – 37 5 750 * 88 Protrans Jet Park, Boksburg 6 340 100.0 28 4 338 – 89 PS Props Boksburg North, Boksburg 6 600 – 31 4 636 * 90 Range Industrial Park Blackheath, Bellville 15 273 – 78 5 074 47 91 Sebenza 137 Sebenza, Edenvale 3 698 – 15 4 111 * 92 Serenade Elandsfontein 3 390 – 15 4 395 * 93 Trafford Park Pinetown 21 007 – 123 5 855 50 94 Vereeniging Street 36 Alrode, Alberton 4 919 – 9 1 748 * 95 Vinimark Building – Linbro Park Linbro Park 2 762 – 18 6 516 * 96 Watt Meadowdale, Germiston 2 824 – 15 5 417 * 97 Westmead Factory Westmead, Durban 4 434 – 25 5 570 55 98 Whitworth Heriotdale ext 8, Johannesburg 3 341 – 16 4 790 * 99 Wingfield Jet Park, Boksburg 7 206 – 34 4 677 * 100 Zandfontein Zandfontein, Pretoria 18 435 – 63 3 423 * Industrial parks 296 570 3.5 1 349 4 295 43 1 Celtis Business Park Stormill, Roodepoort 9 300 4.8 36 3 849 * 2 Central Park – Cape Town Elsiesrivier, Cape Town 49 135 – 205 4 174 42 3 Gold Reef Park Booysens, Johannesburg 20 667 14.0 63 3 039 44 4 Hilltop Industrial Park Elandsfontein 76 283 – 333 4 368 38 5 Maitland Industrial Park Maitland, Cape Town 27 961 1.1 139 4 982 52 6 Omni Park Aeroton, Johannesburg 41 331 15.3 190 4 585 45 7 Pine Industrial Park New Germany 36 611 – 138 3 775 45 8 Route 24 Meadowdale, Germiston 23 122 1.8 110 4 775 48 9 Runway Park Mobeni, Durban 12 160 – 135 4 893 39 Retail warehousing 96 650 5.5 594 6 139 58 1 Builders Market Middelburg 12 973 – 34 2 629 * 2 Commercial City Strijdom Park, Randburg 14 884 10.7 114 7 639 77 3 Fountains Motown CBD, Pretoria 12 649 22.2 54 4 253 75 4 Gateway Alberton 6 074 12.8 47 7 737 81 5 Greenhills Centre Elandsfontein 1 913 9.1 13 7 005 118 6 Isipingo 2257 Prospecton, Durban 9 774 – 67 6 865 * 7 M1 Place Eastgate, Sandton 22 425 – 146 6 493 42 8 Meadowdale Meadowdale, Germiston 15 958 – 119 7 432 69 Motor-related outlets 35 362 – 311 8 800 92 1 Acacia Rosslyn, Pretoria 2 745 – 26 9 362 * 2 Bardene Bardene, Boksburg 1 260 – 12 9 762 * 3 Cornick Midrand 3 948 – 21 5 319 * 4 Ellenby Motors Hatfield, Pretoria 5 542 – 71 12 865 * 5 Kentyre Randburg 2 306 – 15 6 505 * 6 N1 Tyre N1 City, Cape Town 1 345 – 16 11 896 * 7 Pasteur Northcliff, Johannesburg 3 074 – 38 12 232 * 8 Rushair Aeroton, Johannesburg 12 647 – 88 6 982 * 9 Stormain Stormill, Roodepoort 2 495 – 24 9 620 * WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 83 About the Growthpoint reporting

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Mini units 130 420 2.6 690 5 297 57 1 Alumina Silvertondale, Pretoria 1 328 – 5 3 990 53 2 Chelsea Road Industrial Park New Germany 11 589 – 60 5 177 52 3 Clayville Mini Units Clayville, Midrand 8 201 – 32 3 939 47 4 Devro Park Pinetown 3 931 – 16 3 943 49 Annual financial statements 5 Eastgate Business Park Eastgate, Sandton 13 875 9.8 103 7 452 73 6 Ferndale Commercial Park Strijdom Park, Randburg 4 281 – 19 4 462 51 7 Ferntowers Ferndale, Randburg 5 235 17.6 26 4 928 57 8 Fusie 142 Silvertondale, Pretoria 1 529 – 8 5 296 55 9 Gallagher Place Midrand 8 606 2.7 36 4 160 51 10 Glen Murray Industrial Park Redhill, Durban 8 357 4.3 55 6 617 69 11 Greystones Industrial Glen Anil, Durban 3 295 – 16 4 826 62 12 Isando Industrial Isando, Kempton Park 4 993 – 15 2 904 45 13 Isando Industrial Park Isando, Kempton Park 11 936 – 51 4 281 46 Property portfolio Property 14 Knightsgate Driehoek, Germiston 16 778 3.3 79 4 697 50 15 Palm River Pinetown 8 156 – 42 5 199 62 16 Scientia Pretoria East, Pretoria 12 167 – 80 6 591 70 17 Thynk Industrial Park Briardene, Durban 6 163 – 47 7 675 81 Midi units 80 167 1.1 376 4 610 49 1 Anchor Industrial Park Jet park, Boksburg 14 986 – 66 4 417 53 2 City Deep Industrial Park City Deep, Johannesburg 10 944 – 45 4 103 51 3 Eagle Industrial Park (50%) Richards Bay 7 699 7.3 37 3 961 43 4 Galaxy Linbro Park 11 181 – 80 7 110 73

