vunani pre-list cov nh...vunani property investment fund limited (formerly vunani property...
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Vunani Property Investment Fund Limited(formerly Vunani Property Investment Fund Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2005/019302/0 6)
JSE code: VPF ISIN: ZAE000157459
The definitions commencing on page 11 hereof apply mutatis mutandis throughout this Pre-Listing Statement.
PRE-LISTING STATEMENTPrepared and issued in terms of the JSE Listings Requirements relating to:
A private placing of units by the Company to eligible investors by way of an:
• offer to subscribe for a maximum of 66 334 357 new VPIF units with an approximate value of R497.5 million at the private placing price; and
• offer for sale of 22 232 113 VPIF units with an approximate value of R166.7 million at the private placing price.
The private placing will be implemented via a bookbuild exercise and it is estimated that the final private placing price pursuant to the private placing will fall within a range of between R7.00 and R8.00 per unit. For purposes of this Pre-Listing Statement, a mid-range price of R7.50 per unit has been used.
2011
Opening date of the private placing (09:00) Monday, 1 8 July
Closing date of the private placing (12:00) by which date eligible investors must submit their applications to the Bookrunners in order to participate in the private placing Friday, 2 9 July
Date upon which eligible investors will be notified of their selection to participate in the private placing and the number of VPIF units allocated to them and the pricing thereof Tuesday, 2 August
Market to be advised of the fulfilment of the conditions precedent Friday, 5 August
Listing date (09:00) Thursday, 11 August
Notification of any change to the above dates will be released on SENS and published in the press.
The placing units will rank pari passu in all respects with all other units issued by VPIF, including in respect of distributions. The salient terms of the debentures forming part of the VPIF units are set out in Appendix 10 hereof.
This Pre-Listing Statement is not an invitation to the general public to subscribe for VPIF units but is issued in compliance with the JSE Listings Requirements for the purpose of providing information about VPIF. T he private placing is open for acceptance only to eligible investors in terms of the offer for subscription and the offer for sale.
Subject to:
• obtaining a spread of unitholders acceptable to the JSE;
• the approval by Vunani shareholders of the Vunani disposal (refer definition);
• the minimum subscription being received; and
• the registration of transfer of the Athol Ridge property to VPIF .
the JSE has granted VPIF a listing for all of the VPIF units in issue after the private placing, in the “Real Estate – Real Estate Holdings and Development” sector of the JSE List, in terms of the FTSE classification, under the abbreviated name “VPIF”, JSE code “VPF” and ISIN: ZAE000157459, with effect from the commencement of trade on Thursday, 11 August 2011. The listing is a primary listing.
Capital structure
Authorised:
The authorised capital of VPIF is R5 000 000, comprising 2 000 000 000 ordinary shares with a par value of R0.0025 each; each of which is linked to one debenture with a face value of R2.4975.
Issued capital:
The issued unit capital of VPIF, before and after the private placing, comprising ordinary shares having a par value of R0.0025 each: each of which is linked to one debenture with a face value of R2.49 75, is set out below:
Units in issue prior to the Units in issue after the private placing Units in issue after the private placingprivate placing at par value based on the minimum number of based on the maximum number of 40 867 691 new units to be issued at 66 334 357 new units to be issued at the mid -range price of R7.50 each the mid -range price of R7.50 each
57 024 000 97 891 691 123 358 357
Value
R142 560 000 R 449 067 682 R 640 067 678
Independent reporting accountants
and auditors
Legal adviser
There is no share premium and there are no treasury units.
The listing of VPIF’s units on the JSE is conditional upon a minimum subscription of R366.7 million being received (refer paragraph 14
of this Pre-Listing Statement).
The placing units will be allotted in multiplies of 1 000 units to eligible investors . Fractions of units will not be issued.
VPIF units can only be traded on the JSE in dematerialised form. Accordingly, unitholders who elect to receive VPIF units in certificated
form will have to dematerialise their certificated units should they wish to trade therein.
The directors, whose names are set out in the “Corporate Information” section of this Pre-Listing Statement, collectively and individually,
accept full responsibility for the accuracy of the information given and certify that, to the best of their knowledge and belief, there are
no other facts, the omission of which would make any statement false or misleading and that they have made all reasonable enquiries
to ascertain such facts and that this Pre-Listing Statement contains the information required by the Companies Act and the JSE Listings
Requirements.
Each of the Corporate Adviser and Joint Sponsor, Independent Lead Sponsor, independent reporting accountants and auditors, legal
adviser, transfer secretaries, independent valuer, debenture trustee, investment bank, joint bookrunners and commercial banker have
consented in writing to act in the capacity stated and to their names being stated and, where applicable, their reports being included in this
Pre-Listing Statement. Furthermore they have not withdrawn their consents prior to the finalisation of this Pre-Listing Statement.
5 July 2011
An abridged version of this Pre-Listing Statement will be released on SENS on Monday, 1 8 July 2011 and published in the press
on Tuesday, 1 9 July 2011.
Copies of this Pre-Listing Statement are available in English only and may be obtained during normal business hours between Monday,
18 July 2011 and Thursday, 11 August 2011 from the registered office of the Company and the offices of the Independent Lead Sponsor,
Corporate Adviser and Joint Sponsor and the transfer secretaries, the addresses of which are set out in the “Corporate Information”
section hereof.
NOTES:
If you are in any doubt about the contents of this Pre-Listing Statement, you should consult your CSDP, broker, attorney,
accountant or other professional adviser.
Private placing in South Africa only
This Pre-Listing Statement is issued in connection with the private placing in South Africa only and is addressed only to person to whom
the private placing may lawfully be made. The distribution of this Pre-Listing Statement may be restricted by law and any persons into
whose possession it comes must inform themselves about and observe any such restrictions. This Pre-Listing Statement does not
constitute an offer of or an invitation to subscribe for and/or purchase any of the units in VPIF in any jurisdiction in which such offer,
subscription or sale would be unlawful.
Forward-looking statements
This Pre-Listing Statement includes forward-looking statements. Forward-looking statements are statements including, but not limited to,
any statements regarding the future financial position of VPIF and its future prospects. The forward-looking statements have been based
on current expectations and projections in respect of future results, which are not a guarantee for future performance even though the
directors consider them to be reasonable.
Risk factors, which may cause the actual results, performance or achievements of VPIF to be materially different from any of those
expressed or implied in the forward-looking statements include, inter alia, force majeure, another global economic crisis, an unforeseen
material deterioration in the South African economic system or unforeseen liquidation of a major tenant in the VPIF portfolio.
Corporate Adviser, Joint Sponsor
and Joint Bookrunner Independent Lead Sponsor
Independent valuer Investment Bank and Joint Bookrunner
1
CORPORATE INFORMATION
Directors (at listing)
P D Naidoo+ (Independent Non-executive Chairman)R F Kane* (CEO)C E Chimombe-Munyoro#M de Lange* (Financial Director)E G Dube#R R Emslie+J R Macey+P W Mac kenzie*
+ Independent Non-Executive
* Executive # Non-executive
Company secretary and registered office
M de Lange, B.Com (Law), B.Com (Hon)(Acc)Vunani House Block CAthol Ridge Office Park151 Katherine StreetSandown, Sandton, 2196(PO Box 652419, Benmore, 2010)
Website: http://www.vpif.co.za
Date and place of incorporation
6 June 2005Pretoria, South Africa
Corporate Adviser, Joint Sponsor and Joint Bookrunner
Vunani Corporate Finance (trading as a division of Vunani Capital Proprietary Limited)(Registration number 1998/001469/07)Vunani House Block CAthol Ridge Office Park151 Katherine StreetSandown, Sandton, 2196(PO Box 652419, Benmore, 2010)
Independent Lead Sponsor
Grindrod Bank Limited(Registration number 1994/007994/06)Building Three1st Floor, North Wing, Commerce Square39 Rivonia Road (corner Helling Road)Sandton, 2196(PO Box 78011, Sandton, 2146)
Investment Bank and Joint Bookrunner
Investec Corporate Finance (trading as a division of Investec Bank Limited)(Registration number 1969/004763/06)2nd Floor100 Grayston DriveSandown, Sandton, 2196(PO Box 785700, Sandton, 2146)
Legal adviser
Edward Nathan Sonnenbergs Incorporated(Registration number 2006/018200/21)150 West StreetSandton, 2196(PO Box 783347, Sandton, 2146)
Independent reporting accountants and auditors
KPMG Inc(Registration number 1999/021543/21)Registered Accountants and AuditorsKPMG Crescent85 Empire RoadParktown, 2193(Private Bag 9, Parkview, 2122)
Independent valuer
Mills Fitchet Magnus Penny Proprietary Limited(Registration number 1996/004736/07)20th Floor, 1 Thibault SquareLong StreetCape Town, 8001(PO Box 4442, Cape Town, 8000)
Transfer secretaries
Computershare Investor Services Proprietary Limited(Registration number 2004/003647/07)Ground Floor70 Marshall StreetJohannesburg, 2001(PO Box 61051, Marshalltown, 2107)
Commercial bank
First National Bank Limited(Registration number 1929/001225/06)Carlton CentreCommissioner StreetJohannesburg, 2001(PO Box 5745, Johannesburg, 2000)
Trustees of VPIT will be:
P D NaidooR F KaneC E Chimombe-MunyoroM de LangeE G DubeR R EmslieJ R MaceyP W Mac kenzie
Debenture Trustee will be:
Fluxmans Inc(Registration number 2000/024775/21)11 Biermann AvenueRosebankJohannesburg, 2196
(Private Bag X41, Saxonwold, 2196)
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TABLE OF CONTENTS
Page
CORPORATE INFORMATION 1
SALIENT INFORMATION 5
SALIENT DATES AND TIMES 10
DEFINITIONS 11
PRE-LISTING STATEMENT 16
PART A: INTRODUCTION 16
1. Purpose of this Pre-Listing Statement 16
2. Overview of VPIF 17
2.1 Background 17
2.2 Company structure 18
2.3 The South African property market 19
2.4 Investment strategy 20
2.5 Growth strategy 21
2.6 Prospects 21
2.7 Management of VPIF’s assets 21
2.8 Property management 25
2.9 Interests of VPIF directors in the Acquisition properties 26
2.10 Other information 2 6
3. The VPIF Portfolio 27
3.1 VPIF existing properties 27
3.2 Acquisition properties 2 7
3.3 Details of the VPIF Portfolio 29
4. Rationale for the transaction and the listing 3 4
5. VPIT Trust Deed 3 4
PART B: THE PRIVATE PLACING, LISTING AND ISSUE OF UNITS 3 5
6. The private placing 3 5
7. Particulars of the private placing and private placing price 3 5
7.1 Particulars of the private placing 3 5
7.2 Private placing price 3 5
8. Time and date of the opening and closing of the private placing 3 5
9. Listing of the VPIF units 3 6
9.1 Conditions precedent to the listing 3 6
9.2 JSE approval 3 6
9.3 Listing on any other stock exchange 3 6
10. Participation in the private placing and applications 3 6
10.1 Dematerialised units 3 6
10.2 Payment for and delivery of VPIF units 3 7
11. Issue of the placing units 3 7
12. Strate 3 7
13. Exchange Control Regulations 3 7
14. Minimum subscription, commissions and brokers’ fees 3 8
15. Simultaneous issues, options or preferential rights in respect of units or previous offers and other terms and conditions of the private placing 3 8
3
Page
PART C: FINANCIAL INFORMATION 3 9
16. Historical financial information and unaudited pro forma financial information 3 9
16.1 Audited historical financial information 3 9
16.2 Unaudited pro forma financial effects of the transaction 3 9
16.3 Change in financial year-end 3 9
17. Forecasts for the six months ending 30 June 2011 and the year ending 30 June 2012 3 9
18. Dividend and distribution policy 4 2
19. Advances and borrowings 4 3
20. Material commitments, lease payments and contingent liabilities 4 5
21. Adequacy of capital 4 5
22. Material changes 4 5
23. Audit Committee and financial director 4 5
PART D: INFORMATION RELATING TO THE COMPANY 4 6
24. Incorporation, history and nature of business 4 6
24.1 Incorporation and history 4 6
24.2 Nature of business 4 6
25. Prospects 4 6
26. Controlling and major unitholders 4 6
27. Material contracts, promoters, service and other agreements 4 6
28. Litigation 4 7
29. Subsidiaries 4 7
30. Provisions of the MOI 4 7
31. Corporate Governance 4 7
PART E: CAPITAL STRUCTURE 4 8
32. Capital at incorporation 4 8
33. Summary of alterations to the capital and units issued in the last three years 4 8
34. Authorised and issued unit capital 4 9
35. Variation of rights attaching to units 4 9
36. Voting rights 4 9
37. Authorisations relating to units 50
38. Debentures 50
PART F: INFORMATION RELATING TO THE DIRECTORS AND SENIOR MANAGEMENT 5 1
39. Directors 5 1
40. Senior management 5 3
41. Information contained in the directors’ declarations 5 3
42. Other directorships/partnerships held by the directors during the past five years 5 3
43. Directors’ interests in the Company’s securities 5 3
44. Directors’ interests in transactions 5 4
45. Directors’ remuneration 5 4
45.1 Remuneration and benefits 5 4
45.2 Other payments 5 5
46. Directors’ secondment 5 6
PART G: ADDITIONAL INFORMATION 5 7
47. Advisers’ interests 5 7
48. Strate eligibility 5 7
49. Expenses 5 7
50. Consents 5 8
51. Directors’ responsibility statement 5 8
52. Documents available for inspection 5 8
4
Page
APPENDICES
1. The VPIF Portfolio 59
2. Independent valuation report on the Properties 6 5
3. Independent reporting accountants’ report on the value and existence of the VPIF Acquisition properties 7 1
4. Report of historical financial information of VPIF for the year ended 31 December 2010 7 3
5. Independent reporting accountants’ report on the audited historical financial information of VPIF for the year ended 31 December 2010 9 2
6. Unaudited pro forma financial information of VPIF at 31 December 2010 9 4
7. Independent reporting accountants’ report on the unaudited pro forma financial information of VPIF 9 9
8. Independent reporting accountants’ report on the forecast financial information of VPIF 10 1
9. Salient features of the VPIT Trust Deed 10 4
10. Salient features of the Debenture Trust Deed 1 10
11. Extracts from the MOI 11 9
12. Corporate Governance 12 7
13. Salient features of the Acquisition Agreement 13 1
14. Other directorships of the VPIF directors for the past five years 13 2
APPLICATION FORM – private placing (blue) Attached
5
SALIENT INFORMATION
The salient information provides an outline of the information contained in this Pre-Listing Statement, which Pre-Listing Statement should be read in its entirety for a full appreciation hereof.
