Profile Premium Properties Limited (“Premium”) is a “property loan stock” Company listed on the “Real Estate Holdings” sector on the JSE Limited (“JSE”). Premium derives its revenue from rentals receivable from property investments. The portfolio comprises of commercial, re- tail, industrial and residential properties with a lettable area of 635 744m2 which includes 3 014 residential units. The total value of Premium’s property portfolio at year end was R2.4 billion. Premium uses the positive elements of gearing to maximise returns to unitholders.
The portfolio consists of mainly multi-tenanted buildings situated predominantly in the Pretoria Central Business District with further holdings in Hatfield, Silverton and Johan- nesburg Central Business District. It is the policy of Premium to invest in areas of high growth, and in properties with turnaround potential or redevelopment prospects. Premium has appointed City Property Administration (Proprietary) Limited (“City Property”) as administrators and managers of the portfolio. Premium Properties Limited
Key investment indicators
increase Total return Total in distributions, from of capital and INVESTMENT 72.5 cents to 84.5 cents distributions portfolio 16.6 12 R2.5 percent percent billion
JSE trading statistics 2008 2007 2006 2005 2004 2003 Unit price - high (cents) 1 550 1 230 900 520 365 200 Unit price - low (cents) 1 145 731 510 320 180 148 Unit price - at year end (cents) 1 260 1 200 900 462 311 185 Volume of units traded during the year 17 060 959 15 399 980 21 745 324 15 128 195 14 863 676 11 598 046 Units traded to average units in issue (%) 13.9 13.6 19.1 13.3 14.9 11.6 Total returns Opening unit price (cents) 1 200 900 462 311 185 185 Income return (cents) 84.5 72.5 61.0 50.0 38.0 29.4 Capital return (cents) 60.0 300.0 438.0 151.0 126.0 - Total return (cents) 144.5 372.5 499.0 201.0 164.0 29.4 Return: opening unit price (%) 12.0 41.4 108.0 64.6 88.6 15.9
1 Annual Report 2008
Salient features The salient features of the Group of the year ended 29 February 2008 are as follows: 2008 2007 2006 2005 2004 2003 R’000 R’000 R’000 R’000 R’000 R’000 Property investments (cost/valuation) 2 340 378 1 756 056 1 216 742 821 456 668 369 545 043 Linked unitholders’ funds 1 350 728 922 344 680 055 449 342 307 510 249 853 Secured loans 765 943 650 357 414 461 317 342 329 566 270 125 Revenue (rental and operating cost/recoveries) 274 249 223 058 165 898 151 179 124 737 109 108 Net operating rental profit 154 186 135 967 97 134 87 680 71 797 62 586 Administration and collection fees 30 186 22 088 16 360 13 146 10 505 8 870 Depreciation 1 064 850 500 541 602 747 Interest received 2 255 958 752 2 778 860 760 Income from Associate (excluding revaluation) 9 570 6 716 5 040 5 238 3 597 3 228 Interest paid – Secured and other loans 66 960 58 065 39 193 34 762 37 699 35 034 – Linked unitholders 105 885 81 945 68 959 56 520 37 668 29 150 Dividends 546 420 341 280 188 139 Operating profit to property investments 6.6% 7.8% 7.9% 10.6% 10.7% 11.6% Operating cost to revenue 43.8% 39.0% 41.4% 42.0% 34.6% 35.3% Operating profit to revenue 56.2% 61.0% 58.6% 58.0% 65.4% 64.7% Administration and collection fees to revenue 11.0% 9.9% 9.9% 8.7% 9.6% 9.2% Return on linked unitholders’ funds 7.9% 8.9% 10.1% 12.6% 12.3% 11.7% Linked units in issue (‘000) 130 106 113 607 113 607 113 607 99 625 99 625 Distribution per linked unit (cents) 84,5 72,5 61,0 50,0 38,0 29,4 Net asset value per linked unit (cents) 1 038 812 599 396 309 251 Market price per linked unit year-end (cents) 1 260 1 200 900 462 311 185 Market capitalisation year-end 1 639 341 1 363 285 1 022 463 524 864 309 831 184 304
Distributable earnings The following additional information is provided and is aimed at disclosing to the users the basis on which the distribution is calculated. 2008 2007 2006 2005 2004 2003 R’000 R’000 R’000 R’000 R’000 R’000 Revenue - earned on contractual basis 283 996 215 518 167 261 148 409 124 737 109 108 Net rental income from properties - earned on contractual basis 163 933 128 427 98 497 84 910 71 797 62 586 Investment income 10 226 7 674 5 792 8 016 4 457 1 757 Income before interest 174 159 136 101 104 289 92 926 76 254 64 343 Finance costs (excluding debenture interest) 66 960 52 970 34 554 34 658 37 699 35 034 Income before taxation 107 199 83 131 69 735 58 268 38 555 29 309 Taxation 21 - 272 30 23 17 Unitholders distributable earnings 107 220 83 131 69 463 58 238 38 532 29 292 Interest received - Prepaid distribution 3 508 - - - - - Unitholders distributable earnings 110 728 83 131 69 463 58 238 38 532 29 292 Distributable earnings per linked unit (cents) 85,1 73,2 61,1 51,3 38,7 29,4 Distribution per linked unit (cents) 84,5 72,5 61,0 50,0 38,0 29,4
2 Premium Properties Limited
Property portfolio analysis
Geographical spread Based on gross lettable area Based on site area Gross lettable % of total Site area % of total Location area (m2) portfolio (m2) portfolio Pretoria Central 333 137 52.4 193 872 36.4 Silverton 52 586 8.3 83 873 15.7 Johannesburg and Reef 69 919 11.0 36 366 6.8 Hatfield 48 486 7.6 24 057 4.5 Arcadia 40 199 6.3 30 846 5.8 Pretoria West 33 631 5.3 65 443 12.3 Pretoria - Other 22 513 3.6 37 846 7.1 Moot (Gezina) 15 814 2.5 22 276 4.2 Hermanstad 13 588 2.1 30 842 5.8 Pretoria North 5 871 0.9 7 655 1.4 Total 635 744 100.0 533 076 100.0
Geographical spread Based on rent received Based on property value Rent received % of total Property % of total Location (R) portfolio value (R) portfolio Pretoria Central 149 974 772 61.3 1 238 878 560 53.4 Silverton 17 584 586 7.2 166 238 442 7.2 Hatfield 5 508 619 2.3 364 945 195 15.6 Hatfield - Leasehold 5 691 647 2.3 - - Arcadia 18 297 924 7.4 158 003 096 6.8 Pretoria - Other 11 453 557 4.7 94 539 604 4.1 Moot (Gezina) 7 163 786 2.9 51 098 662 2.2 Pretoria West 8 011 108 3.3 66 714 225 2.9 Johannesburg and Reef 15 796 192 6.5 133 947 472 5.8 Hermanstad 3 279 212 1.3 29 127 585 1.3 Pretoria North 2 058 091 0.8 17 078 182 0.7 Total 244 819 494 100.0 2 320 571 023 100.0
3 Annual Report 2008
Lease expiry profile - GLA Lettable area Current annualised Year (m2) % contractual income Monthly commercial and residential 141 124 22.2 39 013 176 Vacancies 142 197 22.4 - 2009 129 636 20.4 113 917 512 2010 103 470 16.3 66 013 800 2011 62 375 9.8 29 119 824 2012 38 193 6.0 19 729 096 2013 and later 18 749 2.9 15 139 476 Total 635 744 100 282 932 884
Gross lettable area by sector % of total gross lettable Sector Gross lettable area (m2) area % of revenue Offices 208 323 32.8 29.8 Retail 175 717 27.6 30.4 Commercial 41 927 6.6 5.8 Industrial 79 397 12.5 10.2 Residential 130 380 20.5 23.8 Total 635 744 100.0 100.0
% %
4 Premium Properties Limited
Property portfolio analysis c o n t i n u e d
Vacancies by sector % of % of total total portfolio % of new Core gross warehoused developments vacancies GLA lettable for and (% of total Sector (m2) area development acquisitions portfolio) Offices 67 054 10.5 (2.1) (0.5) 7.9 % Retail 26 907 4.2 - (0.7) 3.5 Commercial 7 256 1.1 - (0.2) 0.9 Industrial 22 376 3.5 - - 3.5 Residential 18 604 2.9 - (2.7) 0.2 Total 142 197 22.2 (2.1) (4.1) 16.0
Vacancies by Location % of total portfolio % of new Core % of total warehoused developments vacancies gross lettable for and (% of total Location GLA (m2) area development acquisitions portfolio) Pretoria Central 56 660 8.9 - (0.6) 8.3 Johannesburg and Reef 37 390 5.9 (2.1) (0.3) 3.5 Hatfield 20 606 3.2 - (3.2) - Silverton 7 945 1.2 - - 1.2 Arcadia 8 413 1.3 - - 1.3 Pretoria West 3 783 0.6 - - 0.6 Hermanstad 4 116 0.6 - - 0.6 Pretoria - Other 1 980 0.3 - - 0.3 Pretoria North 944 0.1 - - 0.1 Moot (Gezina) 360 0.1 - - 0.1 Total 142 197 22.2 (2.1) (4.1) 16.0
5 Annual Report 2008
Directorate and administration
Premium Properties Limited Auditors
Incorporated in the Republic of South Africa Grant Thornton Registration number: 1994/003601/06 Registered Auditors Share code: PMM Chartered Accountants (SA) ISIN: ZAE 000009254 South African Member of Grant Thornton International Directors P O Box 1470 A Wapnick zm (Chairman) Pretoria 0001 J P Wapnick zq (Managing) M J Holmes vqm Sponsor M Z Pollack vqm Nedbank Capital S Wapnick u P O Box 1144 z Executive director Johannesburg v Independent non-executive director 2000 u Non-executive director q Member of the Audit Committee Trustee for debenture holders m Member of the Investment Committee O Tugendhaft Secretary TWB & Partners P O Box 786728 City Property Administration (Proprietary) Limited Sandton 2146 CPA House Tel: (011) 291 5000 101 Du Toit Street Pretoria 0002 Transfer secretaries
Business address Computershare Investor Services 2004 (Pty) Ltd (Registration number 2004/003647/07) CPA House 101 Du Toit Street 70 Marshall Street Pretoria 0002 Marshalltown 2001 P O Box 61051 Postal Address Marshalltown 2107 P O Box 15 Tel: (011) 370 7700 Pretoria 0001 Fax: (011) 668 7712 Tel: (012) 319 8811 E-mail & Website Fax: (012) 319 8812 [email protected] Bankers www.premiumproperties.co.za Nedbank P O Box 1144 Johannesburg 2000
6 Premium Properties Limited
CHAIRMAN’S AND MANAGING DIRECTOR’S REVIEW
Introduction
On behalf of the Board of Directors, we are pleased to report that Premium has continued its impressive record of growth by providing unitholders with growth in distributions of 16.6%.
During the year, Premium continued to further its strategy of investing and growing its portfolio in the Pretoria and Johannesburg CBDs and surrounding areas as well as extracting value by development and refurbishment of properties. Premium’s ability to once again achieve strong financial results is the product of its ongoing successful execution of this strategy.
Economic overview
During the period the property market performed well underpinned by buoyant economic growth and positive prop- erty fundamentals. Inflation, however, has accelerated well above the Reserve Bank’s 3% - 6% target range, forcing the Reserve Bank to lift inflation rates, with ten increases of 50 basis points each since June 2006. This together with the introduction of the National Credit Act, is slowing the high level of business and consumer spend.
Premium unit price
During the financial period, Premium’s unit price has shown growth of 5%, from a price of 1200 cents at 28 February 2007 to 1260 cents at 29 February 2008. The total return which includes capital growth as well as distributions paid for the year, was 12%.
Subsequent to the year end the effect of inflation and consequent further interest rate increases unfolded. This im- pacted on the local property sector’s unit prices and Premium’s unit price has also decreased as part of the overall market correction.
Results
Premium continued its strong performance delivering distributable profit of R110,7 million, up 33,2% on the 2007 results. Revenue and net operating profit increased by 22.9% and 13.4% respectively, compared with the previous comparable period. The core portfolio, representing those properties held for 12 comparable months, reflects rental income growth of 15%. The office component of the portfolio benefited from the slowing of the provision of new office space and increased demand for properties at affordable rentals.
The residential portfolio continued its expansion and contributed 23.8% of the rental income. With the shortage of housing stock, vacancies declined to the current 2% which had a positive impact on the results.
The investment in IPS Investments (Pty) Limited continued to provide superior earnings’ growth with profits from this Company increasing to R9,6 million.
Distributions to unitholders
The growth in distributions is based on earnings derived from the portfolio and investment income and excludes capital profits and losses. Premium paid an interim distribution of 40,5 cents per linked unit. The total distribution for the year of 84,5 cents per linked unit equates to an increase of 16.6% on that paid in the previous corresponding period.
7 Annual Report 2008
Property and investment portfolio
At 29 February 2008, the property portfolio consisted of 153 properties situated in Gauteng valued at R2.4 billion. The portfolio was revalued upward by R230,9 million, which contributed to the increase in the net asset value of 27.8%. The increase in the valuation was mainly as a result of increased rental income. The rising inflation and interest rates are expected to place pressure on capitalisation rates, and we accordingly are not forecasting further revaluation gains for the portfolio for the next financial year.
The performance of the investment property portfolio was strong with significant leasing activity having been undertaken during the year, including a new lease with a government tenant of over 5800 square metres at Govpret, situated in the Pretoria CBD. This property was previously vacant.
The residential properties, which make up a substantial component of the portfolio, continued to deliver excellent results. Premium has a committed residential development pipeline to build in excess of 500 units which includes two residential conversions in the Johannesburg CBD and a greenfield residential project in Arcadia Pretoria.
Two mixed use developments were completed during the year. The residential units of Brisk Place, situated in the Johannesburg CBD, are fully let with yields exceeding expectations. Phase I of The Fields development situated in Hatfield Pretoria was also completed at a total cost of R310 million. This first phase created 677 residential units as well as 4000 m2 of retail space. Once it is fully let the anticipated yield will be approximately 10%. To date the letting activity is satisfactory and Phase I should be fully let by 28 February 2009. Phase II of the project, which includes a four level parking basement, “A” grade office and retail space and a hotel, with a total lettable area of 28 000m2, has commenced.