5 Northreef Elandsfontein 2 178 – 10 4 683 * General information 6 Rojolea Lea Glen, Roodepoort 4 770 – 13 2 747 30 7 Route 41 Roodepoort 12 542 – 40 3 213 37 8 Westgate (50%) Pinetown 15 867 1.8 85 5 351 50 Maxi units 14 466 – 75 5 191 55 1 Lanner Place Falcon Park, Pinetown 14 466 – 75 5 191 55 Low-grade industrial 134 405 3.8 519 3 840 42 1 Airport View Spartan, Kempton Park 1 054 – 6 5 218 * 2 Allen Road Elandsfontein 6 088 – 44 7 145 57 3 Belgor Spartan, Kempton Park 1 133 – 5 4 765 * 4 Bofors 2 Epping, Cape Town 12 938 3.1 53 4 066 44 5 Chamroy Krugersdorp 10 790 – 13 1 168 * 6 Dacres Epping, Cape Town 4 768 – 20 4 132 * 7 Dekema Wadeville, Germiston 1 686 – 5 2 847 * 8 Gunners Epping, Cape Town 28 592 4.0 84 2 945 39 9 Isando 103 Isando, Kempton Park 2 581 – 10 3 953 * 10 Isando 104 Isando, Kempton Park 2 509 100.0 7 2 590 * 11 Isando 107 Isando, Kempton Park 1 929 – 7 3 525 * 12 Janhope Duncanville, Vereeniging 9 384 – 35 3 708 42 13 Kinghall 1 Epping, Cape Town 4 950 – 21 4 141 * 14 Kinghall 2 Epping, Cape Town 2 482 – 15 5 963 * WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 84 Group annual financial statements 30 June 2017

Property portfolio detail – South Africa continued At 30 June 2017

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand Low-grade industrial continued 15 Loper Corner Spartan, Kempton Park 1 533 – 7 4 240 48 16 Loper View Spartan, Kempton Park 2 116 51.5 9 4 206 54 17 Maitland Maitland, Cape Town 9 729 – 40 4 132 42 18 Monteer Isando, Kempton Park 6 373 – 33 5 225 47 19 New Germany New Germany 10 466 – 35 3 373 37 20 Romatile Jet Park, Boksburg 4 608 – 22 4 796 53 21 Spartan View Spartan, Kempton Park 1 290 – 8 6 357 71 22 Sparticor Spartan, Kempton Park 1 616 – 9 5 446 51 23 Westmead Industrial Park Pinetown 5 790 – 31 5 337 53 High-tech industrial 153 414 0.4 1 195 6 026 67 1 Adcock Ingram – Midrand Midrand 21 536 – 202 9 356 * 2 Altergen Wadeville, Germiston 5 880 – 21 3 572 * 3 Cummings Eastgate, Sandton 7 502 – 46 6 185 * 4 Eagle Freight Meadowdale, Germiston 6 972 – 46 6 225 * 5 Fifers Spartan, Kempton Park 5 995 – 36 5 972 * 6 Highland Meadowdale, Germiston 3 956 – 32 8 140 * 7 Impala Road Eastgate, Sandton 5 996 – 34 5 587 60 8 Linbro Linbro Park 4 004 – 30 7 392 * 9 Midrand Central Business Park 520 Midrand 4 013 – 42 10 366 78 10 Montague Business Park (25%) Montague Gardens, Cape Town 30 885 – 345 2 509 64 11 N1 Business Park (20%) Midrand 21 567 – 172 7 975 76 12 National Data Systems Selby, Johannesburg 13 529 – 58 4 294 * 13 Protec Park Chloorkop, Kempton Park 5 645 – 32 5 722 * 14 Stormill 51 Stormill, Roodepoort 1 755 – 8 4 729 * 15 Tripark Kelvin View, Johannesburg 14 179 4.0 91 6 432 63 High-grade industrial 290 360 3.9 2 149 7 398 67 1 2 Baker Street Marconi Beam, Cape Town 8 268 – 51 6 217 52 2 Aeroport Spartan, Kempton Park 12 972 – 68 5 211 52 3 African Products Meadowdale, Germiston 4 539 – 54 11 986 * 4 Albert Amon 212 Meadowdale, Germiston 1 512 – 9 5 822 * 5 Aviation Place Airport Industrial, Cape Town 2 200 – 16 7 182 * 6 Corobrik Meadowdale, Germiston 2 470 – 28 11 295 104 7 Ebony Meadowdale, Germiston 11 365 – 73 6 379 59 8 Electron Isando, Kempton Park 6 284 – 33 5 268 48 9 Flamon Meadowdale, Germiston 1 992 – 11 5 722 52 10 GIE Portions 1 and 2 of Erf 308 Meadowdale, Germiston 17 406 – 121 6 969 62 11 Gillets Pinetown 13 465 – 69 5 095 * 12 Growthpoint Business Park Midrand 68 685 13.1 644 9 378 84 13 Highway Wilbart, Germiston 3 383 – 22 6 562 * 14 Hillclimb Road Pinetown 4 211 – 25 5 865 * 15 Inanda Road Springfield Springfield Park, Durban 5 816 – 34 5 777 55 16 Mount Joy Elandsfontein 10 305 – 65 6 298 * 17 Nestlé Bellville, Cape Town 16 255 – 129 7 942 * WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 85 About the Growthpoint reporting