THE PRE-LISTING STATEMENT
This Pre-Listing Statement relates to a private placing of units in the Company by way of an:
• offer to subscribe for a maximum of 66 334 357 new VPIF units with an approximate value of R497.5 million at the private placing price; and
• offer for sale of 22 232 113 VPIF units with an approximate value of R166.7 million at the private placing price.
No public offer is being made.
INTRODUCTION
Subject to listing, VPIF offers investors an opportunity to participate in the only office-dominated JSE property fund, which sector the directors believe is well-poised for recovery. The portfolio comprises 21 strategically located, high quality buildings and offers a competitive distribution yield together with a consistent growth profile.
The investment strategy of VPIF has been consistent since 2007 and it has delivered exceptional growth. The investment strategy is represented by the diagram set out below.
The fund intends to double its portfolio size over the next 18 months through the acquisition of well-located B+ and A grade office buildings with a stable tenant profile. The A/B+ segment of the office market is characterised by greater volumes, more arbitrage opportunities and a rental base that will be pushed higher as vacancies decline and new developments demand premium rentals. VPIF intends to source buildings in which yield enhancing refurbishments can be carried out. In the short term, the fund will avoid premium AAA grade “trophy” buildings, which the directors believe do not represent good value at this time.
6
The pricing of the private placing set out in this Pre-Listing Statement will take place through a bookbuilding exercise which will enable investors to decide on the most appropriate yield for the VPIF Portfolio. This will ensure that the placement of units is market and demand driven with a maximum level of transparency.
Background to the Vunani Group
The Vunani Group was established following a management buyout in 2003 by the senior executives, Ethan Dube, Butana Khoza and Mark Anderson, of the entire issued share capital of African Harvest Capital (Pty) Limited (“African Harvest Capital”), a wholly-owned subsidiary of African Harvest Limited (“African Harvest”), a company previously listed on the JSE.
Vunani was incorporated in 1997 (as a wholly-owned subsidiary of African Harvest and traded under the name African Harvest Capital), specialising in BEE-related investments, corporate advisory services, private equity transactions and trading activities. It listed on the Alternative Exchange of the JSE in 2007 to raise capital and grow its financial services activities, which includes Vunani Properties.
A recapitalisation of the Vunani Group took place in 2010. The Vunani Group remains a majority black owned and managed financial services group, with the original management team still in place.
Vunani Properties was formed in 200 3, together with its senior executives Pete Mac kenzie and Rob Kane, both of whom have considerable experience in all aspects of the property industry. This experience includes construction, property development, property asset management and finance.
Vunani Properties’ strategy has been to grow a strong property balance sheet through long-term holdings in commercial property assets on the one hand, and property developments, which can, inter alia, enhance the value of these property assets on the other hand.
The listing of VPIF represents a consolidation of all the commercial property interests held by Vunani Properties and a platform to further grow its assets.
Background to VPIF
In 2005 Ethan Dube joined the board of Hyprop, South Africa’s largest listed retail property fund. Through this relationship, Vunani identified an opportunity to provide Hyprop with a BEE enterprise development venture while bulking up its own commercial portfolio of property assets. A win-win result for both parties as Hyprop had been contemplating a sale of its commercial office portfolio as it represented non-retail assets. The formation of VPIF was effected by combining the commercial properties owned by Vunani Properties with a commercial portfolio owned by Hyprop.
At the time that this transaction was under consideration, Standard Bank Properties Proprietary Limited agreed to dispose of a portfolio of its own commercial property assets (largely incorporating bank branches in large and mid-sized towns across South Africa) to VPIF.
Since its formation the fund has been managed by the same team at Vunani Properties. This will continue from listing date onwards through VPAM, a wholly-owned subsidiary of Vunani Properties. Rob Kane will continue in his role as the Chief Executive Officer of VPIF and will be supported by the Vunani Properties team, in particular its Managing Director, Pete Mac kenzie, and Marelise de Lange who has been appointed the Financial Director of VPIF. As VPIF will remain a significant and important investment holding for the Vunani Group its senior executives will remain keenly involved as evidenced by Ethan Dube’s position as a non-executive director of VPIF and chairman of VPAM.
The fund has historically performed well with annual compounded growth of 34.3% to December 2010. This has been achieved with limited acquisitions but primarily through tight management and yield-enhancing refurbishments. The fund now owns 21 buildings, with commercial offices comprising just over 92% of the VPIF Portfolio, and valued at R947.6 million in aggregate. This includes 3 A grade properties recently developed for tenants by Vunani Properties and acquired by the fund just prior to the listing. One of these was the Loop Street property, a benchmark “green” refurbishment of a 1904 listed building in the City of Cape Town, which is now on a seven-year lease with the Department of Public Works.
All of Vunani’s commercial property holdings will, following VPIF’s listing, be held through the fund and/or VPIT and going forward any commercial property investments offered to Vunani Properties for purchase will only be transacted if they take place through the fund.
7
The main purpose of the listing is to provide the fund with a platform for acquisitive growth. This will initially be facilitated through the private placing and will provide it with debt capacity to acquire yield-enhancing properties. The fund will be able to utilise the expertise of its management team to add value to the VPIF Portfolio through yield-enhancing upgrades and refurbishments. An example is the current R9 million upgrade to Murrayfield Forum; a mixed use property in Murrayfield, Pretoria. In addition, all properties developed by Vunani Properties and that meet the fund’s investment criteria will be offered to VPIF for purchase on a first right of refusal basis. Appropriate corporate governance structures are in place to ensure that the best interests of the fund are maintained at all times as well as to ensure no conflicts of interest arise between any related parties.
The listing will also provide Vunani Properties with an opportunity to reduce a portion of equity-related debt that was associated with the establishment of VPIF as well as debt linked to the Athol Ridge property.
THE PRIVATE PLACING
The purpose of the private placing is to raise a minimum of R366.7 million, which will be utilised as set out in paragraph 14 of this Pre-Listing Statement. The private placing has not been underwritten. The private placing will be implemented via a bookbuild exercise. The Bookrunners will obtain indications of interest from eligible investors to acquire VPIF units and following this book-building process, the private placing price will be determined. Eligible investors wishing to participate in the private placing are required to complete the Application Form (blue) attached to this Pre-Listing Statement setting out the Rand value of the VPIF units they wish to apply for as well as the price. Subject to the conditions precedent (set out in paragraph 9.1 of this Pre-Listing Statement) being met and the determination of the private placing price, the eligible investors selected by the fund will be advised of the number of VPIF units they have been allocated. The units so allocated will be issued on the listing date upon receipt of payment in respect thereof.
*Based on a mid-range private placing price of R7.50 Offer for subscription
Private placing price range pursuant to the private placing R7.00 – R8.00Maximum number of VPIF units to be issued 66 334 357Maximum value* R497.5 millionMinimum number of VPIF units to be issued 40 867 691Minimum value* R306.5 million
PURPOSE OF THE PRE-LISTING STATEMENT AND THE LISTING
The purpose of this Pre-Listing Statement is to:
• provide eligible investors with the relevant information regarding VPIF, the VPIF Portfolio and the directors and managers thereof;
• provide eligible investors with information relating to VPIF’s strategy and future prospects;
• provide details of the private placing; and
• enable VPIF to obtain a listing for its units.
The purpose of the listing is to:
• consolidate Vunani Group’s property portfolio exposures into one vehicle;
• raise capital to enable VPIF to grow its property portfolio through acquisitions;
• provide investors, both institutional and private, with an opportunity to participate in the stable income streams and future capital growth of VPIF;
• provide a spread of investors that will provide liquidity and tradeability in the units; and
• enhance investor and public awareness of VPIF.
PROPERTY INFORMATION
VPIF offers investors a sectorally focused high quality portfolio comprising 21 quality properties with a wide geographical spread. Tenants’ activities are spread over a wide range of industries with a predominantly national or listed bias. The properties are graded from B to A+, with the majority being B+/A. Historically, the portfolio has performed well with low vacancies, well-managed arrears and continued tenant retention. Compound distribution growth of 18.6% per annum has been achieved since 2007. Capital value growth over the same period has been 15.7% (defined as the growth from the acquisition price at December 2006 to the independent valuation at 1 January 2011), giving a total annual compounded return of 34.3% since inception.
8
In essence, the listing of VPIF offers a well-organised and smoothly functioning property investment vehicle to investors and is well-positioned to achieve the investment strategy set out in paragraph 2.4 of this Pre-Listing Statement.
Before the transaction After the transaction
VPIF Portfolio size (GLA m2) 86 978 m2 99 684 m2
Value of VPIF Portfolio R776.5 million R947.6 million
Refer to paragraphs 2 and 3 and Appendices 1 and 2 for detailed information relating to the Properties.
INVESTMENT STRATEGY
VPIF’s investment strategy is focused on:
• providing unitholders with a competitive distribution yield together with a stable and consistent growth profile, which will increase the economic value attributable to unitholders;
• providing investors with the only office-dominated JSE property fund. The directors believe that the office sector is poised for recovery and the fund is well-positioned to deliver enhanced returns;
• continued grooming of the existing portfolio with a focus on tenant retention, tight management, targeted upgrades and extracting value out of unutilised bulk in the portfolio;
• acquiring well-located B+ and A grade office buildings with a stable tenant profile. In particular, VPIF will source buildings in which yield -enhancing refurbishments can be carried out. In the short term, the fund will avoid A Grade “trophy” buildings, which the directors believe are overpriced in the current market and have little opportunity for yield enhancement;
• acquisitions, which will take cognisance of the need for geographic and industry diversification but not, however, at the expense of yield and quality;
• acquisitions that will take advantage of the current office market in which recent lease negotiations have depressed property values; and
• utilising the Company’s BEE status to retain and attract both Government and national tenants. Historically the fund has been able to secure leases for up to six years with National Government.
PROSPECTS
The directors believe the fund will continue to deliver solid returns and that it is well-placed to take advantage of current market conditions. The board is of the opinion that:
• the office market is at its lowest ebb, thereby creating embedded value for investors;
• office property rentals will rise disproportionally in the medium term as the current oversupply is absorbed and the lack of new developments impacts on rentals;
• the fund will acquire properties that enhance its stable base of well-managed, well-located buildings;
• the high proportion of single tenant and National Government/listed tenants will give an underlying strength to the cash flows;
• the current portfolio contains approximately 19 000 m2 of unutilised bulk in prime locations which value will be extracted; and
• the fund will continue to utilise its BEE rating to retain Government tenants and selectively acquire new Government tenanted buildings, provided those assets represent sound investments.
The fund has a right of first refusal on any Vunani Properties completed developments, which currently amount to R150 million of assets. In addition, the fund has a pipeline of R450 million of assets from third party vendors.
FINANCIAL INFORMATION
All the financial information set out in this Pre-Listing Statement is the responsibility of the directors. Such information has been prepared for illustrative purposes only and, because of its nature, may not fairly reflect the financial position and results of the fund.
VPIF’s year-end has been changed from December to June.
9
Forecasts
The table below sets out summaries of the unaudited profit forecasts of the fund for the year ending 30 June 2012 and should be read in conjunction with paragraph 17 of this Pre-Listing Statement:
Based on a subscription of Based on a maximum subscription
R306.5 million, which results of R497.5 million, which results
in a loan to value of in a loan to value of
approximately 20% at approximately 0% at
a mid-range price of a mid-range price of
750 cents per unit 750 cents per unit
Units in issue 97 891 691 123 358 357Distribution per unit (cents) 70.55 70.84Earnings per unit (cents) 108.15 94.52Headline earnings per unit (cents) 40.51 40.85Forward yield (based on distribution) per unit at a price of 750 cents per unit 9.4% 9.5%
Pro forma financial information
The table below sets out summaries of the unaudited pro forma financial information of the fund at 31 December 2010, after the transaction, and should be read in conjunction with paragraph 16.2 and Appendix 6 to this Pre-Listing Statement:
Based on a subscription of Based on a maximum subscription
R306.5 million, which results of R497.5 million, which results
in a loan to value of in a loan to value of
approximately 20% at approximately 0% at
a mid-range price of a mid-range price of
750 cents per unit 750 cents per unit
Number of units in issue 97 891 691 123 358 357Net asset value per unit (cents) 728.2 727.6Tangible net asset value per unit (cents) 768.9 758.9
10
SALIENT DATES AND TIMES
2011
Opening date of the private placing (09:00) Monday,18 July
Closing date of the private placing (12:00) by which date eligible investors must have submitted their applications to the Bookrunners in order to qualify to participate in the private placing Friday, 29 July
Date when eligible investors will be notified of their participation in the private placing and the number of units allocated to them and the pricing thereof Tuesday, 2 August
Market to be advised of the fulfilment of the conditions precedent Friday, 5 August
Listing of VPIF units on the JSE Thursday, 11 August
The dates and times set out above are subject to change and any changes will be released on SENS and published in the press.
JSE APPROVAL
The JSE has granted approval for the listing of all the VPIF units in issue, after the private placing, with effect from the commencement of trade on the JSE on Thursday, 11 August 2011, subject to the conditions precedent set out below .
CONDITIONS PRECEDENT TO THE LISTING
The listing is subject to:
• VPIF obtaining a spread of unitholders acceptable to the JSE;
• the approval by Vunani shareholders of the Vunani disposal;
• the minimum subscription being received; and
• the registration of transfer of the Athol Ridge property to VPIF .
COPIES OF THIS PRE-LISTING STATEMENT
Copies of this Pre-Listing Statement, in English, may be obtained during business hours at the addresses set out in the “Corporate Information” section hereof between Monday, 18 July 2011 and Thursday, 11 August 2011 from:
• the Company;
• the Lead Independent Sponsor;
• the Corporate Adviser and Joint Sponsor; and
• the transfer secretaries.
In addition, this Pre-Listing Statement is available in electronic form on VPIF’s website (www.vpif.co.za).
DATE OF INFORMATION PROVIDED
Unless the context clearly indicates otherwise, all information provided in this Pre-Listing Statement is provided at the last practicable date.
