INTEGRATED ANNUAL REPORT 2013 About this report
This integrated annual report presents Attacq Limited’s financial, operational, social and environmental performance for the 2013 financial year. The Company obtained formal approval from the JSE to list on 14 October 2013, therefore this is the Company’s first integrated report. Integrated reporting is a process and we acknowledge some areas might require improvement and/or refinement, and we are working towards producing a more integrated report in the future.
The Company reports in accordance with International Financial Reporting Standards (IFRS) and the South African Companies Act 71, of 2008. As far as possible, the Company has applied the principles contained in the King Report on Corporate Governance for South Africa 2009 (King III).
The content of this report is intended to provide stakeholders with the information necessary to evaluate the Company’s performance over the past year and to assess its ability to create and sustain value in the short, medium and long term.
The 2013 financial year refers to the period from 1 July 2012 to 30 June 2013.
Attacq will be listed on the JSE in South Africa under the share code ATT and the Company reports in line with the JSE’s Listings Requirements.
This integrated annual report contains forward looking statements that, unless otherwise indicated, reflect the Company’s expectations as at 30 June 2013. Actual results may differ materially from the Company’s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate. The Company cannot guarantee that any forward looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on any forward looking statements. The Company disclaims any intention and assumes no obligation to update or revise any forward looking statement even if new information becomes available, as a result of future events or for any other reason, other than as required by the JSE Listings Requirements.
Creativity is a wonderful thing.
2 CONTENTS
About this report 02
Overview A History of Achievements 04 Highlights 06 Background and Profile 06 Group Structure 08 Footprint 10 Financial Indicators 12 Business Model and Strategy 13 Strategy Flowchart 14 Board of Directors and Governance Structure 15 Executive Management and Reporting Structure 19 Our Stakeholders 20
Performance and Strategic Review Chairman’s Report 21 Chief Executive Officer’s Report 23 Financial Director’s Report 26 Operational Review 30
Corporate Governance Governance Report 46 Material Risks 51 Remuneration Report 53 Transformation, Social and Ethics Report 54 Application of Principles in the King Code 56 Shareholder Analysis 61
Audited Consolidated Annual Financial Statements for the year ended 30 June 2013 Directors’ Responsibilities and Approval 65 Company Secretary Report 66 Independent Auditor’s Report 67 Report of the Audit and Risk Committee 68 Directors’ Report 69 Statement of Financial Position 78 Statement of Comprehensive Income 80 Statement of Changes in Equity 81 Statement of Cash Flows 82 Accounting Policies 84 Notes to the Annual Financial Statements 94
Audited Company Annual Financial Statements for the year ended 30 June 2013 Directors’ Responsibilities and Approval 181 Company Secretary Report 182 Independent Auditor’s Report 183 Report of the Audit and Risk Committee 184 Directors’ Report 185 Statement of Financial Position 193 Statement of Comprehensive Income 194 Statement of Changes in Equity 195 Statement of Cash Flows 196 Accounting Policies 198 Notes to the Annual Financial Statements 206
Notice of Annual General Meeting 252 Proxy Form 261 Glossary 265 Corporate Information 268
3 A HISTORY OF ACHIEVEMENTS
Converted to Commenced construction on Atterbury is formed a public company Bagatelle – Mall of Mauritius
1994 2006 2009
2005 2008
Attacq is formed Acquired Waterfall development rights
4 West Hills Mall, Accra, Ghana Accra Mall, Accra, Ghana
32.5% of Atterbury Africa acquired
25% of Atterbury Property acquired
2012
2011 2013
Sale of Attfund Retail to Hyprop Rights offer of R580 million heavily oversubscribed Acquired interest in MAS Internalisation of asset manager
Secured 264 595m² in Waterfall developments
Acquired 75% interest in retail fund Abacus
Acquired Garden Route Mall
Listing on the JSE
Buyback of Waterfall Development Company’s shares in Attacq
5 highlights – 2013
• CAGR in NAV per share of more than 20% since 2005 • NAV growth year-on-year of 15.9% • Total assets grew to R13.35 billion • The 1.75 million m² Waterfall pipeline gained momentum with 264 595 m² under construction • Received formal approval to list on the JSE on 14 October 2013 • Broke ground on the largest single phase super regional mall in South Africa, the Mall of Africa • Internalisation of the Asset and Property Manager on the direct property portfolio • Consolidated the international portfolio via increased shareholding in MAS
What we build, builds us.
BACKGROUND & Profile
Attacq is a leading South African capital growth fund in the geographically. In the long-term, the Group’s investment real estate sector. It has consistently delivered growth in strategy is to invest 70% by value in South Africa, 20% by capital to its investors through its strategic property holdings value in other parts of Africa and 10% by value internationally and developments. Attacq has grown gross assets to outside of Africa. R13.35 billion with an initial gross asset value of R600 million as at 30 June 2005. Attacq is driven by a passionate entrepreneurial spirit, brought to life by a committed and enthusiastic team. A proactive and Attacq focuses on sustainable capital appreciation hands-on management approach, coupled with a positive through the development and ownership of a balanced outlook and belief in the future of South Africa, has built the portfolio of properties with contractual income streams. Company to the highly regarded industry force it is today. Capital appreciation is supplemented by development and redevelopment profits made within the Company. The top management structure is relatively young by industry standards, but well respected with an in-depth The business of the Group is undertaken in two focus areas: understanding of the dynamics of the property market, investments and developments. Investments comprise coupled with a proven delivery capability. The multi- completed buildings held directly or indirectly. The current disciplinary team boasts a wide range of professionals target is to have 65% of the portfolio in investments and including engineers, chartered accountants, lawyers, 35% in developments. Attacq diversifies its investments bankers and investment managers.
6 EXECUTIVE MANAGEMENT From left: Morné Wilken – Chief Executive Officer, Melt Hamman – Financial Director, Helena Austen – Head of Legal Department, Peter de Villiers – Head of Africa and International Investments, Nicolle Weir – Head of Property and Asset Management and Talana Smith – Company Secretary.
Photographed at Brooklyn Bridge, Pretoria
7 Group structure
Property and Investment Holdings
International Africa (excluding Africa) (excluding South Africa)
- MAS (21.1%) - Bagatelle – Mall of Mauritius, Port Louis, - Karoo I (36.8%) and Karoo II (39.9%) Mauritius (41.8%) - Nova Eventis, Leipzig, Germany (19.7%) - Bagatelle Office, Port Louis, Mauritius - Bishopsgate, Birmingham, England (30%) (41.8%) - Caltongate, Edinburgh, Scotland (26.3%) - Atterbury Africa • Achimota, Accra, Ghana (24.4%) • Accra Mall, Accra, Ghana (15.3%) • West Hills Mall, Accra, Ghana (14.6%) • Waterfall Mall, Lusaka, Zambia (8.1%)
LEGEND Vacant land In process or to be developed with expected completion date Accounted for as an investment in associate Accounted for as an investment 79.4% effective shareholding in Building A; 100% effective shareholding in Building B Undivided share Held for sale % Attacq’s effective shareholding in a property (other than in respect of associates) In the process of being disposed GP Gauteng province EC Eastern Cape province NW North West province WC Western Cape province
Caltongate, Edinburgh, Scotland
8 Developments
- Club Retail, Pretoria, GP (40.0%) – Apr 2014 - Lynnwood Bridge – Phase III, South Africa Pretoria, GP (100%) – May 2014 - Newtown and Majestic Development, Johannesburg, GP Office and Retail Portfolio (62.5%) – Oct 2014 Mixed Use Portfolio - Mall of Namibia – The Grove, Windhoek, Namibia (31.3%) – - Garden Route Mall, George, - Aurecon Building, Pretoria, Oct 2014 WC (80.0%) GP (79.4%) - Waterfall, Johannesburg, GP - Brooklyn Mall, Pretoria, - Woodmead North Office Park, • Waterfall land (84.7%)
GP (18.8%) Johannesburg, GP (42.4%) • Cell C Campus (84.7%) – - Glenfair Boulevard, Pretoria, - Great Westerford, Cape Town, Dec 2013
GP (100%) WC (50.0%) • Group 5 (84.7%) – Jan 2014 - Mooirivier Mall, Potchefstroom, - Lynnwood Bridge, Pretoria, • Waterfall Corner (84.7%) – NW (75%) GP (100%) Apr 2014 - Mill Square, Stellenbosch, - Brooklyn Bridge and Lewis • Waterfall Lifestyle (84.7%) –
WC (60%) – May 2014 House, Pretoria, GP (25%) June 2014 - Eikestad Mall, Stellenbosch, - Club 1, Pretoria, GP (40.0%) • MB Technologies warehouse
WC (60%) - Atterbury House, Cape Town, (84.7%) – Dec 2013 - Andringa Walk, Stellenbosch, WP (100%) • Mall of Africa (84.7%) – Apr 2016 WC (75%) • City Lodge (84.7%) – Nov 2014 - De Ville, Cape Town, • Maxwell Office Park (42.4%)
WC (100%) - Attacq building – Dec 2013 - Wingspan (34.2%) - Golder & Associates building – - Rapfund (26.0%) Feb 2014 - Fountains Mall, Jeffreys Bay, - Premier Foods building – EC (35.9%) Jun 2014 - Spec building – Jun 2014 Industrial Portfolio Other
- Massbuild Distribution Centre, - Le Chateau, Hartbeespoort Dam, Johannesburg, GP (84.7%) GP (100%) - Val de Vie, Paarl, WC (50.0%) Atterbury Property (25.0%) - Geelhoutboom, George, WC – strategic investment (36.7%) in property developer - Paradise Coast (serviced stands), Mossel Bay, WC (44.8%)
Adams & Adams Building, Lynnwood Bridge, Pretoria Newtown and Majestic, Johannesburg
9 FOOTPRINT
Footprint based on assets as % of total assets
International Africa 6.6% 4.9%
2012 South Africa 88.5%
International Africa 6.7% 5.1%
2013 South Africa 88.2%
10 South African properties: Geographical segmentation
Western Cape 30% 2012 Western Cape North West 18% 9%
Gauteng North West 61% 10% 2013
Gauteng 72%
South African properties: Business segmentation
Land 30% 2012 Under construction 2% Land 30% Completed 68% 2013
Under construction 13% Completed 57%
11 financial indicators
Investment property
2013 R9 495 680 2012 R8 497 139 2011 R4 840 709 2010 R4 233 574 2009 R3 201 584 2008 R1 506 055
Total assets
2013 R13 349 389 2012 R11 587 351 2011 R9 549 312 2010 R7 507 270 2009 R6 022 597 2008 R4 225 777
Equity
2013 R5 728 904 2012 R5 033 316 2011 R4 458 272 2010 R4 421 985 2009 R4 022 317 2008 R2 840 693
Gearing
2013 41.4% 2012 40.0% 2011 39.9% 2010 28.5% 2009 26.8% 2008 24.8%
12 Business Model and Strategy
Eikestad Mall Precinct Attacq focuses on long-term sustainable capital growth achieved through actively investing in and managing land, property development rights and investment properties and benefiting from key long-term strategic relationships and alignments. Capital appreciation on completed properties and vacant land is supplemented by development and redevelopment profits generated within the Company.
The business has two focus areas: investments and developments. Investments comprise completed buildings held directly or indirectly. The Group’s properties, property-related rights and land are in respect of office, mixed use, retail and light industrial properties and developments. A number of the current investment properties were developed by Atterbury Property. Developments comprise greenfields development of land or brownfields development by refurbishment, upgrade or other improvement to Lynnwood Bridge existing buildings.
The current target is to have 65% of the portfolio in investments and 35% in developments in order to mitigate business risks. The balanced approach of diversification in South Africa (70%), Africa (20%) and International (10%) markets also mitigates geographical risks. The next page provides an illustration of this strategy.
Key differentiators include: Our quality property portfolio; 25% strategic shareholding in Atterbury Property; Existing developments; Mall of Namibia 10–15 year development pipeline in terms of Waterfall; and Diversification strategy that includes exposure to international markets and Africa.
Our quality portfolio includes landmark properties such as the Lynnwood Bridge development, Garden Route Mall, Mooirivier Mall, Eikestad Mall Precinct as well as the 25% interest in Brooklyn Mall.
Attacq holds 25% of Atterbury Property, the successful property development company with which it shares a common history and lineage. The balance of the shareholding in Atterbury Property is held by its founders and management. Attacq’s shareholding in Atterbury Property is strategic and positions Attacq to access and participate in the opportunities and deal flow generated by this dynamic developer. Mooirivier Mall
Attacq is currently involved with construction of commercial and retail buildings in excess of 400 000m2. These developments include Lynnwood Bridge Phase III, Newtown, Mall of Namibia and the Waterfall Business Estate.
The quality of the Waterfall Business Estate (1.75 million m² of developable bulk), which is a development linking Tshwane and Johannesburg, provides a substantial pipeline which will be developed over the next 10–15 years.
Attacq has positioned itself appropriately to identify potential growth opportunities on the African continent. The investment in Atterbury Africa allows us an investment vehicle through which to take advantage of these opportunities as they arise. Attacq also has Newtown and Majestic international exposure through MAS which has a primary listing on the Luxembourg Stock Exchange and a secondary listing on the JSE. MAS holds property investments in Germany, Switzerland and the United Kingdom. By geographically diversifying our portfolio, we are mitigating our risk against over-exposure to the South African economy.
Subsequent to the listing, the Group’s focus on long-term sustainable capital growth will differentiate it from other JSE-listed property entities that focus on the generation and regular distribution of income to shareholders. Attacq will therefore not seek REIT status as the REIT regulatory regime is intended for property entities focused on income distribution rather than capital growth.
13 Greenfields Greenfields Brownfields Brownfields Landholding redevelopments) (Refurbishment and (Refurbishment (New developments) Developments Developments – 35% Development profit/revaluation Development growth Capital • • Create Pipeline Create Funds Direct Portfolio Office and mixed use Office and mixed industrial Light land Vacant Listed / Unlisted / Unlisted Listed • • Retail • • South Africa – 70% South Africa Predictable income flow income Predictable growth and income Capital • Stability • • Utilise Balance Sheet to secure and secure fund developments SheetUtilise to Balance Increase in Risk / Return Profile in RiskIncrease / Return Provide complete buildings to generate income generate buildings to complete Provide Other Mauritius Atterbury Africa Africa – 20% Africa Investments – 65% Investments Rand hedge mainly US dollar correlated diversity Geographical prospects High growth chart • • • w o Fl MAS Other International – 10% International Rand hedge diversity Geographical • • S trategy
14 Board of Directors and Governance Structure
Board
Audit and Risk Remuneration and Transformation, Social Investment Committee Nominations Committee and Ethics Committee Committee
Pierre Tredoux Thys du Toit Hellen El Haimer Independent Independent Independent non-executive Chairman non-executive Director non-executive Director
• Appointed: February 2005 • Appointed: August 2013 • Appointed: August 2013 as a director – Up for re-election • Qualifications: BSc Agric, MBA • Qualifications: BSoc Sci LLB at the next AGM • Committee: Investment (Hons) Strategic Management, • Qualifications: CA (SA) H Dip Property Investment • Committees: Remuneration • Committees: Audit and Risk; and Nominations; Investment Transformation, Social and Ethics
Founder and executive director of Thys is an investment professional Hellen is the Managing Director of the Barnstone group, Pierre is also with 28 years of experience, the bulk the FM Institute Proprietary Limited, a former partner and managing of which was gained at Coronation a facilities and property management director of Deloitte Consulting South Fund Managers. In 1993 he was consulting company. Hellen is an Africa. He has advised many of South one of the founding members of admitted attorney with over 15 Africa’s leading organisations on Coronation Fund Managers, which years’ post-qualification experience corporate strategy and structure, listed on the JSE in June 2003. Thys in the legal, property and facilities operational and performance held the position of CEO from 1997 management fields. Hellen has held improvement, enterprise applications to 2008 and during his tenure with senior positions in the Department and corporate governance. Coronation grew the business into of Public Works and SARS in property Pierre has worked in the financial the second largest independent and facilities disciplines and held services, manufacturing, mining fund manager in South Africa. Thys an executive position at ABSA, and resources, communications, graduated with a BSc Agric and responsible for the facilities and beverages, professional services, MBA Cum Laude from the University property management of their tourism and leisure sectors both of Stellenbosch. Thys started his national property portfolio. Hellen locally and internationally. Pierre is career as a stockbroker at George also worked as a legal manager at also the non-executive chairman Huysamer & Partners and in 1990 Standard Bank Properties. of Atterbury Property, the property joined Syfrets Managed Assets as a development company that Attacq portfolio manager. Thys is a director holds a 25% interest in. He has of a number of JSE listed companies, served on the Board of directors of including PSG Group and Pioneer Attacq since 2005 and was appointed Foods. He now runs an investment as non-executive chairman in 2012. management business, Rootstock Investment Management.
15 Board of Directors (continued)
Stewart Shaw-Taylor Lebo Masekela Francois van Niekerk Independent Independent Non-independent non-executive Director non-executive Director non-executive Director
• Appointed: November 2012 • Appointed: March 2010 • Appointed: January 1997 • Qualifications: CA (SA) • Qualifications: BSc Eng • Qualifications: BA (Econ), MBL • Committees: Audit and Risk; • Committees: Audit and Risk; Remuneration and Nominations Transformation, Social and Ethics
With nearly 30 years’ experience Lebo is the former CEO of Infotech Francois co-founded the Atterbury in investment banking and real Proprietary Limited, a position he Group in 1994. In addition, Francois estate, Stewart is the Head of Real held for eight years. Lebo has over worked for Mobil Oil, Anglo Estate Investments at Standard Bank 20 years of management experience. American, Rembrandt and Armscor Corporate and Investment Banking. Lebo’s experience includes business before venturing into private He is responsible for the real estate development and growth, strategy enterprise in 1980. Francois is the equity and private equity related development and new business founder of the Mertech Group. activities undertaken by Standard ventures. Prior to this Lebo was Francois has founded and co- Bank Corporate and Investment CEO of Lechabile Quality Strategies founded several other operating Banking Division. Proprietary Limited. He has also companies still active in various worked as an engineer for SA industry sectors. He was a member Breweries, Engen Petroleum and of the Unisa Council until 2012 Denel. Lebo has been involved in the and is currently a member of the founding, running and growing of Unisa Council Financial Committee. several private businesses. Francois has received several academic, business and philanthropy awards.
16 Pieter Faure Lucas Ndala Johan van der Merwe Non-independent Non-independent Non-independent non-executive Director non-executive Director non-executive Director
• Appointed: May 2008 – Up for • Appointed: November 2010 • Appointed: May 2008 – Up for re-election at the next AGM • Qualifications: CA (SA) re-election at the next AGM • Qualifications: CA (SA), BCom • Committees: Audit and Risk; • Qualifications: CA (SA), (Law), HDip International Tax Investment MCom (Tax), MPhil Finance • Committee: Investment • Committee: Remuneration and Nominations
Pieter is the CEO of the Mertech Lucas qualified as a chartered Johan has more than 20 years of Group comprising an internationally accountant in 2001 and completed financial and investment experience diversified investment portfolio his training contract with Deloitte. and has been the Chief Executive operating across various industries After his training contract he joined Officer of SIM for over 10 years. including property, technology, Mettle in their structured finance Prior to that Johan was a director clean energy, logistics and financial division and thereafter moved to and executive committee member services. Pieter also oversees the the Corporate credit division of of Investec Asset Management, activities of the Mergon Foundation, Barclays Bank. In 2004, Lucas joined where he was responsible for Private an independent charitable Royal Bafokeng Finance as Manager Equity and its Botswana Office. At foundation established in 1982. of Investments and in 2006, Royal Investec Asset Management, Johan Pieter is the former Chief Financial Bafokeng Finance merged with also served as Global Sector Head Officer of Infotech Proprietary Royal Bafokeng Resources to form of Resources, Head of Equities and Limited and worked across several RBH. In 2008 Lucas was appointed as Sector Head of SA Resources. In professional divisions at PwC, the Finance Director for RBH. Lucas Gencor Industries Inc’s (“Gencor”) where he ultimately specialised in currently serves as the CEO of MOGS Corporate Finance division, Johan Corporate International Tax. Proprietary Limited, a company was on the core team to finalise the focused on mining, oil and gas Gencor/BHP Billiton transaction services. and was responsible for Corporate Finance and Tax at BHP Billiton.
17 Board of Directors (continued)
Morné Wilken Louis van der Watt Melt Hamman Chief Executive Officer Executive Director Financial Director
• Appointed: August 2009 • Appointed: January 1997 • Appointed: July 2013 • Qualifications: B Eng (Hons) • Qualifications: CA (SA), ACMA • Qualifications: CA (SA) Industrial • Committee: Investment • Committees: Investment; • Committee: Investment Transformation, Social and Ethics
Leading Attacq’s listing on the JSE, Louis co-founded the Atterbury Prior to joining Attacq in July 2013, Morné has extensive experience in Group in 1994 and has grown the Melt was the Chief Risk Officer at property development, property Group into one of the largest and WesBank, a division of FirstRand investment, property finance, most successful property developers Bank Limited and appointed to the corporate restructuring and in the country. In 2009 he was WesBank Executive Committee. Melt acquisitions. Morné spent 10 years in awarded the Christo Wiese Medal has served as Credit Risk Manager the Property Finance Division of First for Entrepreneurship from the at Nedbank Limited and a Director National Bank and Rand Merchant South African Academy for Science of Loubser du Plessis Consulting Bank (both divisions of FirstRand and Arts and in 2012 he received Proprietary Limited. Subsequent to Bank Limited) where he excelled as the University of Pretoria Alumni this he was the Head of Credit for a top dealmaker. Morné then led the Laureate Award. Louis is the current FNB Corporate Property Finance strategic roll-out and development CEO of Atterbury Property and also Division and a Financial Director of the Waterfall Business Estate in serves as a non-executive director on of Eagle Ink Systems Proprietary Midrand for Atterbury Property the Board of Hyprop. Limited. Melt has extensive before joining Attacq in 2009 as experience in banking and business Chief Operating Officer. Morné was operations. appointed as the Chief Executive Officer in 2011.
18 Executive management and reporting structure
Chief Executive Officer Executive Director Morné Wilken Louis van der Watt
Head of Asset Head of Africa Financial Director Company Secretary and Property Head of Legal and International Melt Hamman Talana Smith Management Helena Austen Investments Nicolle Weir Peter de Villiers
Head Office Portfolio Finance Team Management Team
Talana Smith – Company Secretary
• Qualification: CA (SA), ACMA, MCom • Committee: Transformation, Social and Ethics
Talana is a qualified CA with a Masters degree and has played a key role since the formation of the Atterbury Group. She was the CFO of the Atterbury Group for the period 2001 to 2010 and also acted as the Company Secretary during this period. Her broad regulatory and commercial experience is a valuable asset to the team.
Nicolle Weir – Head of Asset and Property Management
• Qualification: CA (SA)
Nicolle has extensive financial, auditing and asset management experience. Nicolle joined the Atterbury Group in 2008, first as an asset manager and then as a director of AAM in 2009. Under her operational leadership, the AAM team was honoured in 2011 with a prestigious IPD Investment Award for the fund being the best commercial and overall performer over 3 years. Nicolle completed her training contract with Deloitte and represented Deloitte South Africa in its Global Exchange Programme, gaining 3 years’ experience in Toronto, Canada, specialising in Telecommunications. Nicolle was a senior manager at Deloitte in the Corporate Finance division, and has 8 years’ experience in auditing.
Helena Austen – Head of Legal
• Qualification: BProc, LLM, HDip Tax • Committee: Transformation, Social and Ethics
Helena joined Attacq as the head of the legal department effective 1 September 2013. Helena was admitted as an attorney in March 2002 and is a former partner in Vorster Pereira and director of Faber Goërtz Ellis Austen Inc. Helena has extensive experience and knowledge in South African tax legislation having assisted and advised on various tax matters. Helena also has experience structuring black economic empowerment transactions, carrying out schemes of arrangement, drafting contracts, corporate governance, general company law and company secretarial work.
Peter de Villiers – Head of Africa and International Investments
• Qualification: CA (SA), CFA
Peter studied B Com Accounting Sciences at the University of Pretoria and completed his training contract at Deloitte, qualifying as a chartered accountant in 2002. Thereafter he worked at Deloitte Corporate Finance, BJM Corporate Finance and One Capital prior to joining the Atterbury Group in March 2013. Peter is also a CFA Charterholder.
19 Our stakeholders
Attacq recognises that developing and nurturing positive We engage with our stakeholders through a variety of means relationships with our major stakeholders is a key driver of and channels, both formal and informal, scheduled and ad hoc. business success. Consulting with these individuals and groups The table below details the stakeholders with whom Attacq enables us to enhance our operational profile, to develop our engages on a regular basis and how these engagements strategy, and to anticipate and deal with any issues that may arise. are undertaken.
Stakeholder Means of engagement Civil society Actively involved in community organisations and city improvement districts Employees Group newsletters Regular employee forums Open door policy with all senior management One-on-one meetings with Human Resources Financiers Active and open relationships with funding institutions Industry associations Communication with stakeholders through our involvement in industry associations and organisations including: • South African Council of Shopping Centres (SACSC); • South African Property Owners Association (SAPOA); and • Green Building Council of South Africa Local communities Group newsletters and advertising Sponsorship and promotion of community events and organisations Support of local charities, partnerships with local schools and other Corporate Social Investment projects National government, Regular meetings with relevant regulatory authorities provincial government and municipalities Press and media Engagement with media when strategic and newsworthy events occur Property brokers One-on-one presentations and engagement Incentive programs Broker functions Broker liaison Shareholders Group announcements published in the press, on SENS and posted on the Group website CEO and FD engage with financial media where appropriate Communication with institutional shareholders and investment analysts: • one-on-one interactions; • press announcements; • ad hoc meetings on request; and • investors anonymously polled following results to assess areas of concern Site visits Executive directors are available to answer queries from shareholders Shoppers Shopping centre websites, focus groups, feedback forms, print media, newsletters and social media platforms such as Facebook and Twitter Suppliers Regular discussions with top management Service level agreements Incentive schemes Tenants Customer relationship manager visits Customer satisfaction surveys On-site property management team
Garden Route Mall team
20 CHAIRMAN’S REPORT
Board mandate and review
During October 2012 the Attacq board took a strategic decision to list the business on the JSE; by March of this year we had a strategy in place and on 26 September 2013 we obtained formal approval from the JSE to list on the main board on 14 October 2013.
While the Board and the management team’s immediate focus is on streamlining the portfolio and strengthening the balance sheet to ensure stable and consistent growth going forward, we are well aware of the need to work harder to realise our core strategy. The strategy remains to be focused on capital growth which is evident in our CAGR in NAV per share exceeding 20% since 1 July 2005.
In terms of the Board’s responsibilities over the next year, it will be important to position ourselves appropriately, both in order to support management Pierre Tredoux – Chairman Attacq and to ensure that we meet our various stakeholders’ expectations. The Group has always adhered to corporate governance best practice, however the listing and the associated governance requirements will bring about additional responsibilities and compel us to continuously review our strategy and governance practices and processes. Mitigating economic risk We have increased the size and range of skills available to the Board to optimise the value that comes from Attacq is not immune to the world wide economic trends and the independent non-executive directors. We have risks associated with the global economy. The global economic strengthened our established board committees and climate, slow economic growth in South Africa and the challenges established some new ones to handle the various surrounding government policy directly impacts our clients’ responsibilities trusted upon us as the Board of a business performance and the flow of foreign capital into our listed company, namely: Audit & Risk, Remuneration economy. This will continue to cause difficult trading conditions & Nominations, Transformation, Social & Ethics and and negatively impacts our own ability to continue our expansion Investment. plans and growth strategies.
The Board is confident that the measures Attacq has put in place are solid and will assist us with the mitigation of the above risks. These include seeking opportunities within attractive regions Balancing board support outside of South Africa as well as a clear focus on optimal and executive leadership development of our own investment assets. We are confident that Attacq will be able to continue with its growth objectives and A clear focus on governance responsibilities and mandate deliver the performance expected by our shareholders. is essential and – while being cautious not to detract from this responsibility – it is easy to forget that the very spirit of Positioning Attacq in a competitive market entrepreneurship that brings a company like Attacq to a listing, may easily be lost if the Board does not fully understand its role. Attacq is a property development company, not merely a The challenge lies in finding the balance between appropriate property investment fund. The property industry has historically governance and entrepreneurship within the context of a listed had the luxury of picking and choosing what and where to environment. It is the Board’s responsibility to maintain this develop. Increased competition will somewhat restrict this balance and support the management team whilst adhering to approach, focusing the industry towards projects that protect the strong governance principles we subscribe to, in order to existing local and regional hubs, with suitable infrastructure. ensure that we protect the interest of our shareholders’ and other stakeholders. I believe our board has achieved this during the Attacq has secured three developments in the heart of the formative years of Attacq and is well positioned and capable of South African economy that positions us to capitalise on the continuing with this challenging task in the best interest of all our growth opportunities in the Johannesburg and Tshwane corridor stakeholders. in Gauteng.
21 CHAIRMAN’S REPORT (continued)
The Lynnwood Bridge development in Pretoria, and the Newtown Appreciation project in Johannesburg are both focussed on areas where substantial economic activity already exists. The infrastructure On behalf of the Board, I would like to extend our sincere Attacq creates in these areas serve as a cornerstone for further appreciation to our existing shareholders for their loyal support economic growth. over the last eight years and we look forward to continuing this relationship into the next era. Our prime asset, Waterfall Business Estate, will close the gap between the Johannesburg and Tshwane economies in Gauteng Attacq is a long-term player and we seek strong partners in all and will be rolled out over the next 10–15 years. This greenfields facets of our business. As a board, we will do our best to ensure development allows for a sustainable “new” city where all that we are acting in your best interest and in the best interest of elements integrate seamlessly and efficiently. This is undoubtedly all of our stakeholders. the most exciting development currently in South Africa and perhaps one of the last opportunities to establish a new city Our employees are of paramount importance and, on behalf capitalising on the combined economic growth of Johannesburg of the Board, I thank the management team and staff for their and Tshwane. hard work and dedicated efforts during the year. The team has maintained focus throughout the year and despite the additional Responsible development efforts required to fullfil the listing requirements, they managed to maintain our performance levels and our results bear testimony The Mall of Africa and Waterfall development is essentially to their hard work and commitment. building a new city from the ground up. Attacq is using this unique opportunity to establish itself as a leader in the The alignment of incentives with the performance of the business redevelopment of existing nodes with economic growth is something that we will continue to focus on and the fact that potential. This is a more socially responsible approach and we many of our employees have chosen to become shareholders believe it lends itself to improved services and a better ability to asserts the strong sense of ownership in this business. sustainably meet communities’ needs in the long term. On behalf of the Board, I would like to thank Gideon Oosthuizen This Greenfields development allows us to optimise the best who resigned from the Board in June 2013. Gideon has been an urban design principles for infrastructure, services and open important contributor to the strategic development of Attacq and public spaces. The development will play a major role in creating what we have achieved to date. employment opportunities in the area, as well as becoming a significant tax contributor to the Gauteng economy. The Board welcomes Stewart Shaw-Taylor, Thys du Toit, Hellen El Haimer as well as our new Financial Director, Melt Hamman. Their Growing our borders combined corporate experience across a variety of industries will positively contribute to guiding and governing Attacq in We have a responsibility to our stakeholders to ensure that we achieving its strategic objectives and mitigating risks. follow a focused investment approach into Africa and that we suitably consider and understand the various countries and I would personally like to thank every board member for their regions that we enter. It is vital that we choose strong partners commitment and support over what has been a very busy and – these include Atterbury Africa and MAS – in those countries successful year. and we will take a conservative approach, identifying suitably accretive opportunities with strong upside potential in Africa and abroad. Through our direct and indirect relationships we have investments in Mauritius, Ghana, Zambia and Namibia and will continue to identify further regions in Africa which match our ambitions. Our international investments (excluding Africa) include Switzerland, Germany and the United Kingdom. Pierre Tredoux Chairman Attacq Taking an integrated approach
This is Attacq’s first integrated annual report. We are well aware of our role in ensuring that the Company is driven by the principles set out in King III and our responsibility to contribute towards the ongoing development of best-practice in governance and reporting in the listed property sector.
We have endeavoured to provide our stakeholders with the necessary and required information to enable you, the reader, to make informed decisions about your investment. We will continue to strive to improve our reporting and communication to stakeholders.
22 CHIEF EXECUTIVE OFFICER’S REPORT
Preparing for the next growth phase
The decision to list on the JSE was made in order to create a platform which allows Attacq to enter the next growth phase in the Company’s evolution. In preparation for the listing, we took the opportunity to review and optimise our existing portfolio and, during the course of the past year, we identified a number of non-core assets. This has allowed us to ensure that the structure is appropriately balanced in order to best facilitate our growth ambitions.
Attacq is a capital growth investment and development property company. Overall, Attacq’s strategy is simple – investments give us a strong balance sheet, as well as income, to allow us to take development risk. Developments, in turn, give us the pipeline to create further investment opportunities. For this reason, growth in NAV – as opposed to dividend yield – is the key metric in terms of monitoring our performance. Morné Wilken – Chief Executive Officer Attacq
Following an eventful year for Attacq, the Group recorded a 15.9% increase in NAV per share.
Direct properties – Geographical segmentation 72% 67% Capital growth-focused property and development company
Attacq holds investment properties, in the form of completed buildings held either directly or indirectly through associated investments, as well as developments, comprising greenfields and 24% brownfields opportunities. There is a 65 / 35% allocation in our 18% balance sheet between investments and developments, which is 10% 9% used to mitigate business risks resulting from our strategy.
Gauteng North West Western While ours is not a unique model, it is relatively new to the listed Cape property market in South Africa. Investors however indicated significant interest in the build-up to the listing on the JSE. Direct properties – Business segmentation 61% Attacq’s long-term investment model is reliant on sustainable 57% business practices and requires an unequivocal ability to seek out attractive opportunities. The listing creates a solid platform to ensure that we are suitably capitalised in terms of our immediate requirements and – with the support of our shareholders – can 24% 21% access further growth capital as and when it is needed. 19% 18% Emphasis on quality of assets
Completed Under Land Attacq is in essence a property investment company with a strong construction development focus. While the majority of developers focus on Excluding properties held for sale improving the initial development yield in order to optimise Including properties held for sale profit, we develop property to hold. It is vital, therefore, that we * As at 30 June 2013 closely monitor the sustainability of the design and the quality of our properties – especially during the development phase and therefore we ensure the quality of our portfolio.
23 CHIEF EXECUTIVE OFFICER’S REPORT (continued)
Strategically positioning the balance sheet International
During the last few years Attacq put considerable effort into Attacq took the strategic decision to consolidate the majority of expanding the Waterfall infrastructure and growing a base of our international assets into Luxembourg-listed MAS and to utilise quality investment assets and development opportunities. the relationship for co-investment opportunities from time to time. Large scale deals take time to complete, especially greenfields Our rationale for the MAS consolidation: opportunities intended for development. It is essential that we simultaneously balance our overall exposure and continue to Strategies are aligned (MAS has a 70% investment, 30% position the investment and development portfolio appropriately. development approach); Focus in stable economies: Switzerland, United Kingdom Highlights of material activity in this regard: and Germany; Attacq has a position on the MAS board of directors; and Identified five non-core properties which are now being Good relationship with the MAS management team. held for sale; Reached an agreement to unbundle 50% of Arctospark and Growth opportunity into Africa consolidate some of these international assets into MAS; Reached an agreement to buy out minorities in Abacus We have a responsibility to ensure that we follow a focused (renamed Attacq Retail Fund); investment approach into Africa and will take time to understand Strategically internalised the asset and property manager the various countries and regions that we enter. We currently have on the direct portfolio; exposure to Mauritius, Ghana, Zambia and Namibia. It is vital that Secured 264 595m2 for development at Waterfall in we choose strong partners in these countries to mitigate some of Midrand, Gauteng; the development risks. We will take a conservative approach to Secured 75 000m2 worth of development pipeline in the identifying opportunities in Africa. form of the Newtown Junction in Johannesburg CBD; Commencement of the final development phase of 15 000m2 Sustainability a key differentiator at Lynnwood Bridge; and Commenced the 55 000m² Mall of Namibia development Sustainability is a focus for Attacq, not only because it is the ‘right in Windhoek. thing to do’ for the environment, but it will contribute to the reduction in the cost of occupancy for tenants which in turn will Improving investment asset performance allow better rental growth going forward.
Ultimately, as a capital growth oriented company, our gearing Attacq has developed a detailed, self-monitoring set of guidelines requirement is higher than that of traditional property income in line with South Africa’s Green Star set of benchmark standards funds. Our present gearing levels are at 41.4%, while the Board which will be used in the design of greenfields developments. has allowed a limit of 60%. Our gearing will increase due to additional funding required for the development pipeline. Some Maintaining a people-orientated culture of our present investments are not income producing and this impacts negatively on our cash flow and as a strategic focus, our Staying true to our culture and our approach to development will investment portfolio will be increasingly utilised in such a way as be the greatest challenge and our greatest strength now that we to ensure it generates income. are about to enter the listed environment. Attacq’s success has been our creativity, attention to detail and doing what we love. Mall of Africa The decision to give each employee the option to acquire In 2008 Attacq acquired 323 hectares of land in the Midrand area 1 000 Attacq shares (or the equivalent in cash) upon listing, in Gauteng – positioned between Johannesburg and Tshwane. demonstrates the type of culture we are trying to maintain This land was procured to develop the Waterfall Business Estate, and foster. which subsequently commenced in 2010. The anchor to the new Waterfall City will be the super-regional mall, Mall of Africa. The Prospects mall will serve a catchment area of approximately 6.7 million people who live within an hour’s drive away, of which 4.9 million The Group’s investments are in high quality retail, office, mixed are within half-an-hour’s drive. The 116 000m² Mall of Africa is use and light industrial properties which generate stable, growing intended to open in the first half of 2016. rental income. Additional investments will result from the Group’s roll-out of its existing development pipeline over the next 10–15 While many international brands are eager to enter the South years, with particular emphasis on the Waterfall pipeline and African market, the existing limited availability within the regional its long-term potential as a unique infill development centrally and super regional malls allows the Mall of Africa to cater for this located in Midrand. demand. The pre-let is progressing well with more than 60% of the Gross Lettable Area already secured. The Group will continue to expand its development pipeline and grow its long-term prospects, through opportunities it seizes and Attacq considers Mall of Africa to be a key differentiator and a through its strategic relationships, particularly with Atterbury major quality asset to be held in the retail portfolio. Property (in which it is a 25% shareholder).
24 To summarise, our listing on the JSE will enable the company to a desire to give back to the communities in which we operate access capital efficiently, raise its profile and expand its investor and we intend to carry this approach with us going forward as an base, all of which is expected to enhance its prospects. inherent attribute. The Company is preparing itself for growth and one of the major challenges that we face will be ensuring that we While the management team recognises the constraints and can maintain our unique culture as a business. challenges presently impacting the South African economy, we are confident that the Group will continue to show positive I thank the Attacq employees, the management and the Board growth, given the quality of its investment properties and for its support during an action packed year. I look forward to development pipeline and the nature and strength of the Group’s a challenging and exciting year ahead. key strategic relationships.
Appreciation
The Attacq culture is one of integrity, passion, focus and mutual reliance. The hardworking and honest attitude of our employees Morné Wilken has been instrumental in growing our business. We are driven by Chief Executive Officer Attacq
Design Square, Brooklyn, Pretoria
25 financial director’s report
Investment Properties
highlights The total value of investment properties increased by R1 billion from last year and the value of R9.49 billion as at 30 June 2013 comprises: • Total assets increased over the last year by R1.76 billion to R5.42 billion of properties that are operational (excluding R13.35 billion five properties which were held for sale); R1.27 billion of properties under development; and • 15.9% increase in NAV per share R2.80 billion of infrastructure and vacant land.
to 1196 cents per share Attacq’s entire investment property portfolio was independently • 17.5% increase in NAV per share valued by Old Mutual Investment Group (South Africa) Proprietary Limited, Mills Fitchet KZN CC and Amanda de Wet Consultants and excluding deferred tax to 1366 cents Investment CC. per share The properties under development as well as the infrastructure • Investment Properties (excluding and vacant land are predominantly located in the Waterfall held for sale) increased by R1 billion Business Estate and are in different stages of completion. In to R9.49 billion determining the values of our properties under development, we use the costs incurred to date plus a portion of the final • Gearing increased slightly to 41.4% anticipated fair value gain upon completion of the building (from 40%) determined on a percentage of completion basis and based on an externally determined anticipated completion value. It is our strategy to retain our own developed properties over the long-term and consider disposing of specific properties on an ad hoc basis. Introduction
2013 was a year in which we refined our strategy and put Investment in Associates structures in place for the pending listing on the JSE and entrench Attacq as one of the leading listed property groups in South Africa. Our total investments have reduced marginally from R1.16 billion in 2012 to R1.15 billion in 2013. The main investments are:
Balance sheet analysis A R495 million investment in our Mauritius properties; A 50% shareholding in Reach at a current value of The balance sheet or statement of financial position shows the R249 million. During the year under review we invested position of the Group’s assets, liabilities and equity as at 30 June a further R62 million in Reach, but had to unfortunately 2013, and reflects what the Company owns, owes and the equity account for an impairment loss of R75 million due to the that is attributable to shareholders. underperformance of the Wingspan portfolio. Reach is a 68.4% shareholder in the Wingspan portfolio and a 52% 30 June 2013 30 June 2012 shareholder in the Rapfund portfolio; R’000 R’000 A R210 million investment in MAS. We view this investment as strategic and are in the process of increasing our Total non-current assets 10 885 550 10 268 863 shareholding in MAS via the disposal of our stakes in the Total current assets 862 197 1 056 366 Caltongate development and in Karoo I and Karoo II to MAS Total assets held for sale 1 601 642 262 122 in return for MAS shares; and Our 25% shareholding in Atterbury Property is valued Total assets 13 349 389 11 587 351 at R50 million. The value of our investment has decreased from R103 million in 2012 as a result of our accounting Equity 5 728 904 5 033 316 treatment of the underlying investments in which Total interest bearing debt 5 168 444 4 702 382 both Attacq and Atterbury Property have a mutual Non-interest bearing debt 2 053 468 1 720 476 shareholding. Debt on total assets held for sale 398 573 131 177 Equity and total liabilities 13 349 389 11 587 351 Current Assets
Total non-current assets Current assets have reduced from R1.06 billion to R862.2 million. This is as a result of the reclassification of the loan to Arctospark As at 30 June 2013, our total non-current assets were and Artisan Investment Projects 10 Ltd (Artisan) to assets held for R10.88 billion made up largely of Investment Property sale. Loan accounts to Atterbury Africa and Atterbury Property are of R9.49 billion and Investments in Associates of R1.15 billion. included in current assets.
26 Maturity of debt
7%
24%
42% Assets held for sale Within 1 year
27% 1 to 5 years 5 years and longer
Atterbury Africa Melt Hamman – Financial Director Attacq Atterbury Africa invests in existing and yet to be developed retail centres across sub-Saharan Africa. Attacq has an effective 32.5% shareholding in the Mauritius-based Atterbury Africa via its wholly owned subsidiary, Atterbury Investment Holdings International. The NAV per share at 30 June 2013 of R11.96 is 15.9% higher Attacq has committed to invest R250 million in this venture than the prior year NAV of R10.32. NAV per share excluding over the next few years. Its investment partner, Hyprop, deferred tax amounted to R13.66 (2012: R11.63), representing committed to investing an amount of R750 million. At year end, a 17.5% increase compared to 2012. R112 million of Attacq’s initial R250 million commitment had been invested. Income statement analysis
Assets held for sale The income statement or statement of comprehensive income reflects the revenue generated by the Group as well as the As at 30 June 2013, five properties valued at a combined costs incurred in generating that revenue for the year ended R1.03 billion were classified as assets held for sale (2012: 30 June 2013. three properties valued at R262 million). Subsequent to year end, Attacq disposed of three of these properties. We have 30 June 2013 30 June 2012 received the proceeds from the sale of all three properties and R’000 R’000 have utilised the proceeds to reduce debt. The two remaining properties held for sale are our 50% stake in Great Westerford and Gross rental income 628 532 639 856 the De Ville Shopping Centre, both situated in Cape Town. Property expenses (212 362) (241 288) Also included in assets held for sale is R534 million relating Net rental income 416 170 398 568 to Attacq’s 50% equity holding in and loan to an associate, Other income 126 348 93 371 Arctospark and R35 million relating to Attacq’s 26% equity Operating and other holding in and loan to an associate, Artisan. As at reporting expenses (288 060) (2 999 593) date we have not yet implemented the transactions to dispose Operating profit / (loss) 254 458 (2 507 654) these assets. Fair value adjustments 929 054 996 932 Net income from associates 94 430 (43 208) NAV per share Investment income 48 345 2 791 701 Finance cost (473 196) (492 349) 2013 R11.96 Profit before tax 853 091 745 422 Taxation (202 601) (185 041) 2012 R10.32 Profit for the year 2011 R9.16 from continued operations 650 490 560 381 2010 R7.54 Profit from discontinued 2009 R7.08 operations 108 788 24 436 2008 R6.75 Total comprehensive income for the year 759 278 584 817 2007 R5.48 Non-controlling interest (30 486) (25 814) 2006 R4.08 Profit after taxation 2005 R2.76 and minority interest 728 792 559 003
27 FINANCIAL director’s report (continued)
Rental income and property expenses year-on-year movement Subsequent events is distorted due to discontinued operations being excluded and reflected separately. The continuing operations on a like-for-like A number of transactions, which are disclosed in the financial basis reflect a 15.5% increase in rental income. General property statements, have taken place subsequent to our year end and the expenses increased by 19.5%, with the above-CPI increase date of this report, however two exciting events were: in expenses driven primarily by higher municipal costs and an increase in bad debt provisions. Direct property expenses Rights offer excluding municipal costs and bad debt provisions increased by less than 7%. During July 2013, Attacq issued 50.4 million new shares to existing shareholders at R11.50 per share in terms of a non-renounceable Operating expenses rights offer to raise R580 million. The rights offer, which closed on 24 July 2013, was oversubscribed by 44%. We utilised these funds Operating costs for the current year includes the following to reduce our debt and to invest in opportunities which were abnormal costs: identified and approved by our Investment Committee.
The R75 million impairment loss in respect of Reach; Proposed listing on the JSE A R17 million impairment of goodwill; A final payment of R45 million with respect to the Lynnwood It is our intention to list Attacq on the JSE and to raise a maximumWatch Bridge development; and of R800 million by way of an offer for subscription in Attacq this A further R29 million impairment on investment and loans shares to invited investors. We are confident that the capital provided to associates. raising will be adequate for development projects for the next space! 12 to 18 months; subject to the proviso that should a unique and The management of operating expenses is a focus area as it has a worthwhile opportunity arise, Attacq would go to the market to direct impact on the profitability and NAV growth of Attacq. raise capital for that specific opportunity.
Fair value adjustments Appreciation
12 months 12 months It is highly likely for this report to be the Company’s final report as June 2013 June 2012 an unlisted company as the JSE has granted approval for listing R’000 R’000 and on 1 October 2013 the Companies and Intellectual Property Commission (CIPC) confirmed the registration of our prospectus Fair value adjustments 929 054 996 932 and the opening date of our private placement. It is therefore imminent for Attacq to enter the exciting environment of the Investment properties 854 817 1 020 769 listed space. Other financial assets 57 137 (83 138) Other investments 17 100 59 301 I would like to thank the financial team for their hard work, dedication and commitment during the year, especially during Fair value adjustments of investment properties and investment the build up to the forthcoming listing on the JSE. properties under development totalled R854 million in 2013 (2012: R1.02 billion), excluding investment properties classified as held for sale at year end. The fair value adjustment in the current year of R854 million is due to an overall increase in contracted rentals as well as a decrease in the market capitalisation rates used in valuing the properties. Melt Hamman During the year under review, Attacq disposed of three properties Financial Director Attacq as well as 50% of its 100% holding in Great Westerford for a total consideration of R458 million (2012: R671 million). The disposals took place at prices close to carrying value and therefore a nominal amount of profit was generated. The low profit/loss is indicative of the appropriateness of the fair value adjustments and valuations.
Gearing and finance costs
The consolidated gearing ratio, calculated as total net interest- bearing debt to total assets (including assets held for sale) increased marginally from 40% in 2012 to 41.4% in 2013. The net interest bearing debt is after taking into account the cash balances as at reporting date. As a capital growth fund, Attacq’s gearing is generally expected to be higher than that of its listed income-focused property peers.
28 From left: Peter de Villiers – Head of Africa and International Investments Attacq, Brenda Janse van Rensburg – Financial Manager Attacq and Lungile Meso – Financial Manager Waterfall.
Photographed at Parkdev Building, Brooklyn Bridge, Pretoria
Watch this space!
29 OPERATIONAL REVIEW
Internalisation of the asset management
highlights Historically, Attacq outsourced its asset management services to Atterbury Asset Managers (AAM). In line with what it considers to be international best practice for a fund of its size and in order to • Internalisation of the asset and align the interests of the asset management executives with those property management function on of the Company and its shareholders, the Board took the strategic the direct property portfolio decision to internalise the asset management function through the acquisition of 100% of AAM. • The 1.75 million m² Waterfall Notwithstanding the decision to internalise the asset Business Estate gained momentum management function, the Board is of the view that with regard • Refining of strategy and decision to to the newly established Attacq Retail Fund, it is appropriate to adopt a phased-in approach to the internalisation of the function dispose of certain non-core assets and, accordingly, has entered into a five-year asset and property • Increased shareholding in the Attacq management agreement with Atterbury Property (via Attacq Retail Fund Asset and Property Management, an AAM subsidiary). Retail Fund (previously Abacus) As remuneration for the management duties rendered by • Vacancies across portfolio continue Atterbury Property, an annual management fee equivalent to the sum of 0.199% of the gross asset value and to remain low at 2.9% 49% of the profit generated by Attacq Retail Fund Asset and Property Management will be paid on a monthly basis. The • The initial implementation of the termination date of this agreement is 30 June 2018. This sustainability strategy arrangement allows Attacq to internalise the complete asset management function without incurring any performance • Successful completion of Andringa risks. As an additional benefit it is intended that the retail asset Walk refurbishment in Stellenbosch management knowledge will be transferred to Attacq staff during the life of the agreement. • Brooklyn Bridge, Lynnwood Bridge, Glenfair and Mooirivier received Property and investment portfolio lighting retrofits as part of the Eskom rebate initiative Attacq’s main assets are made up of properties, investments and investments in associates which includes our interests in Africa and the rest of the world.
Overview of South African property portfolio
Attacq has seen significant growth in the developments portfolio as the development and roll-out of the 1.75 million m² Waterfall Business Estate gained momentum during the year under review. The 35 671m² Massbuild Distribution Centre was completed and handed over to Massmart in April 2013 for the commencement of a fifteen year lease. The project was completed on time and within budget. As at 30 June 2013, a Gross Lettable Area (GLA) of approximately 264 595m² was under construction within the Waterfall Business Estate.
As part of the preparation for the listing of Attacq, management took a view across all properties within the portfolio and identified those properties that did not align with the Company’s strategy going forward. The properties successfully disposed of during the year were a 50% share in Great Westerford in the Western Cape, Investec Building in Pretoria and Building G – DTI Campus in Pretoria. Other buildings sold subsequent to 30 June 2013 include the 50% undivided share in Sanridge Square, Atterbury House and Harlequins Office Park. The remaining assets, being the De Ville Shopping Centre and the remaining 50% of Great Westerford, are held for sale and active negotiations are under way to dispose of these buildings in the year ahead. Nicolle Weir – Head of Asset and Property Management Attacq On the next page is a table of all direct properties.
30 Weighted average rental per square metre per External month as at valuation as at Rentable area 30 June 2013 30 June 2013 (m²) Property Name Physical Address Region (R / m²)3 (Rand)1 (primary GLA)2 Office and Mixed Use Portfolio: Lynnwood Bridge – No 4 Daventry Street, Gauteng 177 420 000 000 13 399 Offices (Cnr of Daventry & Lynnwood Road), Lynnwood Manor, Pretoria Lynnwood Bridge – No 4 Daventry Street, Gauteng 157 286 000 000 11 175 Retail (Cnr of Daventry & Lynnwood Road), Lynnwood Manor, Pretoria Lynnwood Bridge – No 4 Daventry Street, Gauteng 135 158 000 000 7 946 City Lodge Hotel (Cnr of Daventry & Lynnwood Road), Lynnwood Manor, Pretoria Lynnwood Bridge – No 4 Daventry Street, Gauteng 212 676 000 000 19 104 Aurecon Building (Cnr of Daventry & Lynnwood Road), Lynnwood Manor, Pretoria Lynnwood Bridge, No 4 Daventry Street, Gauteng - 244 000 000 14 561 Phase III5 (Cnr of Daventry & Lynnwood Road), Lynnwood Manor, Pretoria Brooklyn Bridge and 570 & 531 Fehrsen street, Brooklyn, Pretoria Gauteng 172 592 000 000 23 397 Lewis House Woodmead North Land Parcel 20, Woodmead North Office Gauteng 121 73 000 000 4 235 Office Park Park, Maxwell Drive, Woodmead Maxwell Office Park Cnr of Maxwell Drive and Allandale Road, Gauteng – 67 400 000 6 058 – Golder & Associates Sunninghill Building5 Maxwell Office Park Cnr of Maxwell Drive and Allandale Road, Gauteng – 54 600 000 5 039 Attacq Building5 Sunninghill Cell C Campus5 Cnr Pretoria Main Road (R101) & Perth Street, Gauteng – 510 000 000 44 200 Buccleuch Group 55 Cnr Maxwell Drive & Country Estate Drive, Gauteng – 184 000 000 23 139 Waterfall Estate Newtown 120 Carr Street, Newtown, Johannesburg Gauteng – 243 000 000 38 912 and Majestic (Offices only) Development5 Great Westerford 240 Main Road, Rondebosh, Western 132 523 200 000 32 272 Cape Town Cape Retail Portfolio: Garden Route Mall Garden Route Mall, Confluence of the Western 129 1 054 000 000 52 095 N2 Highway & Knysna Road, George Cape Glenfair Boulevard No 3 Daventry Street, Lynnwood Manor Gauteng 155 327 500 000 15 400 (Cnr of Daventry & Lynnwood Rd) Mooirivier Mall Cnr of Nelson Mandela & North West 121 930 000 000 49 104 Govan Mbeki Drive, Potchefstroom Eikestad Mall 43 Andringa Street, Stellenbosch Western 124 615 000 000 32 196 Cape Andringa Walk 43 Andringa Street, Stellenbosch Western 90 155 000 000 10 376 Cape Mill Square5 43 Andringa Street, Stellenbosch Western – 76 000 000 3 616 Cape Brooklyn Mall Cnr of Fehrsen & Lange Streets, Gauteng 178 2 335 863 000 80 115 Nieuw Muckleneuk, Pretoria De Ville 36 Main Rd (Cnr of Wellington & Main Western 129 199 400 000 12 840 Roads), Durbanville, Cape Town Cape
31 OPERATIONAL REVIEW (continued)
Weighted average rental per square metre per External month as at valuation as at Rentable area 30 June 2013 30 June 2013 (m²) Property Name Physical Address Region (R / m²)3 (Rand)1 (primary GLA)2 Light Industrial Portfolio: Massbuild Cnr of Allandale Road and K101 Gauteng 46 243 000 000 35 671 Distribution Centre (Old Pretoria Road), Midrand MB Technologies K101 (Old Pretoria Road), Woodmead Gauteng N/A4 111 900 000 26 000 warehouse Vacant Land Portfolio: Waterfall Land Midrand, on both sides of the Gauteng N/A 2 254 000 000 N/A N1 Highway between Allandale Road and Buccleuch Interchange Le Chateau Estate D’ Afrique, Hartbeespoort Dam North West N/A 31 000 000 N/A 1. Figures reflect 100% ownership of property assets 2. Rentable area is reflected as primary GLA 3. This is calculated as the average occupied gross rental by primary GLA as at 30 June 2013 4. This property is disclosed as stock and will be transferred to the purchaser on completion. 5. Property is under development
The mature direct portfolio performed well, achieving a total benchmark. The properties included here are Investec Building, return of 16.9% (per the IPD June 2013 Bi-annual Universe Massbuild Distribution Centre, Garden Route Mall, Lynnwood report). This return excludes the assets held for sale as well as Bridge Retail, Hotel and Offices, Glenfair and Woodmead North the Attacq Retail Fund assets. Inclusive of the held for sale assets Office Park. the return dropped slightly to 15.1%. The return is excellent considering the assets included in this index are all mature assets An analysis of the properties in respect of sectoral, geographical, excluding Massbuild Distribution Centre, which only came into tenant, vacancy and lease expiry profiles is provided in the graphs the portfolio in April 2013, and have an average capital value of on the next page. It should be noted that the portfolio excludes R19 606.8/m² and an average net income of R135.1/m2 any investments in associates which are covered at a high level (2012: R127.2/m²), which are all at the upper end of the IPD later in the report.
Massbuild Distribution Centre Waterfall Business Estate
32 Geographical profile by GLA Geographical profile by Gross Rental
15.7% 15.7%
45.7% 44.3%
38.6% Gauteng 40.0% Gauteng North West North West Western Cape Western Cape
Tenant profile by GLA Tenant profile by Gross Rental
8.4% 14.8%
26.0% 65.6% 50.1%
35.1% A A B B C C
For the tenant profile table, the following key is applicable: A. Large international and national tenants, large listed tenants and government or smaller tenants in respect of which rental guarantees are issued. These include, inter alia, Nedbank, ABSA, Woolworths, Shoprite Checkers, Massbuild, Truworths, Edcon and Ellerines. B. Smaller international and national tenants, smaller listed tenants, major franchisees and medium to large professional firms. These include, inter alia, Dischem, The Pro Shop, Planet Fitness and the Cape Union Mart group. C. Other local tenants and sole proprietors. This comprises approximately 315 tenants.
Sectoral profile by GLA Sectoral profile by Gross Rental
2.5% 2.8% 4.4% 11.1%
59.3% 27.1% 65.5% 27.3% Hotel Hotel Industrial Industrial Office Office Retail Retail
33 OPERATIONAL REVIEW (continued)
Rental escalations and rental per square metre The retail fundamentals for the fund are very good and showed positive growth with the average monthly foot count across the portfolio having increased year on year by 8% to 15 feet/m². The annualised weighted average gross rental escalation by GLA
in the properties for the year ending 30 June 2014 is presented The average turnover increased by 20% and was driven largely in the table below. as a result of the completion of Andringa Walk and the positive effect of the refurbishment at Brooklyn Mall. On a like for like basis Sector % excluding Andringa Walk, the average turnover increased by 12%. Retail 7.9% Management expects that the uptake of space at Mill Square and Office 8.6% the completion of the Brooklyn Mall refurbishment will continue Industrial 6.5% to increases feet and turnovers across the portfolio in 2014. Hotel 7.0% Total 8.0% Lease expiries
The weighted average gross rental per square metre in Lease expiry profile GLA (m2) the properties for the year ending 30 June 2014 is presented below. 22.0% > 5 years 46.2% Sector R/m² per month Retail R140.34 4.3% 4–5 years Office R170.98 19.9% Industrial R47.43 2.7% Hotel R135.50 3–4 years Total R134.76 3.1% 14.4% The average annualised property yield of the properties (based 2–3 years 16.0% on existing leases) for the year ending 30 June 2014 is 7.3%. This annualised yield includes those properties to be completed 12.5% during the year ending 30 June 2014 and excludes discontinued 1–2 years 6.2% operations. 15.0% <1 year Garden Route Mall 5.8% 29.1% Attacq holds 80% of the shares in the Company that owns the Vacancy 53 360m² mall in George, Western Cape and has an option to 2.9% acquire the remaining 20% share from Hyprop before the end Held for sale of February 2014. Operating An additional 4 500m² bulk application was approved and management are busy reviewing the feasibility of the second The lease expiry profile for continuing operations poses no phase extension. Although the year-on-year foot count decreased significant risk, with the majority of the renewals due in the next by 1.81% from 2012, the turnover for the mall increased by 11%. one to three years being across the retail portfolio. Management The good turnover growth has resulted in very low arrears, with is confident that renewals will be successfully concluded. The monthly arrears on average less than 1% of monthly collections. current economic trading conditions and the ever increasing Excellent progress has been made on the lease renewals during utility costs, in particular rates and taxes, will continue to keep the year. Several underperforming tenants were not renewed the pressure on the renewal escalations. and were replaced by good quality sustainable tenants that will complement the existing tenant mix, including Coricraft, Cotton Lease expiry profile by GLA On, Cotton On Kids and Typo. Indus- Attacq Retail Fund (previously Abacus) GLA* Retail Office trial Other Total Vacancy 2.6% 21.2% – – 7.3% Attacq currently holds a 75% interest in Abacus. Subsequent to <1 year 7.1% 11.5% – – 7.3% year end, Abacus’ name was changed to Attacq Retail Fund. 1–2 years 8.1% 8.9% – – 7.2% Assets in the portfolio include: 2–3 years 21.6% 10.8% – – 15.7% 3–4 years 4.0% 2.3% – – 3.0% Mooirivier Mall (100%) in Potchefstroom; 4–5 years 27.6% 3.5% – – 17.3% 25% undivided share in Brooklyn Mall in Pretoria; and Eikestad Mall precinct, consisting of an 80% undivided >5 years 29.0% 41.8% 100.0% 100.0% 42.2% share in Eikestad Mall and Mill Square and a 100% share in Total 100.0% 100.0% 100.0% 100.0% 100.0% Andringa Walk, located in the heart of Stellenbosch. * Based on existing leases at 30 June 2013
34 Attacq Retail Fund Asset Management team From left: Flip Smit, Lucille Louw, Johan Basson and Heloise van Niekerk.
Photographed at Brooklyn Mall, Pretoria
35 OPERATIONAL REVIEW (continued)
Lease expiry profile by Gross Rental Developments
Indus- Construction commenced on a number of projects during the GR* Retail Office trial Other Total 2013 financial year, the majority of which will come into operation <1 year 11.4% 12.1% – – 10.8% during the 2014 financial year and which include the following developments: 1–2 years 10.7% 8.5% – – 9.3% 2–3 years 26.3% 10.3% – – 20.1% Anticipated % 3–4 years 5.5% 2.7% – – 4.4% completion Total pre- 4–5 years 25.5% 2.6% – – 17.4% Property Sector date GLA let >5 years 20.6% 63.8% – – 38.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% Waterfall Business Estate * Based on existing leases at 30 June 2013 Cell C Campus Office December 2013 44 200 100% Vacancies Group 5 Office January 2014 23 139 100% Golder & Associates Office February 2014 6 198 100% (Maxwell Office Park) In general good progress was made in managing vacancies across the direct portfolio (including Attacq Retail Fund and assets held Attacq Building Office December 2013 5 154 80% for sale), particularly given the challenging economic climate. (Maxwell Office Park) Both the retail vacancies of 1.5% (2012: 1.9%) and office vacancies Spec Building Office June 2014 4 360 0% of 5.7% (2012: 5.5%) are well below the industry norms of 2.9% on (Maxwell Office Park) regional shopping centres, 8.2% on community shopping centres Premier Foods Office June 2014 4 343 100% and 11.8% on commercial offices. (Maxwell Office Park) Vacancy profile Waterfall Corner Retail April 2014 9 284 >85% Waterfall Lifestyle Retail June 2014 7 277 >57% The vacancy profile indicated below reflects the vacancy Other percentage in terms of current GLA by sector. Lynnwood Office April 2014 15 000 50% Bridge – Phase III Vacancy % based Newtown and Retail October 2014 75 000 70% Sector on total GLA* GLA m2** Majestic & Retail 1.5% 4 922 Office Office 5.8% 18 410 Mall of Namibia Retail October 2014 55 000 80% Industrial – – Hotel – – Waterfall Business Estate Portfolio vacancy 7.3% 23 332** The pie chart below summarises the portion of the total * Based on existing leases at 30 June 2013 developable bulk completed, under construction and secured in 2 2 2 ** 13 662m of the 23 332m (58.6%) of the vacant m relates terms of pipeline as well as what remains undeveloped as at to properties held for sale 30 June 2013. Arrears Waterfall land parcels (Bulk/GLA m2) The total trade arrears net of provision for bad debts across the property portfolio were R15.2 million at 30 June 2013 2.8% (2012: R5.6 million) of which R12 million was received subsequent to year end. 15.1%
Management works tirelessly to ensure that arrears are kept to a minimum, through weekly follow up with tenants in default, 82.1% detailed analysis of tenant turnovers to proactively identify any problems and proper credit control with detailed screening of tenants before concluding any deals. The results are very good Completed when viewed in context with the industry, particularly given Under construction the fact that the majority of the arrears that remain are at an Remaining undeveloped advanced stage in the legal process. Total arrears excluding the collections made subsequent to year end represent less than 5.66% of total monthly collections. In 2008, Atterbury Waterfall Investment Company (AWIC) secured the rights to develop the commercial property on the At year end, total provisions for bad debts across the portfolio Waterfall Business Estate and the right to obtain the leasehold amounted to R3.9 million (2012: R1.9 million). title thereto.
