InTeGrateD AnnuAl reporT 30 June 2017 GROWTHPOINT INTEGRATED ANNUAL REPORT 30 J REPORT ANNUAL INTEGRATED GROWTHPOINT UNE 2017 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 GROWTHPOINT 2017 REPORT SCOPE AND BOundary This report covers the period from 1 July 2016 to 30 June 2017 (FY17) for the financial reporting entity – Growthpoint Properties limited. The report provides an overview of the operations and performance of all businesses, which encompass the South African businesses, including its share in the V&A Waterfront and the Healthcare Fund, as well as its non-South African interests, which include its share in Growthpoint Properties Australia (GOZ) and Globalworth real estate Investments (GWI). These businesses have been depicted in a simplified ownership and legal structure on page 21. Group ANNUAL FINANCIAL INTEGRATED ANNUAL REPORT STATEMENTS (AFS) (IAR) The statutory AFS are prepared The IAr incorporates an overview in accordance with International of our organisation and its key Financial reporting Standards strategic matters, performance (IFrS), JSe listings requirements and governance. and the requirements of the The IAr should be read in Companies Act, no 71 of 2008, conjunction with the AFS, which as amended. together provide a comprehensive overview of our organisation. ANNUAL GENERAL MEETING ESG Report (AGM) NOTICE The booklet containing additional The booklet containing the AGM information relating to notice also includes the environmental, social and summarised audited AFS for governance elements. FY17, relevant extracts from the IAr supporting the notice and the report to shareholders by the Social, ethics and Transformation Committee. Oxford Corner, Rosebank WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 1 About this report NAVIGATING THIS REPORT 2 About this report 3 Performance highlights 4 How we create value 6 Five-year KPI review 9 Value added statement Organisational overview Organisational Organisational overview 20 Governance and 12 Business model and value creation management structure 14 Our Growthpoint story 21 Ownership and legal structure 16 Driving our strategy 22 Board of Directors 18 Stakeholder engagement 24 The Executive Committee Performance review Performance CREATING SPACE TO THRIVE Performance review is essential in allowing us to extend our robust 28 Economic review track record with clarity, and continue on the 32 Interview with the Chairman and Chief Executive Officer path of uninterrupted growth in distributions. 38 Financial Director’s review – LN Sasse, Chief Executive Officer Key matters matters Key 46 Treasury management Combined 70 Overview of property 49 Environmental initiatives portfolio property assets 52 Group Services R122.3bn 56 Our people 60 Remuneration Report RSA performance RSA performance 75 Retail 96 V&A 82 Office 100 Funds management and Africa 90 Industrial 102 Trading and development International performance International performance 107 Global Worth Real Estate Investments (GWI) 109 Growthpoint Australia (GOZ) @growthpoint.com http://www.linkedin.com/company/ growthpointlimited CSR and governance CSR and governance http://www.youtube.com/growthpointlimited 118 Corporate social 134 Risk management and responsibility report internal audit This icon denotes cross-referencing 122 Corporate governance 138 Abbreviations and further reading between sections 140 Contact details WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 2 Integrated annual report 2017 AbOuT THIS Report Integrated reporting journey Assurance third line assurance providers, as well as Growthpoint first issued an integrated Growthpoint has a combined assurance by interacting with persons acting in an annual report (IAR) in FY10. The reports model to enable its Audit Committee to ex officio capacity who attended the in subsequent years, as well as the express the view that it is satisfied that special Audit Committee meetings current year, have evolved and been suitable assurance has been obtained for convened specifically to discuss the IAR. refined to reflect developments in all material statements made in the IAR. integrated reporting, particularly those Responsibility statement advocated by the International The following lines of assurance have The Audit Committee and management Integrated Reporting Council (IIRC), been identified: acknowledge their responsibility to the most significant being the ensure the integrity of this report. The International Integrated Reporting First line of assurance Audit Committee has applied its mind to Framework. Line functions that own and manage risk the report and believes that it addresses and opportunity. all material issues and presents fairly the Guiding