11
DEFINITIONS
In this Pre-Listing Statement, unless a contrary intention clearly applies, words importing the singular include the plural and vice versa, any one gender includes the other genders, natural persons include juristic persons and vice versa and the following terms bear the meanings assigned to them below:
“Acquisition Agreement” the agreement between Vunani Properties and VPIF, dated 20 June 2011, in terms of which, inter alia, VPIF acquires from Vunani Properties the Athol Ridge business and the entire issued share capitals of each of Cedar Park and Pacific Eagle (refer Appendix 13);
“Acquisition properties” collectively or separately and individually, depending on the context, each of the Athol Ridge property, the Loop Street property and the Cedar Park property, details of which are set out in paragraph 3 and Appendices 1 and 2 to this Pre-Listing Statement, acquired by VPIF from Vunani Properties;
“allocation date” the date on which the Company determines the allocation of the units to eligible investors in terms of the private placing, which date is expected to be Tuesday, 2 August 2011;
“Application Form” the application form (blue) attached to and forming part of this Pre-Listing Statement, which, inter alia, eligible investors are required to complete and return in accordance with the instructions contained therein in order to be considered for participation in the private placing;
“Asset Management agreement” the agreement, dated 20 June 2011, entered into between VPIF and VPAM, in terms of which VPAM is appointed to provide asset management services to VPIF, details of which are set out in paragraph 2.7 of this Pre-Listing Statement;
“Athol Ridge business” the business comprising the letting enterprise in respect of the Athol Ridge property including leases, fixed assets, all rights, title and interests, and miscellaneous contracts and the trading liabilities in respect thereof;
“Athol Ridge property” the immovable property on which Athol Ridge Office Park located at 151 Katherine Street, Sandown is situated, inclusive of the Athol Ridge business and owned by Vunani Properties;
“BBBEE Act” the Broad-Based Black Economic Empowerment Act, 2003 (Act 53 of 2003), as amended;
“BEE” Black Economic Empowerment as defined in the BBBEE Act;
“board” or “the directors” the directors of VPIF as set out in the “Corporate Information” section of this Pre-Listing Statement;
“Bookrunners” Investec Corporate Finance (trading as a division of Investec Bank Limited) and Vunani Corporate Finance, trading as a division of Vunani Capital Proprietary Limited);
“business day” any day, other than a Saturday, Sunday or official public holiday in South Africa;
“Cedar Park” Cedar Park Properties 31 Proprietary Limited (Registration number 2007/014552/07), a private company duly registered and incorporated in accordance with the laws of the RSA, a property owning company and an indirect subsidiary of Vunani and whose entire issued share capital is owned by Vunani Properties;
“Cedar Park property” the immovable property described as Building 9 at Greenstone Hill Office Park, Emerald Boulevard, Greenstone Hill, Edenvale, which is registered in the name of Cedar Park;
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“certificated unitholders” unitholders who hold certificated units;
“certificated units” units represented by a paper unit certificate or other physical document(s) of title, which units have not been surrendered for dematerialisation in terms of the Strate system;
“Commission” the Companies and Intellectual Property Commission;
“Common Monetary Area” South Africa, the Republic of Namibia and the Kingdoms of Swaziland and Lesotho;
“Companies Act” the South African Companies Act, No. 71 of 2008, as amended, which came into effect on 1 May 2011;
“conditions precedent” the conditions precedent to the listing as set out in paragraph 9.1 of this Pre-Listing Statement;
“CSDP” Central Securities Depository Participant, as defined in section 1 of the Securities Services Act, appointed by individual unitholders for the purposes of, and in regard to the dematerialisation of documents of title for the purposes of incorporation into Strate;
“debenture” an unsecured variable rate debenture in VPIF having a nominal value of R2.4975, which is indivisibly linked to one ordinary share and which is regulated in terms of the Debenture Trust Deed (refer Appendix 10);
“Debenture Trust Deed” the Debenture Trust Deed,which regulates the relationship between the debenture holders, the trustee and the Company, in respect of the debentures, entered into between the Company and the trustee on 20 June 2011, as amended from time to time, the salient features of which are set out in Appendix 10 ;
“dematerialisation” the process by which certificated units are converted to an electronic form as uncertified units and recorded in the sub-register of unitholders maintained by a CSDP;
“dematerialised unitholders” unitholders who hold dematerialised units;
“dematerialised units” units which have been incorporated into Strate and which are no longer evidenced by physical documents of title, but the evidence of ownership of which is determined electronically and recorded in the sub-register maintained by a CSDP;
“documents of title” unit certificates and/or certified transfer deeds and/or balance receipts of any other documents of title in respect of VPIF units in certificate form;
“Eagle Trust” the Eagle Trust IT5910/96, a trust duly established in accordance with the laws of the RSA, the trustees of which are Pieter Willem Mac kenzie and Susan Penelope Mac kenzie;
“eligible investors” or “applicants” • institutional investors and other entities and persons who fall within the ambit of section 96(1) of the Companies Act and includes but is not limited to persons whose ordinary business, or part of whose ordinary business, is to deal in securities, whether as principals or agents;
• preferential placees invited by the directors and who may participate in the private placing, by virtue of section 96(1)(b) of the Companies Act, where the total acquisition cost of VPIF units for any single addressee acting as principal, is not less than R1 million;
“emigrants” former residents of the Common Monetary Area;
“Exchange Control Regulations” the Exchange Control Regulations of 1961, as amended, in terms of section 9 of the Currency and Exchange Act (Act 9 of 1933), as amended;
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“existing properties” the existing properties constituting the VPIF Portfolio, excluding the Acquisition properties;
“GLA” the gross lettable area, being the total area of a property that can be rented to a tenant;
“Group” VPIF, Cedar Park, Pacific Eagle and, where applicable, VPIT;
“Hyprop” Hyprop Investments Limited (Registration number 1987/005284/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA;
“IFRS” International Financial Reporting Standards;
“independent reporting accountants KPMG Inc. (Registration number 1999/021543/21); and auditors”
“independent valuer” Mills Fitchet Magnus Penny Proprietary Limited (Registration number 1996/004736/07), a private company duly registered and incorporated in accordance with the laws of the RSA;
“IPD” Investment Property Databank, an independent provider of property statistics to the South African property industry;
“JHI” or “the Property Managers” Topeka Trading 4 Proprietary Limited (Registration number 2007/021131/07), a private company and a subsidiary of Excellerate Holdings Limited, duly registered and incorporated in accordance with the laws of the RSA, trading as JHI and the property manager of the fund;
“JSE” JSE Limited (Registration number 2005/022939/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and licensed as an exchange under the Securities Services Act;
“JSE Listings Requirements” the Listings Requirements of the JSE, as amended from time to time;
“King III” the Code of Corporate Practices and Conduct in South Africa representing the principles of good corporate governance as set out in the King Report, as amended or replaced from time to time;
“last practicable date” Tuesday, 28 June 2011 being the last practicable date prior to the finalisation of this Pre-Listing Statement;
“listing” the listing of VPIF, in terms of the JSE Listings Requirements, in the “Real Estate – Real Estate Holdings and Development” sector of the JSE List under the abbreviated name “VPIF”, JSE code VPF and ISIN: ZAE000157459, on the listing date;
“listing date” Thursday, 11 August 2011, being the anticipated date of the listing of the VPIF units on the JSE;
“Loop Street property” the immovable property, situated at 14 Loop Street, Cape Town, which is registered in the name of Pacific Eagle;
“Ludlow Trust” the Ludlow Trust IT1000/2004, a trust duly established in accordance with the laws of the RSA, the trustees of which are Robert Fletcher Kane and Lisa Adele Kane;
“m2” square metres;
“minimum subscription” the approximate amount of R366.7 million to be raised in terms of the offer for subscription and the Vunani Properties offer at the private plac ing price, as further detailed in paragraph 14 of this Pre-Listing Statement;
“MOI” Memorandum of Incorporation for a Public Company, adopted via a special resolution, passed on 24 June 2011 as amended by a further special resolution passed on 28 June 2011 and approved by the JSE on 28 June 2011, the salient features of which are summarised in Appendix II;
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“non-resident” a person whose registered address is outside the Common Monetary Area and who is not an emigrant;
“offer for sale” the Vunani Properties offer and the offer for sale by Hyprop of 14 198 976 units at the private placing price;
“offer for subscription” or the offer of a maximum of 66 334 357 new VPIF units for subscription“maximum subscription” at the private placing price;
“Pacific Eagle” Pacific Eagle Investments 204 Proprietary Limited (Registration number 2007/025771/07), a private company duly registered and incorporated in accordance with the laws of the RSA, a property owning company and an indirect subsidiary of Vunani and whose entire issued share capital is owned by Vunani Properties;
“placing units” the VPIF units to be placed with eligible investors in terms of the private placing;
“Pre-Listing Statement” this Pre-Listing Statement, dated 5 July 2011, including the appendices and the Application Form;
“private placing” or “offer” collectively, the offer for subscription and the offer for sale;
“private placing price” the price at which VPIF units are allocated to placees in terms of the private placing, to be determined in accordance with the provisions of paragraph 7 headed “Particulars of the private placing and the private placing price ;
“private placing price range” the proposed pricing range of the private placing, of between R7.00 and R8.00 per unit. For purposes of this Pre-Listing Statement, a mid-range price of R7.50 per unit has been used;
“Properties” or the “VPIF Portfolio” the Acquisition properties and the existing properties;
“Property Management agreement” the agreement between VPIF and JHI, dated 8 February 2011, in regard to the property management of the Properties, details of which are set out in paragraph 2.8 of this Pre-Listing Statement;
“R” or “Rand” or “ZAR” the South African Rand, the lawful currency of the RSA;
“Secondment agreement” a written secondment agreement entered into between Vunani Capital, VPAM and the executive directors of VPIF, in terms of which, inter alia, Vunani Capital seconds their services to VPAM, more fully dealt with in paragraph 46 of this Pre-Listing Statement;
“Securities Services Act” the Securities Services Act, 2004 (Act 36 of 2004), as amended;
“SENS” Securities Exchange News Service of the JSE;
“share” or “ordinary share ” ordinary shares in the share capital of VPIF with a par value of R0.0025 each linked to a debenture;
“South Africa” or “the RSA” the Republic of South Africa;
“Strate” the settlement and clearing system used by the JSE managed by Strate Limited (Registration number 1998/022242/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and the CSDP registered in terms of the Securities Services Act;
“transaction” the acquisition of the Acquisition properties and the private placing;
“transfer secretaries” Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07), a private company duly registered and incorporated in accordance with the laws of the RSA, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107);
“trustee” the trustee holding office as such in terms of the Debenture Trust Deed (i.e. Fluxmans Inc);
“unitholder” a holder of VPIF units;
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“unit” or “VPIF unit” or “securities” one linked unit with a nominal value of R2.50, comprising one share which is indivisibly linked to one debenture, and which are not capable of disposal independently of each other;
“Valuation Reports” the reports, abridged or detailed as appropriate, prepared by the independent valuer in respect of the VPIF Portfolio;
“vendor” Vunani Properties;
“VPAM” Vunani Property Asset Management Proprietary Limited (Registration number 2007/028777/07), a private company duly registered and incorporated with limited liability in accordance with the laws of the RSA and the asset manager of the fund and wholly owned by Vunani Properties;
“VPIF” or “the Company” or “the fund” Vunani Property Investment Fund Limited (Registration number 2005/019302/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and whose units will be listed on the JSE and, where applicable, includes VPIT;
“VPIT” the trustees of the Vunani Property Investment Trust, in whose favour the Master of the High Court has issued Letters of Authority under reference number IT6363/2006, and which is constituted in terms of and governed by the VPIT Trust Deed, and being also the registered owner of the existing Properties forming part of the VPIF Portfolio;
“VPIT Trust Deed” the Deed of Trust registered on 3 July 2006 under Letters of Authority reference number IT6363/2006 and the Addendum thereto dated 24 June 2011, which aligns the Deed to the JSE Listings Requirements; the salient features of which are set out in Appendix 9 ;
“Vunani” Vunani Limited (Registration number 1997/020641/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and whose shares are listed on the Alternative Exchange of the JSE;
“Vunani Capital” Vunani Capital Proprietary Limited (Registration number 1998/01469/07), a private company duly registered and incorporated with limited liability in accordance with the laws of the RSA, a wholly-owned subsidiary of Vunani;
“Vunani disposal” the dilution of Vunani’s indirect interest in VPIF as a result of the private placing as set out in a circular to Vunani shareholders, dated 7 July 2011, and in terms of which there is an irrevocable undertaking representing in excess of 50% of shares in issue to vote in favour of the relevant resolutions to approve the dilution, which is the requisite majority required;
“Vunani Group” collectively, Vunani, its subsidiaries and any other company which is controlled or jointly controlled by it;
“Vunani Properties” Vunani Properties Proprietary Limited (Registration number 2004/006730/07), a private company duly registered and incorporated with limited liability in accordance with the laws of the RSA, a subsidiary of Vunani and the vendor of Cedar Park, Pacific Eagle and the Athol Ridge property; and
“Vunani Properties offer” the offer for sale by Vunani Properties of 8 033 137 VPIF units at the private placing price.
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Vunani Property Investment Fund Limited(formerly Vunani Property Investment Fund Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2005/019302/06)
JSE code: VPF ISIN: ZAE000000157459
PRE-LISTING STATEMENT
PART A: INTRODUCTION
1. PURPOSE OF THIS PRE-LISTING STATEMENT
This Pre-Listing Statement relates to a private placing of units by the Company by way of the:
• offer for subscription; and
• offer for sale.
No public offer is being made. In accordance with the JSE Listings Requirements, this Pre-Listing Statement contains details of the private placing, together with relevant information relating to VPIF and the Properties.
The purpose of this Pre-Listing Statement is to:
• provide eligible investors with the relevant information regarding VPIF, the VPIF Portfolio and the directors and managers thereof;
• provide eligible investors with information relating to VPIF’s strategy and future prospects;
• provide details of the private placing; and
• enable VPIF to obtain a listing for its units.
Subject to listing, VPIF offers investors an opportunity to participate in the only office-dominated JSE property fund, which sector the directors believe is well-poised for recovery. The portfolio of 21 high quality buildings have a solid tenant profile and offer a competitive distribution yield together with a stable and consistent growth profile. Since inception the fund has been managed by the same management team.
The fund intends to double its portfolio size over the next 18 months through the acquisition of well- located B+ and A grade office buildings with a stable tenant profile. This segment of the office market is characterised by greater volumes, more arbitrage opportunities and a rental base that will be pushed higher as vacancies decline and new developments demand premium rentals. VPIF intends to source buildings in which yield-enhancing refurbishments can be carried out. In the short term, the fund will avoid premium A grade “trophy” buildings, which the directors believe do not represent good value at this time.
In essence, the listing of VPIF offers a well-organised and smoothly functioning property investment vehicle to investors and is well-positioned to achieve the investment strategy set out in paragraph 2.4.
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2. OVERVIEW OF VPIF
2.1 Background
Background to the Vunani Group
The Vunani Group was established following a management buyout in 2004 by the senior executives, Ethan Dube, Butana Khoza and Mark Anderson, of the entire issued share capital of African Harvest Capital, a wholly-owned subsidiary of African Harvest, a company previously listed on the JSE.