36 The Waterfall Business Estate is divided into 12 different land parcels as illustrated in the diagram.
Summary of development of Waterfall land parcels
Bulk/GLA status Under Remaining Total construction Remaining Land development Total land developable and secured undeveloped # Parcel Description timeline area bulk Completed pipeline bulk Years m² m² m² m² m²
1 Parcel 3 Convenience Corner 8 50 000 15 000 – – 15 000 2 Parcel 8 Waterfall Distribution 3 405 969 198 132 44 671 – 153 461 Campus 3 Parcel 9 Waterfall Logistics Precinct 5 331 183 165 592 – 7 500 158 092 4 Parcel 10 Waterfall City 12 1 045 000 800 000 – 142 235 657 765 5 Parcel 10A Corporate City 10 294 200 120 000 – – 120 000 6 Parcel 10B Business Centre 8 53 300 20 000 – – 20 000 7 Parcel 12 Capital City 8 217 483 72 520 – – 72 520 8 Parcel 15 Lifestyle Estate 2 153 162 50 600 – 39 700 10 900 9 Parcel 20 Woodmead North Completed 10 487 4 194 4 194 – – Office Park 10 Parcel 21 Landmark Park 1 113 998 58 200 – 44 200 14 000 11 Parcel 22 Commercial District 2 253 189 94 000 – 30 960 63 040 12 Parcel 24 Factory Depot 10 308 500 154 250 – – 154 250 3 236 471 1 752 488 48 865 264 595 1 439 028 37 OPERATIONAL REVIEW (continued)
Waterfall Business Estate is located between the Allandale and Mall of Namibia – The Grove Woodmead off-ramps on both sides of the M1/N1 highway in Johannesburg, Gauteng. The land joins Modderfontein to the Attacq has an effective shareholding of 31.3% in Mall of Namibia. east and Kyalami and Sunninghill to the west. It is accessible The newly planned regional mall is located in the heart of Kleine from Pretoria via the N1, R21 and R55, and from Sandton and Kuppe, Windhoek. The size of the shopping centre is 55 000m² Johannesburg via the M1, N1, N3 highways and the R55. and is expected to be completed by October 2014. Waterfall is expected to close the gap between the Johannesburg and Tshwane corridor. The business estate Indirect portfolio measures approximately 323ha and 1.75 million m² of developable bulk has to date been approved. The development Reach of Waterfall will be market-driven, and is expected to be rolled out over the next 10–15 years. Reach is invested in two retail portfolios, namely Rapfund and Wingspan. The value of Attacq’s effective interest of 50% The most significant infrastructure improvement to Waterfall shareholding in Reach decreased by a net R13 million to was the upgrade of the Allandale interchange by South African R249 million as at 30 June 2013. This was the net result of a National Roads Agency Limited (SANRAL) which has resulted further R62 million cash investment to follow our rights less an in a free flow interchange and significantly improved impairment loss of R75 million related to the write-off of goodwill accessibility. in the Wingspan portfolio. Key differentiators for Waterfall Business Estate are its Rapfund accessibility to major road infrastructure and the fact that the total development is planned as a greenfields Reach owns 52% of the Rapfund portfolio. Rapfund has development, allowing the best urban design principles 12 properties focused on convenience centres smaller than to be applied in determining infrastructure, services 13 000m² in GLA and is typically anchored by a national food and open public spaces. store operator. Eleven properties are located in Gauteng and the remaining property in the Western Cape. This ensures a sustainable city where all elements integrate seamlessly and efficiently. The Rapfund property portfolio was valued at R968 million at 30 June 2013 (2012: R803.4 million) based on a Other weighted average capitalisation rate of 8.8% (2012: 9.2%). The fund made a 22.3% return for the year. The funds Lynnwood Bridge – Phase III vacancy levels decreased to 5.8% which is below the IPD vacancy benchmark of 8.2% for community shopping Phase III is currently under development and consists of two centres. 7 500m² A-grade office blocks (building A and building B). Aurecon has signed a nine year lease on building A which will 15.4% of the leases expire within the next twelve months commence on 1 April 2014. This building will be linked by however no significant non-renewal risks have been means of a bridge to their current office which is also part of the identified. The fund’s total arrears at 30 June 2013 amount Lynnwood Bridge development. Attacq’s effective shareholding to R10.35 million of which R3.08 million has been provided is 79.4% in building A. Building B is being developed on a for. speculative basis. Wingspan Newtown and Majestic Reach owns 68.4% of the Wingspan portfolio, which is a Attacq holds an effective 62.5% of the Newtown and Majestic specialised fund of upmarket community and regional development which is situated between Museum Africa, shopping centres. The Wingspan portfolio comprises five Mary Fitzgerald Square and Carr Street in an historic area of retail properties valued at R1.99 billion at 30 June 2013 Johannesburg. (2012: R2.16 billion) based on a weighted average capitalisation rate of 8.3% (2012: 8.8%). The Newtown and Majestic development is visible from the landmark Nelson Mandela bridge which provides The Wingspan portfolio comprises the following properties: easy access from the north, while the M1 Carr street offramp affords excellent access from the south. The • Fountains Mall in Jeffreys Bay; development is 75 000m² and consists of two main facets, • Irene Village Mall in Pretoria; namely a 39 000m² office tower anchored by Nedbank Limited • Village Mall in Hartbeespoort; and will be built as a 4-star Green Building. The balance is a • Weskus Mall in Vredenburg; and 36 000m² retail mall which has an expected completion • Westwood Shopping Centre in Durban. date of October 2014. The development is centered on the conversion of the old Potato Sheds. The development will The Westwood Shopping Centre is undergoing a retain and restore the historical elements, keeping the refurbishment which will result in the introduction heritage of the area. of a 3 000m² Game store.
38 The West Hills team at the West Hills Mall, Accra, Ghana
Atterbury Africa Attacq, via AIHI, has committed to invest R250 million in this venture over the next few years. Atterbury Africa invests in Attacq has a direct 25% (effective 32.5%) shareholding in existing and yet to be developed retail centres across sub-Saharan Atterbury Africa via its wholly owned subsidiary Atterbury Africa. Hyprop has committed to invest R750 million as Attacq’s Investment Holdings International (AIHI). investment partners.
To date, Attacq has invested R112.5 million in Atterbury Africa, enabling Atterbury Africa to secure the following assets:
25% A 45% interest in West Hills Mall which is situated in the west of Accra, Ghana and will comprise approximately 27 700m² upon completion in October 2014. Key tenants secured to date include Shoprite, Edgars, Jet, Truworths, Identity, Foschini Group and Woolworths; 37.5% A 47% interest in Accra Mall in Accra, Ghana, which measures 19 075m². The retail centre has been fully let and has a long tenant waiting list due to high demand for retail space. Phase II is in the planning phase and will increase the GLA of the mall to 42 023m². Accra Mall dominates in the region
22.5% due to the size of the mall and consequently the retail offering. This is most evident when the footfall of the mall is considered, which averages 530 000 feet per month; A 75% interest in Achimota in Accra, Ghana with an area of ATTERBURY ASSET 3.59 hectares. Atterbury Africa has recently obtained approval MANAGERS 15% to build a shopping centre of approximately 14 000m² with INTERNATIONAL completion expected by the 3rd of quarter 2015; and
39 James Ehlers – Managing Director of Atterbury Property Developments and Shareholder Photographed at Accra Mall, Accra, Ghana
When did you join the Atterbury Group? January 2002
What is the most significant change that you have experienced in the Atterbury Group over the past few years? The Company has grown from a handful of people to an organisation that is able to operate around the world. It has accumulated experience that enables it to operate professionally across the property spectrum. The real change is the growth. The more we grow, the more we have to adapt new environments we find ourselves in. It is a different world to the one we were in ten years ago.
What is the secret to successfully managing your development team? You need to allow people to express themselves in the way they work. They all have ownership and responsibility for their deliverables but you need to understand the specific skill set of each person and ensure that the work they do is 100% aligned to that. That way, they enjoy what they do and ultimately do it well.
Where do you see Attacq in five years? I see Attacq growing at a phenomenal rate. There is so much work to do on the new developments side, both in South Africa and elsewhere that the prospects can only be good.
What would be the ultimate development project that you would want to undertake? We are already doing it. I remind all of us from time to time that doing something like Waterfall is a once in a lifetime opportunity. The combination of timing, location and scale of this development is unheard of in this country. We have a big responsibility to ensure that what we do there is well conceived and delivered to the highest standard. Something that future generations can be proud of.
40 OPERATIONAL REVIEW (continued)
A 25% interest in Waterfall Mall in Lusaka, Zambia, which is the development is 9 203m2 and the leasing of the development vacant land measuring 8.09 hectares. is progressing well, with all indications being that construction will commence at the beginning of 2014. All these assets are developed in partnership with local investors. For West Hills Mall, the Ghanaian Pension Fund known as the Motor City Social Security National Insurance Trust, is the key local partner. The 5 700m2 development is located on the eastern side of the M1 motorway. A number of offers have been received and the construction of phase I of the development will commence in February 2014.
International portfolio
MAS
After the sale of Attacq’s indirect stake in the Caltongate development to MAS, Attacq will hold 23.9% of the issued shares of MAS. MAS is listed on the Luxembourg Stock Exchange where it has its primary listing with a secondary listing on the JSE.
MAS’ strategy is to invest 70% of its funds in core, mature assets with long-term leases, thus providing predictable cash flow used to pay dividends. The strategy is to invest the remaining 30% of its assets in developments that have slightly higher risk and reward profiles, enabling MAS to generate long-term capital growth. Historically MAS has approached Attacq to Bagatelle – Mall of Mauritius co-invest in a number of developments as a strategic investment partner, thereby increasing Attacq’s effective exposure to international developments. An example is Caltongate where Mauritius MAS raised approximately €23.8 million during February 2013. It is expected that the favourable buying opportunities in the Bagatelle – Mall of Mauritius UK market and greater Euro zone will continue for at least another 18 months and MAS is well-positioned to make Attacq via Atterbury Mauritius Consortium Proprietary Limited, further acquisitions. owns an effective 41.8% of this 45 000m² mixed-use development. It opened on 29 September 2011 and comprises a retail centre Karoo I of 40 000m², a 220-room hotel and a petrol station. This asset is strategically located in the heart of the most economically active Karoo I is a specialised investment fund organised as an region in Mauritius, between the capital, Port Louis and Cyber City. investment company with variable capital in the form of a partnership limited by shares governed by the laws of the Grand The mall continues to show excellent year-on-year growth in Duchy of Luxembourg. the trading fundamentals with the monthly footfall at the mall increasing by 11.9% year on year. The vacancy in the mall at Attacq has an effective 36.8% interest in Karoo I via Arctospark. 30 June 2013 was 6.1%, which is expected to reduce to 0% by Karoo I targets real estate capital markets, including equity and November 2013 based on the committed leases taking effect debt investments, in listed and unlisted enterprises. Underlying subsequent to year end. assets comprise mainly commercial real estate physically located in Western Europe including the United Kingdom, Ireland, North Gardens of Bagatelle America and Canada. The fund is listed on the Euro-MTF market of the Luxembourg Stock Exchange and has a five-year lock-in until This office park development forms part of the Bagatelle precinct 2015. and can accommodate approximately 30 000m2 of commercial bulk. The size of the buildings will be determined by the tenant Karoo II requirements and will be constructed around a short-hole golf course in the development. The first building has already been Attacq has an effective 39.9% interest in Karoo II via Arctospark. completed with 50% let for ten years to Arup Sigma, a Mauritian Karoo II has the same investment strategy, lock-in period and structural, civil and environmental engineering firm. target market focus as Karoo I, but is allowed to invest directly in property whereas Karoo I invests only in equity and debt Deco City instruments. The fund is invested in many of the same assets as Karoo I, weighting them differently. The material difference The available bulk at Bagatelle has been earmarked for a Deco between the two funds is Karoo II’s investment in Waterside City to accommodate all the Lifestyle and Furniture tenants that Shopping Centre in the North East of England, making up 39% of cannot be accommodated within the mall. The proposed size of its current NAV.
41 OPERATIONAL REVIEW (continued)
Attacq has reached an agreement with MAS subject to the initiatives were implemented during the course of the year conclusion of formal agreements and the fulfilment of which included basement sensors for lighting, extraction fans, various conditions to sell its interest in Karoo I and II to MAS escalator adjustments and the installation and adjustment of a for a total purchase consideration of EUR 34.2 million. The building management system at Mooirivier Mall. Water initiatives transaction price is at a discount to the combined NAV of the implemented across the portfolio focused on the programming Karoo funds and will be settled through the issuance of of irrigation systems to ensure only the bare minimum watering 31.9 million new shares of MAS. After the full implementation was required, additional water meters to accurately account of the transaction, it is expected that Attacq will hold 47.3% for the water usage across the properties, low flush toilets and of the issued shares of MAS. leak registers that are monitored on a daily basis. Management is currently investigating the recycling of landscaping waste to Bishopsgate create compost.
Bishopsgate is a student residential development in Birmingham, All waste collected across the portfolio is recycled with recycled England, with 147 student residential units well located in close material increasing by as much as 10% over the last year. proximity to the CBD and Birmingham University. Attacq via AIHI Management is embarking on an extensive drive with tenants in has a 30% interest in Bishopsgate. the next financial year with the aim of reducing the amount of non-recyclable waste by a further 10%. Discussions and revisions Nova Eventis to supply agreements are under way with all suppliers to ensure that where possible materials being used on site are sustainable Attacq has an effective interest of 19.7% in Nova Eventis, and environmentally friendly. This includes paint that will be used a 91 000m2 super-regional retail centre in Germany. Nova in the R2 million re-painting of Brooklyn Bridge that commenced Eventis is trading acceptably under difficult macro-economic in October 2013. conditions. In addition, a comprehensive green sustainability database was Sustainability and our environment developed by Attacq which will be used to assess the baseline specifications for refurbishments, tenant fit-outs and existing Our sustainability strategy has taken a two-pronged approach buildings. The database sets out the minimum requirements which reviews all new buildings coming on line as well as the going forward that will have to be met when signing off existing building portfolio. feasibilities for refurbishments and new builds or baseline specifications on which tenant installation allowances can be All new buildings being developed, including those developed spent. during 2013, have been designed based on the principles encompassed in a four star green building. Although official 4-star Sustainability is an ongoing focus area for Attacq. A number of green ratings will not be pursued for all new buildings (unless tenant awareness programmes will be introduced in the next specifically requested by a tenant), the idea is that these buildings financial year. After the successful implementation of the ‘low will be benchmarked and rated according to the new existing hanging fruit’ initiative, the focus will shift to how tenants can building performance tool released by the Green Building Council reduce their own occupancy costs. of SA (GBCSA) during October 2013. This tool will prove the quality of the ongoing sustainable performance of the building. Corporate Social Investment
During the year Aurecon was appointed to perform an energy Giving back to the community in which we operate is embedded and water benchmarking analysis across the existing direct in Attacq’s DNA as well as Atterbury, our founding company. By commercial portfolio in Gauteng. The analysis was based on the investing in and promoting social programmes that improve the energy and water section of the pilot tool released in October relationships between our customers, suppliers and communities, 2013 as the existing building performance benchmark. The we hope to help raise the living standards of South African objective was to identify all the buildings that were operating communities, which in turn is a catalyst for economic growth. significantly below the midpoint on the benchmarking scale Although we may receive B-BBEE points for these initiatives, our and then to identify certain buildings which were subsequently focus is on the communities and not the points. subjected to a detailed audit by Aurecon to identify energy and water saving initiatives that could be implemented immediately within the building, as well as portfolio-wide initiatives that we Atterbury Trust referred to as our “low hanging fruit” initiative. The founders of the Atterbury Group, Louis van der Watt and Francois van Niekerk, initially allocated a portion of As part of this initiative a full LED lighting retrofit was undertaken their shareholding to the Atterbury Trust which is now a key in all the common areas at Brooklyn Bridge, Lynnwood Bridge, shareholder. Glenfair and Mooirivier Mall. The retrofit was done as part of the Eskom standard product rebate and the rebates received The main objectives of the trust are to encourage education from Eskom, along with the deal negotiated with a supplier, and to promote the advancement of arts and culture. To date resulted in no additional capex being required to complete 140 students have received their tertiary degrees and three the retrofits. The retrofits are expected to save an estimated schools in the west of Pretoria are supported by the trust. Attacq R350 000 per annum just on the common area energy costs, currently supports the initiatives via donations to the trust. which will be passed on directly to tenants. A number of other
42 Mandela Day 2013 at Beyers Bytjies
Atterbury Foundation This is a non-profit company established with the objective of assisting in upliftment projects within the regions where the Atterbury Group owns or develops property.
An example of an initiative is the Re-connect Shelter: When project managers realised that one of the houses that had been bought to be demolished for the Lynnwood Bridge development was occupied by homeless children, the Atterbury Foundation sourced and bought a house and arranged for a Non-Governmental Organisation (NGO) to run a foster-care home for the children. The house was donated to the NGO and Attacq continues to support the Mandela Day 2013 at Beyers Bytjies initiative by paying the property rates.
Other initiatives include: Geelhoutboom in the Western Cape. In return for assisting in the project to remove alien wattle trees in the area, the local community are able to take the wood and resell it for cash; Newtown – We worked with the Johannesburg council to find alternative accommodation for homeless people who were occupying the land that was to be redeveloped; and Soshanguwe Community Library – We spent R7.4 million on building and stocking a library for the community.
Attacq Development Trust The Board has, in principle, agreed to establish a Development Trust which will hold a maximum of 5% of the issued shares in Attacq. The Development Trust will benefit selected disadvantaged, but deserving, young South Africans of all orientations with the main focus on education. The detailed structure, including the funding, is intended to be finalised post listing subject to the necessary regulatory approvals.
Included in the plans is a graduate internship programme where students who received tertiary education bursaries will be rotated throughout the business to gain experience in asset and property management. The initiative will be run in conjunction with Royal Bafokeng Holdings, a major Zahn Hulme – Chief Administrative shareholder in Attacq. Officer – Atterbury Trust
For more information about these initiatives, refer to page 54 in the Transformation, Social and Ethics Report.
Our people
With the internalisation of the Asset and Property Manager, Attacq absorbed the existing employees and appointed a number of new employees from 1 July 2013.
We are in the process of drawing up and implementing policies and procedures for the various elements that relate to staff, including development and retention. This is an ongoing process and we intend to provide feedback on our progress in 2014.
Our people continue to be a key stakeholder in the success and sustainability of the business. An important challenge for our leadership as we grow and gather momentum is to sustain the Atterbury Trust Engineering and QS students perception that everyone who works at Attacq is part of the Attacq family and is valued for their contribution to the business.
43 The Attacq Team @ Brooklyn Bridge, Pretoria
44 “Dok and his A-team”
45 Governance report
highlights
• Appointment of Pierre Tredoux as independent non-executive Chairman • Appointment of Stewart Shaw-Taylor as Chairman of Audit and Risk Committee • Appointment of Thys du Toit and Hellen El Haimer as independent non-executive directors • Appointment of a new Financial Director, Melt Hamman • Formalising our risk management framework • Formalising a Remuneration and Nominations Committee • Employment of PwC to fulfil the internal audit function
When you invest in creativity, it never comes back empty-handed.
46 Introduction
The Attacq Board regards responsible corporate citizenship as a key component of its growth strategy, strategic decisions, audits and assessments. Attacq is committed to complying with all legislation and regulations applicable to its business, including all tax legislation, the JSE Listings Requirements, the South African Companies Act, as well as the recommendations of established corporate governance frameworks such as the guidelines contained in King III.
The Group’s integrated report includes reviews of the Company, together with a detailed review of the financial results and financing positions. In this manner, the Board seeks to present a balanced and understandable assessment of the Group’s overall position and prospects.
Function and Composition of the Board of Directors
The Board sets the strategic objectives of Attacq and determines Attacq’s investment and performance criteria. It is also responsible for the sustainability of the Company, proper management, control, compliance and ethical behaviour of the businesses under its direction.
The Board has approved a charter detailing its responsibilities for the adoption of strategic plans, monitoring of operational performance and management and determination of policy and processes. This ensures the integrity of the Company’s risk management function and internal controls and communication policy.
The Board meets at least four times a year. Ad hoc Board meetings are held as and when required to plan and review: strategy, financial performance, resources, operations, risk, capital expenditure, reporting and compliance matters, standards of conduct, transformation, diversity, employment equity, human resources and environmental management. A clear division of responsibilities between the directors is maintained to ensure that no single director has unfettered decision-making powers.
The Board of Directors consists of three executive directors and nine non-executive directors. Five of the non-executive directors are regarded as independent and this includes the Chairman.
When you invest in creativity, The Group’s independent non-executive directors are:
Pierre Tredoux (Chairman) it never comes back empty-handed. Thys du Toit Hellen El Haimer Lebo Masekela Stewart Shaw-Taylor
The non-executive directors are persons of calibre with the necessary skills and experience to provide judgement that is independent of management on issues relating to strategy, performance, resources, transformation, diversity, employment equity, standards of conduct and evaluation of performance.
47 Governance report (continued)
The composition of the Board has changed as follows: The Audit and Risk Committee is governed by terms of reference which have been approved by the Board and serve to outline the Gideon Oosthuizen – Resigned 20 June 2013 Committee’s role, authority, responsibilities and accountability. Stewart Shaw-Taylor – Appointed 29 November 2012 The terms of reference stipulate that the Committee meets at least Melt Hamman – Appointed 8 July 2013 four times a year. Thys du Toit – Appointed 2 August 2013 Hellen El Haimer – Appointed 2 August 2013 The Committee is also required to meet at least once a year with the internal and external auditors of the Company without Board Committees management being present. The internal audit function is outsourced to PwC Advisory Services Proprietary Limited. The Board has established specific committees to give detailed attention to certain of its responsibilities. The Board is conscious The Committee’s primary objective is to provide the Board with of the fact that such delegation of duties is not an abdication of additional assurance regarding the efficacy and reliability of the the Board members’ responsibilities and the Committees operate financial information used by the directors to assist them in the within defined, written terms of reference which are subject to discharge of their duties. The Committee monitors the existence change as and when so required by the Board to accommodate of adequate and appropriate financial and operating controls the changing needs of the Company. The Committees report and ensures that significant business, financial and other risks quarterly to the Board on their activities. The Committees are the have been identified and are being suitably managed. It is also Audit and Risk Committee; the Remuneration and Nominations responsible to ensure that satisfactory standards of governance, Committee; the Transformation, Social and Ethics Committee and reporting and compliance are in operation. the Investment Committee. In compliance with its oversight role in relation to the preparation of this report, the Audit and Risk Committee has been responsible for the accuracy of the content of the 2013 Integrated Annual Board committees for the 30 June 2014 Financial Year Report.
Transfor- The executive directors are charged with the responsibility of mation, Remuner- determining the adequacy, extent and operation of the systems Social ation and throughout the year by performing comprehensive reviews and Invest- Audit and Nomina- testing of the effectiveness of the internal control systems in ment & Risk Ethics tions operation.
Non-executive Directors Remuneration and Nominations Committee Pierre Tredoux (Chairman) The Remuneration Committee and Nominations Committee have Francois van Niekerk been combined to form the Remuneration and Nominations Pieter Faure Committee. The Committee comprises Johan van der Merwe, Lucas Ndala Pierre Tredoux and Stewart Shaw-Taylor. All of the Committee Johan van der Merwe members are non-executive directors, the majority of which Stewart Shaw-Taylor are independent. When dealing with remuneration matters, Hellen El Haimer the Committee is chaired by Johan van der Merwe and when Thys du Toit dealing with nominations matters, the Committee is chaired by Attacq’s Chairman, Pierre Tredoux. The terms of reference of the Lebo Masekela Committee were approved by the Board during the year under review and the responsibilities of the Committee include the Executive Directors following: Morné Wilken (CEO)
Melt Hamman (FD) Identification and nomination of new directors for approval Louis van der Watt by the Board; Ensuring that any and all appointments to the Board are Independent non-executive director formal and transparent; Overseeing induction and training of directors and conducting annual performance reviews of the Board and Audit and Risk Committee various Board Committees; Reviewing the Group’s board structures, the size and The Audit and Risk Committee is chaired by Stewart Shaw-Taylor composition of the various boards within the Group and and includes independent non-executive directors Hellen El making recommendations in respect of these matters; Haimer and Lebo Masekela and a non-independent non-executive Approving the classification of directors as independent; director, Lucas Ndala. CEO, Morné Wilken and FD, Melt Hamman Overseeing an appropriate separation between executive, attend meetings by invitation. The Board is satisfied that the non-executive, and independent directors; and independence, experience and qualifications of each member Ensuring the proper and effective functioning of the Group’s enable them to fulfil the committee’s mandates. various boards of directors.
48 Transformation, Social and Ethics Committee Executive Committee
Please refer to page 54 for the full Transformation, Social and Membership of Attacq’s Executive Committee comprises Morné Ethics report. Wilken, Melt Hamman, Nicolle Weir, Talana Smith, Peter de Villiers and Helena Austen. Louis van der Watt is invited to the Investment Committee Executive Committee meetings on an ad hoc basis due to the significant experience, expertise and strategic direction he The Investment Committee appointed by the Board has been in provides to Attacq. The Committee is responsible for the Group’s operation for a number of years and comprises Pierre Tredoux operational activities, developing strategy and policy proposals (Chairman), Morné Wilken, Louis van der Watt, Melt Hamman, for consideration by the Board and implementing the Board’s Pieter Faure, Thys du Toit and Lucas Ndala. It is governed by a directives. Other responsibilities include providing leadership mandate which has been approved by the Board and serves to senior management and employees; developing the annual to outline the Committee’s role, authority, responsibilities and budget and business plans for approval by the Board; and accountability. developing, implementing and monitoring internal controls, governance, risk management, ethics and authority levels. The Investment Committee meets when necessary to consider acquisitions, redevelopments and sales of investment properties Company Secretary (“investment proposals”). A quorum consists of two non-executive directors and two executive directors being present at the The Board of directors has direct access to the Company Secretary, meeting. Where an investment proposal is not unanimously Talana Smith, who provides guidance and assistance in line with approved by the non-executive directors or wherever certain the requirements outlined in the Companies Act, King III and the maximum amounts as determined by the Investment Committee’s JSE Listings Requirements. She advises on corporate governance mandate are exceeded, the investment proposal is referred to the and is responsible for the administration of the Company Board. documentation.
The Company Secretary, where necessary, arranges training Committee attendance for the year ended 30 June 2013 on changing regulations and legislation and could involve the Group’s sponsors, auditors or organisations such as the Institute of Trans- Directors. Audit Social for- In- & & ma- vest- The Board has considered and is satisfied with the Company Board Risk Ethics tion ment Secretary’s competence, qualifications and experience.
Pierre Tredoux 5/5 1/1 2/2 The Company Secretary is not a member of the Board and an Morné Wilken 5/5 3/3 3/4 2/2 arm’s-length relationship between the Board and the Company Secretary is regulated through the provisions of a service Louis van der Watt 5/5 1/2 agreement. Gideon Oosthuizen 5/5 3/4 1/2 Francois van Niekerk 5/5 Pieter Faure 5/5 3/3 2/2 Special Focus of the Board and the Board Lucas Ndala 4/5 3/3 1/2 Sub-Committees Johan van der Merwe 4/5 Over and above the responsibilities and focus of the Board and Stewart Shaw-Taylor 3/3 2/2 the various Sub-Committees set out above, the Board pays special Lebo Masekela 5/5 2/3 3/3 4/4 attention to certain areas of governance which are especially Thomas Reilly important from a risk, financial and control perspective. These (Alternate director) 2/5 areas are pro-active Risk Management, ensuring reliable financial Wilhelm Nauta information through Internal Control and Internal Audit. (Alternate director) 3/5 1/2 5 3 3 4 2 Risk Management
Resigned 20 June 2013 Attacq’s risk management framework has been developed Appointed 29 November 2012 with the assistance of PwC Advisory Services and is reviewed Chairman and assessed by the Audit and Risk Committee on an ongoing Resigned Chairman basis. New Chairman Attacq is cognisant of the fact that it faces a number of risks in Subsequent to year end the Transformation Committee was achieving its strategic objectives. Effective identification and combined with the Social & Ethics Committee management of risk are factors in Attacq’s ability to deliver against its strategic objectives. The Attacq risk management process is a simple, yet efficient way of identifying relevant, real risks and addressing them efficiently and effectively:
49 Governance report (continued)
1. Identified risks are, in the first instance, divided into the The strategic focus of Internal Audit is to: following categories: Strategic, Financial, Credit, Foreign Operations, Operational Management, Deal Assessment and improve risk-based alignment in order to provide assurance Implementation, Fund Management, New Developments, on key risks that may prevent or effect the realisation of Stakeholder, Legal & Regulatory, IT, Environmental and strategic goals; and Human Resources. assist management in further developing the internal 2. The risks are then assessed according to likelihood and financial control framework to identify financial reporting impact. risks and ensure controls are adequate to address the risk of 3. After a detailed analysis of the above, the risks are then material misstatements of financial results. further divided according to the following responses: a. no action is required due to the lack in severity of the Share dealings and conflict of interests risk; b. transferring or sharing of the risk (ie Insurance); Prior to its listing, Attacq implemented a formal policy on share c. assuming the risk; or dealings and conflicts of interest in place. d. active management to mitigate the risk. 4. Combined action plans are assessed by both management Board members, directors of major subsidiaries, the Company and the Audit and Risk Committee. Secretary and certain other managers are required to disclose their shareholdings, additional directorships and any potential The Board regards plans for improvement based on residual risk conflicts of interest. Directors and associates are required to calculations including control strategies as the most cost-effective obtain clearance from the FD or CEO prior to any share dealings. way of mitigating risks. These dealings will then be announced as per the JSE Listings Requirements. Management is required to make a quarterly attestation that all potential risks, including any new emerging risks, have been The Company operates a policy of prohibiting dealings by identified and recorded and controls have been reviewed for directors and certain managers in periods immediately preceding effectiveness and action plans prepared where appropriate. the announcement of its interim and year-end financial results, any period while the Company is trading under cautionary Through the risk management process, the Group has identified announcement and at any other time deemed necessary by the the key inherent risks which are outlined on page 51. Board.
Internal control Special Resolutions
To meet the Company’s responsibility to provide reliable The following special resolutions were passed by the subsidiaries financial information, the Company maintains financial and legal of Attacq for the 30 June 2013 financial year: compliance and operational systems of internal control. These controls are designed to provide reasonable assurance that Company name Resolution taken transactions are concluded in accordance with management’s authority, that the assets are adequately protected against Authorisation to material losses, unauthorised acquisition, use or disposal, and provide finan- those transactions are properly authorised and recorded. cial assistance Adoption of (Section 45 of The systems include a documented organisational structure and Memorandum of the Companies division of responsibility, established policies and procedures Incorporation Act) which are communicated throughout the Group, and the careful selection, training and development of people. Atterbury Attfund – 6 July 2012 Investment Company Internal Audit Number 3 (Pty) Ltd Atterbury Property – 6 July 2012 The Group acknowledges the importance of an independent Investments (Pty) Ltd strategically aligned Internal Audit function to assist the Audit Atterbury Mauritius 30 April 2013 6 July 2013 and Risk Committee in discharging its responsibilities. The Internal Consortium (Pty) Ltd Audit function is outsourced to PwC Advisory Services and reports directly to the Audit and Risk Committee. They have Atterbury Parkdev 13 December 2012 – free and unrestricted access to all areas within the Group, Consortium (Pty) Ltd including management, personnel, activities, locations and Design Square Shopping – 25 July 2012 information. Centre (Pty) Ltd Highgrove Property – 6 July 2012 Systematic and thorough annual Internal Audit coverage plans Holdings (Pty) Ltd are prepared together with management and approved by the Lynnaur Investments 15 April 2013 – Audit and Risk Committee. Business areas within the Group (Pty) Ltd receive coverage by following a methodical risk-based audit Lynnwood Bridge Office – 11 January 2013 approach. Park (Pty) Ltd
50 material risks
Risk Potential Impact Stakeholder Mitigation Risk Category Volatile macro- A potential slowdown Financiers Being the supplier of choice – quality Financial economic conditions. in the South African Shareholders and timely delivery. economy and Tenants Diversification of portfolio into Africa increasing labour and Internationally. unrest could lessen South Africa’s attractiveness to investors resulting in limited growth and thus lower demand for rental space. Succession planning – Loss of knowledge Employees Employment of new talent. Human key man dependencies and resources due to Shareholders Sharing of resources from Attacq’s Resources due to a small team the size of the team. associated companies if faced with a that was only formally crisis. employed by Attacq on All of the executive management 1 July 2013. has an existing and/or potential shareholding in the Company via existing shares and options. A staff incentive scheme is currently being considered for senior management. Breakdown in local and Delays to secure Regulators Following processes diligently and Legal and industry legislation. planning consent Shareholders maintaining good relationships with Regulatory due to legislative or Tenants the relevant stakeholders. other risks inherent in the planning environment. Escalating utility Rates and taxes Regulators Environmental studies done and Financial charges and rates and have a substantial Shareholders equivalent of 4-Star Green designs taxes. impact, increasing Suppliers for new developments and existing costs for operational Tenants properties. properties. Eskom retrofit completed to the common areas in 4 of the existing properties. Aurecon doing an energy and water review on existing properties. Interest rates and Increased interest Financiers Exposure to interest rates is managed Financial volatility in the global rates will result in a Shareholders by fixing interest rates over periods in bond market. negative financial relation to the maturity of the funding. impact. Debt funding Limitation to develop Financiers Funding is spread between the major Credit requirements. Waterfall Business Shareholders South African banks. Estate and other Cash flows are monitored on a weekly future developments. basis to ensure that cash resources Increased cost of and facilities are adequate to cover funding. commitments. Repayment of Staggered debt maturities are in place funding. to manage refinancing concentration risk. Additional laws and Non-adherence will Employees PwC has been appointed as internal Legal and rules will be applicable result in fines and Shareholders auditors. Regulatory to Attacq once listed on penalties as well as A new head of legal has been the JSE. reputational risk. appointed. Increasing costs of Staff complement is less than compliance. 40, therefore educating staff and implementing a new policy and process is at a relatively low cost.
51 Lucresia Packery – Shareholder and Attacq employee
When did you start working for the Atterbury Group? I started working for the Company in December 2008; the best move I ever made.
Which valuable lesson did you learn from working closely with the CEO of Attacq over the past two years? Well, the most important lesson would be to act with integrity. People who demonstrate integrity draw others to them because they are trustworthy and dependable.
If you could invite anyone to your dinner table, who would it be and what will you cook? Sjoe, this question is pretty difficult, but let’s get the easy bit out of the way, it’s going to be Indian, I will start off with the all-time favourite samoosas followed by butter chicken with naan and for dessert soji. Now the difficult bit, my table would include Louis Moolman, Princess Diana, Madiba, Barack Obama, Piers Morgan and David Beckham.
Where do you see Attacq in 5 year’s time? In 5 years’ time Attacq’s footprint would be well established in Africa and our exposure would have increased considerably. The Mall of Africa would be trading exceptionally and the new city at Waterfall would be coming to life.
52 REMUNERATION REPORT
Introduction based STI. The quantum of the STI is a function of the annual growth in the NAV per share of the Company on a consolidated Prior to 1 July, Attacq had no employees as it utilised and paid basis. Only if the annual growth in the NAV per share exceeds for the services of AAM and Atterbury Property to manage 7%, a standard reward percentage will be applied to their annual the portfolio and to support the business. During the year the guaranteed package. Remuneration and Nominations Committee was established, comprising Johan van der Merwe, Pierre Tredoux and Stewart The following specific LTI’s are currently in place: Shaw-Taylor, all of whom are non-executive directors. The terms of reference for this committee was approved by the Board and Morné Wilken the committee is in the process of finalising the remuneration At a shareholders’ meeting on 29 November 2012, it was approved philosophy which will be implemented. More details will be that Morné is entitled to 2 000 000 Attacq ordinary shares at a disclosed in our 2014 Integrated Annual Report. price of R8.50 per share. The first 40% of the share options vested on or before 30 June 2013 and was exercised by Morné during the The remuneration structure for non-executive directors is set out month of August 2013. The remaining 60% may be exercised in in detail below: equal portions of 20% per year on 30 June 2014, 30 June 2015 and 30 June 2016. 30 June 2014 30 June 2013 Proposed fee Melt Hamman payable Fees paid At the shareholders’ meeting on 27 August 2013, it was approved that Melt, in his capacity as Financial Director, is entitled to R R 1 200 000 Attacq ordinary shares at a price of R9.50 per share. The first 60% of the shares may be exercised on 30 June 2016, Basic fees: the following 20% on 30 June 2017 and the remaining 20% on Board Chairman 300 000 150 000 30 June 2018. Melt will be entitled to take delivery of the shares Independent into his portfolio within six months of the vesting date. non-executive director 195 000 130 000 Non-executive director 195 000 100 000 Nicolle Weir At the same shareholders’ meeting it was approved that Nicolle, Committee fees: in her capacity as Head of Asset and Property Management, is Audit and Risk Chairman 110 000 65 000 entitled to 1 000 000 Attacq shares at a price of R11.96 per share. Audit and Risk Member 88 000 44 000 The first 60% of the shares may be exercised on 30 June 2017, the Transformation, Social & following 20% on 30 June 2018 and the remaining 20% on Ethics Chairman 37 500 N/A 30 June 2019. Nicolle will be entitled to take delivery of the shares into her portfolio within six months of the vesting date. Transformation, Social & Ethics Member 30 000 N/A Transformation Chairman N/A 65 000 Helena Austen Under a general authority approved at the same shareholders’ Transformation Member N/A 44 000 meeting, Helena, in her capacity as Head of Legal, has been given Social and Ethics Chairman N/A 65 000 the option to acquire 500 000 Attacq shares at a price of R11.96 Social and Ethics Member N/A 44 000 per share. The first 60% of the shares may be exercised on Remuneration and 30 September 2016, the following 20% on 30 September 2017 Nominations Chairman 25 000 N/A and the remaining 20% on 30 September 2018. Helena will be Remuneration and entitled to take delivery of the shares into her portfolio within Nominations Member 20 000 N/A six months of the vesting date. Investment Chairman 75 000 65 000 Investment Member 60 000 44 000
Management’s incentives
Staff’s remuneration is a combination of Total Guaranteed package, a Short-term Incentive (STI) and a Long-term Incentive (LTI). The objective of the STI is to motivate employees, drive performance and retain key talent over the one-year operating cycle. As for the LTI, the objective is similar in terms of staff motivation and retention but slightly different in that the main focus is to deliver sustained performance over the long-term to create shareholder wealth. The measurement of the performance is the annual growth in the NAV per share.
The employment agreements of Morné Wilken, Melt Hamman and Nicolle Weir, in their capacities as the executive directors and Head of Asset and Property Management, includes a formula Cell C Warehouse, Waterfall Business Estate
53 TRANSFORMATION, SOCIAL AND ETHICS COMMITTEE From left: Talana Smith, Helen El Haimer, Melt Hamman, Helena Austen and Lebo Masekela.
Transformation, Social and Ethics Report
The Transformation, Social and Ethics Committee (TSE) includes Board and the Committee is accountable and reports to the Board. independent non-executive directors Lebo Masekela (Chairman) The Committee is responsible for implementing Attacq’s strategy and Hellen El Haimer. Melt Hamman (FD), Helena Austen (Head of for B-BBEE transformation, driving environmental responsibility Legal) and Talana Smith (Company Secretary) forms the balance and sustainability issues. of the Committee. Nicolle Weir (Head of Asset and Property Management) and a TSE Consultant attends by invitation. The The mandate of the Committee includes monitoring the Committee meets on a quarterly basis and more frequently if ad impact of compliance with legislation including the Companies hoc special meetings need to be convened. Act, Tax Legislation, the B-BBEE Act, Employment Legislation and Environmental Legislation. The Committee monitors Overall responsibility and mandate good corporate citizenship and Attacq’s contribution to the development of communities. The Committee also reviews the of the TSE Committee ethical standards of the Board and the Company including, but not limited to, the implementation of anti-corruption The mandate of the TSE Committee has been approved by the measures.
54 The Committee will assist in the formulation of a Green Policy During the current B-BBEE audit, Attacq has increased its black to be implemented throughout the Group. The Committee will shareholding beyond 25.1%, thereby achieving the status of monitor the implementation of the Policy on new developments a black empowered enterprise. Changes were made to the as well as on the expansion and maintenance of existing composition of the Board by improving the representation. properties. With procurement levels exceeding 100% during 2013, With the internalisation of the asset management function, the procurement by Attacq from suppliers with a scorecard level Group will for the first time since its incorporation have direct of four and above has improved to R1.5 billion. Procurement employees. It is the aim of the Committee to ensure that the expenditure with black owned suppliers has increased to R180 Company creates a workplace where employees are treated with million compared to R85 million in 2012. fairness, dignity and respect. The Group will provide opportunities for personal improvement and growth. Health and safety There are a number of initiatives, especially in the enterprise concerns are also of great importance. The sharing of ideas is development and socio-economic development areas that will encouraged and suggestions are welcomed. assist Attacq in improving its B-BBEE rating.
B-BBEE Rating
During 2013, Attacq has, with reference to its 2012 grading and under the guidance of a consultant, achieved a level five rating under the property charter for B-BBEE. Our tenants were able to claim an 80% B-BBEE procurement level of recognition from Attacq.
55 Application of Principles in the King Code
Attacq is committed to the principles of transparency, integrity, fairness and accountability as advocated in the King Code. We strive to meet these objectives as set out in the table below.
Key – Level of application: 1 – Not applied/will not be applied 2 – In process/partially applied 3 – Full application
Level of Principle Comments Application 1. Ethical leadership and corporate citizenship 1.1 The Board should provide effective 3 Ethics form part of the values of the Board and Group leadership based on an ethical foundation 1.2 The Board should ensure that the Company 3 The Group identifies and contributes to selected corporate social is, and is seen to be, a responsible corporate investment initiatives citizen 1.3 The Board should ensure that the Company’s 2 The Board meets regularly to review management of the Company. ethics are managed effectively A Transformation, Social and Ethics Committee is in place which supports the Board in managing the ethics program 2. Board and Directors 2.1 The Board should act as the focal point for 3 Contained in board charter as guiding principle and custodian of corporate governance 2.2 The Board should appreciate that strategy, 3 Contained in board charter as guiding principle risk, performance and sustainability are inseparable 2.3 The Board should provide effective 3 Contained in board charter as guiding principle leadership based on an ethical foundation 2.4 The Board should ensure that the Company 3 The Group identifies and contributes to selected corporate social is and is seen to be a responsible corporate investment initiatives citizen 2.5 The Board should ensure that the Company’s 3 The Board meets regularly to review management of the Company. ethics are managed effectively Feedback from the Transformation, Social and Ethics Committee is a standard item on the Board meeting 2.6 The Board should ensure that the Company 3 An Audit and Risk Committee is in operation and is chaired by an has an effective and independent audit independent non-executive director committee 2.7 The Board should be responsible for the 3 Contained in board charter as guiding principle. The Board is governance of risk supported by the Audit and Risk Committee 2.8 The Board should be responsible for 3 Contained in board charter as guiding principle. IT Risks are also information technology (IT) governance managed through the Audit and Risk Committee 2.9 The Board should ensure that the Company 3 Contained in board charter as guiding principle and reviewed complies with applicable laws and considers regularly adherence to non-binding rules, codes and standards 2.10 The Board should ensure that there is an 3 A risk based internal audit function is in operation and reports to effective risk-based internal audit the Audit and Risk Committee 2.11 The Board should appreciate that 3 Contained in board charter as guiding principle stakeholders’ perceptions affect the Company’s reputation 2.12 The Board should ensure the integrity of the 3 The Board and/or members of the Audit and Risk Committee Company’s integrated report review the annual integrated report 2.13 The Board should report on the effectiveness 3 The internal controls are reviewed by an independent Internal of the Company’s system of internal controls Audit function which reports to the Audit and Risk Committee. The Audit and Risk Committee also reports to shareholders via the committee’s report which is included in the annual financial statements
56 Level of Principle Comments Application 2.14 The Board and its directors should act in the 3 Contained in board charter as guiding principle best interests of the Company 2.15 The Board should consider business 3 None of the related companies are currently in business rescue rescue proceedings or other turnaround mechanisms as soon as the Company is financially distressed as defined in the Act 2.16 The Board should elect a chairman of the 3 Board has elected a chairman. The chairman is independent and is Board who is an independent non-executive not the CEO director. The CEO of the Company should not also fulfil the role of chairman of the Board 2.17 The Board should appoint the chief 3 The Board has appointed a CEO executive officer and establish a framework for the delegation of authority 2.18 The Board should comprise a balance of 3 The Board consists of 12 directors including the 3 executive power, with a majority of non-executive directors. 5 of the 9 non-executive directors are independent directors. The majority of non-executive directors should be independent 2.19 Directors should be appointed through a 3 A formal and transparent process is in place for appointing formal process directors. The Remuneration and Nominations Committee assists with the process of identifying and appointing suitable candidates 2.20 The induction of and ongoing training 3 Continuous training of board members is taking place and is and development of directors should be managed by the Company Secretary conducted through formal processes 2.21 The Board should be assisted by a 3 The Board considers the Company Secretary to be suitably competent, suitably qualified and qualified and experience and in a position to advise the Company experienced Company secretary independently 2.22 The evaluation of the Board, its committees 3 The Board delegates certain functions to the following committees: and the individual directors should be Executive Committee, Audit and Risk Committee, Remuneration performed every year and Nominations Committee, Transformation, Social and Ethics Committee and Investment Committee. An annual evaluation process is taking place under the guidance of the remuneration and nominations committee 2.23 The Board should delegate certain functions 3 The Board has formed standing committees to perform certain to well-structured committees without function and ad hoc committees are formed as and when required. abdicating its own responsibilities The individual committees are listed on 2.22 above 2.24 A governance framework should be agreed 2 Attacq’s existing governance framework is currently being between the Group and its subsidiary boards implemented across major subsidiaries 2.25 Companies should remunerate directors and 3 Directors’ remuneration is determined annually based on market executives fairly and responsibly related benchmarks by the Remuneration and Nominations Committee 2.26 Companies should disclose the 3 The Company discloses directors’ remuneration in the Integrated remuneration of each individual director and Annual Report certain senior executives 2.27 Shareholders should approve the Company’s 2 The policy will be finalised at the next Remuneration and remuneration policy Nominations Committee meeting and thereafter tabled at a future shareholders meeting 3. Audit Committees 3.1 The Board should ensure that the Company 3 The Board has an Audit and Risk Committee in compliance with has an effective and independent audit King III committee 3.2 Audit committee members should 3 The Committee consists of suitably qualified and experienced be suitably skilled and experienced independent directors independent, non-executive directors (subsidiary exemption) 3.3 The audit committee should be chaired by 3 The Committee is chaired by Stewart Shaw-Taylor, an independent an independent non-executive director non-executive director
57 Application of Principles in the King Code (continued)
Level of Principle Comments Application 3.4 The audit committee should oversee the 3 The Committee and/or members of the Committee reviews the integrated reporting (integrated reporting, Integrated Annual Report prepared by management financial, sustainability and summarised information) 3.5 The audit committee should be responsible 3 All significant judgements and reporting decision are reported to for evaluating the significant judgements the Committee and reporting decisions affecting the integrated report 3.6 The audit committee’s review of the 3 The Audit and Risk Committee reviews all integrated reports, financial reports should encompass the interim results and any provisional results announcements annual financial statements, interim reports, preliminary or provisional result announcements, summarised integrated information, any other intended release of price-sensitive financial information, trading statements, circulars and similar documents 3.7 The audit committee should ensure that 2 The Committee has engaged with an external service provider to a combined assurance model is applied implement a formal assurance model to provide a coordinated approach to all assurance activities 3.8 The audit committee should satisfy itself of 3 The Committee performs an annual review of the finance function the expertise, resources and experience of and performance of the FD through discussion with management the Company’s finance function 3.9 The audit committee should be responsible 3 Internal audit reviews are undertaken as and when deemed for overseeing of internal audit necessary by the Committee in which case it will oversee the internal audit process 3.10 The audit committee should be an integral 3 The Company has a combined Audit and Risk Committee component of the risk management process 3.11 The audit committee is responsible for 3 The Committee oversees the external audit functions and review recommending the appointment of the the appropriateness and independence of the external auditor external auditor and overseeing the external annually audit process 3.12 The audit committee should report to 3 The Committee formally reports to the shareholders in the the Board and shareholders on how it has Integrated Annual Report and on a frequent basis to the Board discharged its duties 4. The governance of risk 4.1 The Board should be responsible for the 3 Contained in board charter as guiding principle and supported by governance of risk the role and responsibility of the Audit and Risk Committee 4.2 The Board should determine the levels of risk 3 The Audit and Risk Committee operates within its approved tolerance charter, framework and policy which are reviewed on an annual basis by both the Audit and Risk Committee and the Board 4.3 The risk committee or audit committee 3 The Audit and Risk Committee operates within its approved should assist the Board in carrying out its risk charter, framework and policy which are reviewed on an annual responsibilities basis 4.4 The Board should delegate to management 3 Management has reviewed the application of the risk framework the responsibility to design, implement and monitor the risk management plan 4.5 The Board should ensure that risk 2 The Board, with the assistance of the Audit and Risk Committee is assessments are performed on a continual in the process of formalising its risk review process basis 4.6 The Board should ensure that frameworks 3 The Audit and Risk Committee operates within its approved charter, and methodologies are implemented to framework and policy which will be reviewed on an annual basis. increase the probability of anticipating The independent internal audit function will provide assurance unpredictable risks with respect to the implementation of the methodologies 4.7 The Board should ensure that management 3 Management reports any material risks and its approach to the considers and implements appropriate risk Audit and Risk Committee on a regular basis responses
58 Level of Principle Comments Application 4.8 The Board should ensure continual risk 3 Management reports any material risks and its approach to the monitoring by management Audit and Risk Committee on a regular basis. The independent internal audit function will provide assurance with respect to the implementation of the monitoring process 4.9 The Board should receive assurance 2 The Board, with the assistance of the Audit and Risk Committee is regarding the effectiveness of the risk in the process of formalising its risk review process management process 4.10 The Board should ensure that there are 3 The Board is comfortable with the existing processes which are in processes in place enabling complete, place timely, relevant, accurate and accessible risk disclosure to stakeholders 5. The governance of Information Technology (IT) 5.1 The Board should be responsible for 2 The Board is in the process of finalising its IT governance information technology (IT) governance framework 5.2 IT should be aligned with the performance 2 The Board is in the process of finalising its IT governance and sustainability objectives of the Company framework 5.3 The Board should delegate to management 2 The Board is in the process of finalising its IT governance the responsibility for the implementation of framework an IT governance framework 5.4 The Board should monitor and evaluate 3 IT investments and expenses form part of the normal budgeting significant IT investments and expenditure process, and is therefore approved by the Board 5.5 IT should form an integral part of the 2 The Board is in the process of finalising its IT governance Company’s risk management framework 5.6 The Board should ensure that information 2 The Board is in the process of finalising its IT governance assets are managed effectively framework 5.7 A risk committee and audit committee 2 Once the IT governance framework is finalised, it will be monitored should assist the Board in carrying out its IT by the Audit and Risk Committee responsibilities 6. Compliance with laws, codes, rules and standards 6.1 The Board should ensure that the Company 3 The Board requires management to report on compliance on a complies with applicable laws and considers regular basis adherence to non-binding rules, codes and standards 6.2 The Board and each individual director 3 Training is provided to board members from time to time as should have a working understanding of the required effect of the applicable laws, rules, codes and standards on the Company and its business 6.3 Compliance risk should form an integral part 3 The Audit and Risk Committee operates within its approved of the Company’s risk management process charter, framework and policy which will be reviewed on an annual basis 6.4 The Board should delegate to management 3 Management is responsible or compliance processes the implementation of an effective compliance framework and processes 7. Internal audit 7.1 The Board should ensure that there is an 3 PwC Advisory Services Proprietary Limited was appointed as the effective risk-based internal audit external service provider of the internal audit function 7.2 Internal audit should follow a risk-based 2 The effectiveness of the internal audit function will improve with approach to its plan the assistance of the external service provider 7.3 Internal audit should provide a written 2 Our external service provider attends Audit and Risk Committee assessment of the effectiveness of the meetings where written assessments are tabled and discussed Company’s system of internal control and risk management 7.4 The audit committee should be responsible 3 Operationally the internal audit function reports directly into the for overseeing internal audit Audit and Risk Committee 7.5 Internal audit should be strategically 2 Operationally the internal audit function reports directly in to the positioned to achieve its objectives Audit and Risk Committee
59 Application of Principles in the King Code (continued)
Level of Principle Comments Application 8. Governing stakeholder relationships 8.1 The Board should appreciate that 3 The Board monitors stakeholder perceptions stakeholders’ perceptions affect a Company’s reputation 8.2 The Board should delegate to management 3 Management is responsible for dealing proactively with to proactively deal with stakeholder stakeholder relationships relationships 8.3 The Board should strive to achieve the 3 Stakeholder’s interests are considered during decision-making appropriate balance between its various processes stakeholder groupings, in the best interests of the Company 8.4 Companies should ensure the equitable 3 The Board considers the equitable treatment of shareholders in treatment of shareholders decision-making 8.5 Transparent and effective communication 3 Communication to stakeholders is the responsibility of the with stakeholders is essential for building executive team and Company secretary and is monitored by the and maintaining their trust and confidence Board 8.6 The Board should ensure that disputes 3 All disputes communicated to the Board are resolved effectively are resolved as effectively, efficiently and and efficiently expeditiously as possible 9. Integrated Reporting and disclosure 9.1 The Board should ensure the integrity of the 3 The Board ensures the integrity of the Integrated Annual Report Company’s integrated report through the advice and assistance of independent experts 9.2 Sustainability reporting and disclosure 2 The Board subscribes to reporting to stakeholders on the should be integrated with the Company’s sustainability of the Company and is in the process of financial reporting implementing a comprehensive process 9.3 Sustainability reporting and disclosure 2 As this is the Company’s first Integrated Annual Report, the Board is should be independently assured reviewing the process
Cell C Campus, Waterfall Business Estate
60 Shareholder analysis
As at 30 June 2013, Attacq’s shareholders holding more than As at 4 October 2013, Attacq’s shareholders holding more than 5% (including treasury shares) consisted of the following: 5% (including treasury shares) consisted of the following:
5.68% 5.44%
7.88% 18.24% Sanlam Life Insurance Ltd 5.75% 19.28% Royal Bafokeng Holdings (Pty) Ltd Sanlam Life Insurance Ltd 8.37% Mergon Foundation NPC Mergon Foundation NPC 14.40% Razorbill Properties 91 Royal Bafokeng Holdings 12.95% (Pty) Ltd (Pty) Ltd 12.56% BNF Investments (Pty) Ltd 14.94% BNF Investments (Pty) Ltd Abacus Holdings (Pty) Ltd Abacus Holdings (Pty) Ltd
The movement in issued shares from 30 June 2013 until 4 October 2013 is illustrated below:
Date Number of shares Price Reason
Opening balance 30 June 2013 522 989 885 Issue 29 July 2013 50 434 783 R11.50 Rights issue Cancellation 22 August 2013 (36 187 884) R3.76 Restructure in terms of the Atterbury Investment Managers (Pty) Ltd transaction Issue 28 August 2013 800 000 R8.50 Option exercised by Morné Wilken Issue 28 August 2013 60 000 R12.00 Issue of shares to Melt Hamman Repurchase 28 August 2013 (2 160 853) R10.32 Attacq repurchased shares from the Atterbury Trust Issue 04 September 2013 36 187 884 R7.18 Restructure in terms of the Atterbury Investment Managers (Pty) Ltd transaction Repurchase 04 September 2013 (25 188 346) R10.32 Restructure in terms of the Atterbury Investment Managers (Pty) Ltd transaction Closing balance 04 October 2013 546 935 469
Shareholder spread at 30 June 2013 as defined in terms of the JSE Listings Requirements
Number of shareholders Number of shares held Percentage of shares in issue Public 510 121 820 630 23.29% Non-public 36 401 169 255 76.71% 546 522 989 885 100.00%
Attacq’s shares are currently trading in the Over-The-Counter (OTC) market.
Below are trading statistics for the year ended 30 June 2013. number of transactions: 305; number of shares traded: 43 179 753; average price per share traded of R10.72; and highest price per share traded of R12.50.
61 Shareholder analysis (continued)
Directors’ interest in Attacq shares
As at 30 June 2012, 30 June 2013 and 4 October 2013, Attacq’s directors had the following interests in Attacq shares:
Beneficial as at 30 June 2012 Beneficial as at 30 June 2013 Name Direct Indirect Total Direct Indirect Total
Morné Wilken – 354 747 354 747 – 404 747 404 747 Louis van der Watt 774 283 18 805 271 19 579 554 2 284 17 307 683 17 309 967 Pierre Tredoux – 40 328 40 328 – 40 165 40 165 Stewart Shaw-Taylor* – – – 650 000 – 650 000 Francois van Niekerk – 38 846 562 38 846 562 – 43 430 377 43 430 377 Lebo Masekela – 309 082 309 082 – 121 882 121 882 Johan van der Merwe – 591 578 591 578 – 541 226 541 226 Pieter Faure – 3 607 589 3 607 589 – 3 563 906 3 563 906 Lucas Ndala – – – – – – Wilhelm Nauta (Alternate) – – – – – – Thomas Reilly (Alternate) – – – – – – Gideon Oosthuizen** 242 350 1 189 906 1 432 256 – 1 088 432 1 088 432 Total 1 016 633 63 745 063 64 761 696 652 284 66 498 418 67 150 702
Movements between 30 June 2013 and 4 October 2013 Beneficial as at 4 October 2013 Name Direct Indirect Total Direct Indirect Total
Morné Wilken – 931 020 931 020 – 1 335 767 1 335 767 Melt Hamman 60 000 – 60 000 60 000 – 60 000 Louis van der Watt – 863 559 863 559 2 284 18 171 242 18 173 526 Pierre Tredoux – 2 641 2 641 – 42 806 42 806 Stewart Shaw-Taylor – – – 650 000 – 650 000 Francois van Niekerk – (8 514 043) (8 514 043) – 34 916 334 34 916 334 Hellen El Haimer – – – – – – Thys du Toit – – – – – – Lebo Masekela – 12 828 12 828 – 134 710 134 710 Johan van der Merwe – – – – 541 226 541 226 Pieter Faure – (427 324) (427 324) – 3 136 582 3 136 582 Lucas Ndala – – – – – – Wilhelm Nauta (Alternate) – – – – – – Thomas Reilly (Alternate) – – – – – – Gideon Oosthuizen** – 1 017 1 017 – 1 089 449 1 089 449 Total 60 000 (7 130 302) (7 070 302) 712 284 59 368 116 60 080 400
* Stewart Shaw-Taylor was appointed on 29 November 2012 ** Gideon Oosthuizen resigned on 20 June 2013
62 De Wet Coetzee – Asset Manager Atterbury Africa and Shareholder Photographed at West Hills Mall, Ghana
Why did you acquire Attacq shares? One should only invest in something you believe in. I believe in the assets we develop and trust our asset management skills to maximize the yield on the assets. It was therefore a no brainer to acquire Attacq shares.
Which aspect of your job do you find most challenging? Work-life balance.
What surprised you most about working in Ghana? The friendly and welcoming nature of the Ghanaian people.
What made you decide to climb Kilimanjaro next year? I want to contribute towards the Atterbury Trust in helping others less fortunate. I also want to summit the highest peak in Africa seeing that we, the Atterbury Group is expanding into Africa and I am very much a part of that.
Which qualities must an inspiring leader have? Self believe and a sense of humour. Believing in yourself to influence others and knowing when not to take yourself too seriously.
63 ATTACQ LIMITED (Previously Atterbury Investment Holdings Ltd) (Registration number: 1997/000543/06)
Directors’ Responsibilities and Approval 65 Company Secretary Report 66 Independent Auditor’s Report 67 Report of the Audit and Risk Committee 68 Directors’ Report 69 Statement of Financial Position 78 Statement of Comprehensive Income 80 Statement of Changes in Equity 81 Statement of Cash Flows 82 Accounting Policies 84 Notes to the Annual Financial Statements 94
Audited Consolidated Annual Financial Statements for the year ended 30 June 2013
These Annual Financial Statements have been prepared under supervision of P Smit CA (SA), CFO of Attacq Limited until 30 June 2013.
64 Directors’ Responsibilities and Approval
The directors are required by the South African Companies Act, 71 of 2008 (as amended) (the Companies Act), to maintain adequate accounting records and are responsible for the content and integrity of the consolidated financial statements and related financial information upon which the financial statements in this report are based. It is their responsibility to ensure that the consolidated annual financial statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the year then ended. The external auditors are engaged to express an independent opinion on the consolidated annual financial statements.
The consolidated annual financial statements are prepared in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board, and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial controls established by the Group and places considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group.
While operating risk cannot be fully eliminated, the Group endeavours to minimise said risk by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. 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 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 30 June 2014 and, in 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, set out on pages 69 to 176 in this report, have been prepared on the going concern basis.
The consolidated annual financial statements were approved by the Board and were signed on its behalf by:
P Tredoux MC Wilken Chairman Chief Executive Officer
Pretoria 4 October 2013
65 Company Secretary Report
Save for the information disclosed below with regard to the accuracy of the issued share capital of the Company as previously reflected in the returns and notices filed with the Companies and Intellectual Property Commission (CIPC), in terms of section 88(2)(e) of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act), I hereby certify that, to the best of my knowledge and belief, the Company has filed all such returns and notices as are required of a public company in terms of the Companies Act with the CIPC for the financial year ended 30 June 2013, and that all such returns and notices appear to be true, correct and up to date.
A transaction was entered into by the Company during 2006 in terms of which, inter alia, Atterbury Investment Managers Proprietary Limited (Attvest) indemnified the Company (the Indemnity) in respect of 50% (fifty percent) of all amounts which the Company would have to pay to First Rand Bank Limited (acting through its Rand Merchant Bank Division) (RMB) pertaining to a guarantee provided by RMB for the payment by the Company of the balance of the purchase price of a rental enterprise acquired by the Company. In consideration for Attvest granting the Indemnity, the Company agreed to allot and issue 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares in the share capital of the Company to Attvest (the Initial Attvest Shares).
Subsequent to the conclusion and implementation of the Indemnity, it transpired that the issuing of the Initial Attvest Shares was void ab initio by virtue of such shares not being fully paid up at the time of the allotment and issue thereof by the Company to Attvest, as contemplated in section 92(1) of the Companies Act, 61 of 1973 (as amended). The parties agreed to regularise the aforesaid transaction and thereby give effect to the original commercial agreement between them on substantially the same terms and conditions as contemplated above. Accordingly, the re-implementation of the aforesaid transaction was approved by way of special resolution adopted by the shareholders of the Company at the special shareholders’ meeting held on 27 August 2013, such approval being recorded in the minutes of such special shareholders’ meeting, which are available for inspection via access to the Company’s website or on request from the Company Secretary. The transaction is disclosed in the Directors’ Report.
Talana Smith Company Secretary
4 October 2013
Woodmead North Office Park
66 INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF ATTACQ LIMITED
We have audited the consolidated annual financial statements of Attacq Ltd set out on pages 78 to 176 which comprise the consolidated statement of financial position as at 30 June 2013, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information. Directors’ Responsibility for the Consolidated Annual Financial Statements The Company’s directors are responsible for the preparation and fair presentation of these consolidated annual financial statements in accordance with International Financial Reporting Standards and the requirements of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act), and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated 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 and perform the audit to obtain reasonable assurance about whether the consolidated annual financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated annual financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 management, as well as evaluating the overall presentation of the consolidated 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 consolidated annual financial statements present fairly, in all material respects, the financial position of Attacq Ltd as at 30 June 2013 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act. Other reports required by the Companies Act As part of our audit of the consolidated annual financial statements for the year ended 30 June 2013, we have read the Directors’ Report, the Audit and Risk Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated annual financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated annual financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. Report on Other Legal and Regulatory Requirements As detailed in the Report of the Audit and Risk Committee the Company’s Audit and Risk Committee was not constituted in compliance with the requirements of section 94 of the Companies Act. The Committee did not comprise of three non-executive, independent directors as contemplated by the Companies Act. As detailed in paragraph 5 of the Directors’ Report, the Company has identified non-compliance with the requirements of section 92 of the Companies Act of South Africa, 1973 following a transaction concluded in 2006. In addition, as detailed in paragraph 5 of the Directors’ Report the Company is not in compliance with the requirements of section 48 of the Companies Act. Subsidiaries of the Company held more than 10% of the shares in issue by the Company. The Board has put measures in place to rectify these areas of non-compliance.
Deloitte & Touche Registered Auditors Per: Z Jasper Partner 4 October 2013
Riverwalk Office Park, Block B, 41 Matroosberg Road, Ashlea Gardens X6, Pretoria, 0081, South Africa, PO Box 11007, Hatfield, 0028
National Executive: LL Bam Chief Executive, AE Swiegers Chief Operating Officer, GM Pinnock Audit, DL Kennedy Risk Advisory, NB Kader Tax, TP Pillay Consulting, K Black Clients & Industries, JK Mazzocco Talent & Transformation, CR Beukman Finance, M Jordan Strategy, S Gwala Special Projects, TJ Brown Chairman of the Board, MJ Comber Deputy Chairman of the Board Member of Deloitte Touche Tohmatsu Limited
67 Report of the Audit and Risk Committee for the year ended 30 June 2013
The Group’s Audit and Risk Committee is a committee of the Board of directors. The activities of the Audit and Risk Committee are determined by its terms of reference as approved by the Board and its statutory responsibilities as per the South African Companies Act, 71 of 2008 (as amended) (the Companies Act).
The membership of the Audit and Risk Committee comprises the following non-executive directors. They are: • Stewart Shaw-Taylor (Chairman) – appointed November 2012 – independent • Pierre Tredoux (Chairman) – resigned November 2012 – independent • Pieter Faure – resigned August 2013 • lucas Ndala • lebo Masekela – appointed November 2012 – independent • Hellen El Haimer – appointed August 2013 – independent
The Audit and Risk Committee consists of four non-executive directors, one of whom is not independent.
Pierre Tredoux, an independent non-executive director, was the chairman of the Audit and Risk Committee until November 2012, where-after, Stewart Shaw-Taylor, an independent non-executive director became the chairman. Pierre Tredoux stepped down from the Audit and Risk Committee on his appointment as chairman of the Group.
Statutory Duties In the execution of its statutory duties during the past financial period, the Audit and Risk Committee: • Nominated for appointment as auditor, Deloitte & Touche (Deloitte) (engagement partner: Z Jasper), who, in our opinion, is independent of the Group. • Determined the fees to be paid to Deloitte. • Determined Deloitte’s terms of engagement. • Defined the non-audit services Deloitte may provide on a pre-approved basis. • Approved the non-audit services provided by Deloitte during the year. • Received no complaints relating to the accounting practices of the Group, the content or auditing of its financial statements, the internal financial controls or any other related matter. • Recommended for approval the financial statements and report for the year ended 30 June 2013.
Delegated Duties The Audit and Risk Committee also assisted the Board with the following duties: • Reviewed the key risks facing the Group and the risk management processes implemented.
External Audit The Audit and Risk Committee is satisfied with the independence of the external auditor, Deloitte, including the provision of non-audit services in compliance with the Group policy. We have recommended to the Board that Deloitte be retained as independent external auditors for the financial year ending 30 June 2014.
Finance Function We are satisfied that: • The financial director of Atterbury Property Holdings (Pty) Ltd, Flip Smit, who acted as CFO of Attacq Ltd for the last three years in terms of the asset management contract, has the necessary expertise and experience to carry out his duties and to meet his responsibilities. • The Group has internalised the asset management function from July 2013, and Melt Hamman has been appointed as financial director with effect from 8 July 2013. • The Group’s accounting practices are effective and adhered to.