Value/m² Gross (excluding rental additional (month/ GLA Vacancy Value bulk) m²) Property name Location m² % Rm Rand Rand High-grade industrial continued 18 Oude Moulen Maitland, Cape Town 10 205 – 64 6 262 56 19 Racetrack Midrand 5 923 – 50 8 475 * 20 Rectron – Umhlanga Umhlanga Ridge, Durban 2 293 – 21 9 158 * 21 Rivonia Crossing 1 Sunninghill, Sandton 14 848 – 122 8 203 71 Annual financial statements 22 Rivonia Crossing 2 Sunninghill, Sandton 19 778 11.3 187 9 470 100 23 The Grove Business Estate Somerset West, Cape Town 17 659 – 76 4 287 49 24 Trade Centre Mount Edgecombe Mount Edgecombe, Durban 14 306 – 96 6 690 * 25 Triangle Wilbart, Germiston 3 681 – 23 6 275 * 26 Western Province Park Goodwood, Cape Town 10 539 – 58 5 503 53 Vacant land/land under development – – 744 – – 1 Ferntowers Erf 2019 Ferndale, Randburg – – 4 – – 2 GIE 4B Erf 307 (Remainder) Meadowdale, Germiston – – 48 – – 3 GIE Common Roadway Meadowdale, Germiston – – – – – Property portfolio Property 4 GIE Marketing Office Meadowdale, Germiston – – 2 – – 5 Maskew Isando, Kempton Park – – 6 – – 6 Midas Meadowdale Meadowdale, Germiston – – 51 – – 7 Midrand Central Business Park 519 Midrand – – 18 – – 8 Mill Road Park Bellville, Cape Town – – 46 – – 9 Neon Erf 26 Fulcom Park, Springs – – 4 – – 10 Protrans Erf 6 Jet Park, Boksburg – – 6 – – 11 Sailor Malan Erf 115/156 Aeroton, Johannesburg – – 8 – – 12 Saligna Boksburg – – 52 – –

13 Samrand Development 88 Midrand – – 266 – – General information 14 Samrand Erf 5437 Midrand – – 78 – – 15 Samrand Erf 5437 Remainder Midrand – – 17 – – 16 Samrand Erf 5456 Midrand – – 85 – – 17 Wadeville 100% Germiston – – 53 – – 233 TOTAL INDUSTRIAL 2 266 957 3.1 12 586 5 068 50 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 86 Group annual financial statements 30 June 2017

Analysis of Growthpoint RSA TENANT BASE 30 June 2017

30 June 2017 30 June 2016 % of Number of % of Number of Retail GLA GLA tenants GLA GLA tenants A. Large tenants 66% 897 498 19 65% 904 220 19 B. Medium tenants 17% 236 176 79 18% 246 509 86 C. Other tenants 17% 221 101 1 645 17% 233 419 1 767 Total 100% 1 354 775 1 743 100% 1 384 148 1 872 Category A consists of tenant groups occupying more than 10 000m² of space. Category B consists of tenant groups occupying between 1 000m² and 10 000m² of space. Category C consists of tenant groups occupying less than 1 000m² of space.

30 June 2017 30 June 2016 % of Number of % of Number of Office GLA GLA tenants GLA GLA tenants A. Large tenants 33% 540 490 27 33% 548 357 26 B. Medium tenants 43% 702 174 255 44% 730 847 262 C. Other tenants 24% 390 586 1 231 23% 379 459 1 246 Total 100% 1 633 250 1 513 100% 1 658 663 1 534 Category A consists of tenant groups occupying more than 10 000m² of space. Category B consists of tenant groups occupying between 1 000m² and 10 000m² of space. Category C consists of tenant groups occupying less than 1 000m² of space.

30 June 2017 30 June 2016 % of Number of % of Number of Industrial GLA GLA tenants GLA GLA tenants A. Large tenants 42% 925 732 46 41% 872 709 42 B. Medium tenants 49% 1 073 505 328 50% 1 051 729 316 C. Other tenants 9% 196 766 479 9% 192 242 515 Total 100% 2 196 003 853 100% 2 116 680 873 Category A consists of tenant groups occupying more than 10 000m² of space. Category B consists of tenant groups occupying between 1 000m² and 10 000m² of space. Category C consists of tenant groups occupying less than 1 000m² of space.