Vunani was incorporated in 1997 (as a wholly-owned subsidiary of African Harvest and trading under the name African Harvest Capital), specialising in BEE-related investments, corporate advisory services, private equity transactions and trading activities. It listed on the Alternative Exchange of the JSE in 2007 to raise capital and grow its financial services activities, which includes Vunani Properties.
A recapitalisation of the Vunani Group took place in 2010. The Vunani Group remains a majority black-owned and managed financial services group, with the original management team still in place.
Vunani Properties was formed in 2003, together with its senior executives Pete Mac kenzie and Rob Kane, both of whom have considerable experience in all aspects of the property industry. This experience includes property construction, property development, property asset management and finance.
Vunani Properties’ strategy has been to grow a strong property balance sheet through long-term holdings in commercial property assets on the one hand, and property developments, which can, inter alia, enhance the value of these property assets, on the other hand.
The listing of VPIF represents a consolidation of all the commercial property interests previously held by Vunani Properties and a platform to further grow its assets.
Background to VPIF
In 2005 Ethan Dube joined the board of Hyprop, South Africa’s largest listed retail property fund. Through this relationship Vunani identified an opportunity to provide Hyprop with a BEE enterprise development venture while bulking up its own commercial portfolio of property assets. A win-win result for both parties as Hyprop had been contemplating a sale of a commercial office portfolio as it represented non-retail assets. The formation of VPIF was effected by combining the commercial properties owned by Vunani Properties with a commercial portfolio owned by Hyprop. The current shareholding of VPIF is 50.2% Vunani and 49.8% Hyprop.
At the time that this transaction was under consideration, Standard Bank Properties Proprietary Limited agreed to dispose of a portfolio of its own commercial property assets (largely incorporating bank branches in large and mid-sized towns across South Africa) to VPIF.
Since its formation the fund has been managed by the same team . This will continue with effect from the listing date, through VPAM, a wholly-owned subsidiary of Vunani Properties. Rob Kane will continue in his role as the Chief Executive Officer of VPIF and will be supported by the Vunani Properties team, in particular its Managing Director, Pete Mac kenzie, and Marelise de Lange who has been appointed as Financial Director of VPIF. As VPIF will remain a significant and important investment holding for the Vunani Group its senior executives will remain keenly involved as evidenced by Ethan Dube’s position as a non-executive director of VPIF and chairman of VPAM.
The fund has historically performed well with annual compounded growth of 34.3% to December 2010. It is significant that this growth has been achieved in particularly tough trading conditions. The growth has been achieved with limited acquisitions but primarily through tight management and yield-enhancing refurbishments. The fund now owns 21 buildings, with commercial offices comprising just over 92% of the VPIF Portfolio, and valued at R947.6 million in aggregate. This includes 3 properties recently developed for tenants by Vunani Properties and acquired by the fund just prior to or at the listing date. All the Acquisition properties are A grade properties and are predominantly leased by national tenants on long leases. One of these is the Loop Street property, a benchmark “green” refurbishment of a 1904 listed building in the City of Cape Town, which is now on a seven-year lease with the Department of Public Works.
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Vunani’s commercial property holdings will, following VPIF’s listing, be held through the fund in respect of the Acquisition properties and through VPIT in respect of the existing properties and going forward any future purchases will be transacted through the fund.
The main purpose of the listing is to provide the fund with a platform for acquisitive growth. This will initially be facilitated through the private placing and will provide the fund with debt capacity to acquire yield-enhancing properties. The fund will not take on development risk, however, it will be able to utilise the expertise of its management team to add value to the VPIF Portfolio through yield-enhancing upgrades and refurbishments. An example is the current R9 million upgrade to Murrayfield Forum; a mixed use property in Murrayfield, Pretoria. In addition, all properties developed by Vunani Properties and that meet the fund’s investment criteria will be offered to VPIF for purchase on a first right of refusal basis. Appropriate corporate governance structures are in place to ensure that the best interests of the fund are maintained at all times as well as to ensure no conflicts of interest arise between any related parties.
The listing will also provide Vunani Properties with an opportunity to reduce a portion of equity- related debt that was associated with the establishment of VPIF as well as debt linked to the Athol Ridge property.
The location of the properties comprising the VPIF Portfolio reflects the economic bias in South Africa with most of the properties located in Johannesburg and Pretoria followed by Cape Town. The remainder of the properties are situated in economically strong, large and mid-sized towns giving a geographical diversification. The portfolio comprises 92% offices with the balance being ancillary retail and one rural retail centre that has been a sound investment and has significant expansion potential.
2.2 Company structure
VPIF is a variable loan stock company with its sole assets being the Properties; the Acquisition properties will be held by VPIF, with the existing properties being held by VPIT in terms of the VPIT Trust Deed. The JSE has approved the existing properties being held by VPIT and VPIT will be fully bound by the JSE Listings Requirements as if it were a subsidiary of VPIF, subject to there being only one beneficiary of VPIT, namely VPIF. After listing VPIF will be structured as follows:
Based on the minimum Based on the number of units to maximum number be issued of units to be issued
Number of Number of units % units %
Vunani Properties 20 592 911 21.04 20 592 911 16.69Hyprop 28 397 9521 29.01 14 198 9762 11.51Investors* 48 900 828 49.95 88 566 4 70 71.80
97 891 691 100.00 123 358 357 100.00
Directors (as detailed in paragraph 43) included in the Vunani Properties number 11 834 742 12.1 11 834 742 9.6
* Once the bookbuild process has been completed and, if necessary, a SENS announcement will be released relating to
the investment by any material unitholders in VPIF.
1. Assuming Hyprop does not dispose of any units.
2. Assuming Hyprop disposes of 50% of its units.
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2.3 The South African property market
The South African property market has shown resilience in the global economic crisis and has held its own when compared with other off-shore markets. Locally, South African property has performed well since 1999 as shown below:
South African property stocks have delivered a total annual return of 14.1% (2009) and 29.6% (2010), which compares well with the All Share Index of 18% (2010). However, South African property fundamentals have seen sustained pressure in the last two years as evidenced by the industry experiencing rising vacancies and arrears. Speculative developments led to oversupply and a struggling economy has put pressure on tenants to meet rental obligations. Further downward pressure was exerted on rentals due to increasing consumption costs, particularly in electricity and rates. The recovery has been slower than expected but the directors believe the market is at the bottom of the cycle; tenants will begin to feel the economy pick up towards the end of 2011; and that the oversupply of office accommodation will be absorbed in the medium term. Thereafter, the lack of new developments will exert upward pressure on rentals in 2012. Furthermore, new developments will require rentals in excess of R140m2 – R160/m2 gross in order to be viable. This will enable existing buildings (such as those owned by VPIF) to command rental premiums. The table below gives the historical performance of the office market. The cyclical nature of the total returns is evident as is the impending improvement of the market.
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The latest IPD data indicates that the South African property market turned the corner in Q4’2010. However, the directors are aware of the need to carefully manage the fund’s existing tenant base for the remainder of calendar 2011 until the upturn in the economy is felt by tenants. Lease renewals towards the last quarter of 2011 and into 2012 will likely reflect the improving economy.
2.4 Investment strategy
VPIF’s investment strategy is focused on:
• providing unitholders with a competitive distribution yield together with a stable and consistent growth profile, which will increase the economic value attributable to unitholders;
• providing investors with the only office -dominated JSE property fund. The directors believe that the office sector is poised for recovery and the fund is well -positioned to deliver enhanced returns;
• continued grooming of the existing portfolio with a focus on tenant retention, tight management, targeted upgrades and extracting value out of unutilised bulk in the portfolio;
• acquiring well-located B+ and A grade office buildings with a stable tenant profile. In particular, VPIF will source buildings in which yield-enhancing refurbishments can be carried out. In the short term, the fund will avoid A Grade “trophy” buildings, which the directors believe are overpriced in the current market and have little opportunity for yield enhancement;
• acquisitions, which will take cognisance of the need for geographic and industry diversification but not, however, at the expense of yield and quality;
• acquisition that will take advantage of the current office market in which recent lease negotiations have depressed property values; and
• utilising the Company’s BEE status to retain and attract both Government and national tenants. Historically the fund has been able to secure leases for up to six years with National Government.
The diagram below explains the fund’s target market for acquisitions. The directors believe the Premium Grade sector of the market is over traded with limited stock. As such the value proposition is limited. The directors will focus on the B+ and A grade market, which is characterised by greater volumes, more arbitrage opportunities and a rental base that will be pushed higher as vacancies decline and newer developments demand premium rentals.
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2.5 Growth strategy
The directors will focus on:
• sustaining income growth and capital appreciation; and
• growing the portfolio while maintaining the quality thereof as well as the yield.
The directors’ ability to extract further value from the existing asset base and also make yield-enhancing acquisitions is core to VPIF’s strategy. A number of privately held portfolios have been identified for acquisition amounting to R450 million. In addition, the fund has a right of first refusal on any Vunani Properties completed commercial developments, currently amounting to R150 million. With capacity to take on debt, VPIF will be able to utilise a combination of cash and equity in concluding transactions. The fund will not undertake new developments within the fund but will outsource such function so as to avoid any negative impact on distributions and diversion of the fund’s focus on core activities. This includes the undeveloped bulk within the VPIF portfolio comprising approximately 19 000 m2. The undeveloped bulk (which relates to the unutilised development rights which are of no value) has been included at zero value in the valuation of the fund. The undeveloped bulk relates to the Perseus Park and the Linger Longer properties. Perseus Park is close to the rapidly developing office node on the N1/Lynwood Road interchange. Development of the bulk may be for the current tenant, The State Information Technology Agency (“SITA”), or for a third party. The Linger Longer site is being rezoned as it is strategically located to Sandton’s Gautrain station. As such, it is within the zone designated by the local authority for additional bulk. The current concept is to consolidate Linger Longer with the adjacent Vodacom property to build a super-basement of parking with offices above.
Within the current VPIF Portfolio, there are further yield-enhancing refurbishments to be undertaken at Rynlal, Wale Street, Benstra and Motherwell. These will typically be tenant driven.
2.6 Prospects
The directors believe the fund will continue to deliver solid returns and that it is well -placed to take advantage of current market conditions. The board is of the opinion that:
• the office market is at its lowest ebb, thereby creating embedded value for investors;
• office property rentals will rise disproportionally in the medium term as the current oversupply is absorbed and the lack of new developments impacts on rentals;
• the fund will acquire properties that enhance its stable base of well -tenanted, well -located buildings;
• the high proportion of single tenant and National Government/listed tenants will give an underlying strength to the cash flows;
• the current portfolio contains approximately 19 000 m2 of unutilised bulk in prime locations which value will be extracted;
• the fund will continue to utilise its BEE rating to retain Government tenants and selectively acquire new Government tenanted buildings , provided those assets represent sound investments.
2.7 Management of VPIF’s assets
The fund will be managed by VPAM in accordance with the terms of the Asset Management agreement, which is available for inspection as set out in paragraph 52. The VPAM management team, set out in paragraph 2.7.2, has remained unchanged since inception and each of the executives has substantial technical and financial skills to enable VPAM to maximise the long-term success of the fund
2.7.1 Asset Management agreement
The Asset Management agreement shall be for an initial period of seven years following the listing date, renewable for subsequent 5-year periods in accordance with the provisions of that agreement. The agreement may be terminated on the expiry of three months’ written notice. In terms of the JSE Listings Requirements, where an Asset Management agreement is entered into or renewed, such agreement cannot be entered into or renewed:
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• without a majority of the votes cast by unitholders (excluding any parties or their associates who are party to or have an interest in the agreement); and
• without providing therein for the right of unitholders, in a general meeting called by them or held by the Company, to cancel the agreement at any time before its expiry date, subject to a majority of the votes cast by unitholders (excluding any parties or their associates who are party to or have an interest in the contract).
In the event that VPAM is not in default but an independent majority of the unitholders decide to terminate the Asset Management agreement, if VPAM so requires, the fund shall be obliged to purchase the VPAM business at fair market value which is defined as the asset management fee which would be payable to VPAM for the year following the date of termination . The fair market value is determined by multiplying the last monthly asset management fee payable prior to the date of termination by 12, capitalised at the rate equivalent to the forward yield of VPIF determined at the date of termination. Further termination rights and rights of default are contained in the Asset Management agreement.
2.7.2 Information relating to VPAM
Name: Vunani Property Asset Management Proprietary Limited
Legal form: A private company (Registration number 2007/028777/07), duly registered and incorporated with limited liability in accordance with the laws of the RSA
Business address: Vunani House Block C, Athol Ridge Office Park, 151 Katherine Street, Sandown
Shareholder: Wholly-owned by Vunani Properties, the shareholders of which are: Vunani – 78%, Ludlow Trust – 10%, Eagle Trust 12%
Terms of contract Set out in paragraphs 2.7.1 and 2.7.4 and remuneration:
Directors
Name Professional Relevant Appointments to other qualifications experience listed property entities
E G Dube MSc (Statistics) Refer paragraph 39 below Hyprop Executive MBA
R F Kane B.Sc (Civ) Eng., MBA Refer paragraph 39 below None
M de Lange B.Com (Law), B.Com Refer paragraph 39 below None (Hon)(Acc)
B M Khoza B Com PG Dip Refer curriculum vitae None (Accounting) CA(SA) below
P W Mac kenzie BSc Building Refer paragraph 39 below None Management, MBA
Butana Mangaliso Khoza (42), B Com PG Dip (Accounting) CA(SA)
Business address: Vunani House Block C, 151 Katherine Street, Sandown, Sandton, 2196
Butana completed articles with KPMG Inc in 1994 and spent six months in their office in Vancouver, Canada. He then joined Southern Asset Management and later transferred to Futuregrowth, then a division of Southern Life. He left Southern Life to establish African Harvest Capital with E G Dube. Butana served in a number of senior executive roles at African Harvest Capital. He is chairman of Vunani Securities. From August 2007, Butana assumed responsibility for the development of the Vunani Group’s alternative asset management products, incorporating the jointly owned Collective Investment Scheme, which houses Exchange Traded Fund among other products and Vunani Private Equity Partners Proprietary Limited.
2.7.3 Asset management services
VPAM will render the following services as the fund may reasonably direct in order to ensure that the operating standard is achieved and maintained:
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Operating standard:
VPAM shall strategically manage the VPIF Portfolio in an efficient manner, in good faith and diligently in accordance with sound, reasonable and prudent asset management practices and in keeping with directives issued by the fund from time to time.