Compliance As detailed in the Directors’ report, the Company was not in compliance with the requirements of the Companies Act in that subsidiaries of the Company held more than 10% of the shares in issue by the Company. In addition, the Company has identified non-compliance with the requirements of section 92 of the Companies Act of South Africa, 1973 following a transaction concluded in 2006. These non-compliance issues have been addressed with the approval of Special Resolution no. 14 at the special shareholders meeting held on 27 August 2013. The Audit and Risk Committee has reviewed and recommended for approval to the Board, the Group annual financial statements.
On behalf of the Audit and Risk Committee
Stewart Shaw-Taylor Chairman 4 October 2013
68 Directors’ report for the year ended 30 June 2013
The directors have pleasure in submitting their annual report for the year ended 30 June 2013.
1. Nature of business
Attacq Ltd (Attacq) carries on the business of a property holding, development and investment group through the ownership of: • directly held investment properties; and • subsidiaries, associates and other investments with directly held investment properties and property investments.
Attacq is managed by Atterbury Asset Managers (Pty) Ltd (AAM), appointed in terms of an evergreen contract, subject to strict performance criteria set by the Board. The following directors and officers of the Group have an interest, directly or indirectly, in the asset manager: LLS van der Watt, GJ Oosthuizen, PH Faure, BF van Niekerk, P Smit and T Smith. The Group has agreed to internalise the asset manager with effect from July 2013 by acquiring all the issued shares of AAM.
The business of the Group is to invest in and develop quality A-grade properties as long-term investments which generate quality rental income and sustainable long-term capital growth for its shareholders over the long-term. Attacq was previously known as Atterbury Investment Holdings Ltd.
2. Authorised and issued share capital
As at 30 June 2013, Attacq had an authorised share capital of 1 000 000 000 ordinary par value shares of R0.0001 each. The total number of issued shares at year end is 522 989 885 shares. If the Attacq shares held by Attacq subsidiaries (Lynnwood Bridge Office Park (Pty) Ltd, Abacus Holdings (Pty) Ltd and Razorbill Properties 91 (Pty) Ltd) are excluded, the total number of issued shares was 449 406 150. During the Special General Meeting held on 27 August 2013, the unissued shares were placed under the control of the directors, subject to certain conditions. No additional shares were issued during the year ended 30 June 2013.
The net asset value per share of the Group as at 30 June 2013 is calculated at R11.96 (30 June 2012: R10.32) per issued share. This is based on a net asset value as at 30 June 2013 of R5.373 billion and the 449 406 150 issued shares mentioned above.
According to the records of Attacq, shareholders registered as holding five percent or more of the issued share capital at 30 June 2013 are as follows:
Number of shares June 2013 June 2012
Abacus Holdings (Pty) Ltd 29 726 516 29 726 516 BNF Investments (Pty) Ltd 41 232 474 47 282 129 Mergon Foundation (Association incorporated under Section 21) 65 692 240 75 024 045 Sanlam Life Insurance Ltd 95 395 536 95 395 536 Razorbill Properties 91 (Pty) Ltd 43 800 054 43 800 054 Lisinfo 222 Investments (Pty) Ltd (Royal Bafokeng Holdings (Pty) Ltd) 67 708 955 67 708 955
The directors’ interest in the issued shares of Attacq, directly or indirectly, as at 30 June 2013 was as follows:
Beneficial Name Direct Indirectly Total BF van Niekerk – 43 430 377 43 430 377 LLS van der Watt 2 284 17 307 683 17 309 967 MC Wilken – 404 747 404 747 PH Faure – 3 563 906 3 563 906 P Tredoux – 40 165 40 165 JHP van der Merwe – 541 226 541 226 WL Masekela – 121 882 121 882 LM Ndala – – – S Shaw-Taylor 650 000 – 650 000 AW Nauta (Alternate) – – – TJA Reilly (Alternate) – – – Total 30 June 2013 652 284 65 409 986 66 062 270 Total 30 June 2012 1 016 633 63 745 063 64 761 696
Apart from the shares issued as per note 22; no shares were issued to directors during the year ended 30 June 2013.
69 Directors’ report (continued) for the year ended 30 June 2013
3. Interest in subsidiaries and associates
Direct % Shares June June June June Name and nature of business Issued 2013 2012 2013 2012
Direct subsidiaries and associates
Atterbury Attfund Investment Company No. 1 (Pty) Ltd 10 000 100 100 10 000 10 000 Investment company Atterbury Attfund Investment Company No. 3 (Pty) Ltd (note l) 10 000 80 80 8 000 8 000 Investment company Atterbury Mauritius Consortium (Pty) Ltd (Note c) 100 80 80 80 80 Property investment company Atterbury Property Investments (Pty) Ltd 100 100 100 100 100 Investment company Atterbury Property Johannesburg (Pty) Ltd 100 100 100 100 100 Dormant Atterbury Waterfall Investment Company (Pty) Ltd (Note d) 100 80 80 80 80 Property investment company De Ville Shopping Centre (Pty) Ltd 1 000 100 100 1 000 1 000 Property investment company Harlequin Duck Properties 204 (Pty) Ltd 400 100 100 400 400 Dormant Highgrove Property Holdings (Pty) Ltd 100 000 100 100 100 000 100 000 Investment company Le Chateau Property Development (Pty) Ltd 1 000 100 100 1 000 1 000 Development company Lord Charles & Lady Brooks Office Park Holdings (Pty) Ltd 1 000 100 100 1 000 1 000 Dormant Lady Brooks (Pty) Ltd 1 000 100 100 1 000 1 000 Dormant Lynnwood Bridge Office Park (Pty) Ltd 1 000 100 100 1 000 1 000 Property investment and development company Riverport Trading 143 (Pty) Ltd 100 - 51 - 51 Property investment company Atterbury Parkdev Consortium (Pty) Ltd 100 100 100 100 100 Property investment company Abacus Holdings (Pty) Ltd 659 955 75 75 495 663 495 663 Property investment company Mantrablox (Pty) Ltd 100 80 80 80 80 Property investment company Lynnaur Investments (Pty) Ltd (Note e) 100 75 75 75 75 Property investment company Atterbury Investment Holdings International Ltd (Mauritian) 1 100 100 1 1 Investment company Atterbury Property Holdings (Pty) Ltd 10 791 992 25 25 2 697 948 2 470 048 Development company MAS Real Estate Inc 66 238 363 21 24 13 974 309 9 695 982 Property investment and development company Attfund Limited – – 43 – 19 372 602 Property investment company Liquidated in October 2012 Paradise Coast Property Development (Pty) Ltd (Note j) 100 33 33 33 33 Property investment company Brooklyn Bridge Office Park (Pty) Ltd 1 000 25 25 250 250 Property investment company Geelhoutboom Estate (Pty) Ltd 1 200 37 37 440 440 Property investment company
70 Directors’ report (continued) for the year ended 30 June 2013
Direct % Shares June June June June Name and nature of business Issued 2013 2012 2013 2012
Keysha Investments 213 (Pty) Ltd 1 000 50 50 500 500 Property investment company Travenna Development Company (Pty) Ltd 1 000 36 36 360 360 Property investment company Razorbill Properties 91 (Pty) Ltd 100 100 100 100 100 Treasury company Arctospark (Pty) Ltd 100 50 50 50 50 Investment company Sinco Investments Six (Pty) Ltd (Namibian company) (Note i) 300 25 – 75 – Property investment company The Club Retail Park (Pty) Ltd (Note f) 1 198 31 31 372 372 Property investment company
Indirect subsidiaries and associates
Aldabri 96 (Pty) Ltd 100 100 100 100 100 Property investment company Atterbury Attfund Investment Company No. 2 (Pty) Ltd 100 100 100 100 100 Investment company Design Square Shopping Centre (Pty) Ltd 9 174 653 100 100 9 174 653 9 174 653 Property investment company – In process of deregistration Mall of Mauritius at Bagatelle Ltd (Mauritian) (Note g) 1 000 50 50 499 499 Property investment company Bagaprop Ltd (Mauritian) (Note g) 1 000 50 50 499 499 Property investment company Nieuwtown Property Development Company (Pty) Ltd (Note b) 100 50 50 50 50 Property investment company Majestic Offices (Pty) Ltd (Note b) 100 50 50 50 50 Property investment company Atterbury Africa Ltd (Mauritian) (Note k) 200 25 50 25 25 Property investment company Artisan Investment Projects 10 Ltd 2 400 000 26 26 631 200 630 000 Property investment company Bishopsgate Student Residential Ltd 4 365 512 30 30 1 309 654 1 309 684 Property investment company Retail Africa Consortium Holdings (Pty) Ltd (Note a) 625 20 20 125 125 Property investment company Fountains Regional Mall (Pty) Ltd (Note h) 100 000 13 10 12 731 9 500 Property investment company
The effective shareholding that the Group has in the entities above, is shown below: a) Excludes convertible equity loan b) The Group has an effective share of 62.5% via its investment in Atterbury Property Holdings (Pty) Ltd c) The Group has an effective share of 83.75% via its investment in Atterbury Property Holdings (Pty) Ltd d) The Group has an effective share of 84.69% via its investment in Atterbury Property Holdings (Pty) Ltd e) The Group has an effective share of 79.4% via its investment in Atterbury Property Holdings (Pty) Ltd f) The Group has an effective share of 40% via its investment in Atterbury Property Holdings (Pty) Ltd g) The Group has an effective share of 41.79% via its investment in Atterbury Property Holdings (Pty) Ltd h) The Group has an effective share of 35.90% via its investment in Atterbury Property Holdings (Pty) Ltd and Retail Africa Consortium Holdings (Pty) Ltd i) The Group has an effective share of 31.25% via its investment in Atterbury Property Holdings (Pty) Ltd j) The Group has an effective share of 44.80% via its investment in Atterbury Property Holdings (Pty) Ltd k) The Group has an effective share of 32.5% via its investment in Atterbury Property Holdings (Pty) Ltd l) The Group has an effective share of 100% via its investment in Aldabri 96 (Pty) Ltd
In the consolidated annual financial statements, all percentages indicate direct shareholding, unless stated otherwise.
71 Directors’ report (continued) for the year ended 30 June 2013
4. Investment Property
Net additions to investment properties to the value of R1,451 billion were made during the current financial period, consisting of:
Nature of Cost value Property Held By addition R’000
Brooklyn Mall, Pretoria Abacus Holdings (Pty) Ltd Capital extension 22 052 Glenfair Boulevard, Pretoria Attacq Ltd Refurbishment 3 830 De Ville Shopping Centre, Cape Town De Ville Shopping Centre (Pty) Ltd Refurbishment 1 897 Harlequins Office Park,Pretoria Atterbury Parkdev Consortium (Pty) Ltd Capital extension 112 Great Westerford, Cape Town Attacq Ltd Capital extension 2 875 Sanridge Square, Midrand Attacq Ltd Capital extension 106 Atterbury House, Cape Town Attacq Ltd Capital extension 11 782 Lynnwood Bridge Office Park Lynnwood Bridge Office Park (Pty) Ltd Development 78 339 Aurecon building, Pretoria Lynnaur Investments (Pty) Ltd Capital extension 174 Andringa Walk, Stellenbosch Abacus Holdings (Pty) Ltd Development 25 505 Eikestad Mall, Stellenbosch Abacus Holdings (Pty) Ltd Development 3 938 Newtown Junction, Newtown Nieuwtown Property Development Company (Pty) Ltd Development 259 647 Majestic, Newtown Majestic Offices (Pty) Ltd Development 20 487 Mill Square, Stellenbosch Abacus Holdings (Pty) Ltd Capital extension 53 464 West Hills Mall, Ghana West Hills Mall Ltd Development 59 843 Waterfall, Gauteng Atterbury Waterfall Investment Company (Pty) Ltd Development 907 198 1 451 249
The Group has formally approved the sale of the following investment properties and therefore they were classified as held for sale as at 30 June 2013:
Valued at June 2013 Anticipated Property Held By R’000 date of sale
Great Westerford Attacq Ltd 258 871 Jun 2014 Harlequins Office Park Atterbury Parkdev Consortium (Pty) Ltd 132 838 Aug 2013 Atterbury House Attacq Ltd 335 942 Sep 2013 Sanridge Square Attacq Ltd 99 834 Aug 2013 De Ville Shopping Centre De Ville Shopping Centre (Pty) Ltd 184 239 Jun 2014 1 011 724
The transactions for Harlequins Office Park and Sanridge Square were implemented during August 2013. Atterbury House was transferred during September 2013.
The Group has formally approved the sale of the following associate investments and therefore they were classified as held for sale as at 30 June 2013:
Valued at June 2013 Anticipated Property Held By R’000 date of sale
Artisan Investment Projects 10 Ltd Shares and loan account 34 698 Oct 2013 Arctospark (Pty) Ltd Shares and loan account 533 693 Oct 2013 568 391
72 Directors’ report (continued) for the year ended 30 June 2013
5. Legal and regulatory matters
Attvest transaction
5.1 Also refer to the extract of the special resolution number 14 of the special general shareholders meeting held on 27 August 2013, as detailed in 5.6 onwards.
5.2 A transaction was entered into by Attacq during 2006 in terms of which, inter alia, Atterbury Investment Managers (Pty) Ltd (Attvest) indemnified Attacq (the Indemnity Agreement) in respect of 50% (fifty percent) of all amounts which Attacq would have to pay to First Rand Bank Ltd (acting through its Rand Merchant Bank Division) (RMB) pertaining to a guarantee provided by RMB for the payment by Attacq of the balance of the purchase price of a letting enterprise acquired by Attacq. In consideration for Attvest granting the aforesaid indemnity, Attacq agreed to allot and issue 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares in the share capital of Attacq to Attvest (the Initial Attvest Shares).
5.3 Subsequent to the conclusion and implementation of the Indemnity Agreement, it transpired that the issuing of the Initial Attvest Shares was void ab initio by virtue of such shares not being fully paid up at the time of the allotment and issue thereof by Attacq to Attvest, as contemplated in section 92(1) of the Companies Act, 61 of 1973 (as amended) and therefore all subsequent transactions in relation to the Initial Attvest Shares are void ab initio.
5.4 The parties agreed to regularise the aforesaid transaction and thereby give effect to the original commercial intent of the parties, that is, Attvest being granted the right to subscribe for 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares in the capital of Attacq at an issue price of R3.77 (three Rand and seventy seven cents) escalated at 12% (twelve percent) per annum (nominal annual compounded annually in arrears) per share in consideration for having indemnified Attacq in terms of the Indemnity Agreement.
5.5 Broadly speaking, the regularisation of the above transaction involved Attacq allotting and issuing 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares to Attvest, and buying back 25 188 346 (twenty five million, one hundred and eighty eight thousand, three hundred and forty six) of Attacq’s shares held by Attvest, with the net effect being that Attacq and Attvest were placed in the same commercial position. The full details of this transac- tion are set out in the minutes of the Attacq shareholders’ meeting held on 27 August 2013, at which meeting the shareholders of Attacq approved the aforesaid regularisation of the transaction between Attacq and Attvest by way of a special resolution.
5.6 Extract of special resolution
The conclusion of the Proposed Transaction between the Company, Atterbury Investment Managers (Pty) Ltd (Attvest) and Razorbill Properties 91 (Pty) Ltd (Razorbill), subject to the Board complying with the related requirements of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act), was approved. Accordingly, in order to give effect to the implementation of the Proposed Transaction, the following elements of the Proposed Transaction was approved by 99.99% (ninety nine point nine nine percent) of the Shareholders present in person or by proxy:
5.6.1 the conclusion and implementation by the Company of the Subscription and Repurchase Agreement, in substantially the same form as the copy of the Subscription and Repurchase Agreement which has been available for inspection at the Company’s offices from the date of the notice of the Meeting, together with any addenda to such Subscription and Repurchase Agreement concluded from time to time;
5.6.2 subject to compliance with the requirements of the Company’s MOI, if any, and the Companies Act, the cancellation of the share certificates in respect of the Initial Attvest Shares and the amendment of the share register of the Company to remove the Initial Attvest Shares from the share register, and/or of any other documents required to give effect to such cancellation;
5.6.3 to the extent required by section 44 of the Companies Act, the provision of authority to the Board, in accordance with section 44(2) of the Companies Act, and subject to the requirements of the Companies Act, and the MOI of the Company, if any, to authorise the Company to provide the Subscription Financial Assistance to Attvest;
5.6.4 subject to the implementation of the Subscription and Repurchase Agreement, the provision of authority to the Board, the provisions of the Companies Act, and the MOI of the Company, if any, to issue the Attvest Subscription Shares to Attvest at an issue price of R7.18 (seven Rand and eighteen cent) per share on the terms and conditions contained in the Subscription and Repurchase Agreement;
73 Directors’ report (continued) for the year ended 30 June 2013
5.6.5 subject to the implementation of the Subscription and Repurchase Agreement, to the extent required, the authorisation of the Company, in accordance with the provisions of section 41(1) of the Companies Act, to allot and issue the Attvest Subscription Shares to Attvest in accordance with the terms and conditions of the Subscription and Repurchase Agreement, given that Attvest is related to a director of the Company;
5.6.6 subject to the provisions of section 48(8) of the Companies Act, the provision of authority to the Board, subject to compliance with the Companies Act and the MOI of the Company, if any, to authorise the Company to repurchase the Buy-back Shares from Attvest at the market value price of R10.32 (ten Rand and thirty two cent) per share (out of the reserves of the Company, and shall not reduce its “contributed tax capital“ (as such term is defined in the Income Tax Act, No. 58 of 1962 (as amended)), being an amount equal to the Repurchase Price in accordance with the terms and conditions of the Subscription and Repurchase Agreement;
5.6.7 in terms of and subject to the provisions of section 45 of the Companies Act, the provision of authority to the Board, subject to compliance with the requirements of the Company’s MOI, if any, and the Companies Act, to authorise the Company to provide direct or indirect financial assistance to Attvest, being a related or inter-related Company of a director of the Company, by the Set-Off, being the set-off of Attvest’s obligation to pay the Attvest Amount against the Company’s obligation to pay the Repurchase Price in accordance with the terms and conditions of the Subscription and Repurchase Agreement (to the extent that the Set-Off constitutes financial assistance); and
5.6.8 to do all things necessary to implement the above transaction.
Own shares held
The Companies Act limits the number of shares that a holding company’s subsidiaries can own in its holding company to not more than 10%, in aggregate of the number of issued shares. This requirement was incorrectly applied by Attacq on a subsidiary by subsidiary basis, instead of on the basis of all its subsidiaries cumulatively, resulting in Attacq’s subsidiaries exceeding the 10% limit. The reason for Attacq exceeding the aforesaid limit was due to an acquisition by Razorbill Properties 91 (Pty) Ltd (Razorbill) of shares in the share capital of Attacq from Attvest, which shares formed part of the shares issued to Attvest by Attacq pursuant to the transaction. As the issue of shares to Attvest was void ab intio (as described in paragraph 5 above), the purported transfer of Attacq shares by Attvest to Razorbill was also void ab initio. As such, Attacq’s subsidiaries do not legally exceed the 10% limit.
6. Post year-end transactions
The following notable transactions occurred since 30 June 2013:
Listing and related matters
The Board resolved to proceed with the listing of Attacq on the JSE. The anticipated listing date will be during October 2013. The Company is in the process of obtaining all the required approvals for listing.
Shareholders’ approval was obtained to convert Attacq’s current 1 000 000 000 R0.0001 par value shares to 2 000 000 000 non-par value shares.
The Board has made the decision to acquire all of the shares in Atterbury Asset Managers (Pty) Ltd (AAM) and thereby effectively internalise the asset management of Attacq’s direct portfolio to be in line with the rest of the market, to create synergies between Attacq and the asset manager and remove any conflicts of interest that may exist between Attacq and the asset manager. Attacq has acquired 100% of the issued shares in AAM for a purchase consideration of R271 million, which was settled in cash. In terms of the transaction the previous shareholders of AAM, being Atterbury Property Holdings (Pty) Ltd and Attventure (Pty) Ltd, were required to subscribe for a total of R135.4 million of Attacq shares at a price of R11.96 per share. Atterbury Property Holdings (Pty) Ltd has a lock in period of 5 years in respect of 1 600 000 of these shares.
Rights Offer
A Non-Renounceable Rights Offer of R580 000 000 was made to existing shareholders. The Rights Offer which closed on 24 July 2013 was at a price of R11.50 per share. The purpose of the rights offer was to: • enhance Attacq’s ability to take advantage of local and international acquisition opportunities that are available to Attacq; • partly fund Attacq’s future developments and projects, particularly the Waterfall development; and • strengthen Attacq’s balance sheet improving its ability to use cash to conclude transactions.
The Rights Offer was 44% oversubscribed. Excesses were allocated on an equitable basis and 50 434 782 shares were issued pursuant to the Rights Offer.
74 Directors’ report (continued) for the year ended 30 June 2013
Sale of Atterbury Parkdev Consortium (Pty) Ltd
Attacq entered into an agreement with Delta Property Fund Limited (Delta) on 20 August 2013 to dispose of 100% of the issued shares in Atterbury Parkdev Consortium Pty Limited (APC) which owns the Harlequins Office Park, which shares constituted the entire ordinary share capital of APC held by Attacq. The shares were disposed of cum any dividend Brooklyn Mall – Interior, Pretoria distribution but free from encumbrances.
Purchase of 75% of the issued shares in Brooklyn Bridge Office Park (Pty) Ltd
Currently Attacq holds a 25% interest in Brooklyn Bridge Office Park (Pty) Ltd. The Board approved the purchase of the remaining 75% shareholding in Brooklyn Bridge Office Park (Pty) Ltd for a purchase consideration of approximately R156.5 million. A part of the purchase price will be payable in Attacq shares. The transaction is still suspensive on a number of conditions.
Unbundling of Arctospark (Pty) Ltd (Arctospark)
Attacq reached agreement on the restructuring of Attacq’s investment in Arctospark. Attacq previously owned its share of Karoo I, Karoo II and Stenham European Shopping Centre Fund Limited through its shareholding in Arctospark. On implementation of this restructure Attacq will hold the assets directly.
Sale of shareholding in Karoo I and II to MAS Real Estate Inc (MAS)
Subsequent to the unbundling of Arctospark, Attacq has reached an agreement with MAS to sell its investments in Karoo I and Karoo II to MAS for a total consideration of €35 million. MAS will settle the purchase price by the issuing of shares in MAS at an issue price of €1.07 per MAS share. The transaction is still suspensive on a number of conditions.
Sale of Atterbury Theatre
Lynnwood Bridge Office Park (Pty) Ltd, a wholly owned subsidiary of Attacq reached an agreement with the public benefit organisation known as Atterbury Trust on the disposal of the Atterbury Theatre property for an amount of R42.3 million. This disposal was settled by way of the Atterbury Trust transferring 2 160 853 Attacq shares to Attacq at a price of R10.32 per share and the balance in cash. The Atterbury Theatre was classified as inventory at year-end.
Sale of Atterbury House
Attacq reached an agreement on the disposal of the Atterbury House property to Ascension Properties Ltd for an amount of R341 million. The transfer took take place on 12 September 2013.
Sale of 50% undivided share in Sanridge Square
Attacq reached an agreement with Rapfund Holdings (Pty) Ltd (Rapfund) to dispose Attacq’s 50% undivided share in Sanridge Square property to Rapfund for an amount of R103.5 million, being the disposal price of R98.6 million escalated at a rate of 7.9% per annum from 1 January 2013 until the transfer date which was 20 August 2013.
Disposal of Attacq’s shares in Artisan Investment Projects 10 Limited
Attacq reached agreement with MAS on the disposal of Attacq’s shareholding in and loan to Artisan Investment Projects 10 Limited to MAS for an amount of GBP2 800 000 to be settled by the issue of 2 616 822 shares in MAS at an issue price of €1.07 per MAS share. Exchange rates of €0.86/GBP and R14.04/GBP were assumed. The transaction is still subject to Reserve Bank approval.
Acquisition of the Trinsam Trust’s shares in Atterbury Waterfall City (Pty) Ltd (AWC)
Morné Wilken has an indirect benefit in the Trinsam Trust which is an existing shareholder in AWC. This shareholding was part of his incentive when he joined the Atterbury Group in 2008. The Board has requested the disposal of the shareholding in AWC, which is the 20% shareholder in Atterbury Waterfall Investment Company (Pty) Ltd (AWIC), to prevent a potential conflict of interest. Attacq and Morné Wilken have reached agreement whereby Attacq will acquire the shares in AWC, whereby Attacq effectively increases its shareholding in AWIC with 1.225%. The aggregate purchase price consists of two payment tranches. The first portion purchase of R13.51 million will be paid by the issue of Attacq shares issued R11.96 per share. The second portion of the purchase price is payable at the earliest of 30 June 2020 or such other date triggered by certain events as defined in the agreement. The second
75 Directors’ report (continued) for the year ended 30 June 2013
portion of the purchase price will be R11.586 million escalating at an interest rate equal to the prime lending rate or the amount as determined according to a formula contained in the agreement.
Acquisition of the Abacus Trust’s shares in Abacus Holdings (Pty) Ltd Waterfall Business Estate Attacq has reached agreement with the Abacus Trust to acquire the Abacus Trust’s shares and claims for R25 million, which it holds via the Abacus Trust and Mooirivier Mall (Pty) Ltd in Abacus Holdings (Pty) Ltd. The agreement is subject to the fulfilment of suspensive conditions.
New Development approvals:
Mall of Africa – Waterfall Land Parcel 10
Previously the Board approved bulk earthworks on this project up to R73 million, and subsequent to June 2013, the Board approved to increase this amount to R140 million. The Board has now approved the commencement of construction of the Mall of Africa development, subject to certain financing terms and pre-letting requirements. The Mall of Africa will consist of a super-regional mall of 116 000m² and parking structures of 41 000m². Total capital cost is budgeted at R3.130 billion.
Waterfall Lifestyle – Waterfall Land Parcel 15
The Board approved the development of this retail centre, with the anchor tenant being Virgin Active. The total capital cost amounts to R103.6 million.
Waterfall Allandale/K101 intersection upgrade
The Board approved the upgrade of the intersection. The upgrading of the intersection will relieve the current traffic congestion in the area and will increase access into surrounding sites and the marketability of the site. The upgrading of this intersection also forms part of the servicing of Land Parcel 9, which is a condition for clearance certificates. The total capital cost amounts to R16.5 million.
Sale of shares in Keysha Investments 213 (Pty) Ltd
Attacq contracted with RJS Trust whereby RJS Trust will purchase Attacq’s 50% shareholding and claims in Keysha Investments 213 (Pty) Ltd for a total amount of R14 million. The agreement is suspensive on the condition that Attacq is released from all sureties given to Investec pertaining to this investment.
Attvest buy-back subscription by Attvest for Attacq shares and subsequent buy-back of Attacq shares
The Directors’ Report include details of the Attvest transaction under point 5 – Legal and regulatory matters. Subsequent to the special shareholders meeting held on 27 August 2013, the transaction as explained in note 5 were implemented. The result being that Attvest subscribed for 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) Attacq shares at a subscription price of R7.18 per share. The Company then repurchased 25 188 346 (twenty five million one hundred and eighty eight thousand three hundred and forty six) Attacq shares from Attvest at R10.32 per share, totalling R259 943 728 (two hundred and fifty nine million nine hundred and forty three thousand seven hundred and twenty eight Rand), as repayment of the indemnified amount in terms of the original Indemnification Agreement.
Adoption of new Memorandum of Incorporation (MOI)
The shareholders approved the adoption of the new MOI which is in line with the requirements of the Companies Act of 2008 and the JSE requirements on the special shareholders meeting of 27 August 2013. The MOI has subsequently been registered with Companies and Intellectual Property Commission (CIPC).
7. Dividends
No dividends were declared by Attacq.
76 Directors’ report (continued) for the year ended 30 June 2013
8. Directors
P Tredoux Chairman effective from 1 July 2012 – non-executive director MC Wilken Chief executive officer LLS van der Watt Executive director GJ Oosthuizen Executive director (resigned 20 June 2013) M Hamman Financial director (appointed 8 July 2013) BF van Niekerk Non-executive director (retired as chairman on 30 June 2012) PH Faure Non-executive director LM Ndala Non-executive director WL Masekela Non-executive director JHP van der Merwe Non-executive director MM du Toit Non-executive director (appointed 2 August 2013) HR El Haimer Non-executive director (appointed 2 August 2013) S Shaw-Taylor Non-executive director (appointed 29 November 2012) TJA Reily Alternate director to JHP van der Merwe AW Nauta Alternate director to LM Ndala
9. Company Secretary
The Company Secretary of Attacq is T Smith.
Business Address: 2nd Floor The Parkdev Building, Brooklyn Bridge, 570 Fehrsen Street, Brooklyn, 0181 Postal Address: Postnet Suite 205, Private Bag x20009, Garsfontein, 0043
10. Auditors
Deloitte & Touche will continue in office in accordance with the Companies Act.
Newtown and Majestic, Johannesburg CBD
77 STATEMENT OF FINANCIAL POSITION for the year ended 30 June 2013
Group June 2013 June 2012 Notes R’000 R’000
Assets Non-current Assets Property, plant and equipment 2 5 666 2 367 Investment properties 3 9 495 681 8 497 139 Per valuation 9 663 652 8 607 082 Straight-line lease debtor (167 971) (109 943) Straight-line lease debtor 167 971 109 943 Deferred initial lease expenditure 4 504 4 351 Goodwill 4 – 16 929 Investments in associates 6 1 145 246 1 156 943 Other investments 7 58 379 476 997 Deferred tax assets 12 8 103 4 194 10 885 550 10 268 863 Current Assets Inventories 5 126 304 41 644 Taxation receivable 1 497 711 Trade and other receivables 15 155 497 81 351 Loans to shareholders 9 – 6 308 Loans to associates 8 487 142 621 652 Other financial assets 10 47 368 104 199 Cash and cash equivalents 11 44 389 200 501 862 197 1 056 366 Non-current Assets classified as held for sale 3 & 13.1 1 601 642 262 122 Total Assets 13 349 389 11 587 351 Equity and Liabilities Issued capital and share premium 16 2 196 594 2 196 596 Distributable reserves 3 170 832 2 442 040 Equity-settled employee benefit reserve 5 488 – Foreign currency translation reserve 159 (668) Equity attributable to owners of the holding company 5 373 073 4 637 968 Non-controlling Interest 355 831 395 348 Total Equity 5 728 904 5 033 316 Non-current Liabilities Long-term borrowings 17 3 872 731 3 640 378 Deferred tax liabilities 12 775 434 591 838 Other financial liabilities 10 70 944 127 331 Provision for liabilities relating to associates 6 71 355 58 202 Provision for liabilities relating to other investments 7 – 9 049 Finance lease liabilities 14 624 358 440 148 5 414 822 4 866 946 Current Liabilities Loans from associates 8 – 9 284 Other financial liabilities 10 145 257 213 177 Finance lease liabilities 14 6 662 114 018 Taxation payable 25 759 7 198 Trade and other payables 18 327 990 150 231 Provisions 19 5 709 – Current portion of long-term borrowings 17 1 295 713 1 062 004 1 807 090 1 555 912 Non-current Liabilities directly associated with assets held for sale 13.2 398 573 131 177 Total Liabilities 7 620 485 6 554 035 Total Equity and Liabilities 13 349 389 11 587 351
78 Lungile Meso – Financial Manager Waterfall
How did your path cross with Attacq? Absolute pure chance. When I left my previous job I intended on taking a three month sabbatical. In week two of this I got a call to come for an interview at Attacq, I came, saw what I liked but didn’t like the fact that I would have to cut my sabbatical short. So I stalled for two weeks, just to squeeze in a month. After that, I made the commitment to work for Attacq, till this day I haven’t regretted it.
What is the most enjoyable aspect of your job? You work with seasoned business people at Attacq. As a result you are bound to learn a thing or two every day from them by just being in the room with them. However, it doesn’t end there; they have an inclusive culture, like being asked for input on deals. There are also so many aspects to the job, there’s never a dull moment, especially on Waterfall.
Who is your role model? My mom, a hard working woman with a great work ethic. I have never seen her give up on putting food on the table, putting clothes on my back, and ensuring I get a good education. I learned a lot from her about focusing on your goals and putting in a 110% in everything you do.
What inspires your sense of style? If I look at my wardrobe there are four things that immediately pop up; unique, simple yet elegant, stand out, and quirky. Unique refers to my shirts and suits, simple yet elegant to my collection of matching belts and shoes, stand out to my wrist watches, and quirky to my collection of Happy Socks. A combination of all those is what inspires my style.
How do you relax? I like spending time with friends and family, doing the simple things. I have date night every Wednesday, without fail. Poker night once a month with the boys, occasionally going out on a Friday, and hitting the market and restaurants on Saturday. Sundays I reserve for cooking, I have just recently taken up making fresh pasta, it is very therapeutic. I have also never come across anyone who died over a good glass or two of a single malt in the garden over a lekker braai.
79 STATEMENT OF Comprehensive Income for the year ended 30 June 2013
Group June 2013 June 2012 Notes R’000 R’000
Continuing operations Gross rental income 628 532 639 856 Rental income 543 279 603 577 Straight-line lease income adjustments 85 253 36 279 Property expenses (212 362) (241 288) Net rental income 416 170 398 568 Other income 20 126 348 93 371 Operating and other expenses 20 (288 060) (2 999 593) Operating profit / (loss) 20 254 458 (2 507 654) Fair value adjustments 929 054 996 932 Investment properties 3 854 817 1 020 769 Other financial assets / (liabilities) 10 57 137 (83 138) Other investments 7 17 100 59 301 Net income / (loss) from associates 6 & 24 94 430 (43 208) Investment income 25 48 345 2 791 701 Finance costs 26 (473 196) (492 349) Profit before taxation 853 091 745 422 Taxation 23 (202 601) (185 041) Profit for the year from continuing operations 650 490 560 381 Discontinued operations Profit from discontinued operations net of taxation 13.3 108 788 24 436 Total comprehensive income for the year 759 278 584 817 Attributable to: Owners of the company 728 792 559 003 Non-controlling interests 30 486 25 814 Earnings per share From continuing and discontinued operations Basic (cents) 35 162.17 118.09 Diluted (cents) 35 162.00 118.03 From continuing operations Basic (cents) 35 137.96 112.93 Diluted (cents) 35 137.82 112.87
80 STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2013
Attributa- Equity- ble to Foreign settled equity currency employee Distrib- holders of Non- Share Share translation benefit utable the controlling capital premium reserve reserve reserves company interest Total R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance at 1 July 2011 47 2 424 859 – – 1 883 037 4 307 943 150 329 4 458 272 Total comprehensive income – – – – 559 003 559 003 25 814 584 817 Originating from business combinations – – – – – – 219 205 219 205 Foreign currency translation – – (668) – – (668) – (668) Treasury shares held (1) (236 310) – – – (236 311) – (236 311) Issue of shares 1 8 000 – – – 8 001 – 8 001 Balance at 30 June 2012 47 2 196 549 (668) – 2 442 040 4 637 968 395 348 5 033 316 Total comprehensive income – – – – 728 792 728 792 30 486 759 278 Derecognition of foreign currency translation reserve and non-controlling interests due to sale of subsidiaries – – 321 – – 321 (65 003) (64 682) Recognition of share-based payments – – – 5 488 – 5 488 – 5 488 Dividends paid – – – – – – (5 000) (5 000) Foreign currency translation – – 506 – – 506 – 506 Issue of shares – adjustment (2) – – – – (2) – (2) Balance at 30 June 2013 45 2 196 549 159 5 488 3 170 832 5 373 073 355 831 5 728 904
Note 16
81 STATEMENT OF CASH FLOWS for the year ended 30 June 2013
Group June 2013 June 2012 Notes R’000 R’000
Cash flow from operating activities Cash generated from operating activities 32.1 475 335 437 979 Investment income 25 48 345 64 449 Finance costs 26 (473 196) (492 349) Taxation paid (29 039) (122 928) Cash flow relating to non-current assets held for sale (40 750) (34 573) Net cash utilised in operating activities (19 305) (147 422)
Cash flow from investing activities Expenditure to maintain operating capacity Proceeds from disposal of investment properties 318 810 95 713 Property, plant and equipment acquired (4 816) (2 100) Property, plant and equipment disposed 46 –
Expenditure to expand operating capacity Subsidiaries disposed / (acquired) 32.2 & 32.3 40 601 (9 585) Investment properties acquired (1 451 249) (617 163) Other loans repaid 16 973 125 841 Associates acquired (162 319) (320 729) Other investments disposed 466 458 1 948 323 Cash flow relating to non-current assets held for sale 138 972 575 470 Net cash (utilised in) / generated from investing activities (636 524) 1 795 770
Cash flow from financing activities Capital raised – 8 001 Long-term borrowings raised 1 769 837 1 888 786 Long-term borrowings repaid (786 017) (2 646 513) Loans to shareholders repaid 6 308 – Loans from shareholders repaid – (88 109) Loans from Group companies repaid (9 284) (2 961) Loans to Group companies advanced (354 316) (585 170) Cash flow relating to non-current assets held for sale (79 205) (104 739) Net cash generated from / (utilised in) financing activities 547 323 (1 530 705)
Total cash movement for the year (108 506) 117 643 Cash at the beginning of the year 200 501 36 141 Cash (disposed) / acquired with subsidiaries (47 606) 46 717
Total cash at the end of the year 11 44 389 200 501
82 Kristi Maree – Managing Director Word4Word and Shareholder Photographed at West Hills Mall, Ghana
How did you get involved with the Atterbury Group? I first got involved with the Atterbury Group in 1999 when my company was appointed to do the marketing for Atterbury Value Mart in Pretoria. Today, 14 years later, we are still proudly involved in the marketing of many of their projects.
Tell us about your big break-through on the social media front? Social Media has changed the way we approach marketing and Louis van der Watt agreed to let us prove this at the Atterbury Group’s Mall of Mauritius, Bagatelle. When we launched the mall in 2011, we had 85 000 people on the mall’s Facebook page and today 136 000 people on the page makes this one of the biggest Facebook pages on the island. The Atterbury Group is very supportive of our social media efforts and we effectively use this tool to communicate with their shoppers.
How do you cope with all the travelling that your job requires? Our company is actively involved in the marketing of shopping centres in Ghana, Kenya, Namibia, India, Mauritius, Taiwan and China. This brings about extensive local and international travel which can at times be quite challenging but mostly exciting. Good planning and an excellent support system at home and at work ensure smooth travels.
What has been your most successful marketing campaign to date Marketing campaigns are a bit like children – it is just so difficult to choose only one! Our company executes more than 2 000 campaigns per year. We are currently working on the launch campaigns for Newtown Junction and West Hills Mall in Accra (both Atterbury Group projects) and these two will both be unique and exciting events.
Which factors will make Attacq a market force to be reckoned with? Through the years I have learned that the success of a company mainly depends on the people involved, or as Atterbury rightly states “it’s a matter of association”. The people behind Attacq are driven, dedicated and talented in so many ways, it guarantees success at all levels.
83 accounting policies for the year ended 30 June 2013
1. Presentation of financial statements
The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practises Committtee, Financial Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and requirements of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act). The annual financial statements have been prepared on the historical cost basis, except for the measurement of investment properties and financial instruments at fair value or amortised cost, and incorporate the principal accounting policies set out below. They are presented in South African Rands.
These accounting policies are consistent with the previous periods.
1.1 Consolidation
Basis of consolidation
The consolidated annual financial statements incorporate the financial statements of the Company and all entities, including special purpose entities, which are controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries are included in the consolidated financial statements from the effective date of acquisition to the effective date of disposal.
All inter-company transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the Company’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest. The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent.
The Company accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.
Business consolidations
The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business Combinations are recognised at their fair values at acquisition date. On acquisition, the Company assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for Company purposes.
Non-controlling interest arising from a business combination is measured either at their share of the fair value of the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in the note for business combinations.
Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed. If a bargain purchase is calculated, this amount is accounted for directly in the statement of comprehensive income.
Investment in associates
An associate is an entity over which the Company has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
An investment in associate is accounted for using the equity method. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost adjusted for post acquisition changes in the Company’s share of net assets of the associate, less any impairment losses.
Losses in an associate in excess of the Company’s interest in that associate are recognised only to the extent that the Company has incurred a legal or constructive obligation to make payments on behalf of the associate.
84 accounting policies (continued) for the year ended 30 June 2013
Any goodwill on acquisition of an associate is included in the carrying amount of the investment, however, a gain on acquisition is recognised immediately in profit or loss.
Profits or losses on transactions between the Company and an associate are eliminated to the extent of the Company’s interest therein.
1.2 Investment property
Investment properties are properties held to earn rentals and/or capital appreciation (including property under construction for such purposes).
Investment property is recognised as an asset when it is probable that the future economic benefits that are associated with the investment property will flow to the enterprise, and the cost of the investment property can be measured reliably.
Investment property is initially recognised at cost. Costs include costs incurred initially, transaction costs and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.
Where a property is under construction with the purpose of holding the completed property for long-term rental yields or for capital appreciation, such property is classified as investment property under construction. Maintenance and repairs, which neither materially add to the value of the properties nor prolong their useful lives, are charged against income.
Tenant installations are costs paid by the lessor on behalf of the lessee on signature of the lease agreement for cost spent by the lessor to ensure the building is in the condition suitable for the lease. Tenant installations on the first lease are capitalised against the project, while tenant installations on subsequent leases signed are capitalised and expensed through the statement of comprehensive income over the lease period.
Fair value
Subsequent to initial measurement investment property is measured at fair value. 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.
If the fair value of investment property under construction is not determinable, it is measured at cost until the earlier of the date it becomes determinable or construction is complete. In the current period the Group re-assessed the judgements made on buildings under construction or refurbishment. The value of these investments is determined with reference to the cost incurred to date plus a portion of the final anticipated fair value gain upon completion of the building. The final anticipated fair value gain upon completion of the building is the difference between the total cost of the development and the value of the building calculated using the capitalised net income method. The realised fair value gain, being a portion of the present value of the anticipated fair value gain, is determined with reference to the stage of completion of the building.
The change in estimate has an impact on investment properties (refer note 3).
1.3 Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses. Depreciation is provided on all property, plant and equipment to write down the cost, less residual value, using the straight line method of depreciation, over the items’ estimated useful lives.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, annually. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater that it’s estimated recoverable amount.
1.4 Investment in joint ventures
In respect of its interest in jointly controlled assets, the Group recognises in its financial statements: • its share of the jointly controlled assets, classified according to the nature of the assets; • any liabilities that it has incurred; • its share of any liabilities incurred jointly with its partners in relation to the joint venture; • any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and • any expenses that it has incurred in respect of its interest in the joint venture.
85 accounting policies (continued) for the year ended 30 June 2013
1.5 Financial instruments
Initial recognition and measurement
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are recognised on the statement of financial position when the Group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are recognised initially at fair value. In the case of financial assets or liabilities not classified at fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instruments are added to the fair value. For financial assets carried at fair value, the change in fair value is recognised in profit or loss or in equity, as appropriate.
Subsequent measurement
Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period.
Net gains or losses on the financial instruments at fair value through profit or loss exclude dividends and interest.
Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.
Held-to-maturity investments are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.
Available for sale financial assets are subsequently measured at fair value. This excludes equity investments for which a fair value is not determinable, which are measured at cost less accumulated impairment losses.
Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in equity until the asset is disposed of or determined to be impaired. Interest on available for sale financial assets calculated using the effective interest method is recognised in profit or loss as part of other income.
Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.
Fair value determination
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and reference to the proportionate interest held by the Group in the net equity of the investee.
Impairment of financial assets
At each reporting date the Group assesses all financial assets, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.
For amounts due to the Group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.
Impairment losses are recognised in profit or loss.
Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised. Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available for sale.
86 accounting policies (continued) for the year ended 30 June 2013
Loans to / (from) group companies
These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs.
Loans to group companies are classified as loans and receivables. Loans from group companies are classified as financial liabilities measured at amortised cost.
Loans to shareholders, directors, managers and employees
These financial assets are classified as loans and receivables.
Inventories
Inventories are measured at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method to the extent that significant differences occur. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method to the extent that significant differences occur.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.
Cash from financing activities and cash from investing activities are calculated as the gross amount in the respective accounts.
Bank overdraft and borrowings
Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs.
Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 22.
87 accounting policies (continued) for the year ended 30 June 2013
The fair value determine at the grant date is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimate, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefit reserve.
Derivatives
Derivative financial instruments, which are not designated as hedging instruments, consisting of interest rate swaps, are initially measured at fair value on the contract date, and are re-measured to fair value at subsequent reporting dates.
Derivatives are classified as financial assets at fair value through profit or loss.
1.6 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.
A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Tax expenses
Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: • a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or • a business combination.
Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income.
Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.
1.7 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
88 accounting policies (continued) for the year ended 30 June 2013
The Group as lessor – operating leases
Rental income from operating leases is recognised on a straight- line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
The Group as lessee – finance leases Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (See 1.13). Contingent rentals are recognised as expenses in the periods in which they are incurred.
1.8 Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
1.9 Impairment of assets
The Group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the Group also tests goodwill for impairment annually.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.
The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order: • first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and • then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.
The Group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.
1.10 Share capital and equity
Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.
If the Group reacquires its own equity instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) on those instruments are deducted from equity until the shares are cancelled or reissued. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Consideration paid or received shall be recognised directly in equity.
1.11 Provisions and contingencies
Provisions are recognised when: • the Group has a present obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the obligation.
The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
89 accounting policies (continued) for the year ended 30 June 2013
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.
Contingent commitments and contingent liabilities are not recognised. Contingencies are disclosed in notes 28 and 29.3.
1.12 Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.
Interest is recognised, in profit or loss, using the effective interest rate method.
Dividends are recognised, in profit or loss, when the Group’s right to receive payment has been established.
1.13 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows: • Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings. • Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.
The capitalisation of borrowing costs commences when: • expenditures for the asset have occurred; • borrowing costs have been incurred; and • activities that are necessary to prepare the asset for its intended use or sale are in progress.
Capitalisation is suspended during extended periods in which active development is interrupted.
Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
1.14 Translation of foreign currencies
Foreign currency transactions
A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
At the end of the reporting period: • foreign currency monetary items are translated using the closing rate; • non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and • non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised in profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.
90 accounting policies (continued) for the year ended 30 June 2013
Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.
Investments in subsidiaries, joint ventures and associates
The results and financial position of a foreign operation are translated into the functional currency using the following procedures: • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; • income and expenses for each item of profit or loss are translated at exchange rates at the dates of the transactions; and • all resulting exchange differences are recognised to other comprehensive income and accumulated as a separate component of equity.
Exchange differences arising on a monetary item that forms part of a net investment in a foreign operation are recognised initially to other comprehensive income and accumulated in the translation reserve. They are recognised in profit or loss as a reclassification adjustment through to other comprehensive income on disposal of net investment.
1.15 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions and judgements concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Trade receivables, Held to maturity investments and Loans and receivables
The Group assesses its trade receivables, held to maturity investments and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the Group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.
Effective date of property transactions
In the event of an investment property being disposed/acquired, the effective date of the transaction is generally treated as the date when all suspensive conditions have been met, and the buyer becomes contractually entitled to the income and expenses associated with the property, and not when the property is transferred.
Fair value estimation
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
91 accounting policies (continued) for the year ended 30 June 2013
Impairment testing
The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value- in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions.
The Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including industry specific and macroeconomic variances.
For direct and indirect foreign investments and loans, the Group also takes into account foreign currency fluctuations and international markets.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the provision.
Provisions were raised and management determined an estimate based on the information available.
Expected manner of realisation for deferred tax
Deferred tax is provided for on the fair value adjustments of investment properties based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability. Refer note to 12 – Deferred tax.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
Useful lives of property, plant and equipment
The Group reviews the estimated useful lives of property, plant and equipment at the end of each reporting period.
Item Useful life • Cleaning equipment 3 years • Computer equipment 3 years • Motor vehicles 5 years • kitchen equipment 3 years • other fixed assets 5–10 years
Valuation of financial instruments
The Group uses valuation techniques that include inputs that are not based on observable market data to estimate the fair value of certain types of financial instruments. Note 1.5 on Financial instruments provides detailed information about the key assumptions used in the determination of the fair value of financial instruments, as well as the detailed sensitivity analysis for these assumptions.
The directors believe that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments.
92 accounting policies (continued) for the year ended 30 June 2013
1.16 Segment reporting
Determination and presentation of operating segments
The Group determines and presents operating segments based on information that is provided internally to the Chief Operating Decision-Maker, namely the Chief Executive Officer.
Segment results that are reported to the Chief Operating Decision-Maker include items directly attributable to a segment or a region, as well as those that can be allocated on a reasonable basis.
On a primary basis the operations are organised into the following business segments – office and mixed use, retail, vacant land, projects and light industrial. The Chief Operating Decision-Maker however asses each investment property on an individual basis in making decisions about its performance. Any capital expenditure relating to investment property will be accounted for as under note 1.2 (Investment property) and will be shown separately under note 3 (Investment Property) of the financial statements.
1.17 New accounting pronouncements
The Group has not yet adopted the following pronouncements, which have been issued by the International Accounting Standards Board. The Group is considering these pronouncements but believe that it will not have a material impact on its results, financial position or cash flow:
Accounting standard / interpretation Effective date for years starting on or after: IAS 1 Amendments resulting from the Annual Improvement cycles 1 January 2013 IAS 12 Income taxes 1 January 2013 IAS 16 Property Plant and Equipment 1 January 2013 IAS 19 Employee Benefits Revised 1 January 2013 IAS 27 Separate Financial Statements 1 January 2013 IAS 28 Investment in Associates and Joint Ventures 1 January 2013 IAS 32 Financial Instruments : Presentation 1 January 2014 IAS 34 Interim Financial Reporting 1 January 2013 IAS 36 Amendments resulting from recoverable amount disclosures 1 January 2014 IAS 39 Amendments for novation of derivatives 1 January 2014 IFRS 7 Financial Instruments : Disclosure 1 January 2013 IFRS 9 Financial Instruments 1 January 2015 IFRS 10 Consolidated Financial Statements 1 January 2013 IFRS 11 Joint Arrangements 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 Fair Value Measurement 1 January 2013
Great Westerford, Newlands
93 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
2. Property, plant and equipment
Group June 2013 June 2012 Accumulated Accumulated depreciation depreciation and Carrying and Carrying Cost impairment value Cost impairment value R’000 R’000 R’000 R’000 R’000 R’000
Other fixed assets 5 639 (1 589) 4 050 2 279 (349) 1 930 Cleaning equipment 484 (206) 278 484 (181) 303 Kitchen equipment 140 (139) 1 140 (139) 1 Computer equipment and software 1 553 (253) 1 300 96 (96) – Motor vehicles 154 (117) 37 277 (144) 133 Total 7 970 (2 304) 5 666 3 276 (909) 2 367
The carrying value of property, plant and equipment can be reconciled as follows:
Group Carrying value at Depreciation Carrying beginning of and value at end the year Acquisitions Disposals impairment of the year R’000 R’000 R’000 R’000 R’000
June 2013 Other fixed assets 1 930 3 359 – (1 239) 4 050 Cleaning equipment 303 – – (25) 278 Kitchen equipment 1 – – – 1 Computer equipment and software – 1 457 – (157) 1 300 Motor vehicles 133 – (46) (50) 37 2 367 4 816 (46) (1 471) 5 666
June 2012 Other fixed assets 216 2 025 – (311) 1 930 Cleaning equipment 411 – – (108) 303 Kitchen equipment 34 – – (33) 1 Computer equipment 7 75 – (82) – Motor vehicles 196 – – (63) 133 864 2 100 – (597) 2 367
Motor vehicles are encumbered as per note 17.
94 Mall of Africa – Waterfall Land Parcel 10
95 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties
Group June 2013 June 2012 R’000 R’000
Fair value Balance at beginning of the year 8 497 139 4 840 709 Additions 1 451 249 795 700 Additions via business combinations – 2 127 079 Provision for tenant installations – (9 119) Net gain from fair value adjustment 968 606 1 047 720 Continuing operations 854 817 1 020 769 Discontinued operations 113 789 26 951 Transfer to inventory (31 565) (41 627) Transfers to held for sale and disposal (1 325 576) (263 323) Disposed via sale of subsidiary (63 055) – Foreign currency effect (1 117) – Balance at end of the year 9 495 681 8 497 139
Reconciled as follows: Cost 7 603 039 6 273 108 Fair value adjustment 3 503 453 2 638 925 Straight-line lease income adjustment against fair value – Continuing operations (167 971) (109 943) Straight-line lease income adjustment against fair value – Discontinued operations (21 527) – Transfer to inventory (31 565) (41 627) Transfers to assets held for sale and disposals (1 325 576) (263 323) Disposed via sale of subsidiary (63 055) – Foreign currency effect (1 117) – Total value 9 495 681 8 497 140
Investment properties consist of: Commercial
Building G, DTI Campus (50% undivided share, Pretoria) – Attacq Ltd Balance at the beginning of the year – – Net gain from fair value adjustment – 7 000 Straight-line lease income adjustment against fair value – 1 304 Transfer to assets held for sale – (8 304) Balance at the end of the year – – Reconciled as follows: Cost – – Fair value adjustments – 7 000 Straight-line lease income adjustment against fair value – 1 304 Transfer to assets held for sale – (8 304) – –
Kumba Head Office (Centurion) – Attacq Ltd Balance at beginning of the year – – Net gain from fair value adjustment – 7 084 Transfer to assets held for sale / disposal – (7 084) Balance at end of the year – – Reconciled as follows: Cost – – Fair value adjustments – 7 084 Transfer to assets held for sale / disposal – (7 084) – –
96 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
Harlequins Office Park (Pretoria) – Atterbury Parkdev Consortium (Pty) Ltd Balance at beginning of the year 113 626 107 367 Additions 112 213 Net gain from fair value adjustment 18 889 4 787 Straight-line lease income adjustment against fair value 211 1 259 Transfer to assets held for sale (132 838) – Balance at end of the year – 113 626 Reconciled as follows: Cost 69 193 69 081 Fair value adjustments 66 808 47 919 Straight-line lease income adjustment against fair value – discontinued operations (3 163) (3 374) Transfer to assets held for sale (132 838) – – 113 626
Great Westerford (50% undivided share, Cape Town) – Attacq Ltd Balance at beginning of the year 486 000 502 593 Additions 2 875 1 737 Net gain / (loss) from fair value adjustment 57 834 (19 157) Straight-line lease income adjustment against fair value 2 288 827 Disposal of 50% undivided share in Great Westerford (290 126) – Transfer to assets held for sale (258 871) – Balance at end of the year – 486 000 Reconciled as follows: Cost 345 008 342 133 Fair value adjustments 206 718 148 884 Straight-line lease income adjustment against fair value – discontinued operations (2 729) (5 017) Disposal of 50% undivided share in Great Westerford (290 126) – Transfer to assets held for sale (258 871) – – 486 000
Hampton Office Park (Johannesburg) – Attacq Ltd Balance at beginning of the year – – Additions – 392 Net gain from fair value adjustment – 59 746 Straight-line lease income adjustment against fair value – 3 222 Transfer to assets held for sale / disposal – (63 360) Balance at end of the year – – Reconciled as follows: Cost – 392 Fair value adjustments – 62 968 Transfer to assets held for sale / disposal – (63 360) – –
97 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
Investec Building (Pretoria) – Riverport Trading 143 (Pty) Ltd Balance at beginning of the year – 121 330 Net gain from fair value adjustment – 8 157 Straight-line lease income adjustment against fair value – 490 Transfer to assets held for sale – (129 977) Balance at end of the year – – Reconciled as follows: Cost – 69 147 Fair value adjustments – 73 011 Straight-line lease income adjustment against fair value – (12 181) Transfer to assets held for sale – (129 977) – –
Atterbury House (Cape Town) – Attacq Ltd Balance at beginning of the year 285 296 282 877 Additions 11 782 3 Net gain from fair value adjustment 38 951 10 792 Provision for future tenant installations – (8 519) Straight-line lease income adjustment against fair value (87) 143 Transfer to assets held for sale (335 942) – Balance at end of the year – 285 296 Reconciled as follows: Cost 146 473 134 691 Fair value adjustments 191 825 152 874 Straight-line lease income adjustment against fair value – discontinued operations (2 356) (2 269) Transfer to assets held for sale (335 942) – – 285 296
Retail
Brooklyn Mall (25% undivided share, Pretoria) – Abacus Holdings (Pty) Ltd Balance at beginning of the year 508 368 298 676 Additions 22 052 125 863 Net gain from fair value adjustment 46 439 88 406 Straight-line lease income adjustment against fair value (1 859) (4 577) Balance at end of the year 575 000 508 368 Reconciled as follows: Cost 337 438 315 386 Fair value adjustments 243 998 197 559 Straight-line lease income adjustment against fair value (6 436) (4 577) 575 000 508 368
In 2010 the Group owned 100% of Design Square. During 2011 this asset was combined with Brooklyn Mall to give the Group an 18% undivided share in the combined mall. The effective date was 1 May 2011.
During the prior year another 7% was acquired increasing the Group share to a 25% undivided share in Brooklyn Mall.
98 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
De Ville Shopping Centre (Cape Town) – De Ville Shopping Centre (Pty) Ltd Balance at beginning of the year 193 569 172 297 Additions 1 897 4 668 Net (loss) / gain from fair value adjustment (2 999) 20 088 Provision for future tenant installations – (3 709) Straight-line lease income adjustment against fair value (8 228) 225 Transfer to assets held for sale (184 239) – Balance at end of the year – 193 569 Reconciled as follows: Cost 191 798 189 901 Fair value adjustments 3 101 6 100 Straight-line lease income adjustment against fair value – discontinued operations (10 660) (2 432) Transfer to assets held for sale (184 239) – 193 569
Glenfair Boulevard Shopping Centre (Pretoria) *** – Attacq Ltd Balance at beginning of the year 289 275 247 966 Additions 3 830 4 642 Net gain from fair value adjustment 27 405 39 470 Provision for future tenant installations – (469) Straight-line lease income adjustment against fair value (3 601) (2 334) Balance at end of the year 316 909 289 275 Reconciled as follows: Cost 253 700 249 870 Fair value adjustments 73 800 46 395 Straight-line lease income adjustment against fair value (10 591) (6 990) 316 909 289 275
Sanridge Square (50% undivided share, Midrand) – Attacq Ltd Balance at beginning of the year 92 798 80 000 Additions 106 1 185 Net gain from fair value adjustment 7 597 13 565 Straight-line lease income adjustment against fair value (667) (1 952) Transfer to assets held for sale (99 834) – Balance at end of the year – 92 798 Reconciled as follows: Cost 67 102 66 996 Fair value adjustments 35 351 27 754 Straight-line lease income adjustment against fair value – discontinued operations (2 619) (1 952) Transfer to assets held for sale (99 834) – – 92 798
99 Lynnwood Bridge, Pretoria
100 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
Lynnwood Bridge (Pretoria) – Lynnwood Bridge Office Park (Pty) Ltd Balance at beginning of the year 796 694 1 122 539 Additions 78 339 43 980 Net gain from fair value adjustment 124 185 135 964 Straight-line lease income adjustment against fair value (22 862) (14 210) Transfer to inventory – (41 627) Transfer to separate disclosure – Aurecon Building to Lynnaur Investments (Pty) Ltd – (449 952) Balance at end of the year 976 356 796 694 Reconciled as follows: Cost 777 697 706 498 Fair value adjustments 252 278 162 580 Transfer to inventory – (41 627) Straight-line lease income adjustment against fair value (53 619) (30 757) 976 356 796 694
During the prior year the transaction was implemented where the Aurecon building was transferred from the wholly-owned subsidiary Lynnwood Bridge Office Park (Pty) Ltd to Lynnaur Investments (Pty) Ltd in which the Group has a 79.4% effective share. Also refer note 19. Lynnwood Bridge Phase 3 is currently being developed, and once completed, 50% of the building will also be transferred to Lynnaur Investments (Pty) Ltd.
Aurecon building (Pretoria) – Lynnaur Investments (Pty) Ltd Balance at beginning of the year 625 299 – Transfer from Lynnwood Bridge for separate disclosure – 449 952 Additions 174 13 248 Net gain from fair value adjustment 44 826 167 800 Straight-line lease income adjustment against fair value (26 141) (5 701) Balance at end of the year 644 158 625 299 Reconciled as follows: Cost 463 374 463 200 Fair value adjustments 212 626 167 800 Straight-line lease income adjustment against fair value (31 842) (5 701) 644 158 625 299
Garden Route Mall (George) – Mantrablox (Pty) Ltd Balance at beginning of the year 957 423 – Acquired via business combination – 888 000 Net gain from fair value adjustment 76 000 84 000 Straight-line lease income adjustment against fair value (10 238) (14 577) Balance at end of the year 1 023 185 957 423 Reconciled as follows: Cost 888 000 888 000 Fair value adjustments 160 000 84 000 Straight-line lease income adjustment against fair value (24 815) (14 577) 1 023 185 957 423
101 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
Mooirivier Mall (Potchefstroom) – Abacus Holdings (Pty) Ltd Balance at beginning of the year 793 631 – Acquired via business combination – 724 000 Net gain from fair value adjustment 132 273 74 000 Straight-line lease income adjustment against fair value (10 726) (4 369) Balance at end of the year 915 178 793 631 Reconciled as follows: Cost 724 000 724 000 Fair value adjustments 206 273 74 000 Straight-line lease income adjustment against fair value (15 095) (4 369) 915 178 793 631
Andringa Walk (Stellenbosch) – Abacus Holdings (Pty) Ltd Balance at beginning of the year 141 559 – Acquired via business combination – 180 265 Additions 25 505 120 242 Net (loss) from fair value adjustment (18 362) (158 916) Straight-line lease income adjustment against fair value (2 409) (32) Balance at end of the year 146 293 141 559 Reconciled as follows: Cost 326 012 300 507 Fair value adjustments (177 278) (158 916) Straight-line lease income adjustment against fair value (2 441) (32) 146 293 141 559
Eikestad Mall (Stellenbosch) – Abacus Holdings (Pty) Ltd Balance at beginning of the year 451 281 – Acquired via business combination – 334 814 Additions 3 938 19 434 Net gain from fair value adjustment 34 460 100 115 Straight-line lease income adjustment against fair value (6 412) (3 082) Balance at end of the year 483 267 451 281 Reconciled as follows: Cost 358 186 354 248 Fair value adjustments 134 575 100 115 Straight-line lease income adjustment against fair value (9 494) (3 082) 483 267 451 281
Mill Square (Stellenbosch)*** – Abacus Holdings (Pty) Ltd Additions 53 464 – Net gain from fair value adjustment 4 582 – Straight-line lease income adjustment against fair value (27) – Balance at end of the year 58 019 – Reconciled as follows: Cost 53 464 – Fair value adjustments 4 582 – Straight-line lease income adjustment against fair value (27) – 58 019 –
102 Kofi Sekyere – Chairman West Hills Mall Ltd (Ghana)
Which factors make Ghana an investment destination of choice on the African continent? Ghana has one of the fastest growing economies in the world, it is a regional centre for gold and other minerals, cocoa and the new-found oil and gas sector makes Ghana ripe for investment opportunities. Political and economic stability prevails and have paved the way for the emergence of a robust commodities sector and dynamic financial industry. In addition, Ghana has a relatively independent judicial system and a natural culture of hospitality. It is therefore not by accident that Ghana was voted the sixth best African destination for direct investment for 2013–2014 by the FDI Magazine. The traditional add-ons like a free market based economy, ability to remit dividends and investment incentives create a friendly environment for investing.
How did the partnership with the Atterbury Group come about? This is something that I frequently talk about. We, at Sandpark Properties Limited, have been working closely with the Social Security & National Insurance Trust (SSNIT), the largest non- bank financial services company and the National Pensions Administrator in Ghana, to develop a shopping centre on a piece of land that it owned. Somewhere along the line SSNIT made a decision to partner with a strategic investor rather than having a 100 % ownership of the centre. This led to a search for potential investors, a journey that saw trips and presentations to potential suitors in Ghana, USA, South Africa and Europe. One of the private equity firms that we approached in South Africa referred us to the Atterbury Group. I will never forget what transpired at our very first meeting with James Ehlers.
It was a breakfast meeting to discuss the shopping centre proposal. The whole discussion took about an hour and after responding to key issues posed by James and the deal structure, he said ‘Ok we are in’. I sat in disbelief not realising that the long journey of looking for a potential investor was over. The partnership with the Atterbury Group had just begun.
I guess this is what happens when you are dealing with a group that understands its business with a commitment to its market place and understands the value of local knowledge. We have not looked back since!!!
What excites you most about the West Hills Mall development? It has been fascinating to watch the progress on the development, the ebb and flow of the negotiations and seeing the landscape of Western Accra. It is exciting knowing that with each and every passing day the dream of providing Ghanaians with a first class shopping experience – ‘right next door’ – is becoming a reality. The art of creation just excites me!!
What are the top three items on your bucket list? Learn to play a musical instrument, live to see my grandchildren and make a difference!
What is your life motto? Follow your passion because when you love what you do, you will never ‘work’ another day in your life.
103 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
Development
Le Chateau (Hartbeespoortdam) ** – Le Chateau Property Development (Pty) Ltd Balance at beginning of the year 15 000 15 048 Additions – 690 Net gain / (loss) from fair value adjustment 2 000 (738) Balance at end of the year 17 000 15 000 Reconciled as follows: Cost 37 508 37 508 Fair value adjustments (20 508) (22 508) 17 000 15 000
Newtown (Johannesburg) *,*** – Nieuwtown Property Development Company (Pty) Ltd Balance at beginning of the year 173 274 Acquired via investment in subsidiary – 159 227 Additions 259 647 16 875 Net loss from fair value adjustment (5 558) (2 828) Balance at end of the year 427 363 173 274 Reconciled as follows: Cost 435 749 176 102 Fair value adjustments (8 386) (2 828) 427 363 173 274
Majestic Offices (Johannesburg) *,*** – Majestic Offices (Pty) Ltd Balance at beginning of the year 24 251 Acquired via investment in subsidiary – 19 310 Additions 20 487 416 Net (loss) / gain from fair value adjustment (7 573) 4 525 Balance at end of the year 37 165 24 251 Reconciled as follows: Cost 40 213 19 726 Fair value adjustments (3 048) 4 525 37 165 24 251
West Hills Mall (Ghana)*** – West Hills Mall Ltd Balance at beginning of the year – – Additions 59 843 – Net gain from fair value adjustment 4 329 – Disposed via sale of subsidiary (63 055) – Foreign currency effect (1 117) – Balance at end of the year – – Reconciled as follows: Cost 59 843 – Fair value adjustments 4 329 – Disposed via sale of subsidiary (63 055) – Foreign currency effect (1 117) – – –
104 NOTESNOTES TTOO THE ANNUALANNUAL FINANCIALFINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
Waterfall (Midrand) *,**,*** (See note below for breakdown) – Atterbury Waterfall Investment Company (Pty) Ltd Balance at beginning of the year 2 549 792 1 890 013 Additions 907 198 264 708 Net gain from fair value adjustment 487 696 447 534 Provision for future tenant installations – 3 578 Disposal (23 726) (8 794) Straight-line lease income adjustment against fair value (13 612) – Transfers to inventory (31 565) – Transferred to assets held for sale – (47 247) Balance at end of the year 3 875 783 2 549 792 Reconciled as follows: Cost 2 028 277 1 153 224 Transfer to assets held for sale and disposal (23 726) (56 041) Straight-line lease income adjustment against fair value (13 612) – Transfers to inventory (31 565) – Fair value adjustments 1 916 409 1 452 609 3 875 783 2 549 792 9 495 681 8 497 139
* Leasehold ** Development land *** Investment property under construction or refurbishment
Investment properties are encumbered as described in note 17.