Rental escalation (%) 2017 2016 Retail 7.2 7.3 Office 8.1 8.1 Industrial 8.3 8.4

Lease expiry by sector (% of GLA) RSA (excluding V&A Waterfront)

0 Vacant Monthly By FY18 By FY19 By FY20 By FY21 By FY22 FY23 and beyond ■ Retail ■ Office ■ Industrial WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 87

Analysis of V&A waterfront tenant base (100%) 30 June 2017 About the Growthpoint reporting

Retail Office Fishing and industrial Hotels and residential Tenant base GLA Number GLA Number GLA Number GLA Number (excluding vacancies) (m2) of tenants (m2) of tenants (m2) of tenants (m2) of tenants A. Large tenants – – 21 975 2 44 679 6 22 238 3 B. Medium tenants 21 139 19 25 405 18 12 780 5 29 364 11 C. Other tenants 26 978 544 16 447 148 2 1 275 7 48 117 563 63 827 168 57 461 12 51 877 21 Category A consists of tenant groups occupying more than 10 000m² of space.

Category B consists of tenant groups occupying between 1 000m² and 10 000m² of space. Annual financial statements Category C consists of tenant groups occupying less than 1 000m² of space. Rental escalation (%) 2017 2016 Retail 7.7 7.4 Office 8.7 7.9 Fishing and industrial 7.3 8.1 Hotel and residential 8.6 7.3

Lease expiry (% of GLA) V&A Waterfront portfolio Property

0 General information Vacant By FY18 By FY19 By FY20 By FY21 By FY22 FY23 and beyond WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 88 Group annual financial statements 30 June 2017

Property portfolio detail – Australia At 30 June 2017

Gross rental GLA Vacancy Value Value/m² (annum/m²) Property name Location m² % Rm Rand AUD Industrial 753 193 0.5 11 056 14 679 125 1 1 – 3 Pope Court Beverley, SA 14 459 – 206 14 247 142 2 10 Butler Boulevard Adelaide Airport, SA 8 461 – 85 10 046 159 3 120 Link Road Tullamarine, VIC 26 517 – 159 5 996 58 4 120 Northcorp Boulevard Broadmeadows, VIC 58 320 – 780 13 375 99 5 120 – 132 Atlantic Drive Keysborough, VIC 12 864 – 242 18 812 126 6 12 – 16 Butler Boulevard Adelaide Airport, SA 16 800 – 142 8 452 117 7 13 Business Street Yatala, QLD 8 951 – 151 16 870 189 8 130 Sharps Road Tullamarine, VIC 28 100 – 246 8 754 113 9 1500 Ferntree Gully Road and 8 Henderson Road Knoxfield, VIC 22 009 – 424 19 265 153 10 19 Southern Court Keysborough, VIC 6 455 – 81 12 548 115 11 20 Colquhoun Road Perth Airport, WA 80 374 – 1 533 19 073 142 12 20 Southern Court Keysborough, VIC 11 430 – 153 13 386 103 13 27 – 149 Lenore Drive Erskine Park, NSW 29 476 – 637 21 611 145 14 3 Millennium Court Knoxfield, VIC 8 040 – 108 13 433 105 15 3 Viola Place Brisbane Airport, QLD 3 431 – 20 5 829 207 16 31 Garden Street Kilsyth, VIC 8 919 – 101 11 324 104 17 34 Reddalls Road Kembla Grange, NSW 355 – 241 678 873 4 746 18 40 Annandale Road Tullamarine, VIC 44 424 – 331 7 451 118 19 45 – 155 South Centre Road Tullamarine, VIC 14 082 24.9 79 5 610 90 20 5 Viola Place Brisbane Airport, QLD 14 726 – 80 5 433 167 21 51 – 65 Lenore Drive Erskine Park, NSW 3 720 – 321 86 290 592 22 522 – 1550 Wellington Road Mulgrave, VIC 68 144 – 661 9 700 67 23 599 Main North Road Gepps Cross, SA 67 238 – 737 10 961 100 24 6 Kingston Park Court Knoxfield, VIC 7 645 – 122 15 958 124 25 60 Annandale Road Tullamarine, VIC 16 276 – 121 7 434 83 26 6 – 17 John Morphett Place Erskine Park, NSW 24 881 – 452 18 166 142 27 70 Distribution Street Larapinta, QLD 76 109 – 2 057 27 027 187 28 75 Annandale Road Tullamarine, VIC 10 280 – 72 7 004 89 29 81 Derby Street Silverwater, NSW 7 984 – 167 20 917 193 30 9 – 11 Drake Boulevard Keysborough, VIC 25 743 – 315 12 236 103 31 Lots 2, 3 and 4, 44 – 54 Raglan Street Preston, VIC 26 980 – 232 8 599 75 Office 299 955 1.5 21 480 71 611 523 1 1 Charles Street Parramatta, NSW 32 356 – 3 046 94 140 622 2 10 – 12 Mort Street Canberra, ACT 15 398 – 746 48 448 475 3 1231 – 1241 Sandgate Road Nundah, QLD 12 980 – 1 039 80 046 669 4 255 London Circuit Canberra, ACT 8 972 – 723 80 584 630 5 3 Murray Rose Avenue Sydney Olympic Park 13 423 – 973 72 486 388 6 333 Ann Street Brisbane, QLD 16 369 12.9 1 162 70 988 473 7 33 – 39 Richmond Road Keswick, SA 11 835 – 622 52 556 524 8 5 Murray Rose Avenue Sydney Olympic Park 12 386 – 973 78 556 411 9 7 Laffer Drive Bedford Park, SA 6 639 – 155 23 347 409 10 75 Dorcas Street South Melbourne, VIC 23 811 – 1 806 75 847 624 11 89 Cambridge Park Drive Cambridge, TAS 6 876 – 271 39 412 436 12 A1, 32 Cordelia Street South Brisbane QLD 10 052 13.1 805 80 084 639 13 A4, 52 Merivale Street South Brisbane QLD 9 405 – 761 80 914 513 14 Building 2, 572 – 576 Swan Street Richmond, VIC 14 602 – 802 54 924 518 15 Building B, 211 Wellington Road Mulgrave, VIC 12 780 – 727 56 886 444 16 Building C, 211 Wellington Road Mulgrave, VIC 10 305 – 557 54 051 272 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 89 About the Growthpoint reporting