Strategy:
VPAM will prepare and present a strategic plan to the fund prior to the commencement of each financial year. This strategic plan will be reviewed bi-annually and the progress in implementation will be reported on quarterly within 60 days after the end of each quarter, unless VPIF agrees otherwise. VPAM will from time to time recommend general strategies to maximise the performance of the VPIF Portfolio and strategies regarding property acquisitions, disposals, new developments, funding the expansion of the VPIF Portfolio and interest rate strategies in respect of the fund’s liabilities. VPAM will also recommend such other strategies deemed to be in the best interests of the fund.
Marketing:
VPAM will market the fund to investors, analysts, bankers, financiers, the press and the investment community generally.
Strategic research:
VPAM will conduct or use available research into the relative investment merits of the various sectors and geographical localities of the property market.
Succession plan:
A human resources plan will be submitted to the fund for its approval from time to time to ensure the adequate management and staffing of VPAM with a view to ensuring that VPAM maintains the requisite skills and expertise to conduct the business of the fund.
Asset management services:
VPAM will perform the following asset management services:
• Formalise a strategic plan for the property portfolio and make recommendations regarding portfolio re-engineering, streamlining and risk balancing within the portfolio.
• Scrutinise the maintenance plan prepared for each property and revise the programme and budget in terms of affordability, if deemed necessary.
• Perform quarterly performance analyses of property managers and for the property portfolio as a whole in terms of performance against budgets and relevant industry benchmarks, with a focus on gross revenue growth, expense control and management of a comprehensive utility cost programme (i.e. actual recoveries to actual costs).
• Perform risk and exposure analyses on a semi-annual basis and review the perceived potential and current risks to which each property is or might be exposed and to which the fund is or might be exposed and report thereon.
• Forecast building lifecycles and revise the business plan for each property on an annual basis.
• Make recommendations regarding improvements to the property portfolio and, more specifically, regarding upgrades, renovations, developments, selling of assets and acquisitions on a quarterly basis or as VPAM deems fit in its reasonable discretion.
• Conduct viability and feasibility studies to appraise upgrades, development and acquisition opportunities.
• Have annual independent property valuations for multi- and single tenant buildings prepared.
• Manage marketing strategy at property management level to include target market identification, compilation of tenant mix, tenant procurement and selection of objectives.
• Make use of market research and available surveys, together with market intelligence to ensure that the property managers implement at property level, a relevant marketing strategy for all rentable premises, including rent reviews with lease renewals.
• Advise on long-term loan funding structures, maintaining debt to open market value ratios and implementing approved interest rate hedging strategies.
• Manage the appointment process and assess the performance of property managers against agreed industry benchmarks and constantly review and advise on any contractual issues relating to property managers.
• In all instances, act in the best interests of the fund.
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Operational management:
VPAM will manage the day-to-day operations of the fund, as follows:
• Management and supervision of bank statements and reconciliation thereof.
• Financial control:
– Cash flow management.
– Bank accounts.
– Bank exposure limits policy.
– Overdraft and funding facilities.
– System and internal controls review.
– Deposits/Securities.
• Tender documentation.
• Annual insurance review.
• Manage insurance claims processing and settling.
• Manage the process of risk assessment of tenants, including the taking of any legal action when required.
• Monitoring and reporting on changes to regulatory requirements.
• Appraisal of project definition and design concepts.
• Manage the function/process of project quality, cost and time control as well as building inspections.
• Zoning and town planning controls.
• Retain responsibility for audits and inspections regarding compliance requirements in respect of national building regulations, including local authority laws and the Occupational Health and Safety Act.
• Rates and tax objections.
• Replacement costing.
• Ensure compliance with regulatory and statutory requirements and authorities.
• Corporate governance controls.
• Marketing of the fund’s image.
• Control professional appointments of auditors, corporate advisers, legal advisers, sponsors (if applicable), insurers, consultants and service providers.
• Retain responsibility for communication including communication and announcements, on a regular basis in respect of financial results, informal press and SENS releases (if applicable) and annual reports.
• Preparation of all trustee and committee documentation and documentation pertaining to the fund for the directors of the fund.
• Manage the business process according to VPIF board approved and authorised levels of authority.
2.7.4 Fees payable to VPAM
The monthly remuneration payable by the fund to VPAM for all asset management and operational management services rendered by it in terms of the Asset Management agreement shall be 1/
12th of 0.5% (one-twelfth of zero comma five percent) of the aggregate of
the market capitalisation of the fund determined by multiplying the number of linked units in issue at month-end by the monthly weighted average price thereof and the borrowings of the fund, less cash or cash equivalents, payable monthly in arrears. There will be no transaction fees payable to VPAM.
The asset management fee will exclude any expenses that are directly related to the operation of the fund, including but not limited to:
• auditing fees;
• company secretarial fees;
• independent valuation fees;
• financing costs and finance raising fees;
• professional or advisory fees; and
• development management fees.
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In addition to the Asset Management fee, the fund shall pay a Property Management fee, the amount of which shall be agreed from time to time between the fund and the Property Managers in consideration for the performance of the property management services.
Letting commissions will be payable to VPAM or its sub-contractors for the successful conclusion of new leases and renewal of leases and will be in keeping with generally accepted tariffs, as follows:
(a) 5% of the first 2 years rental on the space let;
(b) 2.5% on the next 3 years rental on the space let to new tenants;
(c) 1.5% on the next 3 years rental on the space let to new tenants;
(d) 1% on the balance thereafter,
with a minimum of one month’s rental.
If an existing lease is renewed, or should an existing tenant expand its premises or relocate within the relevant property, then the commission payable shall be 30% of the amounts set out in (a) to (d).
Further increased commission may need to be paid in order to secure tenants from time to time. Any such increase in commission payable shall be agreed by the parties.
2.8 Property management
The management of the properties within the VPIF Portfolio has been capably undertaken by JHI since inception. The JHI team works seamlessly with VPAM.
The original Property Management agreement with JHI was signed on 13 December 2006 and Addenda thereto have been signed, the latest of which is dated 8 February 2011. The effective date of the current agreement is 1 January 2011 and it will remain in force for one year, whereafter it will be renewed subject to continued satisfactory performance and subject to the right of either party to terminate it on three months’ written notice.
The Property Management agreement with JHI governs the entire VPIF Portfolio for a fee of 2.85% ( in cluding Value Added Tax (“VAT”) of gross monthly collections. However, under the umbrella of JHI, the Benstra and Motherwell properties are governed by separate management agreements, which are materially the same as the JHI agreement, with First Property Trust and Ramprop, respectively, due to those companies being best suited to manage those assets in the areas in which they are situated.
JHI is a well-established property services company with more than a century of experience. The JHI directors are: J E Wellsted, M van der Walt, G G Hulley, J Boshoff and D Subramanian.
JHI’s business address is: JHI Place, 2 Norwich Close, Sandton .
None of the VPIF directors have any beneficial interest, direct or indirect in JHI. Vunani Capital and the chairman of the fund previously held a 20% interest and a 10% interest in JHI, respectively, but this was disposed of during the last 18 months.
The directors of JHI do not have any beneficial interest, direct or indirect, in the VPIF Portfolio and there is no relationship between the JHI directors and any other person, where a duty in relation to that other person conflicts or may conflict with JHI and this situation prevailed over the past two years.
No placing units will be issued to JHI.
The Property Management agreement is available for inspection as set out in paragraph 52.
The property management services set out below have been sub-contracted to JHI in terms of the Property Management agreement and include but are not limited to instituting systems and procedures with a view to ensuring that:
• rental, operating costs and VAT recoveries are collected timeously and tenants’ deposits are accounted for;
• all property expenses are paid timeously, including without limitation, stamp duties and relevant property taxes;
• the landlord’s rights are enforced against defaulting tenants;
• the buildings on the Properties are adequately insured against all relevant risks;
• routine inspections of all the buildings and Properties take place with a view to ensuring the continued maintenance thereof and that authorised capital expenditures are carried out;
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• tenant complaints and requirements are timeously and efficiently dealt with. Tenant complaints that are not resolved timeously are to be brought to the attention of the fund;
• all tenants are informed of all rules, regulations and notices issued by the fund;
• income and expenditure budgets are prepared for each property during the last 3 months of the preceding financial year in respect of the current budget period;
• monthly income and expenditure accounts are prepared for each property;
• lease expiries and renewals are dealt with expeditiously and anticipated vacancies are reported on and filled where possible prior to their occurrence. A rolling 12-month lease expiry table will be kept up to date comprising GLA and the Rand value of leases;
• best endeavours are made to let vacant space immediately and space which is to become vacant before leases expire;
• leases are entered into in accordance with the letting policies of the fund from time to time and all necessary documentation in this regard is timeously prepared and executed;
• contracts are entered into with suppliers of services to buildings at competitive rates having due regard to the quality of service provided;
• the Properties are generally efficiently and properly maintained.
Secretarial and accounting will be performed as follows:
• surplus funds are to be invested in accordance with the directions of the fund;
• full, accurate and up -to -date books of account and other records relating to the management of each property are to be maintained in such manner and format as may from time to time be acceptable to the fund and its auditors: such books of account and other records to be available at reasonable times for inspection, examination, audit and transcription by the fund;
• maintenance of the fund’s secretarial documentation including minutes and resolutions;
• providing information to the fund’s auditors for the annual audit;
• attending to the annual audit and preparation of the annual financial statements;
• taking minutes at meetings;
• preparing and timeously circulating agenda, reports, minutes and other documentation required for board meetings of the fund, including round robin resolutions;
• attending to the requirements of the JSE, including without limitation, procuring the preparation and distribution of circulars, payments of distributions and the convening of general meetings of unitholders; and
• liaison with the sponsors, corporate advisers, legal advisers, auditors and other professional advisers on all relevant matters.
Compliance matters will be dealt with as follows:
• Action to be taken as may be necessary to ensure full compliance by the fund with all the legal, statutory, JSE and secretarial obligations and the insurance requirements of each property in the VPIF Portfolio. The Property Managers shall ensure compliance by the fund with all labour (if applicable), insurance, tax and other laws relating to the fund as directed by VPAM ; and
• VPAM shall notify VPIF of any violation of any statutory obligations which come to its attention and use its best endeavours to remedy such violation.
2.9 Interests of VPIF directors in the Acquisition properties
The VPIF directors’ interests in the Acquisition properties are as follows:
• P W Mac kenzie has, through the Eagle Trust, a 12% interest in Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle.
• R F Kane has, through the Ludlow Trust, a 10% interest in Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle.
• E G Dube has, through the END Trust, a 24.6% interest in Vunani, which in turn owns 78% of Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle.
• C E Chimombe-Munyoro has, through the Anbesa Investment Trust, a 0.2% interest in Vunani, which in turn owns 78% of Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle
Details of the date and cost of the Acquisition properties is set out in Appendix 1.
2.10 Other information
2.10.1 Distributions
Distributions will be made to unitholders bi-annually as described in paragraph 18.
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2.10.2 Properties acquired in the last three years
Details of the immovable properties owned by the fund are set out in paragraph 3 and Appendix 1. Other than the Acquisition properties dealt with in paragraph 3.1, none of the Other Properties were acquired within the last three years, however, the initial price thereof and the date of acquisition are set out in Appendix 1.
2.10. 3 Properties disposed of in the last three years
The fund disposed of the Yorkor property in Pretoria for R27,5 million in cash on 18 December 2008 to Martycel Properties CC (the member being Mr S P Smit), 638 Rudolf Street, Constantia Park, Pretoria. The most recent valuation in respect of that property reflected a value of R14 million. VPIF intends to grow the portfolio but it will from time to time trade out those properties that are unlikely to retain their value or where the fund can make an attractive arbitrage.
2.10. 4 Acquisition of subsidiaries
Other than as set out in paragraphs 3.2 and 29 below, the application for the listing of the units does not coincide, directly or indirectly, with the acquisition by the fund of securities in or the business undertaking of any other company, which company or business undertaking will become a subsidiary of or part of the business of the fund in the long term.
2.10.5 Independent reporting accountants’ report
The independent reporting accountants have issued a report regarding the value and existence of the Acquisition properties, which report is set out in Appendix 3.
3. THE VPIF PORTFOLIO
3.1 VPIF existing properties
The following are regarded as the predominant properties in the VPIF Portfolio:
• Athol Ridge Office Park, Sandton;
• Pacific Eagle, 14 Loop Street, Cape Town;
• Cedar Park, Greenstone Hill Office Park, Greenstone Hill, Gauteng;
• Standard Bank Private Bank, Hyde Park;
• Vodacom Park, Sandton;
• Investment Place, Sandton;
• Wale Street Chambers, Cape Town;
• Standard Bank office/retail branches in the following economically strong towns:
– Harrismith, KwaZulu-Natal;
– Ladysmith, KwaZulu-Natal;
– Stanger, KwaZulu-Natal;
– Upington, Northern Cape;
• Perseus Park, East Pretoria;
• Benstra Building, Pretoria; and
• Belvedere, Sunninghill.
3.2 Acquisition properties
The following transactions were effected as part of an internal restructuring within the Vunani Group and will result in VPIF acquiring 3 A+ grade quality, well-located properties, with long leases with blue-chip tenants from Vunani Properties. Where applicable, these transactions have been approved by the shareholders of Vunani, and will take effect simultaneously with the listing:
• VPIF will acquire the entire issued ordinary share capital of Cedar Park, which owns the Cedar Park property, as a going concern, based on the aggregate net asset value thereof for R3.9 million;
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• VPIF will acquire the entire issued ordinary share capital of Pacific Eagle, which owns the Loop Street property, as a going concern, based on the aggregate net asset value thereof for R13 million;
• VPIF will acquire the Athol Ridge property, as a going concern, for an aggregate amount of R104.4 million.
The funds raised in respect of the private placing will be utilised as set out in paragraph 14.
The Acquisition properties are being acquired at the value determined by the independent valuer on 1 January 2011, such value being in line with the directors’ valuation.
Notwithstanding the transfer dates of the Acquisition properties, VPIF shall be deemed to have acquired possession thereof with effect from the “Closing Date” as defined in the Acquisition Agreement, which date may not be later than two business days prior to the listing date and from which date VPIF shall be entitled to all benefits and income arising therefrom and from which date the Acquisition properties shall be held by VPIF at its risk and expense. At the last practicable date, clearance had not been obtained for the transfer of the Athol Ridge property valued at R104.4 million (11% of the VPIF Portfolio). Every effort will be made to secure the required clearance and registration as soon as possible. Vunani Properties has warranted that it has the absolute right and has obtained the relevant authority from the bondholder in respect thereof to sell the property and the directors are not aware of any reason for this property not to be transferred to the fund. Having regard to the fact that the acquisition of the Athol Ridge property is an internal transaction, no provision has been made in the forecast financial information set out in paragraph 17 below for the possibility of it not transferring to the fund.