Waterfall (Midrand) can be broken down into the following:
Waterfall (Midrand) – Development rights Balance at beginning of the year 2 213 999 1 809 699 Disposal (23 726) (8 794) Net gain from fair value adjustment 244 899 422 060 Transfers to other segments (167 228) (8 966) Transfers to inventory (31 565) – Balance at end of the year 2 236 379 2 213 999
Waterfall (Midrand) – Infrastructure & Services Balance at beginning of the year 300 292 80 313 Additions 539 375 219 979 Transfers to other segments (285 629) – Balance at end of the year 554 038 300 292
Waterfall (Midrand) – Completed Investment properties Balance at beginning of the year 35 500 – Additions 135 945 19 961 Straight-line lease income adjustment against fair value (13 612) – Provision for future tenant installations – 3 578 Net gain from fair value adjustment 61 061 10 488 Transfers from other segments 62 533 1 473 Balance at end of the year 281 427 35 500
105 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Group June 2013 June 2012 R’000 R’000
Waterfall (Midrand) – Investment properties under development Net gain from fair value adjustment 181 736 – Additions 231 878 – Transfers from other segments 390 325 – Balance at end of the year 803 939 –
Waterfall (Midrand) – Assets held for sale Additions – 24 767 Transfers from other segments – 7 493 Net gain from fair value adjustment – 14 986 Transferred to assets held for sale – (47 246) Balance at end of the year – –
Waterfall (Midrand) – Total Balance at beginning of the year 2 549 792 1 890 013 Additions 907 198 264 708 Net gain from fair value adjustment 487 696 447 534 Disposal (23 726) (8 794) Provision for future tenant installations – 3 578 Straight-line lease income adjustment against fair value (13 612) – Transfers to inventory (31 565) – Transferred to assets held for sale – (47 247) Balance at end of the year 3 875 783 2 549 792
Fair valuations
The effective date of the revaluations was 30 June 2013. The previous valuations were done on 30 June 2012.
Investment properties and properties under construction
Buildings and buildings under construction
The revaluations for investment property buildings and buildings under construction were performed by the Valuation Division of Old Mutual Investment Group South Africa (Pty) Ltd (OMIGSA), a registered independent and professional valuer. The independent valuers at OMIGSA and the OMIGSA property valuation manager, Mr. Trevor King (Registered Professional Valuer and Chartered Valuation Surveyor), are not connected to the Group and have recent and substantial experience in valuing investment properties of this nature.
The industry accepted capitalisation of normalised net income methodology has been adopted for valuation of the investment properties, and includes the following: - consideration of market norm operating costs, including letting commission and tenant installations; - inclusion of perpetual vacancy factors, as well as short-term vacancy provisions on specific buildings; and - application of market norm market rentals, capitalisation rates and discount rates.
Capitalisation rates adopted for the valuations ranged between 6.75% to 10% (2012: 7.25% to 10%).
In addition to the valuations performed, certain cost provisions and obligations were included in determining the fair value of the properties disclosed.
The value of buildings under construction or refurbishment, was determined with reference to the cost incurred to date plus a portion of the final anticipated fair value gain upon completion of the building. The final anticipated fair value gain upon completion of the buildings is the difference between the total costs of development and the value of the building calculated using the capitalised net income method.
106 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
The realised fair value gain, being a portion of the present value of the anticipated fair value gain, is determined with reference to the stage of completion of the building. The stage of completion of the building is determined with respect to the costs to date of the top structure and the total anticipated costs excluding the land and the related funding costs. The final anticipated fair value of the building is determined upon completion of the building using the external valuation upon completion.
Development land
Except for the directors valuation that was done on Le Chateau, the revaluations for the development land was performed by an independent valuer Amanda de Wet (B. Proc LLB (UP), Nat Dip in REES (Unisa)), a member of the SA Institute of Valuers, who is not connected to the Group and has recent experience in valuing investment properties of this nature.
Waterfall leasehold and development rights
The effective date of the revaluations on Waterfall Land and Waterfall Buildings including buildings under construction was 30 June 2013. Revaluations were performed by the Valuation Division of Old Mutual Investment Group South Africa (Pty) Ltd (OMIGSA), a registered independent and professional valuer. The independent valuers at OMIGSA, and the OMIGSA property valuation manager Mr. Trevor King (Registered Professional Valuer and Chartered Valuation Surveyor), are not connected to the Group and have recent experience in valuing investment properties of this nature. In 2012 these revaluations were performed by an independent valuer, A de Wet. A de Wet is not connected to the Group and has recent experience in valuing investment properties of this nature.
The acquisition of the Waterfall leasehold and development rights were subject thereto that 20% thereof vests in Atterbury Property Holdings (Pty) Ltd, as developer of the infrastructure and improvements on the land parcels referred to above. To facilitate the vesting of the said 20%, the leasehold and development rights were transferred applying Section 45 of the Income Tax Act (with the effect that the original base cost remains unchanged) to Atterbury Waterfall Investment Company (Pty) Ltd (AWIC), effective 31 May 2009. The transfer price of R804 624 817 (initial transfer value of R750 000 000 escalated at a rate equal to the prime interest lending rate from 27 October 2008 to 31 May 2009) was settled by way of an intercompany loan raised between AWIC and Attacq Ltd.
Waterfall Land
In 2009 the Company entered into a sale of development rights and lease agreements with Waterfall Development Company (Pty) Ltd in terms of which it obtained the right to develop the parcels of land listed below and call for the registration of long- term lease agreements against the title deeds of these parcels (it is anticipated that all the lease agreements will be registered within the foreseeable future).
For both years presented, Waterfall comprise development rights obtained relating to:
- land parcel 3, 8, 9, 10, 10a, 10b, 12 and 24 of portion 1/RE of the Farm Waterfall No. 5; - land parcel 15 on portion 62 of the Farm Waterfall No. 5; - land parcel 20 on portion 706 of the Farm Waterfall No. 5; - land parcel 21 on portion 75 of the Farm Waterfall No. 5; and - land parcel 22 on portion 78 of the Farm Waterfall No. 5.
The valuation is done by applying the residual-land valuation model and includes the following key assumptions:
- an estimated development plan spanning 1 to 8 years; - serviced land prices between R386 and R2 800 (2012: R450 and R3 000) per bulk square metre, depending on services installed and usage; - estimated capital outlays and professional fees as per independent quantity surveyor; - provision for additional costs, e.g. agents commission and marketing; - inflation linked escalations of costs and income of 0% (2012: 10%) per annum; and - discount rates for present value calculations of 0% to 25% (2012: 0% to 22%)
With respect to a portion of land measuring 24 896m², situated on a portion of land parcel 10 of portion 1/RE of the Farm Waterfall No. 5 and relating to the development known as Maxwell Office Park, the valuation included in the annual financial statements is also only 50% of the value as 50% of the development rights were sold to the East & West Investments (Pty) Ltd during the current year through a 50/50 joint venture between the two parties.
107 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Waterfall Buildings including buildings under construction The valuation of buildings and buildings under construction was performed by applying the industry accepted capitalisation of normalised net income methodology, and includes the following:
- consideration of market norm operating costs, including letting commission and tenant installations; - inclusion of perpetual vacancy factors, as well as short-term vacancy provisions on specific buildings; and - application of market norm market rentals, capitalisation rates, and discount rates.
The following buildings were under development during the current financial year on the relevant land parcels:
- Woodmead North Office Park was developed on land parcel 20 on portion 706 of the Farm Waterfall No. 5. The valuation included in the annual financial statements is only 50% of the value as 50% of the development rights and the building was sold to the East & West Investments (Pty) Ltd during the previous year, through a 50/50 joint venture between the two parties; and - Massbuild Distribution Centre was developed on land parcel 8 on portion 1/RE of the Farm Waterfall No. 5.
The following buildings were under construction on the relevant land parcels:
- Cell C Multi-Use-Premises on land parcel 21 on portion 75 of the Farm Waterfall No. 5; - Group 5 Head Office on land parcel 15 on portion 62 of the Farm Waterfall No. 5; and - Maxwell Office Park (Phase I) on land parcel 10 of portion 1/RE of the Farm Waterfall No. 5.
The value of these developments was determined with reference to the cost incurred to date plus a portion of the final anticipated fair value gain upon completion of the building. The final anticipated fair value gain upon completion of the buildings is the difference between the total costs of development and the value of the building calculated using the capitalised net income method.
The realised fair value gain, being a portion of the present value of the anticipated fair value gain, is determined with reference to the stage of completion of the building. The stage of completion of the building is determined with respect to the costs to date of the top structure and the total anticipated costs excluding the land and the related funding costs. The final anticipated fair value of the building is determined upon completion of the building using the external valuation upon completion.
Refer to note 14 for description of the finance lease liability linked to these investment properties.
The change in estimate’s impact in the current year, being the additional fair value gain recognised given the stage of completion of buildings under construction, is as follows:
Net effect Fair value gain Tax effect after tax R’000 R’000 R’000 Investment property (Lynnwood Bridge Phase 3, Newtown, Majestic Offices): 49 341 9 201 40 140 Investment property Waterfall (Cell C, Group 5 Head Office, Maxwell Office Park): 181 736 33 890 147 846 Total 231 077 43 091 187 986
108 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
4. Goodwill
Group June 2013 June 2012 R’000 R’000
Carrying value at the beginning of the year 16 929 17 961 Goodwill written off (16 929) – Transferred to assets held for sale – (1 032) Carrying value at the end of the year – 16 929
The goodwill balance can be allocated to investments that represent cash-generating units. These investments are Highgrove (Pty) Ltd, the Investec Building and De Ville Shopping Centre. The portion transferred to assets held for sale in the prior year relates to the Investec Building which was held for sale in the prior year.
Goodwill is tested for impairment annually, or when there is an indication of impairment. For impairment testing purposes, goodwill is allocated to a cash-generating unit, of which the recoverable amount is determined based on value in use.
Management has assessed the cash flows of the cash-generating units that the goodwill can be allocated to, and decided to write off the existing goodwill. In the current year this amount has been written off in the statement of comprehensive income under “operating and other expenses“. Management does not believe the goodwill represents additional future value to be unlocked in the assets that is currently not reflected in the fair value as determined in the valuations.
5. Inventories
Group June 2013 June 2012 R’000 R’000
Lynnwood Bridge – Atterbury Theatre 41 660 41 644 Atterbury Waterfall Investment Company (Pty) Ltd – MB Technologies Building * 84 644 – Carrying value at the end of the year 126 304 41 644
* The amount includes R31.6 million transferred from investment properties per note 3, and the balance being capital expenditure on the development.
Lynnwood Bridge, Pretoria
109 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Investment in associates
Group June 2013 June 2012 R’000 R’000
Fair value Balance at the beginning of the year 1 098 741 3 380 809 Additions 175 439 537 808 Transfers from other investments (9 049) 23 450 Write-down of investment – (2 800 850) Share in retained profits / (losses) – Continuing operations 160 442 (43 208) Share in retained profits – Discontinued operations 14 895 – Impairment loss (74 667) – Adjustment for non-controlling interests due to cross shareholding (66 012) – Disposal due to loss of control in subsidiary (Waterfall Mall in Zambia and Accra Mall in Ghana) (145 201) – Transfer due to loss of control in subsidiary (Atterbury Africa Ltd) (5 637) – Foreign currency effect 3 863 732 Movement in provision for surety (18 752) – Transfer to assets held for sale (60 167) – Balance at the end of the year – net of provision for impairment 1 073 893 1 098 741
Reconciled as follows: Cost 711 940 536 502 Share of net retained profits since acquisition 657 722 562 239 Adjustment for non-controlling interests due to cross shareholding (66 012) – Movement in provision for surety (18 752) – Disposal due to loss of control in subsidiary (Waterfall Mall in Zambia and Accra Mall in Ghana) (145 201) – Transfer due to loss of control in subsidiary (Atterbury Africa) (5 637) – Transfer to assets held for sale (60 167) – Balance at the end of the year – net of provision for impairment 1 073 893 1 098 741
Investments in associates comprise the following:
Attfund Ltd Balance at the beginning of the year – 2 800 850 Write down of investments – (2 800 850) Balance at the end of the year – –
Effective 1 September 2011, Attfund Ltd declared a dividend in specie whereby Attfund Retail Ltd shares were distributed to all its shareholders. Hyprop Investments Ltd effectively bought all the shares in Attfund Retail Ltd from the existing Attfund Retail Ltd shareholders. Payment was part in cash and part in Hyprop Investments Ltd combined units (refer note 7).
Rapfund Holdings (Pty) Ltd (23%) Balance at the beginning of the year – 82 025 Transfer to associate investment (Reach) – (82 025) Balance at the end of the year – –
110 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Investment in associates (continued)
Group June 2013 June 2012 R’000 R’000
Paradise Coast Property Development (Pty) Ltd (33.3%) Balance at the beginning of the year (347) (108) Share of retained profits / (losses) for the year – (239) Movement in provision for surety (479) – Balance at the end of the year (826) (347)
Keysha Investments 213 (Pty) Ltd (50%) Balance at the beginning of the year (24 430) (20 499) Movement in provision for surety 10 766 (3 931) Balance at the end of the year (13 664) (24 430)
Brooklyn Bridge Office Park (Pty) Ltd (25%) Balance at the beginning of the year 50 537 43 477 Share of retained profits for the year 4 936 7 060 Balance at the end of the year 55 473 50 537
Travenna Development Company (Pty) Ltd (36%) Balance at the beginning of the year 56 536 53 640 Share of retained profits for the year 9 163 2 896 Balance at the end of the year 65 699 56 536
Geelhoutboom Estate (Pty) Ltd (36.7%) Balance at the beginning of the year (16 965) (15 346) Share of retained (losses) for the year – (1 619) Movement in provision for surety (11 892) – Balance at the end of the year (28 857) (16 965)
The Club Retail Park (Pty) Ltd (31%) Balance at the beginning of the year (1 810) (1 682) Share of retained (losses) for the year – (128) Movement in provision for surety (2 041) – Balance at the end of the year (3 851) (1 810)
Mall of Mauritius at Bagatelle Ltd (Mauritius) (49.9%) Balance at the beginning of the year 221 979 438 451 Transfer to Bagaprop Ltd – (104 595) Share of retained profits / (losses) for the year 20 673 (111 877) Balance at the end of the year 242 652 221 979
The shareholding in Mall of Mauritius at Bagatelle Ltd is held via a subsidiary company Atterbury Mauritius Consortium (Pty) Ltd.
Bagaprop Ltd (Mauritius) (49.9%) Balance at the beginning of the year 181 753 – Transfer from Mall of Mauritius at Bagatelle Ltd – 104 595 Share of retained profits for the year 70 939 77 158 Balance at the end of the year 252 692 181 753
The shareholding in Bagaprop Ltd is held via a subsidiary company Atterbury Mauritius Consortium (Pty) Ltd.
111 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Investment in associates (continued)
Group June 2013 June 2012 R’000 R’000
Waterfall Mall Ltd (Zambia) (25%) ** Balance at the beginning of the year 9 372 – Additions – 10 330 Disposal (10 328) – Share of retained profits for the year 973 (908) Foreign currency effect (17) (50) Balance at the end of the year – 9 372
Accra Mall Ltd (Ghana) (42.5%) ** Balance at the beginning of the year 136 633 – Disposal (134 874) – Additions – 141 923 Share of retained (losses) for the year (1 790) (5 015) Foreign currency effect 31 (275) Balance at the end of the year – 136 633
Artisan Investment Projects 10 Ltd – Caltongate (Edinburgh) (26.3%) Balance at the beginning of the year 9 077 – Additions – 12 982 Transfer to other associate – Bishopsgate Student Residential Ltd – (5 926) Share of retained profits for the year 115 965 Foreign currency effect 845 1 056 Transfer to assets held for sale (10 037) – Balance at the end of the year – 9 077
Bishopsgate Student Residential Ltd (Scotland) (30%) Balance at the beginning of the year 17 435 – Transfer from other associate – Artisan Investment Projects 10 Ltd – 5 926 Share of retained (losses) for the year (67) – Additions – 11 509 Foreign currency effect 3 004 – Balance at the end of the year 20 372 17 435
Retail Africa Consortium Holdings (Pty) Ltd (Reach) (20%) Balance at the beginning of the year 261 456 – Transfer from other investments – 23 450 Transfer from associate investment (Rapfund Holdings (Pty) Ltd) – 82 025 Additions 62 235 158 467 Impairment loss (74 667) – Share of retained (losses) for the year – (2 486) Balance at the end of the year 249 024 261 456
* The Group has an effective 50% interest in Reach.
Arctospark (Pty) Ltd (50%) Balance at the beginning of the year (14 649) – Additions 50 000 – Share of retained profits / (losses) for the year 14 780 (14 649) Transfer to assets held for sale (50 131) – Balance at the end of the year – (14 649)
112 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Investment in associates (continued)
Group June 2013 June 2012 R’000 R’000
An additional provision for impairment of R34,4 million has been made against this investment.
Atterbury Property Holdings (Pty) Ltd (25%) Balance at the beginning of the year 102 600 – Adjustment for minorities due to cross shareholding (66 012) – Additions 13 119 102 600 Balance at the end of the year 49 707 102 600
The “adjustment for minorities due to cross shareholding“ relate to the adjustment needed in order to reflect the effect of the cross shareholding that the Group has in certain projects in which Atterbury Property Holdings (Pty) Ltd also has an interest in.
MAS Real Estate Inc (21.1%) * Balance at the beginning of the year 109 565 – Additions 50 084 100 000 Net gain from fair value adjustment 49 978 9 565 Balance at the end of the year 209 627 109 565
Fountains Regional Mall (Pty) Ltd (12.73%) Transfer from other investments (9 049) – Movement in provision for surety (14 985) – Balance at the end of the year (24 034) –
During the current year, shareholding in Fountains Regional Mall (Pty) Ltd increased as a result of buying out diluting shareholders interests. The effective interest of the Group increased to 35.9%.
Sinco Investments Six (Pty) Ltd (Mall of Namibia) (25%) Balance at the beginning of the year – – Movement in provision for surety (123) – Balance at the end of the year (123) –
The Group has a 31.25% effective interest in the development. This is a 931 million Namibian dollar project that is still under development and accordingly does not show material net equity at this stage. The target completion date is October 2014.
Atterbury Africa Ltd (25%) ** Balance at the beginning of the year – – Share of retained profits for the year 5 637 – Transfer due to loss of control in subsidiary (5 637) – Balance at the end of the year – –
Total investment in associates 1 145 246 1 156 943 Provision for liabilities relating to associates (71 355) (58 202) Total value 1 073 891 1 098 741
* MAS Real Estate Inc was incorrectly classified under other investments in the prior year. ** Atterbury Africa Ltd was a subsidiary in the previous year and was transferred to associates in the current year as the shareholding changed when Hyprop Investments Ltd invested.
113 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Investment in associates (continued)
Proportion Owned Group June 2013 June 2012 % %
Proportion interest held in associates:
Attfund Ltd (liquidated October 2012 ) – 42.5 Atterbury Parkdev Consortium (Pty) Ltd – Held for sale 100.0 100.0 Paradise Coast Property Development (Pty) Ltd 33.3 33.3 Keysha Investments 213 (Pty) Ltd 50.0 50.0 Mall of Mauritius at Bagatelle Ltd 49.9 49.9 Brooklyn Bridge Office Park (Pty) Ltd 25.0 25.0 Travenna Development Company (Pty) Ltd 36.0 36.0 Atterbury Africa Ltd 25.0 50.0 Geelhoutboom Estate (Pty) Ltd 36.7 36.7 The Club Retail Park (Pty) Ltd 31.0 31.0 Waterfall Mall Ltd – 25.0 Accra Mall Ltd – 50.0 Artisan Investment Projects 10 Ltd – Held for sale 26.3 26.3 Retail Africa Consortium Holdings (Pty) Ltd 20.0 20.0 Arctospark (Pty) Ltd – Held for sale 50.0 50.0 Bagaprop Ltd 49.9 49.9 Atterbury Property Holdings (Pty) Ltd 25.0 25.0 Bishopsgate Student Residential Ltd 30.0 30.0 MAS Real Estate Inc 21.1 23.7 Fountains Regional Mall (Pty) Ltd * 12.73 9.5 Sinco Investments Six (Pty) Ltd 25.0 –
The assets and revenue of the Group’s associates are as follows:
Assets Liabilities Revenue R’000 R’000 R’000
2013 Paradise Coast Property Development (Pty) Ltd 24 538 27 016 – Atterbury Parkdev Consortium (Pty) Ltd 138 659 108 921 14 351 Keysha Investments 213 (Pty) Ltd 28 610 84 223 371 Mall of Mauritius at Bagatelle Ltd 574 806 88 529 179 924 Brooklyn Bridge Office Park (Pty) Ltd 624 119 402 227 93 737 Travenna Development Company (Pty) Ltd 382 974 203 812 31 993 Geelhoutboom Estate (Pty) Ltd 5 841 59 434 – The Club Retail Park (Pty) Ltd 227 777 240 180 11 100 Atterbury Africa Ltd 587 286 530 188 1 937 Artisan Investment Projects 10 Ltd 134 086 97 776 452 Retail Africa Consortium Holdings (Pty) Ltd 644 629 54 294 – Arctospark (Pty) Ltd 1 682 680 1 343 604 20 924 Bagaprop Ltd 1 338 120 831 722 133 489 Atterbury Property Holdings (Pty) Ltd 929 475 696 288 126 328 Bishopsgate Student Residential Ltd 149 505 83 385 8 459 MAS Real Estate Inc 1 108 572 271 191 52 548 Fountains Regional Mall (Pty) Ltd 269 670 458 462 41 635 Sinco Investments Six (Pty) Ltd 310 648 311 263 –
114 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Investment in associates (continued)
Assets Liabilities Revenue R’000 R’000 R’000
2012 Attfund Ltd – – – Atterbury Parkdev Consortium (Pty) Ltd 118 191 76 218 12 283 Paradise Coast Property Development (Pty) Ltd 26 074 26 837 – Keysha Investments 213 (Pty) Ltd (‘Val de Vie’) 33 045 81 905 16 Mall of Mauritius at Bagatelle Ltd 513 160 68 311 913 646 Brooklyn Bridge Office Park (Pty) Ltd 627 058 421 950 46 813 Travenna Development Company (Pty) Ltd 423 614 266 775 28 223 Geelhoutboom Estate (Pty) Ltd 16 488 62 752 – The Club Retail Park (Pty) Ltd 202 050 202 189 9 500 Waterfall Mall Ltd 60 578 22 291 – Accra Mall Ltd 620 969 299 010 18 977 Artisan Investment Projects 10 Ltd 108 617 75 334 – Retail Africa Consortium Holdings (Pty) Ltd 608 542 54 538 – Arctospark (Pty) Ltd 1 303 865 1 333 164 – Bagaprop Ltd 1 079 852 692 401 278 507 Atterbury Property Holdings (Pty) Ltd 397 738 229 025 32 656 Bishopsgate Student Residential Ltd 116 831 59 719 – MAS Real Estate Inc 660 922 238 144 22 017
During the current year, the shareholding in Fountains Regional Mall (Pty) Ltd increased as a result of acquiring other shareholders interests. The effective interest of the Group increased to 35.9%.
7. Other investments
Group June 2013 June 2012 R’000 R’000
Fair value
Balance at the beginning of the year 467 948 67 174 Additions 14 818 1 765 838 Disposals (440 133) (1 400 915) Transfer to associates 9 049 (23 450) Impairment loss (10 403) – Net gain from fair value adjustment 17 100 59 301 Balance at the end of the year 58 379 467 948
Reconciled as follows: Cost 86 967 428 219 Fair value adjustment (28 588) 39 729 Balance at the end of the year 58 379 467 948
Other investments comprise the following:
Rainprop (Pty) Ltd Balance at the beginning of the year 6 741 4 242 Net (loss) / gain from fair value adjustment (1 262) 2 499 Balance at the end of the year 5 479 6 741
115 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
7. Other investments (continued)
Group June 2013 June 2012 R’000 R’000
Fountains Regional Mall (Pty) Ltd Balance at the beginning of the year (9 049) (4 877) Net loss from fair value adjustment – (4 172) Transfer to associate 9 049 – Balance at the end of the year – (9 049)
Isibaya House (Pty) Ltd Balance at the beginning of the year – 86 Net loss from fair value adjustment – (86) Balance at the end of the year – –
Retail Africa Wingspan Investments (Pty) Ltd Balance at the beginning of the year – 23 450 Transfer to investment in associates (Reach) – (23 450) Balance at the end of the year – –
Investment through Foreign Investment Allowance Investec Securities Ltd Balance at the beginning of the year 48 484 44 273 Additions 14 819 – Net gain from fair value adjustment – 4 211 Impairment loss (10 403) – Balance at the end of the year 52 900 48 484
Hyprop Investments Ltd Balance at the beginning of the year 421 771 – Additions – 1 765 838 Disposals (440 133) (1 400 914) Net gain from fair value adjustment 18 362 56 847 Balance at the end of the year – 421 771
Total other investments 58 379 476 997 Provision for liabilities relating to other investments – (9 049) Total value 58 379 467 948
The Group has investments in the following companies:
Group June 2013 June 2012 % %
Unlisted Isibaya House (Pty) Ltd – 18.75 Fountains Regional Mall (Pty) Ltd – 9.50 Rainprop (Pty) Ltd 1.50 1.50 Stenham European Shopping Centre Fund Ltd 4.50 4.50
Listed Hyprop Investments Ltd – 2.22
116 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
7. Other investments (continued)
Investment through foreign investment allowance During 2008, the Group acquired an investment in Stenham European Shopping Centre Fund Ltd (SESCF), an entity listed on the Channel Island Stock Exchange, by way of an asset swap agreement with Investec Securities Ltd. The underlying asset of SESCF is Nova Eventis Regional Shopping Centre, a 91 000m2 regional mall located near Leipzig, Germany.
The fair value of the foreign investment allowance, as determined by the directors and based on the equity of SESCF were calculated on 36 070 shares (2012: 20 517 shares) held by the Group in SESCF. The management accounts show a value of Euro 149.1 per share (2012: Euro 224.9) at currency exchange rate of R12.85/Euro (2012: R10.50/Euro). Management however decided to make an additional impairment of Euro 34.97 per share due to market conditions. The value therefore used to value SESCF was Euro 114.13 per share.
During 2009 the Group entered into an option agreement with Wattchatt (Pty) Ltd (a related entity), to acquire Leipzig Nova Eventis Consortium (Pty) Ltd, which holds an additional 30 545 shares (2012: 17 374 shares) (3.81% shareholding) in SESCF. This option was still in place at year end.
8. Loans to / (from) associates
Group June June June June June June 2013 2013 2013 2012 2012 2012 Loan Impair- Loan Impair- amount ment Total amount ment Total R’000 R’000 R’000 R’000 R’000 R’000
Loans have been made to / (received from) the following associates:
Associates Paradise Coast Property Development (Pty) Ltd 3 885 – 3 885 4 046 (12) 4 034 Brooklyn Bridge Office Park (Pty) Ltd 2 697 – 2 697 2 305 – 2 305 Keysha Investments 213 (Pty) Ltd 27 009 (14 134) 12 875 25 058 (20 789) 4 269 Geelhoutboom Estate (Pty) Ltd 14 840 – 14 840 10 947 (4 119) 6 828 Atterbury Africa Ltd 112 355 – 112 355 – – – Fountains Regional Mall (Pty) Ltd 13 684 – 13 684 10 579 (3 502) 7 077 Bagaprop Ltd 7 638 – 7 638 – – – Sinco Investments Six (Pty) Ltd (Mall of Namibia) 64 333 – 64 333 – – – The Club Retail Park (Pty) Ltd 52 203 (9 387) 42 816 40 836 (9 387) 31 449 Travenna Development Company (Pty) Ltd – – – (9 284) – (9 284) Arctospark (Pty) Ltd* – – – 495 562 – 495 562 Atterbury Property Holding (Pty) Ltd 212 019 – 212 019 49 603 – 49 603 Artisan Investment Projects 10 Ltd* – – – 20 525 – 20 525 Current assets 487 142 621 652 Current liabilities – (9 284) Total 510 663 (23 521) 487 142 650 177 (37 809) 612 368
117 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
8. Loans to / (from) associates (continued)
For both years presented, the loans from or to associates and joint ventures bear interest at prime, are unsecured and no repayment terms have been set, except the loans noted below which do not bear interest or bear interest at different rates: - keysha Investments 213 (Pty) Ltd (no interest); - Arctospark (Pty) Ltd (no interest); - Sinco Investments Six (Pty) Ltd (Mall of Namibia) (no interest); - Geelhoutboom Estate (Pty) Ltd (no interest); - Fountains Regional Mall (Pty) Ltd (interest on out of parity loan balances only); - The Club Retail Park (Pty) Ltd (interest on out of parity loan balances only); and - The loan between Attacq Ltd and Atterbury Property Holdings (Pty) Ltd (APH) amounts to a net loan of R250 473 952 and consists of various accounts with interest rates ranging from prime to prime + 1.5%. A loan of R17.138 million is repayable by Attacq Ltd within 1 year. A loan of R48 million is repayable by APH over 7 years in capital repayments of R4 million per annum starting December 2015. A loan of R66 million is repayable by APH within 1 year. On Group level there is a loan by Atterbury Mauritius Consortium (Pty) Ltd to APH amounting to R53 million that is interest free. Also on Group level there is a loan receivable by Nieuwtown Property Development Company (Pty) Ltd of R14.567 million from APH that is interest free. On Group level the net loan receivable from APH is R212 018 691.
* The Artisan Investment Projects 10 Ltd and Arctospark (Pty) Ltd loans have been transferred to assets held sale.
The fair value of the loans to / (from) the entities listed above are considered by management to approximate the carrying value of the loans. The interest rates of the loans are considered to be market related and have no fixed terms of repayment. In terms of the Group policy, intercompany loans within the Group bear no interest.
9. Loans to shareholders
Group June 2013 June 2012 R’000 R’000
- Atterbury Property Developments (Pty) Ltd – 6 308
Current assets – 6 308 Current liabilities – –
The loan is unsecured, has no specific terms of repayment and bears interest at prime.
The fair value of the loan is considered by management to approximate the carrying value of the loan as the interest rates charged are considered to be market related, no fixed terms of repayment have been determined.
118 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
10. Other financial assets / (liabilities)
Group June June June June June June 2013 2013 2013 2012 2012 2012 Loan Impair- Loan Impair- amount ment Total amount ment Total R’000 R’000 R’000 R’000 R’000 R’000
Loans and receivables / (payables) Atterbury Property Development (Pty) Ltd (22 288) – (22 288) – – – Atterbury Property Development (Pty) Ltd – Beau Rivage 10 677 (10 677) – 10 677 (10 677) – Atterbury Waterfall City (Pty) Ltd (4 653) – (4 653) (4 275) – (4 275) Association for People with Disabilities 88 (88) – 88 (88) – Leipzig Nova Eventis Consortium (Pty) Ltd 87 058 (42 296) 44 762 83 291 (7 963) 75 328 Rainprop (Pty) Ltd 230 – 230 316 (244) 72 Scarlett Sky Investment 36 (Pty) Ltd 3 012 (3 012) – 3 613 (3 013) 600 Travenna Development Company (Pty) Ltd 379 – 379 – – – TTA Shares (Pty) Ltd – – – 1 – 1 Zwelinzima Holdings (Pty) Ltd 263 (263) – 263 (263) – Atterbury Foundation 1 785 – 1 785 1 641 – 1 641 Waterfalls Zambia Ltd – – – 76 – 76 Waterfalls Mall Ltd – – – 1 388 – 1 388 Accra Mall Ltd – – – 14 795 – 14 795 Lynnwood Bridge Property Owners Association 69 – 69 – – – Nasek Investments Ltd – – – 10 140 – 10 140 Sanlam Capital Markets – – – (78 288) – (78 288) Nedbank Ltd (304) – (304) (304) – (304) Abacus Trust (412) – (412) (412) – (412) Hyprop Investments Ltd (117 600) – (117 600) (117 600) – (117 600) Atterbury Property Holdings International Ltd – – – (12 298) – (12 298) Atterbury Property Holdings International Ltd – – – 15 – 15 West Hills Mall Ltd 143 – 143 143 – 143 Loans and receivables 47 368 104 199 Current liabilities (145 257) (213 177) Total (41 553) (56 336) (97 889) (86 730) (22 248) (108 978)
119 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
10. Other financial assets / (liabilities) (continued)
Unless specified, the loans are unsecured and indefinite, and terms are the same for both years presented. Furthermore, the loans bear no interest except those listed below:
A portion of the loan to Atterbury Property Development (Pty) Ltd relates to an advance with regard to the Beau Rivage development. The repayment thereof is linked to the sale of residential stands on this development. Due to the uncertainty pertaining the timing of recovery of the loan on the short-term, the loan was fully impaired during the previous year. The current year loan relates to loan advances by Atterbury Property Developments (Pty) Ltd to the Group not relating to the Beau Rivage development.
The following loans bear interest at prime: - Atterbury Waterfall City (Pty) Ltd; and - Sanlam Capital Markets.
The loan from Hyprop Investments Ltd bears interest at 8.5% (2012: 8.5%).
The fair value of the loans to / (from) the entities listed above are considered by management to approximate the carrying value of the loans. The terms of the loans are considered to be market related, have no fixed terms of repayment (other than the loan to Atterbury Investment Managers (Pty) Ltd in the prior year) and neither party has deferred payment of the loans.
Due to the uncertainty pertaining the timing of the recovery thereof, some loans have been impaired as disclosed above.
Group June 2013 June 2012 R’000 R’000
Held at fair value through profit and loss Derivative financial assets and liabilities utilised for hedging against interest rates: Carrying value at the beginning of the year (127 331) (44 193) Derivatives realised (750) – Fair value adjustment 57 137 (83 138) Derivative financial assets – – Derivative financial liabilities (70 944) (127 331)
The derivatives are interest rate swap agreements entered into by the Group with various financial institutions (refer to note 31). The derivatives were valued by each financial institution involved by referring to the market swap curve as at 30 June 2013 and on 30 June 2012. The swap agreements entail a flow of funds, calculated on the difference between interest at a floating and fixed rates on the outstanding capital amount.
Total non-current financial assets – – Total current financial assets 47 368 104 199 Total non-current financial liabilities (70 944) (127 331) Total current financial liabilities (145 257) (213 177)
120 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
11. Cash and cash equivalents
Group June 2013 June 2012 R’000 R’000
Bank accounts and cash on hand 44 389 200 501
The Group has an overdraft facility to the amount of R105 000 000 (2012: R45 000 000) with Nedbank Ltd. A letter of undertaking for the amount of R20 000 000 (2012: R20 000 000) for Attacq Ltd and R5 000 000 (2012: R5 000 000) for Atterbury Waterfall Investment Company (Pty) Ltd was issued by Nedbank Property Partners relating to the Waterfall development has also been provided as security. The Group also has an overdraft facility to the amount of R80 000 000 with Standard Bank, secured by a mortgage bond over Waterfall – Land Parcel 10A. The overdraft facilities bear interest at prime.
12. Deferred tax
Group June 2013 June 2012 R’000 R’000
The balance comprises: Deferred tax asset - Advance receipts – – - Assessed losses (4 443) (17 597) - Prepayments – – - Wear and tear allowance – 1 240 - Straight-line debtor – 681 - Deferred initial lease expenditure – – - Pre-production interest – 1 773 - Bad debt allowance – (201) - Unutilised interest expense on foreign investments – – - Fair value adjustment on derivatives – – - Capital gains on fair value adjustments and equity accounting 12 252 2 345 - Other (15 912) – - Assessed loss not recognised – 7 565 Total deferred tax asset (8 103) (4 194)
Reconciliation of deferred tax asset Balance at the beginning of the year (4 194) (9 124) - originating temporary difference on advance receipts – 58 290 - Increase in tax losses available for set off against future taxable income 13 154 (17 598) - originating temporary difference on prepayments – (8 403) - originating temporary difference on wear and tear allowance (1 240) (4 138) - originating temporary difference on straight-line debtor (681) 681 - originating temporary difference on deferred initial lease expenditure – (37 707) - originating temporary difference on pre-production interest (1 773) 1 886 - originating temporary difference on bad debt allowance 201 5 731 - originating temporary difference on unutilised interest expense on foreign investments – 9 127 - originating temporary difference on fair value adjustment on derivatives – (12 849) - originating temporary difference on capital gains on fair value adjustments and equity accounting 9 907 2 345 - originating temporary difference on other movements (15 912) – - originating temporary difference on assessed losses not recognised (7 565) 7 565 Balance at the end of the year (8 103) (4 194)
121 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
12. Deferred tax (continued)
Group June 2013 June 2012 R’000 R’000
Deferred tax liability - Advance receipts (2 788) 2 315 - Assessed losses (138 216) (100 290) - Prepayments 697 1 346 - Wear and tear allowance 20 882 26 275 - Straight-line debtor 57 195 26 032 - Deferred initial lease expenditure 1 112 (13 502) - Pre-production interest 26 306 46 937 - Bad debt allowance (763) (380) - Unutilised interest expense on foreign investments – (13 023) - Fair value adjustment on derivatives (19 864) (26 120) - Capital gains on fair value adjustments and equity accounting 835 590 644 326 - Other (4 717) (2 078) Total deferred tax liability 775 434 591 838
Reconciliation of deferred tax liability Balance at the beginning of the year 591 838 537 925 - originating temporary difference on advance receipts (5 103) (55 024) - Increase in tax losses available for set off against future taxable income (37 926) (23 556) - originating temporary difference on prepayments (649) 9 671 - originating temporary difference on wear and tear allowance (5 393) 3 860 - originating temporary difference on straight-line debtor 31 163 5 259 - originating temporary difference on deferred initial lease expenditure 14 614 22 693 - originating temporary difference on pre-production interest (20 631) 4 790 - originating temporary difference on bad debt allowance (383) (5 754) - originating temporary difference on unutilised interest expense on foreign investments 13 023 (10 341) - originating temporary difference on fair value adjustment on derivatives 6 256 (897) - originating temporary difference on capital gains on fair value adjustments and equity accounting 191 264 105 290 - originating temporary difference on other movements (2 639) (2 078) Balance at the end of the year 775 434 591 838
Use and Sales rate The deferred tax rate applied to the fair value adjustments of investment properties / financial assets is determined by the expected manner of recovery. Where the expected recovery of the investment properties / financial assets is through sale, the capital gains tax rate of 18.65% for 2013 and 2012 is used. If the expected manner of recovery is through definite use the normal tax rate of 28% is applied. If the manner of recovery is partly through use and partly through sale, a combination of the capital gains rate and the normal tax rate is used.
The applicable tax rates on temporary differences are based on management’s best estimate of the manner in which these temporary differences will realise.
Gains in the fair value of investment property give rise to taxable temporary differences, being the difference between the original cost price and the market value as determined annually by external valuers. Refer to note 3 for valuation details.
Market value of investment properties represents the best estimate of value to be realised in the open market between a willing buyer and a willing seller. Thus, disposal of investment properties will primarily give rise to capital gains tax.
122 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
12. Deferred tax (continued)
In determining the amount of deferred tax to be raised, accounting standards require: - the revaluation of land to be separated from that of buildings and deferred tax to be calculated using the consequences of sale, and - in respect of the buildings, management is required to estimate the expected period of use until sale and an estimated sales value (residual value). The fair value adjustment is then split between a use value and a sale value component and the respective tax consequences applied to each component.
Given the overall nature of the Group’s investment property portfolio and the historic performance of the portfolio as a whole as well as the individual properties, management estimates the expected future sale value (residual value) of the investment properties to at least be equal to the market values at year end. Thus, the fair value attributable to the value in use component of the investment properties is most likely to be nil. There is thus no benefit to value land separately for determining deferred tax consequences.
Consequently: - net fair value gains on investment properties are included at capital gains tax rates; - straight-line rentals are included at normal tax rates; - future recoupment of wear and tear allowances on individual depreciable components of investment properties are included normal tax rates; and - deferred initial lease costs are included at normal tax rates.
13. Assets and liabilities held for sale
13.1 Non-current assets held for sale
Group June 2013 June 2012 R’000 R’000
The following investment properties are presented as held for sale: - Great Westerford 258 871 – - Harlequins Office Park 132 838 – - Atterbury House 335 942 – - Sanridge Square 99 834 – - De Ville Shopping Centre 184 239 – - Digistics Building – 47 246 - Investec Building – 129 977 - Building G – 83 867 1 011 724 261 090 Goodwill relating to the Investec Building – 1 032 Straight-line debtor relating to investment property 21 527 – 1 033 251 262 122
The following associates and loans to associates are presented as held for sale: - Investment in Artisan Investment Projects 10 Ltd – Caltongate (Edinburgh) 10 037 – - Investment in Arctospark (Pty) Ltd 50 131 – - loan to Artisan Investment Projects 10 Ltd – Caltongate (Edinburgh) 24 661 – - loan to Arctospark (Pty) Ltd 483 562 – Total assets held for sale 1 601 642 262 122
123 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
13. Assets and liabilities held for sale (continued)
13.2 Non-current liabilities held for sale
Group June 2013 June 2012 R’000 R’000
- Harlequins Office Park 55 501 – - Momentum guarantee facility 233 428 – - De Ville Shopping Centre 109 644 – - Digistics Building, in favour of Atterbury Waterfall Investment Company (Pty) Ltd – 22 867 - Investec Building, in favour of Investec Bank – 52 436 - Building G, in favour of Rand Merchant Bank – 55 874 398 573 131 177
13.3 Discontinued operations of non-current assets held for sale
Profit and loss Income 135 510 23 135 Fair value adjustments on investment properties 113 789 26 951 Net income from associates 14 895 – Expenses (129 442) (18 028) Net profit before tax 134 752 32 058 Tax (25 964) (7 622) 108 788 24 436
Other assets and liabilities (2 309) 424 Trade and other receivables 15 911 329 Trade and other payables 34 404 2 468
The sale transactions of Sanridge Square (situated in Midrand) and Harlequins Office Park held via Atterbury Parkdev Consortium (Pty) Ltd (situated in Pretoria) were finalised during August 2013. Atterbury House (situated in Cape Town) was sold and transferred during September 2013. The sale of Great Westerford (situated in Cape Town) is expected to take place before June 2014. The sale of the shares in Arctospark (Pty) Ltd was implemented during October 2013.
De Ville Shopping Centre, Cape Town
124 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
14. Finance lease liability
Group June 2013 June 2012 R’000 R’000
Atterbury Waterfall Investment Company (Pty) Ltd 574 129 501 373 Majestic Offices (Pty) Ltd 4 804 4 572 Nieuwtown Property Development Company (Pty) Ltd 52 087 48 221 631 020 554 166
The figures above are reconciled as follows: Atterbury Waterfall Investment Company (Pty) Ltd Lessor: Waterfall Development Company (Pty) Ltd Minimum lease payments due: - within one year 6 662 128 287 - in second to fifth year inclusive 173 785 394 319 - later than five years 748 858 429 121 929 305 951 727 less: future finance charges (355 176) (450 354) Present value of minimum lease payments 574 129 501 373
Present value of minimum lease payments due: - within one year 6 662 113 236 - in second to fifth year inclusive 133 121 239 171 - later than five years 434 346 148 966 574 129 501 373
Majestic Offices (Pty) Ltd Lessor: City of Johannesburg Minimum lease payments due: - within one year 205 190 - in second to fifth year inclusive 1 297 923 - later than five years 20 390 20 970 21 892 22 083 less: future finance charges (17 088) (17 510) Present value of minimum lease payments 4 804 4 573
Present value of minimum lease payments due: - within one year – 181 - in second to fifth year inclusive – 700 - later than five years 4 804 3 692 4 804 4 573
125 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
14. Finance lease liability (continued) Group June 2013 June 2012 R’000 R’000
Nieuwtown Property Development Company (Pty) Ltd Lessor: City of Johannesburg Minimum lease payments due: - within one year 1 018 641 - in second to fifth year inclusive 6 447 4 585 - later than five years 12 282 271 12 285 150 12 289 736 12 290 376 less: future finance charges (12 237 649) (12 242 156) Present value of minimum lease payments 52 087 48 220
Present value of minimum lease payments due: - within one year – 601 - in second to fifth year inclusive – 3 477 - later than five years 52 087 44 142 52 087 48 220
Non-current liabilities 624 358 440 148 Current liabilities 6 662 114 018
In 2009 the Group entered into a sale of development rights and lease agreements with Waterfall Development Company (Pty) Ltd in terms whereof it obtained the right to develop the relevant land parcels and call for the registration of long-term lease agreements against the title deeds of these land parcels (it is anticipated that all the lease agreements will be registered within the foreseeable future). These agreements are treated as finance leases in which the investment property is recognised and measured at fair value, and a liability is recognised based on the terms set out below.
In terms of the Waterfall agreements, Atterbury Waterfall Investment Company (Pty) Ltd (AWIC) is obliged to pay, to the land owner, an amount equal to 6% of the net rentals from the leasehold improvements. This obligation is inseparable from the leased land, and is treated as a finance lease liability as mentioned above.
The 6% net rental obligation is calculated based on: - anticipated market rentals for commercial-, retail- and industrial- leasehold improvements, with annual escalations of 0% p.a (2012: 6%); - staggered rental income streams based on anticipated completion dates of the various leasehold improvements / disposal of leasehold rights; and - discounting of anticipated cash flow streams to determine the present value of the obligation at rates of 0% to 25% (2012: 0% to 22%).
Also refer to note 3 for further description of the Waterfall investment property.
The Group entered into a finance lease agreement in the name of Majestic Offices (Pty) Ltd with the City of Johannesburg for a 30 year lease, with option to extend for a further 19 years lease on Erf 591, Newtown, Johannesburg. The effective finance lease starting date was 3 February 2011 with the basic monthly instalment starting at R15 000 (escalating at 8% compounded annually). With effect from the date of completion (actual or deemed) rental becomes payable to the City of Jo’burg equal to the greater of R15 000 per month (escalating at 8% per annum) and an amount equal to 2.5% of the net rental plus operating expenses recovered.
The Group entered into a finance lease agreement in the name of Nieuwtown Property Development Company (Pty) Ltd with the City of Johannesburg for a 90 year lease on Erven 45, 46, 47, 56, 57 and 58 Newtown, Johannesburg. The effective finance lease starting date is 16 September 2010 with the basic monthly instalment starting at R80 000 (escalating with 8% compounded annually). Once the development is completed the basic rental is payable as follows: 1.75% of rental income for year 1–30, 1.9% of rental income for year 31 to 60 and 2% of rental income for year 61 to 90.
126 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
15. Trade and other receivables
Group June 2013 June 2012 R’000 R’000
Deposits 3 735 708 Sundry receivables 67 573 41 011 Trade debtors 19 108 7 465 Value Added Tax receivable 68 958 34 028 Allowance for doubtful debts (3 877) (1 861) 155 497 81 351
The fair value of deposits, sundry receivables, VAT and trade debtors are deemed to be the same as the carrying value.
Trade receivables past due but not impaired Trade receivables which are less than 1 month past due are not considered to be impaired. At 30 June 2013, R13 037 364 (2012: R2 561 510) were not past due. Trade receivables with a total value of R6 070 286 (2012: R4 903 709) were past due at year- end.
Trade receivables impaired As of 30 June 2013, trade receivables of R3 877 366 (2012: R1 861 604) were impaired and provided for.
Trade receivables age analysis excluding amounts impaired and provided for: - Current 13 037 2 562 - 30 Days 319 941 - 60 Days 792 2 605 - 90 Days 623 749 - 120 Days and more 4 337 609
Movement in the allowance for doubtful debt Opening balance 1 861 2 896 Impairment losses recognised on receivables 2 453 1 444 Impairment losses reversed (437) (2 479) Balance at the end of the year 3 877 1 861
The creation and release of provision for impaired receivables have been included in operating expenses in the statement of comprehensive income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. In considering any impairments on debtor accounts, the Group takes into account deposits held, bank guarantees issued by the debtor, additional sureties provided by the principals of the debtors and running Transunion (ITC) checks on debtors and their principals.
127 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
16. Issued Capital and Share Premium
Group June 2013 June 2012 Shares Shares
Reconciliation of number of shares issued: Reported at the beginning of the year 522 989 885 521 535 340 Issue of share capital – 1 454 545 Total issued shares 522 989 885 522 989 885
Adjust for treasury shares held by: Razorbill Properties 91 (Pty) Ltd (43 800 054) (43 800 054) Abacus Holdings (Pty) Ltd (29 726 516) (29 726 516) Lynnwood Bridge Office Park (Pty) Ltd (57 165) (57 165) Total adjusted issued shares 449 406 150 449 406 150
R’000 R’000
Authorised 1 000 000 000 ordinary shares of R0.0001 each 100 100
Reconciliation of shares issued in Rand value: Reported at the beginning of the year 54 52 Issue of share capital * (2) 2 Total issued shares 52 54
Adjust for treasury shares held by: Razorbill Properties 91 (Pty) Ltd (4) (4) Abacus Holdings (Pty) Ltd (3) (3) Total adjusted issued shares 45 47
Issued Ordinary 45 47 Share premium 2 196 549 2 196 549 2 196 594 2 196 596
477 010 115 (2012: 477 010 115) unissued ordinary shares are under the control of the directors in terms of resolution of members passed at the last special general meeting on 27 August 2013. This authority remains in force until the next annual general meeting.
* The adjustment relates to a rounding item in the prior year, corrected in the current year.
Refer to the directors report for shares held in Attacq Ltd by Group companies.
Equity-settled employee benefit reserve Balance at the beginning of the year – – Arising on share-based payments 5 488 – Balance at end of year 5 488 –
Refer note 22 for details of the share options granted.
128 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Long-term borrowings
Group June 2013 June 2013 June 2012 June 2012 R’000 R’000 R’000 R’000 Loan Short-term Loan Short-term amount portion amount portion
Held at amortised cost
Long-term borrowing are secured by way of mortgage bonds registered over investment properties (refer note 3), shares pledged (refer note 29.1) and suretyship provided by the Group (refer note 29.3).
Investec Bank 127 160 5 792 6 795 6 795
Attacq Ltd 122 158 790 – –
Riverport Trading 143 (Pty) Ltd – – 52 436 7 139 Loans bearing interest between prime and prime minus 1.28% per annum and repayable in structured monthly payments. The loans were fully repayable by April 2017. This facility was settled when the asset was sold in the previous year.
Transferred to held for sale liabilities. – – (52 436) (7 139)
Sinco Investments Six (Pty) Ltd 122 158 790 – – Loan bearing interest at prime less 0.5%. The loan needs to be settled over 84 months with a residual amount of R80 million. Bullet payments of R10 million need to be made in months 36, 48, 60 and 72. Secured by way of cession of 25% Attacq Ltd shareholding in Sinco Investments Six (Pty) Ltd as well as a cession of 25% of Atterbury Property Holdings (Pty) Ltd shareholding in Sinco Investments Six (Pty) Ltd. A guarantee by Atterbury Property Holdings (Pty) Ltd for the loan amount up to R60 million has also been given.
Le Chateau Property Development (Pty) Ltd 5 002 5 002 6 795 6 795 Mortgage bond over the remainder of Portion 85 of the Farm Welgegund No. 491, Registration Division JQ, North West Province measuring 58 560 square metres. The loan bears interest at prime and is repayable by July 2013 with a residual of R4 845 368. Secured by way of suretyship to the amount of R7.5 million by Attacq Ltd.
Nedbank 2 918 230 150 486 2 342 132 21 145
Nieuwtown Property Development Company (Pty) Ltd 240 942 12 137 – – Development loan over the lease in respect of Erven 621, 558, 564, 568 and 591 Newtown for the amount of R1.2 billion and R100 million respectively. The loans bear interest at prime repayable over a period of 10 years starting from 1 December 2014 which is the estimated completion date of the development. Secured by way of suretyship to the amount of R300 million by Attacq Ltd.
129 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Long-term borrowings (continued)
Group June 2013 June 2013 June 2012 June 2012 R’000 R’000 R’000 R’000 Loan Short-term Loan Short-term amount portion amount portion
Lynnwood Bridge Office Park (Pty) Ltd Mortgage bond over Portion 3 of Erf 582 Lynnwood Manor (Phase 3), 611 435 15 682 548 902 9 580 Sections 1 & 2 in Sectional Title Scheme known as SS Lynnwood Bridge Retail 1 (on Portion 1 of Erf 582) (Retail & City Lodge) and Section 1 & 2 in Sectional Title Scheme known as SS Lynnwood Bridge Offices 2 (on Portion 2 of Erf 582) (Adams & Atterbury) for an amount of R1.450 billion. Fixed instalment servicing interest and capital until July 2021 with a residual of R200 million. The loan bears interest at between prime – 1% and prime – 0.5% per annum. The development loan on phase 3 of Lynnwood Bridge bears interest at prime – 0.5% and is repayable by September 2024 with a residual amount of R98.7 million. Estimated repayment will commence in September 2014 which is the estimated completion date of the development. Secured by way of suretyship to the amount of R400 million by Attacq Ltd.
Interest rate swap agreements have been entered into with respect to the abovementioned secured loans with a value between R93 million and R300 million and interest rates ranging between 11.08% and 11.43%. Maturity dates range between March 2014 and March 2021.
De Ville Shopping Centre (Pty) Ltd 109 644 109 644 120 042 11 264 Mortgage Bond over Erf 2011 Durbanville for an amount of R157.5 million. Loans bearing interest between prime and 10.5% per annum and are repayable in structured monthly payments of between 30 months and 72 months. Joint and several suretyship to the amount of R146 million is provided by Attacq Ltd.
Transferred to held for sale liabilities. (109 644) (109 644) – –
Atterbury Waterfall Investment Company (Pty) Ltd 403 557 122 103 39 854 –
Land Parcel 22 52 204 52 204 39 854 – Mortgage bond over the lease in respect of Portion 759 (a portion of Portion 78) of the Farm Waterval 5 (proposed township Buccleuch Extension 9) for the amount of R300 million. The total available facility of R78 million bears interest at prime less 1%, with an interest roll-up of R2 050 000.
Cell C 306 778 25 324 – – Development loan over the lease in respect of Portion 761 of the Farm Waterval No. 5 IR (proposed township Buccleuch Extension 10) for an amount of R600 million. The loan bears interest at prime. Once completed this loan will convert to three terms loans with rates ranging between JIBAR + 2.5% and prime + 2.5%, repayable between 12 months and 10 years. Estimated completion date is 1 December 2013. Secured by way of suretyships of R160 million by Attacq Ltd and R40 million by Atterbury Property Holdings (Pty) Ltd.
130 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Long-term borrowings (continued)
Group June 2013 June 2013 June 2012 June 2012 R’000 R’000 R’000 R’000 Loan Short-term Loan Short-term amount portion amount portion
Tarsus building (MB Technologies) 44 575 44 575 – – Development loan over the lease in respect of Portion 759 (a portion of Portion 78) of the Farm Waterval 5 (proposed township Buccleuch Extension 9) for the amount of R300 million. The loan bears interest at prime. The loan will be settled at the estimated completion date of the development in January 2014. Secured by way of suretyship to the amount of R80 million by Attacq Ltd.
Abacus Holdings (Pty) Ltd 1 662 296 564 1 633 334 301
Brooklyn Mall 362 835 – 344 734 – Mortgage Bond over 25% undivided share of Erven 415, 438, 178 Nieuw Muckleneuk for R390 million (Brooklyn Mall). Loans bearing interest at prime – 1%. The facility has to be settled by October 2022.
Mooirivier Mall 511 817 – 478 903 – Mortgage bond over Remainder of the Farm Mooirivier Mall, Farm No. 707 and Erf 1365 Baillie Park for R720 million (Mooirivier). Loan bearing interest at prime – 1%. The facility has to be settled by October 2021.
Andringa Walk 306 484 – 284 004 123 Mortgage bond over Sections 1 and 2 in the sectional title scheme known as “Andringa Walk“ together with the undivided share in the common property and the right of exclusive use for R350 million (Skybird / Andringa / Mill Square). Sectional covering bond by Abacus Holdings (Pty) Ltd over Sections 1, 22, 23, 26, 27, 30, 33, 34 and 36 (of which Section 36 is to be released and replaced by section 38) in the Scheme “De Waal“, together with an undivided share in the common property and any right of exclusive use, situated on Erf 2000 Stellenbosch for R100 million (Andringa residential). The loan bears interest at prime – 0.35%, while development is taking place and prime – 1% after completion of development. Repayment of the capital amount has to take place 120 months after development has been completed. The estimated date of settling the capital amount is December 2022.
Eikestad Mall 480 596 – 424 309 178 Mortgage bond over Erven 6083, 7365, 4282, 2045, 2048, 4803, 2046/RE and 2043/RE Stellenbosch for R800 million (Eikestad – 80% undivided share in the properties). The loan bears interest at prime – 0.35%, while development is taking place and prime – 1% after completion of development. Repayment of the capital amount has to take place 120 months after development has been completed. The estimated date of settling the capital amount is December 2022.
Abacus Holdings (Pty) Ltd 564 564 101 384 – Loan bearing interest at prime – 0.75%. All loans in Abacus Holdings (Pty) Ltd are secured by cession and pledge of 29 726 516 Attacq shares by Abacus Holdings (Pty) Ltd with a minimum value of R250 million.
131 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Long-term borrowings (continued)
Group June 2013 June 2013 June 2012 June 2012 R’000 R’000 R’000 R’000 Loan Short-term Loan Short-term amount portion amount portion
Rand Merchant Bank (RMB) 500 220 2 943 917 032 368 791
Attacq Ltd – – 358 407 358 407 Guarantee facility issued at a fixed interest rate of 12% per annum, 233 428 233 428 – – capitalised, with a settlement in April 2014. Secured by way of 5 657 493 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd and mortgage bonds over Great Westerford for R550 million and Atterbury House for R160 million.
Transferred to held for sale liabilities. (233 428) (233 428) – –
Momentum – – 358 407 358 407 Guarantee facility issued at a fixed interest rate of 12% per annum, with settlement in December 2012.
Lynnaur Investments (Pty) Ltd 500 220 2 943 494 326 614 Mortgage bond over the property known as Section No. 3 in the Sectional Title Scheme known as SS Lynnwood Bridge Offices 2 (Portion 2 of Erf 582 Lynnwood Manor) for an amount of R575 million. Two loans are secured with RMB. The first loan of R450 million is fixed and fully repayable by April 2023. The second loan of R50 million services interest monthly is linked to 3-month JIBAR rate + 2.95% and the capital amount is due by February 2016. Cross collateral security in the form of the mortgage bonds registered by Attacq over the Great Westerford property (for R550 million) and Atterbury House (for R160 million). Also secured by way of suretyship to the amount of R155 million by Attacq Ltd.
Majestic Offices (Pty) Ltd – – 4 571 4 571 A loan facility for the development of the property known as Majestic bearing interest at prime. The bond will was settled in April 2013.
Atterbury Parkdev Consortium (Pty) Ltd 55 501 55 501 59 728 5 199 Mortgage bond over Erf 606 Groenkloof Extension 9 for an amount of R55 million. The loan facility bears interest at 10.85%. The facility has annual capital instalments and is fully repayable by February 2016. The loan has a residual value of R45 627 597. Secured by way of suretyship to the amount of R45 million by Attacq Ltd.
Transferred to held for sale liabilities. (55 501) (55 501) – –
Standard Bank 1 141 515 838 449 1 300 509 609 359
Attacq Ltd 482 651 333 136 963 546 572 512
Interim operational loan – – 80 000 80 000 During the year a loan was provided at a rate of JIBAR +1.44% payable monthly until the overdraft facility has been activated.
132 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Long-term borrowings (continued)
Group June 2013 June 2013 June 2012 June 2012 R’000 R’000 R’000 R’000 Loan Short-term Loan Short-term amount portion amount portion
Glenfair Boulevard Shopping Centre 72 908 5 319 99 190 2 719 Mortgage bond over Glenfair Boulevard for an amount of R234.4 million. The loan bears interest at 1-month JIBAR + 1.22% and 3-month JIBAR + 1.4%. The facility has annual capital instalments and the maturity date is February 2016. Secured by way of cession and pledge of Attacq Ltd’s shareholding in Reach.
Garden Route Mall 250 129 250 129 258 000 8 011 The loan bears interest at 1-month JIBAR + 0.9% + costs. This loan expires 31 March 2014. Secured by way of cession and pledge of the 80% shareholding in Mantrablox (Pty) Ltd held by Attacq Ltd.
Atterbury Waterfall Investment Company (Pty) Ltd – Mall of Africa 32 606 32 606 – – Mortgage bond over Glenfair Boulevard Shopping Centre for an amount of R234.4 million. The loan bears interest at 3-month JIBAR + 1.65% + costs. The loan expires October 2013. Secured by way of cession and pledge of Attacq Ltd’s shareholding in Reach.
Standard Bank – Bridging facility 81 926 – 419 458 419 458 Mortgage Bond over Waterfall – Land Parcels 9 & 12 (R375 million). Mortgage Bond over Glenfair Boulevard Shopping Centre (security value of R100 million). Loan facility bearing interest at 1-month JIBAR + 1.5% + costs. The facility has minimum fixed repayment terms, the maturity date is December 2014 and it is secured by way of a cession and pledge of shares in MAS Real Estate Inc held by Attacq Ltd to the value of R150 million and a cession and pledge of shares held by Attacq in Reach to the value of R60 million.
Atterbury Waterfall Investment Company (Pty) Ltd – Land Parcel 8 45 082 45 082 106 898 62 324 The loan facility bears interest at 1-month JIBAR + 1.75% and the maturity date is July 2013.
Atterbury Waterfall Investment Company (Pty) Ltd 358 864 205 313 – –
Land Parcel 8 41 364 41 364 – – Mortgage Bond over the leases in respect of Remaining Extent of Portion 1 of the Farm Waterval No. 5 IR for an amount of R130 million, R45 million in respect of proposed Jukskei View Ext 79 and R54 million in respect of proposed Jukskei View Ext 80. The loan bears interest at 1-month JIBAR + 1.85% + costs. The loan expires on 31 October 2013 and is secured by way of suretyships by Attacq Ltd of R77.8 million and by Atterbury Property Holdings (Pty) Ltd of R15 million.
Land Parcel 10 159 057 159 057 – – Mortgage Bond by AWIC over the leases in respect of Remaining Extent of Portion 1 of the Farm Waterval No. 5 IR for an amount of R300 million, R100 million in respect of proposed Jukskei View Ext 67 and R200 million in respect of proposed Jukskei View Ext 86. The loan bears interest at 3-month JIBAR + 1.50% + costs. The loan expires in October 2013 and is secured by way of suretyships by Attacq Ltd of R194.4 million and by Atterbury Property Holdings (Pty) Ltd of R48.6 million.
133 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Long-term borrowings (continued)
Group June 2013 June 2013 June 2012 June 2012 R’000 R’000 R’000 R’000 Loan Short-term Loan Short-term amount portion amount portion
Woodmead North Office Park 27 501 1 122 – – Term loan over the lease in respect of Erf 3540 Jukskei View Ext 7 for an amount of R58.4 million. The loan bears interest at 1-month JIBAR + 1.50% + cost. The loan expires in November 2017 and is secured by way of a suretyship by Attacq Ltd of R10 million and a causa suretyship by East & West Investments (Pty) Ltd of R29.2 million.
Group 5 116 068 3 770 – – Mortgage over the lease in respect of Portion 736 (a portion of Portion 1) of the Farm Waterval No. 5 IR (proposed Erven 1763 & 1764 Jukskei View Ext 47) for the amount of R470 million. The loan bears interest at 3-month JIBAR + 1.70% + costs. The loan expires January 2019 and is secured by way of suretyship by Attacq Ltd of R110 million and by Atterbury Property Holdings (Pty) Ltd of R27.5 million.
Maxwell Office Park 14 874 – – – Infrastructure loan over the lease in respect of Portion 766 of the Farm Waterval No. 5 IR (proposed Erf 3600 Jukskei View Ext 83) for the amount of R300 million. The loan bears interest at 3-month JIBAR +1.70% + costs. The loan expires in April 2019 and is secured by way of suretyships by Attacq Ltd of R32 million and by Atterbury Property Holdings (Pty) Ltd to R8 million as well as a causa suretyship by East & West Investments (Pty) Ltd of R87.25 million.
Mantrablox (Pty) Ltd 300 000 300 000 300 116 - Mortgage bond over the Portion 326 of the Farm Kraaibosch Number 195, George (known as Garden Route Mall) for an amount of R300 million, servicing interest until 31 March 2014 at 1-month JIBAR + 0.7% + costs.
Nieuwtown Property Development Company (Pty) Ltd – – 36 847 36 847 Interest only development loan at JIBAR + 1.2%. The loan was settled in April 2013.
Sanlam 481 224 297 949 135 758 55 758
Atterbury Waterfall Investment Company (Pty) Ltd 183 375 100 55 758 55 758 Mortgage Bond over the lease in respect of the lease area (11,0728ha) on Erf 3548 Jukskei View Ext 79 for an amount of R250 million. The loan bears interests at prime – 0.5%. The final maturity date of the loan is in May 2028 and is secured by way of suretyships by Attacq Ltd of R32 million and by Atterbury Property Holdings (Pty) Ltd of R8 million.
Attacq Ltd* 86 860 86 860 80 000 – Bridging loan to finance the acquisition of ordinary shares in Wingspan. The loan bears interest at prime and is secured by way of cession and pledge of 10 000 000 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd. Also secured by way of surety to the amount of R100 million by Attacq Ltd. The final maturity date of the loan is 29 June 2014.
134 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Long-term borrowings (continued)
Group June 2013 June 2013 June 2012 June 2012 R’000 R’000 R’000 R’000 Loan Short-term Loan Short-term amount portion amount portion
Attacq Ltd 210 989 210 989 – – Short-term bridging loan bearing interest at a fixed rate of 8.5%. The loan is repayable by August 2013. The loan is secured by way of pledge of 27 272 728 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd. Also secured by way of a surety to the amount of R200 million by Attacq Ltd.