Gross rental GLA Vacancy Value Value/m² (annum/m²) Property name Location m² % Rm Rand AUD Office continued 17 Building C, 219 – 247 Pacific Highway Artarmon, NSW 14 496 – 1 151 79 401 604 18 Buildings 1 and 3, 572 – 576 Swan Street Richmond, VIC 9 909 – 612 61 762 526 19 Car Park, 32 Cordelia Street and 52 Merivale Street South Brisbane QLD – – 261 – – 20 Car Park, 572 – 576 Swan Street Richmond, VIC – – 11 – – 21 CB1, 22 Cordelia Street South Brisbane QLD 11 529 – 918 79 625 558 Annual financial statements 22 CB2, 42 Merivale Street South Brisbane QLD 6 598 – 512 77 599 552 23 Optus Centre, 15 Green Square Close Fortitude Valley 16 442 2.8 1 385 84 235 517 24 Quad 2, 6 Parkview Drive Sydney Olympic Park 5 145 9.5 286 55 590 472 25 Quad 3, 102 Bennelong Parkway Sydney Olympic Park 5 244 – 299 57 018 425 26 Vantage, 109 Burwood Road Hawthorn 12 403 – 877 70 711 336 57 Total Australia 1 053 148 0.7 32 536 30 894 237

ANALYSIS OF GROWTHPOINT Australia TENANT BASE

30 June 2017 portfolio Property Office Industrial GLA Number GLA Number Tenant base (excluding vacancies) (%) % of tenants % of tenants A. Large tenants 41.6 7 87.6 14 B. Medium tenants 51.7 44 12.3 15 C. Other tenants, large 6.7 63 0.1 3 Category A consists of tenant groups occupying more than 10 000m² of space. Category B consists of tenant groups occupying between 1 000m² and 10 000m² of space.

Category C consists of tenant groups occupying less than 1 000m² of space General information

Rental escalation (%) 2017 2016 Office 3.5 3.4 Industrial 2.9 2.7

Lease expiry by sector (% of GLA) Australia

0 Vacant By FY18 By FY19 By FY20 By FY21 By FY22 FY23 and beyond ■ Gross monthly rental WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 90 Group annual financial statements 30 June 2017

Discovery, Sandhurst, Sandton WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 91 About the Growthpoint reporting GENERAL INFORMATION Annual financial statements Property portfolio Property General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 92 Group annual financial statements 30 June 2017

SHAREHOLDERS’ ANALYSIS As at 30 June 2017

Number of % of total Number % of issued shareholders shareholders of shares capital Shareholder spread 1 – 1 000 shares 7 969 30.98 2 308 901 0.08 1 001 – 5 000 shares 8 600 33.43 22 369 896 0.77 5 001 – 10 000 shares 3 303 12.84 23 991 991 0.83 10 001 – 20 000 shares 2 263 8.80 32 082 415 1.11 20 001 – 50 000 shares 1 495 5.81 46 898 963 1.62 50 001 – 100 000 shares 647 2.52 45 690 742 1.58 100 001 – 200 000 shares 554 2.15 88 185 854 3.05 200 001 – 500 000 shares 330 1.28 117 685 691 4.07 500 001 – 1 000 000 shares 209 0.81 146 780 461 5.08 1 000 001 – 10 000 000 shares 305 1.19 827 524 266 28.65 10 000 001 shares and over 47 0.18 1 534 943 402 53.14 Total 25 722 100.00 2 888 462 582 100.00 Distribution of shareholders Collective investment schemes 1 035 4.02 1 252 069 033 43.35 Retirement benefit funds 579 2.25 781 812 810 27.07 Empowerment companies 4 0.02 238 609 588 8.26 Retail shareholders 18 798 73.08 118 480 215 4.10 Trusts 3 761 14.62 89 497 627 3.10 Sovereign wealth funds 36 0.14 54 868 767 1.90 Private companies 689 2.68 54 629 829 1.89 Assurance companies 37 0.14 54 519 578 1.89 Organs of state 3 0.01 50 751 351 1.76 Stockbrokers and nominees 61 0.24 48 643 693 1.68 Insurance companies 78 0.30 42 375 861 1.47 Treasury 2 0.01 27 053 288 0.94 Foundations and charitable funds 198 0.77 22 527 795 0.78 Scrip lending 12 0.05 19 188 682 0.66 Custodians 68 0.26 15 028 623 0.52 Investment companies 33 0.13 7 481 984 0.26 Medical aid funds 36 0.14 4 841 609 0.17 Close corporations 197 0.77 3 205 140 0.11 Other companies 72 0.28 1 439 119 0.05 Hedge funds 8 0.03 730 076 0.03 Share schemes 1 0.00 706 699 0.02 Unclaimed scrip and control accounts 14 0.05 1 215 0.00 Total 25 722 100.00 2 888 462 582 100.00 Shareholder type Non-public shareholders 16 0.06 448 144 184 15.51 Directors and associates (excluding Staff Incentive Scheme) 11 0.04 52 345 878 1.81 Government Employees Pension Fund 3 0.01 368 038 319 12.74 Treasury shares 1 0.00 27 053 288 0.94 Growthpoint Staff Incentive Scheme 1 0.00 706 699 0.02 Public shareholders 25 706 99.94 2 440 318 398 84.49 Total 25 722 100.00 2 888 462 582 100.00 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 93 About the Growthpoint reporting