Unitholders will be advised, via a SENS release, once all the Acquisition properties have been transferred to VPIF.
The Competition Authorities have been consulted regarding the transactions set out above and have indicated that they consider the transactions to be an internal restructuring and therefore not notifiable in terms of the provisions of the Competition Act, 1998 (Act 89 of 1998), as amended.
Settlement of the consideration relating to the Acquisition properties will take place immediately prior to or on the listing date or as soon as transfer has taken place.
No promoter has been involved in these transactions.
The salient features on the Acquisition Agreement are set out in Appendix 13.
The Acquisition Agreement is available for inspection as set out in paragraph 52.
Details of the vendor
Vendor’s information Address Shareholders
Vunani Properties Vunani House, 151 Katherine Street, Sandown Vunani – 78%Directors: Ludlow Trust – 10%E G Dube Eagle Trust – 12%B M KhozaP W Mac kenzieR F KaneW G Frawley
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Guarantees, warranties, restrictions and income tax considerations
The Acquisition Agreement contains warranties normal for acquisitions of this nature.
Save for the rental guarantee detailed in paragraph 3.3.9, no other financial guarantees have been given by the vendor pursuant to the book debts and/or other assets.
The Acquisition Agreement does not preclude the vendor from carrying on business in competition with VPIF or impose any other restrictions on the vendor. Accordingly, no cash payments have been made in respect of restraints of trade.
There is a liability for accrued taxation, which was taken into account in arriving at the purchase consideration of Pacific Eagle.
Goodwill arises in respect of the transaction as detailed in Appendix 6.
3.3 Details of the VPIF Portfolio
The market value of the VPIF Portfolio, in terms of an independent valuation, is R943 150 000 with an effective GLA of 99 684.09 m2.
Details of the VPIF Portfolio are set out in Appendix 1.
Analyses of the VPIF Portfolio by market value, sector, tenancy, geographical spread by lease expiry profile and weighted average yield at 1 April 2011 are set out below. All graphs are related to the 12-month forecast period to 30 June 2012.
3.3.1 Geographic spread
The majority of the properties comprising the VPIF Portfolio are situated in Gauteng Province. Going forward the fund expects to acquire more geographically diversified properties however this will depend on the investment opportunities that become available.
3.3.2 Sectoral spread
The sectoral spread of the VPIF Portfolio reflects a heavy concentration towards the office sector due to the historical focus and strategy of the fund. There are only two dedicated retail properties, Motherwell which performs exceptionally well, and Linger Longer, which will be redeveloped into a large office block. The sectoral bias will be retained as it is this focus that has enabled the fund to perform well.
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3.3.3 Contracted vs. Uncontracted rental income
The VPIF Portfolio rental income has historically been stable given the quality of the buildings and the high percentage of tenant retention. However, the lease expiries in 2012 will provide opportunity for upward rental revision, given the strengthening rental market.
Uncontracted rental income is defined as that income for which there are no leases in place. For the two reporting periods, 2011 and 2012, uncontracted rental comprises 4% and 18% of revenue, respectively. The uncontracted figure must be compared with the portfolio vacancy of 4.8% (2% excluding developments in progress). The uncontracted rental is made up of 2 leases:
• 14% of GLA is occupied by SITA at Perseus Park, Pretoria. SITA have indicated they want to renew with a long lease and these negotiations are in progress. The directors are confident that SITA will renew the lease;
• 4.5% of GLA is occupied by the City of Cape Town in Wale Street Chambers. The City has progressively taken up all available space in the building and has committed to renew. Negotiations are in progress and the directors are confident that the lease will be renewed.
3.3.4 Tenant spread
The VPIF Portfolio has a strong tenant base which is weighted toward Government, national and listed tenants, which jointly comprise 74% of GLA. The total number of tenants in the VPIF Portfolio is approximately 182.
For the graphs below the following key applies:
– “A”: Government, large national tenants, listed tenants, and major franchises. These include, inter alia, SITA, The Compensation Commission; Vodacom Limited, The Standard Bank of South Africa Limited, ABSA Limited and the SA Post Office.
– “B”: National tenants, listed tenants, franchisees, and medium to large professional firms. These include, inter alia, Aegis BPO Holdings Limited, GOBA Limited, Pam Golding Properties Limited, Life Sense and Alliance Media.
– “C”: Other comprises all other tenants that do not fall into the above categories, of which there are approximately 100 tenants.
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3.3.5 Single vs. Multi-tenanted buildings
39% of gross income is generated from single-tenanted properties and the balance is generated from multi-tenanted properties.
3.3.6 Vacancy profile by sector
The total vacant GLA in the VPIF Portfolio amounts to 4.844 m² or 4.83%. It should be noted that 2% of the VPIF Portfolio is currently being redeveloped and tenanting of this space will commence in Q3’2011 giving an effective vacancy of 2.8%. Vunani Properties has provided a 2-year rent guarantee at market-related rentals on 1.8% of the GLA in respect of vacancies in the Athol Ridge property and the Cedar Park property. The directors consider this “prime” space is being marketed at realistic rentals and believe it will be let in the short term.
The vacancies in the VPIF Portfolio are well below the national average reported by IPD.
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3.3.7 Lease expiry
The lease expiry profile reflects current leases expiring as a percentage of both GLA and current income receivable for the VPIF Portfolio. Current leases include the rental guarantee from Vunani Properties as detailed in paragraph 3.3.9. The fund is likely to benefit from lease expiries in 2012 in respect of which upward rentals are anticipated.
# Expiring leases in 2012 include the following (% GLA):
SITA 14.0% Management is in negotiations with SITA who has indicated it will renew the lease.
City of Cape Town 4.5% Management has a letter of commitment from the City of Cape Town to renew the lease and negotiations are in progress.
Compensation Fund 7.8% Compensation Fund has extended its lease until March 2012 and have requested a lease proposal for conversion of the building to a “Green Building”.
Pam Golding 1.5% Pam Golding will renew the lease and negotiations are in progress.
Hillside Tavern 0.5% Hillside Tavern has indicated it wants another five-year lease.
Standard Bank, Springs 1.9% SBSA will renew the lease following a major upgrade of the branch.
Standard Bank, Ladysmith 1.4% SBSA will renew the lease. Negotiations are in progress.Standard Bank, Stanger 1.3% SBSA will renew the lease. Negotiations are in progress.
Impala Platinum 1.9% Impala Platinum is a long-term tenant and it is considered unlikely it will not renew the lease.
Total committed leased area 34.8%
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$ Expiring leases in 2013 include the following (% GLA):
Standard Bank, Upington 1.2% Management is confident that SBSA will renew the lease.
Standard Bank, Randburg 0.9% Management is confident that SBSA will renew the lease.
Aegis 5.3% Aegis is expanding and management is confident it will renew.
Telesure 3.1% Telesure is expanding and management is confident it will renew.
Amethyst 1.7% Management is confident it will renew.
Total lease GLA, whichmanagement is confident will be renewed 12.2%
Total GLA = 99.684 m2
3.3.8 Rental escalations, rental per m2 and average annual property yield
The weighted average rental per m2 (excluding vacancies) for the VPIF Portfolio by sector is as follows:
– Commercial: R91 m2.
– Retail: R89 m2.
The weighted average rental escalation (by GLA) for the VPIF Portfolio* is:
– Office: 8.9%.
– Retail: 8.1%.
The forward annualised property yield to 30 June 2012 is 10% (refer paragraph 17).
* Excludes leases expiring before 2012.
3.3.9 Rental guarantee
Vunani Properties has warranted in favour of VPIF that:
• the monthly gross rental income to accrue to VPIF, whether directly or indirectly, from the lettable office space in the Cedar Park property existing as at the listing date, over the two-year period immediately following the listing date, (and covering a lettable floor area of 261 m² at R95 m2 gross, as well as six covered and 10 open parking bays) shall not be less than R29 695.00, exclusive of VAT thereon for the first year and for the second year, an annual escalation of 8% on the aforesaid rental. “Gross rental income” for purposes of this warranty comprises the leased rental, including rates and taxes (but not increases in rates and taxes), insurance, maintenance, but excluding consumption charges (including electricity, water and sewerage) and any VAT thereon. If the aggregate
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monthly gross rental income actually received in respect of any period of 12 consecutive months following the listing date, falls short of the amount of the aggregate monthly gross rental income guaranteed, then and in such event Vunani Properties shall pay to VPIF, an amount equal to the shortfall within 30 (thirty) days of receipt of a certificate from VPIF’s auditors certifying the amount of the shortfall and showing how it was calculated;
• the monthly gross rental income to accrue to VPIF, whether directly or indirectly, from the lettable office space in the Athol Ridge property, existing as at the listing date, over the two-year period immediately following the listing date and covering a lettable floor area of 1 593 m² at R110 m2 gross, 61 covered, eight shaded and 37 open parking bays, as well as three stores, shall not be less than R221 880,00, exclusive of VAT, thereon for the first year and, for the second year, an annual escalation of 8% on the aforesaid rental. “Gross rental income” for purposes of this warranty comprises the leased rental, including rates and taxes (but not increases in rates and taxes), insurance, maintenance, but excluding consumption charges (including electricity, water and sewerage) and VAT thereon. If the aggregate monthly gross rental income actually received in respect of any period of 12 consecutive months following the listing date falls short of the amount of the aggregate monthly gross rental income guaranteed, then and in such event Vunani Properties shall pay to VPIF an amount equal to the shortfall within 30 days of receipt of a certificate from VPIF’s auditors certifying the amount of the shortfall and showing how it was calculated.
4. RATIONALE FOR THE TRANSACTION AND THE LISTING
The rationale for the transaction is to create critical mass for VPIF and to settle debt.
The purpose of the listing is to:
• consolidate Vunani Group’s property portfolio exposures into one vehicle;
• raise capital to enable VPIF to grow its property portfolio through acquisitions;
• provide investors, both institutional and private, with an opportunity to participate in the stable income streams and future capital growth of VPIF;
• provide a spread of investors that will provide liquidity and tradeability in the units; and
• enhance investor and public awareness of VPIF.
5. VPIT TRUST DEED
The salient features of the VPIT Trust Deed are set out in Appendix 9.
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PART B: THE PRIVATE PLACING, LISTING AND ISSUE OF UNITS
6. THE PRIVATE PLACING
The private placing consists of the offer for subscription and the offer for sale.
The private placing has not been underwritten.
Save as set out in paragraph 14, there are no other material expenditure items that would need to be financed from the proceeds of the minimum subscription or any other source.
Fractions of units will not be issued.
7. PARTICULARS OF THE PRIVATE PLACING AND PRIVATE PLACING PRICE
7.1 Particulars of the private placing
The private placing by the Company will comprise the offer for subscription and the offer for sale at the private placing price.
The Bookrunners will obtain indications of interest from eligible investors to acquire VPIF units as part of a “book-building” process. Following this book-building process, the private placing price will be determined based on an analysis of market demand and will be released on SENS on Tuesday, 2 August 2011 and published in the press on Wednesday, 3 August 2011. Any change to these dates will likewise be released on SENS and published in the press.
Eligible investors wishing to participate in the private placing are required to complete the Application Form attached to this Pre-Listing Statement setting out the Rand value of the VPIF units they wish to apply for as well as the price range.
Subject to the conditions precedent set out in paragraph 9.1 below being met , the eligible investors selected by VPIF will be advised of the number of VPIF units they have been allocated once the private placing price has been determined. The units so allocated will be issued on the listing date at the private placing price, upon receipt of payment in respect thereof.
The placing units will rank pari passu with all other VPIF units in issue, including in respect of distributions. The placing units will be issued in dematerialised form and no fractions of units will be issued.
7.2 Private placing price
The private placing price is estimated to fall within the range of between R7.00 and R8.00 per unit. The final private placing price may, however, be outside of th is price range. The Private Placing Price will be exclusive of uncertificated securities tax and will be payable in full in Rand without any deduction or set-off.
For purposes of this Pre-Listing Statement, a mid-range price of R7.50 per unit has been used.
8. TIME AND DATE OF THE OPENING AND CLOSING OF THE PRIVATE PLACING
2011
Opening date of the private placing (09:00) Monday, 18 July
Closing date of the private placing (12:00) by which date eligible investors must have submitted their applications to the Bookrunners in order to qualify to participate in the private placing Friday, 29 July
Date when eligible investors will be notified of their participation in the private placing and the number of units allocated to them and the pricing thereof Tuesday, 2 August
Market to be advised of the fulfilment of the conditions precedent Friday, 5 August
Listing of VPIF units on the JSE Thursday, 11 August
The dates and times set out above are subject to change and any changes will be released on SENS and published in the press.
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9. LISTING OF THE VPIF UNITS
9.1 Conditions precedent to the listing
The listing is subject to:
• VPIF obtaining a spread of unitholders complying with the JSE Listings Requirments (i.e. 300 “public” unitholders holding at least 20% of the Company’s units);
• the approval by Vunani shareholders of the Vunani disposal;
• the minimum subscription being received; and
• the registration of transfer of the Athol Ridge property to VPIF .
9.2 JSE approval
Subject to the fulfilment of the conditions precedent, the JSE has approved the listing of all the VPIF units in issue after the private placing on the Main Board of the JSE List in the “Real Estate – Real Estate Holdings and Development” sector of the JSE List, in terms of the FTSE classification, under the abbreviated name “VPIF”, JSE code “VPF” and ISIN: ZAE000157459.
Dealings in the units are expected to commence on Thursday, 11 August 2011.
Acceptance of the offer and the allotment and issue of the placing units pursuant thereto will be conditional upon the listing of the units on the JSE by not later than Thursday, 11 August 2011, or by such extended date as the Committee of the Issuer Services Division of the JSE may determine, provided that such extended date falls within 30 days from the anticipated date of listing.
9.3 Listing on any other stock exchange
VPIF’s units are not listed on any other stock exchange nor has any application been made for a listing on any stock exchange, other than the JSE.
10. PARTICIPATION IN THE PRIVATE PLACING AND APPLICATIONS
The private placing is open for acceptance by eligible investors only. The private placing will be governed by the laws of the RSA and applicants will be deemed, when applying for units, to have consented and submitted to the jurisdiction of the courts of the RSA in respect of all matters connected to the private placing.
Eligible investors interested in participating in the private placing should contact the Bookrunners prior to the closing date of the private placing (refer paragraph 8) to provide indications of their interest.