Atterbury Waterfall Investment Company (Pty) Ltd – – – –
Atterbury Waterfall Investment Company (Pty) Ltd – – 22 866 22 866 Development loan bearing interest at prime and is repayable on demand.
Transferred to held for sale liabilities – – (22 866) (22 866)
WesBank 95 95 157 157
Attacq Ltd 95 95 157 157 Hire purchase facility repayable over a period of 17 (2012:26) remaining monthly instalments bearing interest at prime rate. The facility is secured over the motor vehicle as per note 2.
Non-current liabilities 3 872 731 – 3 640 378 – Current liabilities – 1 295 713 – 1 062 004 Total 5 168 444 4 702 382
* This loan was disclosed under Other financial liabilities in the previous year. The loan has been transferred to Long-term borrowings.
The fair value of the borrowings listed above are considered by management to approximate the carrying value of these borrowings. Rates and repayments terms are regarded as market related, given that financial institutions takes cognisance of market conditions, the risk profile of the Group and surety provided on every transaction.
18. Trade and other payables
Group June 2013 June 2012 R’000 R’000
Trade payables 295 821 52 061 Deposits held 15 550 16 155 Amounts received in advance 8 689 4 592 Value Added Tax payable 2 878 7 613 Sundry payables 5 052 69 810 327 990 150 231
The fair value of trade payables, deposits held, VAT, amounts received in advance and sundry payables are deemed to be the same as the carrying value.
Trade payables include amounts due relating to buildings under construction.
135 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
19. Provisions
Group June 2013 June 2012 R’000 R’000
Provision for the transfer of an undivided share of a building within the Lynnwood Bridge development to a third party Opening balance – 15 153 Utilised during the year – (15 153) Provision for payment on profit from Lynnwood Bridge Phase 3 to Atterbury Property Developments (Pty) Ltd 5 709 5 709 –
The provision of the previous year related to the Group entering into an agreement with a third party which would result in the transfer of a 25% undivided share in one of the office buildings in the Lynnwood Bridge development. This transaction was implemented during the previous year. In the current year, a provision is made for the profit share on Lynnwood Bridge Phase 3.
20. Operating profit / (loss) is stated after inclusion of the following:
Group June 2013 June 2012 R’000 R’000
Other income Excess of acquirer’s interest in the net fair value of acquiree’s assets and liabilities over cost – 41 333 Profit on sale of subsidiaries 12 683 – Profit on sale of shares 49 279 – Reversal of impairment of loans 22 023 10 993 Sundry income 3 214 36 361 Foreign exchange income 21 952 4 684 Profit on sale of investment property 17 197 – 126 348 93 371 Property expenses Bad debt written off (1 672) (33) Depreciation and assets written off (1 299) (597) Provision for bad debts (2 017) 1 035
Operating and other expenses Auditor’s remuneration (6 149) (4 082) (Impairment) / reversal of loans (372) 10 993 Adjustment on equity investments (103 822) – Goodwill written off (16 929) – Share-based payment (5 488) – Final payment on Lynnwood Bridge Office Park (Pty) Ltd (44 601) (12 700) Write-down of Attfund Ltd – (2 800 851) Loss on disposal of associate – (20 752) Loss on disposal of investment property – (6 556)
136 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
21. Operating lease receivables
Group June 2013 June 2012 R’000 R’000
Value of minimum lease payments receivable - within one year 445 158 345 755 - in second to fifth year inclusive 1 414 796 894 153 - later than 5 years 1 662 022 626 064 3 521 976 1 865 972
Lease agreements are entered into with tenants on variable terms depending on the location and nature of the lettable area. The lease term for office buildings are generally longer than for retail outlets.
22. Directors’ and prescribed officers’ remuneration
Salaries Bonuses Benefits Total R’000 R’000 R’000 R’000
Executive directors, key management and prescribed officers were not remunerated by Attacq Ltd and its subsidiaries up to 30 June 2013. Their services were outsourced and were paid by Atterbury Property Holdings (Pty) Ltd and Atterbury Asset Managers (Pty) Ltd for the 2012 and 2013 year.
Executive directors Remuneration and benefits for executive directors were as follows: 2013 LLS van der Watt 1 680 350 20 2 050 MC Wilken 1 620 1 062 17 2 699 GJ Oosthuizen 360 75 4 439 3 660 1 487 41 5 188
2012 LLS van der Watt 1 529 255 2 1 786 MC Wilken 1 510 250 1 1 761 GJ Oosthuizen 240 40 – 280 3 279 545 3 3 827
Key management and prescribed officers Key management and prescribed officers in both years were: P Smit T Smith LH Louw
Remuneration and benefits for key management and prescribed officers was as follows: 2013 2 618 557 78 3 253
2012 2 385 398 52 2 835
137 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
22. Directors’ and prescribed officers’ remuneration (continued)
Group June 2013 June 2012 R’000 R’000
Non-executive directors – fees for services as directors P Tredoux 345 240 WL Masekela 260 120 LM Ndala* 232 209 JHP van der Merwe* 100 90 PH Faure* 232 170 BF van Niekerk* 100 224 S Shaw-Taylor** 105 – W van Rhyn*** – 24 1 374 1 077
* lM Ndala’s fees are paid to Mining Oil and Gas Services (Pty) Ltd * JHP van der Merwe’s fees are paid to Sanlam Investment Management (Pty) Ltd * PH Faure’s fees are paid to Alkara 114 (Pty) Ltd, BNF Investments (Pty) Ltd and Mertech Investments (Pty) Ltd * BF van Niekerk’s fees are paid to BNF Trust (Pty) Ltd ** S Shaw-Taylor joined in October 2012, and his fees are paid to Standard Bank *** W van Rhyn resigned in August 2011
Executives and prescribed officers Equity-settled employee benefit reserve 5 488 –
Share options granted to Director The Attacq Ltd board resolved in November 2012 to grant MC Wilken 2 000 000 (two million) share options that vest over a five year period in equal tranches. The first tranche vested on 30 June 2012 and the final tranche will vest on 30 June 2016. For vesting to occur MC Wilken has to remain employed as executive director.
Each option converts into one ordinary share in Attacq Ltd on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting. The exercise price of the options is fixed at R8.50 per share. There is no option of cash settlement.
Summary of share options (‘000) MC Wilken: Opening balance 400 – Granted during the year 400 400 Exercised during the year – – Balance at end of year 800 400 Number of options not yet vested 1 200 1 600 Number of options not yet exercised 2 000 2 000
Fair value at 30 June 2013 The fair value of the options was determined to be R6.86 per option. The options were priced using a forecast of the estimated growth in the share price over the period in which the options vest. Inputs into the model were as follows: - the Attacq share price from June 2012 to the issue date; - management’s best estimate of the share price growth rate until June 2016; - the vesting pattern of the share options as described above; and - the exercise price of the options.
138 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
22. Directors’ and prescribed officers’ remuneration (continued)
An employee benefit expense of R5 487 570 (2012: R-) was recognised in the statement of comprehensive income. An equity settled employee benefits reserve was created in equity to the same value.
23. Taxation
Group June 2013 June 2012 R’000 R’000
Income tax relating to continuing operations
Income tax recognised in profit or loss
Current Local income tax – recognised in current tax for current years (20 949) (58 554)
Deferred (181 652) (46 621)
Secondary tax on companies Charge for the year – (79 866)
(202 601) (185 041)
Reconciliation of the tax expense Applicable tax rate 28.00% 28.00% Adjusted for: - Non-deductible expenditure 0.24% 106.24% - Dividends received (0.10%) (137.71%) - Fair value adjustments (9.95%) (10.41%) - Tax rate adjustment – 22.79% - Section 42 base cost roll over – 15.94% - Other 5.96% 7.67% Net (reduction) / increase (3.85%) 4.52%
Effective rate 24.15% 32.52%
24. Share of associated companies retained profit / (loss)
Group June 2013 June 2012 R’000 R’000
Attributable share of retained profit / (loss) for the year excluding extraordinary items Net profit / (loss) for the year 94 430 (43 208) Less: Dividends and debenture interest received from associates – – 94 430 (43 208)
139 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
25. Investment income
Group June 2013 June 2012 R’000 R’000
Dividend income Dividends (including distribution i.t.o. Attfund Ltd) 6 561 2 742 107 Interest income Loans and receivables 41 784 49 594 48 345 2 791 701
26. Finance cost
Group June 2013 June 2012 R’000 R’000
Long-term borrowings 317 656 297 098 Bank overdrafts 4 755 1 256 Interest on finance lease liability 72 756 65 571 Interest on swaps 56 078 45 406 Other interest 21 951 83 018 473 196 492 349
27. Related parties
Relationship Related parties are defined as those entities with which the Group transacted during the year and in which the following relationship(s) exist: Shareholding Direct subsidiaries Atterbury Attfund Investment Company No.1 (Pty) Ltd Atterbury Attfund Investment Company No.3 (Pty) Ltd Atterbury Mauritius Consortium (Pty) Ltd Atterbury Property Investments (Pty) Ltd Atterbury Property Johannesburg (Pty) Ltd Atterbury Waterfall Investment Company (Pty) Ltd De Ville Shopping Centre (Pty) Ltd Harlequin Duck Properties 204 (Pty) Ltd Highgrove Property Holdings (Pty) Ltd Le Chateau Property Development (Pty) Ltd Lord Charles & Lady Brooks Office Park Holdings (Pty) Ltd Lady Brooks (Pty) Ltd Lynnwood Bridge Office Park (Pty) Ltd Razorbill Properties 91 (Pty) Ltd Atterbury Parkdev Consortium (Pty) Ltd Abacus Holdings (Pty) Ltd Mantrablox (Pty) Ltd Lynnaur Investments (Pty) Ltd Atterbury Investments Holdings International Ltd (Mauritian)
140 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
27. Related parties (continued)
Direct associates Attfund Ltd Paradise Coast Property Development (Pty) Ltd Brooklyn Bridge Office Park (Pty) Ltd Geelhoutboom Estate (Pty) Ltd Keysha Investments 213 (Pty) Ltd Travenna Development Company (Pty) Ltd Retail Africa Consortium Holdings (Pty) Ltd Sinco Investments Six (Pty) Ltd The Club Retail Park (Pty) Ltd Arctospark (Pty) Ltd Atterbury Africa Ltd Atterbury Property Holdings (Pty) Ltd MAS Real Estate Inc
Indirect subsidiaries and associates Aldabri 96 (Pty) Ltd Atterbury Attfund Investment Company No.2 (Pty) Ltd Design Square Shopping Centre (Pty) Ltd Mall of Mauritius at Bagatelle Ltd (Mauritian) Bagaprop Ltd (Mauritian) Nieuwtown Property Development Company (Pty) Ltd Majestic Offices (Pty) Ltd Atterbury Arica Ltd (Mauritian) Artisan Investment Projects 10 Ltd Bishopsgate Student Residential Ltd Fountains Regional Mall (Pty) Ltd
Directorships BF van Niekerk LLS van der Watt GJ Oosthuizen – resigned June 2013 MC Wilken PH Faure P Tredoux JHP van der Merwe WL Masekela LM Ndala S Shaw-Taylor AW Nauta M Hamman TJA Reily
Management Key management and prescribed officers P Smit T Smith LH Louw
Transactions between Group companies which are eliminated on consolidation are not disclosed. All transactions with related parties are considered to be market related.
141 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
27. Related parties (continued)
Sales and services to / Balances (Purchases Dividends Interest owing by / and services received from received from (to) (net of Shares issued from) / (paid to) / (paid to) impairment) R’000 R’000 R’000 R’000 R’000
Abacus Trust 2013 – – – – (412) 2012 – – – – (412) Arctospark (Pty) Ltd 2013 – – – – 483 562 2012 – – – – – Atterbury Africa Ltd 2013 – – – 981 112 355 2012 – – – – – Atterbury Asset Managers (Pty) Ltd 2013 – (27 046) – (90) (6) 2012 – (27 722) – – (1 717) Atterbury Property Developments (Pty) 2013 – (96 964) – (251) (24 067) Ltd 2012 – – – 229 6 308 Atterbury Property Holdings (Pty) Ltd 2013 – (4 662) – 16 234 211 869 2012 – – – 3 158 49 603 Atterbury Property Foundation (Pty) Ltd 2013 – – – – 1 785 2012 – – – 140 1 641 Atterbury Property Holdings 2013 – – – – – International 2012 – – – – 2 427 Atterbury Trust 2013 – 198 – – – 2012 – – – – – Attvest Property Development JV (Pty) 2013 – – – (161) 3 885 Ltd 2012 – – – – 4 035 2013 – – – (378) (4 653) Atterbury Waterfall City (Pty) Ltd 2012 – – – (367) (4 275) Brooklyn Bridge Office Park (Pty) Ltd 2013 – – – 194 2 697 2012 – – – 156 2 305 Circle Vest (Pty) Ltd 2013 – – – – – 2012 – – – – (52) Fountains Regional Mall (Pty) Ltd 2013 – – – (17) 13 684 2012 – – – 189 7 077 Geelhoutboom (Pty) Ltd 2013 – – – – 14 840 2012 – 3 586 – – 6 828 Isibaya House (Pty) Ltd 2013 – – – – – 2012 – – 1 814 – – Keysha Investments 213 (Pty) Ltd 2013 – – – (831) 12 875 2012 – – – 110 4 269 Leipzig Nova Eventis Consortium (Pty) 2013 – – – – 44 762 Ltd 2012 – – – – – Lynnwood Bridge Home Owners 2013 – – – – 69 Association 2012 – – – – – Bagaprop Ltd 2013 – – – – 7 638 2012 – – – – – The Club Retail Park (Pty) Ltd 2013 – – – 1 514 42 816 2012 – – – 1 635 31 449 Rainprop D&C Joint Venture 2013 – – – – – 2012 – – – – (168) Rainprop (Pty) Ltd 2013 – – – 33 230 2012 – (4) – – 240
142 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
27. Related parties (continued)
Sales and services to / Balances (Purchases Dividends Interest owing by / and services received from received from (to) (net of Shares issued from) / (paid to) / (paid to) impairment) R’000 R’000 R’000 R’000 R’000
Sanlam Capital Markets (Pty) Ltd 2013 – – – – – 2012 – – – (861) (78 288) Sanlam Ltd 2013 – – – – – 2012 – – – – (80 000) Sinco Investments Six (Pty) Ltd 2013 – – – – 64 333 2012 – – – – – Stenham European Shopping Centre 2013 – – 3 225 – – Fund Ltd 2012 – – 1 355 – – Scarlet Sky (Pty) Ltd 2013 – – – – – 2012 – – – – 601 Travenna Development Company (Pty) 2013 – – – (524) 379 Ltd 2012 – – – (1 239) (9 284) TTA Shares (Pty) Ltd 2013 – – – – – 2012 – – – – 1 West Hills Mall Ltd 2013 – – – – 143 2012 – 143 – – 143 Tredoux Family Holdings 2013 – – – – – 2012 2 000 – – – – JHP van der Merwe 2013 – – – – – 2012 1 455 – – – – 2013 – (128 474) 3 225 16 704 988 784 2012 3 455 (23 997) 3 169 3 150 (57 269)
Glenfair Boulevard, Pretoria
143 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
28. Contingent liabilities
Group June 2013 June 2012 R’000 R’000
The Group entered into a put option agreement with Sanlam Investment Management (SIM) in terms of which the Group, upon receiving a put notice, is required to buy-back, or sell to a third party, within a period of six months after receipt of the notice, the Group’s shares put by SIM. The minimum put amount is R100 million. The agreement lapses should SIM dispose of the related shares held, in the event the Group lists on the Johannesburg Securities Exchange, or by mutual agreement between SIM and the Group. The amount disclosed reflects the value of all shares which can be put by SIM in terms of the put option agreement, although SIM has agreed to limit the put to no more than 20% of the applicable shares held per year. The short-term portion of the contingent liability would therefore be 20% of the disclosed amount. 1 140 543 984 538
The Group entered into a put option agreement with Lisinfo 222 Investments (Pty) Ltd (a company through which Royal Bafokeng Holdings (RBH) holds its shares) in terms of which the Group, upon receiving a put notice, is required to buy-back, or sell to a third party, within a period of six months after receipt of the notice, the Group’s shares put by RBH. The agreement lapses should RBH dispose of the related shares held, in the event the Group lists on the Johannesburg Securities Exchange, or by mutual agreement between RBH and the Group. The amount disclosed reflects the value of all shares which can be put by RBH in terms of the put option agreement, although RBH has agreed to limit the put to no more than 20% of the applicable shares held per year. The short-term portion of the contingent liability would therefore be 20% of the disclosed amount. 809 524 698 796
The Group entered into a put option agreement with ENL Ltd (ENL) in terms of which the Group, upon receiving a put notice, is required to buy-back, or sell to a third party, within a period of six months after receipt of the notice, the Group’s shares put by ENL. The agreement lapses should ENL dispose of the related shares held, in the event the Group lists on the Johannesburg Securities Exchange, or by mutual agreement between ENL and the Group. The amount disclosed reflects the value of all shares which can be put by ENL in terms of the put option agreement. 112 963 97 506
The agreement entered into by the Group to purchase shares in the subsidiary Lynnwood Bridge Office Park (Pty) Ltd provided for an adjustment to the purchase price based on the final cost of the project once determined. The last phase (Phase 3) is now being developed and accordingly the liability relating this agreement has been provided for. – 24 619
The Group received additional shares in Atterbury Africa Ltd (AA) by providing a guarantee on behalf of the developer shareholders in AA in terms of which it underwrites losses made by AA at specific dates. – – 2 063 030 1 805 459
144 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
29. Commitments
29.1 Shares pledged
Group June 2013 June 2012 Shares Shares
Shares held by the Group in Hyprop Investments Ltd were pledged as security in respect of the obligations towards Standard Bank on the bridging loan facility as per note 17. – 334 627 325 Shares held by the Group in Hyprop Investments Ltd were pledged as security in respect facilities with Nedbank on the Abacus Holdings (Pty) Ltd portfolio, as per note 17. – 87 143 684 Shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd were pledged as security in respect of the obligations towards Sanlam as per note 17. 10 000 000 10 000 000 Shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd were pledged as security in respect of the obligations towards Rand Merchant Bank as per note 17. 5 657 493 – Shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd were pledged as security in respect of the obligations towards Sanlam Life Insurance Ltd as per note 17. 13 636 364 – Shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd were pledged as security in respect of the obligations towards Sanlam Life Insurance Ltd as per note 17. 13 636 364 – Shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd were pledged as security in respect of the obligations towards Nedbank as per note 17. – 265 252 Shares held by Abacus Holdings (Pty) Ltd in Attacq Ltd were pledged as security in respect of the obligations towards Nedbank as per note 17. 29 726 516 29 726 516 72 656 737 461 762 777
29.2 Capital commitments
R’000 R’000
Already contracted but not provided for Investment properties
The Waterfall leasehold and development rights relates to at least 1 752 488m2 bulk of property zoned for light industrial, commercial and retail use. Current costs committed are for the installation of services on various land parcels on the Waterfall land and initial development costs. The Group has an effective 84.7% interest in the development. 39 354 1 600
The Group entered into an agreement to develop Waterfall – Land Parcel 21 into a corporate and retail campus for Cell C. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 377 199 596 000
During the year the Group developed a warehousing facility referred to as the “Digistics Building“ on Waterfall – Land Parcel 8 sold to Waterfall Investment Company (Pty) Ltd upon completion. The project was completed before 30 June 2013. The Group had an effective 84.7% interest in the development. – 30 000
During the year the Group developed a warehousing facility referred to as the “Massbuild DC“ on Waterfall – Land Parcel 8 to be held as investment property for leasing purposes. The project was completed before 30 June 2013. The Group has an effective 84.7% interest in the development. – 150 000
Due to increased development activity and top structures reaching the completion stage on Waterfall – Land Parcel 8, the surrounding infrastructure has to be developed. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 26 322 40 000
145 The Grove – Mall of Namibia, Kleine Kuppe, Windhoek
2 development This 55000m is due to open in the latter half of 2014
146 147 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
29. Commitments
29.2 Capital commitments (continued)
Group June 2013 June 2012 R’000 R’000
Already contracted but not provided for (continued)
Development of the infrastructure on Waterfall – Land Parcel 10 commenced during the previous year in preparation for the construction of various retail and commercial buildings. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 81 570 200 000
Development of the bulk earthworks on Waterfall – Land Parcel 10 commenced during the current year in preparation for the construction of various retail and commercial buildings. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 68 114 –
The Group entered into an agreement to development an office building on Waterfall – Land Parcel 15, referred to as the “Group 5 Building“, for leasing purposes. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 290 981 408 000
The Group entered into an agreement to develop an office and retail centre building on Waterfall – Land Parcel 15, referred to as “Waterfall Lifestyle“, for leasing purposes. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 103 650 –
The Group entered into an agreement to develop an office building on Waterfall – Land Parcel 15, referred to as the “Maxwell Office Park – Golder Building“, for leasing purposes. The Group has an effective 43% interest in the development. Committed capital outlay at year end is: 57 457 –
The Group entered into an agreement to develop an office building on Waterfall – Land Parcel 15, referred to as the “Maxwell Office Park – Attacq Building“, for leasing purposes. The Group has an effective 43% interest in the development. Committed capital outlay at year end is: 54 440 –
The Group entered into an agreement to develop a retail centre on Waterfall – Land Parcel 15, referred to as “Waterfall corner“, for leasing purposes. The Group has an effective 43% interest in the development. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 129 085 –
The Group entered into an agreement to develop an office building on Waterfall – Land Parcel 22, referred to as the “MB Technologies Building“, for leasing purposes. The Group has an effective 84.7% interest in the development. Committed capital outlay at year end is: 164 111 –
The Group entered into an agreement to develop an retail centre in Windhoek, Namibia called “The Grove“. The Group has an effective 31.25% interest in the development. The Group has an effective 84.7% interest in the development. Committed total capital outlay at year end is: 220 080 –
The Group entered into an agreement to develop a retail and office centre in Johannesburg CBD, called Newtown. The development is done in two entities namely Nieuwtown Property Development Company(Pty) Ltd and Majestic Offices (Pty) Ltd. The Group has an effective 62.5% interest in the development. Committed total capital outlay at year end is: 641 703 –
148 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
29. Commitments
29.2 Capital commitments (continued)
Group June 2013 June 2012 R’000 R’000
Already contracted but not provided for (continued)
The Group entered into an agreement to develop an office building in Pretoria known as “Lynnwood Bridge Phase 3“. The Group has a 100% interest in the development. Committed total capital outlay at year end is: 193 540 –
The Group entered into an agreement to develop a retail centre in Stellenbosch known as “Eikestad and Mill Square“. The Group has an effective 60% interest in the development. Committed total capital outlay at year end is: 29 146 –
The Group entered into an agreement to develop a retail centre in Stellenbosch known as “Andringa Walk“. The Group has an effective 75% interest in the development. Committed total capital outlay at year end is: 2 846 –
The Group entered into an agreement to further develop the retail centre in Pretoria known as “Brooklyn Mall“. The Group has an effective 18.8% interest in the development. Committed total capital outlay at year end is: 23 521 –
The Group entered into an agreement to develop a retail centre in Pretoria known as “The Club Retail“. The Group has an effective 40% interest in the development. Committed total capital outlay at year end is: 36 978 –
The Group entered into an agreement to develop an office park in Mauritius known as “Bagatelle Office Development – Building B“. The Group has an effective 41.8% interest in the development. Committed total capital outlay at year end is: * 12 910 –
The Group entered into an agreement to develop a retail centre in Ghana known as “West Hills Mall in Accra“. The Group has an effective 14.63% interest in the development. Committed total capital outlay at year end is: * 85 981 –
The Group is considering to exercise the option it has to purchase another 20% in Garden Route Mall. The option can be exercised for a period of six months commencing September 2013. 209 000 –
Paradise Coast Property Development (Pty) Ltd entered into a sale agreement with Papilio Investments 33 (Pty) Ltd for the acquisition of residential property, referred to as Paradise Coast, near Mossel Bay, for a consideration of R20 million. Attvest Property Development JV, in which the Group has n effective 44.8% interest, is obligated to issue a guarantee equal to the consideration amount, in favour of Papilio Investments 33 (Pty) Ltd. The amount was paid during the current year, however, a guarantee of R10 million had to be issued to the JV. 3 300 6 600
As part of the sale of shares agreement between Attacq Ltd, Atterbury Investment Managers (Pty) Ltd and Atterbury Property Cape (Pty) Ltd (the sellers), relating to the acquisition of De Ville Shopping Centre (Pty) Ltd, Attacq Ltd agreed to a profit distribution in favour of the sellers. The profit share will be paid in three tranches in Decembers 2010, 2011 and 2012 respectively, based on a pre-determined formula set in the sale of shares agreement. The final amount due is to be calculated on 30 June 2013 numbers. – (8 800) 2 851 288 1 423 400
149 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
29. Commitments
29.2 Capital commitments (continued)
Group June 2013 June 2012 R’000 R’000
Approved but not contracted
The Group has approved capital expenditure as at the year end to investment properties (excluding specific items mentioned below ). 32 599 30 466
The Group made the decision to fund it’s investment in Retail Africa Consortium Holdings (Pty) Ltd in order to follow the rights issue of Retail Africa Wingspan Investments (Pty) Ltd. Further rights issues were followed during the current year, with the balance shown at the end of the current year as the amount approved not yet requested. 11 725 49 052
Arctospark (Pty) Ltd announced a rights issue during the 2012 financial year in order to follow a rights issue of its investment in Stenham European Shopping Centre Fund Ltd, and to cover operational shortfalls for the next 3 years. The Group elected to follow its rights at a discount of 15% to the net asset value of the Company as at 31 May 2012. – 38 000
The Stenham European Shopping Centre Fund Ltd, a foreign investment in which the Group has a 4.5% direct share, announced a rights issue during the 2012 financial year. The Group elected to follow it’s rights on the direct investment, as well as via the 3.81% share option with Wattchatt (Pty) Ltd (refer note 7). – 23 962
In 2012 the Group approved an investment in the Atterbury Africa Ltd of up to R100 million. This was increased to R250 million during the current year. Amounts committed not yet drawn at year end were: 140 000 100 000
The Group entered into an agreement to develop a hotel building on Waterfall – Land Parcel 15, referred to as the “City Lodge“, for leasing purposes. Committed capital outlay at year end is: 95 794 -
The Group entered into an agreement to develop a retail centre and hotel in Lusaka, Zambia known as “Waterfall Mall“. The Group has an effective 8.125% interest in the development. Committed total capital outlay at year end is: 5 575 - 285 693 241 480 3 136 981 1 664 880
These commitments will be financed in the normal course of business, by a combination of bank funding and equity funding. Equity funding may also include partnering. This is done within the guidelines set by the Board.
* The commitments are converted to Rands at the spot rate as at year end.
29.3 Contingent commitments
Sureties given by the Group:
Surety in respect of loan funds advanced by Investec Bank to Atterbury Property Developments (Pty) Ltd for acquisition and development of “Beau Rivage“. 10 000 10 000
Surety in respect of loan funds advanced by Investec Bank to Le Chateau Property Development (Pty) Ltd for development of “Le Chateau“. 7 500 7 500
150 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
29. Commitments
29.3 Contingent commitments (continued)
Group June 2013 June 2012 R’000 R’000
Sureties given by the Group (continued)
Surety in respect of loan funds advanced by Nedbank for Arctospark (Pty) Ltd for the acquisition of a further investment in Karoo II. 160 000 160 000
Surety in respect of loan funds advanced by Standard Bank to Atterbury Waterfall Investment Company (Pty) Ltd (AWIC) for the installation of services in relation to Land Parcel 8 at Waterfall Midrand. 77 800 77 800
Causa Surety by AWIC in respect of funds advanced to Attacq Ltd regarding a bridging loan facility provided by Standard Bank, refer note 17. AWIC pledged its development rights in terms of certain Land Parcels on Waterfall until the mortgage bonds were registered. This surety was cancelled and released on 13 June 2013. – 710 000
Surety in respect of loan funds advanced by Investec Bank to Riverport Trading 143 (Pty) Ltd in respect of finance agreements of the “Investec Building“. – 35 400
Surety in respect of loan funds advanced by Nedbank to Nieuwtown Property Development Company (Pty) Ltd for the development of Newtown Junction (mixed use development) . 300 000 –
Surety in respect of loan funds advanced by Rand Merchant Bank to Atterbury Property One (Pty) Ltd for the acquisition and development of “Kingswood Retirement Village“. 7 800 26 000
Joint surety given in respect of loan funds advanced by Rand Merchant Bank to Travenna Development Company (Pty) Ltd as additional surety over Erf 59, a portion of Erf 78 and remaining extents of Erf 79 and 433 of Farm Elandspoort No. 357 Division JR. 17 022 17 022
Surety in respect of loan funds advanced by Investec Bank to Fountains Regional Mall (Pty) Ltd for the development of the Fountains Mall situated in Jeffreys Bay. 200 000 158 000
Surety in respect of loan funds advanced by Investec Bank to Keysha Investments 213 (Pty) Ltd for the acquisition of vacant land in the Val de Vie Estate, Franschoek. 27 000 27 000
Surety in respect of loan funds advanced by Standard Bank for the “Bella Rosa Lifestyle Village“ in Tygervalley, Western Cape. 5 000 5 000
Surety in respect of loan funds advanced by Nedbank to Atterbury Waterfall Investment Company (Pty) Ltd in respect of the service installation for Waterfall – Land Parcel 22 and the bridging loan to MBT Services (Pty) Ltd. 80 000 80 000
Surety in respect of loan funds advanced by Investec Bank to Geelhoutboom Estate (Pty) Ltd in respect of the Geelhoutboom residential development land. 29 000 29 000
Surety in respect of loan funds advanced by Investec Bank to Brooklyn Bridge Office Park (Pty) Ltd in respect of the investment property known as “Brooklyn Bridge Office Park“. 81 000 81 000
Surety in respect of loan funds advanced by Rand Merchant Bank to Atterbury Parkdev Consortium (Pty) Ltd in respect of the investment property known as “Harlequins Office Park“. 45 000 45 000
151 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
29. Commitments
29.3 Contingent commitments (continued)
Group June 2013 June 2012 R’000 R’000
Sureties given by the Group (continued)
Surety in respect of loan funds advanced and to be advanced by Nedbank (previously Imperial Bank) to De Ville Shopping Centre (Pty) Ltd in respect of the investment property known as “De Ville Shopping Centre“. 146 000 146 000
Surety in respect of loan funds advanced by Nedbank to The Club Retail Park (Pty) Ltd in respect of the mixed use development known as “Club 1“. 66 600 69 600
Surety in respect of loan funds to be advanced by WBHO (Pty) Ltd. – 80 000
Surety in respect of funds advanced by Nedbank to Lynnwood Bridge Office Park (Pty) Ltd for the development of Lynnwood Bridge Office Park. 400 000 250 000
Surety in respect of funds advanced by Investec Bank for Sinco Investments Six (Pty) Ltd for the development of The Mall of Namibia. 200 000 –
Surety in respect of funds advanced by Standard Bank for the development of Waterfall – Land Parcel 10 (Golder and Attacq buildings). 32 000 –
Surety in respect of funds advanced by Standard Bank for the development of the Altech building situated on Waterfall – Land Parcel 20 in Midrand. 10 000 10 000
Surety in respect of funds advanced by Nedbank to AWIC for the development of Waterfall – Land Parcel 21 (Cell C). 160 000 –
Surety in respect of funds advanced by Standard Bank for the development of Waterfall – Land Parcel 15 (Group 5). 110 000 –
Surety in respect of funds advanced by Nedbank to Atterbury Property Development JV (Pty) Ltd for the purchasing of Paradise Coast. 10 000 10 000
Surety in respect of funds advanced by Rand Merchant Bank for the purchase of the Aurecon building in Pretoria by Lynnaur Investments (Pty) Ltd, as well as causa surety in respect of a pledge of 5 567 493 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq. 155 000 155 000
Surety in respect of funds advanced by Standard Bank for the infrastructure service cost for Waterfall – Land Parcel 10 in Midrand. 194 400 120 000
Surety in respect of funds advanced by Sanlam Capital Markets Ltd and Sanlam Credit Conduit (Pty) Ltd for the development of the Massbuild DC situated on Waterfall – Land Parcel 8 in Midrand. 32 000 48 000
Surety in respect of funds advanced by Sanlam Capital Markets Limited to Atterbury Africa Ltd for the purchase of Accra Mall in Ghana. The surety is for USD 10 million. The surety was cancelled and released in June 2013. – 84 140
Guarantee issued by Nedbank towards overdraft facilities of Atterbury Property Holdings (Pty) Ltd. 5 000 5 000
152 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
29. Commitments
29.3 Contingent commitments (continued)
Group June 2013 June 2012 R’000 R’000
Sureties given by the Group (continued)
The Group provided a rental guarantee to Leaf Capital (Pty) Ltd regarding the 50% undivided share sold in Great Westerford. The guarantee is valid for three years ending August 2015 on 7 049m2 of office space as well as parking bays. The maximum remaining commitment is: 25 847 –
Surety in respect of funds advanced by Sanlam Capital Markets Ltd to Atterbury Africa Ltd in respect of Accra Mall in Ghana. The surety is for USD 3 935 103. The surety was cancelled and released in December 2012. – 33 110
Causa surety by AWIC in respect of funds advanced by Standard Bank to East & West Investments (Pty) Ltd for the development of the “Golder and Attacq Buildings“ situated on Land Parcel 10 (Jukskei view ext 83). Causa surety for the mortgage bond registered over the joint lease with East & West in respect of Jukskei view ext 83. 77 636 –
Causa surety by AWIC in respect of funds advanced by Standard Bank to East & West Investments (Pty) Ltd for the development of the Altech building situated on Land Parcel 20. Causa surety for the mortgage bond registered over the joint lease with East & West in respect to Erf 3540 Jukskei view ext 7. 29 200 22 300
Causa surety by AWIC in respect of and overdraft facility provided by Standard Bank to Attacq Ltd for bridging capital requirements relating to services on the Waterfall land (the causa surety is in respect of the mortgage bond by AWIC over the lease in respect of Land Parcel 10a). 300 000 300 000
Causa surety by Razorbill Properties 91 (Pty) Ltd in respect of funds advanced by Sanlam Life Insurance Ltd and SIM Hedgeco (Pty) Ltd to Attacq Ltd (the causa surety is in respect of a pledge of 37 272 728 shares held by Razorbill in Attacq Ltd). 300 000 100 000
Guarantee issued by Standard Bank in respect of Delico Achimota Ghana Ltd and West Hills Mall Ltd. 40 176 70 000 3 340 981 2 971 872
The Club, Hazelwood, Pretoria 153 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
30. Financial instruments
Although the Group does not trade in financial instruments, it is exposed to credit, interest and liquidity risks in the normal course of its operations. The Board of the Group is responsible for the management of the risk exposure. Therefore, risk management policies are regularly reviewed by the Board to reflect and adapt to changes in the Group’s activities in market conditions.
Categories of financial instruments
At fair Financial Equity value Available liabilities and non- through Loan and for sale at financial profit and receiva- financial amortised instru- Notes Total Cash loss bles assets cost ments R’000 R’000 R’000 R’000 R’000 R’000 R’000
Group – June 2013 Assets Non-current assets Property, plant and equipment 2 5 666 – – – – – 5 666 Investment properties 3 9 495 681 – – – – – 9 495 681 Straight-line lease income adjustment 167 971 – – – – – 167 971 Deferred initial lease expenditure 4 504 – – – – – 4 504 Investments in associates 6 1 145 246 – – – 1 145 246 – – Other investments 7 58 379 – 52 900 – 5 479 – – Deferred tax 12 8 103 – – – – – 8 103
Current assets Inventories 5 126 304 – – – – – 126 304 Taxation receivable 1 497 – – – – – 1 497 Trade and other receivables 15 86 538 – – 86 538 – – – Loans to associates and joint ventures 8 487 142 – – 487 142 – – – Other financial assets 10 47 368 – – 47 368 – – – Cash and cash equivalents 11 44 389 44 389 – – – – – Non-current assets classified as held for sale 13.1 1 601 642 – – – – – 1 601 642 Total assets 13 280 430 44 389 52 900 621 048 1 150 725 – 11 411 368
154 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
30. Financial instruments (continued)
At fair Financial Equity value Available liabilities and non- through Loan and for sale at financial profit and receiva- financial amortised instru- Notes Total Cash loss bles assets cost ments R’000 R’000 R’000 R’000 R’000 R’000 R’000
Group – June 2013 Liabilities Non-current liabilities Long-term borrowings 17 3 872 731 – – – – 3 872 731 – Deferred tax liability 12 775 434 – – – – – 775 434 Other financial liabilities 10 70 944 – 70 944 – – – – Provision for impairment of associates 6 71 355 – – – – – 71 355 Finance lease liability 14 624 358 – – – – 624 358 –
Current liabilities Finance lease liability 14 6 662 – – – – 6 662 – Other financial liabilities 10 145 257 – – – – 145 257 – Taxation payable 25 759 – – – – – 25 759 Trade and other payables 18 316 423 – – – – 316 423 – Provisions 19 5 709 – – – – – 5 709 Current portion of long-term borrowings 17 1 295 713 – – – – 1 295 713 – Liabilities associated with non-current assets classified as held for sale 13.2 398 573 – – – – – 398 573 Total liabilities 7 608 918 – 70 944 – – 6 261 144 1 276 830
Group – June 2012 Assets Non-current assets Property, plant and equipment 2 2 367 – – – – – 2 367 Investment properties 3 8 497 139 – – – – – 8 497 139 Straight-line lease income adjustment 109 943 – – – – – 109 943 Deferred initial lease expenditure 4 351 – – – – – 4 351 Goodwill 4 16 929 – – – – – 16 929 Investments in associates 6 1 156 943 – – – 1 156 943 – – Other investments 7 476 997 – 470 256 – 6 741 – – Deferred tax 12 4 194 – – – – – 4 194
Current assets Inventories 5 41 644 – – – – – 41 644 Taxation receivable 711 – – – – – 711 Trade and other receivables 15 47 323 – – 47 323 – – – Loans to shareholders 9 6 308 – – 6 308 – – – Loans to associates and joint ventures 8 621 652 – – 621 652 – – – Other financial assets 10 104 199 – – 104 199 – – – Cash and cash equivalents 11 200 501 200 501 – – – – – Non-current assets classified as held for sale 13.1 262 122 – – – – – 262 122 Total assets 11 553 323 200 501 470 256 779 482 1 156 944 – 8 939 400
155 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
30. Financial instruments (continued)
At fair Financial Equity value Available liabilities and non- Equity and through Loan and for sale at financial non-finan- profit and receiva- financial amortised instru- cial instru- Notes Total Cash loss bles assets cost ments ments R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Group – June 2012 Liabilities Non-current liabilities Long-term borrowings 17 3 560 378 – – – – 3 560 378 – Deferred tax liability 12 591 838 – – – – – 591 838 Other financial liabilities 10 127 331 – 127 331 – – – – Provision for impairment of associates 6 58 202 – – – – – 58 202 Provision for impairment of other investments 7 9 049 – – – – – 9 049 Finance lease liability 14 440 148 – – – – 440 148 –
Current liabilities Finance lease liability 14 114 018 – – – – 114 018 – Other financial liabilities 10 293 177 – – – – 293 177 – Taxation payable 7 200 – – – – – 7 200 Trade and other payables 18 138 026 – – – – 138 026 – Current portion of long-term borrowings 17 1 062 004 – – – – 1 062 004 – Loans from associates and joint ventures 8 9 284 – – – – 9 284 – Liabilities associated with non-current assets classified as held for sale 13.2 131 177 – – – – 131 177 – Total liabilities 6 541 832 – 127 331 – – 5 748 212 666 289
31. Risk management
Changing market conditions expose the Group to various financial risks, including interest, credit and liquidity risks. The Group is exposed to foreign exchange risks in the following investments: - asset swap agreement with Investec Securities relating to the acquisition of its investment in Stenham European Shopping Centre Fund Ltd, of which the exposure is denominated in Euros; - investment in Artisan Investment Projects 10 Limited and Bishopsgate Student Residential Ltd, of which the exposure is in Euro and British Pounds; - investment in Atterbury Investment Holdings International Ltd and Arctospark (Pty) Ltd, of which the exposure is denominated in USD and Euro; - investment in the Bagaprop Ltd and Mall of Mauritius at Bagetelle Ltd in Mauritius, of which the exposure is denominated in Mauritian Rupees; and - investment in Sinco Investment Six (Pty) Ltd, of which the exposure is denominated in Namibian Dollars.
Although the Group does not trade in financial instruments for speculative purposes, it does utilise derivative instruments to manage exposure to some of these risks.
The Group finances its operations through a mixture of retained profits, bank borrowings and long-term borrowings.
Although the Group has an accounting policy to designate some derivative financial instruments as hedging instruments from time to time, none were designated as such during the current financial year. Although it was not applicable this financial year, the Group also has an accounting policy for hedge accounting.
There have been no significant changes during the year to the types of financial risks the Group is exposed to nor to the measurement and management of these risks.
156 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
31. Risk management (continued)
Interest rate risk The Group policy is to manage interest rate risk so that fluctuations in variable rates do not have a material impact on profit or loss.
It is the policy of the Group to enter into interest rate swap and fixed interest rate agreements with financial institutions to the extent that between 60% and 70% of its mortgaged liabilities are held at fixed interest rates (refer note 17). At year end, 59% (2012: 64%) of borrowings were fixed.
The estimated impact of a 1% increase in interest rates would have a before tax impact of R40 064 3852 (2012: R11 241 000) decrease in profits of the Group.
The Group makes use of interest rate derivatives and fixed rate borrowings to hedge its exposure to interest rate fluctuations (refer notes 10 and 17).
To hedge the fair value risk of fixed interest liabilities, the Group uses interest rate swaps and fixes, thus hedging the fair value of the financial liabilities.
Interest rate swap derivative The Group has entered into interest rate swap contracts that entitle, or obligate it to receive interest at a fixed rate on notional principal amounts and entitle or obligate it to pay interest at a floating rate on the same notional principal amounts. Under these agreements the Group agrees with the counter party to exchange at monthly intervals the difference between the fixed and floating interest amounts calculated on the notional principal amounts.
The interest rate swap derivatives has been valued using a market quoted swap curve as at 30 June 2013.
Interest rate swaps exposed to credit risk at year end were as follows:
Institution R’000 Fixed rate Expiry year Expiry month Swap or Fix Linked
Nedbank 93 177 11.08 2014 3 Swap Prime Nedbank 299 411 11.26 2015 3 Swap Prime Nedbank 300 000 11.39 2016 3 Swap Prime Nedbank 150 000 11.43 2021 5 Swap Prime Nedbank 1 100 000 9.57 2016 10 Swap Prime Rand Merchant Bank 25 000 10.74 2013 12 Swap JIBAR Rand Merchant Bank 50 000 11.09 2013 12 Swap JIBAR Rand Merchant Bank 450 000 10.58 2023 12 Fix Prime Standard Bank 14 500 10.98 2018 4 Swap JIBAR Standard Bank 32 000 11.88 2016 3 Swap JIBAR Standard Bank 16 000 11.80 2019 3 Swap JIBAR Standard Bank 32 000 11.85 2017 3 Swap JIBAR Standard Bank 25 000 11.06 2016 5 Swap JIBAR Standard Bank 45 000 10.94 2018 5 Swap JIBAR Sanlam Capital Markets 130 000 10.48 2023 4 Fix Prime 2 762 088
This recognition is in terms of IAS 39 Financial Instruments: Recognition and Measurement, which requires that interest rate swaps be fair valued and marked to market at each reporting date.
157 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
31. Risk management (continued)
Group June 2013 June 2012 R’000 R’000
Unrealised profit / (losses) on revaluation of derivative instruments 57 137 (83 138) 57 137 (83 138)
The Group’s exposure to fair value interest rate risk and cash flow interest risk can be summarised as follows:
Financial liabilities Bank borrowings at fixed rates 2 532 537 2 615 803 Bank borrowings at floating rates 2 635 905 2 137 756 Loans received at floating rates 145 257 302 461 Interest rate swaps linked to JIBAR rates (at fair value) 70 944 127 331 5 384 643 5 183 351
Credit risk Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group’s cash and cash equivalents are placed with high credit quality financial institutions. Credit risk in respect of trade receivables is limited due to the spread of the customer base and credit approval processes.
The Group’s exposure to credit risk is primarily in respect of tenants and is influenced by the individual characteristics and risk profile of each tenant. The exposure to credit risk from tenants is mitigated by the spread of the tenant base. The granting of credit to customers is made on application and is approved by the property managers based on their credit assessment of new and existing customers. Customers are required to supply refundable lease deposits and/or bank guarantees and/or suretyships by their principals. At year end, the Group did not consider there to be any significant concentration of credit risk which has not been insured or adequately provided for. In providing for impairments on tenant accounts, the Group takes cognisance of guarantees delivered by tenants and/or their bankers as well as unencumbered assets of tenants and their principals which may be attached.
The Group has some exposure in respect of loans granted where collateral has been requested. The financial position of the counter parties are considered at granting of the loans and is also evaluated on an on-going basis (refer notes 8, 9 and 10).
The carrying amounts of financial assets, excluding interest rate swaps, included in the consolidated balance sheet represent the maximum exposure to credit risk in respect of these assets. The maximum credit exposure of interest rate swaps is represented by the fair value of these contracts.
Refer to note 15 for an analysis of the Group’s trade receivables’ ageing, overdue accounts and impairments.
Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group ensures that adequate funds are available to meet its expected and unexpected financial commitments through surplus funds deposited at financial institutions and undrawn borrowing facilities. In some cases certain short-term liabilities will be settled as part of pre-determined approved structured deals.
The Group’s contractual maturity on non-derivative financial liabilities, net of interest (based on undiscounted cash flows) at year end are as follows:
158 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
31. Risk management (continued)
longer than less than 1 year 1 to 5 years 5 years Total R’000 R’000 R’000 R’000
June 2013 Long-term borrowings 1 340 122 1 487 234 2 341 086 5 168 442 Trade and other payables 325 112 – – 325 112 Other financial liabilities 145 257 70 944 – 216 201 Non-current liabilities classified as held for sale 398 573 – – 398 573 Finance lease liability 6 662 133 121 491 237 631 020 2 215 726 1 691 299 2 832 323 6 739 348
June 2012 Long-term borrowings 1 062 004 1 342 095 2 218 283 4 622 382 Trade and other payables 142 618 – – 142 618 Other financial liabilities 293 177 – – 293 177 Loans from associates and joint ventures 9 284 – – 9 284 Non-current liabilities classified as held for sale 131 177 – – 131 177 Finance lease liability 114 018 243 348 196 800 554 166 1 752 278 1 585 443 2 415 083 5 752 804
Insurance risk The Group is exposed to insurance risk primarily on its investment properties. The Group has insured all its properties at estimated replacement values and against loss of income as a result of disrupted operations.
Newtown and Majestic, Johannesburg, CBD
159 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
32. Notes to the cash flow statement
32.1 Cash flows from operating activities
Group June 2013 June 2012 R’000 R’000
Profit before taxation, including discontinued operations 987 843 777 480 Adjustments for: Investment income (48 822) (64 449) Finance costs 514 426 492 349 Depreciation 1 471 597 Other non cash movements 64 994 – Profit on disposal of other investments (41 142) – Profit on disposal of subsidiary (12 591) – Loss on disposal of associates – 20 752 Profit on disposal of investment properties (11 787) (493) Impairment loss – Other investments 10 403 – Impairment loss – Associates 74 667 – Fair value adjustment to investment properties held for sale (113 789) – Fair value adjustment to other investments (17 100) (68 866) Fair value adjustment to investment properties (854 817) (1 020 769) Fair value adjustment to other financial instruments (57 137) 83 138 Straight-line rental adjustment (91 736) (35 753) Deferred initial lease expenditure (153) 998 Excess of acquirers interest above fair value – (41 333) Equity income from associate (109 325) 52 773 Movement in finance lease liability 76 853 66 595 Reversal of loan impairment (21 651) – Movement in provisions 5 709 (15 153) Movement in provision for surety 18 752 – Provision for impairment of other investments – 4 171 Impairment of goodwill 16 929 147 366 Share-based payments 5 488 – Foreign currency translation effect 1 944 (1 400) Cash generated by operation before working capital changes 399 429 398 003
Change in working capital: Increase in inventories (53 095) (17) Increase in accounts receivable (85 242) (29 675) Increase in accounts payable 214 243 69 666 475 335 437 979
160 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
32. Notes to the cash flow statement
32.2 Business combinations resulting from acquisition of subsidiaries
Group June 2013 June 2012 R’000 R’000
Abacus Holdings (Pty) Ltd Acquired 75% of the Company on 1 September 2011.
Investment property – 1 551 355 Goodwill – 207 519 Other financial assets – 400 000 Other financial liabilities – (1 427 270) – 731 604 Unissued equity – (71 651) Non-controlling interest – (164 291) Purchase price – 495 662
Paid via equity contribution – Brooklyn Mall – (95 662) Paid via equity contribution – Other financial assets – (400 000) Net cash flow – –
Majestic Offices (Pty) Ltd Acquired effective 62.5% of the Company on 1 April 2012.
Investment property – 19 310 Trade and other receivables – 19 Cash and cash equivalents – 1 Other financial liabilities – (5 084) Deferred tax – (1 238) Loans from shareholders – (488) Finance lease obligation – (4 515) Trade and other payables – (5) – 8 000 Non-controlling interest – (3 000) Excess on acquisition – (5 000) Net cash flow – –
161 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
32. Notes to the cash flow statement
32.2 Business combinations resulting from acquisition of subsidiaries (continued)
Group June 2013 June 2012 R’000 R’000
Nieuwtown Property Development Company (Pty) Ltd Acquired an effective 62.5% of the Company on 1 April 2012.
Investment property – 159 227 Other financial assets – 1 502 Trade and other receivables – 9 Cash and cash equivalents – 236 Other financial liabilities – (36 637) Deferred tax – (3 363) Loans from shareholders – (34 003) Finance lease obligation – (47 152) Trade and other payables – (84) – 39 735 Non-controlling interest – (14 900) Excess on acquisition – (24 835) Net cash flow – –
Mantrablox (Pty) Ltd Acquired 80% of the Company on 1 September 2011.
Investment property – 888 000 Trade and other receivables – 6 897 Cash and cash equivalents – 9 467 Other financial liabilities – (300 000) Trade and other payables – (6 779) – 597 585 Paid via funding from Standard bank – (258 000) Paid via set-off of proceeds in Attfund restructure – (212 400) Paid via shareholder loan to Hyprop Investments Ltd – (117 600) Net cash outflow – 9 585
West Hills Mall Ltd (Ghana) Acquired 60% of the Company on 22 February 2012.
Cash and cash equivalents – 37 014 – 37 014 Non-controlling interest – (37 014) Net cash flow – –
Cash flow on acquisition of subsidiaries – 9 585
162 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
32. Notes to the cash flow statement
32.3 Subsidiaries disposed
Group June 2013 June 2012 R’000 R’000
Atterbury Africa Ltd Sold effectively 37.5% of the Company in December 2012. Directly holding 25% on 30 June 2013.
Property, plant and equipment 9 – Investment property 63 054 – Investments in Associates 144 568 – Other financial assets 11 154 – Loans to associates and joint ventures 18 766 – Trade and other receivables 10 201 – Cash and cash equivalents 44 459 – Other financial liabilities (205 885) – Loans from shareholders (36 994) – Trade and other payables (43 508) – Non-controlling interest held in Atterbury Africa Ltd (28 381) – (22 556) – Non-controlling interest derecognised 8 459 – Share of net assets after sale (transfer to associate) 5 639 – Profit on disposal 8 458 – Net cash flow – –
Riverport Trading 143 (Pty) Ltd Sold 51% of the investment in July 2012. Effective holding of 0% as at 30 June 2013.
Investment property 129 976 – Straight-line debtor 12 181 – Trade and other receivables 885 – Cash and cash equivalents 3 147 – Other financial liabilities (51 871) – Deferred tax (17 103) – Loans from shareholders (4 037) – Trade and other payables (1 854) – 71 324 – Non-controlling interest derecognised (34 856) – Profit on disposal of subsidiary 4 133 – Net cash flow 40 601 –
163 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
33. Other business combinations
Group June 2013 June 2012 R’000 R’000
Mooirivier Mall On 1 September 2011 the Company acquired Mooirivier Mall, situated in Potchefstroom.
Fair value of assets acquired and liabilities assumed Investment property – 724 000 Surplus on acquisition – (11 499) – 712 501 Acquisition date fair value of consideration paid Nedbank bond – (548 211) Nedbank equity – (119 100) Shareholders loans – (45 190) – (712 501) Revenue and profit or loss of Mooirivier Mall Revenue of R67 474 285 and profit of R47 125 490 of Mooirivier Mall have been included in the Group results since date of acquisition to 30 June 2012.
Eikestad Mall On 1 September 2011 the Group acquired an 80% undivided share in Eikestad Mall situated in Stellenbosch. Goodwill of R219 018 316 arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the businesses. Goodwill is not deductible for income tax purposes.
Fair value of assets acquired and liabilities assumed Investment property – 334 814 Goodwill – 219 018 – 553 832 Acquisition date fair value of consideration paid Nedbank bonds – (404 190) Abacus Trust loan – (100 000) Shareholders loan – (49 642) – (553 832) Acquisition related costs The acquisition related costs amounted to R1 105 175. These costs have been expensed in the previous year of acquisition and are included in comprehensive income. Revenue and profit or loss of Eikestad Mall Revenue of R28 734 466 and profit of R19 922 658 of Eikestad Mall have been included in the Group results since date of acquisition to 30 June 2012.
164 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
33. Other business combinations (continued)
Group June 2013 June 2012 R’000 R’000
Garden Route Mall On 1 September 2011 the Group acquired an 80% share in Mantrablox (Pty) Ltd (Garden Route Mall) situated in George.
Fair value of assets acquired and liabilities assumed Investment property – 888 000 Current assets – 16 364 Other financial liabilities – (300 000) Current liabilities – (6 779) – 597 585 Acquisition date fair value of consideration paid Standard Bank bond – (258 000) Offset in Attfund restructure deal – (212 400) Shareholders loan – Hyprop Investments Ltd – (117 600) Cash – (9 585) – (597 585) Revenue and profit or loss of Garden Route Mall Revenue of R85 681 417 and profit of R33 763 220 of Garden Route Mall have been included in the Group results since the date of acquisition to 30 June 2012.
34. Subsequent events
Subsequent events are detailed in note 6 of the directors’ report.
Garden Route Mall, George
165 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
35. Earnings, headline earnings and net asset value per share
At 30 June 2013 the Company had 449 406 150 shares in issue after adjusting for treasury shares (Refer note 16).
The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the Company is based on the following data:
June 2013 Continuing operations Discontinued operations Total Total non-con- non-con- trolling trolling Total for interest interest continued Tax effect effect Tax effect effect and dis- of the of the of the of the continued adjust- adjust- adjust- adjust- opera- Gross ments ments Total Gross ments ments Total tions R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Earnings for the purpose of earning per share 620 005 – – 620 005 108 788 – – 108 788 728 792
Number of shares Weighted average number of ordinary shares for the purpose of earnings per share 449 406 – – 449 406 449 406 – – 449 406 449 406 Effect of dilutive potential ordinary shares : Share options 456 – – 456 456 – – 456 456 Weighted average number of ordinary shares for the purpose of diluted earnings per share 449 862 – – 449 862 449 862 – – 449 862 449 862
Earnings per share (cents) Basic 137.96 – – 137.96 24.21 – – 24.21 162.17 Diluted 137.82 – – 137.82 24.18 – – 24.18 162.00
Headline earnings / (loss) for the purpose of headline earnings / (loss) per share Total comprehensive income attributable to ordinary shareholders 620 005 – – 620 005 108 788 108 788 728 792 Loss on disposal of associates – – – – – – – – –
166 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
35. Earnings, headline earnings and net asset value per share (continued)
June 2013 Continuing operations Discontinued operations Total non- Total non- con- con- trolling trolling Total for interest interest continued Tax effect effect Tax effect effect and dis- of the of the of the of the continued adjust- adjust- adjust- adjust- opera- Gross ments ments Total Gross ments ments Total tions R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Profit on disposal of other investment (49 279) 9 199 – (40 080) – – – – (40 080) Profit on sale of subsidiaries (12 591) 2 350 – (10 240) – – – – (10 240) Reversal of impairment of loans (21 651) 4 042 – (17 610) – – – – (17 610) (Profit) / loss on disposal of investment property (17 197) 3 210 – (13 987) 5 410 (1 010) – 4 400 (9 587) Impairment of associates and other investments 85 070 (15 880) – 69 190 – – – – 69 190 Impairment of goodwill 16 929 – – 16 929 – – – – 16 929 Loans impaired 40 372 (7 536) – 32 836 – – – – 32 836 Fair value adjustments (910 692) 169 996 104 331 (636 366) (113 789) 21 241 – (92 548) (728 914) Net income from associates (94 430) 17 627 – (76 803) (14 895) 2 780 – (12 114) (88 917) Headline (loss) / earnings for the purpose of basic and diluted headline (loss) / earnings per share (343 464) 183 008 104 331 (56 126) (14 486) 23 011 – 8 525 (47 601) Straight-line lease income adjustments (54 529) Finance lease interest 44 366 Actual lease payments (546) Distributable (loss) / earnings (58 310)
Number of shares Weighted average number of ordinary shares for the purpose of earnings per share 449 406 449 406 449 406 Effect of dilutive potential ordinary shares : Share options 456 456 456 Weighted average number of ordinary shares for the purpose of diluted earnings per share 449 862 449 862 449 862
Headline (loss) / income per share (cents) Basic (12.49) 1.90 (10.59) Diluted* (12.49) 1.90 (10.59)
167 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
35. Earnings, headline earnings and net asset value per share (continued)
June 2013 Continuing operations Discontinued operations Total non- Total non- con- con- trolling trolling Total for interest interest continued Tax effect effect Tax effect effect and dis- of the of the of the of the continued adjust- adjust- adjust- adjust- opera- Gross ments ments Total Gross ments ments Total tions R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Net asset value per share (cents) Net asset value per share is calculated by dividing the ordinary shareholders equity by the issued share capital (after adjusting for treasury shares held) at year end
Number of shares Closing number of shares (adjusted for treasury shares) 449 406
Net asset value Ordinary shareholders’ equity 5 373 073 Net asset value (adjusted for treasury shares) per share (cents) 11.96
* No dilutionary effect on the share options for June 2013 as there is a headline loss for the year.
Cell C, Waterfall Business Estate
168 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
35. Earnings, headline earnings and net asset value per share (continued)
At 30 June 2012 the Company had 449 406 150 shares in issue after adjusting for treasury shares (Refer note 16).
The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the Company is based on the following data:
June 2012 Continuing operations Discontinued operations Total non- Total non- con- con- trolling trolling Total for interest interest continued Tax effect effect Tax effect effect and dis- of the of the of the of the continued adjust- adjust- adjust- adjust- opera- Gross ments ments Total Gross ments ments Total tions R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Earnings for the purpose of earning per share 534 567 – – 534 567 24 436 – – 24 436 559 003
Number of shares Weighted average number of ordinary shares for the purpose of earnings per share 473 373 – – 473 373 473 373 – – 473 373 473 373 Effect of dilutive potential ordinary shares : Share options 255 – – 255 255 – – 255 255 Weighted average number of ordinary shares for the purpose of diluted earnings per share 473 627 – – 473 627 473 627 – – 473 627 473 627
Earnings per share (cents) Basic 112.93 – – 112.93 5.16 – – 5.16 118.09 Diluted 112.87 – – 112.87 5.16 – – 5.16 118.03
Headline earnings / (loss) for the purpose of headline earnings / (loss) per share Total comprehensive income attributable to ordinary shareholders 534 567 534 567 24 436 – – 24 436 559 003
169 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
35. Earnings, headline earnings and net asset value per share (continued)
June 2012 Continuing operations Discontinued operations Total non- Total non- con- con- trolling trolling Total for interest interest continued Tax effect effect Tax effect effect and dis- of the of the of the of the continued adjust- adjust- adjust- adjust- opera- Gross ments ments Total Gross ments ments Total tions R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Loss on disposal of associates 20 752 (3 874) – 16 879 – – – – 16 879 Profit on disposal of other investment (493) 92 – (401) – – – – (401) Reversal of impairment of loans (10 993) 2 052 – (8 941) – – – – (8 941) Impairment of goodwill 147 366 – – 147 366 – – – – 147 366 Loans impaired – – – – – – – – – Fair value adjustments (940 085) 175 483 102 814 (661 788) (26 951) 5 031 – (21 920) (683 708) Net income from associates 43 208 (8 065) – 35 142 – – – – 35 142 Headline (loss) / earnings for the purpose of basic and diluted headline (loss) / earnings per share (205 677) 165 687 102 814 62 825 (2 515) 5 031 – 2 516 65 340 Straight-line lease income adjustments (26 108) Finance lease interest 57 362 Actual lease payments (47) Distributable (loss) / earnings 96 547
Number of shares Weighted average number of ordinary shares for the purpose of earnings per share 473 373 473 373 473 373 Effect of dilutive potential ordinary shares : Share options 255 255 255 Weighted average number of ordinary shares for the purpose of diluted earnings per share 473 627 473 627 473 627
Headline (loss) / income per share (cents) Basic 13.27 0.53 13.80 Diluted 13.27 0.53 13.80
Net asset value per share (cents)
170 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
35. Earnings, headline earnings and net asset value per share (continued)
June 2012 Continuing operations Discontinued operations Total non- Total non- con- con- trolling trolling Total for interest interest continued Tax effect effect Tax effect effect and dis- of the of the of the of the continued adjust- adjust- adjust- adjust- opera- Gross ments ments Total Gross ments ments Total tions R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Net asset value per share is calculated by dividing the ordinary shareholders equity by the issued share capital (after adjusting for treasury shares held) at year end
Number of shares Closing number of shares (adjusted for treasury shares) 449 406
Net asset value Ordinary shareholders’ equity 4 637 968 Net asset value (adjusted for treasury shares) per share (cents) 10.32
Mooirivier Mall, Potchefstroom
171 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
36. Segmental reporting
30 June 2013 Business segment Investment Total Investment Property GLA Region property Other assets Total assets liabilities R’000 R’000 R’000 R’000
Atterbury House1 26 242 Western Cape 335 942 18 884 354 826 152 808 Great Westerford2 32 667 Western Cape 258 871 29 578 288 449 129 188 Harlequins Office Park1 5 450 Gauteng 132 838 5 821 138 659 72 148 Lynnwood Bridge 52 372 Gauteng 976 356 104 945 1 081 301 716 792 Aurecon Building 21 628 Gauteng 644 158 56 104 700 262 570 321 Altech Building 4 471 Gauteng 37 793 2 865 40 658 37 354 Office and mixed use 2 385 958 218 197 2 604 155 1 678 611
De Ville Shopping Centre1 13 455 Western Cape 184 239 16 407 200 646 112 926 Glenfair Boulevard Shopping Centre 17 205 Gauteng 316 909 19 178 336 087 89 918 Sanridge Square1 12 045 Gauteng 99 834 7 548 107 382 6 302 Garden Route Mall 53 362 Western Cape 1 023 185 33 081 1 056 266 548 937 Brooklyn Mall 80 115 Gauteng 575 000 14 036 589 036 397 539 Mooirivier Mall 53 051 North West 915 178 24 898 940 076 541 236 Andringa Walk 10 655 Western Cape 146 293 4 457 150 750 289 271 Eikestad Mall 32 453 Western Cape 483 267 14 381 497 648 500 272 Mill Square 3 616 Western Cape 58 019 198 58 217 607 Retail 3 801 924 134 184 3 936 108 2 487 008
Le Chateau North West 17 000 194 17 194 7 267 Waterfall – Land Gauteng 2 236 380 – 2 236 380 647 271 Vacant land 2 253 380 194 2 253 574 654 538
Newtown 66 000 Gauteng 427 363 50 041 477 404 329 846 Majestic Offices 9 000 Gauteng 37 165 2 496 39 661 27 082 Waterfall – Infrastructure and Services – Gauteng 554 037 11 814 565 851 357 281 Waterfall – Group 5 23 139 Gauteng 230 437 8 568 239 005 191 063 Waterfall – Maxwell Office Park 11 352 Gauteng 58 923 29 991 88 914 40 977 Waterfall – Cell C 44 200 Gauteng 514 578 18 263 532 841 434 622 Developments 1 822 503 121 173 1 943 676 1 380 871
Massbuild 35 671 Gauteng 243 634 14 472 258 106 241 506 Light industrial 243 634 14 472 258 106 241 506
Total 10 507 399 488 220 10 995 619 6 442 534
Head Office / Other 2 353 770 1 177 951
Total according to statement of financial position 13 349 389 7 620 485
172 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
36. Segmental reporting (continued)
30 June 2013 Straight- Rev- line enue rental (incl adjust- Income straight ment Profit / tax profit Business segment line (ex- Interest Interest (loss) / (ex- Net profit Investment Property GLA Region rental) pense) revenue expense before tax pense) / (loss) R’000 R’000 R’000 R’000 R’000 R’000 R’000
Atterbury House1, 4 26 242 Western Cape 26 362 87 12 13 565 33 356 – 33 356 Great Westerford2, 4 32 667 Western Cape 48 567 (2 288) 16 10 490 55 385 – 55 385 Harlequins Office Park1 5 450 Gauteng 14 351 (212) – 6 520 21 356 (3 827) 17 529 Lynnwood Bridge 52 372 Gauteng 119 917 22 863 52 71 628 136 812 (28 595) 108 217 Aurecon Building 21 628 Gauteng 90 314 26 141 4 51 523 42 150 (10 114) 32 036 Altech Building 4 471 Gauteng 5 143 2 432 1 185 – 5 405 (1 600) 3 805 Office and mixed use 304 654 49 023 1 269 153 726 294 464 (44 136) 250 328
De Ville Shopping Centre1 13 455 Western Cape 30 230 8 229 51 10 655 (4 238) (2 431) (6 669) Glenfair Boulevard3 Shopping Centre 17 205 Gauteng 43 264 3 601 67 7 196 42 609 (9 420) 33 189 Sanridge Square1, 3 12 045 Gauteng 15 106 667 49 – 13 998 (3 330) 10 668 Garden Route Mall 53 362 Western Cape 119 998 10 238 – 72 604 69 505 (13 206) 56 299 Brooklyn Mall4 80 115 Gauteng 57 655 1 859 14 32 504 52 880 – 52 880 Mooirivier Mall4 53 051 North West 112 408 10 726 83 45 850 148 532 – 148 532 Andringa Walk4 10 655 Western Cape 15 835 2 409 3 27 455 (34 798) – (34 798) Eikestad Mall4 32 453 Western Cape 54 497 6 412 41 43 058 26 844 – 26 844 Mill Square4 3 616 Western Cape 226 27 – – 4 397 – 4 397 Retail 449 219 44 168 308 239 322 319 729 (28 387) 291 342
Le Chateau North West – – – 495 1 483 – 1 483 Waterfall – Land Gauteng – – 1 463 – 244 011 (44 242) 199 769 Vacant land – – 1 463 495 245 494 (44 242) 201 252
Newtown 66 000 Gauteng – – 145 – (6 229) 10 189 3 960 Majestic Offices 9 000 Gauteng – – – – (7 860) 2 288 (5 572) Waterfall – Infrastructure and Services – Gauteng – – – 271 (7 107) 1 325 (5 782) Waterfall – Group 5 23 139 Gauteng – – – 24 092 29 921 (5 580) 24 341 Waterfall – Maxwell Office Park 11 352 Gauteng – – – 4 803 11 900 (2 219) 9 681 Waterfall – Cell C 44 200 Gauteng – – – 36 342 100 821 (18 801) 82 020 Developments – – 145 65 508 121 446 (12 798) 108 648
Massbuild 35 671 Gauteng 17 412 11 180 20 505 29 747 (5 258) 24 489 Light industrial 17 412 11 180 – 20 505 29 747 (5 258) 24 489
Total 771 285 104 373 3 185 479 556 1 010 880 (134 821) 876 059
Head Office / Other (7 243) (12 633) (23 037) (93 744) (116 781)
Total according to statement of com- prehensive income (incl discontinued operations) 764 042 91 736 987 843 (228 565) 759 278
173 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
36. Segmental reporting (continued)
30 June 2012 Business segment Investment Total Investment Property GLA Region property Other assets Total assets liabilities R’000 R’000 R’000 R’000
Atterbury House 26 242 Western Cape 285 296 6 403 291 699 152 091 Great Westerford2 32 667 Western Cape 486 000 31 710 517 710 241 307 Harlequins Office Park 5 450 Gauteng 113 626 4 566 118 192 74 379 Lynnwood Bridge 52 372 Gauteng 796 694 110 645 907 339 642 206 Aurecon Building 21 628 Gauteng 625 299 33 318 658 617 543 368 Altech Building 4 471 Gauteng 35 500 35 35 535 22 152 Investec Building1 6 302 Gauteng 129 977 16 086 146 063 70 919 Building G1, 3 7 919 Gauteng 83 867 13 057 96 924 56 785 Digistics Building1 9 000 Gauteng 47 247 1 146 48 393 39 033 Office and mixed use 2 603 506 216 966 2 820 472 1 842 240
De Ville Shopping Centre 13 455 Western Cape 193 569 8 953 202 522 123 389 Glenfair Boulevard Shopping Centre 17 205 Gauteng 289 275 11 851 301 126 105 582 Sanridge Square 12 045 Gauteng 92 798 7 065 99 863 1 291 Garden Route Mall 53 362 Western Cape 957 423 23 363 980 786 544 148 Brooklyn Mall 80 115 Gauteng 508 368 7 346 515 714 366 794 Mooirivier Mall 53 051 North West 793 631 15 432 809 063 500 366 Andringa Walk 10 655 Western Cape 141 559 205 141 764 283 191 Eikestad Mall 32 453 Western Cape 451 281 7 814 459 095 445 482 Retail 3 427 904 82 029 3 509 933 2 370 243
Le Chateau North West 15 000 193 15 193 9 354 Waterfall – Land Gauteng 2 213 999 9 131 2 223 130 683 350 Vacant land 2 228 999 9 324 2 238 323 692 704
Newtown 66 000 Gauteng 173 274 3 472 176 746 93 660 Majestic Offices 9 000 Gauteng 24 251 28 24 279 12 567 Waterfall – Infrastructure and Services – Gauteng 300 312 20 025 320 337 278 251 Developments 497 837 23 525 521 362 384 478
Total 8 758 246 331 844 9 090 090 5 289 665
Head Office / Other 2 497 261 1 264 370
Total according to statement of financial position 11 587 351 6 554 035
174 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
36. Segmental reporting (continued)
30 June 2012 Straight- Rev- line enue rental (incl adjust- Income straight ment Profit / tax profit Business segment line (ex- Interest Interest (loss) / (ex- Net profit Investment Property GLA Region rental) pense) revenue expense before tax pense) / (loss) R’000 R’000 R’000 R’000 R’000 R’000 R’000
Atterbury House 26 242 Western Cape 39 233 (143) 21 32 737 (367) – (367) Great Westerford2 32 667 Western Cape 73 192 (4 049) 22 20 208 47 270 – 47 270 Harlequins Office Park 5 450 Gauteng 12 283 (1 259) – 7 091 7 138 (2 254) 4 884 Lynnwood Bridge 52 372 Gauteng 145 866 14 209 1 492 70 350 119 721 (42 461) 77 260 Aurecon Building 21 628 Gauteng 16 887 5 701 1 028 9 924 160 422 (43 494) 116 928 Altech Building 4 471 Gauteng – – – 1 704 9 338 (2 615) 6 723 Investec Building1 6 302 Gauteng 13 743 (490) – 5 617 13 195 (4 205) 8 990 Building G1, 3 7 919 Gauteng 7 598 (1 304) – 5 331 8 862 – 8 862 Digistics Building (Held for sale) 9 000 Gauteng – – – – (2 015) 564 (1 451) Office and mixed use 308 802 12 665 2 563 152 962 363 564 (94 465) 269 099
De Ville Shopping Centre 13 455 Western Cape 19 990 (225) – 11 323 12 609 1 202 13 811 Glenfair Boulevard Shopping Centre3 17 205 Gauteng 33 746 2 334 25 12 247 47 201 – 47 201 Sanridge Square3 12 045 Gauteng 15 226 1 952 146 1 900 19 024 – 19 024 Garden Route Mall 53 362 Western Cape 100 259 14 577 1 177 24 472 75 677 (109 440) (33 763) Brooklyn Mall4 80 115 Gauteng 54 390 4 577 – 26 055 55 255 – 55 255 Mooirivier Mall4 53 051 North West 89 733 4 369 – 36 196 23 207 – 23 207 Andringa Walk4 10 655 Western Cape 183 32 – 21 465 (191 288) – (191 288) Eikestad Mall4 32 453 Western Cape 35 639 3 082 – 32 070 52 871 – 52 871 Retail 349 166 30 698 1 348 165 728 94 556 (108 238) (13 682)
Le Chateau North West – – – – 1 449 – 1 449 Waterfall – Land Gauteng – – – 92 364 343 063 (70 271) 272 792 Vacant land – – – 92 364 344 512 (70 271) 274 241
Newtown 66 000 Gauteng 62 – 141 – 46 025 (10 085) 35 940 Majestic Offices 9 000 Gauteng – – – – 4 436 (1 380) 3 056 Waterfall – Infrastructure and Services – Gauteng – – – – (101) 28 (73) Developments 62 – 141 – 50 360 (11 437) 38 923
Total 658 030 43 363 4 052 411 054 852 992 (284 411) 568 581
Head Office / Other 4 960 (7 084) (75 512) 91 748 16 236
Total according to statement of comprehensive income (incl discontinued operations) 662 990 36 279 777 480 (192 663) 584 817
175 NOTESNOTES TTOO THE ANNUALANNUAL FINANCIALFINANCIAL STATEMENTS for the year ended 30 June 2013
36. Segmental reporting (continued)
Refer to note 1.15 in the accounting policies for a description on the determination and presentation of operating segments as shown on the previous page.