Total % of issued shareholding capital Beneficial shareholders holding greater than 1% of the issued shares Government Employees Pension Fund 368 038 319 12.74 Southern Palace Properties (Pty) Ltd 160 942 921 5.57 Old Mutual Group 134 510 088 4.66 Stanlib 122 954 874 4.26 Vanguard 103 662 763 3.59 Investec 93 738 144 3.25

Prudential 82 427 405 2.85 Annual financial statements Eskom Pension and Provident Fund 78 619 226 2.72 Investment Solutions 77 692 930 2.69 BEE Consortium (Quick Leap) 77 666 667 2.69 MMI 73 481 038 2.54 Sanlam 65 641 582 2.27 Coronation 51 393 413 1.78 Unemployment Insurance Fund (PIC) 42 617 533 1.48 Ishares Funds 37 976 114 1.31 SPDR Funds 30 424 419 1.05 1 601 787 436 55.45 Property portfolio Property Fund managers holding greater than 1% of the issued shares Public Investment Corporation Limited 384 361 494 13.31 Liberty Holdings (STANLIB Asset Management) 176 177 821 6.10 Investec Group 148 681 476 5.15 Old Mutual plc 137 565 951 4.76 Prudential plc 116 786 703 4.04 The Vanguard Group 110 213 257 3.82 BlackRock, Inc. 90 548 235 3.13 Sesfikile Capital 81 885 120 2.83 Sanlam Limited 78 527 693 2.72 Coronation Fund Managers 78 417 247 2.71 General information MMI Holdings (Momentum Asset Management) 75 906 033 2.63 Meago Asset Managers 73 825 229 2.56 State Street Corporation 63 024 716 2.18 Mondrian Investment Partners 56 223 285 1.95 Eskom Pension and Provident Fund 52 156 620 1.81 Dimensional Fund Advisors Group 31 094 818 1.08 Barclays (Absa Asset Management) 28 786 287 1.00 1 784 181 985 61.77 30 June 2017 30 June 2016 Share performance – 12 months ended Shares traded 1 773 606 731 1 855 699 381 Monthly average 147 800 561 154 641 615 Shares in issue 2 888 462 582 2 786 093 366 Shares traded as % of number of shares in issue 61.40% 66.61% Value traded R45 562 057 101 R45 725 880 754 Monthly average R3 796 838 092 R3 810 490 063 Opening price 1 July 2016 and 3 July 2017 R24.42 R26.46 Closing price 30 June R24.48 R25.68 Intraday high for the period R28.17 R28.50 Intraday low for the period R23.61 R17.96 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 94 Group annual financial statements 30 June 2017

SHAREHOLDERS’ ANALYSIS continued As at 30 June 2017

Regional beneficial holdings

0 500 000 000 1 000 000 000 1 500 000 000 2 000 000 000 2 500 000 000 3 000 000 000

June 2017

June 2016

■ South Africa ■ Americas ■ Europe ■ Asia ■ Africa ■ Middle East

Categories of holders

0 500 000 000 1 000 000 000 1 500 000 000 2 000 000 000 2 500 000 000 3 000 000 000

June 2017

June 2016

■ Collective investment schemes ■ Retirement benefit funds ■ Empowerment companies ■ Retail shareholders ■ Trusts ■ Private companies ■ Other holdings

Fund manager holdings by country

0 500 000 000 1 000 000 000 1 500 000 000 2 000 000 000 2 500 000 000 3 000 000 000

June 2017

June 2016

■ South Africa ■ United States ■ United Kingdom ■ Netherlands ■ Singapore ■ Rest of Europe ■ Rest of World ■ Non-institutional and below threshold (<100K shares) WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 95