The basis of allocation of the VPIF units will be determined by fund in its sole discretion but will be done on an equitable basis, after consultation with the Bookrunners, however, in determining the basis of allocation, the date that eligible investors apply for units will be taken into account. Applicants will be notified of their allocations on Tuesday, 2 August 2011. Based on the level of demand and the final private placing price, applicants may not receive any VPIF units or a lesser number of units than applied for. Any dealing in VPIF units prior to actual delivery thereof is entirely at the risk of the applicant. Subject to the aforegoing, no preference of allotment will be given to any particular eligible investor. No late applications will be accepted.
Once submitted, applications are irrevocable and may not be withdrawn.
10.1 Dematerialised units
The units will be allotted/transferred to the successful applicants in dematerialised form only. All successful applicants must therefore have appointed a CSDP or broker to receive and hold their units on their behalf. Should a successful applicant require a physical certificate in respect of his units, he will have to materialise such units following the listing, which will incur a cost. It should be noted that there are risks associated with holding physical certificates, including the risk of loss or tainted scrip, which is not covered by the JSE Guarantee Fund. Unitholders who elect to hold their units in materialised form will have to dematerialise their units should they wish to trade in them.
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10.2 Payment for and delivery of VPIF units
Each successful applicant must, as soon as possible but by no later than 12;00, three business days (expected to be Friday, 5 August 2011) prior to the listing date, after being notified of an allocation of units forward to:
• his CSDP, all information required by such applicant’s CSDP and instruct his CSDP to pay the amount due for the units to the designated account of VPIF; and
• the Bookrunners, details of his CSDP, the name of the account holder and number of units and such other information as is required by the Bookrunners’ CSDP in order to affect delivery of the relevant units. Such information must be confirmed to the Bookrunners by no later than 12;00, three business days (expected to be Friday, 5 August 2011) prior to the listing date.
Applicants are advised to contact their CSDP to establish the date by which they are required to transfer the necessary funds to the CSDP. Each applicant must then place the necessary funds with its CSDP or make any other appropriate arrangements to enable its CSDP to make payment for the allocated units on Wednesday, 10 August 2011, in accordance with each applicant’s agreement with its CSDP.
The applicant’s CSDP must commit to Strate to the receipt of the applicant’s allocation of units against payment by no later than 17:00 on Wednesday, 10 August 2011.
On the listing date (which is expected to be Thursday, 11 August 2011), the applicant’s allocation of units will be credited to the applicant’s CSDP or broker during the Strate settlement runs, which occur throughout the day.
11. ISSUE OF THE PLACING UNITS
The units issued in terms of the private placing will:
• be issued in electronic format ;
• be allotted subject to the provisions of laws of the RSA, including, inter alia, the Companies Act and any of the Company’s constitutional documents including the MOI and the Debenture Trust Deed; and
• rank pari passu in all respects with the existing units in issue in that they:
– are in all respects identical;
– are of the same nominal value and the same amount per unit has been paid-up;
– carry the same rights as to unrestricted transfer, attendance and voting at general/annual general meetings, and in all other respects; and
– are entitled to dividends/distributions at the same rate and for the same period, so that at the next ensuing distribution the dividend/distribution payable on each unit will be the same amount.
If applicable, the “certified transfer deeds and other temporary documents of title” procedure approved by the JSE will be used and only “block” certificates will be issued for any certificated units allotted and issued by the fund.
12. STRATE
Units may only be traded on the JSE in electronic form and will trade for electronic settlement in terms of Strate immediately following the listing. Details relating to the mechanics of Strate can be obtained from the Strate website (http://www.strate.co.za).
13. EXCHANGE CONTROL REGULATIONS
Currency and units are not freely transferable from South Africa and must be dealt with in terms of the Exchange Control Regulations. The following summary is intended as a guide only and is therefore not comprehensive. If you are in any doubt, please consult your professional adviser.
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Emigrants from the Common Monetary Area:
• a former resident of the Common Monetary Area and who is an eligible investor, who has emigrated from the RSA, may use blocked Rand to subscribe for placing units in terms of the private placing;
• all payments in respect of placing units acquired by emigrants using blocked Rand must be made through an authorised dealer in foreign exchange;
• any units issued pursuant to the use of emigrant blocked Rand will be credited to their blocked unit accounts at the CSDP controlling their blocked portfolios;
• any unit certificates issued in respect of units purchased with blocked Rand in terms of the private placing will be endorsed “Non-Resident” in accordance with the Exchange Control Regulations and will be placed under the control of the authorised dealer through whom the payment was made;
• refunds are not expected, however, if applicable, any refund monies payable in respect of unsuccessful applications or partly successful applications, as the case may be, for placing units in terms of the private placing, emanating from blocked Rand accounts will be returned in terms of the Exchange Control Regulations, to the authorised dealer administering such blocked Rand accounts, for the credit of such applicants’ blocked Rand accounts.
Eligible investors resident outside the Common Monetary Area should:
• note that any unit certificates issued will be endorsed “Non-Resident” in terms of the applicable Exchange Control Regulations;
• note that dematerialised units issued to a dematerialised unitholder whose registration has been so endorsed will be endorsed “Non-Resident” in accordance with the Exchange Control Regulations. The CSDP or broker through whom the unitholder has dematerialised his shares will ensure that he adheres to the Exchange Control Regulations;
• seek advice as to whether any Governmental and/or other legal consent is required and/or whether any other formality must be observed to enable a subscription to be made in terms of the private placing.
14. MINIMUM SUBSCRIPTION, COMMISSIONS AND BROKERS’ FEES
The directors believe that a minimum subscription of R366.7 million will be required which will be applied as follows.
Description AmountR’m
From the offer for subscription: Costs of the listing 11.7 Repayment of loans 294.8
306.5From the Vunani Properties offer: 60.2
366.7
Other than described in paragraph 49 below, no commissions, discounts, brokerages or other special terms have been granted by the Company in the three years preceding the last practicable date in connection with the issue or sale of any units in the capital of VPIF.
15. SIMULTANEOUS ISSUES, OPTIONS OR PREFERENTIAL RIGHTS IN RESPECT OF UNITS OR PREVIOUS OFFERS AND OTHER TERMS AND CONDITIONS OF THE PRIVATE PLACING
No simultaneous or almost simultaneous issues of units have been made by the Company.
The final number of units to be issued by the fund will depend on the results of the book-build exercise.
There is no contract or arrangement, either actual or proposed, whereby any option or preferential right of any kind has been or will be given to any person to subscribe for any units in VPIF.
No offer has been made to the public for the subscription or the sale of units in the Company during the three years preceding the last practicable date.
There are no other material terms and conditions relating to the private placing.
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PART C: FINANCIAL INFORMATION
All the financial information set out in this Pre-Listing Statement is the responsibility of the directors.
The independent reporting accountants have provided confirmation to the JSE that they have reviewed this Pre-Listing Statement and that the content hereof is not contradictory to the “Report of historical information of VPIF for the year ended 31 December 2010” set out in Appendix 4.
16. HISTORICAL FINANCIAL INFORMATION AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
16.1 Audited historical financial information
The report on the audited historical financial information of VPIF for the year ended 31 December 2010 is set out in Appendix 4 and the independent reporting accountants’ report thereon is set out in Appendix 5. The audit report for VPIF for the year ended 31 December 2010 was issued without qualification.
16.2 Unaudited pro forma financial effects of the transaction
The unaudited pro forma financial effects of the transaction, for which the directors are responsible, are provided for illustrative purposes only to show the effect of the transaction on net asset value per unit (“NAVPU”) and tangible net asset value per unit (“TNAVPU”) as if the transaction had taken effect on 31 December 2010 based on both the minimum and maximum subscription. Because of their nature, the unaudited pro forma financial effects may not give a fair presentation of VPIF’s financial position and performance. The unaudited pro forma financial effects have been compiled from the audited financial results for the year ended 31 December 2010 and are presented in a manner consistent with the format and accounting policies adopted by VPIF and have been adjusted as described in the notes set out in Appendix 6.
Based on a Based on a the maximum subscription of subscription of R306.5 million : LTV R497.5 million : LTV approximately 20% approximately 0%
Actual After % After %
NAVPU (cents) 3 053.2 728.2 (76.1) 727.6 (76.2)TNAVPU (cents) 3 388.9 768.9 (77.3) 758.9 (77.6)
Units in issue (’000) *14 256 97 892 123 358
* Before the sub-division of units described in paragraph 33.
The unaudited pro forma statement of financial position of VPIF in respect of the year ended 31 December 2010, before and after the transaction, is set out in Appendix 6 and the independent reporting accountants’ report in regard thereto is set out in Appendix 7.
16.3 Change in financial year-end
The Company’s year-end has been changed from December to June and, accordingly, the next financial reporting period of the Company will be in respect of the six months ended 30 June 2011.
17. FORECASTS FOR THE SIX MONTHS ENDING 30 JUNE 2011 AND THE YEAR ENDING 30 JUNE 2012
The unaudited forecast consolidated statements of comprehensive income of VPIF for the six months ending 30 June 2011 and the year ending 30 June 2012 (“the forecasts”) are set out below. The independent reporting accountants’ report on the forecasts is set out in Appendix 8.
The forecasts have been prepared on an aggregate basis in respect of the VPIF Portfolio and have been prepared based on a minimum and maximum number of units to be issued. The forecasts have been prepared in compliance with the IFRS accounting policies adopted by VPIF.
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Consolidated forecast statements of comprehensive income
Forecast Forecast year ending Year ending 30.06.2012 30.06.2012 based on a based on a subscription subscription *Actual Forecast of R306. 5 of R497.5 Year Six months million : LTV million : LTV ended ending approximately approximately 31.12.2010 30.06.2011 20% 0% R’000 R’000 R’000 R’000
Revenue – investment property income 103 825 64 365 149 998 149 998Straight-line effect of leases 893 487 1 274 1 274Property expenses (35 442) (21 495) (55 374) (55 374)
Net rental and related revenue 69 276 43 357 95 898 95 898Other operating expenses (3 646) (2 062) (6 666) (6 666)Listing expenses – (4 300) (7 400) (10 700)
Operating profit 65 630 36 995 81 832 78 532Finance income 487 158 – –Finance amortisations – (2 733) (23 278) (27 566)Finance costs (34 158) (23 649) (18 895) (572)
Profit before debenture interest and tax 31 959 10 771 39 659 50 394Fair value adjustments 109 781 37 239 77 196 77 196
Profit before debenture interest and taxation 141 740 48 010 116 855 127 590Trust distribution – net rental income (9 943) – – –Debenture interest (20 429) (17 316) (69 064) (87 386)
Net income before taxation 111 368 30 694 47 791 40 204Taxation – deferred (15 822) (5 282) (10 986) (10 986)
Profit after tax for the year 95 546 25 412 36 805 29 218Add back: Unit interest and distribution 30 372 17 316 69 064 87 386
Earnings 125 918 42 728 105 869 116 604Headline earnings adjustment:Change in fair value net of tax (93 958) (31 958) (66 210) (66 210)
Headline earnings 31 960 10 770 39 659 50 394
Reconciliation of distributable earnings:
Revenue 103 825 64 365 149 998 149 998
Property expenses (35 442) (21 495) (55 374) (55 374)Other operating expenses (3 646) (2 062) (6 666) (6 666)
Retained net rental income (694) – – –Net interest (33 671) (23 492) (18 895) (572)
Distributable earnings 30 372 17 316 69 064 87 386
Distributed via:Trust distribution – net rental income 9 943 – – –Debenture interest 20 429 17 316 69 064 87 386
30 372 17 316 69 064 87 386
Units in issue 14 256 000 57 024 000 97 891 691 123 358 357
Earnings per unit (cents) 883.26 74.93 108.15 94.52Distribution per unit (cents) 213.05 30.37 70.55 70.84Headline earnings per unit (cents) 224.19 18.89 40.51 40.85Forward yield (based on distribution) per unit at an offer price of 750 cents
per unit 9.4% 9.5%
* The historical information has been included for reference purposes only.
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Assumptions:
The forecasts are based on the following assumptions:
Rental income
In the case of existing leases:
• Where there is reasonable certainty of renewal (due to high capital expenditure by the tenant or early indication of renewal) a market-related rental has been used with no allowance for vacancy.
• Where there is some doubt as to the existing tenant renewing, depending on the building, its location and market rentals, a vacancy period of 3 to 6 months has been allowed and thereafter market rentals have been applied.
• The rental guarantees provided by VP in respect of Cedar Park and Athol Ridge have been included in contracted revenue for 2 years from 1 April 2011.
• All forecast revenue has been disclosed in the following table illustrating the spread between contracted and uncontracted rental:
Forecast Forecast 30.06.2011 30.06.2012
Percentage contracted 96 82Percentage uncontracted 4 18
100 100
Property-related expenditure
Property-related expenses have been based on historical data and forecasted expenses provided by management:
• Rates
Depending on the specific municipality, rates have been escalated at between 10% and 20%.
• Municipal charges
Municipal charges are fully recovered. Escalations therein have been estimated at 14%. This only affects the property management fee charge as the basic municipal charge is fully recovered from tenants in the normal course of business.
• Property management fee
A property management fee (JHI) of 2.85% on all collections including VAT has been provided.
• Capital expenditure, tenant installation costs and agents’ commission
All capital expenditure is specific as required or anticipated. Tenant installation costs have been provided as and where necessary to secure the continuous lettability of the space. Normally one month’s rent of tenant installation costs for every year of lease. Agents’ commission has been provided at tariff. These expenses are charged to income on an amortised basis over the life of the lease.
• Contracted expenses
Contracted expenses such as cleaning, property management, etc., have been included at contracted agreed rates and escalated accordingly.
• Finance costs
Finance costs are calculated at a fixed rate of 9.95% as per the existing facility in place with The Standard Bank of South Africa Limited. In the event that a 0% loan to value is achieved, the entire fixed rate will be broken. The break cost of approximately R7.3 million will be capitalised and will attract variable interest at 7.84%. In the event that a 20% loan to value is achieved, the break cost will be R3 million, which will also be capitalised and expensed at 7.84% interest.
• Debenture interest
Debenture interest payable in respect of the VPIF units is based on distributable earnings (refer formula set out in Appendix 10).
• Deferred tax
Deferred tax on the straight-line rental revenue adjustment and the fair value adjustment has been included at a rate of 28% and 14%, respectively.
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All the listing costs attributable to the listing have been expensed, however the cash flow thereof will be paid out of debt. The costs that have already been incurred during the period end ing 30 June 2011 have been expensed in that period and the costs that are subject to the listing have been expensed in the forecast period ending 30 June 2012. The costs relating to the minimum subscription and maximum subscription are R11.7 million and R15.0 million, respectively, of which R4.3 million has been expensed in the period end ing 30 June 2011 and the remaining portion in the period ending 30 June 2012.