During the year eight properties were acquired for a total purchase price of R124 million providing an average yield of 10%. Details of the properties are set out below:
Name of property Physical address Description Rentable area m2
ABSA Pretorius Str 250 Pretoruis Str, Pretoria CBD Offices & shops 3 260 Loveday Str building 60-66 Loveday Str, Johannesburg CBD Retail 2 921 Northvaal 225 Vermuelen Str, Pretoria CBD Offices & shops 13 842 Provisus 523 Church Str, Arcadia Offices 5 894 Pavillion 92 Jeppe Str, Arcadia, Pretoria Shops 1 919 Gilboa 50 Hamilton Str, Arcadia, Pretoria Offices 3 436 Armadale 1 Twist Str, Johannesburg CBD Residential 11 874 MBA building 527 Church Str, Arcadia Pretoria Offices 2 850
To date significant value has been derived from these properties as a result of strong letting activity. Ten of the floors of the Armadale property consist of residential units.
The property portfolio has a total lettable area of 635 744 m2 with vacancies of 22.2% of the total rentable area. Many of the properties are fully let. However a large percentage of the vacancies are in respect of properties recently developed or undergoing redevelopment or refurbishment. In recent years a number of properties were acquired with large vacancies, where no or relatively insignificant consideration was paid for the vacant space. The most notable examples of the vacant space are at The Fields, Fedsure House, Armadale and Longsbank. These account for 8.1 % of the total vacancies.
The property portfolio is well diversified by sectoral spread and situated wholly in Gauteng. Further details are set out on pages 3 - 5.
Borrowings
A capital raising exercise from various institutional investors was successfully completed in September 2007 and a total number of 16 499 403 new linked units was issued at an average price of 1388 cents. The total proceeds of
8 Premium Properties Limited
CHAIRMAN’S AND MANAGING DIRECTOR’S REVIEW c o n t i n u e d
R229 million were utilsed to fund The Fields development, refurbishments, acquisitions of properties and to reduce debt. As a result, the Group is in a strong position, with gearing at 33% and substantial cash reserves currently available.
It is Premium’s policy to hedge the majority of its exposure to interest rate fluctuations thereby ensuring the sustain- ability of growth in distributions. The Group has substantial hedging in place at balance sheet date, with 58% of debt fixed at an average interest rate of 10.6%. Subsequent to year end, interest rates in respect of a further R302 million of debt were fixed, leaving Premium with limited exposure to fluctuations in interest rates. Further details of the loan expiry profile are set out below.
Outlook
Looking forward, Premium has a strong balance sheet to continue to build on the strategic objectives to deliver long term sustainable growth for our unitholders.
There are signs that the Reserve Bank’s monetary policy of increasing interest rates is working, with consumer spending decreasing and general business confidence at a low. This will contribute to the slow down of economic growth. The Board, however believes that Premium is well positioned for future growth and to take advantage of opportunities as they arise. Provided market conditions do not deteriorate significantly, Premium expects to deliver further growth in distributions for the year ending 28 February 2009.
Conclusion
We wish to thank our fellow Board members as well as City Property’s staff for their dedication and support during a year in which we continued our impressive record of growth.
Fixed loan expiry profile (%)
45 40 35 30 % 25 20 15 10 5
Floating Fixed to Fixed to Fixed to Fixed to 2010 2 011 2014 2019
Feb 08 Jun 08
9 Annual Report 2008
CORPORATE GOVERNANCE STATEMENT
The Board of Directors endorses the Code of Corporate Practices and Conduct, and supports the principles of open- ness, integrity and accountability as set out in the 2002 committee report on corporate governance (King II). The directors believe that in all relevant respects the Company complied with the recommendations of the King II report.
Board of directors
The constitution of the Board of directors is set out on page 6 of this report. The Board meets at least three times per year, and consists of three non-executive directors and two executive directors, including the Chairman. As the Chairman has always been, and remains, a driving force behind the Company’s direction, the directors consider that it is in the Company’s interest that he remains the Chairman. The Board aims to ensure that the structure, size, composition and effectiveness of the Board and the committees are maintained at levels that are appropriate in the context of the group’s strategy. All directors are subject to retirement by rotation and re-election by Premium shareholders in accordance with the articles of association. The directors’ remuneration is subject to recommenda- tion made by the Board and approved from time to time in a general meeting.
The Board has set the strategic objectives of the Company and determines investment and performance criteria as well as being responsible for the proper management, control, compliance and ethical standards of the business.
Independent non-executive directors are independent of management and free from any relationship that could materially interfere with the execution of their independent judgement. Their business experience enables them to evaluate strategy and act in the Company’s best interest.
Directors have to obtain approval from the Chairman of the Company to buy or sell linked units in the Company, whether directly or indirectly. Directors and any employees who become aware of sensitive financial information cannot directly or indirectly deal in the Company’s linked units until the information is in the public arena.
All the directors may seek independent professional advice, if necessary, and have access to the services of the Com- pany Secretary, who is responsible to ensure both the effective functioning of the Board and the proper administra- tion of Board proceedings.
Directors’ responsibility
The directors are responsible, inter alia, for the preparation of the annual financial statements, which fairly present the state of the Company and Group at the end of the financial year, and the results for that year.
The directors review the controls and procedures in place so as to ensure the accuracy and integrity of the account- ing records. The directors are of the opinion that adequate accounting records are maintained and take cognisance of reports and recommendations received from the audit committee from time to time.
The external auditors are responsible for reporting on the annual financial statements.
Appropriate accounting policies supported by reasonable and prudent judgements and estimates are applied in the preparation of the annual financial statements, and there are no material departures from Internal Financial Report- ing Standards.
The directors consider and approve the Group’s annual budget.
Internal financial and operating controls
The effectiveness of the internal control system is monitored through management overview and comprehensive reviews. The Company does not have an internal audit function as this has been deemed unnecessary in the past.
10 Premium Properties Limited
CORPORATE GOVERNANCE STATEMENT c o n t i n u e d
The Board is responsible for the Group’s systems of internal control. These systems are designed to provide reason- able, but not absolute, assurance as to the integrity and reliability of the financial statements, to safeguard, verify and maintain accountability of its assets and to identify and minimise significant fraud, potential liability, loss and material misstatement while complying with applicable laws and regulations.
There are inherent limitations to the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation and asset safeguarding. Furthermore, the effectiveness of an internal control system can change with circumstances. The system is therefore designed to manage rather than eliminate risk of failure and opportunity risk.
The controls throughout the Group concentrate on critical risk and these are closely monitored. Continued reviews and reporting structures enhance the control environment. Nothing has come to the attention of the directors to indi- cate that a material breakdown in the controls within the Group has occurred during the year.
Risk management
The objective of risk management is to identify, assess, manage and monitor the risks to which the Group is exposed. This is the Board’s responsibility.
Management is involved in a continuous process of developing and enhancing its comprehensive systems for risk identification and management and this process has been in place for the year under review and up to the date of this report. These risks encompass such areas as tenant vacancies, total or partial destruction of investment proper- ties, compliance with regulations and legislation and public liability. Furthermore, the level of borrowings and the exposure to interest rate movements is carefully monitored and taken care of.
In consultation with expert risk consultants, risks are assessed and appropriate insurance cover purchased for all material risks above pre-determined limits. Levels of cover are assessed annually and adjusted according to the circumstances. Financial risk management is dealt with in the notes to the annual financial statements.
Audit committee
The committee comprises two independent non-executive directors. Mr M J Holmes, an independent non-executive director, acts as chairman.
The external auditors and the financial manager attend the meetings by invitation. This committee meets at least three times a year and has its own written terms of reference. These include the review of the annual financial statements before they are presented to the Board, the review of internal control systems with reference to the find- ings of the external auditors and considering any changes in accounting policies. It also reviews any material audit recommendations.
The committee has complied with the terms of reference during the period under review.
Investment committee
The Board has established an investment committee, comprising the independent non-executive directors and the chairman. The committee considers the acquisition and sale of properties. The committee has complied with the terms of reference during the period under review.
11 Annual Report 2008
Meetings held
Audit Committee Investment Board meetings meetings Committee meetings Held Attended Held Attended Held Attended M Z Pollack vqm 3 3 3 3 3 3 M J Holmes vqm 3 2 3 2 3 2 S Wapnick u 3 3 - - 3 3 J P Wapnick zq 3 3 3 3 3 3 A Wapnick zm 3 3 - - 3 3 z Executive director | v Independent non-executive director | u Non-executive director q Member of the Audit Committee | m Member of the Investment Committee
Going concern
The annual financial statements have been prepared on the going concern basis since the directors have every rea- son to believe that the Company has adequate resources in place to continue in operation for the foreseeable future.
Relations with unitholders
The Board understands the information needs of unitholders and places great importance on meaningful dialogue with unitholders and ensures they are kept appropriately informed of matters affecting the Group and have access to the Group.
The Board is also committed to transparency and disclosure of relevant and appropriate information in the annual report as well as other communication channels to enable all unitholders and potential unitholders access to relevant information.
Employment equity and remuneration committee
As the Group has a limited number of employees, having contracted out the management of the affairs of the Company to City Property Administration (Proprietary) Limited, it has neither worker participation nor employment equity programmes, nor has it formed a remuneration committee. It does however, encourage and support such practices.
Directors remuneration
As the executive directors are paid by City Property Administration (Proprietary) Limited, no remuneration is paid by the Company, other than directors’ and committee fees. Details of directors fees which are determined by the Board, are set out on page 16 of this report. No non-executive or executive directors hold service contracts.
Code of ethics
The Company’s code of ethics requires all employees within the Company to act with the utmost good faith and integrity in all transactions and with all stakeholders with whom they interact. It commits the Company and employ- ees to sound business practices and compliance with legislation.
12 Premium Properties Limited
RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS
Directors’ responsibilities and approval of the annual financial statements.
The directors are required by the South African Companies Act, 1973, to maintain adequate accounting records and are responsible for the content and integrity of the consolidated annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the group and Company as at the end of the financial year and the results of their operations and cash flows for the period ended, in conformity with International Financial Reporting Standards. The group’s external auditors are engaged to express an independent opinion on the consolidated and Company annual financial statements.
The consolidated annual financial statements are prepared in accordance with International Financial Reporting Standards and incorporate disclosure in line with the accounting policies of the group. The consolidated annual financial statements are based upon appropriate accounting policies consistently applied and supported by reason- able and prudent judgements and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial control estab- lished by the group and place considerable importance on maintaining a strong control environment.
The directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the consolidated annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.
The directors have reviewed the group’s cash flow forecast for the year to 28 February 2009 and, in the light of this review and the current financial position, they are satisfied that the group has access to adequate resources to continue in operational existence for the foreseeable future.
The consolidated annual financial statements, and Company annual financial statements, set out on pages 15 to 45, which have been prepared on the going concern basis, were approved by the Board of directors on 28 July 2008 and were signed on their behalf by:
A Wapnick JP Wapnick Chairman Managing Director 28 July 2008 Pretoria
Certification by Company Secretary The Company Secretary hereby certifies, in compliance with section 268G(d) of the Companies Act 1973, as amended, that all returns required have been lodged with the Registrar of Companies and that all such returns are true, correct, and up to date.
City Property Administration (Proprietary) Limited Company Secretary 28 July 2008 Pretoria
13 Annual Report 2008
report FOR the independent auditors
To the members of Premium Properties Limited and its subsidiaries
We have audited the accompanying company financial statements and group annual financial statements of Pre- mium Properties Ltd, which comprise the director’s report, the balance sheet as at 29 February 2008, the income statement, the statement of changes in equity and cash flow statement for the year ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 15 to 45
Directors’ responsibility for the annual financial statements
The Company’s directors are responsible for the preparation and fair presentation of these annual financial state- ments in accordance with International Financial Reporting Standards, and in the manner required by the Com- panies Act of South Africa, 1973. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the annual financial statements that are free from mate- rial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan to perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatements of the annual financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the annual financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the annual financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the annual financial statements present fairly, in all material respects, the financial position of the Company and the group at 29 February 2008, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Compa- nies Act of South Africa, 1973.
Grant Thornton per A Vieira Chartered Accountants (SA) Chartered Accountant (SA) Registered Auditors Registered Auditor 28 July 2008 Pretoria
14 Premium Properties Limited
REPORT OF THE DIRECTORS
To the members of Premium Properties Limited
Your directors have pleasure in submitting their report for the year ended 29 February 2008.
Nature of business
Premium Properties Limited is a property loan stock Company listed on the JSE Limited (“JSE”) investing in retail, commercial, industrial and residential properties and deriving income from rentals.
The group’s profit for the year was as follows:
2008 2007 R’000 R’000
Revenue 274 249 223 058 Operating profit 154 186 135 967 Amortisation of debenture premium 5 392 1 700 Net gain from fair value adjustment of investment properties 230 927 306 526 Income from investments and associates 44 829 24 600 435 334 468 793 Finance charges (66 960) (52 970) Profit before debenture interest 368 374 415 823 Debenture interest (105 885) (81 945) Profit before taxation 262 489 333 878 Taxation (52 679) (89 469) Profit after taxation 209 810 244 409
Distribution to unitholders (cents) Dividend Interest Total 2008 2007 2008 2007 2008 2007 Interim 0.20 0.17 40.30 33.53 40.50 33.70 Final 0.22 0.20 43.78 38.60 44.00 38.80 0.42 0.37 84.08 72.13 84.50 72.50
Share capital and debentures
The authorised share capital comprises of 200 000 000 ordinary shares of 1 cent each. At 29 February 2008 there were 130 106 442 (2007: 113 607 039) linked units in issue, each comprising one ordinary share of 1 cent and one unsecured variable rate debenture of 149 cents each. During the year 16 499 403 units were issued. Details are as follows.
Date No of Units Issue price(cents) 8 August 2007 13 632 019 1 367 3 September 2007 2 867 384 1 363 Total 16 499 403
15 Annual Report 2008
The ordinary shares and debentures trade as linked units on the JSE. In terms of the debenture trust deed, the inter- est payable on the debenture component of the linked unit is always 200 times greater than the dividend payable per ordinary share.
Non-current assets
There were no major changes during the year to the nature of the non-current assets or to the policy relating to the use thereof.
Borrowing powers
The directors are authorised to borrow funds up to an amount not exceeding 66.67% of the directors’ bona fide valua- tion of the consolidated property portfolio.
Subsidiaries
Your Company’s interest in property owning subsidiaries is fully set out on pages 45.
Special resolutions
A special resolution to authorise the Company and/or its subsidiaries to acquire linked units was passed at the annual general meeting held on 7 September 2007
Management contract and administration
During the year the group’s investment properties were managed (in terms of an agreement) by City Property Administration (Pty) Ltd, the entire share capital of which is effectively owned by Messrs A Wapnick and J P Wapnick.
Post balance sheet events
After year end, interest rates in respect a further R302 million of debt was fixed for 5 - 10 years. As a result of the fixing of interest rates Premium’s floating borrowing has reduced to 9.1% of total borrowings. The loans were fixed at an average rate of 12.5%.