SHAREHOLDERS’ INFORMATION About the Growthpoint reporting

Shareholders’ diary Financial year end 30 June Annual financial statements posted September Annual general meeting (09:00) 14 November 2017 Announcement of results and analyst presentations Interim March Annual August

Dividends Declared Paid Annual financial statements Interim February/March March/April Final August September

Updates and further information posted from time to time can be found on the company’s public website at: https://growthpoint.co.za/ investor-relations/shareholder-information

Notice of annual general meeting The notice of the company’s annual general meeting to be held on 14 November 2017 is contained in a separate booklet, posted to shareholders, incorporating the company’s summarised audited annual financial statements for FY17 and other information relevant to the annual general meeting. The notice will also be available on the company’s public website at: https://growthpoint.co.za/investor-

relations/final-results portfolio Property General information WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 96 Group annual financial statements 30 June 2017

Directorate and administration

Directors Management company JF Marais (Chairman)^ Growthpoint Management Services (Pty) Ltd EK de Klerk (Managing Director)* (Registration number: 2004/015933/07) MG Diliza• The Place, 1 Sandton Drive, Sandton, 2196 PH Fechter PO Box 78949, Sandton, 2146 LA Finlay^ JC Hayward (Lead Independent Director)^ Audit Committee HS Herman^ LA Finlay (Chairman) SP Mngconkola^ PH Fechter R Moonsamy^ JC Hayward NBP Nkabinde^ LN Sasse (Chief Executive Officer)* The Audit Committee members are all independent FJ Visser^ non-executive directors. G Völkel (Financial Director)* Risk Management Committee ^ Independent JC Hayward (Chairman) • BEE structure stakeholder * Executive directors SP Mngconkola NBP Nkabinde Auditors FJ Visser KPMG Inc. (Registration number: 1999/021543/21) The following parties attend or are represented at KPMG Crescent Audit Committee and/or Risk Management Committee 85 Empire Road, Parktown, 2193 meetings: Private Bag 9, Parkview, 2122 D Bouma (Corporate Treasurer) O Chauke (Head of Human Resources) Transfer secretaries AL Davis (Chief Information Officer) Computershare Investor Services (Pty) Ltd EK de Klerk (Managing Director) (Registration number: 2004/003647/07) RA Krabbenhöft (Company Secretary) Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 SA Nizetich (Head of Internal Audit and Risk Management) PO Box 61051, Marshalltown, 2107 M Pinto (Deputy Company Secretary) LN Sasse (Chief Executive Officer) Sponsor FJ Schindehütte (Financial Manager) Investec Bank Limited G Völkel (Financial Director) (Registration number: 1969/004763/06) 100 Grayston Drive, Sandton, 2196 By invitation: PO Box 785700, Sandton, 2146 E Binedell (Fund Director – Industrial) SA le Roux (Fund Director – Retail) Registered office RG Pienaar (Fund Director – Office) Growthpoint Properties Limited (Registration number: 1987/004988/06) The external auditors, KPMG Inc., attend or are represented at all The Place, 1 Sandton Drive, Sandton, 2196 regular meetings and ad hoc meetings as required of the Audit PO Box 78949, Sandton, 2146 Committee, as well as Risk Management Committee meetings.

Company Secretary RA Krabbenhöft The Place, 1 Sandton Drive, Sandton, 2196 PO Box 78949, Sandton, 2146 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 97 About the Growthpoint reporting

Property Committee Remuneration Committee PH Fechter (Chairman) FJ Visser (Chairman) MG Diliza HS Herman HS Herman JF Marais R Moonsamy Standing attendees: The following members of management attend Property O Chauke (Head of Human Resources) Committee meetings: EK de Klerk (Managing Director) LN Sasse (Chief Executive Officer) RA Krabbenhöft (Company Secretary) E Binedell (Fund Director – Industrial) M Pinto (Deputy Company Secretary) K Bourhill (Valuer) LN Sasse (Chief Executive Officer) Annual financial statements EK de Klerk (Managing Director) PricewaterhouseCoopers Inc. (independent adviser RA Krabbenhöft (Company Secretary) to the committee) SA le Roux (Fund Director – Retail) S Mills (Management Accountant) Executive Committee of Management (Exco) RG Pienaar (Fund Director – Office) LN Sasse (Chief Executive Officer) (Committee Chairman) M Pinto (Deputy Company Secretary) O Chauke (Head of Human Resources) G Völkel (Financial Director) EK de Klerk (Managing Director) E Binedell (Fund Director – Industrial) Social, Ethics and Transformation Committee D Bouma (Corporate Treasurer) MG Diliza (Chairman) AL Davis (Chief Information Officer)

LA Finlay G de Klerk (Regional Head – Durban) portfolio Property SP Mngconkola N Kuzmanich (Head of Marketing) R Moonsamy SA le Roux (Fund Director – Retail) NBP Nkabinde G Muchanya (Executive – Corporate Finance) RG Pienaar (Fund Director – Office) The following members of management attend Transformation DS Stoll (Regional Head – Cape Town) Committee meetings: SD Theunissen (CSR Manager) O Chauke (Head of Human Resources) L Turner (Head of Investor Relations) EK de Klerk (Managing Director) G Völkel (Financial Director) P Engelbrecht (Development Head) RA Krabbenhöft (Company Secretary) Standing attendees: S Paul (Assistant Company Secretary) RA Krabbenhöft (Company Secretary) General information M Pinto (Deputy Company Secretary) M Pinto (Deputy Company Secretary) C Rennison (Group Services and Procurement) SD Theunissen (CSR Manager) G Völkel (Financial Director)