Additions on the above property portfolio can be seen under note 3 (Investment property) as well as in the director’s report under note 4.
Note 1. Held for sale. 2. 50% undivided share sold during 2013. 50% undivided share held for sale as at 30 June 2013. 3. In 2012, taxation on all the underlying buildings held directly by Attacq Ltd was calculated on a summarised basis and not assigned per building. The reporting method for segment purposes was changed during 2013 where tax was calculated per building and assigned accordingly to each building held directly by Attacq. 4. For both years presented taxation on the buildings held by Abacus Holdings (Pty) Ltd and the Momentum buildings was calculated on a summarised basis and not assigned and reported per building.
West Hills Mall, Accra, Ghana
176 Working in West AFRICA
Nick Brown – GHC Africa
Johan Venter –Broll
Osafo Gyimah
Moses Honu – Diagonanal Projects
Wessel Boshoff – Atterbury Asset Managers
Cobus van Heerden – Director Atterbury Property Developments
Wynand Baard – Financial Manager Renier van Rensburg – Atterbury Africa Financial Director Atterbury Africa 177 James Roets
Mia Wilsenach
Zanne van Niekerk Keano van Niekerk
Elzette Fouché
Souri du Plessis
Rouche Engelbrecht Carike Baard Altus Marais
Martelie Marais
178 Botha Smit
Attkids @ Lynnwood Bridge, Pretoria
Mienke van Zyl
Katelyn Love Gerhard-Nico van Zyl
David de Witt
Lelani Strydom
Leanke Strydom Abigail Love
179 ATTACQ LIMITED (Previously Atterbury Investment Holdings Ltd) (Registration number: 1997/000543/06)
Directors’ Responsibilities and Approval 181 Company Secretary Report 182 Independent Auditor’s Report 183 Report of the Audit and Risk Committee 184 Directors’ Report 185 Statement of Financial Position 193 Statement of Comprehensive Income 194 Statement of Changes in Equity 195 Statement of Cash Flows 196 Accounting Policies 198 Notes to the Annual Financial Statements 206
Audited COMPANY Annual Financial Statements for the year ended 30 June 2013
These Audited Annual Financial Statements have been prepared under supervision of P Smit CA (SA), CFO of Attacq Limited until 30 June 2013.
180 Directors’ Responsibilities and Approval
The directors are required by the South African Companies Act, 71 of 2008 (as amended) (the Companies Act), to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information upon which the financial statements in this report are based. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the Company as at the end of the financial year and the results of its operations and cash flows for the year then ended. The external auditors are engaged to express an independent opinion on the annual financial statements.
The annual financial statements are prepared in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board, and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.
The directors acknowledge that they are ultimately responsible for the system of internal financial controls established by the Company and places considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Company and all employees are required to maintain the highest ethical standards in ensuring the Company’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Company is on identifying, assessing, managing and monitoring all known forms of risk across the Company.
While operating risk cannot be fully eliminated, the Company endeavours to minimise said risk by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. 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 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 Company’s cash flow forecast for the year to 30 June 2014 and, in light of this review and the current financial position, they are satisfied that the Company has access to adequate resources to continue in operational existence for the next twelve months. The annual financial statements, set out on pages 185 to 250 in this report, have been prepared on the going concern basis.
The annual financial statements were approved by the Board and were signed on its behalf by:
P Tredoux MC Wilken Chairman Chief Executive Officer
Pretoria 20 November 2013
181 Company Secretary Report
Save for the information disclosed below with regard to the accuracy of the issued share capital of the Company as previously reflected in the returns and notices filed with the Companies and Intellectual Property Commission (the CIPC), in terms of section 88(2)(e) of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act), I hereby certify that, to the best of my knowledge and belief, the Company has filed all such returns and notices as are required of a public company in terms of the Companies Act with the CIPC for the financial year ended 30 June 2013, and that all such returns and notices appear to be true, correct and up to date.
A transaction was entered into by the Company during 2006 in terms of which, inter alia, Atterbury Investment Managers (Pty) Ltd (Attvest) indemnified the Company (the Indemnity) in respect of 50% (fifty percent) of all amounts which the Company would have to pay to First Rand Bank Ltd (acting through its Rand Merchant Bank Division) (RMB) pertaining to a guarantee provided by RMB for the payment by the Company of the balance of the purchase price of a rental enterprise acquired by the Company. In consideration for Attvest granting the Indemnity, the Company agreed to allot and issue 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares in the share capital of the Company to Attvest (the Initial Attvest Shares).
Subsequent to the conclusion and implementation of the Indemnity, it transpired that the issuing of the Initial Attvest Shares was void ab initio by virtue of such shares not being fully paid up at the time of the allotment and issue thereof by the Company to Attvest, as contemplated in section 92(1) of the Companies Act, 61 of 1973 (as amended). The parties agreed to regularise the aforesaid transaction and thereby give effect to the original commercial agreement between them on substantially the same terms and conditions as contemplated above. Accordingly, the re-implementation of the aforesaid transaction was approved by way of special resolution adopted by the shareholders of the Company at the special shareholders’ meeting held on 27 August 2013, such approval being recorded in the minutes of such special shareholders’ meeting, which are available for inspection via access to the Company’s website and on request from the Company Secretary. The transaction is disclosed in the Directors’ Report.
Talana Smith Company Secretary
20 November 2013
182 INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF ATTACQ LIMITED
We have audited the annual financial statements of Attacq Ltd set out on pages 193 to 250 which comprise the statement of financial position as at 30 June 2013, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information. Directors’ Responsibility for the Annual Financial Statements The Company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards and the requirements of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act), and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 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 and perform the audit to obtain reasonable assurance about whether the annual 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 auditor’s judgement, including the assessment of the risks of material misstatement 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 management, 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 Attacq Ltd as at 30 June 2013 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act. Other reports required by the Companies Act As part of our audit of the annual financial statements for the year ended 30 June 2013, we have read the Directors’ Report, the Audit and Risk Committee’s Report and the Company Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited annual financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited annual financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. Report on Other Legal and Regulatory Requirements As detailed in the Report of the Audit and Risk Committee the Company’s Audit and Risk Committee was not constituted in compliance with the requirements of section 94 of the Companies Act. The Committee did not comprise of three non-executive, independent directors as contemplated by the Companies Act. As detailed in paragraph 5 of the Directors’ Report, the Company has identified non-compliance with the requirements of section 92 of the Companies Act of South Africa, 1973 following a transaction concluded in 2006. In addition, as detailed in paragraph 5 of the Directors’ Report the Company is not in compliance with the requirements of section 48 of the Companies Act. Subsidiaries of the Company held more than 10% of the shares in issue by the Company. The Board has put measures in place to rectify these areas of non-compliance.
Deloitte & Touche Registered Auditors Per: Z Jasper Partner 20 November 2013
Riverwalk Office Park, Block B, 41 Matroosberg Road, Ashlea Gardens X6, Pretoria, 0081, South Africa, PO Box 11007, Hatfield, 0028
National Executive: LL Bam Chief Executive, AE Swiegers Chief Operating Officer, GM Pinnock Audit, DL Kennedy Risk Advisory, NB Kader Tax, TP Pillay Consulting, K Black Clients & Industries, JK Mazzocco Talent & Transformation, CR Beukman Finance, M Jordan Strategy, S Gwala Special Projects, TJ Brown Chairman of the Board, MJ Comber Deputy Chairman of the Board Member of Deloitte Touche Tohmatsu Limited
183 Report of the Audit and Risk Committee for the year ended 30 June 2013
The Group’s Audit and Risk Committee is a committee of the Board of directors. The activities of the Audit and Risk Committee are determined by its terms of reference as approved by the Board and its statutory responsibilities as per the South African Companies Act, 71 of 2008 (as amended) (the Companies Act).
The membership of the Audit and Risk Committee comprises the following non-executive directors. They are: • Stewart Shaw-Taylor (Chairman) – appointed November 2012 – independent • Pierre Tredoux (Chairman) – resigned November 2012 – independent • Pieter Faure – resigned August 2013 • lucas Ndala • lebo Masekela – appointed November 2012 – independent • Hellen El Haimer – appointed August 2013 – independent
The Audit and Risk Committee consists of four non-executive directors, one of whom is not independent.
Pierre Tredoux, an independent non-executive director, was the chairman of the Audit and Risk Committee until November 2012, where- after, Stewart Shaw-Taylor, an independent non-executive director became the chairman. Pierre Tredoux stepped down from the Audit and Risk Committee on his appointment as chairman of the Group.
Statutory Duties In the execution of its statutory duties during the past financial period, the Audit and Risk Committee: • Nominated for appointment as auditor, Deloitte & Touche (Deloitte) (engagement partner: Z Jasper), who, in our opinion, is independent of the Company. • Determined the fees to be paid to Deloitte. • Determined Deloitte’s terms of engagement. • Defined the non-audit services Deloitte may provide on a pre-approved basis. • Approved the non-audit services provided by Deloitte during the year. • Received no complaints relating to the accounting practices of the Group, the content or auditing of its financial statements, the internal financial controls or any other related matter. • Recommended for approval the financial statements and report for the year ended 30 June 2013.
Delegated Duties The Audit and Risk Committee also assisted the Board with the following duties: • Reviewed the key risks facing the Group and the risk management processes implemented.
External Audit The Audit and Risk Committee is satisfied with the independence of the external auditor, Deloitte, including the provision of non-audit services in compliance with the company policy. We have recommended to the Board that Deloitte be retained as independent external auditors for the financial year ending 30 June 2014.
Finance Function We are satisfied that: • The financial director of Atterbury Property Holdings (Pty) Ltd, P Smit, who acted as CFO of Attacq Limited for the last three years in terms of the asset management contract, has the necessary expertise and experience to carry out his duties and to meet his responsibilities. • The Company has internalised the asset management function from July 2013, and M Hamman has been appointed as financial director with effect from 8 July 2013. • The Company’s accounting practices are effective and adhered to.
Compliance As detailed in the Directors’ report, the Company was not in compliance with the requirements of the Companies Act in that subsidiaries of the Company held more than 10% of the shares in issue by the company. In addition, the Company has identified non-compliance with the requirements of section 92 of the South African Companies Act of South Africa, 61 of 1973 (as amended) following a transaction concluded in 2006.
These non-compliance issues have been addressed with the approval of Special Resolution no. 14 at the special shareholders meeting held on 27 August 2013. The Audit and Risk Committee has reviewed and recommended for approval to the Board, the Company’s annual financial statements.
On behalf of the Audit and Risk Committee
Stewart Shaw-Taylor Chairman 20 November 2013
184 Directors’ report for the year ended 30 June 2013
The directors have pleasure in submitting their annual report for the year ended 30 June 2013.
1. Nature of business
Attacq Ltd (Attacq) carries on the business of a property holding, development and investment company through the ownership of: • directly held investment properties; and • subsidiaries, associates and other investments with directly held investment properties and property investments.
Attacq is managed by Atterbury Asset Managers (Pty) Ltd (AAM), appointed in terms of an evergreen contract, subject to strict performance criteria set by the Board. The following directors and officers of the Company have an interest, directly or indirectly, in the asset manager: LLS van der Watt, GJ Oosthuizen, PH Faure, BF van Niekerk, P Smit and T Smith. The Company has agreed to internalise the asset manager with effect from July 2013 by acquiring all the issued shares of AAM.
The business of the Company is to invest in and develop quality A-grade properties as long-term investments which generate quality rental income and sustainable long-term capital growth for its shareholders over the long-term.
Attacq was previously known as Atterbury Investment Holdings Ltd.
2. Authorised and issued share capital
As at 30 June 2013, Attacq had an authorised share capital of 1,000,000,000 ordinary par value shares of R0.0001 each. The total number of issued shares at year end is 522 989 885 shares. If the Attacq shares held by Attacq subsidiaries (Lynnwood Bridge (Pty) Ltd, Abacus Holdings (Pty) Ltd and Razorbill Properties 91 (Pty) Ltd) are excluded, the total number of issued shares was 449 406 150. During the Special General Meeting held on 27 August 2013, the unissued shares were placed under the control of the directors, subject to certain conditions. No additional shares were issued during the year ended 30 June 2013.
According to the records of Attacq, shareholders registered as holding five percent or more of the issued share capital at 30 June 2013 are as follows:
Number of shares June 2013 June 2012
Abacus Holdings (Pty) Ltd 29 726 516 29 726 516 BNF Investments (Pty) Ltd 41 232 474 47 282 129 Mergon Foundation (Association incorporated under Section 21) 65 692 240 75 024 045 Sanlam Life Insurance Ltd 95 395 536 95 395 536 Razorbill Properties 91 (Pty) Ltd 43 800 054 43 800 054 Lisinfo 222 Investments (Pty) Ltd (Royal Bafokeng Holdings (Pty) Ltd) 67 708 955 67 708 955
The directors’ interest in the issued shares of Attacq, directly or indirectly, as at 30 June 2013 was as follows:
Beneficial Name Direct Indirectly Total BF van Niekerk – 43 430 377 43 430 377 LLS van der Watt 2 284 17 307 683 17 309 967 MC Wilken – 404 747 404 747 PH Faure – 3 563 906 3 563 906 P Tredoux – 40 165 40 165 JHP van der Merwe – 541 226 541 226 WL Masekela – 121 882 121 882 LM Ndala – – – S Shaw-Taylor 650 000 – 650 000 AW Nauta (Alternate) – – – TJA Reilly (Alternate) – – – Total 30 June 2013 652 284 65 409 986 66 062 270 Total 30 June 2012 1 016 633 63 745 063 64 761 696
No shares were issued to directors during the year ended June 2013.
185 Directors’ report (continued) for the year ended 30 June 2013
3. Interest in subsidiaries and associates
Direct % Shares June June June June Name and nature of business Issued 2013 2012 2013 2012
Direct subsidiaries and associates
Atterbury Attfund Investment Company No. 1 (Pty) Ltd 10 000 100 100 10 000 10 000 Investment company Atterbury Attfund Investment Company No. 3 (Pty) Ltd (note l) 10 000 80 80 8 000 8 000 Investment company Atterbury Mauritius Consortium (Pty) Ltd (Note c) 100 80 80 80 80 Property investment company Atterbury Property Investments (Pty) Ltd 100 100 100 100 100 Investment company Atterbury Property Johannesburg (Pty) Ltd 100 100 100 100 100 Dormant Atterbury Waterfall Investment Company (Pty) Ltd (Note d) 100 80 80 80 80 Property investment company De Ville Shopping Centre (Pty) Ltd 1 000 100 100 1 000 1 000 Property investment company Harlequin Duck Properties 204 (Pty) Ltd 400 100 100 400 400 Dormant Highgrove Property Holdings (Pty) Ltd 100 000 100 100 100 000 100 000 Investment company Le Chateau Property Development (Pty) Ltd 1 000 100 100 1 000 1 000 Development company Lord Charles & Lady Brooks Office Park Holdings (Pty) Ltd 1 000 100 100 1 000 1 000 Dormant Lady Brooks (Pty) Ltd 1 000 100 100 1 000 1 000 Dormant Lynnwood Bridge Office Park (Pty) Ltd 1 000 100 100 1 000 1 000 Property investment and development company Riverport Trading 143 (Pty) Ltd 100 - 51 - 51 Property investment company Atterbury Parkdev Consortium (Pty) Ltd 100 100 100 100 100 Property investment company Abacus Holdings (Pty) Ltd 659 955 75 75 495 663 495 663 Property investment company Mantrablox (Pty) Ltd 100 80 80 80 80 Property investment company Lynnaur Investments (Pty) Ltd (Note e) 100 75 75 75 75 Property investment company Atterbury Investment Holdings International Ltd (Mauritian) 1 100 100 1 1 Investment company Atterbury Property Holdings (Pty) Ltd 10 791 992 25 25 2 697 948 2 470 048 Development company MAS Real Estate Inc 66 238 363 21 24 13 974 309 9 695 982 Property Investment and Development company Attfund Limited – – 43 – 19 372 602 Property investment company Liquidated in October 2012 Paradise Coast Property Development (Pty) Ltd (Note j) 100 33 33 33 33 Property investment company Brooklyn Bridge Office Park (Pty) Ltd 1 000 25 25 250 250 Property investment company Geelhoutboom Estate (Pty) Ltd 1 200 37 37 440 440 Property investment company
186 Directors’ report (continued) for the year ended 30 June 2013
Direct % Shares June June June June Name and nature of business Issued 2013 2012 2013 2012
Keysha Investments 213 (Pty) Ltd 1 000 50 50 500 500 Property investment company Travenna Development Company (Pty) Ltd 1 000 36 36 360 360 Property investment company Razorbill Properties 91 (Pty) Ltd 100 100 100 100 100 Treasury company Arctospark (Pty) Ltd 100 50 50 50 50 Investment company Sinco Investments Six (Pty) Ltd (Namibian company) (Note i) 300 25 – 75 – Property investment company The Club Retail Park (Pty) Ltd (Note f) 1 198 31 31 372 372 Property investment company
Indirect subsidiaries and associates
Aldabri 96 (Pty) Ltd 100 100 100 100 100 Property investment company Atterbury Attfund Investment Company No. 2 (Pty) Ltd 100 100 100 100 100 Investment company Design Square Shopping Centre (Pty) Ltd 9 174 653 100 100 9 174 653 9 174 653 Property investment company – In process of deregistration Mall of Mauritius at Bagatelle Ltd (Mauritian) (Note g) 1 000 50 50 499 499 Property investment company Bagaprop Ltd (Mauritian) (Note g) 1 000 50 50 499 499 Property investment company Nieuwtown Property Development Company (Pty) Ltd (Note b) 100 50 50 50 50 Property investment company Majestic Offices (Pty) Ltd (Note b) 100 50 50 50 50 Property investment company Atterbury Africa Ltd (Mauritian) (Note k) 200 25 50 25 25 Property investment company Artisan Investment Projects 10 Ltd 2 400 000 26 26 631 200 630 000 Property investment company Bishopsgate Student Residential Ltd 4 365 512 30 30 1 309 654 1 309 654 Property investment company Retail Africa Consortium Holdings (Pty) Ltd (Note a) 625 20 20 125 125 Property investment company Fountains Regional Mall (Pty) Ltd (Note h) 100 000 13 10 12 731 9 500 Property investment company
The effective shareholding that the Company has in the entities above, is shown below: a) Excludes convertible equity loan b) The Company has an effective share of 62.5% via its investment in Atterbury Property Holdings (Pty) Ltd c) The Company has an effective share of 83.75% via its investment in Atterbury Property Holdings (Pty) Ltd d) The Company has an effective share of 84.69% via its investment in Atterbury Property Holdings (Pty) Ltd e) The Company has an effective share of 79.4% via its investment in Atterbury Property Holdings (Pty) Ltd f) The Company has an effective share of 40% via its investment in Atterbury Property Holdings (Pty) Ltd g) The Company has an effective share of 41.79% via its investment in Atterbury Property Holdings (Pty) Ltd h) The Company has an effective share of 35.90% via its investment in Atterbury Property Holdings (Pty) Ltd and Retail Africa Consortium Holdings (Pty) Ltd i) The Company has an effective share of 31.25% via its investment in Atterbury Property Holdings (Pty) Ltd j) The Company has an effective share of 44.80% via its investment in Atterbury Property Holdings (Pty) Ltd k) The Company has an effective share of 32.5% via its investment in Atterbury Property Holdings (Pty) Ltd l) The Company has an effective share of 100% via its investment in Aldabri 96 (Pty) Ltd
In the annual financial statements, all percentages indicate direct shareholding, unless stated otherwise.
187 Directors’ report (continued) for the year ended 30 June 2013
4. Investment Property
Net additions to investment properties to the value of R18.593 million were made during the current financial period, consisting of:
Nature of Cost value Property Held By addition R’000
Glenfair Boulevard, Pretoria Attacq Ltd Refurbishment 3 830 Great Westerford, Cape Town Attacq Ltd Capital extension 2 875 Sanridge Square, Midrand Attacq Ltd Capital extension 106 Atterbury House, Cape Town Attacq Ltd Capital extension 11 782 18 593
The Company has formally approved the sale of the following investment properties and therefore they were classified as held for sale as at 30 June 2013:
Valued at June 2013 Anticipated Property Held By R’000 date of sale
Great Westerford Attacq Ltd 25 8871 Jun 2014 Atterbury House Attacq Ltd 335 942 Sep 2013 Sanridge Square Attacq Ltd 99 834 Aug 2013 694 647
The transaction for Sanridge Square was implemented during August 2013. Atterbury House was transferred during September 2013.
The Company has formally approved the sale of the following subsidiary and associate investments and therefore they were classified as held for sale as at 30 June 2013: Valued at June 2013 Anticipated Property Held By R’000 date of sale
Atterbury Parkdev Consortium (Pty) Ltd Shares and loan account 29 738 Oct 2013 Arctospark (Pty) Ltd Shares and loan account 533 693 Oct 2013 563 431
5. Legal and regulatory matters
Attvest transaction
5.1 Also refer to the extract of the special resolution number 14 of the special general shareholders meeting held on 27 August 2013, as detailed below in 5.6 onwards.
5.2 A transaction was entered into by Attacq during 2006 in terms of which, inter alia, Atterbury Investment Managers (Pty) Ltd (Attvest) indemnified Attacq (the Indemnity Agreement) in respect of 50% (fifty percent) of all amounts which Attacq would have to pay to First Rand Bank Limited (acting through its Rand Merchant Bank Division) (RMB) pertaining to a guarantee provided by RMB for the payment by Attacq of the balance of the purchase price of a letting enterprise acquired by Attacq. In consideration for Attvest granting the aforesaid indemnity, Attacq agreed to allot and issue 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares in the share capital of Attacq to Attvest (the Initial Attvest Shares).
5.3 Subsequent to the conclusion and implementation of the Indemnity Agreement, it transpired that the issuing of the Initial Attvest Shares was void ab initio by virtue of such shares not being fully paid up at the time of the allotment and issue thereof by Attacq to Attvest, as contemplated in section 92(1) of the South African Companies Act, 61 of 1973 (as amended) and therefore all subsequent transactions in relation to the Initial Attvest Shares are void ab initio. 5.4 The parties agreed to regularise the aforesaid transaction and thereby give effect to the original commercial intent of the parties, that is, Attvest being granted the right to subscribe for 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred
188 Directors’ report (continued) for the year ended 30 June 2013
and forty four) shares in the capital of Attacq at an issue price of R3.77 (Three Rand and Seventy Seven Cent) escalated at 12% (twelve percent) per annum (nominal annual compounded annually in arrears) per share in consideration for having indemnified Attacq in terms of the Indemnity Agreement.
5.4 The parties agreed to regularise the aforesaid transaction and thereby give effect to the original commercial intent of the parties, that is, Attvest being granted the right to subscribe for 36,187,844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares in the capital of Attacq at an issue price of R3.77 (Three Rand and Seventy Seven Cent) escalated at 12% (twelve percent) per annum (nominal annual compounded annually in arrears) per share in consideration for having indemnified Attacq in terms of the Indemnity Agreement.
5.5 Broadly speaking, the regularisation of the above transaction involved Attacq allotting and issuing 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) shares to Attvest, and buying back 25 188 346 (twenty five million, one hundred and eighty eight thousand, three hundred and forty six) of Attacq’s shares held by Attvest, with the net effect being that Attacq and Attvest were placed in the same commercial position. The full details of this transaction are set out in the minutes of the Attacq shareholders’ meeting held on 27 August 2013, at which meeting the shareholders of Attacq approved the aforesaid regularisation of the transaction between Attacq and Attvest by way of a special resolution.
5.6 Extract of special resolution
The conclusion of the Proposed Transaction between the Company, Atterbury Investment Managers (Pty) Ltd (Attvest) and Razorbill Properties 91 (Pty) Ltd (Razorbill), subject to the Board complying with the related requirements of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act) was approved. Accordingly, in order to give effect to the implementation of the Proposed Transaction, the following elements of the Proposed Transaction was approved by 99.99% (ninety nine point nine nine percent) of the Shareholders present in person or by proxy:
5.6.1 the conclusion and implementation by the Company of the Subscription and Repurchase Agreement, in substantially the same form as the copy of the Subscription and Repurchase Agreement which has been available for inspection at the Company’s offices from the date of the notice of the Meeting, together with any addenda to such Subscription and Repurchase Agreement concluded from time to time;
5.6.2 subject to compliance with the requirements of the Company’s MOI, if any, and the Companies Act, the cancellation of the share certificates in respect of the Initial Attvest Shares and the amendment of the share register of the Company to remove the Initial Attvest Shares from the share register, and/or of any other documents required to give effect to such cancellation;
5.6.3 to the extent required by section 44 of the Companies Act, the provision of authority to the Board, in accordance with section 44(2) of the Companies Act, and subject to the requirements of the Companies Act, and the MOI of the Company, if any, to authorise the Company to provide the Subscription Financial Assistance to Attvest;
5.6.4 subject to the implementation of the Subscription and Repurchase Agreement, the provision of authority to the Board, the provisions of the Companies Act, and the MOI of the Company, if any, to issue the Attvest Subscription Shares to Attvest at an issue price of R7.18 (Seven Rand and Eighteen Cent) per share on the terms and conditions contained in the Subscription and Repurchase Agreement;
5.6.5 subject to the implementation of the Subscription and Repurchase Agreement, to the extent required, the authorisation of the Company, in accordance with the provisions of section 41(1) of the Companies Act, to allot and issue the Attvest Subscription Shares to Attvest in accordance with the terms and conditions of the Subscription and Repurchase Agreement, given that Attvest is related to a director of the Company;
5.6.6 subject to the provisions of section 48(8) of the Companies Act, the provision of authority to the Board, subject to compliance with the Companies Act and the MOI of the Company, if any, to authorise the Company to repurchase the Buy-back Shares from Attvest at the market value price of R10.32 (Ten Rand and Thirty Two Cent) per share (out of the reserves of the Company, and shall not reduce its “contributed tax capital“ (as such term is defined in the Income Tax Act, No. 58 of 1962 (as amended)), being an amount equal to the Repurchase Price in accordance with the terms and conditions of the Subscription and Repurchase Agreement;
5.6.7 in terms of and subject to the provisions of section 45 of the Companies Act, the provision of authority to the Board, subject to compliance with the requirements of the Company’s MOI, if any, and the Companies Act, to authorise the Company to provide direct or indirect financial assistance to Attvest, being a related or inter-related company of a director of the Company, by the Set-Off, being the set-off of Attvest’s obligation to pay the Attvest Amount against the Company’s obligation to pay the Repurchase Price in accordance with the terms and conditions of the Subscription and Repurchase Agreement (to the extent that the Set-Off constitutes financial assistance); and
189 Directors’ report (continued) for the year ended 30 June 2013
5.6.8 to do all things necessary to implement the above transaction.
Own shares held
The Companies Act limits the number of shares that a holding company’s subsidiaries can own in its holding company to not more than 10%, in aggregate of the number of issued shares. This requirement was incorrectly applied by Attacq on a subsidiary by subsidiary basis, instead of on the basis of all its subsidiaries cumulatively, resulting in Attacq’s subsidiaries exceeding the 10% limit. The reason for Attacq exceeding the aforesaid limit was due to an acquisition by Razorbill Properties 91 (Pty) Ltd (Razorbill) of shares in the share capital of Attacq from Attvest, which shares formed part of the shares issued to Attvest by Attacq pursuant to the transaction. As the issue of shares to Attvest was void ab intio (as described in paragraph 5 above), the purported transfer of Attacq shares by Attvest to Razorbill was also void ab initio. As such, Attacq’s subsidiaries do not legally exceed the 10% limit.
6. Post year-end transactions
The following notable transactions occurred since 30 June 2013:
Listing and related matters
The Board resolved to proceed with the listing of Attacq on the JSE. The Company was listed on 14 October 2013 with a successful private placement of R800 million.
Shareholders’ approval was obtained to convert Attacq’s current 1 000 000 000 R0.0001 par value shares to 2 000 000 000 non-par value shares.
The Board has made the decision to acquire all of the shares in Atterbury Asset Managers (Pty) Ltd (AAM) and thereby effectively internalise the asset management of Attacq’s direct portfolio to be in line with the rest of the market, to create synergies between Attacq and the asset manager and remove any conflicts of interest that may exist between Attacq and the asset manager. Attacq has acquired 100% of the issued shares in AAM for a purchase consideration of R271 million, which was settled in cash. In terms of the transaction the previous shareholders of AAM, being Atterbury Property Holdings (Pty) Ltd and Attventure (Pty) Ltd, were required to subscribe for a total of R135.4 million of Attacq shares at a price of R11.96 per share. Atterbury Property Holdings (Pty) Ltd has a lock in period of 5 years in respect of 1 600 000 of these shares.
Rights Offer
A Non-Renounceable Rights Offer of R580 000 000 to existing shareholders was completed on 24 July 2013. The offer at a price of R11.50 per share was 44% oversubscribed. Excesses were allocated on an equitable basis and 50 434 782 shares were issued pursuant to the Rights Offer.
Sale of Atterbury Parkdev Consortium (Pty) Ltd
Attacq entered into an agreement with Delta Property Fund Ltd (Delta) on 20 August 2013 to dispose of 100% of the issued shares in Atterbury Parkdev Consortium (Pty) Limited (APC) which owns the Harlequins Office Park. The shares were disposed of cum any dividend distribution but free from encumbrances.
Purchase of 75% of the issued shares in Brooklyn Bridge Office Park (Pty) Ltd
Currently Attacq holds a 25% interest in Brooklyn Bridge Office Park (Pty) Ltd. The Board approved the purchase of the remaining 75% shareholding in Brooklyn Bridge Office Park (Pty) Ltd for a purchase consideration of approximately R156.5 million. A part of the purchase price will be payable in Attacq shares. The transaction is still suspensive on a number of conditions.
Unbundling of Arctospark (Pty) Ltd (Arctospark)
Attacq reached agreement on the restructuring of Attacq’s investment in Arctospark. Attacq previously owned its share of Karoo I, Karoo II and Stenham European Shopping Centre Fund Ltd through its shareholding in Arctospark. On implementation of this restructure Attacq will hold the assets directly.
Sale of shareholding in Karoo I and II to MAS Real Estate Inc (MAS)
Subsequent to the unbundling of Arctospark, Attacq has reached an agreement with MAS to sell its investments in Karoo I and Karoo II to MAS for a total consideration of €35 million. MAS will settle the purchase price by the issuing of shares in MAS at an issue price of €1.07 per MAS share. The transaction is still suspensive on a number of conditions.
190 Directors’ report (continued) for the year ended 30 June 2013
Sale of Atterbury Theatre
Lynnwood Bridge Office Park (Pty) Ltd, a wholly owned subsidiary of Attacq, reached an agreement with the public benefit organisation known as Atterbury Trust on the disposal of the Atterbury Theatre property for an amount of R42.3 million. This disposal was settled by way of the Atterbury Trust transferring 2 160 853 Attacq shares to Attacq at a price of R10.32 per share and the balance in cash. The Atterbury Theatre was classified as inventory at year-end.
Sale of Atterbury House
Attacq reached an agreement on the disposal of the Atterbury House property to Ascension Properties Ltd for an amount of R341 million. The transfer took take place on 12 September 2013.
Sale of 50% undivided share in Sanridge Square
Attacq reached an agreement with Rapfund Holdings (Pty) Ltd (Rapfund) to dispose Attacq’s 50% undivided share in Sanridge Square property to Rapfund for an amount of R103.5 million, being the disposal price of R98.6 million escalated at a rate of 7.9% per annum from 1 January 2013 until the transfer date which was 20 August 2013.
Disposal of Attacq’s shares in Artisan Investment Projects 10 Limited
Attacq reached agreement with MAS on the disposal of Attacq’s shareholding in and loan to Artisan Investment Projects 10 Ltd to MAS for an amount of GBP2 800 000 to be settled by the issue of 2 616 822 shares in MAS at an issue price of €1.07 per MAS share. Exchange rates of €0.86/GBP and R14.04/GBP were assumed. The transaction is still subject to South African Reserve Bank approval.
Acquisition of the Trinsam Trust’s shares in Atterbury Waterfall City (Pty) Ltd (AWC)
MC Wilken has an indirect benefit in the Trinsam Trust which is an existing shareholder in AWC. This shareholding was part of his incentive when he joined Atterbury Property Holdings (Pty) Ltd in 2008. The Board has requested the disposal of the shareholding in AWC, which is the 20% shareholder in Atterbury Waterfall Investment Company (Pty) Ltd (AWIC), to prevent a potential conflict of interest. Attacq and MC Wilken have reached agreement whereby Attacq will acquire the shares in AWC, whereby Attacq effectively increases its shareholding in AWIC with 1.225%. The aggregate purchase price consists of two payment tranches. The first portion purchase of R13.51 million will be paid by the issue of Attacq shares at R11.96 per share. The second portion of the purchase price is payable at the earliest of 30 June 2020 or such other date triggered by certain events as defined in the agreement. The second portion of the purchase price will be R11.59 million escalating at an interest rate equal to the prime lending rate or the amount as determined according to a formula contained in the agreement.
Acquisition of the Abacus Trust’s shares in Abacus Holdings (Pty) Ltd
Attacq has reached agreement with the Abacus Trust to acquire the Abacus Trust’s shares and claims for R25 million, which it holds via the Abacus Trust and Mooirivier Mall (Pty) Ltd in Abacus Holdings (Pty) Ltd. The agreement is subject to the fulfilment of suspensive conditions.
New Development approvals:
Mall of Africa – Waterfall Land Parcel 10
Previously the Board approved bulk earthworks on this project up to R73 million, and subsequent to June 2013, the Board approved to increase this amount to R140 million. The Board has now approved the commencement of construction of the Mall of Africa development, subject to certain financing terms and pre-letting requirements. The Mall of Africa will consist of a super-regional mall of 116 000m² and parking structures of 41 000m². Total capital cost is budgeted at R3.13 billion.
Waterfall Lifestyle – Waterfall Land Parcel 15
The Board approved the development of this retail centre, with the anchor tenant being Virgin Active. The total capital cost amounts to R103.6 million.
Waterfall Allandale/K101 intersection upgrade
The Board approved the upgrade of the intersection. The upgrading of the intersection will relieve the current traffic congestion in the area and will increase access into surrounding sites and the marketability of the site. The upgrading of this intersection also forms part of the servicing of Land Parcel 9, which is a condition for clearance certificates. The total capital cost amounts to R16.5 million.
191 Directors’ report (continued) for the year ended 30 June 2013
Sale of shares in Keysha Investments 213 (Pty) Ltd
Attacq contracted with RJS Trust whereby RJS Trust will purchase Attacq’s 50% shareholding and claims in Keysha Investments 213 (Pty) Ltd for a total amount of R14 million. The agreement is suspensive on the condition that Attacq is released from all sureties given to Investec pertaining to this investment.
Attvest buy-back subscription by Attvest for Attacq shares and subsequent buy-back of Attacq shares
The Director’s Report include details of the Attvest transaction under point 5 – Legal and regulatory matters. Subsequent to the special shareholders meeting held on 27 August 2013, the transaction as explained in note 5 was implemented. The result being that Attvest subscribed for 36 187 844 (thirty six million, one hundred and eighty seven thousand, eight hundred and forty four) Attacq shares at a subscription price of R7.18 per share. The Company then repurchased 25 188 346 (twenty five million one hundred and eighty eight thousand three hundred and forty six) Attacq shares from Attvest at R10.32 per share, totalling R259 943 728 (two hundred and fifty nine million nine hundred and forty three thousand seven hundred and twenty eight Rand), as repayment of the indemnified amount in terms of the original Indemnification Agreement.
Adoption of new Memorandum of Incorporation (MOI)
The shareholders approved the adoption of the new MOI which is in line with the requirements of the Companies Act and the JSE requirements on the special shareholders meeting of 27 August 2013. The MOI has subsequently been registered with Companies and Intellectual Property Commission (CIPC).
7. Dividends
No dividends were declared by Attacq.
8. Directors
P Tredoux Chairman effective from 1 July 2012 – non-executive director MC Wilken Chief executive officer LLS van der Watt Executive director GJ Oosthuizen Executive director (resigned 20 June 2013) M Hamman Financial director (appointed 8 July 2013) BF van Niekerk Non-executive director (retired as chairman on 30 June 2012) PH Faure Non-executive director LM Ndala Non-executive director WL Masekela Non-executive director JHP van der Merwe Non-executive director MM du Toit Non-executive director (appointed 2 August 2013) HR El Haimer Non-executive director (appointed 2 August 2013) S Shaw-Taylor Non-executive director (appointed 29 November 2012) TJA Reily Alternate director to JHP van der Merwe AW Nauta Alternate director to LM Ndala
9. Company Secretary
The Company Secretary of Attacq is T Smith.
Business Address: 2nd Floor The Parkdev Building, Brooklyn Bridge, 570 Fehrsen Street, Brooklyn, 0181 Postal Address: Postnet Suite 205, Private Bag x20009, Garsfontein, 0043
10. Auditors
Deloitte & Touche will continue in office in accordance with the Companies Act.
192 STATEMENT OF FINANCIAL POSITION for the year ended 30 June 2013
Company June 2013 June 2012 Notes R’000 R’000 Restated
Assets Non-current Assets Property, plant and equipment 2 1 466 343 Investment properties 3 316 909 1 153 369 Per valuation 327 500 1 167 644 Straight-line lease debtor (10 591) (14 275) Straight-line lease debtor 10 591 14 275 Deferred initial lease expenditure 4 538 4 357 Investments in subsidiaries 4 2 377 042 1 745 808 Investment in associates 5 695 541 581 821 Other investments 6 58 379 389 853 3 464 466 3 889 826 Current Assets Trade and other receivables 13 22 995 45 809 Loans to subsidiaries 7 2 762 374 2 523 161 Loans to associates 8 405 983 592 925 Other financial assets 9 45 135 81 719 Cash and cash equivalents 10 – 63 161 3 236 487 3 306 775 Non-current Assets classified as held for sale 12.1 1 265 782 83 867 Total Assets 7 966 735 7 280 468 Equity and Liabilities Issued capital share premium and stated capital 14 2 808 061 2 808 061 Available for sale reserve 1 349 758 744 591 Equity-settled employee benefit reserve 14 5 488 – Distributable reserves 1 587 434 1 454 944 5 750 741 5 007 596 Non-current Liabilities Long-term borrowings and other financial liabilities 15 282 591 874 805 Deferred tax liabilities 11 361 358 278 768 Provision for liabilities relating to subsidiaries 4 16 189 14 876 Provision for liabilities relating to associates 5 71 355 58 201 Provision for liabilities relating to other investments 6 – 9 049 731 493 1 235 699 Current Liabilities Loans from subsidiaries 7 496 902 495 462 Loans from associates 8 – 9 283 Taxation payable 16 562 7 917 Trade and other payables 16 51 136 29 328 Bank overdraft 10 49 688 80 000 Current portion of long-term borrowings and other financial liabilities 15 636 785 359 259 1 251 073 981 249 Non-current Liabilities directly associated with assets held for sale 12.2 233 428 55 924 Total Liabilities 2 215 994 2 272 872 Total Equity and Liabilities 7 966 735 7 280 468
193 STATEMENT OF Comprehensive Income for the year ended 30 June 2013
Company June 2013 June 2012 Notes R’000 R’000 Restated
Continuing operations Gross rental income 43 326 176 632 Rental income 39 725 176 538 Straight-line lease income adjustments 3 601 94 Property expenses (16 043) (78 617) Net rental income 27 283 98 015 Other income 17 19 230 36 897 Operating and other expenses 17 (142 196) (2 720 550) Operating loss 17 (95 683) (2 585 638) Fair value adjustments 59 619 74 249 Investment properties 3 23 804 41 355 Other investments 6 29 366 43 694 Other financial assets / (liabilities) 15 6 449 (10 800) Gain on available for sale financial assets 17 34 907 1 406 192 Investment income 20 175 094 2 655 324 Finance costs 21 (99 590) (144 407) Profit before taxation 74 347 1 405 720 Taxation 19 (19 255) (177 258) Profit for the year from continuing operations 55 092 1 228 462 Discontinued operations Profit from discontinued operations net of taxation 12.3 77 398 66 688 Profit for the year 132 490 1 295 150 Other comprehensive income Gain on available for sale financial assets 22 768 571 477 837 Taxation relating to components of other comprehensive income 22 (135 006) (87 968) Realisation of available for sale financial assets 22 (28 398) (1 143 703) Other comprehensive income for the year net of taxation 22 605 167 (753 834) Total comprehensive income for the year 737 657 541 316
194 STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2013
Equity- settled Available employee Distrib- Share Share Total share for sale benefit utable Total capital premium capital reserve reserve reserves equity R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance at 30 June 2011 52 2 800 010 2 800 062 1 498 425 – 159 794 4 458 281 Total comprehensive income – – – 432 816 – 108 500 541 316 Originating from business combinations – – – – – – – Issue of shares – 7 999 7 999 – – – 7 999 Balance at 30 June 2012 – Closing balance as previously reported 52 2 808 009 2 808 061 1 931 241 – 268 294 5 007 596 Restatement – – – (1 186 650) – 1 186 650 – Balance at 30 June 2012 – Restated 52 2 808 009 2 808 061 744 591 – 1 454 944 5 007 596 Total comprehensive income – – – 605 167 – 132 490 737 657 Recognition of share-based payment reserve – – – – 5 488 – 5 488 Balance at 30 June 2013 52 2 808 009 2 808 061 1 349 758 5 488 1 587 434 5 750 741
Note 14
Included in the above is a restatement on the available for sale reserve. Refer to note 30 for detail on the restatement.
195 STATEMENT OF CASH FLOWS for the year ended 30 June 2013
Company June 2013 June 2012 Notes R’000 R’000
Cash flow from operating activities Cash generated from operating activities 28 35 999 49 399 Interest income 20 86 518 87 575 Dividends received 20 88 576 – Finance costs 21 (99 590) (144 407) Taxation paid 29 (38 028) (116 415) Cash flows relating to non-current assets held for sale (25 842) (31 674) Net cash generated from / (utilised in) operating activities 47 633 (155 522)
Cash flow from investing activities Purchase of investment property (18 593) (7 961) Sale of investment property 284 715 536 260 Property plant and equipment acquired (1 761) – Property plant and equipment disposed 46 9 Associates acquired (162 319) (131 844) Associates disposed – 585 860 Other investments disposed 380 403 1 350 040 Other investments acquired (14 819) (167 190) Cash flow relating to non-current assets held for sale 90 627 – Net cash generated from investing activities 558 299 2 165 174
Cash flow from financing activities Capital raised – 7 999 Long-term borrowings raised 453 887 – Long-term borrowings repaid (502 868) (1 484 712) Loans from group companies repaid (7 843) (508 619) Loans to group companies advanced (526 033) (68 898) Cash flow relating to non-current assets held for sale (55 924) – Net cash utilised in financing activities (638 781) (2 054 230)
Total cash movement for the year (32 849) (44 578) Cash at the beginning of the year (16 839) 27 739
Total cash at the end of the year 10 (49 688) (16 839)
196 Prof Flip and Nakkie van der Watt – Shareholders Photographed at Glenfair Boulevard, Lynnwood Manor, Pretoria
When did you obtain your Attacq shares? We obtained our shares in 2002.
What is the secret in raising children with exceptional entrepreneurial skills? We allowed them the freedom to independently voice their opinions; we shared their diverse interests and activities, we supported them in all their initiatives and obviously lots of prayer!
What was the highlight in your career? Amongst the many highlights definitely my 15 year tenure as Dean of Student affairs at the University of Pretoria and the involvement with students!
What do you enjoy most about living in Kingswood Village? To be able to live securely and peacefully with an abundance of time to travel whilst our health stills allows it.
How long have you been married? What is the secret to a happy life together? We have been married for 51 years. And I have to say this in Afrikaans: “Naas die genade van Bo, ook nog uithou, moed hou en jou bek hou!!“
197 accounting policies for the year ended 30 June 2013
1. Presentation of financial statements
The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practises Committtee, Financial Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and requirements of the South African Companies Act, 71 of 2008 (as amended) (the Companies Act). The annual financial statements have been prepared on the historical cost basis, except for the measurement of investment properties and financial instruments at fair value or amortised cost, and incorporate the principal accounting policies set out below. They are presented in South African Rands.
These accounting policies are consistent with the previous periods.
1.1 Investment properties
Investment properties are properties held to earn rentals and/or capital appreciation (including property under construction for such purposes).
Investment property is recognised as an asset when it is probable that the future economic benefits that are associated with the investment property will flow to the enterprise, and the cost of the investment property can be measured reliably.
Investment property is initially recognised at cost. Costs include costs incurred initially, transaction costs and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.
Where a property is under construction with the purpose of holding the completed property for long-term rental yields or for capital appreciation, such property is classified as investment property under construction. Maintenance and repairs, which neither materially add to the value of the properties nor prolong their useful lives, are charged against income.
Tenant installations are costs paid by the lessor on behalf of the lessee on signature of the lease agreement for cost spent by the lessor to ensure the building is in the condition suitable for the lease. Tenant installations on the first lease are capitalised against the project, while tenant installations on subsequent leases signed are capitalised and expensed through the statement of comprehensive income over the lease period.
Fair value
Subsequent to initial measurement investment property is measured at fair value. 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.
If the fair value of investment property under construction is not determinable, it is measured at cost until the earlier of the date it becomes determinable or construction is complete. In the current period the Company re-assessed the judgements made on buildings under construction or refurbishment. The value of these investments is determined with reference to the cost incurred to date plus a portion of the final anticipated fair value gain upon completion of the building. The final anticipated fair value gain upon completion of the building is the difference between the total cost of the development and the value of the building calculated using the capitalised net income method. The realised fair value gain, being a portion of the present value of the anticipated fair value gain, is determined with reference to the stage of completion of the building.
The change in estimate has no impact on investment properties (refer note 3).
1.2 Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses. Depreciation is provided on all property, plant and equipment to write down the cost, less residual value, using the straight line method of depreciation, over the items’ estimated useful lives.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, annually. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater that it’s estimated recoverable amount.
198 accounting policies (continued) for the year ended 30 June 2013
1.3 Financial instruments
Initial recognition and measurement
The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities are recognised on the statement of financial position when the Company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are recognised initially at fair value. In the case of financial assets or liabilities not classified at fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instruments are added to the fair value. For financial assets carried at fair value, the change in fair value is recognised in profit or loss or in equity, as appropriate.
Subsequent measurement
Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period.
Net gains or losses on the financial instruments at fair value through profit or loss exclude dividends and interest.
Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.
Held-to-maturity investments are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.
Available for sale financial assets are subsequently measured at fair value. This excludes equity investments for which a fair value is not determinable, which are measured at cost less accumulated impairment losses.
Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in equity until the asset is disposed of or determined to be impaired. Interest on available for sale financial assets calculated using the effective interest method is recognised in profit or loss as part of other income.
Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.
Fair value determination
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and reference to the proportionate interest held by the Company in the net equity of the investee.
Impairment of financial assets
At each reporting date the Company assesses all financial assets, to determine whether there is objective evidence that a financial asset or Company of financial assets has been impaired.
For amounts due to the Company, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.
Impairment losses are recognised in profit or loss.
Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised. Reversals of impairment losses are recognised in profit or loss except for equity investments classified as available for sale.
199 accounting policies (continued) for the year ended 30 June 2013
Loans to / (from) group companies
These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs.
Loans to group companies are classified as loans and receivables. Loans from group companies are classified as financial liabilities measured at amortised cost.
Loans to shareholders, directors, managers and employees
These financial assets are classified as loans and receivables.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method to the extent that significant differences occur. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method to the extent that significant differences occur.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.
Cash from financing activities and cash from investing activities are calculated as the gross amount in the respective accounts.
Bank overdraft and borrowings
Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Company’s accounting policy for borrowing costs.
Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 18.
The fair value determine at the grant date is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of the equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimate, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefit reserve.
Derivatives
Derivative financial instruments, which are not designated as hedging instruments, consisting of interest rate swaps, are initially measured at fair value on the contract date, and are re-measured to fair value at subsequent reporting dates. Derivatives are classified as financial assets at fair value through profit or loss.
200 accounting policies (continued) for the year ended 30 June 2013
1.4 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Tax expenses
Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: • a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or • a business combination.
Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income.
Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity.
1.5 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
The Company as lessor – operating leases
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
The Company as lessee – finance leases
Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company’s general policy on borrowing costs (See 1.11). Contingent rentals are recognised as expenses in the periods in which they are incurred.
201 accounting policies (continued) for the year ended 30 June 2013
1.6 Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
1.7 Impairment of assets
The Company assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the Company also tests goodwill for impairment annually.
If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.
The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order: • first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and • then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.
The Company assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.
1.8 Share capital and equity
Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.
If the Company reacquires its own equity instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) on those instruments are deducted from equity until the shares are cancelled or reissued. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. Consideration paid or received shall be recognised directly in equity.
1.9 Provisions and contingencies
Provisions are recognised when: • the Company has a present obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the obligation.
The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.
Contingent commitments and contingent liabilities are not recognised. Contingencies are disclosed in notes 24 and 25.3.
1.10 Revenue
Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.
Interest is recognised, in profit or loss, using the effective interest rate method.
Dividends are recognised, in profit or loss, when the Company’s right to receive payment has been established.
202 accounting policies (continued) for the year ended 30 June 2013
1.11 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows: • Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary investment of those borrowings. • Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.
The capitalisation of borrowing costs commences when: • expenditures for the asset have occurred; • borrowing costs have been incurred and • activities that are necessary to prepare the asset for its intended use or sale are in progress.
Capitalisation is suspended during extended periods in which active development is interrupted.
Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
1.12 Translation of foreign currencies
Foreign currency transactions
A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
At the end of the reporting period: • foreign currency monetary items are translated using the closing rate; • non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and • non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised in profit or loss in the period in which they arise.
When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.
Cash flows arising from transactions in a foreign currency are recorded in Rands by applying to the foreign currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.
Investments in subsidiaries, joint ventures and associates
The results and financial position of a foreign operation are translated into the functional currency using the following procedures: • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; • income and expenses for each item of profit or loss are translated at exchange rates at the dates of the transactions; and • all resulting exchange differences are recognised to other comprehensive income and accumulated as a separate component of equity.
Exchange differences arising on a monetary item that forms part of a net investment in a foreign operation are recognised initially to other comprehensive income and accumulated in the translation reserve. They are recognised in profit or loss as a reclassification adjustment through to other comprehensive income on disposal of net investment.
203 accounting policies (continued) for the year ended 30 June 2013
1.13 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the key assumptions and judgements concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Trade receivables, Held to maturity investments and Loans and receivables
The Company assesses its trade receivables, held to maturity investments and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the Company makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset.
Effective date of property transactions
In the event of an investment property being disposed / acquired, the effective date of the transaction is generally treated as the date when all suspensive conditions have been met, and the buyer becomes contractually entitled to the income and expenses associated with the property, and not when the property is transferred.
Fair value estimation
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Company is the current bid price.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.
Impairment testing
The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value- in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions.
The Company reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including industry specific and macroeconomic variances.
For direct and indirect foreign investments and loans, the Company also takes into account foreign currency fluctuations and international markets.
204 accounting policies (continued) for the year ended 30 June 2013
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the provision.
Provisions were raised and management determined an estimate based on the information available.
Expected manner of realisation for deferred tax
Deferred tax is provided for on the fair value adjustments of investment properties based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability. Refer note 11 – Deferred tax.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
Useful lives of property, plant and equipment
The Company reviews the estimated useful lives of property, plant and equipment at the end of each reporting period.
Item Useful life • Cleaning equipment 3 years • Computer equipment and software 3 years • Motor vehicles 5 years • kitchen equipment 3 years • other fixed assets 5–10 years
Valuation of financial instruments
The Company uses valuation techniques that include inputs that are not based on observable market data to estimate the fair value of certain types of financial instruments. Note 1.3 on Financial instruments provides detailed information about the key assumptions used in the determination of the fair value of financial instruments, as well as the detailed sensitivity analysis for these assumptions.
The directors believe that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments.
1.14 New accounting pronouncements
The Company has not yet adopted the following pronouncements, which have been issued by the International Accounting Standards Board. The Company is considering these pronouncements but believe that it will not have a material impact on its results, financial position or cash flow:
Accounting standard / interpretation Effective date for years starting on or after: IAS 1 Amendments resulting from the Annual Improvement cycles 1 January 2013 IAS 12 Income taxes 1 January 2013 IAS 16 Property Plant and Equipment 1 January 2013 IAS 19 Employee Benefits Revised 1 January 2013 IAS 27 Separate Financial Statements 1 January 2013 IAS 28 Investment in Associates and Joint Ventures 1 January 2013 IAS 32 Financial Instruments : Presentation 1 January 2014 IAS 34 Interim Financial Reporting 1 January 2013 IAS 36 Amendments resulting from recoverable amount disclosures 1 January 2014 IAS 39 Amendments for novation of derivatives 1 January 2014 IFRS 7 Financial Instruments : Disclosure 1 January 2013 IFRS 9 Financial Instruments 1 January 2015 IFRS 10 Consolidated Financial Statements 1 January 2013 IFRS 11 Joint Arrangements 1 January 2013 IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 IFRS 13 Fair Value Measurement 1 January 2013
205 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
2. Property, plant and equipment
Company June 2013 June 2012 Accumulated Carrying Accumulated Carrying Cost depreciation value Cost depreciation value R’000 R’000 R’000 R’000 R’000 R’000
Other fixed assets 776 (720) 56 413 (238) 175 Cleaning equipment 131 (123) 8 131 (98) 33 Kitchen equipment 314 (314) – 314 (314) – Computer equipment and software 1 431 (68) 1 363 33 (33) – Motor vehicles 381 (342) 39 536 (401) 135 Total 3 033 (1 567) 1 466 1 427 (1 084) 343
The carrying value of property, plant and equipment can be reconciled as follows:
Company Carrying value at Depreciation Carrying beginning of and value at end the year Acquisitions Disposals impairment of the year R’000 R’000 R’000 R’000 R’000
June 2013 Other fixed assets 175 363 – (482) 56 Cleaning equipment 33 – – (25) 8 Kitchen equipment – – – – – Computer equipment and software – 1 398 – (35) 1 363 Motor vehicles 135 – (46) (50) 39 343 1 761 (46) (592) 1 466
June 2012 Other fixed assets 216 – (9) (32) 175 Cleaning equipment 77 – – (44) 33 Kitchen equipment 35 – – (35) – Computer equipment 7 – – (7) – Motor vehicles 197 – – (62) 135 532 – (9) (180) 343
Motor vehicles are encumbered as per note 15.
206 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties
Company June 2013 June 2012 R’000 R’000
Fair value Balance at beginning of the year 1 153 369 1 104 446 Additions 18 593 7 961 Net gain from fair value adjustment 129 720 119 711 Continuing operations 23 804 41 355 Discontinued operations 105 916 78 356 Transfer to assets held for sale / disposal (984 773) (78 749) Balance at end of the year 316 909 1 153 369
Reconciled as follows: Cost 812 284 794 083 Fair value adjustment 507 694 452 959 Straight-line lease income adjustment against fair value – Continuing operations (10 591) (16 228) Straight-line lease income adjustment against fair value – Discontinued operations (7 704) 1 304 Transfers to assets held for sale and disposals (984 774) (78 749) Total value 316 909 1 153 369
Investment properties consist of:
Commercial
Building G, DTI Campus (50% undivided share, Pretoria) Balance at the beginning of the year – – Net gain from fair value adjustment – 7 000 Straight-line lease income adjustment against fair value – 1 304 Transfer to assets held for sale / disposal – (8 304) Balance at the end of the year – – Reconciled as follows: Cost – – Fair value adjustments – 7 000 Straight-line lease income adjustment against fair value – 1 304 Transfer to assets held for sale / disposal – (8 304) – –
Kumba Head Office (Centurion) Balance at the beginning of the year – – Additions – – Net gain from fair value adjustment – 7 084 Straight-line lease income adjustment against fair value – – Transfer to assets held for sale / disposal – (7 804) Balance at the end of the year – – Reconciled as follows: Cost – – Fair value adjustments – 7 084 Straight-line lease income adjustment against fair value – – Transfer to assets held for sale / disposal – (7 084) – –
207 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Company June 2013 June 2012 R’000 R’000
Great Westerford (50% undivided share, Cape Town) Balance at beginning of the year 486 000 502 593 Additions 2 875 1 737 Net gain from fair value adjustment 57 834 (19 157) Straight-line lease income adjustment against fair value – discontinued operations 2 288 827 Dispose of 50% undivided share in Great Westerford (290 126) – Transfer to assets held for sale / disposal (258 871) – Balance at end of the year – 486 000 Reconciled as follows: Cost 345 008 342 133 Fair value adjustments 206 718 148 884 Straight-line lease income adjustment against fair value (2 729) (5 017) Dispose of 50% undivided share in Great Westerford (290 126) – Transfer to assets held for sale / disposal (258 871) – – 486 000
Hampton Office Park (Johannesburg) Balance at beginning of the year – – Additions – 392 Net gain from fair value adjustment – 59 746 Straight-line lease income adjustment against fair value – 3 222 Transfer to assets held for sale / disposal – (63 360) Balance at end of the year – – Reconciled as follows: Cost – 392 Fair value adjustments – 62 968 Straight-line lease income adjustment against fair value – – Transfer to assets held for sale / disposal – (63 360) – –
Atterbury House (Cape Town) Balance at beginning of the year 285 296 274 358 Additions 11 782 3 Net gain from fair value adjustment 38 951 10 792 Straight-line lease income adjustment against fair value (87) 143 Transfer to assets held for sale / disposal (335 942) – Balance at end of the year – 285 296 Reconciled as follows: Cost 146 473 134 691 Fair value adjustments 191 825 152 874 Straight-line lease income adjustment against fair value – discontinued operations (2 356) (2 269) Transfer to assets held for sale / disposal (335 942) – – 285 296
208 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
Company June 2013 June 2012 R’000 R’000
Retail
Glenfair Boulevard Shopping Centre (Pretoria) * Balance at beginning of the year 289 275 247 497 Additions 3 830 4 642 Net gain from fair value adjustment 27 405 39 470 Straight-line lease income adjustment against fair value (3 601) (2 334) Balance at end of the year 316 909 289 275 Reconciled as follows: Cost 253 700 249 870 Fair value adjustments 73 800 46 395 Straight-line lease income adjustment against fair value (10 591) (6 990) 316 909 289 275
Sanridge Square (50% undivided share, Midrand) Balance at beginning of the year 92 798 80 000 Additions 106 1 185 Net gain from fair value adjustment 7 597 13 565 Straight-line lease income adjustment against fair value (667) (1 952) Transfer to assets held for sale / disposal (99 834) – Balance at end of the year – 92 798 Reconciled as follows: Cost 67 102 66 996 Fair value adjustments 35 351 27 754 Straight-line lease income adjustment against fair value (2 619) (1 952) Transfer to assets held for sale / disposal (99 834) – – 92 798
Total investment properties 316 909 1 153 369
* Investment property under construction or refurbishment.
Investment properties are encumbered as described in note 15.