Directors and meetings attended
The directors of your Company during the year and to the date of this report were Messrs M J Holmes, M Z Pollack, A Wapnick, J P Wapnick and S Wapnick.
Directors’ remuneration 2008 2007 As an Audit As an Audit As a Board Committee As a Board Committee member member Total member member Total R R R R R R R J Inggs - - - 55 000 - 55 000 M Z Pollack 75 000 24 000 99 000 60 000 18 000 78 000 M J Holmes 75 000 30 000 105 000 60 000 24 000 84 000 S Wapnick 75 000 - 75 000 60 000 - 60 000 J P Wapnick 75 000 - 75 000 60 000 - 60 000 A Wapnick 75 000 - 75 000 60 000 - 60 000 375 000 54 000 429 000 355 000 42 000 397 000
16 Premium Properties Limited
Directors’ shareholding
As far as can be accurately established, the beneficial and non-beneficial interest held by your directors in the Company at 29 February 2008 amounted to:
2008 Direct Indirect Indirect beneficial beneficial non-beneficial Total % M J Holmes 1 000 - 90 000 91 000 0.1 M Z Pollack 105 089 - 1 245 200 1 350 289 1.0 A Wapnick 16 000 1 379 685 11 701 560 13 097 245 10.1 J P Wapnick 18 000 5 428 641 2 361 966 7 808 607 6.0 S Wapnick 16 000 5 073 294 2 359 067 7 448 361 5.7 156 089 11 881 620 17 757 793 29 795 502 22.9
2007 Direct Indirect Indirect beneficial beneficial non-beneficial Total % M J Holmes 1 000 - 90 000 91 000 0.1 M Z Pollack 104 800 - 1 245 200 1 350 000 1.2 A Wapnick 16 000 1 379 685 11 249 328 12 645 013 11.1 J P Wapnick 18 000 5 260 705 1 949 066 7 227 771 6.4 S Wapnick 16 000 5 031 105 1 949 068 6 996 173 6.2 155 800 11 671 495 16 482 662 28 309 957 25.0
Changes in directors’ shareholding between year-end and 28 July 2008
Purchase Price per unit Date No of units (cents) Value (R) Director
16 May 2008 337 000 1 180 3 976 600 *Tomnef Investments(Pty) limited
19 May 2008 255 000 1 150 2 932 500 *Tomnef Investments(Pty) limited
21 May 2008 25 000 1 100 275 000 *Tomnef Investments(Pty) limited
21 May 2008 500 000 1 100 5 500 000 *Tomnef Investments(Pty) limited
23 May 2008 125 000 1 095 1 368 750 *Tomnef Investments(Pty) limited
29 May 2008 288 600 1 050 3 030 300 *Tomnef Investments(Pty) limited
26 June 2008 96 524 1 017 981 766 * Rondomann Investments (Pty) Limited
27 June 2008 170 000 1 016 1 726 500 * Rondomann Investments (Pty) Limited
* Directors A Wapnick, S Wapnick and J P Wapnick indirectly, non-beneficially each hold a third of the share capital in Tomnef Investments (Pty) Limited/Rondomann Investment (Pty) Limited
17 Annual Report 2008
Valuation of Portfolio
Premium’s investment property - including property, plant and equipment was valued by the directors at R2,370 million. Each year one-third of the properties are to be valued on a rotational basis by an independent external valuer. The external valuers, Amanda de Wet and Van Zyl Valuers’ valuation of one-third of the portfolio was 2.9% more than the directors valuation.
Net asset value
The net asset value per linked unit is 1 038 cents (2007: 812 cents). After adding back the provision for deferred taxation relating to investment property of R281,8 million, the net asset value is 1 255 cents (2007: 1 011 cents) per linked unit. The closing price per linked unit at 29 February 2008 was 1 260 cents.
Company Secretary
City Property Administration (Proprietary) Limited CPA House P O Box 15 101 Du Toit Street Pretoria Pretoria 0001
18 Premium Properties Limited
BALANCE SHEETS for the year ended 29 February 2008
GROUP COMPANY
2008 2007 2008 2007 Notes R’000 R’000 R’000 R’000 Assets Non-current assets 2 530 739 1 884 692 951 874 739 937 Investment properties 2 2 350 222 1 775 565 31 470 4 828 Property, plant and equipment 3 19 807 18 291 - - Investment in subsidiaries 4 - - 860 800 714 531 Investment in associate 5 160 710 90 836 59 604 20 578
Current assets 21 073 19 932 3 544 2 210 Trade and other receivables 6 20 368 19 358 2 854 1 647 Cash and cash equivalents 705 574 690 563 Total assets 2 551 812 1 904 624 955 418 742 147
Equity and liabilities Equity capital and reserves 932 762 722 340 73 865 68 622 Share capital 7 2 507 1 349 2 507 1 349 Non-distributable reserves 8 901 944 689 533 68 226 62 834 Retained earnings 28 311 31 458 3 132 4 439
Non-current liabilities 1 477 981 1 017 061 795 840 607 739 Debentures and premium 9 417 966 200 004 417 966 200 004 Long term borrowings 10 765 465 575 208 377 313 406 335 Deferred taxation 11 294 550 241 849 561 1 400
Current liabilities 141 069 165 223 85 713 65 786 Short term borrowings 10 478 75 149 - - Trade and other payables 12 64 779 29 766 9 901 5 478 Bank overdraft 18 565 16 228 18 565 16 228 Linked unitholders for distribution 57 247 44 080 57 247 44 080 Total equity and liabilities 2 551 812 1 904 624 955 418 742 147
19 Annual Report 2008
INCOME STATEMENTS for the year ended 29 February 2008
GROUP COMPANY 2008 2007 2008 2007 Notes R’000 R’000 R’000 R’000
Revenue 13 274 249 223 058 47 537 38 072 Operating costs (120 063) (87 091) (30 956) (22 693) Operating profit 14 154 186 135 967 16 581 15 379 Amortisation of debenture premium 5 392 1 700 5 392 1 700 Fair value adjustment of investment properties 230 927 306 526 - - Write up of investment properties 230 927 291 020 - - Reversal of impairment losses 15 506 - - Profit from operations 390 505 444 193 21 973 17 079 Income from subsidiaries 15 - - 121 898 104 482 Income from investments 16 2 255 958 643 238 Income from associate 17 42 574 23 642 11 726 4 146 Profit from ordinary activities before finance charges 435 334 468 793 156 240 125 945 Finance charges 18 (172 845) (134 915) (152 444) (123 393) Profit before taxation 262 489 333 878 3 796 2 552 Taxation 19 (52 679) (89 469) 835 (53) Net profit for the year 209 810 244 409 4 631 2 499
Cents Cents Earnings per share 23 171.1 215.1 Headline earnings per share 23 2,3 2,5 Earnings per linked unit 23 257,5 287,3 Headline earnings per linked unit 23 84,2 74,6
20 Premium Properties Limited
Statements of changes in equity for the year ended 29 February 2008
FAIR ShareSHARE capital SHAREShare CAPITALCapital VALUEFair value RETAINEDRetained Total CAPITAL PREMIUMpremium RESERVEreserve RESERVEreserve EARNINGSearnings TOTAL R’000 R’000 R’000 R’000 R’000 R’000
Group Balance at 1 March 2006 1 136 213 19 057 432 607 25 338 478 351 Profit for the year 244 409 244 409 Transfer of fair value adjustment - Investment property 219 243 (219 243) - - Associate 16 926 (16 926) - Transfer to capital reserve - debenture premium amortised 1 700 (1 700) - Dividends paid (420) (420) Balance at 28 February 2007 1 136 213 20 757 668 776 31 458 722 340 Issue of new units 165 993 1 158 Profit for the year 209 810 209 810 Transfer of fair value adjustment - Investment property 174 015 (174 015) - - Associate 33 004 (33 004) - Transfer to capital reserve - debenture premium amortised 5 392 (5 392) - Dividends paid (546) (546) Balance at 29 February 2008 1 301 1 206 26 149 875 795 28 311 932 762
FAIR ShareSHARE capital SHAREShare CAPITALCapital VALUE Total CAPITAL PREMIUMpremium RESERVEreserve RESERVE TOTAL R’000 R’000 R’000 R’000 R’000
Company Balance at 1 March 2006 1 136 213 61 134 4 060 66 543 Profit for the year 2 499 2 499 Transfer to capital reserve - debenture premium amortised 1 700 (1 700) - Dividends (420) (420) Balance at 28 February 2007 1 136 213 62 834 4 439 68 622 Profit for the year 4 631 4 631 Issue of shares 165 993 1 158 Transfer to capital reserve - debenture premium amortised 5 392 (5 392) - Dividends (546) (546) Balance at 29 February 2008 1 301 1 206 68 226 3 132 73 865
21 Annual Report 2008
Cash flow statements for the year ended 29 February 2008
GROUP COMPANY 2008 2007 2008 2007 Notes R’000 R’000 R’000 R’000
Cash flows from operating activities 51 180 (13 637) 16 647 (2 124) Cash generated from operations 26.2 197 402 114 150 22 206 10 379 Investment income 13 981 958 134 264 104 720 Finance charges (66 960) (52 970) (46 559) (41 448) Distribution to linked unitholders 26.3 (93 264) (75 775) (93 264) (75 775) Normal tax refunded 26.4 21 - - -
Cash flows from investing activities (393 484) (237 803) (214 347) (147 598) Purchase of investment properties - Additions (123 573) (126 600) (29 052) - - Capital expenditure (228 306) (108 679) - - Purchase of property, plant and equipment - Additions (2 579) (141) - - Proceeds on disposal of investment properties - 1 780 - - Loans advanced to subsidiaries - (146 269) (143 434) Loan advanced to associates (39 026) (4 163) (39 026) (4 164)
Cash flows from financing activities 340 098 235 896 195 490 134 171 Proceeds/ (decrease) from long term borrowings 115 586 235 896 (29 022) 134 171 Issue of linked units 224 512 - 224 512 -
Net decrease in cash and cash equivalents (2 206) (15 544) (2 210) (15 551) Cash and cash equivalents at the beginning of the year 26.5 (15 654) (110) (15 665) (114) Cash and cash equivalents at the end of the year 26.5 (17 860) (15 654) (17 875) (15 665)
22 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008
1. Accounting policies distributable reserve.
The annual financial statements have been prepared in 1.4 Investment property accordance with International Financial Reporting Standards and the Companies Act of South Africa. The annual financial Investment properties are properties held to earn rentals and statements have been prepared on the historic cost basis, except appreciate in capital value. Investment property is recognised for the measurement of investment property at fair value, and as an asset when, and only when, it is probable that the future incorporate the principal accounting policies, set out below. economic benefits that are associated with the investment property, will flow to the enterprise, and the cost of the investment 1.1 Basis of consolidation property can be measured reliably.
The consolidated financial statements incorporate the financial Investment property is initially recognised at cost. Transaction statements of the Company and entities (including special costs are included in the initial measurement. Subsequent purpose entities) controlled by the Company (its subsidiaries). expenditure relating to investment property that has been Control is achieved where the Company has the power to govern recognised is added to the carrying amount of the investment the financial and operating policies of an entity so as to obtain property when it is probable that future economic benefits, in benefits from its activities. excess of the originally assessed standard of performance of the existing investment property, will flow to the enterprise. All other The results of subsidiaries acquired or disposed of during the subsequent expenditure is expensed in the period in which it is year are included in the consolidated income statement from the incurred. effective date of acquisition or up to the effective date of disposal, as appropriate. Fair value At the balance sheet date all investment property is measured at Where necessary, adjustments are made to the financial fair value. Independent valuations are obtained on a rotational statements of subsidiaries to bring their accounting policies into basis ,ensuring that every property is valued every three years. line with those used by other members of the Group The directors value the entire property portfolio on an annual All intra-group transactions, balances, income and expenses are basis. These fair values of property exclude accrued operating eliminated in full on consolidation. lease income. A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arises and 1.2 Business combinations transferred to a non-distributable reserve. Land and buildings is not depreciated. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition 1.5 Property, plant and equipment is measured as the aggregate fair value of the underlying assets given, equity instruments issued and liabilities incurred or The cost of an item of property, plant and equipment is recognised assumed at the date of exchange, plus costs directly attributable as an asset when to the acquisition. Identifiable assets acquired and liabilities and · it is probable that future economic benefits associated with contingent liabilities assumed in a business combination are the item will flow to the Company; and measured initially at their fair values at the acquisition date. The excess of cost of the acquisition over the fair value of the · the cost of the item can be measured reliably. Group’s share of the identifiable net assets acquired is recorded as goodwill and is tested for impairment on an annual basis. Property, plant and equipment are stated at cost less depreciation and any accumulated impairment losses. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised Subsequent expenditure relating to an item of property, plant directly in the income statement. An impairment loss recognised and equipment that has already been recognised is added to the for goodwill is not reversed in a subsequent period. On disposal of carrying amount of the asset to the extent that it is probable that a subsidiary, attributable goodwill is included in the determination future economic benefits, in excess of the originally assessed of the profit or loss on disposal. standard of performance of the existing asset, will flow to the enterprise. 1.3 Reserves The residual value and the useful life of each asset are reviewed Realised profits on the disposal of investment property, although at each financial year end. Each part of an item of property, plant legally distributable, are transferred to a non-distributable and equipment with a cost that is significant in relation to the reserve as it is the group’s policy to regard such profits as not total cost of the item is depreciated separately. being available for distribution. Gains and losses on revaluation of investment property are similarly transferred to a non- The depreciation charge for each period is recognised in profit or loss.
23 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
Depreciation is provided on all property, plant and equipment Trade and other receivables to write down the cost, less estimated residual value by equal Trade receivables are measured on initial recognition at fair instalments over the shorter of the lease term or their useful lives value, and are subsequently measured at amortised cost using as follows: the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss · Plant and equipment - 5 to 20 years when there is objective evidence that the asset is impaired.
· Improvements to leasehold property are written off over the Trade and other payables period of the lease. Trade and other payables are initially measured at fair value and · The gain or loss arising from the disposal or retirement are subsequently measured at amortised cost, using the effective of an asset is determined as the difference between the interest rate method. sale proceeds and the carrying amount of the asset and is Cash and cash equivalents recognised in the income statement. Cash and cash equivalents comprise cash on hand and demand 1.6 Investments in subsidiaries deposits, and other short-term investments that are readily convertible to a known amount of cash and are subject to an Investments in subsidiaries are stated in the Company’s financial insignificant risk of changes in value. These are initially and statements at cost, less any impairment losses. subsequently recorded at fair value.