Nomination Committee JF Marais (Chairman) MG Diliza PH Fechter LA Finlay JC Hayward HS Herman

Standing attendees: LN Sasse (Chief Executive Officer) EK de Klerk (Managing Director) RA Krabbenhöft (Company Secretary) WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 98 Group annual financial statements 30 June 2017

ABBREVIATIONS

Acucap Acucap Properties Limited GBCSA Green Building Council of South Africa AdmedGap Hospitalisation Gap Cover GCTC Guaranteed cost to company AFS Annual financial statements GDP Gross domestic product AGM Annual general meeting GEPF Government Employees Pension Fund Alsi 40 JSE/Actuaries All Share Top 40 Companies GLA Gross lettable area Index GOZ Growthpoint Properties Australia A-REIT Australian REIT GRI Global Reporting Initiative ASX Australian Stock Exchange Growthpoint Growthpoint Properties Limited AUD Australian Dollar GSIS Growthpoint Staff Incentive Scheme B-BBEE Broad-based black economic empowerment HALO Helping and loving others CCI FNB/BER Consumer Confidence Index IAR Integrated annual report CDLI JSE100 Carbon Disclosure Leadership Index IAS Investment Analysts Society CDP Carbon Disclosure Project IASB International Accounting Standards Board CEO Chief Executive Officer IFRS International Financial Reporting Standards CGU Cash-generating unit IIRC International Integrated Reporting Council CIPC Companies and Intellectual Property Income Tax Act Income Tax Act, No 58 of 1962 Commission IoD Institute of Directors CO Carbon dioxide IT Information technology Companies Act Companies Act 2008 JSE JSE Limited COSO Committee of Sponsoring Organisations JSE Listings Listings Requirements of the JSE Limited CPLI JSE 100 Carbon Performance Leadership Index Requirements CRISA Code for Responsible Investment in South JV Joint venture Africa King III King Report and Code of Governance for South CSI Corporate social investment Africa 2009 CSR Corporate social responsibility KPA Key performance area DJSI Dow Jones Sustainability World Index KPI Key performance indicator DRIP Distribution re-investment plan kWh Kilowatt hours EAP Growthpoint Employee Assistance Programme LTI Long-term incentive ERM Enterprise risk management LTV Loan to value ratio ERS Executive retention scheme MOI Memorandum of Incorporation EUR Euro MOCAA Museum of Contemporary Art Africa Exco Executive Management Committee Moody’s Moody’s Investor Services FCTR Foreign currency translation reserve MSCI Morgan Stanley Capital International FY Financial year NDR Non-distributable reserve GAI Governance assessment instrument NGO Non-government organisation WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Group annual financial statements 30 June 2017 99 About the Growthpoint reporting

OCI Other comprehensive income PIC Public Investment Corporation (SOC) Limited REIT Real Estate Investment Trust Remco Remuneration Committee RFP Request for proposal RSA Republic of South Africa

SA REIT South African Real Estate Investment Trust Annual financial statements SAPOA South African Property Owners Association SESCF Stenham European Shopping Centre Fund SENS Securities Exchange News Service SME Small medium enterprises SRI JSE Socially Responsible Investment Index STI Short-term incentive

Sycom Sycom Property Fund portfolio Property Tiber Tiber group of companies TFR Total fixed remuneration The Board The Board of Directors of Growthpoint Properties Limited The company Growthpoint Properties Limited The Group Growthpoint Properties Limited Group VWAP Volume weighted average price WALE Weighted average lease expiry General information ZAR South African Rand

WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 100 Group annual financial statements 30 June 2017

CONTACT DETAILS

Johannesburg office Physical address: The Place, 1 Sandton Drive, Sandton, 2196 Postal address: PO Box 78949, Sandton, 2146 Switchboard tel: +27 (0) 11 944 6000 General fax: +27 (0) 11 944 6005

Durban office Physical address: 4th Floor, Lincoln On The Lake, 2 The High Street, Parkside, Umhlanga Ridge, KwaZulu-Natal, 4319 Postal address: PO Box 1330, Umhlanga Rocks, 4320 Switchboard tel: +27 (0) 31 584 5100 General fax: +27 (0) 31 584 5110

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[email protected] www.growthpoint.co.za WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 The Place, 1 Sandton Drive, Sandton Gauteng, 2196, South Africa Tel: +27 (0) 11 944 6000, Fax: +27 (0) 11 944 6005 PO Box 78949, Sandton, 2146, South Africa Docex: 48 Sandton Square [email protected] www.growthpoint.co.za GROWTHPOINT GROUP ANNUAL FINANCIAL STATEMENTS 30 J une 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170