principles integrated performance of the Strategy Second line of assurance organisation. Governance Specialist functions that facilitate and Stakeholder responsiveness oversee risk and opportunity. This report was approved by the Audit Performance Committee on 7 September 2017 and is Prospects Third line of assurance signed on its behalf by: Internal assurance providers that provide Materiality objective assurance. Materiality is defined as those matters that substantively affect the Fourth line of assurance organisation’s ability to create value External assurance providers. over the short, medium and long term. Fifth line of assurance LA Finlay LN Sasse In applying this concept, Growthpoint Board committees. Chairman of the Chief Executive strives to bring together the material Audit Committee Officer information about its strategy, governance, While the IAR is not audited, it contains performance and prospects to reflect the information from the AFS, on which an commercial, social and environmental unmodified audit opinion has been context within which it operates. expressed. Where information has not been derived from the AFS, the Audit The determination of materiality is Committee obtained assurance with not a single event, but rather a process regard thereto by reviewing information that has evolved through formal internal from first line providers of assurance, reporting as well as continuous which had been reviewed by second and engagement with stakeholders. Forward looking statements The IAR contains certain statements that are forward looking. By their very nature, such statements cannot be considered guarantees of future outcomes as they are dependent on events and circumstances, the predictability of which is uncertain and not necessarily within the organisation’s control. Send us your feedback: Scan the QR code To ensure that we report on issues to gain quick that matter to our stakeholders please access to our provide any feedback and questions website. to: [email protected]. WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited Integrated annual report 2017 3 About this report PERFORMANCE HIGHLIGHTS OuR YEAR IN NuMbERS Organisational overview Organisational 195.8 cents R5.6bn 9.8% 6.5% growth 10.4% distributable growth in gross revenue in dividend per share income growth Performance review Performance Largest South Market African primary capitalisation 8th listed REIT year 21st R70.7bn inclusion in FTSE/ largest company in JSE Responsible the FTSE/JSE Top 40 Index matters Key Index constituent of FTSE EPRA/ Top 10 NAREIT Emerging Index Investment proposition: Sustainable quality of earnings RSA performance 14-year track record of uninterrupted dividend growth Underpinned by high-quality physical property assets Diversified across international geographies and R3.8bn sectors average value of Dynamic and proven management track record shares traded per Best practice corporate governance International performance month Transparent reporting Level 3 BEE contributor 4.4% vacancies 35.0% LTV CSR and governance RSA vacancies improved R122.3bn gearing levels remain from 5.7% FY16 – strong focus Group property assets conservative, increase on tenant retention from 33.7% FY16 WorldReginfo - 5d2ba1e5-4448-4ef2-b859-b87e13015170 Growthpoint Properties Limited 4 Integrated annual report 2017 HOw wE Create valuE Our vision To be a leading international Our mission property company, We create value for all our providing space to thrive. stakeholders through innovative and sustainable property solutions. Growthpoint has operated as a Real Estate Investment Trust (REIT) from 1 July 2013. The REIT structure is a tax regime that provides “flow OWN IT through” on a pre-tax basis of the THE POWER net property income to investors OF US in the form of a taxable dividend. It is the most prevalent structure Our BE THE for investment in property in values BEST international jurisdictions. As investment in listed property WOW THEM continues to globalise, the REIT structure has become BREAK NEW a recognised international standard. GROUND FY17 FY16 Change REIT distribution Interim dividend 95.0 89.5 6.1% In terms of the dividend and dividend withholding tax Final dividend 100.8 94.3 6.9% provisions of the Income Tax Act, read in conjunction with section 25BB of the Income Tax Act, distributions received Total dividend 195.8 183.8 6.5% from a REIT will be taxed in the hands of the shareholder as follows: Distributions received by resident shareholders are taxed as a dividend for income purposes, but are not exempt in terms of the usual dividend exemption For more information about our and are accordingly exempt from dividend withholding tax. The dividends shares and