1.7 Investment in associates Financial liabilities Interest bearing loans, debentures and overdrafts are recorded at An associate is an enterprise in which the investor has significant the proceeds received net of direct issue costs. Finance charges influence and which is neither a subsidiary nor a joint venture of are accounted for on an annual basis and are added to the the investor. Significant influence is the power to participate in the carrying amount of the instrument to the extent that they are not financial and operating policy decisions of the investee but is not settled in the period in which they arise. control or joint control over those policies. 1.9 Taxation In the group financial statements, an investment in an associate is accounted for using the equity method, except when the Current tax assets and liabilities asset is classified as held-for-sale. Under the equity method, the Current tax for current and prior periods is, to the extent unpaid, investment is initially recognised at cost and the carrying amount recognised as a liability. If the amount already paid in respect is increased or decreased to recognise the group’s share of the of current and prior periods exceeds the amount due for those profits or losses of the investee after acquisition date. The use of periods, the excess is recognised as an asset. the equity method is discontinued from the date the Company ceases to have significant influence over an associate. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) Any impairment losses are deducted from the carrying amount of the tax authorities, using the tax rates (and tax laws) that have the investment in associate. been enacted or substantively enacted by the balance sheet date.
Profits and losses resulting from transactions with associates are Deferred tax assets and liabilities recognised only to the extent of unrelated investors’ interests in A deferred tax liability is recognised for all taxable temporary the associate. differences, except to the extent that the deferred tax liability arises from: In the Company’s financial statements, an investment in an associate is carried at cost less any impairment losses. · the initial recognition of goodwill; or
1.8 Financial instruments · goodwill for which amortisation is not deductible for tax purposes; or Initial recognition and measurement The group classifies financial instruments, or their component · the initial recognition of an asset or liability in a transaction parts, on initial recognition as a financial asset, a financial liability which: or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised – is not a business combination; and when the Company becomes a party to the transaction. Initial – at the time of the transaction, affects neither accounting measurement is at cost, which includes transaction costs. profit nor taxable profit (tax loss).
Subsequent to initial recognition, these instruments are measured A deferred tax asset is recognised for all deductible temporary as follows: differences to the extent that it is probable that taxable profit will
24 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued be available against which the deductible temporary difference recognised when it is due in terms of the lease agreement. can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that: Income from investments Interest is recognised on a time proportion basis that takes into · is not a business combination; and account the effective yield on the asset.
· at the time of the transaction, affects neither accounting Dividends are recognised on the shareholder’s right to receive profit nor taxable profit (tax loss). payment.
A deferred tax asset is recognised for all deductible temporary 1.12 Cash and cash equivalents differences arising from investments in subsidiaries, branches and associates, and interests in joint ventures, to the extent that it is Cash and cash equivalents consist of cash on hand and balances probable that: with banks.
· the temporary difference will reverse in the foreseeable 1.13 Non-Distributable Reserves future; and Non-distributable reserves comprise of the fair value reserve and · taxable profit will be available against which the temporary the capital reserve. difference can be utilised. 1.14 Comparative figures A deferred tax asset is recognised for the carry forward of unused Where necessary, comparative figures have been adjusted to tax losses and unused STC credits to the extent that it is probable conform with changes in presentation in the current year. These that future taxable profit will be available against which the include changes to reclassification of certain borrowings. unused tax losses and unused STC credits can be utilised. 1.15 Impairment of assets Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised The group (Company) assesses at each balance sheet date whether or the liability is settled, based on tax rates (and tax laws) that there is any indication that an asset may be impaired. If any such have been enacted or substantively enacted by the balance sheet indication exists, the group (Company) estimates the recoverable date. amount of the asset.
Tax expenses If there is any indication that an asset may be impaired, Current and deferred taxes are recognised as income or an recoverable amount is estimated for the individual asset. If it is expense and included in profit (loss) for the period, except to the not possible to estimate the recoverable amount of the individual extent that the tax arises from: asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. · a transaction or event which is recognised, in the same or a different period, directly in equity or The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. · a business combination If the recoverable amount of an asset is less than its carrying Current tax and deferred taxes are charged or credited directly to amount, the carrying amount of the asset is reduced to its equity if the tax relates to items that are credited or charged, in recoverable amount. That reduction is an impairment loss. the same or a different period, directly to equity. An impairment loss of assets carried at cost less any accumulated 1.10 Provisions and contingencies depreciation or amortisation is recognised immediately in profit Provisions are recognised when the Group/Company has a present or loss. Any impairment loss of a revalued asset is treated as a obligation as a result of a past event which will probably result in revaluation decrease. an outflow of economic benefits that can be reasonably estimated. An entity assesses at each reporting date whether there is any The amount of a provision is the present value of the expenditure indication that an impairment loss recognised in prior periods expected to be required to settle the obligation. for assets other than goodwill may no longer exist or may have 1.11 Revenue recognition decreased. If any such indication exists, the recoverable amounts of those assets are estimated. Rental income Comprises revenue from rental income and related recoveries and A reversal of an impairment loss of assets carried at cost less excludes value added taxation. The income is recognised on the accumulated depreciation or amortisation other than goodwill straight line basis over the lease term. Turnover based rental is is recognised immediately in profit or loss. Any reversal of an im- pairment loss of a revalued asset is treated as a revaluation increase.
25 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
1.16 Significant judgements 1.18 Leases
In preparing the annual financial statements, management A lease is classified as a finance lease if it transfers substantially is required to make estimates and assumptions that affect all the risks and rewards incidental to ownership. A lease is the amounts represented in the annual financial statements classified as an operating lease if it does not transfer substantially and related disclosures. Use of available information and the all the risks and rewards incidental to ownership. application of judgement is inherent in the formation of estimates. Operating leases - lessor Actual results in the future could differ from these estimates which may be material to the annual financial statements. Contractual rental income is recognized on a straight-line basis Information regarding judgements that have the most significant over the period of the lease term. effect on the amounts recognised in the financial statements as An adjustment is made to contractual rental income earned to well as key sources of estimation uncertainty are set out in notes bring to account in the current period the difference between the 1.4 and 1.5. rental income that the Company is currently entitled to and the rental for the period calculated on a smoothed straight-line basis. 1.17 Statements and interpretations not yet effective Initial direct costs incurred in negotiating and arranging operating At the date of authorisation of these annual financial statements, leases are added to the carrying amount of the leased asset and the following Standards and Interpretations were in issue but not recognized as an expense over the lease term on the same basis as yet effective: the lease income. Effective Income for leases is disclosed under revenue in the income IFRS 2 Share-based Payments 1 January 2009 statement. IFRS 3 Business Combinations 1 July 2009 1.19 Compound instruments IFRS 8 Operating Segments 1 January 2009 Linked units are classified as compound instruments, consisting IAS 1 Presentation of financial statements 1 January 2009 of a liability component and an equity component. At the date IAS 23 Borrowing Costs 1 January 2009 of issue, the liability component is recognised at fair value. Consolidated and separate financial Subsequent to initial recognition the liability component is IAS 27 statements 1 July 2009 recognised at amortised cost. The premium relating to the liability IFRIC 11 IFRS 2 Group and treasury transactions 1 March 2009 component is amortised over the period to the maturity date of the IFRIC 12 Service concessions arrangements 1 January 2009 debenture. IFRIC 13 Customer Loyalty programmes 1 July 2008 IAS 19 the limit on a defined benefit asset, 1.20 Borrowing costs minimum funding requirements and their interaction Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as The group has not early adopted any of these pronouncements. part of the cost of that asset until such time as the asset is ready The new standards, amendments and interpretations that are for its intended use. The amount of borrowing costs eligible for expected to be relevant to the Group’s financial statements are as capitalisation is determined as follows: follows . · Actual borrowing costs on funds specifically borrowed IAS 1: This statement relates to the presentation of the owners for the purpose of obtaining a qualifying asset less any changes in equity and introduces a statement of comprehensive temporary investment of those borrowings. income. This amendment does not affect the financial position or · Weighted average of the borrowing costs applicable to the results of the group but will result in additional disclosure. the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised IAS 23: This amendment requires the capitalisation of borrow- do not exceed the total borrowing costs incurred. ing costs directly attributable to the acquisition, production or construction of qualifying assets that need time to get ready for The capitalisation of borrowing costs commences when: intended use. Premium Properties have always adopted the policy · expenditures for the asset have occurred; of capitalising borrowing costs therefore the intended change will · borrowing costs have been incurred, and not have an impact on the financial position of the group. · activities that are necessary to prepare the asset for its IFRS 8: This standard specifies how an entity should report infor- intended use or sale are in progress. mation about operating segments in it financial position. Premium Capitalisation ceases when substantially all the activities Properties does not currently provide a segmental report and this necessary to prepare the qualifying asset for its intended use or standard will result in additional disclosure but has no effect on sale are complete. the financial position. All other borrowing costs are recognised as an expense in the period in which they are incurred.
26 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
2. Investment properties (Note 10) Fair value At beginning of year 1 737 765 1 197 743 - - Property acquisitions 123 573 126 600 29 052 - Improvements 212 816 112 356 - - Interest capitalised 15 490 5 095 - - Net gain from fair value adjustment of investment properties 230 927 306 528 - - Impairments - (8 777) - - Property disposals - (1 780) - - 2 320 571 1 737 765 29 052 - Straight lining of operating leases 29 651 37 800 2 418 4 828 At end of year 2 350 222 1 775 565 31 470 4 828
2.1 Details of investment properties The fair value of the investment properties of the group has been determined by the directors on 29 February 2008 taking into account prevailing market rentals, occupation levels and capitalisation rates. A schedule of investment properties owned by the group is set out on pages 39 to 44. A register of investment properties is maintained at the Company’s registered office which may be inspected by members or their duly authorised agents. The group has pledged most of its investment properties to secure banking facilities granted to the group.
3. Property, plant and equipment Cost Improvements to leasehold property 17 239 17 239 Plant and equipment 7 706 4 869 24 945 22 108
Accumulated depreciation Improvements to leasehold property 1 522 1 234 Plant and equipment 3 616 2 583 5 138 3 817
Carrying value Improvements to leasehold property 15 717 16 005 Plant and equipment 4 090 2 286 19 807 18 291
3.1 Movement for the year Additions - Plant and equipment 2 579 141 Depreciation (1 064) (849) 1 515 (708)
27 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
4. Investment in subsidiaries Shares at cost (note 10) 22 348 22 348 Loans to subsidiaries (note 10) 838 452 692 183 - Cost 840 705 694 436 - Impairment losses (2 253) (2 253) 860 800 714 531 The loans are unsecured, and bear interest at variable rates (2007: 19%) and are repayable by mutual consent
Fair Value of loans to subsidiaries 838 452 692 183
A schedule of the Company’s interest in subsidiaries is fully set out on page 45. The aggregate amounts of profits after tax of the subsidiaries amounts to R205 179 000 (2007: R241 910 000). Shares and loan accounts of certain subsidiary companies have been pledged and ceded to secure banking facilities granted to the group.
5. Investment in associate 40% interest in unlisted shares of IPS Investments (Proprietary) Limited a Company involved in property investment and development deriving income from rentals of which 40% of the voting power is held.
Carrying value of investment: Shares at cost 1 1 1 1 Loan to associate 59 603 20 577 59 603 20 577 Reserves since acquisition 101 106 70 258 - - 160 710 90 836 59 604 20 578 Directors’ valuation 160 710 90 836 59 604 20 578
Summary of financial information of IPS Investments (Proprietary) Limited (100%) Assets Non-current 719 056 456 764 Current 14 021 16 088 733 072 472 852
Equity and liabilities Equity capital and reserves 256 432 175 647 Non-current liabilities 441 596 275 180 Current liabilities 35 049 22 125 733 077 472 852 Turnover 67 737 48 035 Net profit 91 424 50 580
An amount of R267 276 910 has been committed for by the Group in respect of capital expenditure to be undertaken by IPS Investments (Pty) Ltd
6. Trade and other Receivables Trade debtors 15 765 9 513 1 660 681 Sundry Receivables 4 603 9 845 1 193 966 20 368 19 358 2 853 1 647
28 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
All trade and other receivables are short term in nature. The carrying value of trade receivables is considered a reasonable approximation of Fair Value. All of Premium Properties trade and other receivable have been reviewed for impairment. Certain trade receivables were found to be impaired and a provision of R6 062 938 (2007: R4 094 839) has been recorded accordingly. The impaired trade receivables are from tenants who are experiencing financial difficulties. The age analysis of trade receivables outstanding is as follows Not more than 30 days 14 474 7 938 1 553 497 More than 30 days less that 60 days 866 1 159 68 109 More than 60 days 425 416 39 75 Total 15 765 9 513 1 660 681
Reconciliation of provision for bad debts Balance at the beginning of the year 4 094 2 033 997 660 Provisions during the year 3 264 2 872 - 337 Amounts written off during the year (1 296) (811) (448) - Balance at the end of the year 6 062 4 094 549 997
7. Share capital Authorised - Par value shares: 200 000 000 Ordinary shares of 1 cent each 2 000 2 000 2 000 2 000 Issued: 130 106 442 (2007: 113 607 039) Ordinary shares of 1 cent each 1 301 1 136 1 301 1 136 Balance at the beginning of the year 1 136 1 136 1 136 1 136 Issue of new shares during the year 165 - 165 -
Share premium 1 206 213 1 206 213 Balance at the beginning of the year 213 213 213 213 Issue of new shares during the year 998 - 998 - Issue costs (5) - (5) - 2 507 1 349 2 507 1 349 69 893 558 unissued ordinary shares of 1 cent each are under the control of the directors subject to the conditions of paragraph 6.1 of the Company’s Memorandum of Association and the requirement of the JSE. This authority remains in force until the Company’s next annual general meeting.
8. Non-distributable reserves Capital reserve 26 149 20 757 68 226 62 834 Fair value reserve - Investment property 777 376 603 361 - - - Associate 98 419 65 415 - - Fair value reserves comprise all fair value adjustments that are recognised directly in equity and/or transfers from retained earnings 901 944 689 533 68 226 62 834
29 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
9. Debentures and premium Issued 130 106 442( 2007:113 607 039) unsecured variable debentures of 149 cents each 193 864 169 274 193 864 169 274 Balance at the beginning of the year 169 274 169 274 169 274 169 247 Issue of new units during the year 24 590 - 24 590 - Debenture premium at the end of the year 224 102 30 730 224 102 30 730 Debenture premium at the beginning of the year 30 730 32 430 30 730 32 430 Debenture Premium on new issue 198 764 - 198 764 - Amortisation of debenture premium during the year (5 392) (1 700) (5 392) (1 700) 417 966 200 004 417 966 200 004
The issue of each debenture is linked to one ordinary share in the share capital of the Company, together comprising one linked unit. Any further issues of linked units will be in the same ratio. In terms of the debenture trust deed, the aggregate interest entitlement of every debenture linked to each ordinary share in respect of any financial year shall be 200 times the dividend declared on each ordinary share for the same period. The debentures are redeemable after 25 years from date of allotment.