Fair valuations The effective date of the revaluations was 30 June 2013. The previous valuation was done on 30 June 2012.
Buildings and buildings under construction The revaluations for investment property buildings and buildings under construction were performed by the Valuation Division of Old Mutual Investment Group South Africa (Pty) Ltd (OMIGSA), a registered independent and professional valuer. The independent valuers at OMIGSA and the OMIGSA property valuation manager, Mr. Trevor King (Registered Professional Valuer and Chartered Valuation Surveyor), are not connected to the Group and have recent and substantial experience in valuing investment properties of this nature.
The industry accepted capitalisation of normalised net income methodology has been adopted for valuation of the investment properties, and includes the following: - consideration of market norm operating costs, including letting commission and tenant installations, - inclusion of perpetual vacancy factors, as well as short-term vacancy provisions on specific buildings, and - application of market norm market rentals, capitalisation rates and discount rates.
Capitalisation rates adopted for the valuations ranged between 6.75% to 10% (2012: 7.25% to 10%).
209 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
3. Investment properties (continued)
In addition to the valuations performed, certain cost provisions and obligations were included in determining the fair value of the properties disclosed.
The value of buildings under construction or refurbishment, was determined with reference to the cost incurred to date plus a portion of the final anticipated fair value gain upon completion of the building. The final anticipated fair value gain upon completion of the buildings is the difference between the total costs of development and the value of the building calculated using the capitalised net income method.
The realised fair value gain, being a portion of the present value of the anticipated fair value gain, is determined with reference to the stage of completion of the building. The stage of completion of the building is determined with respect to the cost to date of the top structure and the total anticipated costs excluding the land and the related funding costs. The final anticipated fair value of the building is determined upon completion of the building using the external valuation upon completion.
4. Investments in subsidiaries
Company June 2013 June 2012 R’000 R’000
Balance at the beginning of the year 1 730 932 749 855 Additions – 707 939 Net gain from fair value adjustment 705 629 253 107 Disposals (36 267) (37) Transfer to non-current assets held for sale (29 738) – Impairment loss (8 390) – Adjustment in provision for liabilties relating to subsidiaries (1 313) 20 068 Balance at the end of the year 2 360 853 1 730 932
Reconciled as follows: Investment in subsidiaries 2 377 042 1 745 808 Provision for liabilities relating to subsidiaries (16 189) (14 876) Net investment in subsidiaries 2 360 853 1 730 932
Investments in subsidiaries comprise the following: De Ville Shopping Centre (Pty) Ltd (100%) Balance at the beginning of the year (7 265) (16 768) Fair value adjustment through other comprehensive income – – Provision for liabilities associated with the subsidiary (3 923) 9 503 Balance at the end of the year (11 188) (7 265)
Harlequin Duck Properties 204 (Pty) Ltd (100%) Balance at the beginning of the year 5 763 8 251 Fair value adjustment through other comprehensive income (309) (2 488) Balance at the end of the year 5 454 5 763
Lynnwood Bridge Office Park (Pty) Ltd (100%) Balance at the beginning of the year 72 269 20 041 Additions – – Fair value adjustment through other comprehensive income 150 109 52 228 Balance at the end of the year 222 378 72 269
Atterbury Attfund Investment Company No. 3 (Pty) Ltd (80%) Balance at the beginning of the year 42 233 36 563 Fair value adjustment through other comprehensive income – 5 670 Impairment loss (8 390) – Balance at the end of the year 33 843 42 233
210 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
4. Investments in subsidiaries (continued)
Company June 2013 June 2012 R’000 R’000
Atterbury Attfund Investment Company No. 1 (Pty) Ltd (100%) Balance at the beginning of the year 53 928 47 102 Fair value adjustment through other comprehensive income 99 6 826 Balance at the end of the year 54 027 53 928
Atterbury Property Gauteng (Pty) Ltd (100%) Balance at the beginning of the year – 37 Disposal – (37) Balance at the end of the year – –
Atterbury Property Johannesburg (Pty) Ltd (100%) Balance at the beginning of the year (111) (8) Fair value adjustment through other comprehensive income – – Provision for liabilities associated with the subsidiary 111 (103) Balance at the end of the year – (111)
Highgrove Property Holdings (Pty) Ltd (100%) Balance at the beginning of the year 86 007 81 730 Fair value adjustment through other comprehensive income (12 267) 4 277 Balance at the end of the year 73 740 86 007
Lady Brooks (Pty) Ltd (100%) Balance at the beginning of the year 25 882 23 636 Fair value adjustment through other comprehensive income 56 2 246 Balance at the end of the year 25 938 25 882
Lord Charles and Lady Brooks Office Park Holdings (Pty) Ltd (100%) Balance at the beginning of the year 46 865 39 968 Fair value adjustment through other comprehensive income 138 6 897 Balance at the end of the year 47 003 46 865
Atterbury Waterfall Investment Company (Pty) Ltd (80%) Balance at the beginning of the year 541 435 319 042 Fair value adjustment through other comprehensive income 319 702 222 393 Balance at the end of the year 861 137 541 435
Atterbury Property Investments (Pty) Ltd (100%) Balance at the beginning of the year 98 479 84 909 Fair value adjustment through other comprehensive income (4 625) 13 570 Balance at the end of the year 93 854 98 479
Atterbury Attfund Investment Company No. 2 (Pty) Ltd (indirect subsidiary) (100%) Balance at the beginning of the year 18 657 18 122 Fair value adjustment through other comprehensive income 1 703 535 Balance at the end of the year 20 360 18 657
Atterbury Mauritius Consortium (Pty) Ltd (80%) Balance at the beginning of the year 81 439 17 124 Fair value adjustment through other comprehensive income 63 357 64 315 Balance at the end of the year 144 796 81 439
211 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
4. Investments in subsidiaries (continued)
Company June 2013 June 2012 R’000 R’000
Riverport Trading 143 (Pty) Ltd (51%) (Disposed during the period) Balance at the beginning of the year 36 267 31 694 Fair value adjustment through other comprehensive income – 4 573 Disposal (36 267) – Balance at the end of the year – 36 267
Le Chateau Property Company (Pty) Ltd (100%) Balance at the beginning of the year (7 500) (18 168) Fair value adjustment through other comprehensive income – – Movement in provision for liabilities associated with the subsidiary 2 498 10 668 Balance at the end of the year (5 002) (7 500)
Atterbury Parkdev Consortium (Pty) Ltd (100%) Balance at the beginning of the year 43 050 38 450 Additions – – Fair value adjustment through other comprehensive income (13 312) 4 600 Transfer to non-current assets held for sale (29 738) – Balance at the end of the year – 43 050
Majestic Offices (Pty) Ltd (indirect subsidiary) (50%) Balance at the beginning of the year 5 103 – Fair value adjustment through other comprehensive income (2 074) 5 103 Balance at the end of the year 3 029 5 103
Abacus Holdings (Pty) Ltd (75%) Balance at the beginning of the year 448 668 – Additions – 707 939 Fair value adjustment through other comprehensive income 160 139 (259 271) Balance at the end of the year 608 807 448 668
Nieuwtown Property Development Company (Pty) Ltd (indirect subsidiary) (50%) Balance at the beginning of the year 18 818 – Fair value adjustment through other comprehensive income 1 313 18 818 Balance at the end of the year 20 131 18 818
Atterbury Investment Holdings International Ltd (100%) Balance at the beginning of the year – – Fair value adjustment through other comprehensive income 159 – Balance at the end of the year 159 –
Mantrablox (Pty) Ltd (80%) Balance at the beginning of the year – – Fair value adjustment through other comprehensive income 15 877 – Balance at the end of the year 15 877 –
Lynnaur Investments (Pty) Ltd (75%) Balance at the beginning of the year 102 815 – Fair value adjustment through other comprehensive income (2 904) 102 815 Balance at the end of the year 99 911 102 815
212 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
4. Investments in subsidiaries (continued)
Company June 2013 June 2012 R’000 R’000
Razorbill Properties 91 (Pty) Ltd (100%) Balance at the beginning of the year – – Fair value adjustment through other comprehensive income 28 486 – Balance at the end of the year 28 486 –
Aldabri 96 (Pty) Ltd – indirect subsidiary (20%)* Balance at the beginning of the year 18 130 18 130 Fair value adjustment through other comprehensive income (18) – Balance at the end of the year 18 112 18 130
Investments in subsidiaries 2 377 042 1 745 808 Provision for liabilities relating to subsidiaries (16 189) (14 876)
* Aldabri 96 (Pty) Ltd was incorrectly classified under associates in the prior years.
5. Investments in associates
Company June 2013 June 2012 R’000 R’000
Balance at the beginning of the year 523 620 2 765 273 Additions 174 311 385 643 Disposal / write-down of investment – (2 623 767) Impairment (74 667) (2 486) Net gain from fair value adjustment 64 076 19 523 Movement in provision for surety (3 973) (20 566) Transfers from other investments (9 049) – Transfer to assets held for sale (50 131) – Balance at the end of the year 624 186 523 620
Reconciled as follows: Investments in associates 695 541 581 821 Provision for surety (71 355) (58 201) Balance at the end of the year 624 186 523 620
Investments in associates comprise the following:
Attfund Ltd Balance at the beginning of the year – 2 623 767 Write-down of investment – (2 623 767) Balance at the end of the year – –
Effective 1 September 2011 Attfund Ltd declared a dividend in specie whereby Attfund Retail Ltd shares were distributed to all its shareholders. Hyprop Investments Ltd acquired all the shares in Attfund Retail Ltd from the existing Attfund Retail Ltd shareholders. Payment was part in cash and part in Hyprop Investments Ltd combined units.
213 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
5. Investments in associates (continued)
Company June 2013 June 2012 R’000 R’000
Rapfund Holdings (Pty) Ltd (23%) Balance at the beginning of the year – 82 026 Transfer to associate investment (Reach) – (82 026) Balance at the end of the year – –
Paradise Coast Property Development (Pty) Ltd (33.3%) Balance at the beginning of the year (347) (108) Movement in provision for surety (479) (239) Balance at the end of the year (826) (347)
Keysha Investments 213 (Pty) Ltd (50%) Balance at the beginning of the year (24 430) (20 499) Movement in provision for surety 10 766 (3 931) Balance at the end of the year (13 664) (24 430)
Brooklyn Bridge Office Park (Pty) Ltd (25%) Balance at the beginning of the year 50 537 43 476 Fair value adjustment through other comprehensive income 4 936 7 061 Balance at the end of the year 55 473 50 537
Travenna Development Company (Pty) Ltd (36%) Balance at the beginning of the year 56 537 53 640 Fair value adjustment through other comprehensive income 9 162 2 897 Balance at the end of the year 65 699 56 537
Geelhoutboom Estate (Pty) Ltd (36.7%) Balance at the beginning of the year (16 965) (15 346) Movement in provision for surety (11 892) (1 619) Balance at the end of the year (28 857) (16 965)
The Club Retail Park (Pty) Ltd (31%) Balance at the beginning of the year (1 810) (1 683) Movement in provision for surety (2 041) (127) Balance at the end of the year (3 851) (1 810)
Retail Africa Consortium Holdings (Pty) Ltd (Reach) (20%) * Balance at the beginning of the year 261 456 – Transfer from other investments – 23 450 Transfer from associate investment (Rapfund Holdings (Pty) Ltd) – 82 026 Additions 62 235 158 466 Impairment (74 667) (2 486) Balance at the end of the year 249 024 261 456
* The Company has an effective 50% interest in Reach.
214 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
5. Investments in associates (continued)
Company June 2013 June 2012 R’000 R’000
Arctospark (Pty) Ltd (50%) Balance at the beginning of the year (14 649) – Additions 50 000 – Movement in provision for surety 14 780 (14 649) Transfer to assets held for sale (50 131) – Balance at the end of the year – (14 649)
An additional provision for impairment of R34.4 million has been made against this investment recognised through profit and loss.
Atterbury Property Holdings (Pty) Ltd (25%) Balance at the beginning of the year 103 726 – Additions 11 992 103 726 Balance at the end of the year 115 718 103 726
MAS Real Estate Inc (21.1%) * Balance at the beginning of the year 109 565 – Additions 50 084 100 000 Fair value adjustment through other comprehensive income 49 978 9 565 Balance at the end of the year 209 627 109 565
Fountains Regional Mall (Pty) Ltd (12.73%) Balance at the beginning of the year – – Transfer from Other investments (9 049) – Movement in provision for surety (14 985) – Balance at the end of the year (24 034) –
During the current period shareholding in Fountains Regional Mall (Pty) Ltd increased as a result of buying out diluting shareholders interest. The effective interest of the Company increased to 35.9%.
Sinco Investments Six (Pty) Ltd (Mall of Namibia) (25%) Balance at the beginning of the year – – Movement in provision for surety (123) Balance at the end of the year (123) –
The Company has a 31.25% effective interest in the development. This is a 931 million Namibian dollar project that is still under development and accordingly doesn’t show material net equity at this stage. The target completion date is October 2014.
Investments in associates 695 541 581 821 Provision for liabilities relating to associates (71 355) (58 201)
* MAS Real Estate Inc was incorrectly classified under other investments in the prior year.
215 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
5. Investments in associates (continued)
Proportion Owned Company June 2013 June 2012 % %
Proportion interest held in associates:
Attfund Ltd (liquidated October 2012) – 42.5 Paradise Coast Property Development (Pty) Ltd 33.3 33.3 Keysha Investments 213 (Pty) Ltd 50.0 50.0 Brooklyn Bridge Office Park (Pty) Ltd 25.0 25.0 Travenna Development Company (Pty) Ltd 36.0 36.0 Geelhoutboom Estate (Pty) Ltd 36.7 36.7 The Club Retail Park (Pty) Ltd 31.0 31.0 Retail Africa Consortium Holdings (Pty) Ltd 20.0 20.0 Arctospark (Pty) Ltd 50.0 50.0 Atterbury Property Holdings (Pty) Ltd 25.0 25.0 MAS Real Estate Inc 21.1 23.7 Fountains Regional Mall (Pty) Ltd * 12.73 9.5 Sinco Investments Six (Pty) Ltd 25.0 –
Assets Liabilities Revenue Profit/(loss) R’000 R’000 R’000 R’000
June 2013 Paradise Coast Property Development (Pty) Ltd 24 538 27 016 – (1 323) Keysha Investments 213 (Pty) Ltd (Val de Vie) 28 610 84 223 371 (6 753) Brooklyn Bridge Office Park (Pty) Ltd 624 119 402 227 93 737 17 135 Travenna Development Company (Pty) Ltd 382 974 203 812 31 993 25 539 Geelhoutboom Estate (Pty) Ltd 5 841 59 434 – (7 330) The Club Retail Park (Pty) Ltd 227 777 240 180 11 100 (15 122) Retail Africa Consortium Holdings (Pty) Ltd 644 629 54 294 114 (2 643) Arctospark (Pty) Ltd 1 682 680 1 343 604 20 924 268 375 Atterbury Property Holdings (Pty) Ltd 1 006 736 765 967 118 241 47 018 MAS Real Estate Inc 1 108 572 271 191 52 548 11 325 Fountains Regional Mall (Pty) Ltd 269 670 458 462 41 635 (91 482) Sinco Investments Six (Pty) Ltd 310 648 311 263 – (304)
June 2012 Paradise Coast Property Development (Pty) Ltd 26 074 26 837 – (439) Keysha Investments 213 (Pty) Ltd (Val de Vie) 33 045 81 905 16 (1 074) Brooklyn Bridge Office Park (Pty) Ltd 627 058 421 950 46 813 11 228 Travenna Development Company (Pty) Ltd 423 614 266 775 28 223 7 838 Geelhoutboom Estate (Pty) Ltd 16 488 62 752 – 8 045 The Club Retail Park (Pty) Ltd 202 050 202 189 9 500 (10 422) Retail Africa Consortium Holdings (Pty) Ltd 608 542 54 538 – (120 079) Arctospark (Pty) Ltd 1 303 865 1 333 164 – (112 245) Atterbury Property Holdings (Pty) Ltd 397 738 229 025 32 656 (597) MAS Real Estate Inc 660 922 238 144 22 017 (5 254)
* During the current year the shareholding in Fountains Regional Mall (Pty) Ltd increased as a result of acquiring other shareholders’ interest. The effective interest of the Company increased to 35.9%.
216 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Other investments
Company June 2013 June 2012 R’000 R’000
Fair value
Balance at the beginning of the year 380 804 67 175 Additions 14 819 1 592 388 Impairment (10 403) – Disposals (363 994) (1 327 054) Provision for liabilities relating to other investments – (4 171) Net gain from fair value adjustment 28 104 52 466 Transfer to associates 9 049 – Balance at the end of the year 58 379 380 804
Reconciled as follows: Cost 86 967 352 079 Fair value adjustment / (impairment loss) (28 588) 28 725 Balance at the end of the year 58 379 380 804
Other investments comprise the following:
Rainprop (Pty) Ltd Balance at the beginning of the year 6 741 4 242 Net (loss) / gain from fair value adjustment (1 262) 2 499 Balance at the end of the year 5 479 6 741
Fountains Regional Mall (Pty) Ltd Balance at the beginning of the year (9 049) (4 878) Net loss from fair value adjustment – (4 171) Transfer to associates 9 049 – Balance at the end of the year – (9 049)
Isibaya House (Pty) Ltd Balance at the beginning of the year – 86 Net loss from fair value adjustment – (86) Balance at the end of the year – –
Retail Africa Wingspan Investments (Pty) Ltd Balance at the beginning of the year – 23 450 Transfer to investment in associates (Reach) – (23 450) Balance at the end of the year – –
Investment through Foreign Investment Allowance Investec Securities Limited Balance at the beginning of the year 48 484 44 273 Additions 14 819 – Net gain from fair value adjustment – 4 211 Impairment loss (10 403) – Balance at the end of the year 52 900 48 484
217 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
6. Other investments (continued)
Company June 2013 June 2012 R’000 R’000
Hyprop Investments Ltd Balance at the beginning of the year 334 628 – Additions – 1 615 838 Disposals (363 994) (1 324 904) Net gain from fair value adjustment 29 366 43 694 Balance at the end of the year – 334 628
Reconciled as follows: Total other investments 58 379 389 853 Provision for liabilities relating to other investments – (9 049) Total value 58 379 380 804
The Company has investments in the following companies:
Company June 2013 June 2012 % %
Unlisted Isibaya House (Pty) Ltd – 18.75 Fountains Regional Mall (Pty) Ltd – 9.50 Rainprop (Pty) Ltd 1.50 1.50 Stenham European Shopping Centre Fund Ltd 4.50 4.50
Listed Hyprop Investments Ltd – 2.22
Investment through foreign investment allowance During 2008, the Company acquired an investment in Stenham European Shopping Centre Fund Ltd (SESCF), an entity listed on the Channel Island Stock Exchange, by way of an asset swap agreement with Investec Securities Limited. The underlying asset of SESCF is Nova Eventis Regional Shopping Centre, a 91 000m2 regional mall located near Leipzig, Germany.
The fair value of the foreign investment allowance, as determined by the directors and based on the equity of SESCF were calculated on 36 070 shares (2012: 20 517 shares) held by the Company in SESCF. The management accounts show a value of Euro 149.1 per share (2012: Euro 224.9) at currency exchange rate of R12.85/Euro (2012: R10.50/Euro). Management however decided to make an additional impairment of Euro 34.97 per share due to market conditions. The value therefore used to value SESCF was Euro 114.13 per share.
During 2009 the Company entered into an option agreement with Wattchatt (Pty) Ltd (a related entity), to acquire Leipzig Nova Eventis Consortium (Pty) Ltd, which holds an additional 30 545 shares (2012: 17 374 shares) (3.81% shareholding) in SESCF. This option was still in place at year end.
218 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
7. Loans to / (from) subsidiaries
Company June June June June June June 2013 2013 2013 2012 2012 2012 Loan Impair- Loan Impair- amount ment Total amount ment Total R’000 R’000 R’000 R’000 R’000 R’000
Loans have been made to / (received from) the following subsidiaries:
Subsidiaries Atterbury Waterfall Investment Company (Pty) Ltd 1 016 045 – 1 016 045 891 320 – 891 320 Lynnwood Bridge Office Park (Pty) Ltd 169 219 – 169 219 159 135 – 159 135 Riverport Trading 143 (Pty) Ltd – – – 4 007 – 4 007 Atterbury Attfund Investment Company No. 3 (Pty) Ltd (42 453) – (42 453) (43 325) – (43 325) Design Square Shopping Centre (Pty) Ltd (154 644) – (154 644) (148 147) – (148 147) Harlequin Duck Properties 204 (Pty) Ltd (5 432) – (5 432) (5 836) – (5 836) Lady Brooks (Pty) Ltd (25 926) – (25 926) (26 182) – (26 182) Lord Charles and Lady Brooks Office Park (Pty) Ltd (46 463) – (46 463) (47 656) – (47 656) Atterbury Mauritius Consortium (Pty) Ltd 223 884 – 223 884 253 518 – 253 518 De Ville Shopping Centre (Pty) Ltd 98 907 – 98 907 82 090 – 82 090 Atterbury Property Johannesburg (Pty) Ltd (21) – (21) (43) – (43) Atterbury Attfund Investment Company No. 2 (Pty) Ltd (75 979) – (75 979) (77 730) – (77 730) Razorbill Properties 91 (Pty) Ltd 366 191 – 366 191 365 452 – 365 452 Atterbury Property Investments (Pty) Ltd 25 – 25 12 – 12 Atterbury Parkdev Consortium (Pty) Ltd 36 772 – 36 772 763 – 763 Le Chateau Property Company (Pty) Ltd 36 968 (22 023) 14 945 34 362 (4 653) 29 709 Highgrove Property Holdings (Pty) Ltd 50 388 – 50 388 50 378 – 50 378 Atterbury Attfund Investment Company No. 1 (Pty) Ltd (54 207) – (54 207) (55 457) – (55 457) Mantrablox (Pty) Ltd 484 794 – 484 794 470 399 – 470 399 Nieuwtown Property Development Company (Pty) Ltd 107 296 – 107 296 45 451 – 45 451 Majestic Offices (Pty) Ltd 6 521 – 6 521 81 – 81 Atterbury Investment Holdings International Ltd 172 474 – 172 474 169 570 – 169 570 Aldabri 96 (Pty) Ltd* (91 777) – (91 777) (91 085) – (91 085) Abacus Holdings (Pty) Ltd 3 182 – 3 182 1 271 – 1 271 Atterbury Waterfall Pocket 22A (Pty) Ltd 15 – 15 4 – 4 Lynnaur Investments (Pty) Ltd 11 716 – 11 716 – – – Total loans to / (from) subsidiaries 2 265 472 2 027 699
Reconciled as follows: Current assets 2 762 374 2 523 161 Current liabilities (496 902) (495 462) Total 2 265 472 2 027 699
* Aldabri 96 (Pty) Ltd was incorrectly classified under associates in the previous years.
Interest is determined at the discretion of directors. For both years presented, the loans to or from subsidiaries bear no interest, are unsecured and no repayment terms have been set, except the loans noted below which bear different terms: - Mantrablox (Pty) Ltd (Prime and servicing interest); - Nieuwtown Property Development Company (Pty) Ltd (Prime and capitalised monthly); - Majestic Offices (Pty) Ltd (Prime and capitalised monthly); - Atterbury Investment Holdings International Ltd (Interest at 8% escalating annually and capitalised); and - lynnaur Investments (Pty) Ltd (Prime and capitalised monthly).
219 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
8. Loans to / (from) associates
Company June June June June June June 2013 2013 2013 2012 2012 2012 Loan Impair- Loan Impair- amount ment Total amount ment Total R’000 R’000 R’000 R’000 R’000 R’000
Loans have been made to / (received from) the following associates:
Associates Paradise Coast Property Development (Pty) Ltd 3 885 – 3 885 4 047 (12) 4 035 Brooklyn Bridge Office Park (Pty) Ltd 2 697 – 2 697 2 305 – 2 305 Keysha Investments 213 (Pty) Ltd 27 009 (14 134) 12 875 25 058 (20 789) 4 269 Geelhoutboom Estate (Pty) Ltd 14 840 – 14 840 10 947 (4 119) 6 828 The Club Retail Park (Pty) Ltd 52 203 (9 387) 42 816 40 836 (9 387) 31 449 Travenna Development Company (Pty) Ltd 379 – 379 (9 283) – (9 283) Arctospark (Pty) Ltd * – – – 495 562 – 495 562 Atterbury Property Holding (Pty) Ltd 250 474 – 250 474 48 477 – 48 477 Fountains Regional Mall (Pty) Ltd 13 684 – 13 684 – – – Sinco Investments Six (Pty) Ltd (Mall of Namibia) 64 333 – 64 333 – – – Total loans to / (from) associates 405 983 583 642
Reconciled as follows: Current assets 405 983 592 925 Current liabilities – (9 283) Total 405 983 583 642
For both years presented, the loans to or from associates bear interest at prime, are unsecured and no repayment terms have been set, except the loans noted below which do not bear interest or interest at different rates: - keysha Investments 213 (Pty) Ltd (no interest); - Arctospark (Pty) Ltd (no interest); - Geelhoutboom Estate (Pty) Ltd (no interest); - Sinco Investments Six (Pty) Ltd (no interest); - The Club Retail Park (Pty) Ltd (interest on out of parity loan balances only); - Fountains Regional Mall (Pty) Ltd (interest on out of parity loan balances only); and - The loan between Attacq Ltd and Atterbury Property Holdings (Pty) Ltd (APH) amounts to a net loan of R250 473 952 and consists of various accounts with interest rates ranging from prime to prime + 1.5%. A loan of R17.138 million is repayable by Attacq Ltd within 1 year. A loan of R48 million is repayable by APH over 7 years in capital repayments of R4 million per annum starting December 2015. A loan of R66 million is repayable by APH within 1 year.
* The Arctospark (Pty) Ltd loan has been transferred to assets held for sale.
The fair value of the loans to / (from) the entities listed above are considered by management to approximate the carrying value of the loans. The interest rates of the loans are considered to be market related and have no fixed terms of repayment.
220 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
9. Other financial assets
Company June June June June June June 2013 2013 2013 2012 2012 2012 Loan Impair- Loan Impair- amount ment Total amount ment Total R’000 R’000 R’000 R’000 R’000 R’000
Loans and receivables Leipzig Nova Eventis Consortium (Pty) Ltd 87 058 (42 296) 44 762 83 289 (47 963) 35 326 Rainprop (Pty) Ltd 230 – 230 71 – 71 Scarlett Sky Investment 36 (Pty) Ltd – – – 3 613 (3 013) 600 Lynx Golfing Estate (Pty) Ltd – – – – – – West Hills Mall Ltd 143 – 143 143 – 143 Atterbury Property Developments (Pty) Ltd – – – 38 504 – 38 504 Fountains Regional Mall (Pty) Ltd – – – 10 579 (3 504) 7 075 Total other financial assets 45 135 81 719
Unless specified the loans are unsecured and indefinite and terms are the same for all periods presented. Furthermore the loans bear no interest.
The fair value of the loans to the entities listed above are considered by management to approximate the carrying value of the loans. The terms of the loans are considered to be market related have no fixed terms of repayment and neither party has deferred payment of the loans.
10. Cash and cash equivalents
Company June 2013 June 2012 R’000 R’000
Bank accounts and cash on hand – 63 161 Overdraft (49 688) (80 000) (49 688) (16 839)
The Company has an overdraft facility to the amount of R100 000 000 (2012: R40 000 000) with Nedbank Ltd. A letter of undertaking for the amount of R20 000 000 (2012: R20 000 000) issued by Nedbank Property Partners relating to the Waterfall development has also been provided as security. The Company also has an overdraft facility to the amount of R80 000 000 with Standard Bank secured by a mortgage bond over Waterfall Land Parcel 10A. The overdraft facilities bear interest at prime.
221 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
11. Deferred tax
Company June 2013 June 2012 R’000 R’000
The balance comprises: Deferred tax liability - Advance receipts (371) (315) - Prepayments 676 303 - Wear and tear allowance 10 204 10 211 - Straight-line debtor 5 018 8 081 - Deferred initial lease expenditure 1 112 – - Bad debt allowance (337) (285) - Fair value adjustment on derivatives (3 278) – - Capital gains on fair value adjustments 341 442 262 652 - Other 6 892 (1 879) Total deferred tax liability 361 358 278 768
Reconciliation of tax liability - opening balance 278 768 401 901 - Advance receipts (56) 259 - Assessed losses – 12 444 - Prepayments 373 231 - Wear and tear allowance (7) (172) - Straight-line debtor (3 063) (2 323) - Deferred initial lease expenditure 1 112 – - Bad debt allowance (52) (135) - Unutilised interest expense on foreign investments – 5 878 - Fair value adjustment on derivatives (3 278) 2 060 - Capital gains on fair value adjustments and equity accounting 78 790 (139 496) - Other 8 771 (1 879) Balance at the end of the year 361 358 278 768
Use and Sales rate The deferred tax rate applied to the fair value adjustments of investment properties / financial assets is determined by the expected manner of recovery. Where the expected recovery of the investment properties / financial assets is through sale, the capital gains tax rate of 18.65% for 2013 and 2012 is used. If the manner of recovery is partly through use and partly through sale, a combination of the capital gains rate and the normal tax rate is used.
The applicable tax rates on temporary differences are based on management’s best estimate of the manner in which these temporary differences will realise.
Gains in the fair value of investment property give rise to taxable temporary differences, being the difference between the original cost price and the market value as determined annually by external valuers. Refer to note 3 for valuation details.
Market value of investment properties represents the best estimate of value to be realised in the open market between a willing buyer and a willing seller. Thus, disposal of investment properties will primarily give rise to capital gains tax.
In determining the amount of deferred tax to be raised, accounting standards require: • the revaluation of land to be separated from that of buildings and deferred tax to be calculated using the consequences of sale, and • in respect of the buildings, management is required to estimate the expected period of use until sale and an estimated sales value (residual value). The fair valu adjustment is then split between a use value and a sale value component and the respective tax consequences applied to each component.
222 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
11. Deferred tax (continued)
Given the overall nature of the Company’s investment property portfolio and the historic performance of the portfolio as a whole as well as the individual properties, management estimates the expected future sale value (residual value) of the investment properties to at least be equal to the market values at year end. Thus, the fair value attributable to the value in use component of the investment properties is most likely to be nil. There is thus no benefit to value land separately for determining deferred tax consequences.
Consequently: • net fair value gains on investment properties are included at capital gains tax rates; • straight-line rentals are included at normal tax rates; • future recoupment of wear and tear allowances on individual depreciable components of investment properties are included at normal tax rates; and • deferred initial lease costs are included at normal tax rates.
12. Assets and liabilities held for sale
12.1 Non-current Assets held for sale
Company June 2013 June 2012 R’000 R’000
The following investment properties are presented as held for sale: - Great Westerford 258 871 – - Atterbury House 335 942 – - Sanridge Square 99 834 – - Building G – 83 867 694 647 83 867 Straight-line debtor relating to investment property 7 704 – 702 351 83 867
The following associates and loans to associates are presented as held for sale: - Investment in Arctospark (Pty) Ltd 50 131 – - loan to Arctospark (Pty) Ltd 483 562 – - Investment in subsidiary – Atterbury Parkdev Consortium (Pty) Ltd 29 738 – Total assets held for sale 1 265 782 83 867
12.2 Non-current Liabilities held for sale
Company June 2013 June 2012 R’000 R’000
- Great Westerford and Atterbury House, in favour of Rand Merchant Bank 233 428 – - Building G, in favour of Rand Merchant Bank – 55 924 233 428 55 924
223 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
12. Assets and liabilities held for sale (continued)
12.3 Discontinued operations of non-current assets held for sale
Company June 2013 June 2012 R’000 R’000
Profit and loss Income 78 804 8 902 Fair value adjustments on investment properties 105 916 78 356 Expenses (90 680) (20 570) Net Profit before tax 94 040 66 688 Tax (16 642) – 77 398 66 688
The sale transactions of Sanridge Square (situated in Midrand) and Harlequins Office Park held via Atterbury Parkdev Consortium (Pty) Ltd (situated in Pretoria) were finalised during August 2013. Atterbury House (situated in Cape Town) was sold and transferred during September 2013. The sale of Great Westerford (situated in Cape Town) is expected to take place before June 2014. The sale of the shares in Arctospark (Pty) Ltd was implemented during October 2013.
13. Trade and other receivables
Company June 2013 June 2012 R’000 R’000
Deposits 374 425 Sundry receivables 15 581 23 909 Trade debtors 5 665 20 906 Value Added Tax receivable 1 375 569 22 995 45 809
The fair value of deposits, sundry receivables, VAT and trade debtors are deemed to be the same as the carrying value.
Trade receivables impaired As of 30 June 2013, trade receivables of R1 603 526 (2012: R807 972) were impaired and provided for.
Trade receivables age analysis: - Current 4 521 20 844 - 30 Days 116 381 - 60 Days 207 63 - 90 Days 735 426 - 120 Days and more 1 690 –
The creation and release of provision for impaired receivables have been included in operating expenses in the statement of comprehensive income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. In considering any impairments on debtor accounts, the Company takes into account deposits held, bank guarantees issued by the debtor, additional sureties provided by the principals of the debtors and running Transunion (ITC) checks on debtors and their principals.
224 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
13. Trade and other receivables (continued)
Company June 2013 June 2012 R’000 R’000
Movement in the allowance for doubtful debt Opening balance 808 716 Impairment losses recognised on receivables 962 282 Impairment losses reversed (167) (190) Balance at the end of the year 1 604 808
14. Issued Capital and Share Premium
Company June 2013 June 2012 R’000 R’000
Reconciliation of number of shares issued: Reported at the beginning of the year 522 989 885 521 535 340 Issue of share capital during the year – 1 454 545 Total issued shares 522 989 885 522 989 885
Authorised 1 000 000 000 ordinary shares of R0.0001 each 100 100
Reconciliation of shares issued in Rand value: Reported at the beginning of the year 52 52 Issue of share capital during the year – – Total issued shares 52 52
Issued Ordinary 52 52 Share premium 2 808 009 2 808 009 2 808 061 2 808 061
477 010 115 (2012: 477 010 115) unissued ordinary shares are under the control of the directors in terms of resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.
Equity-settled employee benefit reserve (refer note 18 for details of share options granted) Balance at the begnning of the year – – Arising on share-based payments 5 488 – Balance at end of year 5 488 –
225 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
15. Long-term borrowings and other financial liabilities
Company June 2013 June 2012 R’000 R’000
At fair value through profit or loss Derivative 11 707 18 157 Relates to interest rate swap derivatives with Standard Bank An expense of R6 449 496 (2012: (R10 800 000 income)) was accounted for as a fair value adjustment on the derivative in the statement of comprehensive income.
Held at amortised costs
Long-term borrowing are secured by way of mortgage bonds registered over investment properties (refer note 3) and suretyship provided by the Company (refer note 29.3).
Investec Bank 122 158 –
Sinco Investments Six (Pty) Ltd – Mall of Namibia 122 158 – Loan bearing interest at prime less 0.5% serviced monthly. The loan needs to be settled over 84 months with a residual amount of R80 million. Bullet payments of R10 million needs to be made in months 36, 48, 60 and 72. Secured by way of cession of 25% Attacq Ltd shareholding in Sinco Investments Six (Pty) Ltd as well as a cession of 25% of Atterbury Property Holdings (Pty) Ltd shareholding in Sinco Investments Six (Pty) Ltd. A guarantee by Atterbury Property Holdings (Pty) Ltd for the loan amount up to R60 million has also been given.
Rand Merchant Bank – 359 102
Guarantee facility issued at a fixed interest rate of 12% per annum, capitalised, with a settlement in April 2014. Secured by way of 5 657 493 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd and mortgage bonds over Great Westerford for R550 million and Atterbury House for R160 million. 233 428 –
Transferred to held for sale liabilities. (233 428) –
Momentum
Guarantee facility issued at a fixed interest rate of 12%, with settlement in December 2012. – 359 102
Standard Bank 482 651 776 648
Glenfair Boulevard Shopping Centre 72 908 99 190 Mortgage bond over Glenfair Boulevard for an amount of R234.4 million. The loan bears interest at 1-month JIBAR plus 1.22% and 3-month JIBAR + 1.4%. The facility has annual capital instalments and the maturity date is February 2016. Secured by way of cession and pledge of Attacq Ltd shareholding in Reach.
Garden Route Mall 250 129 258 000 The loan bearing interest at 1-month JIBAR + 0.9% plus costs. This loan expires 31 March 2014. Secured by way of cession and pledge of 80% shareholding in Mantrablox (Pty) Ltd held by Attacq Ltd.
226 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
15. Long-term borrowings and other financial liabilities (continued)
Company June 2013 June 2012 R’000 R’000
Atterbury Waterfall Investment Company (Pty) Ltd – Land Parcel 8 45 082 – The loan facility bears interest at 1-month JIBAR + 1.75% and the maturity date is July 2013.
Atterbury Waterfall Investment Company (Pty) Ltd – Mall of Africa 32 606 – Mortgage bond over Glenfair Boulevard for an amount of R234.4 million. Loan bearing interest at 3-month JIBAR + 1.65% plus costs. The loan expires in December 2013. Secured by way of cession and pledge of Attacq Ltd shareholding in Reach.
Standard Bank – Bridging facility 81 926 419 458 Mortgage Bond over Waterfall Land Parcels 9 & 12 (R375 million). Mortgage Bond over Glenfair Boulevard (security value of R100 million). Loan facility bearing interest at 1-month JIBAR + 1.5% plus costs. The facility has minimum fixed repayment terms and the maturity date is December 2014. Secured by way of cession and pledge of shares in MAS Real Estate Inc held by Attacq Ltd to the value of R150 million and a cession and pledge of shares held by Attacq in Reach to the value of R60 million.
Sanlam 297 849 80 000
Short-term bridging loan bearing interest at a fixed rate of 8.5%. The loan is repayable 210 989 – by August 2013. The loan is secured by way of pledge of 27 272 728 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd. Also secured by way of surety to the amount of R200 million by Attacq Ltd.
Bridging loan to finance the acquisition of ordinary shares in the capital of Wingspan. 86 860 80 000 The loan bears interest at prime and are secured by way of cession and pledge of 10 000 000 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd. The final maturity date of the loan is 29 June 2014.
WesBank
Hire purchase facility repayable over a period of 15 (2012: 27) remaining monthly 95 157 instalments bearing interest at prime rate. The facility is secured over the motor vehicle as per note 2. Total 902 753 1 215 907
Loans and payables Atterbury Property Developments (Pty) Ltd 4 916 – Total 919 376 1 234 064 Reconciled as follows: Non-current liabilities Fair value through profit or loss 11 707 18 157 At armotised cost 270 884 856 648 282 591 874 805 Current liabilities At armotised cost 636 785 359 259 636 785 359 259
919 376 1 234 064
227 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
15. Long-term borrowings and other financial liabilities (continued)
Company June 2013 June 2012 R’000 R’000
The current liabilities consist of: 636 786 359 259 Investec – Mall of Namibia 790 – Standard Bank – Glenfair Boulevard Shopping Centre 5 319 – Standard Bank – Garden Route Mall 250 129 – Standard Bank – Atterbury Waterfall Investment Company (Pty) Ltd (Mall of Africa) 45 082 – Standard Bank – Atterbury Waterfall Investment Company (Pty) Ltd (Mall of Africa) 32 606 – Sanlam – Short-term loan 210 989 – Sanlam – Short-term loan 86 860 – Rand Merchant Bank – Momentum buildings – 359 102 Atterbury Property Developments (Pty) Ltd 4 916 – WesBank 95 157
The fair value of the borrowings listed above are considered by management to approximate the carrying value of these borrowings. Rates and repayment terms are regarded as market related, given that financial institutions takes cognisance of market conditions, the risk profile of the Company and surety provided on every transaction.
16. Trade and other payables
Company June 2013 June 2012 R’000 R’000
Trade payables 44 598 5 119 Deposits held 6 538 9 942 Amounts received in advance – 951 Value Added Tax payable – 833 Sundry payables – 12 483 51 136 29 328
The fair value of trade payables, deposits held, VAT, amounts received in advance and sundry payables are deemed to be the same as the carrying value.
17. Operating loss is stated after inclusion of the following:
Company June 2013 June 2012 R’000 R’000
Other income Profit on sale of shares – Other investments and associates 24 546 – Foreign exchange income 21 791 – Reversal of impairment 4 281 14 867
Operating and other expenses Movement in provision for surety (5 399) (4 682) Impairment of investments (93 459) – Disposal / write-down of Attfund Ltd investment * – (2 580 571) Brokers fees (35) (6 898) Guarantee and valuation fees (583) (7 358) Auditor’s remuneration (5 420) (2 692) Loss on sale of subsidiary** (36 267) –
228 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
17. Operating loss is stated after inclusion of the following (continued):
* During 2012, the Company received a dividend in specie in the form of Attfund Retail Ltd shares. Hyprop Investments Ltd (Hyprop) acquired all the shares in Attfund Retail Ltd from the existing Attfund Retail Limited shareholders. Payment was part in cash and part in Hyprop combined units. ** During the year the Company received a dividend from Riverport Trading 143 (Pty) Ltd (Riverport) after which the shares in the Company were bought back. Accordingly Attacq Ltd no longer holds any shares in Riverport. The accumulated other comprehensive income recognised in the available for sale reserve on the investments, was realised through the statement of comprehensive income. Subsequently it now shows a loss on sale of subsidiary while the recyclement of the accumulated other comprehensive income of the investments is shown separate. The net profit on the transaction was R4 million.
18. Directors’ and prescribed officers’ remuneration
Salaries Bonuses Benefits Total R’000 R’000 R’000 R’000
Executive directors, key management and prescribed officers were not remunerated by Attacq Ltd up to 30 June 2013. Their services were outsourced and were paid by Atterbury Property Holdings (Pty) Ltd and Atterbury Asset Managers (Pty) Ltd for the 2012 and 2013 year.
Executive directors Remuneration and benefits for executive directors were as follows: 2013 LLS van der Watt 1 680 350 20 2 050 MC Wilken 1 620 1 062 17 2 699 GJ Oosthuizen 360 75 4 439 3 660 1 487 41 5 188
2012 LLS van der Watt 1 529 255 2 1 786 MC Wilken 1 510 250 1 1 761 GJ Oosthuizen 240 40 – 280 3 279 545 3 3 827
Key management and prescribed officers Key management and prescribed officers in both years were: P Smit T Smith LH Louw
Remuneration and benefits for key management and prescribed officers was as follows: 2013 2 618 557 78 3 253
2012 2 385 398 52 2 835
229 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
18. Directors’ and prescribed officers’ remuneration (continued)
Company June 2013 June 2012 R’000 R’000
Non-executive directors – fees for services as directors P Tredoux 345 240 WL Masekela 260 120 LM Ndala* 232 209 JHP van der Merwe* 100 90 PH Faure* 232 170 BF van Niekerk* 100 224 S Shaw-Taylor** 105 – W van Rhyn*** – 24 1 374 1 077
* P Tredoux's fees are paid to Tredoux Family Holdings (Pty) Ltd * lM Ndala's fees are paid to Mining Oil and Gas Services (Pty) Ltd * JHP van der Merwe's fees are paid to Sanlam Investment Management (Pty) Ltd * PH Faure's fees are paid to Alkara 114 (Pty) Ltd, BNF Investments (Pty) Ltd and Mertech Investments (Pty) Ltd * BF van Niekerk's fees are paid to BNF Trust (Pty) Ltd ** S Shaw-Taylor joined in November 2012, and his fees are paid to Standard Bank *** W van Rhyn resigned in August 2011
Executives and prescribed officers Equity-settled employee benefit reserve 5 488 –
Share options granted to Director The Board resolved in November 2012 to grant MC Wilken 2 000 000 (two million) share options that vest over a five year period in equal tranches. The first tranche vested on 30 June 2012 and the final tranche will vest on 30 June 2016. For vesting to occur MC Wilken has to remain employed as executive director.
Each option converts into one ordinary share in Attacq on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting. The exercise price of the options is fixed at R8.50 per share. There is no option of cash settlement.
Summary of share options MC Wilken: Opening balance 400 – Granted during the year 400 400 Balance at end of year 800 400 Number of options not yet vested 1 200 1 600 Number of options not yet exercised 2 000 2 000
230 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
18. Directors’ and prescribed officers’ remuneration (continued)
Fair value at 30 June 2013 The fair value of the options was determined to be R6.86 per option. The options were priced using a forecast of the estimated growth in the share price over the period in which the options vest. Inputs into the model were as follows: - the Attacq share price from June 2012 to the issue date; - management’s best estimate of the share price growth rate until June 2016; - the vesting pattern of the share options as described above; and - the exercise price of the options.
An employee benefit expense of R5 487 570 (2012: R–) was recognised in the statement of comprehensive income. An equity- settled employee benefits reserve was created in equity to the same value.
19. Taxation
Company June 2013 June 2012 R’000 R’000
Income tax relating to continuing operations
Income tax recognised in profit or loss (Including OCI)
Current Local income tax – recognised in current tax for current periods 12 077 46 003 Secondary tax on companies – 79 866
Deferred 142 183 139 357 154 260 265 227
Tax relating to continued operations 19 255 177 258
Reconciliation of the tax expense Applicable tax rate 28.00% 28.00% Adjusted for: - Secondary tax on companies – 182.90% - Dividends received (24.12%) (137.87%) - Fair value adjustments (12.15%) (59.43%) - Provision for impairment of investments 22.65% – - Prior period adjustment 3.00% – - other 12.52% – Net increase / (reduction) 1.90% (14.40%)
Effective rate 29.90% 13.60%
231 Attbabes @ Reggies, Brooklyn Mall, Pretoria
Connie & Prince Zandi
Annalien, Gerrit & Karlien van den Bergh
Caroline & Rorisang Molobi
Leonie & Markus du Preez
Catherine & Lindsay Bosman Marica & Kirsten Steyn
Letty & Nasiphi Rangwanasha
232 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
20. Investment income
Company June 2013 June 2012 R’000 R’000
Dividend income Dividends (2012: dividend distribution received in terms of Attfund Ltd) – Local 85 351 2 567 749 Dividends – Foreign 3 225 –
Interest income 86 518 87 575 Group companies 79 111 86 238 Bank 7 274 403 Other interest 66 886 Tenants interest 67 48
175 094 2 655 324
21. Finance cost
Company June 2013 June 2012 R’000 R’000
Long-term borrowings 62 235 131 633 Bank overdrafts 4 721 4 353 Interest on swaps 8 016 – Other interest 2 223 1 190 Group companies 22 395 7 231 99 590 144 407
22. Other comprehensive income
Gross Tax Realisation Net R’000 R’000 R’000 R’000
Components of other comprehensive income – 2013
Available for sale financial adjustments Gains / (losses) arising during the year 768 571 (135 006) (28 398) 605 167
Components of other comprehensive income – 2012 – Restated
Available for sale financial adjustments Gains / (losses) arising during the year 477 837 (87 968) (1 143 703) (753 834)
233 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
23. Related parties
Relationship Related parties are defined as those entities with which the Company transacted during the year and in which the following relationships exist: Shareholding Direct subsidiaries Atterbury Attfund Investment Company No.1 (Pty) Ltd Atterbury Attfund Investment Company No.3 (Pty) Ltd Atterbury Mauritius Consortium (Pty) Ltd Atterbury Property Investments (Pty) Ltd Atterbury Property Johannesburg (Pty) Ltd Atterbury Waterfall Investment Company (Pty) Ltd Atterbury Parkdev Consortium (Pty) Ltd Atterbury Investments Holdings International Ltd (Mauritian) Abacus Holdings (Pty) Ltd De Ville Shopping Centre (Pty) Ltd Harlequin Duck Properties 204 (Pty) Ltd Highgrove Property Holdings (Pty) Ltd Le Chateau Property Development (Pty) Ltd Lady Brooks (Pty) Ltd Lord Charles and Lady Brooks Office Park Holdings (Pty) Ltd Lynnaur Investments (Pty) Ltd Lynnwood Bridge Office Park (Pty) Ltd Razorbill Properties 91 (Pty) Ltd Mantrablox (Pty) Ltd
Direct associates Attfund Ltd Paradise Coast Property Development (Pty) Ltd Brooklyn Bridge Office Park (Pty) Ltd Geelhoutboom Estate (Pty) Ltd Keysha Investments 213 (Pty) Ltd Travenna Development Company (Pty) Ltd Retail Africa Consortium Holdings (Pty) Ltd Sinco Investments Six (Pty) Ltd The Club Retail Park (Pty) Ltd Arctospark (Pty) Ltd Atterbury Property Holdings (Pty) Ltd MAS Real Estate Inc
Indirect subsidiaries and associates Aldabri 96 (Pty) Ltd Atterbury Attfund Investment Company No. 2 (Pty) Ltd Design Square Shopping Centre (Pty) Ltd Mall of Mauritius at Bagatelle Ltd (Mauritian) Bagaprop Ltd (Mauritian) Nieuwtown Property Development Company (Pty) Ltd Majestic Offices (Pty) Ltd
234 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
23. Related parties (continued)
Directorships BF van Niekerk LLS van der Watt GJ Oosthuizen – resigned June 2013 MC Wilken PH Faure P Tredoux JHP van der Merwe WL Masekela LM Ndala S Shaw-Taylor AW Nauta M Hamman TJA Reilly
Management Key management and prescribed officers: P Smit T Smith LH Louw
Lynnwood Bridge, Pretoria
235 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
23. Related parties (continued)
Sales and services to / Balances (Purchases Dividends Interest owing by / and services received from received from (to) (net of from) / (paid to) / (paid to) impairment) R’000 R’000 R’000 R’000
Aldabri 96 (Pty) Ltd 2013 – – – (91 777) 2012 – – – (91 085) Abacus Holdings (Pty) Ltd 2013 – – 111 3 182 2012 – – – 1 271 Arctospark (Pty) Ltd 2013 – – – 483 562 2012 – – – 495 562 Atterbury Asset Managers (Pty) Ltd 2013 (3 660) – – – 2012 (7 393) – – – Atterbury Attfund Investment Company 1 (Pty) Ltd 2013 – – – (54 207) 2012 – – – (55 457) Atterbury Attfund Investment Company 2 (Pty) Ltd 2013 – – – (75 979) 2012 – – – (77 730) Atterbury Attfund Investment Company 3 (Pty) Ltd 2013 – – – (42 453) 2012 – – – (43 325) Atterbury Investment Holdings International (Pty) Ltd 2013 – – 8 199 172 474 2012 – – 951 169 570 Atterbury Mauritius Consortium (Pty) Ltd 2013 – – (20 824) 223 884 2012 – – 20 842 253 518 Atterbury Parkdev Consortium (Pty) Ltd 2013 – – – 36 772 2012 – – – 763 Atterbury Property Cape (Pty) Ltd 2013 – – – – 2012 – – (1) – Atterbury Property Developments (Pty) Ltd 2013 (43 283) – – (4 916) 2012 – – 3 435 38 504 Atterbury Property Holdings (Pty) Ltd 2013 (3 219) – 16 349 250 474 2012 – – (2 033) 48 477 Atterbury Property Johannesburg (Pty) Ltd 2013 – – – (21) 2012 – – – (43) Atterbury Property Investments (Pty) Ltd 2013 – – – 25 2012 – – – 12 Atterbury Property One (Pty) Ltd 2013 – – – – 2012 – – (155) – Atterbury Trust 2013 (679) – – – 2012 – – – – Atterbury Waterfall Investment Company (Pty) Ltd 2013 – – 11 400 1 016 045 2012 – – 6 011 891 320 Atterbury Waterfall Pocket 22A (Pty) Ltd 2013 – – – 15 2012 – – – 4 Paradise Coast Property Development (Pty) Ltd 2013 – – (161) 3 885 2012 – – – 4 035 Brooklyn Bridge Office Park (Pty) Ltd 2013 – – 194 2 697 2012 – – 156 2 035 Design Square Shopping Centre (Pty) Ltd 2013 – – – (154 644) 2012 – – – (148 147) De Ville Shopping Centre (Pty) Ltd 2013 – – – 98 907 2012 – – 7 077 82 090 Fountains Regional Mall (Pty) Ltd 2013 – – (17) 13 684 2012 – – 165 7 075
236 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
23. Related parties (continued)
Sales and services to / Dividends Balances (Purchases received Interest owing by / and services from / received from (to) (net of from) (paid to) / (paid to) impairment) R’000 R’000 R’000 R’000
Geelhoutboom (Pty) Ltd 2013 – – – 14 840 2012 3 586 – – 6 828 Harlequin Duck Properties 204 (Pty) Ltd 2013 – – – (5 432) 2012 – – – (5 836) Highgrove Property Holdings (Pty) Ltd 2013 – – – 50 388 2012 – – – 50 378 Isibaya House (Pty) Ltd 2013 – – – – 2012 – 18 – – Keysha Investments 213 (Pty) Ltd 2013 – – (831) 12 875 2012 – – – 4 269 Lady Brooks (Pty) Ltd 2013 – – – (25 926) 2012 – – – (26 182) Lord Charles and Lady Brooks (Pty) Ltd 2013 – – – (46 463) 2012 – – – (47 656) Leipzig Nova Eventis Consortium (Pty) Ltd 2013 – – (7 239) 44 761 2012 – – 7 239 35 326 Le Chateau Property Development (Pty) Ltd 2013 – – – 14 945 2012 – – – 29 709 Lynnaur Investements (Pty) Ltd 2013 – – (41) 11 716 2012 – – – – Lynnwood Bridge Office Park (Pty) Ltd 2013 – – – 169 219 2012 – – 1 458 159 135 Majestic Offices (Pty) Ltd 2013 – – 245 6 521 2012 – – – 81 Parkdev (Pty) Ltd 2013 (79) – – – 2012 – – – – The Club Retail Park (Pty) Ltd 2013 – – 1 514 42 816 2012 – – 1 635 31 449 Rapfund Holdings (Pty) Ltd 2013 – – (1 996) – 2012 – – – – Rainprop (Pty) Ltd 2013 – – – 230 2012 (4 000) – – 71 Sinco Investments Six (Pty) Ltd 2013 – – – 64 333 2012 – – – – Scarlet Sky (Pty) Ltd 2013 – – – – 2012 – – – 600 Mantrablox (Pty) Ltd 2013 – – 41 811 484 794 2012 – – (15 545) 470 400 Nieuwtown Property Development Company (Pty) Ltd 2013 – – 8 459 107 296 2012 – – 631 45 451 Stenham European Shopping Centre Fund Ltd 2013 – 3 225 – – 2012 – 1 355 – – Travenna Development Company (Pty) Ltd 2013 – – (524) 379 2012 – – (1 805) (9 284) Razorbill Properties 91 (Pty) Ltd 2013 – – – 366 191 2012 – – – 365 452 Riverport Trading 143 (Pty) Ltd 2013 – 40 519 64 – 2012 – – 48 947 4 007
237 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
23. Related parties (continued)
Sales and services to / Dividends Interest Balances (Purchases received received owing by / and services from / from / (to) (net of from) (paid to) (paid to) impairment) R’000 R’000 R’000 R’000
West Hills Mall Ltd 2013 – – – 143 2012 143 – – 143
2013 (50 920) 43 744 56 602 3 195 235 2012 (7 664) 1 373 79 008 2 692 790
24. Contingent liabilities
Company June 2013 June 2012 R’000 R’000
The Company entered into a put option agreement with Sanlam Investment 1 140 543 984 538 Management (SIM) in terms of which the Company, upon receiving a put notice, is required to buy-back, or sell to a third party, within a period of six months after receipt of the notice, the Company's shares put by SIM. The minimum put amount is R100 000 000. The agreement lapses should SIM dispose of the related shares held, in the event the Company lists on the Johannesburg Securities Exchange, or by mutual agreement between SIM and the Company. The amount disclosed reflects the value of all shares which can be put by SIM in terms of the put option agreement, although SIM has agreed to limit the put to no more than 20% of the applicable shares held per year. The short-term portion of the contingent liability would therefore be 20% of the disclosed amount.
The Company entered into a put option agreement with Lisinfo 222 Investments 809 524 698 796 (Pty) Ltd (a company through which Royal Bafokeng Holdings (Pty) Ltd (RBH) holds its shares) in terms of which the Company, upon receiving a put notice, is required to buy- back, or sell to a third party, within a period of six months after receipt of the notice, the Company's shares put by RBH. The agreement lapses should RBH dispose of the related shares held, in the event the Company lists on the Johannesburg Securities Exchange, or by mutual agreement between RBH and the Company. The amount disclosed reflects the value of all shares which can be put by RBH in terms of the put option agreement, although RBH has agreed to limit the put to no more than 20% of the applicable shares held per year. The short-term portion of the contingent liability would therefore be 20% of the disclosed amount.
The Company entered into a put option agreement with ENL Ltd (ENL) in terms of 112 963 97 506 which the Company, upon receiving a put notice, is required to buy-back, or sell to a third party, within a period of six months after receipt of the notice, the Company's shares put by ENL. The agreement lapses should ENL dispose of the related shares held, in the event the Company lists on the Johannesburg Securities Exchange, or by mutual agreement between ENL and the Company. The amount disclosed reflects the value of all shares which can be put by ENL in terms of the put option agreement.
The agreement entered into by the Company to purchase shares in the subsidiary – 24 619 Lynnwood Bridge Office Park (Pty) Ltd provided for an adjustment to the purchase price based on the final cost of the project once determined. The last phase (phase 3) is now being developed and accordingly the liability relating this agreement has been provided for.
238 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
24. Contingent liabilities (continued)
Company June 2013 June 2012 R’000 R’000
The Company received additional shares in Atterbury Africa Ltd (AA) via its wholly – – owned subsidiary Atterbury Investment Holdings International Ltd, by providing a guarantee on behalf of the developer shareholders in AA in terms of which it underwrites losses made by AA at specific dates. 2 063 030 1 805 459
25. Commitments
25.1 Shares pledged
Company June 2013 June 2012 Shares Shares
Shares held by the Company in Hyprop Investments Ltd were pledged as security in – 334 627 325 respect of the obligations towards Standard Bank on the bridging loan facility as per note 15. – 334 627 325
25.2 Capital commitments
R’000 R’000
Already contracted but not provided for Investment properties
The Company entered into an agreement to develop a retail centre in Windhoek, 220 080 – Namibia called “The Grove“. The Company has a 31.25% interest in the development. Committed total capital outlay at year end is:
The Company entered into an agreement to develop a retail and office centre in 641 703 – Johannesburg CBD, called Newtown. The development is done in two entities namely Nieuwtown Property Development Company (Pty) Ltd and Majestic Offices (Pty) Ltd. The Company has an effective 62.5% interest in the development. Committed total capital outlay at year end is:
The Company entered into an agreement to develop a retail centre in Pretoria known 36 978 – as “The Club Retail“. The Company has an effective 40% interest in the development. Committed total capital outlay at year end is:
The Company is considering to exercise the option it has to purchase another 20% in 209 000 – Garden Route Mall. The option can be exercised for a period of six months commencing September 2013.
Paradise Coast Property Development (Pty) Ltd entered into a sale agreement with 3 300 6 600 Papilio Investments 33 (Pty) Ltd for the acquisition of residential property, referred to as Paradise Coast, near Mossel Bay, for a consideration of R20 000 000. Paradise Coast Property Development, in which the Company has a 33% interest, is obligated to issue a guarantee equal to the consideration amount, in favour of Papilio Investments 33 (Pty) Ltd. The amount was paid during the year, however, a guarantee of R10 000 000 had to be issued to the JV.
239 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
25. Commitments
25.2 Capital commitments (continued)
Company June 2013 June 2012 R’000 R’000
Already contracted but not provided for (continued)
As part of the sale of share agreement between the Company, Atterbury Investment – (8 800) Managers (Pty) Ltd and Atterbury Property Cape (Pty) Ltd (the sellers), relating to the acquisition of De Ville Shopping Centre (Pty) Ltd, the Company agreed to a profit distribution in favour of the sellers. The profit share will be paid in three tranches in December 2010, 2011 and 2012 respectively, based on a pre-determined formula set in the sale of shares agreement. The final amount due is to be calculated on 30 June 2013 numbers. 1 110 881 (2 200)
Approved but not contracted
The Company made the decision to fund it's investment in Retail Africa Consortium 11 725 49 052 Holdings (Pty) Ltd in order to follow the rights issue of Retail Africa Wingspan Investments (Pty) Ltd. Further rights issues were followed during the year, with the balance shown at the end of the year as the amount approved not yet requested.
Arctospark (Pty) Ltd announced a rights issue during the 2012 year in order to follow – 38 000 a rights issue of its investment in Stenham European Shopping Centre Fund Ltd, and to cover operational shortfalls for the next 3 years. The Company elected to follow its rights at a discount of 15% to the net asset value of the Company as at 31 May 2012.
The Stenham European Shopping Centre Fund Ltd, a foreign investment in which the – 23 962 Company has a 4.5% direct share, announced a rights issue during the 2012 financial year. The Company elected to follow it's rights on the direct investment, as well as via the 3.81% share option with Wattchatt (Pty) Ltd.
In 2012 the Company approved an investment in the Atterbury Africa Ltd of up to R100 140 000 100 000 million. This was increased to R250 million during the current reporting year. Amounts committed but not yet drawn at year end were: 151 725 211 014 1 262 606 208 814
These commitments will be financed in the normal course of business, by a combination of bank funding and equity funding. Equity funding may also include partnering. This is done within the guidelines set by the Board.
25.3 Contingent commitments
Sureties given by the Company
Surety in respect of loan funds advanced by Investec Bank to Atterbury Property 10 000 10 000 Developments (Pty) Ltd for acquisition and development of “Beau Rivage“.
Surety in respect of loan funds advanced by Investec Bank to Le Chateau Property 7 500 7 500 Development (Pty) Ltd for development of “Le Chateau“.
Surety in respect of loan funds advanced by Nedbank for Arctospark (Pty) Ltd for the 160 000 160 000 acquisition of a further investment in Karoo II.
240 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
25. Commitments
25.3 Contingent commitments (continued)
Company June 2013 June 2012 R’000 R’000
Sureties given by the Company (continued)
Surety in respect of loan funds advanced by Standard Bank to Atterbury Waterfall 77 800 77 800 Investment Company (Pty) Ltd (AWIC) for the installation of services in relation to Land Parcel 8 at Waterfall Midrand.
Surety in respect of loan funds advanced by Investec Bank to Riverport Trading 143 – 35 400 (Pty) Ltd in respect of finance agreements of Investec building.
Surety in respect of loan funds advanced by Standard Bank to Newtown Property – – Development Company (Pty) Ltd for the interim increase of the loan for the Newtown Junction development. The surety was cancelled and released on 29 May 2013.
Surety in respect of loan funds advanced by Nedbank to Newtown Property 300 000 – Development Company (Pty) Ltd for the development of Newtown Junction (mixed use development) .
Surety in respect of loan funds advanced by Rand Merchant Bank to Atterbury Property 7 800 26 000 One (Pty) Ltd for the acquisition and development of “Kingswood Retirement Village“.
Joint surety given in respect of loan funds advanced by Rand Merchant Bank to 17 022 17 022 Travenna Development Company (Pty) Ltd as additional surety over Erf 59, a portion of Erf 78 and remaining extents of Erf 79 and 433 of Farm Elandspoort No 357 Division JR.
Surety in respect of loan funds advanced by Investec Bank to Fountains Regional Mall 200 000 158 000 (Pty) Ltd for the development of the Fountains Mall situated in Jeffreys Bay.
Surety in respect of loan funds advanced by Investec Bank to Keysha Investments 213 27 000 27 000 (Pty) Ltd for the acquisition of vacant land in the Val de Vie Estate, Franschoek.
Surety in respect of loan funds advanced by Standard Bank for the “Bella Rosa Lifestyle 5 000 5 000 Village“ in Tygervalley, Western Cape.
Surety in respect of loan funds advanced by Nedbank to Atterbury Waterfall Investment 80 000 80 000 Company (Pty) Ltd in respect of the service installation for Waterfall Land Parcel 22 and the bridging loan to MBT Services (Pty) Ltd.
Surety in respect of loan funds advanced by Investec Bank to Geelhoutboom Estate 29 000 29 000 (Pty) Ltd in respect of the Geelhoutboom residential development land.
Surety in respect of loan funds advanced by Investec Bank to Brooklyn Bridge Office Park 81 000 81 000 (Pty) Ltd in respect of the investment property known as “Brooklyn Bridge Office Park“.
Surety in respect of loan funds advanced by Rand Merchant Bank to Atterbury Parkdev 45 000 45 000 Consortium (Pty) Ltd in respect of the investment property known as “Harlequins Office Park“.
Surety in respect of loan funds advanced and to be advanced by Nedbank (previously 146 000 146 000 Imperial Bank) to De Ville Shopping Centre (Pty) Ltd in respect of the investment property known as “De Ville Shopping Centre“.
241 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
25. Commitments
25.3 Contingent commitments (continued)
Company June 2013 June 2012 R’000 R’000
Sureties given by the Company (continued)
Surety in respect of loan funds advanced by Nedbank to The Club Retail Park (Pty) Ltd in 66 600 69 600 respect of the mixed use development known as “Club, Hazelwood“.
Surety in respect of loan funds to be advanced by WBHO Construction (Pty) Ltd. – 80 000
Surety in respect of funds advanced by Nedbank to Lynnwood Bridge Office Park (Pty) 400 000 250 000 Ltd for the development of Lynnwood Bridge Office Park.
Surety in respect of funds advanced by Rand Merchant Bank for the purchase of the 155 000 – Aurecon building in Pretoria by Lynnaur Investments (Pty) Ltd, as well as causa surety in respect of a pledge of 5,567,493 shares held by Razorbill Properties 91 (Pty) Ltd in Attacq Ltd.
Surety in respect of funds advanced by Investec Bank for Sinco Investments Six (Pty) Ltd 200 000 – for the development of The Mall of Namibia.
Surety in respect of funds advanced by Standard Bank for the development of Waterfall 32 000 – Land Parcel 10 (Attacq & Golder buildings ) in Midrand.
Surety in respect of funds advanced by Standard Bank for the development of the 10 000 10 000 Altech building situated on Waterfall Land Parcel 20 in Midrand.
Surety in respect of funds advanced by Nedbank to Atterbury Waterfall Investment 160 000 – Company (Pty) Ltd for the development of Waterfall Land Parcel 21 in Midrand (Cell C).
Surety in respect of funds advanced by Standard Bank for the development of Waterfall 110 000 – Land Parcel 15 in Midrand (Group 5).
Surety in respect of funds advanced by Nedbank to Atterbury Property Development JV 10 000 – (Pty) Ltd for the purchasing of Paradise Coast.