10. Long-term borrowings Secured loans Nedbank Group Limited 639 016 444 524 377 313 346 357 Loans bearing interest at a fixed rate of 11.01% (2007: 11.96%) per annum, applicable until 6 September 2010. 140 000 140 000 140 000 140 000 Loans bearing interest at rates of 2.15% (2007 : between 1.5% and 2%) below the prime bank overdraft rate. 301 216 106 724 60 625 29 669 Loan bearing interest at 9.44% per annum (2007: 9.44%) applicable until 1 May 2009. 97 800 97 800 76 688 76 688 Loans bearing interest at a fixed rate of 10.89% per annum, applicable until 31 October 2009. 100 000 100 000 100 000 100 000 The loans are secured by first covering mortgage bonds over investment property of certain subsidiaries with a fair value of R1 549 750 927 (2007: R937 639 196). The expiry dates of the loans are between 31 October 2009 and 31 January 2013.
Investec Bank Limited - 69 536 - 59 978 The loan is secured by a first covering mortgage bond over investment property of a certain subsidiary and interest was payable at a fixed rate of 1.5% below the prime bank overdraft rate. - 9 558 - - Loan secured by pledge of shares and cession of loan accounts and first covering mortgage bonds over investment property of certain subsidiaries and the loan bears interest at a fixed rate of 11.72% per annum, applicable until 28 August 2007. The repayment date is 28 August 2007. - 59 978 - 59 978
30 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
Standard Bank of SA Limited 117 238 125 799 - - Loan secured by participating mortgage bonds over investment property of a certain subsidiary having a book value of R191 002 235 (2007: R150 553 997). The loans bear interest at a fixed rate of 11.1% per annum applicable until 4 September 2009. 63 174 63 174 - - Loans secured by first covering mortgage bonds over investment properties of certain subsidiaries with fair value of R65 929 299 (2007: R58 706 229) The loans bear interest at 1.75% (2007 1.5%) below the prime bank overdraft rate and are repayable by 3 March 2010. 12 918 21 479 - - Loan secured by participation mortgage bonds over investment property of a certain subsidiary with fair value of R71 453 857 (2007: R63 906 386). The loan bears interest at a fixed rate of 10.81% per annum applicable until 31 October 2009. 41 146 41 146 - -
National Urban Reconstruction and Housing Agency The loan bears interest at 1.5% (2007: 2%) below the prime bank overdraft rate and is repayable on 31 May 2012. 5 478 5 315 - -
ABSA Bank Limited Loan secured by first mortgage bond over investment property of a certain subsidiary with fair value of R23 044 451 (2007: R16 395 901).The loan bears interest at 1% below the prime overdraft rate and is repayable in monthly instalments of R87 864 inclusive of finance charges. 4 211 5 181 - - Total 765 943 650 357 377 313 406 335
Non-current 765 465 575 208 377 313 406 335 Current 478 75 149 - - 765 943 690 335 377 313 406 335
The average cost of borrowings is 11.4% which was 3.1% below prime overdraft rate. At year end 58% of the borrowings were fixed at an average rate of 10.6%. The remaining is financed through variable rate borrowings at an average of 12.4%.
11. Deferred taxation Deferred tax liability Fair value adjustment of investment properties 281 845 226 798 - - Accelerated capital allowances 16 449 8 422 - - Straight line rental income accrual 8 306 10 966 676 1 400 Provision and allowances - - (115) - Tax losses available for set off against future taxable income (12 050) (4 337) - - 294 550 241 849 561 1 400 11.1 Movement for the year At beginning of year 241 849 152 382 1 400 1 367 (Reversing)/ Originating - Straight line rental income accrual (2 660) 2 191 (724) 33 Originating - Accelerated capital allowances 8 027 4 504 - - Reversing - Tax losses available for set off against future taxable income (7 713) (814) - - Originating - provisions and allowances - (115) - Originating - Fair value adjustment of investment properties 55 047 83 586 - - At end of year 294 550 241 849 561 1 400
31 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
12. Trade and other payables Trade Payables 10 538 1 975 3 576 134 Other Payables 54 241 27 791 6 325 5 344 Total 64 779 29 766 9 901 5 478
All amounts are short term. The carrying values are considered to be a reasonable approximation of fair value.
13. Revenue Rent received - Minimum payments 244 819 190 344 42 580 33 311 - Straight lining of operating leases (8 149) 7 540 (2 410) 183 Electricity and water recovered 37 579 25 174 7 367 4 578 Total 274 249 223 058 47 537 38 072
14. Operating profit Operating profit is stated after accounting for the following: Charges Auditors’ remuneration 607 403 607 403 - Audit fee 607 400 607 400 - Fees for other services 3 3 Depreciation and amounts written off 1 064 850 358 361 Directors’ remuneration - For services as directors 429 397 429 397 Operating lease charges 627 293 - Listing and documentation fees 172 143 172 143 Fees for managerial services - Administration fee 12 028 8 171 - - - Collection charges 18 158 13 917 - - - Commission paid 2 820 1 769 - - Employee cost 4 919 4 420 573 841
15. Income from subsidiaries Dividends - 10 000 Interest received 105 448 86 353 Management fees received 16 450 8 129 121 898 104 482
16. Income from investments - Interest received 2 255 958 643 238
32 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
17. Income from associate Interest received 6 504 2 918 6 504 2 918 Management fees received 1 598 1 229 1 598 1 228 Dividends 3 624 - 3 624 - Share of equity accounted earnings (2 156) 2 569 - - Share of fair value reserve 33 004 16 926 - - 42 574 23 642 11 726 4 146
18. Finance charges Interest on Debentures 109 393 81 945 109 393 81 945 Less prepaid distribution (3 508) (3 508) Bank overdraft 552 128 552 128 Interest on borrowings Secured loans 81 898 57 493 46 007 41 320 Other - 444 - - 188 335 140 010 152 444 123 393 Capitalised to cost of investment properties (15 490) (5 095) - - 172 845 134 915 152 444 123 393
19. Taxation 19.1 Major components of tax expense Current year - - - - Secondary tax on companies (21) - 4 - Deferred taxation - Fair value adjustment of investment properties 55 047 83 586 - - - Tax losses available for set off against future taxable income (7 714) (814) - - - Operating lease asset (2 660) 2 192 (724) 53 - Accelerated allowances 8 027 4 505 (115) - 52 679 89 469 (835) 53 19.2 Reconciliation between applicable tax rate and average effective tax rate Effective tax rate 20% 26% (45%) 21% Non-deductible expenses - - (16%) (16%) Tax losses carried forward 5% - (131%) (261%) Reduction in tax rate 1% 4% Exempt income 3% 3% 217% 285% Applicable tax rate 29% 29% 29% 29%
19.3 No provision has been made in the Company for 2008 normal taxation in view of the tax loss incurred. The estimated tax loss available for set-off against future taxable income amounts to R11 047 074 (2007: R9 657 821).
33 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
20. Minimum future rentals receivable 20.1 Non-cancellable rental lease agreements Not later than one year 215 975 194 500 Later than one year and not later than five years 230 046 220 586 Later than five years 1 686 2 872 447 707 417 958
Rental receivable represents contractual rental income excluding other recoveries for leases in existence at 29 February 2008
21. Contingencies The Company has given the following guarantees and sureties: - R1 600 000 in favour of the City of Tshwane Metropolitan Municipality for the provision of certain services to its subsidiaries - R62 640 000 to Nedbank Property Finance for loan facilities granted to its associate Company, IPS Investments (Proprietary) Limited and R98 167 431 for loan facilities granted to its subsidiaries. - R10 874 900 to Standard Bank Properties for loan facilities granted to its associate Company, IPS Investments (Proprietary) Limited. - R129 705 180 to Standard Bank Properties for loan facilities granted to its subsidiaries. - R5 000 000 to National Urban Reconstruction & Housing Agency for loan facilities granted to a subsidiary. - R6 000 000 to ABSA Bank Limited for loan facilities granted to its subsidiaries.
22. Commitments An amount of R386 199 508 (2007: R324 018 039) has been committed for by the group in respect of capital expenditure relating to the improvement and acquisition of certain properties. These developments will be financed by way of existing facilities as well as additional funding from the group’s bankers.
23. Earnings and headline earnings Earnings and headline earnings per linked unit are based on the profit attributable to linked unitholders and the weighted average number of linked units in issue during the year. The weighted average number of linked units in issue for the year under review was 122 644 814 (2007: 113 607 039). Weighted average number of shares 1 March 2007 - 366 days 113 607 039 113 607 039 Issue 8 August 2007 - 13 632 019 units - 205 days 7 635 420 - Issue 3 September 2007 - 2 867 384 units - 179 days 1 402 355 - Total weighted average shares in issue 122 644 814 113 607 039
Earnings per share - net profit after taxation 209 810 244 409 Adjusted for - Debenture premium amortised (5 392) (1 700) - Net gain from fair value adjustment of investment properties (207 019) (239 866) Headline earnings per share (2 602) 2 843 Debenture interest on linked units 105 885 81 945 Headline earnings - linked unitholders 103 284 84 788 Headline earnings per linked unit (cents) 84.2 74.6
34 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
24. Financial risk management The Group’s financial instruments consist mainly of deposits with banks, bank overdrafts, accounts receivable and payable, and loans to and from subsidiaries. In respect of all financial instruments listed above, the carrying value approximates fair value.
24.1 Credit risk Credit risk consists mainly of cash deposits, cash equivalents and trade receivables. The Company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party. Trade receivables consist of a large spread of tenants. The Group monitors the financial position of its tenants on an on-going basis. Provision is made for both specific and general bad debts and at year-end management does not consider there to be any material credit risk exposure.
24.2 Interest rate At 29 February 2008, the Group had borrowings of R765 942 723 (2006: R650 358 228) at various negotiated rates. The average interest rate for 2008 was approximately 11.4% (2007: 10.7%) and 58% of borrowings at year-end are fixed. Interest rate trends are constantly monitored and appropriate steps taken to ensure the Group’s exposure to interest costs is limited. The policy is to minimise interest rate cash flow risk exposure on long term financing. At the 29 February 2008, Premium is exposed to changes to market interest rates through bank borrowings. 42% of bank borrowings are subject to variable interest rates. A breakdown of the borrowings is detailed in note 10.
The table below illustrates the sensitivity of the net result for the year and equity to reasonable changes to interest rates of +/- 0.5% and +/- 1% (2007: +/- 0.5% and +/- 1) with effect from the beginning of the year. These changes are considered to be reasonably possible based on current market conditions. 2008 2007
Effect of 0.5% change R’000 R’000 R’000 R’000 +0.5% -0.5% +0.5% -0.5%
Net result for the year (1 166) 1 166 (533) 533 Equity (1 166) 1 166 (533) 533
2008 2007
Effect of 1% change R’000 R’000 R’000 R’000 +1% -1% +1% -1%
Net result for the year (2 332) 2 332 (1 065) 1 065 Equity (2 332) 2 332 (1 065) 1 065
Subsequent to year end, the Company hedged further borrowings to the value of R 302 million at an average rate of 12.5% for 5-10 years. The fixed portion of long term borrowings is 90.9% compared to 58% at year end. A 0.5% fluctuation in the interest rate will result in a R320 000 annual change in net results for the year and in equity
Cash flow interest rate risk
Due in Less Current than one Due in one to Due in two to Due in three Due after Financial Instrument Interest Rate year two years three years to four years five years R’000 R’000 R’000 R’000 R’000 Floating Borrowings 12.35 - 13% 19 925 19 857 19 780 19 691 34 566 Fixed borrowings 9.44% - 11.1% 45 304 40 871 20 141 10 503 10 503
35 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
24.3 Liquidity risk The companies risk to liquidity is a result of the funds available to cover future commitments. Cash flows are monitored on a monthly basis to ensure that cash resources are adequate to meet funding requirements.
The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed are the undiscounted cash flows.
Less than 1 Between 1 Between 2 year and 2 years and 5 years Over 5 years R’000 R’000 R’000 R’000
Borrowings 478 282 118 306 406 176 941 Trade and other payables 64 779 Bank overdraft 18 565 Distribution to unitholders 57 247
25. Related parties and related party transactions Related parties where control existed during the year are as follows: Directors: J P Wapnick A Wapnick S Wapnick M Z Pollack M J Holmes Companies: City Property Administration (Pty) Ltd Tugendhaft Wapnick Banchetti & Partners
25.1 Related party with whom the group transacted during the year: City Property Administration (Proprietary) Limited Relationship: Company which manages the group’s property and unlisted investment portfolios and over which significant influence is exercised by certain of the above mentioned directors. Pricing policy: - Fixed percentage of collections made. - Percentage of property acquisitions and property sales. - Fixed percentage of the aggregate of the group’s average market capitalisation and total indebtedness to banks and other financial institutions in respect of mortgage bond loans.
Average market capitalisation (based on daily closing price) plus secured loans: 0.5% Collection fee: Commercial: 5% of gross receipts Residential: 7.5% of gross receipts Major repairs and renovations: 5% Properties disposed of: Institute of Estate Agents recommended tariff and in excess of R6,0 million by agreement between parties. Letting fee: Commercial: 50% of the SAPOA tariff in respect of new commercial leases and R1 000 or 50% of the first months rental, which ever is the lesser in respect of existing leases. Residential: R500 in respect of new residential leases. Acquisition of properties: 3% of cost and in excess of R6,0 million by agreement between parties New construction and development: By agreement between parties
36 Premium Properties Limited
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
25.1 Related parties and related party transactions (continued) Type of transactions: Income - Rental of property 145 161 145 161 Expenditure - Administration fees 12 028 8 171 12 028 8 171 - Collection fees 18 158 13 917 3 163 2 381 - Commissions paid 2 663 1 769 527 314 Investment property - Commissions paid on acquisition of investment property and major improvements to investment property 3 680 4 858 - - Accounts payable - Creditor 297 3 414 28 3 177 Accounts receivable - Debtor 46 49 - -
25.2 Related party with whom the group transacted during the year: Tugendhaft Wapnick Banchetti & Partners Relationship: Company which assisted the group with some professional opinions and over which significant influence is exercised by an above mentioned director. Pricing policy: Market related. Expenditure Legal Fee 59 - - - Professional fees 91 176 91 176
26. Cash flow statement 26.1 The following convention applies to figures other than adjustments. Outflows of cash are represented by figures in brackets. Inflows of cash are represented by figures without brackets.
26.2 Reconciliation of operating profit to cash generated from operations Profit before taxation: 262 489 333 878 3 796 2 552 - Straight-lining of operating leases 8 149 (7 540) 2 410 (113) - Depreciation and amortisation 1 064 850 - - - Income from equity accounted investments (42 574) (23 642) (11 726) (4 146) - Dividends received - - (10 000) - Interest received (2 255) (958) (122 541) (94 720) - Finance costs 172 845 134 915 152 444 123 393 - Fair value adjustments (230 927) (291 020) - - - Amortisation of debenture premium (5 392) (1 700) (5 392) (1 700) - Reversal of impairment of investment property - (15 506) - - Operating profit before working capital changes 163 399 129 277 18 991 15 266 - Trade and other receivables (1 010) (11 341) (1 207) (771) - Trade and other payables 35 013 (3 786) 4 422 (4 116) Cash generated from operations 197 402 114 150 22 206 10 379
37 Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS for the year ended 29 February 2008 continued
GROUP COMPANY 2008 2007 2008 2007 R’000 R’000 R’000 R’000
26.3 Distribution to linked unitholders Distribution to linked unitholders owing at beginning of year (44 080) (37 490) (44 080) (37 490) Debenture interest per income statement (105 885) (81 945) (105 885) (81 945) Dividends per income statement (546) (420) (546) (420) Distribution to linked unitholders owing at end of year 57 247 44 080 57 247 44 080 (93 264) (75 775) (93 264) (75 775) 26.4 Normal tax refunded Normal taxation in advance at beginning of year - - - - Per income statement 21 - - - Normal taxation owing at end of year - - - - 21 - - -
26.5 Cash and cash equivalents Cash and cash equivalents included in the cash flow statements comprise the following balance sheet amounts: Funds at call, bank balances and cash 705 574 690 563 Bank overdraft (18 565) (16 228) (18 565) (16 228) (17 860) (15 654) (17 875) (15 665)
27. Prior period adjustments Loans to Investec have been reclassified from long term to short term borrowing. The above results in adjustments as follows Balance sheet items - decrease in long term borrowings - (69 536) - - - increase in short term borrowings - 69 536 - -
28. Segmental reporting The group earns revenue in the form of property rentals. On a primary basis the group is organised into four major operating segments: - Industrial - Office - Retail - Residential - Commercial Details of the revenue by sector are included on page 4. Further segment results cannot be allocated on a reasonable basis due to the ‘mixed use’ of certain of the properties. It is the Company’s investment philosophy to invest only in properties situated in the Gauteng area, therefore the Company has not reported on a geographical basis.
38 Premium Properties Limited
SCHEDULE OF INVESTMENT PROPERTIES OWNED By THE GROUP for the year ended 29 February 2008
Gross Name of Description of Location of Description of Extent lettable Property Value property property held property improvements of land area Vacancy (Rands) m2 m2 % 2008 2007 Arcadia, Pretoria Apollo Centre Erf 1111, Arcadia 210 Du Toit Street Shops and offices 2,552 9,777 57.9 17,649,591 16,644,032 Ptn 1 of Ef 34, Shops, offices, Benrico Arcadia 417 Church Street store & parking 1,499 2,680 50.5 2,767,005 1,368,138 BP Leyds Cnr Leyds & Garage & parking Street Erf 1484, Arcadia Pretorius Street area 5,452 - 10,864,421 8,802,804 Corner Ptn 6 of Erf 77, 243 & 249 Place Arcadia, Pta Hamilton Street 112 flats 1,913 3,677 1.7 26,934,199 24,791,404
Gilboa Erf 1249, Arcadia 50 Hamilton Street Offices 1,682 3,436 - 11,736,476 - L.P.A. Remainder of Erf 62, 484 Pretorius Beleggings Arcadia, Pta Street Shops & workshop 1,914 1,196 - 2,706,211 2,404,244 Remainder of Erf Leo’s Place 1079 451 Church Street Shops & 179 flats 3,416 5,469 - 45,498,155 39,944,183 MBA Building Ptn 1 Erf 75, Arcadia 527 Church Street Offices 1,278 2,850 - 8,318,549 - Shops & vacant Numall Erf 1317, Arcadia 439 Church Street land 8,588 5,220 7.5 18,496,255 15,898,745
Provisus Erf 1186, Arcadia 523 Church Street Offices 2,552 5,894 - 13,032,234 - 30,846 40,199 - 158,003,096 109,853,550
Pretoria Central
Alec’s Place Ptn 1 of Erf 550, Pta 321 Bosman Street Shops and 95 flats 1,357 7,241 4.6 24,284,880 24,269,380 Amanda Ptn 1 of Erf 3095, 245 Schoeman Court Pta Street Shops and 16 flats 2,186 2,918 11.8 10,788,436 8,476,154
AVN Erf 3343, Pta 360 Andries Street Shops & offices 2,374 6,978 - 20,408,440 17,842,410 ABSA Ptn 4 of Erf 250 Pretorius Pretorius 418,Pretoria Street Shops & offices 812 3,260 26.0 8,052,596 - Ptn 3 of Erf 318, Boschurch Pretoria 193 Bosman Street Shops 638 926 - 4,031,795 3,159,750 Shop, basement Remainder of Erf and 7 floors of Burlan 370, Pta 41 Bureau Lane offices 480 1,747 15.8 7,722,230 5,898,079 Shops, 5 floors 296 Schoeman of offices and Centloch Ptn 2 of Erf 520, Pta Street basement 752 3,517 49.7 9,727,064 9,096,443 Central Shops & 3 floors of House Erf 422, Pta 223 Central Street offices 2,552 5,107 19.6 44,851,900 31,340,607
City Place Erf 3039, Pta 111 Church Street Shops & 298 flats 5,725 14,574 22.8 65,817,945 58,307,569
Curpro Erf 2820, Pta 247 Proes Street Motor showroom 2,552 168 - 2,214,990 2,212,384
Ptn 10 of Erf 371 206 Andries Street Shops & offices 348 1,129 2.4 45,937,849 39,735,908 Basement, shops & Cuthchurch Ptn 6 of Erf 371, Pta 259 Church Street offices 375 2,360 - - - Basement, shops & Ptn 9 of Erf 371, Pta 210 Andries Street offices 1,828 5,601 - - - 395 Pretorius Daloria Ptn 4 of Erf 484, Pta Street Shops 1,873 1,564 13.4 5,652,127 5,358,262 Demar Remainder of Erf 371 Schoeman Shops, basement Building 577, Pta Street parking and 70 flats 2,225 5,112 46.9 15,543,984 11,609,390 266 Pretorius Die Meent Erf 3364, Pta Street Shops & offices 7,582 29,794 50.7 63,515,998 57,740,663
39 Annual Report 2008
SCHEDULE OF INVESTMENT PROPERTIES OWNED By THE GROUP for the year ended 29 February 2008 continued
Gross Name of Description of Location of Description of Extent lettable Property Value property property held property improvements of land area Vacancy (Rands) m2 m2 % 2008 2007
Erf 2868, Pta 26 Andries Street Shops 1,317 1,250 10.8 10,203,307 8,644,302
Ptn 1 of Erf 168, Pta 83 Du Toit Street Shops 609 701 24.8 - -
Ptn 4 of Erf 25, Pta 34 Andries Street Shops 508 514 - - - Du Proes Ptn 6 of Erf 168, Pta 400 Proes Street Shops 1,247 1,159 - - -
Ptn 6 of Erf 25, Pta 28 Andries Street Shops 1,001 723 - - - Re of Ptn 2 of Erf 168, Pta 79 Du Toit Street Shops 522 255 - - - Filkem Ptn 15 of Erf 329, Shops, offices & House Pta 278 Church Street basement 443 1,343 8.6 10,338,619 9,229,375 FNB Church Street Ptn 3 of Erf 385, Pta 377 Church Street Shops & offices 761 2,050 - 3,290,070 2,392,212 Shops, 6 floors of offices & basement Govpret Erf 3451, Pta 319 Pretorius Street parking 2,552 6,216 2.6 25,103,005 20,000,000 Hacklu Enterprises Ptn 6 of Erf 205, Pta 359 Proes Street Shops 986 685 18.0 5,315,052 3,088,901 384 Vermeulen Shops, warehousing Erf 3238 Street & workshops 5,104 4,546 16.4 15,248,053 11,998,816 Shops, warehousing Jardown Erf 3273, Pta 377 Proes Street & offices 7,071 5,062 48.7 - - Remainder of Erf Joan’s Place 550, Pta 329 Bosman Street Shops & 28 flats 1,195 825 - 7,415,990 6,179,806 Karps Building Erf 2731, Pta 362 Church Street Shops & 6 flats 2,764 2,758 29.4 1,870,766 1,679,625
Lisa’s Place Erf 692, Pta 180 Visagie Street Flats 2,552 4,925 - 23,027,848 21,708,632 374 Schoeman Shops, offices & Erf 2959, Pta Street hospital 5,598 30,472 0.5 154,409,488 130,436,676 276 Pretorius Erf 479, Pta Street Shops & offices 2,552 718 - - - 365 Pretorius Louis Ptn 1 of Erf 480, Pta Street Shops 638 374 41.2 - - Pasteur 358 Schoeman Ptn 1 of Erf 527, Pta Street Shops & offices 1,276 4,999 - - - Remainder of Erf 363 Pretorius 480, Pta Street Shops 1,276 1,788 50.5 - - Remainder of Ptn 1 366 Schoeman of Erf 528, Pta Street Offices 782 3,265 - - - Nedbank Building Ptn 8 of Erf 327, Pta 190 Andries Street Offices 1,722 6,325 53.7 20,113,605 15,088,971 225 Vermuelen Northvaal Erf 3072, Pta Street Shops & offices 2,966 13,842 5.6 35,981,160 - Ptn 1 of Erf 2599, 327 Paul Kruger Paulefko Pta Street Shop 557 1,409 - 1,505,311 1,337,075 Perl Modes Remainder of Erf Building 3088, Pta 273 Andries Street Shops & offices 1,577 2,110 - 15,407,547 13,296,754 Perm 246 Paul Kruger Building Erf 3190, Pta Street Offices 1,862 5,965 37.2 17,156,781 14,719,446 Ptn 7 & 8 of Erf 174 Schoeman Pete’s Place 505, Pta Street Shops & 181 flats 1,782 6,908 - 44,558,728 44,268,044 Ptn 3 of Erf 3019, Cnr Potgieter & Potmeul Pta Proes Streets Vacant land 16,523 - - 1,305,070 1,305,070 Erf 2678 & Ptn 1 of 175 Du Toit & 394 Potsil Erf 343, Pta Church Street Shop & 46 flats 3,166 3,944 - 9,511,028 10,166,748 117 Van Der Walt Poyntons Erf 2841, Pta Street Shop & offices 2,001 3,146 94,7 17,861,702 16,463,263 Praetor 267 Van Der Walt Forum Erf 3387, Pta Street Shop & offices 2,132 5,628 11.5 20,785,400 18,847,553
40 Premium Properties Limited
SCHEDULE OF INVESTMENT PROPERTIES OWNED By THE GROUP for the year ended 29 February 2008 continued
Gross Name of Description of Location of Description of Extent lettable Property Value property property held property improvements of land area Vacancy (Rands) m2 m2 % 2008 2007 Premium Ptn 1 of Erf 3341, 296 Pretorius Towers Pta Street Shop & offices 1,418 6,005 20.8 30,241,539 26,594,672 385 Pretorius Erf 2774, Pta Street Shops & warehouse 2,181 1,704 40.8 17,650,105 16,408,276 386 Schoeman Erf 2858, Pta Street Shops 4,357 3,163 13.9 - - Pretjolum 391 Pretorius Ptn 2 of Erf 483, Pta Street Offices & shops 993 1,229 10.5 - - Remainder of Erf 2585 267 Du Toit Street Offices 1,785 926 71.5 - - Pretoria 218-224 Schubart Roadworthy Erf 2717, Pta Street Workshop 1,181 705 - 273,748 263,016
Prinschurch Erf 383, Pta 216 Prinsloo Street Office & shops 2,552 13,031 - 50,184,513 48,663,479 327 Schoeman Shops, offices & Erf 3452, Pta Street 175 flats 8,504 10,794 - 88,057,158 77,767,427 Ptn 1 of Erf 3432, Prinsman Pta 328 Skinner Street Shops 4,475 3,119 - - - 317 Schoeman Ptn 1 of Erf 571, Pta Street Offices & shops 1,703 5,725 - - Remainder of Erf Prinsproes 163, Pta 84 Prinsloo Street Shops & offices 2,378 4,640 14.5 10,386,630 9,400,796
Rapier Ptn 3 of Erf 198, Pta 297 Proes Street Shops 1,247 971 - 9,758,720 8,939,030
Erf 3081, Pta 385 Church Street Shops 2,812 1,979 13.4 38,055,109 32,859,528
Erf 385, Pta 379 Church Street Shops 763 803 - - - Shops, warehousing Erf 387, Pta 387 Church Street & 20 flats 2,552 2,134 61.1 - - 362 Pretorius Erf 432, Pta Street Shops & warehouse 2,552 2,808 92.5 - - 388 Pretorius Erf 435, Pta Street Shops & warehouse 2,552 1,881 33.8 - - Rezmep Ptn 1 & 2 of Erf 361 Church Street 384, Pta (East) Shops 553 859 44.6 - - Ptn 1 of Erf 388 & Reaminder of Lot 409, Pta 219 Du Toit Street Shops & 22 flats 1,485 2,434 58.0 - - 378 Pretorius Shops, offices & Ptn 1 of Erf 434, Pta Street warehousing 1,276 2,020 66.3 - - 384 Pretorius Ptn 3 of Erf 434, Pta Street Shops 1,276 2,000 - - - Remainder of Erf 388, Pta 399 Church Street Shops & hotel 1,067 3,152 10.5 - - Erf 2669, Re of Erf 213 & 221 Schubart Russel’s 356, Ptn 3 of Erf Street and 91 Place 356, Pta Church Street Shops & 191 flats 3,021 8,139 - 53,748,941 49,800,175 Scheiding 180 and 190 Place Erf 3509, Pta Scheiding Street Shops & 369 flats 7,656 10,899 - 74,310,506 66,029,641 Remainder of Erf Shops, offices and Shepstru 121, Pta 335 Struben Street houses 2,378 3,070 - 5,700,372 5,340,032 Standard Bank Remainder of Erf 236 Paul Kruger Chambers 2801, Pta Street Offices 1,741 7,745 24.8 29,434,374 29,437,521
Toitman Ptn 4 of Erf 436, Pta 225 Du Toit Street Office & shops 13,034 2,139 - 3,719,183 2,857,185 Central 286 Pretorius Towers Ptn 6 of Erf 423, Pta Street Shops & offices 1,299 7,584 52.5 22,872,088 16,323,197 70 Van Der Walt Vanstrub Erf 3059, Pta Street Shops & warehouse 5,104 4,111 13.3 27,315,645 23,529,406 Volks Remainder of Erf 218-224 Schubart Building 357, Pta Street Showroom 1,276 1,503 100.0 630,691 630,691 193,872 333,137 - 1,231,298,086 1,040,742,340
41 Annual Report 2008
SCHEDULE OF INVESTMENT PROPERTIES OWNED By THE GROUP for the year ended 29 February 2008 continued
Gross Name of Description of Location of Description of Extent lettable Property Value property property held property improvements of land area Vacancy (Rands) m2 m2 % 2008 2007 Hatfield, Pretoria
Erf 714, Hatfield* 420 Festival Street Gym & college - 5,979 - - - Burnfield Erf 92, Hatfield 1050 Burnett Street Shops & hotel 2,803 5,224 1.8 32,447,612 27,288,036 Remainder of Erf 88, Hatfield 1091 Arcadia Street 26 flats & shop 1,461 63 - Cnr Hilda & Burnett Erf 786, Hatfield Street Mixed use 18,517 34,546 60 319,538,748 97,695,423 The Fields 427 Hilda Street Offices 1,276 2,674 - 12,958,835 10,866,071 24,057 48,486 - 364,945,195 135,849,530
Hermanstad, Pretoria Erf 512, 433 Van Riebeeck 9 units of Bartlucia Hermanstad, Pta Street warehousing 25,240 11,490 28.3 23,363,352 21,464,138 Erf 298, 470 Van Der Hoff Hermanstad, Pta Road Shops 1,800 716 19.7 5,764,233 5,640,729 Hoffcity Erf 484, 462 Van Der Hoff Hermanstad, Pta Road Shops 3,802 1,382 10.0 30,842 13,588 - 29,127,585 27,104,867
Johannesburg and Reef 3 West Street Erf 2611, 2612, 3 West Street 1619 Shops & offices 2,230 3,091 21.1 7,041,970 5,950,651
Armadale Erf 4685, Jhb 1 Twist Street Shops & flats 1,984 11,874 39.7 17,066,366 - Bradlows Corner Erf 4844, Jhb 66 Rissik Street Shops 991 2,103 41.4 10,477,925 10,474,737
Leisk House 195 Brisk Place Erf 4866, Jhb Bree Street Flats & shops 1,004 5,636 31.1 24,011,499 17,529,222 Fedsure Shops, offices & House Erf 5297, Jhb 87 Rissik Street parking 3,488 19,273 97.0 7,058,833 5,836,360 Corner Tungsten Iskemp Erf 513, Isando, and Isando Road Warehouse & office 12,742 6,637 8.6 7,342,356 5,257,276 Ptn 285 (a ptn of ptn 85) of farm Landjack Turffontein 96 17 & 19 Eloff Street Warehouse 596 586 - 3,606,016 2,863,038 Erf 98, Heriotdale Ext 3, Germiston Green Street Vacant land 7,867 - - - -
Longsbank Erf 4497, Jhb 187 Bree Street Shops & offices 1,495 9,788 87.7 12,137,303 10,715,388 Erf 1125,1127-1128,1125, 60-66 Loveday Loveday Jhb Street Shops & offices 2,480 2,921 51.6 15,942,546 - Shops, offices & North City Erf 4475, Jhb 28 Melle Street flats 1,489 8,010 1.1 29,262,658 27,672,333 36,366 69,919 - 133,947,472 86,299,005
* Leasehold property disclosed under property, plant and equipment on page 27.