Surety in respect of funds advanced by Standard Bank for the infrastructure service cost 194 400 120 000 for Waterfall Land Parcel 10 in Midrand.
Surety in respect of funds advanced by Sanlam Capital Markets Ltd and Sanlam Credit 32 000 48 000 Conduit (Pty) Ltd for the development of the Massbuild DC situated on Waterfall Land Parcel 8 in Midrand.
Surety in respect of funds advanced by Sanlam Capital Markets to Atterbury Africa Ltd – 84 140 for the purchase of Accra Mall in Ghana. The surety is for USD 10 million. The surety was cancelled and released in June 2013.
Guarantee issued by Nedbank towards overdraft facilities of Atterbury Property 5 000 5 000 Holdings (Pty) Ltd.
The Group provided a rental guarantee to Leaf Capital regarding the 50% undivided share 25 847 – sold in Great Westerford. The guarantee is valid for three years ending August 2015 on 7 049m2 of office space as well as parking bays.
242 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
25. Commitments
25.3 Contingent commitments (continued)
Company June 2013 June 2012 R’000 R’000
Sureties given by the Company (continued)
Surety in respect of funds advanced by Sanlam Capital Markets to Atterbury Africa – 33 110 Ltd in respect of Accra Mall in Ghana. The surety is for USD 3 935 103. The surety was cancelled and released in June 2013.
Guarantee issued by Standard Bank in respect of Delico Achimota Ghana Ltd and West 40 167 70 000 Hills Mall Ltd. 2 634 136 1 674 572
26. Financial instruments
At fair Equity value Available- Financial and non- through for-sale liabilities at financial profit and Loan and financial amortised instru- Notes Total Cash loss receivables assets cost ments R'000 R'000 R'000 R'000 R'000 R'000 R'000
June 2013 Assets Non-current assets Property, plant and equipment 2 1 466 – – – – – 1 466 Investment properties 3 316 909 – – – – – 316 909 Straight-line lease income adjustment 10 591 – – – – – 10 591 Deferred initial lease expenditure 4 538 – – – – – 4 538 Investments in subsidiaries 4 2 377 042 – – – 2 377 042 – – Investments in associates 5 695 541 – – – 695 541 – – Other investments 6 58 379 – 52 900 – 5 479 – –
Current assets Trade and other receivables 13 21 619 – – 21 619 – – – Loans to subsidiaries 7 2 762 374 – – 2 762 374 – – – Loans to associates 8 405 983 – – 405 983 – – – Other financial assets 9 45 135 – – 45 135 – – – Cash and cash equivalents 10 – – – – – – –
Non-current assets classified as held for sale 12.1 1 265 782 – – – – – 1 265 782 Total assets 7 965 359 – 52 900 3 235 111 3 078 062 – 1 599 286
243 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
26. Financial instruments (continued)
At fair Equity value Available- Financial and non- through for-sale liabilities at financial profit and Loan and financial amortised instru- Notes Total Cash loss receivables assets cost ments R'000 R'000 R'000 R'000 R'000 R'000 R'000
June 2013 Liabilities Non-current liabilities Long-term borrowings and other financial liabilities 15 282 591 – 11 707 – – 270 884 – Deferred tax liability 11 361 358 – – – – – 361 358 Provision for impairment of subsidiaries 4 16 189 – – – – – 16 189 Provision for impairment of associates 5 71 355 – – – – – 71 355
Current liabilities Taxation payable 16 562 – – – – – 16 562 Trade and other payables 16 51 136 – – – – 51 136 – Long-term borrowings and other financial liabilities 15 636 785 – – – – 636 785 – Loans from subsidiaries 7 496 902 – – – – 496 902 – Loans from associates 8 – – – – – – –
Liabilities associated with non-current assets classified as held for sale 12.2 233 428 – – – – – 233 428 Total liabilities 2 166 306 – 11 707 – – 1 455 707 698 892
244 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
26. Financial instruments (continued)
At fair Equity value Available- Financial and non- through for-sale liabilities at financial profit and Loan and financial amortised instru- Notes Total Cash loss receivables assets cost ments R'000 R'000 R'000 R'000 R'000 R'000 R'000
2012 – Restated Assets Non-current assets Property, plant and equipment 2 343 – – – – – 343 Investment properties 3 1 153 369 – – – – – 1 153 369 Straight-line lease income adjustment 14 275 – – – – – 14 275 Deferred initial lease expenditure 4 356 – – – – – 4 356 Investments in subsidiaries 4 1 745 809 – – – 1 745 809 – – Investments in associates 5 581 821 – – – 581 821 – – Other investments 6 389 853 – 334 628 – 55 225 – –
Current assets Trade and other receivables 13 45 809 – – 45 809 – – – Loans to subsidiaries 7 2 523 161 – – 2 523 161 – – – Loans to associates 8 592 925 – – 592 925 – – – Other financial assets 9 81 719 – – 81 719 – – – Cash and cash equivalents 10 63 161 63 161 – – – – –
Non-current assets classified as held for sale 12.1 83 867 – – – – – 83 867 Total assets 7 280 468 63 161 334 628 3 243 614 2 382 855 – 1 256 210
245 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
26. Financial instruments (continued)
At fair Equity value Available- Financial and non- through for-sale liabilities at financial profit and Loan and financial amortised instru- Notes Total Cash loss receivables assets cost ments R'000 R'000 R'000 R'000 R'000 R'000 R'000
2012 – Restated Liabilities Non-current liabilities Long-term borrowings and other financial liabilities 15 874 805 – 18 157 – – 856 648 – Deferred tax liability 11 278 768 – – – – – 278 768 Provision for impairment of subsidiaries 4 14 876 – – – – – 14 876 Provision for impairment of associates 5 58 201 – – – – – 58 201 Provision for impairment of other investments 6 9 049 – – – – – 9 049
Current liabilities Taxation payable 7 917 – – – – – 7 917 Trade and other payables 16 29 328 – – – – 29 328 – Long-term borrowings and other financial liabilities 15 359 259 – – – – 359 259 – Loans from subsidiaries 495 462 495 462 Loans from associates and joint ventures 8 9 283 – – – – 9 283 – Bank overdraft 80 000 80 000 – – – – –
Liabilities associated with non-current assets classified as held for sale 12.2 55 924 – – – – 55 924 – Total liabilities 2 272 872 80 000 18 157 – – 1 805 904 368 811
246 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
27. Risk management
Changing market conditions expose the Company to various financial risks, including interest rate, credit and liquidity risks. The Company is exposed to foreign exchange risks in the following investments: - asset swap agreement with Investec Securities relating to the acquisition of its investment in Stenham European Shopping Centre Fund Ltd, of which the exposure is denominated in Euros;
Although the Company does not trade in financial instruments for speculative purposes, it does utilise derivative instruments to manage exposure to some of these risks.
The Company finances its operations through a mixture of retained profits, bank borrowings and long-term borrowings.
Although the Company has an accounting policy to designate some derivative financial instruments as hedging instruments from time to time, none were designated as such during the current financial year. Although it was not applicable this financial year, the Company also has an accounting policy for hedge accounting.
There have been no significant changes during the year to the types of financial risks the Company is exposed to nor to the measurement and management of these risks.
Interest rate risk The Company policy is to manage interest rate risk so that fluctuations in variable rates do not have a material impact on profit or loss.
It is the policy of the Company to enter into interest rate swap and fixed interest rate agreements with financial institutions.
The Company makes use of interest rate derivatives and fixed rate borrowings to hedge its exposure to interest rate fluctuations (refer note 15).
To hedge the fair value risk of fixed interest liabilities, the Company uses interest rate swaps and fixes, thus hedging the fair value of the financial liabilities.
Interest rate swap derivative The Company has entered into interest rate swap contracts that entitle, or obligate it to receive interest at a fixed rate on notional principal amounts and entitle or obligate it to pay interest at a floating rate on the same notional principal amounts. Under these agreements the Company agrees with the counter party to exchange at monthly intervals the difference between the fixed and floating interest amounts calculated on the notional principal amounts.
The interest rate swap derivatives has been valued using a market quoted swap curve as at 30 June 2013.
Interest rate swaps exposed to credit risk at year end were as follows:
Institution R’000 Fixed rate Expiry year Expiry month Swap or Fix Linked
Standard Bank 14 500 10.98 2018 4 Swap JIBAR Standard Bank 32 000 11.88 2016 3 Swap JIBAR Standard Bank 16 000 11.80 2019 3 Swap JIBAR Standard Bank 32 000 11.85 2017 3 Swap JIBAR Standard Bank 25 000 11.06 2016 5 Swap JIBAR Standard Bank 45 000 10.94 2018 5 Swap JIBAR 164 500
This recognition is in terms of IAS 39 Financial Instruments: Recognition and Measurement, which requires that interest rate swaps be fair valued and marked to market at each reporting date.
247 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
27. Risk management (continued)
Credit risk Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Company.
The Company’s cash and cash equivalents are placed with high credit quality financial institutions. Credit risk in respect of trade receivables is limited due to the spread of the customer base and credit approval processes.
The Company’s exposure to credit risk is primarily in respect of tenants and is influenced by the individual characteristics and risk profile of each tenant. The exposure to credit risk from tenants is mitigated by the spread of the tenant base. The granting of credit to customers is made on application and is approved by the property managers based on their credit assessment of new and existing customers. Customers are required to supply refundable lease deposits and/or bank guarantees and/or suretyships by their principals. At year end, the Company did not consider there to be any significant concentration of credit risk which has not been insured or adequately provided for. In providing for impairments on tenant accounts, the Company takes cognisance of guarantees delivered by tenants and/or their bankers as well as unencumbered assets of tenants and their principals which may be attached.
The Company has some exposure in respect of loans granted where collateral has been requested. The financial position of the counter parties are considered at granting of the loans and is also evaluated on an on-going basis (refer notes 7,8 and 9).
The carrying amounts of financial assets, excluding interest rate swaps, included in the consolidated balance sheet represent the maximum exposure to credit risk in respect of these assets.
The maximum credit exposure of interest rate swaps is represented by the fair value of these contracts.
Refer to note 13 for an analysis of the Company’s trade receivables’ ageing, overdue accounts and impairments.
Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company ensures that adequate funds are available to meet its expected and unexpected financial commitments through surplus funds deposited at financial institutions and undrawn borrowing facilities. In some cases certain short-term liabilities will be settled as part of pre-determined approved structured deals.
longer than less than 1 year 1 to 5 years 5 years Total R’000 R’000 R’000 R’000
June 2013 Long-term borrowings and other financial liabilities 636 785 191 223 91 368 919 376 Trade and other payables 51 136 – – 51 136 Loans from subsidiaries 496 902 – – 496 902 Bank overdraft 49 688 – – 49 688 Non-current liabilities classified as held for sale 233 428 – – 233 428 1 467 939 191 223 91 368 1 750 530
2012 – Restated Long-term borrowings and other financial liabilities 359 259 856 648 – 1 215 907 Trade and other payables 28 499 – – 28 499 Loans from group companies 504 745 – – 504 745 Bank overdraft 80 000 – – 80 000 Non-current liabilities classified as held for sale 55 924 – – 55 924 1 028 427 856 648 – 1 885 075
Insurance risk The Company is exposed to insurance risk primarily on its investment properties. The Company has insured all its properties at estimated replacement values and against loss of income as a result of disrupted operations.
248 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
28. Cash flows from operating activities
Company June 2013 June 2012 R’000 R’000
Profit before taxation, including discontinued operations* 168 387 1 405 720 Adjustments for: Dividend income (88 576) – Interest income – including discontinued operations (86 991) (68 288) Non-cash interest received – (32 214) Finance costs – including discontinued operations 125 904 144 407 Depreciation 592 180 Loss on disposal of subsidiaries 36 267 – (Profit) / loss on disposal of investment properties (1 218) 24 037 Profit on disposal of other investments (16 410) – Gain on available for sale financial assets (34 907) (1 406 192) Fair value adjustment on other investments (29 366) (43 694) Other non cash movements (35 106) – Fair value adjustments on investment property (129 720) (41 355) Movements in operating lease assets and accruals – 22 880 Impairment / reversal of impairment on investments 93 460 (14 867) Straight-line rental adjustment 10 566 – Deferred initial lease expenditure (181) 48 Movement in provision for surety 5 285 4 682 Impairment of loans 4 281 40 000 Provision for impairment of other investments – 4 172 Provision for tenant installations – 8 988 Foreign exchange gain (21 792) – Share based payment expense 5 488 – Loss resulting from Attfund Retail Ltd conversion to Hyprop Investments Ltd – 46 502 Cash generated by operation before working capital changes 5 963 95 006
Change in working capital: Decrease / (increase) in accounts receivable 8 228 (32 891) Increase / (decrease) in accounts payable 21 808 (12 716) 35 999 49 399
* Profit / Loss before tax was disclosed excluding discontinued operations in the previous year.
29. Taxation paid
Company June 2013 June 2012 R’000 R’000
Balance at the beginning of the year (7 917) 1 537 Current tax for the year recognised in profit or loss (46 673) (125 869) Balance at end of the year 16 562 7 917 (38 028) (116 415)
249 NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2013
30. Restatement of prior year figures
Certain prior year figures had to be restated due to incorrect disclosure and accounting treatment as detailed below. The line items affected are as follows:
2012 2012 R'000 R'000 Before After
Statement of financial position
Equity and Liabilities Available for sale reserve 1 931 241 744 591 Distributable reserves 268 294 1 454 944
Statement of Comprehensive Income
Operating profit / (loss) Other income 22 030 36 897 Operating and other expenses (2 715 868) (2 720 550) Fair value adjustment other investments – 43 694 Profit before taxation Taxation 96 163 (177 258) Gain on available for sale financial assets – 1 406 192
Other comprehensive income Gain on available for sale financial asset 531 715 477 837 Taxation relating to components of other comprehensive income (98 899) (87 968) Realisation of available for sale financial assets – (1 143 703)
Notes to the statement of cash flows (Loss) / profit before taxation (54 351) 1 405 720 Gain on available for sale financial asset – (1 406 192) Fair value adjustments on other investments – (43 694) Impairment / reversal of impairment on investments – (14 867)
Other comprehensive income In the 2012 financial year the disclosure and movement on available for sale reserve has not been treated correctly. The restatement only affect movements within equity.
It has also been concluded that the movement in provision for sureties as well as impairments on investments should not form part of available for sale reserve and has been reclassified to the statement of comprehensive income under other income and operating and other expenses. The effect on the movements can be seen in the figures above.
250 Chris Lourens – Managing Director, Cairnmead and Shareholder Photographed at Group 5 Head Office, Waterfall Business Estate
For how long have you been involved with Attacq? We have been involved with Attacq since 2004 and have done 150 Health and Safety Plans during this period. Cairnmead has done 1 230 Health and Safety Plans to date.
Which project that you worked on for Attacq was the most challenging? The upgrade of the Glenfair Shopping Centre in Pretoria is right up there. The construction work was executed at all the entrances while the centre was still trading. What made it even more challenging was one of the anchor tenants doing a revamp at the same time. We are very proud to say that no serious incidents occurred.
On which career achievement are you particularly proud? The decision to resign as Health and Safety Inspector at the Department of Labour was a turning point in my career. Despite the challenges I faced, I decided to start a new business at the age of 50, Cairnmead. The company has grown significantly over the years and I look forward to hand over the business to my descendants when I retire. I am extremely proud to say that Cairnmead will next year be in its 10th year of existence
What are the top three items on your bucket list? For myself and the team at Cairnmead to remain humble in order to live the life which our Creator has planes for us. Secondly I would love to add a Golden Blouwildebeest to my existing split cows. It is also a great passion of mine to obtain my helicopter pilot’s license one day.
What makes Cairnmed such a successful company? The initial growth of Cairnmead was mainly based on my 30 years of experience as a technician in the South African Air Force, Mechanical Engineer as well as the Department of Labour. Over the years, the addition of new staff with technical, legal and practical experience helped Cairnmead to deliver exceptional service to our clients like Attacq.
251 NOTICE OF ANNUAL GENERAL MEETING
NOTICE CONVENING THE ANNUAL GENERAL MEETING OF THE SHAREHOLDERS OF ATTACQ LIMITED (REGISTRATION NO: 1997/000543/06) (“the Company“), TO BE HELD AT THE ATTERBURY Theatre, LYNNWOOD BRIDGE OFFICE PARK, 4 DAVENTRY ROAD, LYNNWOOD MANOR, PRETORIA ON FRIDAY, 24 JANUARY 2014, AT 9H00
GENERAL INSTRUCTIONS AND INFORMATION
Notice is hereby given to the shareholders of the Company (“the Shareholders“) of the annual general meeting of the Company (“the AGM“) for the purpose of conducting the following items of business (a) to deal with such business as may lawfully be dealt with at the AGM; (b) the presentation of the directors’ report, the annual financial statements, the Audit and Risk Committee report and the Social and Ethics Committee report of the Company for the year ended 30 June 2013 (contained in the Integrated Annual Report of the Company for the same period, of which report this notice forms a part (“the Integrated Annual Report“)); and (c) consider and, if deemed fit, pass, with or without modification, the ordinary and special resolutions set out hereunder in the manner required by the Companies Act, 71 of 2008 (as amended) (“the Companies Act“), as read with the Listings Requirements (“the Listings Requirements“) of the JSE Limited (“the JSE“), on which exchange the Company’s securities are listed.
Kindly note that in terms of section 63(1) of the Companies Act, meeting participants (including proxies) will be required to provide reasonably satisfactory identification before being entitled to participate in or vote at the AGM. Forms of identification that will be accepted include original and valid identity documents, driver’s licences and passports.
Please note that if you are the owner of dematerialised shares (i.e. have replaced the paper share certificates representing the shares with electronic records of ownership under the JSE electronic settlement system held through a Central Securities Depository Participant (“CSDP“) or broker (or their nominee)) and are not registered as an “own name“ dematerialised shareholder, then you are not a registered shareholder of the Company. Accordingly, in these circumstances, subject to the mandate between yourself and your CSDP or broker, as the case may be:
• if you wish to attend the AGM, you must contact your CSDP or broker, as the case may be, and obtain the relevant letter of representation from it; alternatively
• if you are unable to attend the AGM, but wish to be represented at the meeting, you must contact your CSDP or broker, as the case may be, and furnish it with your voting instructions in respect of the AGM and/or request it to appoint a proxy. The instructions must be provided in accordance with the mandate between yourself and your CSDP or broker, as the case may be, within the time period required by your CSDP or broker, as the case may be. CSDPs, brokers or their nominees, as the case may be, recorded in the Company’s sub-register as holders of dematerialised shares held on behalf of an investor / beneficial owner should, when authorised in terms of their mandate or instructed to do so by the person on behalf of whom they hold dematerialised shares, vote by either appointing a duly authorised representative to attend and vote at the AGM or by completing the attached form of proxy in accordance with the instructions thereon and returning it to the transfer secretaries, Computershare Investor Services Proprietary Limited, as contemplated below.
RECORD DATES, PROXIES AND VOTING
Please note the following important dates with regard to the AGM:
Record date for the purposes of receiving this notice Friday, 29 November 2013 Distribution of the Integrated Annual Report Thursday, 12 December 2013 Last date to trade in order to be eligible to participate in and vote at the AGM Friday, 10 January 2014 Record date for voting purposes Friday, 17 January 2014 Last day to lodge proxy forms for the AGM (by 9h00) Wednesday, 22 January 2014 AGM to be held at 9h00 on Friday, 24 January 2014 Results of AGM published on SENS on Friday, 24 January 2014
Any Shareholder entitled to vote at the AGM is entitled to appoint a proxy, who need not also be a Shareholder of the Company, to attend, participate in and vote at the AGM in the place of that Shareholder by completing the proxy form. The proxy form (attached to this notice as Annexure A), duly completed and signed, must be received by the transfer secretaries, Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by 9h00, on Wednesday, 22 January 2014.
252 Every resolution and other substantive decision at the AGM put to a vote shall be decided on a poll, rather than being determined on a show of hands. On a poll, every Shareholder entitled to vote and present at the AGM (whether in person or represented by proxy) shall have the number of votes determined in accordance with the voting rights associated with the securities in question. Notwithstanding the aforesaid, the Chairperson of the AGM may at any time during the AGM provide that any resolution may proceed to be decided by way of a show of hands. If voting is by a show of hands, any Shareholder who is present at the AGM (whether as a Shareholder or as a proxy for the Shareholder), and entitled to exercise voting rights, has one vote, irrespective of the number of voting rights that person would otherwise be entitled to exercise.
The quorum requirement for the proposed ordinary and special resolutions set out below is sufficient persons being present to exercise, in aggregate, at least 35% (thirty five percent) of all voting rights that are entitled to be exercised on the resolutions, provided that at least 10 (ten) Shareholders are present at the AGM. The percentage of voting rights required to pass the ordinary resolutions is more than 50% (fifty percent) of the voting rights exercised, and the percentage of voting rights required to pass the special resolutions is at least 75% (seventy five percent) of the voting rights exercised thereon.
ELECTRONIC PARTICIPATION
The Company intends to offer Shareholders reasonable access to attend the AGM through electronic conference call facilities, in accordance with the provisions of the Companies Act. Shareholders wishing to participate electronically in the AGM are required to deliver written notice to the Company at The Parkdev Building, 2nd Floor, Brooklyn Bridge, 570 Fehrsen Street, Brooklyn, 0181, or e-mailed to [email protected] (marked for the attention of the Company Secretary) by no later than 9h00 on Wednesday, 15 January 2014 that they wish to participate in the AGM via electronic communication (“the Electronic Notice“). In order for the Electronic Notice to be valid it must contain: (a) if the Shareholder is an individual, a certified copy of his/her identity document and/ or passport; (b) if the Shareholder is not an individual, a certified copy of a resolution by the relevant entity and a certified copy of the identity documents and/or passports of the persons who passed the relevant resolution, which resolution must set out who from the relevant entity is authorised to represent the relevant entity at the AGM via electronic communication; and/or (c) a valid e-mail address and/or facsimile number (“the Contact Address / Number“). Voting on shares will not be possible via electronic communication and accordingly Shareholders participating electronically and wishing to vote their shares at the meeting will need to be represented at the meeting, either in person, by proxy or by letter of representation. The Company shall use its reasonable endeavours on or before 10h00 on Friday, 17 January 2014 to notify each Shareholder, who has delivered a valid Electronic Notice, at its Contact Address / Number, of the relevant details through which the Shareholder can participate in the AGM via electronic communication.
AGENDA FOR THE ANNUAL GENERAL MEETING OF THE COMPANY
1. Welcome by the Chairperson and confirmation of the quorum of the Shareholders.
2. Proposing the following resolutions for adoption by the Shareholders and should the Shareholders deem it fit, adopting such resolutions, with or without modification:
2.1. PROPOSED ORDINARY RESOLUTION NO. 1: Approval of Company Annual Financial Statements
RESOLVED THAT the annual financial statements of the Company for the year ended 30 June 2013, including the director’s report, the Audit and Risk Committee report and the Transformation, Social and Ethics Committee report, be and are hereby approved.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 1 is to approve the annual financial statements of the Company for the year ended 30 June 2013 in accordance with the requirements of the Companies Act, read with the Companies Regulations, 2011.
2.2. PROPOSED ORDINARY RESOLUTION NO. 2: Approval of Consolidated Annual Financial Statements
RESOLVED THAT the consolidated annual financial statements of the Company and its Group for the year ended 30 June 2013, including the director’s report, the Audit and Risk Committee report and the Transformation, Social and Ethics Committee report, be and are hereby approved.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 2 is to approve the consolidated annual financial statements of the Company and its Group for the year ended 30 June 2013 in accordance with the requirements of the Companies Act, read with the Companies Regulations, 2011.
253 NOTICE OF ANNUAL GENERAL MEETING
2.3. PROPOSED SPECIAL RESOLUTION NO. 1: Authorisation to provide financial assistance in terms of section 45 of the Companies Act
RESOLVED THAT the board of directors of the Company (“the Board“) may, in accordance with the provisions of section 45(3)(a)(ii) and 45(3)(b) of the Companies Act, and subject to the requirements of the Companies Act and the Company’s memorandum of incorporation (“MOI“), if any, authorise the Company to provide direct or indirect financial assistance (“Section 45 Financial Assistance“), by way of loans, loan facilities, advances for expenses, assisting with administration of transactions, making payments, extending credit, discharging debts, performing obligations, contractual undertakings, sureties or guarantees, providing related security (including, without limitation, by way of mortgages or pledges of property, cessions of rights, bonds, charges or otherwise) or any other manner of providing financial assistance, on such terms as may be authorised by the Board in accordance with the following:
2.3.1. Section 45 Financial Assistance can be provided to current and future subsidiaries of the Company and to current and future associated companies of the Company (where an associate means any entity in which the Company owns between 20% (twenty percent) and 50% (fifty percent) of the equity;
2.3.2. Section 45 Financial Assistance can be provided to individuals pursuant to a share incentive scheme of the Company;
2.3.3. Section 45 Financial Assistance can be provided in respect of the facilitation of the acquisition of equity in the Company by BEE companies or Black Persons as contemplated in the Broad Based Black Economic Empowerment Act, 53 of 2003, read with the Codes of Good Practice thereto; and
2.3.4. Section 45 Financial Assistance may be provided at any time during a period commencing on the date of adoption of this resolution and ending 2 (two) years from such date; provided that any related corporate action must be duly authorised in compliance with the Listings Requirements and the Companies Act.
Motivation / Explanation: The reason for and the effect of Proposed Special Resolution No. 1 is to authorise, by way of a general authorisation, the Company to provide financial assistance to the above category of persons and/or entities, in accordance with the provisions of section 45 of the Companies Act.
The Board requires the flexibility to enter into transactions for the benefit of the Company and the Shareholders as a general body, which transactions may entail elements of financial assistance. The exercise of the powers to be granted to the Board, as contemplated in this special resolution, shall always be subject to compliance with the other requirements of the Companies Act, such as applying the solvency and liquidity test, and the provisions of the Listings Requirements.
Notwithstanding the title of section 45 of the Companies Act, being “Loans or other financial assistance to directors“, on a proper interpretation, the body of the section may also apply to financial assistance provided by a company to related or inter-related companies and corporations.
Section 45 of the Companies Act provides, inter alia, that the particular financial assistance must be provided only pursuant to a special resolution of the Shareholders, adopted within the previous 2 (two) years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category and the Board must be satisfied that:
(a) immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test, as defined in section 4 of the Companies Act; and (b) the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company.
2.4. PROPOSED SPECIAL RESOLUTION NO. 2: Authorisation to provide financial assistance for the subscription of shares in terms of section 44 of the Companies Act
RESOLVED THAT in terms of and subject to the provisions of section 44 of the Companies Act, the Board may, subject to compliance with the requirements of the Company’s MOI, if any, and the Companies Act, authorise the Company to provide financial assistance (“Section 44 Financial Assistance“) by way of loans, loan facilities, advances for expenses, assisting with administration of transactions, making payments, extending credit, discharging debts, performing obligations, contractual undertakings, sureties or guarantees, providing related security (including, without limitation, by way of mortgages or pledges of property, cessions of rights, bonds, charges or otherwise) or any other manner of providing financial assistance, on such terms as may be authorised by the Board in accordance with the following:
2.4.1. Section 44 Financial Assistance can, without limitation, be provided for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the Company or a related or
254 NOTICE OF ANNUAL GENERAL MEETING
inter-related company or for the purchase of any securities of the Company or a related or inter-related company as contemplated in section 44 of the Companies Act;
2.4.2. Section 44 Financial Assistance in relation to the acquisition of securities or related securities contemplated in section 44(2) of the Companies Act can be provided to the following categories of potential recipients:
2.4.2.1. any present or future company or corporation related or inter-related to the Company;
2.4.2.2. any present or future director or prescribed officer or any employee in terms of an employee incentive scheme of the Company or in terms of a BEE transaction; and
2.4.3. Section 44 Financial Assistance may be provided at any time during a period commencing on the date of adoption of this resolution and ending 2 (two) years from such date; provided that any related corporate action must be duly authorised in compliance with the Listings Requirements and the Companies Act.
Motivation / Explanation: The reason for and the effect of Proposed Special Resolution No. 2 is to provide authority for the Company to provide financial assistance in certain circumstances to any person, as defined in clause 2.4.2 of Proposed Special Resolution No. 2, for the subscription or purchase of any options or securities in the Company.
The Board requires the flexibility to enter into transactions for the benefit of the Company and the Shareholders as a general body, which transactions may entail elements of financial assistance. The exercise of the powers to be granted to the Board, as contemplated in this special resolution, shall always be subject to compliance with the other requirements of the Companies Act, such as applying the solvency and liquidity test, and the provisions of the Listings Requirements.
Section 44 of the Companies Act provides, inter alia, that the particular financial assistance must be provided only pursuant to a special resolution of the Shareholders, adopted within the previous 2 (two) years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category and the Board must be satisfied that:
(a) immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test, as defined in section 4 of the Companies Act; and (b) the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.
2.5. PROPOSED SPECIAL RESOLUTION NO. 3: General authority to repurchase securities
RESOLVED THAT in terms of section 5.67(B)(b), read with section 5.72 of the Listings Requirements, the Company and/or any of its subsidiaries be and are hereby authorised, as a general authorisation, to repurchase the Company’s securities upon such terms and conditions and in such amounts as the directors of the Company may from time to time determine, subject to compliance with the requirements of the Company’s MOI, if any, the Companies Act and the Listings Requirements, and provided that:
• the repurchase of securities may only be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company and the counterparty (reported trades are prohibited), or through any other manner approved by the JSE;
• the Company (or any subsidiary) is authorised to do so in terms of its MOI;
• 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 the passing of this special resolution;
• at any point in time, the Company (or any subsidiary) may only appoint one agent to effect any repurchase(s) on the Company’s behalf;
• in any one financial year the general authority to repurchase will be limited to a maximum of 15% (fifteen percent) (or 10% (ten percent) where the repurchases are effect by a subsidiary) of the Company’s issued share capital of that class at the time authority is granted in that financial year;
• repurchases may not be made at a price greater than 10% (ten percent) above the weighted average of the market value for the securities for the 5 (five) business days immediately preceding the date on which the repurchase transaction is effected;
255 NOTICE OF ANNUAL GENERAL MEETING
• repurchases may not be made during a prohibited period, as defined in paragraph 3.67 of the Listings Requirements, unless a repurchase programme (where the dates and quantities of securities to be repurchased during the prohibited period are fixed) is in place and full details thereof have been disclosed in an announcement on SENS prior to commencement of the prohibited period;
• an announcement in terms of paragraph 11.27 of the Listings Requirements will be published as soon as the Company or any of its subsidiaries have cumulatively repurchased more than 3% (three percent) of the initial number of the relevant class of securities, and for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter;
• the board of directors of the Company must resolve that the repurchase is authorised, the Company and its subsidiaries have passed the solvency and liquidity test, as set out in section 4 of the Companies Act, and since that test was performed, there have been no material changes to the financial position of the Group; and
• the Company’s sponsor will confirm the adequacy of the Company’s working capital for the purpose of undertaking the repurchase, in writing, prior to the repurchase of any securities.
Motivation / Explanation: The Company’s MOI contains a provision allowing the Company to repurchase securities issued by the Company, subject to compliance with the Companies Act and the Listings Requirements. The reason for and effect of Proposed Special Resolution No. 3 is to grant the Company the general authority to repurchase its securities, in accordance with the provisions of the Listings Requirements.
The Board requires the flexibility to enter into transactions for the benefit of the Company and the Shareholders as a general body, which transactions may entail elements of repurchases. The exercise of the powers to be granted to the Board, as contemplated in this special resolution, shall always be subject to compliance with the other requirements of the Companies Act, such as applying the solvency and liquidity test, and the provisions of the Listings Requirements.
Disclosures in terms of the Listings Requirements
The Integrated Annual Report provides details of, inter alia, the: • directors and management of the Company on page 15–19; • major shareholders of the Company on page 61; • directors’ interests in securities on page 62; and • share capital of the Company on page 128.
Litigation There are no legal or arbitration proceedings, including any proceedings that are pending or threatened of which the Company is aware, that may have or have had in the recent past, being at least the previous 12 (twelve) months, a material effect on the Company’s financial position.
Material changes Other than any facts and developments reported on in the Integrated Annual Report, there have been no material changes in the affairs or financial position of the Company and its Group since the date of signature of the audit report and the date of this notice.
Responsibility statement The directors, whose names are given on page 15–18 of the Integrated Annual Report, collectively and individually, accept full responsibility for the accuracy of the information given in this notice 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 Integrated Annual Report and this notice provide all information required by law and the Listings Requirements.
2.6. PROPOSED SPECIAL RESOLUTION NO. 4: Issue of shares by the Company to executive directors, senior and executive employees, prescribed officers and other employees or future executive directors, future senior and executive employees, future prescribed officers and other future employees
RESOLVED THAT subject to the provisions of the Companies Act, the Listings Requirements, the MOI (if any) and the approval of ordinary resolution number 12, the Board is authorised, as it in its discretion thinks fit, to allot, issue, grant options or any other rights exercisable for, authorised but unissued shares in the Company from time to time (including, without limitation, in terms of any transaction falling within clause 8.2.1 of the MOI and/or section 41(1) of the Companies Act) on such terms as may be determined by the Board in its discretion, for such monetary or other consideration (whether payable in cash or otherwise) to:
256 NOTICE OF ANNUAL GENERAL MEETING
2.6.1. executive directors, senior and executive employees, prescribed officers and other employees or future executive directors, future senior and executive employees, future prescribed officers and other future employees of the Company, or to a person related or inter-related to such directors or prescribed officers; or
2.6.2. a nominee of a person contemplated in paragraphs 2.6.1, provided that:
the number of securities which may be allotted, issued or disposed of under this authority does not in aggregate exceed the limits as approved in ordinary resolution number 12.
Motivation / Explanation: The reason for and effect of Proposed Special Resolution No. 4 is proposed as a special resolution because the contemplated authorisation to allot, issue and grant options or any other rights exercisable for authorised but unissued shares in the Company to the persons specified in paragraphs 2.6.1 and 2.6.2 generally requires authorisation by way of a special resolution in terms of subsection 41(1) of the Companies Act. Such authority shall endure until the next annual general meeting of the Company (at which time this authority shall lapse, unless it is renewed at the aforementioned annual general meeting), provided that it shall not extend beyond 15 (fifteen) months from the date on which this special resolution is adopted.
The exercise of the powers to be granted to the Board, as contemplated in this special resolution, shall always be subject to compliance with the other requirements of the Companies Act and the provisions of the Listings Requirements.
2.7. PROPOSED SPECIAL RESOLUTION NO. 5: Approval of Non-Executive Directors’ fees
RESOLVED THAT the following non-executive directors’ fees be and are hereby approved for a period of two years from the passing of this resolution or until its renewal, whichever is the earliest:
Description R Board Chairman (per annum) R300 000 Non-executive director (per annum) R195 000 Audit and Risk Committee – Chairperson (per annum) R110 000 Audit and Risk Committee Member (per annum) R88 000 Transformation, Social and Ethics Committee Chairperson (per annum) R37 500 Transformation, Social and Ethics Committee Member (per annum) R30 000 Remuneration and Nomination Committee Chairperson (per annum) R25 000 Remuneration and Nomination Committee Member (per annum) R20 000 Investment Committee Chairperson (per annum) R75 000 Investment Committee Member (per annum) R60 000
Motivation / Explanation: The reason for and effect of Proposed Special Resolution No. 5 is to authorise the Company to pay the above remuneration and fees to the non-executive directors, as required in terms of sections 66(8) and (9) of the Companies Act.
2.8. PROPOSED ORDINARY RESOLUTION NO. 3: General authority to issue equity securities for cash
RESOLVED THAT the Board is hereby authorised, as a general authorisation, to allot and issue 85 221 459 (eighty five million, two hundred and twenty one thousand, four hundred and fifty nine) authorised unissued securities of the Company for cash as they in their discretion deem fit, subject to compliance with the requirements of the Company’s MOI, if any, the Companies Act and the Listings Requirements and the following limitations, namely that:
• the general authority shall only be valid until the Company’s next annual general meeting or for 15 (fifteen) months from the date of the passing of this ordinary resolution, whichever period is shorter;
• the securities, 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 equity securities or rights that are convertible into a class already in issue;
• an announcement giving full details, including the number of securities issued, the average discount to the weighted average traded price of the securities over the 30 (thirty) business days prior to the date that the price of the issue was agreed, in writing, between the Company and the party(ies) subscribing for the securities and the expected effects of the issue on the net asset value per security, net tangible asset value, earnings and headline earnings per security will be published after any issue representing, on a cumulative basis within the period for which the above general authorisation is valid (as contemplated above), 5% (five percent) of the number of securities in issue prior to that issue;
257 NOTICE OF ANNUAL GENERAL MEETING
• the total aggregate number of securities which may be issued for cash in terms of this authority may not exceed 85 221 459 (eighty five million, two hundred and twenty one thousand, four hundred and fifty nine) securities, being 15% (fifteen percent) of the Company’s issued securities as at the date of notice of this AGM. Accordingly, any securities issued under this authority prior to this authority lapsing shall be deducted from the 85 221 459 (eighty five million, two hundred and twenty one thousand, four hundred and fifty nine) securities the Company is authorised to issue in terms of this authority for the purpose of determining the remaining number of securities that may be issued in terms of this authority;
• in the event of a sub-division or consolidation of securities prior to this authority lapsing, the existing authority shall be adjusted accordingly to represent the same allocation ratio;
• in determining the price at which an issue of securities may be made in terms of this general authority, the maximum discount permitted will be 10% (ten percent) of the weighted average traded price on the JSE of those securities measured over the 30 (thirty) business days prior to the date that the price of the issue is agreed to between the Company and the party(ies) subscribing for the securities; and
• any issue will only be made to “public shareholders“, as defined by the Listings Requirements and not to related parties.
Although this is an ordinary resolution, the minimum percentage of voting rights that is required for this resolution to be adopted is 75% (seventy five percent) of the voting rights to be cast on the resolution.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 3 is to grant the Company the general authority to issue equity securities for cash, in accordance with the provisions of the Listings Requirements.
The Board requires the flexibility to enter into transactions for the benefit of the Company and the Shareholders as a general body, which transactions may entail elements of allotments and issues of shares in the capital of the Company for cash. The exercise of the powers to be granted to the Board, as contemplated in this ordinary resolution, shall always be subject to compliance with the other requirements of the Companies Act and the provisions of the Listings Requirements.
2.9. PROPOSED ORDINARY RESOLUTION NO. 4: Re-appointment of Deloitte as the auditors
RESOLVED THAT Deloitte be and hereby is re-appointed as the independent registered auditors of the Company (for the year ending 30 June 2014), with Miss Z. Jasper as the designated partner of Deloitte who will undertake the audit for the ensuing year.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 4 is to re-appoint Deloitte as the independent registered auditors of the Company.
2.10. PROPOSED ORDINARY RESOLUTION NO. 5: Re-election of Johannes Hendrik Petrus van der Merwe as a director
RESOLVED THAT Johannes Hendrik Petrus van der Merwe (Identity No. 6502265034081), who is required to retire by rotation as a director of the Company at this AGM and who is eligible and available for re-election, is hereby re-elected to serve as a non- executive director of the Company for a period of 3 (three) years, subject to the provisions of the Companies Act pertaining to the cessation of office of director, with immediate effect.
A brief curriculum vitae in respect of Johannes Hendrik Petrus van der Merwe is set out on page 17 of the Integrated Annual Report.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 5 is to re-elect Johannes Hendrik Petrus van der Merwe as a director of the Company, his retirement being in accordance with the requirements of the Company’s MOI.
2.11. PROPOSED ORDINARY RESOLUTION NO. 6: Re-election of Pieter Hendrik Faure as a director
RESOLVED THAT Pieter Hendrik Faure (Identity No. 7410165050083), who is required to retire by rotation as a director of the Company at this AGM and who is eligible and available for re-election, is hereby re-elected to serve as a non-executive director of the Company for a period of 3 (three) years, subject to the provisions of the Companies Act pertaining to the cessation of office of director, with immediate effect.
A brief curriculum vitae in respect of Pieter Hendrik Faure is set out on page 17 of the Integrated Annual Report.
258 NOTICE OF ANNUAL GENERAL MEETING
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 6 is to re-elect Pieter Hendrik Faure as a director of the Company, his retirement being in accordance with the requirements of the Company’s MOI.
2.12. PROPOSED ORDINARY RESOLUTION NO. 7: Re-election of Pierre Tredoux as a director
RESOLVED THAT Pierre Tredoux (Identity No. 5612305072089), who is required to retire by rotation as a director of the Company at this AGM and who is eligible and available for re-election, is hereby re-elected to serve as an independent non- executive director of the Company for a period of 3 (three) years, subject to the provisions of the Companies Act pertaining to the cessation of office of director, with immediate effect.
A brief curriculum vitae in respect of Pierre Tredoux is set out on page 15 of the Integrated Annual Report.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 7 is to re-elect Pierre Tredoux as a director of the Company, his retirement being in accordance with the requirements of the Company’s MOI.
2.13. PROPOSED ORDINARY RESOLUTION NO. 8: Re-election of Stewart Shaw-Taylor as Chairperson and member of the Audit and Risk Committee
RESOLVED THAT Stewart Shaw-Taylor, being an independent non-executive director of the Company, who is eligible and available for re-election, is hereby re-elected as Chairperson and member of the Company’s Audit and Risk Committee with immediate effect and until the next annual general meeting of the Company, in accordance with section 94(2) of the Companies Act.
A brief curriculum vitae of Stewart Shaw-Taylor is set out on page 16 of the Integrated Annual Report.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 8 is to re-elect Stewart Shaw-Taylor as the Chairperson and member of the Audit and Risk Committee of the Company.
2.14. PROPOSED ORDINARY RESOLUTION NO. 9: Re-election of Lucas Malamule Ndala as a member of the Audit and Risk Committee
RESOLVED THAT Lucas Malamule Ndala, being a non-independent non-executive director of the Company, who is eligible and available for re-election, is hereby re-elected as a member of the Company’s Audit and Risk Committee with immediate effect and until the next annual general meeting of the Company, in accordance with section 94(2) of the Companies Act.
A brief curriculum vitae of Lucas Malamule Ndala is set out on page 17 of the Integrated Annual Report.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 9 is to re-elect Lucas Malamule Ndala as a member of the Audit and Risk Committee of the Company.
2.15. PROPOSED ORDINARY RESOLUTION NO. 10: Re-election of Lebokgane Winstone Masekela as a member of the Audit and Risk Committee
RESOLVED THAT Lebokgane Winstone Masekela, being an independent non-executive director of the Company, who is eligible and available for re-election, is hereby re-elected as a member of the Company’s Audit and Risk Committee with immediate effect and until the next annual general meeting of the Company, in accordance with section 94(2) of the Companies Act.
A brief curriculum vitae of Lebokgane Winstone Masekela is set out on page 16 of the Integrated Annual Report.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 10 is to re-elect Lebokgane Winstone Masekela as a member of the Audit and Risk Committee of the Company.
2.16. PROPOSED ORDINARY RESOLUTION NO. 11: Re-election of Hellen El Haimer as a member of the Audit and Risk Committee
RESOLVED THAT Hellen El Haimer, being an independent non-executive director of the Company, who is eligible and available for re-election, is hereby re-elected as a member of the Company’s Audit and Risk Committee with immediate effect and until the next annual general meeting of the Company, in accordance with section 94(2) of the Companies Act.
259 NOTICE OF ANNUAL GENERAL MEETING
A brief curriculum vitae of Hellen El Haimer is set out on page 15 of the Integrated Annual Report.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 11 is to re-elect Hellen El Haimer as a member of the Audit and Risk Committee of the Company.
2.17 PROPOSED ORDINARY RESOLUTION NO. 12: Control over unissued shares
RESOLVED THAT subject to the provisions of the Companies Act, the Listings Requirements and the MOI (if any), the authorised but unissued securities of the Company be and are hereby placed under the control of the Board, and the Board is authorised, as it in its discretion thinks fit, to allot, issue, grant options or any other rights exercisable for, authorised but unissued shares in the Company from time to time (including, without limitation, in terms of any transaction falling within clause 8.2.2. of the MOI and/or section 41(1) of the Companies Act) on such terms as may be determined by the Board in its discretion, for such monetary or other consideration (whether payable in cash or otherwise) and to such person or persons as they in their discretion deem fit, provided that:
2.17.1 the number of securities which may be allotted, issued or disposed of under this authority does not in aggregate exceed 15% (fifteen percent) of the Company’s issued share capital as at the date of passing of this resolution; and
2.17.2 such allotment, issue or disposal is subject to a maximum discount of 10% (ten percent) of the weighted average traded on the JSE of those securities over the 10 (ten) business days prior to the date of allotment, issue or disposal as the case may be.
Motivation / Explanation: The reason for and effect of Proposed Ordinary Resolution No. 12 is to authorise the Board to issue, or grant rights exercisable for, the unissued authorised shares of the Company. Any issue would be subject to the other requirements of the Companies Act and the Listings Requirements. Such authority shall endure until the next annual general meeting of the Company (at which time this authority shall lapse, unless it is renewed at the aforementioned annual general meeting), provided that it shall not extend beyond 15 (fifteen) months from the date on which this resolution is adopted.
The Board requires the flexibility to enter into transactions for the benefit of the Company and the Shareholders as a general body, which transactions may entail elements of allotments and issues of shares in the capital of the Company. The exercise of the powers to be granted to the Board, as contemplated in this resolution, shall always be subject to compliance with the other requirements of the Companies Act and the provisions of the Listings Requirements.
3. General matters: including any matters required to be raised by Shareholders.
By order of the Board 9 December 2013
260 PROXY FORM
ATTACQ LIMITED Annexure A (previously Atterbury Investment Holdings Limited) (Incorporated in the Republic of South Africa) (Registration number 1997/000543/06) JSE share code: ATT ISIN: ZAE000177218 (“the Company“)
For use by shareholders of the Company holding certificated shares and/or dematerialised shareholders who have elected “own name“ registration, nominee companies of Central Securities Depository Participants’ (“CSDP“) and brokers’ nominee companies, registered as such at the close of business on Friday, 17 January 2013 (the voting record date), at the annual general meeting of the Company to be held at Atterbury Theatre, Lynnwood Bridge Office Park, 4 Daventry Road, Lynnwood Manor, Pretoria on Friday, 24 January 2014, commencing at 9h00 (“the AGM“), or any postponement or adjournment thereof. If you are a dematerialised shareholder, other than with “own name“ registration, do not use this form. Dematerialised shareholders, other than with “own name“ registration, should provide instructions to their appointed CSDP or broker in the form as stipulated in the agreement entered into between the shareholder and the CSDP or broker.
I/We (block letters), of (address)
Telephone (Work) Telephone (Cell) being the holder(s) of ordinary shares in the Company, hereby appoint
1. or failing him/her
2. or failing him/her
3. the chairman of the AGM, as my/our proxy to attend, speak and vote (or abstain from voting) and act for me/us and on my/our behalf at the AGM which will be held for the purpose of considering and if deemed fit passing, with or without modification, the resolutions to be proposed thereat and at any adjournment or postponement thereof and to vote for or against such resolutions or to abstain from voting in respect of the shares in the issued capital of the Company registered in my/ our name(s). Insert an “X“ In favour of Against Abstain Ordinary Resolution No. 1. Approval of Annual Financial Statements 2. Approval of Consolidated Annual Financial Statements 3. General authority to issue equity securities for cash 4. Re-appointment of Deloitte as the auditors 5. Re-election of Johannes Hendrik Petrus van der Merwe as a director 6. Re-election of Pieter Hendrik Faure as a director 7. Re-election of Pierre Tredoux as a director 8. Re-election of Stewart Shaw-Taylor as Chairperson and member of the Audit and Risk Committee 9. Re-election of Lucas Malamule Ndala as a member of the Audit and Risk Committee 10. Re-election of Lebokgane Winstone Masekela as a member of the Audit and Risk Committee 11. Re-election of Hellen El Haimer as a member of the Audit and Risk Committee 12. Control over unissued shares Special Resolution No. 1. Authorisation to provide financial assistance in terms of section 45 of the Companies Act 2. Authorisation to provide financial assistance for the subscription of shares in terms of section 44 of the Companies Act 3. General authority to repurchase securities 4. Issue of shares by the Company to executive directors, senior and executive employees, prescribed officers and other employees or future executive directors, future senior and executive employees, future prescribed officers and other future employees 5. Approval of Non-Executive Directors’ fees
Insert an “X“ in the relevant spaces above according to how you wish your votes to be cast. If no options are marked the proxy will be entitled to vote as he/ she thinks fit.
Signed at on 20
Signature(s) (Authority of signatory to be attached)
Assisted by (where applicable)
Telephone number
A shareholder entitled to attend and vote at the annual general meeting is entitled to appoint a proxy to attend, vote and speak in his/her stead. A proxy need not be a member of the Company. Each Shareholder is entitled to appoint one or more proxies to attend, speak and, on a poll, vote in place of that shareholder at the AGM. Forms of proxy must be deposited at Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, or posted to PO Box 61051, Marshalltown, 2107 so as to arrive by no later than 9h00 on Wednesday, 22 January 2014. Please read the notes on the reverse side hereof 261 Annexure A
Notes:
1. This form of proxy is only to be completed by those ordinary shareholders who are: a) holding ordinary shares in certificated form; or b) recorded in the sub-register in electronic form in their “own name“, on the date on which shareholders must be recorded as such in the register maintained by the transfer secretaries, Computershare Investor Services Proprietary Limited, in order to vote at the AGM being held on Friday, 24 January 2014, and who wish to appoint another person to represent them at the AGM.
2. Certificated shareholders wishing to attend the AGM have to ensure beforehand with the transfer secretaries of the Company (being Computershare Investor Services Proprietary Limited) that their shares are registered in their name.
3. Beneficial shareholders whose shares are not registered in their “own name“, but in the name of another, for example, a nominee, may not complete a proxy form, unless a form of proxy is issued to them by a registered shareholder and they should contact the registered shareholder for assistance in issuing instructions on voting their shares, or obtaining a proxy to attend, speak and, on a poll, vote at the AGM.
4. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space, with or without deleting “the chairperson of the AGM“. The person whose name stands first on the form of proxy and who is present at the AGM will be entitled to act as proxy to the exclusion of those whose names follow.
5. A shareholder’s instructions to the proxy must be indicated by means of a tick or a cross in the appropriate box provided. However if you wish to cast your votes in respect of a lesser number of shares than you own in the Company, insert the number of shares in respect of which you desire to vote. If: (i) a shareholder fails to comply with the above; or (ii) gives contrary instructions in relation to any matter; or any additional resolution(s) which are properly put before the meeting; or (iii) the resolution listed in the proxy form is modified or amended, the shareholder will be deemed to authorise the chairperson of the AGM, if the chairperson is the authorised proxy, to vote in favour of the resolutions at the AGM, or any other proxy to vote or to abstain from voting at the AGM as he/she deems fit, in respect of all the shareholder’s votes exercisable thereat. If however the shareholder has provided further written instructions which accompany this form of proxy and which indicate how the proxy should vote or abstain from voting in any of the circumstances referred to in (i) to (iii) above, then the proxy shall comply with those instructions.
6. The forms of proxy should be lodged at Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 or posted to PO Box 61051, Marshalltown, 2107 so as to be received by not later than 9h00 on Wednesday, 22 January 2014.
7. The completion and lodgement of this form of proxy will not preclude the relevant shareholder from attending the AGM and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. In addition to the aforegoing, a shareholder may revoke the proxy appointment by (i) cancelling it in writing, or making a later inconsistent appointment of a proxy; and (ii) delivering a copy of the revocation instrument to the proxy, and to the Company. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as at the later of the date stated in the revocation instrument, if any; or the date on which the revocation instrument was delivered in the required manner.
8. The chairperson of the AGM may reject or accept any form of proxy which is completed and/or received, other than in compliance with these notes, provided that, in respect of acceptances, he is satisfied as to the manner in which the shareholder(s) concerned wish(es) to vote.
9. Any alteration to this form of proxy, other than a deletion of alternatives, must be initialled by the signatory/ies.
10. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the Company or Computershare Investor Services Proprietary Limited or waived by the chairperson of the AGM.
11. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by Computershare Investor Services Proprietary Limited.
12. Where there are joint holders of shares: - any one holder may sign the form of proxy; and - the vote of the senior (for that purpose seniority will be determined by the order in which the names of shareholders appear in the register of members) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint holder(s) of shares.
13. If duly authorised, companies and other corporate bodies who are shareholders of the Company having shares registered in their own name may, instead of completing this form of proxy, appoint a representative to represent them and exercise all of their rights at the AGM by giving written notice of the appointment of that representative. This notice will not be effective at the AGM unless it is accompanied by a duly certified copy of the resolution or other authority in terms of which that representative is appointed and is received at Computershare Investor Services Proprietary Limited, at Ground Floor Marshall Street, Johannesburg, to reach them by no later than 9h00 on Wednesday, 22 January 2014.
14. This form of proxy may be used at any adjournment or postponement of the AGM, including any postponement due to a lack of quorum, unless withdrawn by the shareholder.
15. The aforegoing notes contain a summary of the relevant provisions of section 58 of the Companies Act, 2008 (as amended) (“the Companies Act“), as required in terms of that section. In addition, an extract from the Companies Act reflecting the provisions of section 58 of the Companies Act, is attached to this form of proxy.
262 Annexure A
Extract from the Companies Act
“58. Shareholder right to be represented by proxy
(1) At any time, a shareholder of a company may appoint any individual, including an individual who is not a shareholder of that company, as a proxy to - (a) participate in , and speak and vote at, a shareholders meeting on behalf of the shareholder; or (b) give or withhold written consent on behalf of the shareholder to a decision contemplated in section 60.
(2) A proxy appointment – (a) must be in writing, dated and signed by the shareholder; and (b) remains valid for – (i) one year after the date on which it was signed; or (ii) any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in subsection (4)(c), or expires earlier as contemplated in subsection (8)(d).
(3) Except to the extent that the Memorandum of Incorporation of a company provides otherwise – (a) a shareholder of that company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by the shareholder; (b) a proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person, subject to any restriction set out in the instrument appointing the proxy; and (c) a copy of the instrument appointing a proxy must be delivered to the company, or to any other person on behalf of the company, before the proxy exercises any rights of the shareholder at a shareholders meeting.
(4) Irrespective of the form of instrument used to appoint a proxy – (a) the appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person in the exercise of any rights as a shareholder. (b) the appointment is revocable unless the proxy appointment expressly states otherwise; and (c) if the appointment is revocable, a shareholder may revoke the proxy appointment by - (i) cancelling it in writing, or making a later inconsistent appointment of a proxy; and (ii) delivering a copy of the revocation instrument to the proxy, and to the Company.
(5) The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of – (a) the date stated in the revocation instrument, if any; or (b) the date on which the revocation instrument was delivered as required in subsection (4)(c)(ii).
(6) If the instrument appointing a proxy or proxies has been delivered to a company, as long as that appointment remains in effect, any notice that is required by this Act or the company’s Memorandum of Incorporation to be delivered by the company to the shareholder must be delivered by the company to – (a) the shareholder; or (b) the proxy or proxies, if the shareholder has - (i) directed the company to do so, in writing; and (ii) paid any reasonable fee charged by the company for doing so.
(7) A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the extent that the Memorandum of Incorporation, or the instrument appointing the proxy, provides otherwise.
(8) If a company issues an invitation to shareholders to appoint one or more persons named by the company as a proxy, or supplies a form of instrument for appointing a proxy – (a) the invitation must be sent to every shareholder who is entitled to notice of the meeting at which the proxy is intended to be exercised; (b) the invitation, or form of instrument supplied by the company for the purpose of appointing a proxy, must - (i) bear a reasonably prominent summary of the rights established by this section; (ii) contain adequate blank space, immediately preceding the name or names of any person or persons named in it, to enable a shareholder to write in the name and, if so desired, an alternative name of a proxy chosen by the shareholder; and (iii) provide adequate space for the shareholder to indicate whether the appointed proxy is to vote in favour of or against any resolution or resolutions to be put at the meeting, or is to abstain from voting; (c) the company must not require that the proxy appointment be made irrevocable; and (d) the proxy appointment remains valid only until the end of the meeting at which it was intended to be used, subject to subsection (5).
(9) Subsection (8)(b) and (d) do not apply if the company merely supplies a generally available standard form of proxy appointment on request by a shareholder.“
263 Bagatelle – Mall of Mauritius, Port Louis
264 glossary
AAM Atterbury Asset Managers Proprietary Limited Abacus Attacq Retail Fund Proprietary Limited (previously known as Abacus Holdings Proprietary Limited), which is a 75% held direct subsidiary of Attacq Abacus Holdings Abacus Holdings Management Proprietary Limited (to be renamed Attacq Retail Fund Asset and Management or Attacq Property Management Limited Retail Fund Asset and Property Management or the manager AIHI Refer to the definition of Atterbury Investment Holdings International APC Atterbury Parkdev Consortium Proprietary Limited , the owner of the property known as Harlequins Office Park which company was a wholly-owned subsidiary of Attacq prior to the disposal of Harlequins Office Park Arctospark Arctospark Proprietary Limited which is a 50% held direct associate of Attacq with the remaining 50% held by a consortium of other investors, Attacq is in the process of selling its holding in Arctospark Proprietary Limited Attacq or the Company Attacq Limited (previously known as Atterbury Investment Holdings Limited) Attacq Retail Fund refer to the definition of Abacus Atterbury Africa Atterbury Africa Limited, a company limited by shares and duly incorporated in Mauritius, which company holds a Global Business License (Category 1) and is 25% owned by Attacq’s wholly-owned subsidiary, AIHI, with the balance held by Hyprop Investments Mauritius Limited (37.5%) which is wholly-owned by Hyprop, Atterbury Property Holdings International Limited (22.5%) which is wholly- owned by Atterbury Property and Atterbury Asset Managers International Limited (15%) Atterbury Investment Atterbury Investment Holdings International Limited a company registered and incorporated in the Holdings International Republic of Mauritius and a wholly-owned subsidiary of Attacq Atterbury Group collectively, Attacq and Atterbury Property Atterbury Property Atterbury Property Holdings Proprietary Limited a private company which is a development company undertaking the majority of its developments on behalf of Attacq and a 25% held direct associate of Attacq Attfund Attfund Limited, a public company which was liquidated in 2012 Attfund Retail Attfund Retail Limited, a public company which is a wholly-owned subsidiary of Hyprop Attventure Attventure Proprietary Limited, a private company which is owned by various private investors including the current and past directors, who hold direct and indirect interests in Attventure including Louis van der Watt and Pieter Faure Attvest Atterbury Investment Managers Proprietary Limited, a private company which is 50% held by the Mertech Group and the remaining 50% held by Keurprop Investments Proprietary Limited AWC Atterbury Waterfall City Proprietary Limited which is 93.875% held by Atterbury Property and the remaining 6.125% held by Attacq AWIC Atterbury Waterfall Investment Company Proprietary Limited (the owner of the Waterfall development rights, a private company which is an 80% held direct subsidiary of Attacq with the remaining 20% owned by AWC) B-BBEE Broad-Based Black Economic Empowerment CAGR compound annual growth rate CBD central business district developments projects entailing the development of land sites in order to create value through top structures including buildings direct property portfolio those properties held by Attacq and its subsidiaries Hyprop Hyprop Investments Limited, a public company registered and incorporated in terms of the laws of South Africa and listed on the JSE IPD Investment Property Databank Limited JSE JSE (Registration number 2005/022939/06), licensed as an exchange under the Financial Markets Act (Act No. 19 of 2012), as amended, and a public company registered and incorporated in terms of the laws of South Africa
265 GLOSSARY (continued)
Karoo I Karoo Investment Fund S.C.A. SICAV-SIF, a specialised investment fund (fonds d’ investissement spécialisé – FIS) organised as an investment company with variable capital in the form of a partnership limited by shares (société en commandite par actions – SCA) governed by the laws of the Grand Duchy of Luxembourg Karoo II Karoo Investment Fund II S.C.A. SICAV-SIF, a specialised investment fund (fonds d’ investissement spécialisé – FIS) organised as an investment company with variable capital in the form of a partnership limited by shares (société en commandite par actions – SCA) governed by the laws of the Grand Duchy of Luxembourg King III the Code of Corporate Practices and Conduct in South Africa representing principles of good corporate governance as laid out in the King Report, as amended from time to time MAS MAS Real Estate Inc. (formerly MAS plc, a public limited company registered in accordance with the laws of the British Virgin Islands, registered as an external company in South Africa and which has a primary listing on the Euro-MTF market of the Luxembourg Stock Exchange and a secondary listing on the Alternative Exchange of the JSE Mertech Group collectively, BNF Investments Proprietary Limited, Mergon Foundation NPC and Mertech Investments Proprietary Limited NAV net asset value, being the value of all the Group’s assets after subtracting the value of all of its liabilities as determined in accordance with the consolidated financial statements of Attacq primary GLA the rentable area dedicated to the use of the tenant comprising usable and common area for offices and excluding common area for retail buildings properties collectively, the direct property portfolio and the indirect property portfolio RBH Royal Bafokeng Holdings Proprietary Limited a private company that is the investment arm of the Royal Bafokeng Nation and is the sole shareholder of Lisinfo 222 Investments Proprietary Limited Rapfund Rapfund Holdings Proprietary Limited a private company which is 52% held by Reach with the remaining 48% held by various private shareholders Razorbill Razorbill Properties 91 Proprietary Limited a private company which is a wholly-owned subsidiary of Attacq and which operates as the Group’s treasury company Reach Retail Africa Consortium Holdings Proprietary Limited a private company registered and incorporated in terms of the laws of South Africa in which Attacq holds 20% of the share capital and loans immediately convertible into a further 30% of the share capital, with the remaining shares held by various private shareholders REIT Real Estate Investment Trust, a company listed on the JSE which has received REIT status in terms of the Listings Requirements SIM Sanlam Investment Management, a division of Sanlam Life Insurance Limited VWAP volume weighted average price Waterfall the leasehold and development rights acquired by AWIC from WDC in order to develop and register development rights long-term lease agreements against the title deeds of the Waterfall land parcels Waterfall Business Estate a development located between the Allandale and Woodmead off-ramps on both sides of the M1/N1 highways in Gauteng and comprising all completed properties, developments and future developments on the Waterfall land parcels Waterfall land parcels - land parcels 3, 8, 9, 10, 10a, 10b, 12 and 24 of portion 1/RE of the Farm Waterfall No. 5; - land parcel 15 on portion 62 of the Farm Waterfall No. 5; - land parcel 20 on portion 706 of the Farm Waterfall No. 5; - land parcel 21 on portion 75 of the Farm Waterfall No. 5; - land parcel 22 on portion 78 of the Farm Waterfall No. 5 Waterfall pipeline all current developments and future developments on the Waterfall Business Estate WDC Waterfall Development Company Proprietary Limited, a private company, the previous holder of the Waterfall development rights which was sold to Attacq Wingspan Retail Africa Wingspan Investments Proprietary Limited, a private company which is 68.4% held by Reach with the remaining 31.6% held by various private shareholders
266 All work The West Africa Team, and no play... Accra, Ghana
267 CORPORATE INFORMATION
Registered office of the company Company secretary Attacq Limited Talana Smith (CA(SA), CIMA, MCom) The Parkdev Building The Parkdev Building 2nd Floor, Brooklyn Bridge 2nd Floor, Brooklyn Bridge 570 Fehrsen Street 570 Fehrsen Street Brooklyn, 0181 Brooklyn, 0181 (PostNet suite 205, Private Bag X20009, Garsfontein, 0042) (PostNet Suite 205, Private Bag X20009, Garsfontein, 0042)
Place and date of incorporation Incorporated in the Republic of South Africa on 17 January 1997
Attorneys Sponsor Edward Nathan Sonnenbergs Inc. Java Capital Trustees and Sponsors Proprietary Limited (Registration number 2006/018200/21) (Registration number 2006/005780/07) 1 North Wharf Square, Loop Street 2 Arnold Road Cape Town, 8001 Rosebank, 2196 (PO Box 2293, Cape Town, 8000) Johannesburg (PO Box 2087, Parklands, 2121)
Corporate advisor and bookrunner Independent auditors Java Capital Proprietary Limited Deloitte & Touche (Registration number 2002/031862/07) Registered Auditors 2 Arnold Road Riverwalk Office Park, Block B Rosebank, 2196 41 Matroosberg Road, Ashlea Gardens X6 Johannesburg Pretoria, 0081 (PO Box 2087, Parklands, 2121) (PO Box 11007, Hatfield, 0028)
Independent property valuer Independent property valuer Mills Fitchet KZN CC Old Mutual Investment Group (South Africa) Proprietary Limited (Registration number CK95/43533/23) (Registration number 1993/003023/07) 29 Petrus Stroom Road Mutual Park, Jan Smuts Dargle, 3265 Pinelands, 7405 (PO Box 1339, Howick, 3290) (PO Box 878, Cape Town, 8000)
Independent property valuer Transfer secretaries Amanda de Wet Consultants and Investments CC Computershare Investor Services Proprietary Limited (Registration number 2005/019476/23) (Registration number 2004/003647/07) 16B Maroelana Street Drive Ground Floor, 70 Marshall Street Hazelwood Johannesburg, 2001 Pretoria, 0081 (PO Box 61051, Marshalltown, 2107) (PO Box 2895, Brooklyn Square, 0075)
Banker Investec Private Bank, a division of Investec Bank Limited (Registration number 1969/004763/06) Corner Atterbury and Klarinet Streets Menlo Park Pretoria, 0081 (PO Box 35209, Menlo Park, South Africa, 0102)
268 Banker Banker The Standard Bank of South Africa Limited Nedbank Limited (Registration number 1962/000738/06) (Registration number 1951/000009/06) 30 Baker Street Nedbank Head Office Corner Oxford Road 135 Rivonia Road Rosebank, 2196 Sandton, 2196 (PO Box 8786, Johannesburg, 2000) (PO Box 1144, Johannesburg, 2000)
Banker Rand Merchant Bank, a division of FirstRand Bank Limited (Registration number 1929/001225/06) 1 Merchant Place Corner Fredman Drive and Rivonia Road Sandton, 2196 (PO Box 786273, Sandton, 2146)
André de Klerk with handymen staff – Attacq
269 Versnit January 2013
MB Technologies Tarsus sod-turning – 15 February 2013
270 Atterbury staff – Casual Day, 2 September 2013 SOCIAL PAGES
Dräger sod-turning – 24 August 2013
Attacq Road Show @ Atterbury Theatre on 2 September 2013
Atterbury Bowling Day on 10 May 2013
Massbuild roofwetting – 13 February 2013
Group 5 sod-turning – 17 October 2012 271 www.attacq.co.za