42 Premium Properties Limited
SCHEDULE OF INVESTMENT PROPERTIES OWNED By THE GROUP for the year ended 29 February 2008 continued
Gross Name of Description of Location of Description of Extent lettable Property Value property property held property improvements of land area Vacancy (Rands) m2 m2 % 2008 2007 Moot and Gezina, Pretoria Sectional title unit 1-33 on Erf 1537, 482 Myburgh Shops, warehousing Landmall Capital Park Street & 23 flats 1,862 2,099 24.5 6,751,743 5,494,048 510 Voortrekker Roslev Erf 290, Gezina, Pta Road Shops & 22 flats 2,552 2,387 - 5,873,713 4,860,453 Erf 716 & Remainder 492 Voortrekkers of Erf 336, Gezina, Road & 487 HF Shops & vacant Trekfred Pta Verwoerd Drive land 6,379 2,742 - 11,980,310 10,594,600 Sectional title units Trekmin 1-60 on Erf 667, 630 Voortrekkers Shops & 48 flats Building Gezina, Pta Road 11,483 8,586 - 26,492,896 22,934,363 22,276 15,814 - 51,098,662 43,883,464
Pretoria North
Normed Erf 1739, Pta North 260 Burger Street Offices 7,655 5,871 16.3 17,078,182 16,007,263 7,655 5,871 - 17,078,182 16,007,263
Pretoria West Warehouse & Asland Erf 2947, Pta 365 Mitchell Street workshops 9,993 5,342 4.2 12,129,006 9,231,471 Workshops & Erf 1892, Pta 411 Carl Street warehouses 2,855 1,180 32.0 17,461,430 13,138,010 Workshops & Erf 2987, Pta 30 Zeiler Street warehouses 2,617 1,255 - - - Ptn 1 of Erf 1884, Workshops & Pta 430 Mitchell Street warehouses 1,428 570 - - - Ptn 1 of Erf 1885, Workshops & Pta 414 Mitchell Street warehouses 1,428 738 29.9 - - Carlzeil Ptn 4 of Erf 1893, Workshops & Pta 405 Carl Street warehouses 1,428 907 - - - Remainder of Erf Workshops & 1885, Pta 418 Mitchell Street warehouses 1,428 1,097 - - - Remainder of Erf Workshops & 1886, Pta 410 Mitchell Street warehouses 1,428 779 - - - Remainder of Erf Workshops & 1887, Pta 402 Mitchell Street warehouses 1,665 1,011 - - - Remainder of Erf Workshops & 1891, Pta 423 Carl Street warehouses 1,428 722 33.0 - - Shops, 8 flats, offices, workshops Erf 3276, Pta 135 Church Street & house 4,526 2,206 20.7 12,402,047 9,580,132 Ischurch Remainder of Erf 1518, Pta 127 Church Street Workshops 7,382 2,484 33.3 - - Remainder of Erf 1519, Pta 125 Church Street Workshops 1,428 1,156 - - -
Mitchbuit Erf 3015, Pta 590 Mitchell Street Shops 3,569 1,758 49.9 2,510,058 2,241,480 Cnr Church & Rapanos Erf 2906, Pta Rebecca Streets Shops & house 5,710 2,225 15.1 3,384,589 2,909,657
Erf 2986, Pta 470 Mitchell Street Warehouse 9,993 6,361 - 18,827,095 16,265,302 Ptn 1 of Erf 1871, Pta 490 Mitchell Street Motor showroom 821 97 - - - Ptn 3 of Erf 3166, Warehouse & Rosemitch Pta 496 Mitchell Street workshop 2,819 2,623 17.1 - -
Ptn 4 of Erf 3166 27 Rose-Etta Street 18 Flats 2,070 - - - - Remainder of Erf 462a Mitchell 2955, Pta Street Vacant land 1,427 1,120 - - - 65,443 33,631 - 66,714,225 53,366,052
43 Annual Report 2008
SCHEDULE OF INVESTMENT PROPERTIES OWNED By THE GROUP for the year ended 29 February 2008 continued
Gross Name of Description of Location of Description of Extent lettable Property Value property property held property improvements of land area Vacancy (Rands) m2 m2 % 2008 2007 Pretoria - Other Sectional Title units on Erf 839 & 797, 209 and 213 Troye Monaco Muckleneuk Street 27 flats 2,604 - 7,580,474 6,857,538 Erf 1117, Sunnyside, Pavilion Pta 92 Jeppe Street Shops 3,448 1,919 1.7 11,947,357 - Ptn 1 of Erf 111, Rosslyn Ext 1, 111 Piet Shops, workshop & Rosnew Township Akasia Rautenbach Street garage 19,016 6,456 - 27,865,908 23,970,055 Savyon Remainder of Erf 86, Building Sunnyside, Pta 189 Esselen Street Shops & 28 flats 1,637 2,327 - 14,452,453 8,201,146 Sunnyside Galleries Erf 1355, Sunnyside 277 Esselen Street Offices & shops 3,019 13.2 10,123,447 8,233,387
The Village Erf 71, Trevenna 47 Esselen Street Shops 7,226 4,024 13.9 21,147,588 19,233,044
Valhof Erf 1360, Valhalla 35 Vindella Road Shops & offices 6,519 2,164 23.4 5,740,449 4,851,310 37,846 22,513 98,857,676 71,246,480
Silverton, Pretoria Erf 104, Warehouse & Silvertondale 123 Mosaic Road workshops 5,539 3,188 - 36,610,659 30,262,481 108 Siersteen Warehouse & Erf 15, Silvertondale Avenue workshops 1,470 503 - - - Warehouse & Erf 16, Silvertondale 112 Siersteen Road workshops 1,470 104 - - - Brianley Warehouse & Erf 23, Silvertondale 441 Dekgras Road workshops 1,088 647 - - - Warehouse & Erf 34, Silvertondale 450 Skilderweg workshops 1,088 652 - - - Warehouse & Erf 97, Silvertondale 438 Dekgras Road workshops 3,360 3,611 21,6 - - Warehouse & Erf 98, Silvertondale 421 Rustic Avenue workshops 3,827 4,217 - - - Erf 1603, Silverton Warehousing, Ext 5, Township, Erf 309 Dykor Road motor showroom & Landjack 125, 126, Bonita Crescent vacant land 12,246 1,385 - 3,262,402 2,866,907 Ptn 13 of Erf 409, Notrevlis Silverton 457 Pretoria Road Shops & warehouse 5,093 1,842 - 7,694,068 7,037,296 Erf 206, Silverfas Silvertondale 96 Fascia Road Warehouses 3,850 2,727 0.3 8,912,641 7,269,822 Sectional title units Silvertondale 1-3 on Erf 36, Workshops & 36 Silvertondale 446 Dekgras Road warehouses 2,058 1,753 42.0 4,675,910 4,344,441 Remainder of Erf Shops, offices & Silway 1623, Silverton 617 Pretoria Street 144 flats 23,555 24,080 26.7 80,922,062 69,344,400 Remainder of Erf Supmall 577, Silverton 533 Pretoria Road Shops 2,364 1,288 - 7,028,471 5,756,205 Warehouse & Tomzeil Erf 152, Waltloo 275 Maggs Street workshops 16,865 6,589 - 20,394,631 16,893,812 83,873 52,586 169,500,844 143,775,364
Costs/deposits of new properties - - - - 9,536,938
533,076 635,744 - 2,320,571,223 1,737,764,852
44 Premium Properties Limited
Schedule of interest in subsidiaries for the year ended 29 February 2008
Amount owing Name of subsidiary (Pty) Ltd Cost of shares by/(to) subsidiaries 2008 2007 2008 2007 R R R R
Subsidiaries Bartlucia Investments Share Block 55 033 55 033 4 613 215 4 613 211 Brianley Properties Share Block 3 003 204 3 003 204 8 398 227 8 398 227 Burnfield Properties - - - (100) Centpret Properties 1 1 447 081 743 386 400 425 Du Proes Share Block 200 200 6 791 078 7 343 055 Field Fifteen Investments Share Block 3 989 017 3 989 017 - (8 045 632) Filkem House Share Block 1 829 259 1 829 259 480 523 480 523 Hacklu Enterprises Share Block 150 680 150 680 992 824 975 391 Landjack Properties 1 1 8 621 756 8 834 791 L P A Beleggings Share Block 1 354 593 1 354 593 782 121 782 121 Notrevlis Share Block 344 140 344 140 1 785 348 1 785 348 Prinsman Share Block 3 531 830 3 531 830 32 335 236 32 335 236 Prinsproes Properties Share Block 3 581 786 3 581 786 2 344 902 2 344 902 Rezmep Investments Share Block 2 817 860 2 817 860 26 273 542 27 080 796 Roslev Properties Share Block 491 190 491 190 1 398 262 1 399 044 Savyon Buildings 1 1 291 692 763 212 548 739 Tomzeil Share Block 1 198 498 1 198 498 4 905 844 4 905 844 Tomsunder 1 000 1 000 4 932 888 22 348 293 22 348 293 838 452 316 692 182 809
Premiums Shareholding in the subsidiaries is 100% and all subsidiaries are incorporated to South Africa.
45 Annual Report 2008
Linked unitholders’ analySis for the year ended 29 February 2008
Number of Unitholders’ classification unitholders % Number of Units % 1 - 1,000 shares 180 17.8 92 858 0.1 1,001 - 10,000 shares 390 38.5 1 956 784 1.5 10,001 - 100,000 shares 297 29.3 10 182 403 7.8 100,001 - 1,000,000 shares 118 11.7 40 567 772 31.2 1,000,001 shares and over 27 2.7 77 306 625 59.4 1 012 100.0 130 106 442 100.0
Number of Unitholders’ profile unitholders % Number of Units % Banks 11 1.1 2 746 421 2.1 Close corporations 25 2.5 9 027 526 6.9 Endowment funds 23 2.3 2 640 173 2.0 Individuals 671 66.3 19 532 030 15.0 Insurance Company 5 0.5 176 332 0.1 Investment Company 1 0.1 68 809 0.1 Listed companies 1 0.1 10 342 840 7.9 Mutual funds 32 3.2 26 109 692 20.1 Nominees and trusts 130 12.7 9 700 622 7.5 Other corporations 14 1.4 1 388 716 1.1 Pension funds 21 2.1 7 711 138 5.9 Private companies 78 7.7 40 662 143 31.3 1 012 100.0 130 106 442 100.0
Number of Public/non-public unitholders unitholders % Number of Units % Non-public shareholders 43 4.3 40 138 343 30.8 Directors and families 42 4.2 29 795 503 22.9 Octodec Investments Limited 1 0.1 10 342 840 7.9 Public shareholders 969 95.7 89 968 099 69.2 1 012 100.0 130 106 442 100.0
46 Premium Properties Limited
Linked unitholders’ analySis for the year ended 29 February 2008 continued
Beneficial unitholders holding of 3% or more No. of Units % Directors and families 29 795 503 22.9 Stanlib 16 784 010 12.9 Octodec Investments Limited 10 342 840 7.9 Investec 9 280 174 7.1 Old Mutual Group 4 133 576 3.2
Share Trading Analisys 2007/2008 Highest(cents) Lowest(cents) Volume traded March 2007 1 240 1 200 1 126 509 April 1 400 1 200 279 968 May 1 400 1 325 1 481 619 June 1 400 1 300 516 184 July 1 450 1 370 878 088 August 1 399 1 270 2 229 490 September 1 405 1 290 1 859 249 October 1 480 1 345 2 067 543 November 1 550 1 350 1 103 565 December 1 485 1 390 1 863 422 January 2008 1 440 1 176 1 196 326 February 1 300 1 145 2 459 266
47 Annual Report 2008
Notice of annual general meeting for the year ended 29 February 2008
PREMIUM PROPERTIES LIMITED (Incorporated in the Republic of South Africa) (Registration number 1994/003601/06) ISIN: ZAE 000009254 Share code: PMM (“Premium” or “the Company”)
Notice is hereby given that the thirteen annual general meeting of linked unitholders of Premium will be held on Friday 5 September 2008 at 11:30am at CPA House, 101 Du Toit Street, Pretoria, for the following purposes:
1. To receive, approve and adopt the audited annual financial statements of the Company and the group, together with the directors’ report and independent auditor’s reports for the year ended 29 February 2008.
2. To re-elect the following directors who retire by rotation in accordance with the Company’s articles of association and, being eligi- ble, offer themselves for re-election:
2.1 J P Wapnick Jeffrey Wapnick (47) serves on the Board of other companies including Octodec Investments Limited. He has a wealth of experi- ence in the property industry.
2.2 M J Holmes Michael John Holmes (70) is a chartered accountant and has over thirty years of banking and corporate finance experience. He serves on the Board of Octodec Investments Limited.
3. To confirm the re-appointment of the auditors, Grant Thornton for the ensuing year and to authorise the directors to determine the auditors remuneration for the year ending 29 February 2008.
4. To approve the payment of the remuneration of the directors for the year ended 29 February 2008 as reflected on page 16 of the annual report of which this notice forms part.
5. As special business, to consider and, if deemed fit, to pass with or without modification, the following resolutions:
Ordinary resolution 1 To place the unissued linked units under the directors’ control.
“Resolved that, the authorised but unissued linked units of the Company be placed under the control of the directors of the Company until the next annual general meeting with the authority to allot and issue linked units in the capital of the Company to such persons and upon such terms and conditions as the directors in their sole discretion deem fit, subject to sections 221(2) and 222 of the Compa- nies Act, 61 of 1973, as amended (“the Act”), and the JSE Limited (“JSE”) Listings Requirements”.
Ordinary resolution 2 Approval to issue linked units for cash
“Resolved that subject to not less than 75% of the linked unitholders present in person or by proxy and entitled to vote at the annual general meeting at which this ordinary resolution is to be considered, voting in favour thereof, the directors of the Company be and are hereby authorised by way of a general authority to issue all or any of the authorised but unissued shares, together with debentures linked thereto (“linked units”), in the capital of the Company for cash as they in their discretion deem fit, subject to the following limita- tions:
- this authority shall not extend beyond the later of the date of the next annual general meeting of the Company or the date of expiry of 15 (fifteen) months from the date of this annual general meeting;
- a paid press announcement giving full details, including the impact on net asset value and earnings per share, will be published at the time of any issue representing, on a cumulative basis within any one financial year, 5% (five percent) or more of the number of linked units in issue prior to such issue;
- issues in terms of this authority will not exceed 15% (fifteen percent) in the aggregate of the number of linked units in the Company’s issued share capital in any one financial year. The number of linked units to be issued shall be based on the number of linked units in issue at the date of application, less any linked units issued by the Company during the current financial year, provided
48 Premium Properties Limited
Notice of annual general meeting for the year ended 29 February 2008
that any linked units to be issued for cash pursuant to an acquisition (concluded up to the date of application) may be included as though they were linked units in issue at the date of application;
- In determining the price at which an issue of linked units will be made in terms of this authority the maximum discount permitted will be 10% (ten percent) of the weighted average traded price of such linked units, as determined over a 30-day period to the date that the price of the issue is determined or agreed by the directors;
- Any such issue will only be made to public shareholders as defined by the JSE, and not to related parties; and
- The linked units which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue.
Ordinary resolution 3
“Resolved that the directors and secretary of the Company be and are hereby authorised to do all such things and sign all documents and take all action as they consider necessary to implement the resolutions set out in the notice convening the annual general meeting at which this ordinary resolution number 2 will be considered.”
Special resolution 1
To authorise the Company and/or its subsidiaries to acquire it’s linked units.
Resolved that the Company and/or any of its subsidiaries be and is hereby authorised by way of a general approval as contemplated in Section 85 and Section 89 of the Act to acquire the issued securities of the Company, upon such terms and conditions and in such amounts as the directors of the Company may from time to time determine but subject to the articles of association of the Company, the provision of the Act and the JSE Listings Requirements, where applicable, and provided that: a) the repurchase of securities is implemented through the order book of the JSE trading system, without any prior understanding or arrangement between the Company and the counter party; b) this general authority shall only be valid until the Company’s next annual general meeting, provided that it shall not extend beyond 15 (fifteen) months from the date of passing of this special resolution; c) the Company is authorised thereto by its articles of association; d) the general repurchase by the Company is limited to a maximum of 20% (twenty percent) in aggregate of the Company’s issued capital in any one financial year; e) the general repurchase by the subsidiaries of the Company is limited to a maximum of 10% (ten percent) in aggregate of the Com- pany’s issued share capital in any one financial year; f) the repurchase is not made at a price greater than 10% (ten percent) above the weighted average of the market value for the securi- ties for five business days immediately preceding the date on which the transaction was effected; g) the repurchase does not take place during a prohibited period as defined in paragraph 3.67 of the JSE Listing Requirements; h) the Company publishes an announcement after it or its subsidiaries has cumulatively acquired 3% (three percent) of the number of securities in issue at the time that the linked unitholders’ authority for the purchase is granted and for each 3% (three percent) in aggregate of the initial number acquired thereafter; i) the Company and the group are in a position to repay their debt in ordinary course of business for a period of twelve months after the date of such repurchase; j) the assets of the Company and the Group being fairly valued in accordance with Generally Accepted Accounting Practice, are in excess of the liabilities of the Company and the Group for a period of twelve months after the date of such repurchase; k) the capital and reserves of the Company and the group are adequate for a period of twelve months after the date of such repur- chase; l) the available working capital is adequate to continue the operations of the Company and the group for a period of twelve months after the date of such repurchase;
49 Annual Report 2008
Notice of annual general meeting for the year ended 29 February 2008 continued m) before entering the market to proceed with the repurchase, the Company’s Sponsor has complied with its responsibilities contained in Schedule 25 of the JSE Listings Requirements; n) the Company remains in compliance with paragraphs 3.37 to 3.41 of the JSE Listings Requirements concerning shareholder spread after such a repurchase; and o) the Company appoints only one agent to effect any repurchase on its behalf.
The reason for and effect of the special resolution is to authorise the Company and its subsidiaries, by way of general approval, to acquire its own issued securities, on terms and conditions and in amounts to be determined by the directors of the Company, subject to certain statutory provisions and JSE Listings Requirements.
Directors’ statement regarding the utilisation of the authority sought
The directors of the Company (“the Board”) have no immediate intention to use this authority to purchase the securities of the Company. However, the Board is of the opinion that this authority should be in place should it be appropriate to undertake a repurchase during the currency of the authority.
Other disclosure in terms of Section 11.26 of the JSE listings Requirements
The following additional information, some of which may appear elsewhere in the annual report of which this notice forms part, is pro- vided in terms of the JSE Listings Requirements for purposes of this general authority:
- Directors and management - page 6
- Major beneficial linked unitholders - page 46
- Directors’ interest in securities - page 17
- Share capital of the Company - page 29
Litigation statement
The directors of the Company whose names appear on page 6 of the annual report of which this notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have or had in the recent past, (being at least the previous 12 months) a material effect on the group’s financial position.
Director’s responsibility statement
The directors whose names appear on page 6 of the annual report, collectively and individually accept full responsibility for the accu- racy of the information pertaining to this special resolution and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the special resolution contains all information.
Material changes
Other than the facts and developments reported on in the annual report, there have been no material changes in the affairs of the finan- cial position of the Company and its subsidiaries since the date of signature of the audit report and up to the date of notice.
6. To transact such other business as may be transacted at an annual general meeting.
7. Voting and proxies
A member entitled to attend, speak and vote at the annual general meeting may appoint a proxy to attend, speak and vote in his/her stead and the person so appointed need not be a member of the Company. A proxy form is enclosed for use at this thirteenth annual gen- eral meeting. Proxy forms should be forwarded to reach the transfer secretaries not later than 11:30am on Wednesday, 3 September 2008.
On a show of hands, every linked unitholder of the Company present in person or represented by proxy shall have one vote for every linked unit held in the Company by such linked unitholder.
If you are a certificated or “own-name” dematerialised linked unitholder and unable to attend the annual general meeting of linked unitholders to be held at 11:30am on Friday, 5 September 2008 at the registered office of the Company, CPA House, 101 Du Toit Street,
50 Premium Properties Limited
Notice of annual general meeting for the year ended 29 February 2008 continued
Pretoria and wish to be represented thereat, you must complete and return the attached form of proxy in accordance with the instruc- tions therein. If you have dematerialised your linked units with a Central Securities Depository Participant (“CSDP”) or broker other than “own-name” registered dematerialised linked unit, you must instruct your CSDP or broker to provide you with the necessary letter of representation to attend the annual general meeting or you must instruct your CSDP or broker as to how you wish to vote in this regard. This must be done in terms of the custody agreement entered into between you and the CSDP or broker.
By order of the Board
City Property Administration (Proprietary) Limited Company secretary
28 July 2008 Pretoria
unitholders’ diary for the year ended 29 February 2008
Financial year-end 28 February
Announcement of final dividend and debenture interest distribution 21 April 2008
Payment of dividend and debenture interest 16 May 2008
Annual general meeting 5 September 2008
Publication of interim results and announcement of interim dividend and debenture interest distribution October 2008
Payment of interim dividend and debenture interest November 2008
51 Annual Report 2008 form of proxy
PREMIUM PROPERTIES LIMITED (Incorporated in the Republic of South Africa) (Registration number 1994/003601/06) ISIN: ZAE 000009254 Share code: PMM (“Premium” or “the Company”)
Annual General Meeting - 5 September 2008
For use by certificated linked unitholders or dematerialised linked unitholders with “own name” registration of Premium (“linked unitholders”) at the thirteenth annual general meeting of Premium to be held on Friday, 5 September 2008 at 11:30am (“the annual general meeting”) at CPA House, 101 Du Toit Street, Pretoria.
If linked unitholders have dematerialised their linked units with a Central Securities Depository Participant (“CSDP”) or broker, other than with “own name” registration, they must instruct the CSDP or broker concerned to provide them with the necessary letter of representation to attend the general meeting or the linked unitholder concerned must instruct them as to how they wish to vote in this regard. This must be done in terms of the custody agreement entered into between the linked unitholder and the CSDP or broker concerned.
I/We
(Name/s in block letters) of being the registered holder/s of linked units in Premium, appoint (see note 1).
1. or failing him/her,
2. or failing him/her,
3. the Chairman of the annual general meeting as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purpose of considering, and if deemed fit, with or without modification, the resolution to be proposed thereat and at any adjournment thereof, and to vote for and/or against the resolutions and/or abstain from voting in respect of the linked units registered in my/our name/s, in accordance with the following instructions (see note 2).
Number of votes (1 vote per linked unit) In Favour of Against Abstain 1. To receive, approve and adopt the annual financial statements 2. To re-elect: 2.1 J P Wapnick To re-elect: 2.2 M J Holmes 3. To confirm the re-appointment of the auditors 4. To approve the payment of remuneration to directors 5. Ordinary resolution 1 - To place the unissued linked units under the control of the directors Ordinary resolution 2 - Issue of linked units for cash Ordinary resolution 3 - Authorising the directors and secretary of the Company to implement ordinary resolution 2 Special Resolution 1 - Repurchase of linked units
Signed at this day of 20
Signature
Please read the notes on the reverse hereof
52 Premium Properties Limited notes
Notes
1. Any alteration or correction made to this form of proxy, other than the deletion of alternatives, must be initialed by the signatory(ies).
2. A member entitled to attend and vote may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space provided, with or without deleting ìthe Chairman of the annual general meetingî. A proxy need not be a mem- ber of the Company. The person whose name stands first on the form of proxy and who is present at the meeting will be entitled to act as proxy to the exclusion of those whose names follow.
3. A member is entitled to one vote on a show of hands and, on a poll, one vote in respect of each linked unit held. A member’s in- structions to the proxy must be indicated by inserting the relevant number of votes exercisable by the member in the appropriate box(es). Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all the member’s votes.
4. A vote given in terms of an instrument of proxy shall be valid in relation to the annual general meeting notwithstanding the death of the person granting it, or the revocation of the proxy, or the transfer of the linked units in respect of which the vote is given, unless an intimation in writing of such death, revocation or transfer is received by the transfer secretaries not less than 48 hours before the commencement of the annual general meeting.
5. The Chairman of the annual general meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.
6. The completion and lodging of this form of proxy will not preclude the relevant member from attending the meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such member wish to do so.
7. Documentary evidence establishing the authority of a person signing the form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the Company or transfer secretaries or unless this requirement is waived by the Chairman of the annual general meeting.
8. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the rel- evant documents establishing his/her capacity are produced or have been registered by the Company.
9. Where there are joint holders of linked units:
• Any one holder may sign the form of proxy
• The vote(s) of the senior members (for that purpose seniority will be determined by the order in which the names of members appear in the Company’s register of linked members who tender a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint member(s).
10. Forms of proxy should be lodged with, mailed to or faxed to Computershare Investor Services (Pty) Limited:
Hand deliveries to: Postal deliveries to:
Computershare Investor Services (Pty) Limited Computershare Investor Services (Pty) Limited
Ground Floor P O Box 61051
70 Marshall Street Marshalltown 2107
Johannesburg 2001 Fax: (011) 668 7712
To be received no later than 11:30am on Wednesday 3 September 2008.
Additional forms of proxy are available from the transfer secretaries on request.
53 Annual Report 2008
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