Other general expense items
All other expenses have been increased at 10%, based on detailed forecast budgets and expected growth escalations unless, in specific cases, the present charge is unnecessarily low, in which case, it has been adjusted to the realistic charge at the commencement of the forecast year and subsequent escalations have then incurred the normal 10% increase. No expense items have been changed by 15% or more.
18. DIVIDEND AND DISTRIBUTION POLICY
VPIF has not declared any dividends to date.
The directors do not intend to declare dividends but intend to make bi-annual interest payments in respect of the debenture portion of the units for the periods ended June and December each year.
Appendix 10 contains details of the debentures, including the method of calculating the distribution per unit.
In terms of the MOI all shares rank equally for distributions.
The Company may:
• make Distributions from time to time, provided that:
– any such Distribution:
♦ is to be payable to Shareholders registered as such at a date subsequent to the date of declaration or date of confirmation of the Distribution, whichever is the later;
♦ is pursuant to an existing legal obligation of the Company, or a court order; or
♦ has been authorised by the Board, by resolution and, save in the case of a pro rata payment to all Shareholders (except one which result in Shareholders holding Shares in an unlisted entity) or cash dividends paid out of retained income or capitalisation issues or scrip dividends incorporating an election to receive either capitalisation Shares or cash, it has been sanctioned by Ordinary Resolution;
♦ made by the Company in general meeting, is not larger than that declared by the Directors;
– it reasonably appears that the Company will satisfy the solvency and liquidity test in the Companies Act immediately after completing the proposed Distribution;
– the Board, by resolution, has acknowledged that it has applied the solvency and liquidity test in the Companies Act and reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after completing the proposed Distribution; and
– no obligation is imposed, if it is a distribution of capital, that the Company is entitled to require it to be subscribed again;
must before incurring any debt or other obligation for the benefit of any Holders, comply with the requirements in clause 31.1.1; and
must complete any such Distribution fully within 120 (one hundred and twenty) Business Days after the acknowledgement referred to in clause 31.1.1.3, failing which it must again comply with the aforegoing.
No notice of change of address or instructions as to payment given after the determination of a dividend or other Distribution by the Company in terms of clause 31.1.1.1, shall become effective until after the dividend or other Distribution has been made, unless the Board so determines at the time the dividend or other Distribution is approved.
All unclaimed:
• monies (including, but not limited to Distributions other than dividends) due to Holders shall be held in trust indefinitely until lawfully claimed); and
• dividends (but not any other distribution which shall be held by the Company until lawfully claimed)remaining unclaimed for a period of not less than 3 (three) years from the date on which it became payable may be forfeited by resolution of the Directors for the benefit of the Company.
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The Company shall be entitled at any time to delegate its obligations in respect of unclaimed dividends or other unclaimed Distributions, to any one of the Company’s bankers from time to time.
There is no arrangement under which future dividends or interest distributions will be waived or agreed to be waived.
19. ADVANCES AND BORROWINGS
Other than the indebtedness of VPIF to unitholders in respect of the debentures, VPIF has no other loan capital.
Details of material borrowings by VPIF at 31 December 2010 are set out below:
After Audited 31.12.2010 Adjusted 31.12.2010 Before listing Borrowings (Note 1) (Note 2) (Note 3) R’000 R’000 R’000
HypropLoan entered into between Hyprop and VPIF on 21 September 2006. The loan is unsecured and due for repayment by no later than October 2011 with interest charged at JIBAR plus 3% 7 355 – 7 355
The Standard Bank of South Africa Limited 305 769 32 000 337 769
VPIT
Loan entered into between The Standard Bank of South Africa Limited and VPIT on 2 August 2006. The loan was subsequently amended on 17 September 2007 and 12 August 2010.
Mortgage bond over land and buildings in VPIT with fixed interest rate of 11.78%, repayable on10 October 2013 88 415 – 88 415
Mortgage bond over land and buildings in VPIT with fixed interest of 11.88%, repayable on 21 July 2013 99 417 – 99 417
The loan is secured by a mortgage bond over the properties with interest rate fixed for two years, at 10.5% maturing on 31 May 2011. The bond is secured by sureties from Hyprop
Mortgage bond over land and building in VPIT with a fixed interest rate of 11.87%, repayable on20 March 2013 78 651 – 78 651
Mortgage bond over land and buildings in VPIT with a fixed interest rate of 11.88%, repayable on 30 May 2013 16 000 – 16 000
Mortgage bond over land and buildings in VPIT with a variable interest rate of 1% below prime, repayable on 31 May 2013 727 – 727
Cost of restructuring interest rates to 9.95%, maturing on 28 January 2016 – 23 000 23 000
Additional facility for refurbishments on the same terms and conditions as the existing facility – 9 000 9 000
Pacific Eagle 22 559 – 22 559
Loan agreement entered into between The Standard Bank of South Africa Limited and Pacific Eagle dated 18 June 2010. The loan is secured by a mortgage bond over the property with interest at JIBAR plus 1.3% repayable on 24 November 2014.
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After Audited 31.12.2010 Adjusted 31.12.2010 Before listing Borrowings (Note 1) (Note 2) (Note 3) R’000 R’000 R’000
Investec Bank Limited 188 769 – 188 769
Cedar Park 14 567 – 14 567
Loan entered into between Investec Bank Limited and Cedar Park dated 12 March 2010. The loan is secured by a mortgage bond over the property with a joint and several continuing suretyship by Vunani of R15 million; interest charged at prime less 0.75% repayable on 16 February 2011. Extended for a further year post December 2010.
Athol Ridge 174 202 – 174 202
Loan entered into between Investec Bank Limited and Vunani Properties dated 17 April 2008. The loan is secured by a mortgage bond over the property with fixed interest for two years at 10.15% and surety from Vunani to the extent of R135 million.
Outstanding debt 501 893 32 000 533 893
Debt to be settled (Investec Bank Limited and The Standard Bank of South Africa Limited) (346 370)
Debt reduced to LTV of 20% 187 523Further break cost to be incurred in the event of 0%:LTV and capitalised 7 299Further debt to be settled (Investec Bank Limited and The Standard Bank of South Africa Limited) to reduce LTV to 0%. (187 523)
7 299
Notes:
1. Audited results for the year ended 31 December 2010.
2. Subsequent to year-end, the facility with The Standard Bank of South Africa Limited was re-negotiated at a fixed rate of 9.95% and therefore incurred a break cost of R23 million. An additional facility for refurbishments, on the same terms and conditions as the existing facility, are also taken into account.
3. Reflects adjustments subsequent to year-end and prior to listing.
Debentures in issue at 31 December 2010 (i.e. prior to the sub-division described in paragraph 33 below)
Hyprop 7 099 488VPIF 7 156 512
14 256 000
The loans arose pursuant to the acquisition of properties.
VPIF does not have any material loans receivable outstanding at the last practicable date.
The Company has the powers and capacity of an individual, save to the extent that a juristic person is incapable of exercising any such power, or having any such capacity.
Save to the extent otherwise permitted by the Companies Act, the unitholders may not ratify any action by the Company or the directors that is inconsistent with any such limit, restriction or qualification applicable to such action.
The Company may do anything which the Companies Act empowers a company to do, if so authorised by its MOI and the JSE Listings Requirements.
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No Exchange Control or other restrictions have been imposed on the Company’s borrowings since the Company’s incorporation.
There are no restrictions on the borrowing powers of the directors of the Company in the MOI.
At the last practicable date, VPIF had not undertaken any off-balance sheet financing.
Details and terms of all material inter-company financial and other transactions are set out in note 10 of Appendix 4.
VPIF has an existing facility with The Standard Bank of South Africa Limited as detailed above, which has been re-negotiated subsequent to year-end at a rate of 9.95%. In the event of a 0% LTV, the bank has provided VPIF with an uncommitted facility of which every draw will be subject to credit approval.
20. MATERIAL COMMITMENTS, LEASE PAYMENTS AND CONTINGENT LIABILITIES
At the last practicable date, VPIF had no material commitments, lease payments or contingent liabilities.
21. ADEQUACY OF CAPITAL
The directors are of the opinion that the working capital available to VPIF, subsequent to the private placing, is adequate for its current requirements, i.e. for a period of twelve months from the date of the Pre-Listing Statement and that:
• VPIF and VPIT will be able, in the ordinary course of business, to pay their debts;
• the assets of VPIF and VPIT will be in excess of their liabilities, the assets and liabilities being recognised and measured in accordance with the accounting policies used in the latest audited annual financial statements;
• the working capital of VPIF and VPIT will be adequate for ordinary business purposes; and
• the share capital and/or reserves are adequate for the ordinary business purposes of VPIF and VPIT.
22. MATERIAL CHANGES
The directors report that, other than in the ordinary course of business and in terms of the acquisition of the Athol Ridge, Cedar Park and Pacific Eagle properties and the private placing as dealt with in this Pre-Listing Statement, there have been no material changes in the financial or trading position or the assets and liabilities of the Company between 31 December 2010, the date of the last audited financial statements, and the last practicable date.
23. AUDIT COMMITTEE AND FINANCIAL DIRECTOR
The Company has appointed an Audit Committee, which comprises:
R R Emslie (Chairman); P D Naidoo; andJ R Macey.
In terms of the JSE Listings Requirements, the Company has an executive financial director, Ms M de Lange, appointed with effect from the listing date and the Audit Committee has satisfied itself of the appropriateness of her experience and expertise.
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PART D: INFORMATION RELATING TO THE COMPANY
24. INCORPORATION, HISTORY AND NATURE OF BUSINESS
24.1 Incorporation and history
The Company was incorporated in the RSA on 6 June 2005 as Sovereign Seeker Investment 85 Proprietary Limited (Registration number 2005/019302/07) and changed its name to Vunani Property Investment Fund Proprietary Limited on 7 March 2006. On 24 June 2011, the shareholders passed a special resolution approving the conversion of the company into a public company and the change of name to Vunani Property Investment Fund Limited.
24.2 Nature of business
The main business of the Company is the direct or indirect holding of immovable properties for investment purposes and there has been no change in this business in the last five years.
VPIF is a property company, which invests in assets and opportunities within the commercial sector in South Africa.
VPIF is an independent business, which is supported by its revenue earning history and has control via VPIT over the majority of its assets.
There has been no change in the trading objects or the controlling shareholders of the Company during the past five years.
VPIF does not benefit from any Government protection nor does it benefit from any investment encouragement law affecting its business.
25. PROSPECTS
Part A of this Pre-Listing Statement sets out a detailed overview of the VPIF Portfolio, including the funds’ prospects, which are set out in paragraph 2.6.
26. CONTROLLING AND MAJOR UNITHOLDERS
Prior to the listing and since 2005, Vunani Properties owned 50.2% and Hyprop owned 49.8% of the issued unit capital of VPIF. Major unitholders, subsequent to the listing, will only be known once the allocations in terms of the private placing have been finalised.
27. MATERIAL CONTRACTS, PROMOTERS, SERVICE AND OTHER AGREEMENTS
At the last practicable date, material contracts entered into by VPIF during the two years preceding the last practicable date, other than in the ordinary course of the business carried on by VPIF, are as follows:
• the Acquisition agreement;
• the Asset Management agreement;
• the Property Management agreement;
• the Debenture Trust Deed; and
• the VPIT Trust Deed .
At the last practicable date , no other material contracts had been entered into at any time which contain an obligation or settlement that is material to VPIF.
VPIF has not entered into any promoters’ agreements during the three years preceding the last practicable date.
At the last practicable date, the Company had not entered into any agreement relating to the payment of technical, administration or secretarial fees nor is it a party to any material restraint of trade payments, other than as set out in paragraph 46, or any agreements in terms of the payment of royalties.
The abovementioned agreements are available for inspection as set out in paragraph 52.
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28. 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 months, a material effect on the Group’s financial position.
29. SUBSIDIARIES
The Company’s unlisted subsidiaries at listing date will be:
Cedar Park Pacific Eagle
Date and place of registration: 11 May 2007 RSA 31 August 2007 RSA
Registration number: 2007/014552/07 2007/025771/07
Issued capital: R1 000 R1 000
Main business: Property holding Property holding
Date when will become subsidiary: On listing On listing
Interest: 100% 100%
It is intended that Cedar Park and Pacific Eagle will be divisionalised into VPIF and both companies deregistered.
VPIT is treated as a subsidiary of VPIF for all intents and purposes. The VPIT Trust Deed was registered on 3 July 2006 under Letters of Authority reference number IT6363/2006 and was amended by the Addendum thereto, dated 24 June 2011. The objects of VPIT are set out in Appendix 9.
30. PROVISIONS OF THE MOI
The relevant provisions of the MOI relating to:
• the appointment, term of office and qualification of the directors;
• remuneration of the directors, including any powers enabling directors, in the absence of an independent quorum, to vote remuneration (including pension and other benefits) to themselves or any members of their board; and
• the power of the directors to vote on a proposal, arrangement or contract in which he is materially interested,
are set out in Appendix 11.
31. CORPORATE GOVERNANCE
The directors endorse the Code of Corporate Practices and Conduct as set out in King III. By supporting this Code, the directors have recognised the need to conduct the affairs of the Company with integrity and in accordance with generally accepted corporate practices. The directors recognise that they are ultimately responsible for the financial performance of the Company. The steps taken to comply with King III are set out in Appendix 12.
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PART E: CAPITAL STRUCTURE
32. CAPITAL AT INCORPORATION
At incorporation, the Company’s authorised capital comprised R1 000, divided into 1 000 ordinary shares of R1.00 each and the issued share capital comprised R100, divided into 100 ordinary shares of R1.00 each, which were issued to the subscribers to the memorandum and then transferred to Vunani Properties when the shelf company was purchased.
33. SUMMARY OF ALTERATIONS TO THE CAPITAL AND UNITS ISSUED IN THE LAST THREE YEARS
On 12 April 2006:
• the authorised share capital of R1 000, divided into 1 000 ordinary shares of R1.00 each was sub-divided into 100 000 ordinary shares of R0.01 each and the issued share capital of R100 was sub-divided into 10 000 ordinary shares of R0.01 each;
• the authorised share capital was increased from R1 000, divided into 100 000 ordinary shares of R0.01 each to R1 000 000, divided into 100 000 000 ordinary shares of R0.01;
• the following units were issued at R10.00 each when Vunani and Hyprop pooled their respective commercial properties into VPIF:
Name of shareholder Number of shares %
Vunani Properties 7 156 512 50.2Hyprop 7 099 488 49.8
14 256 000 100.0
The shares are linked to an equivalent number of debentures.
Resulting in a unit capital as follows:
SHARES Rand
Authorised
100 000 000 ordinary shares of R0.01 each 1 000 000
Issued
14 256 000 ordinary shares of R0.01 each 142 560
DEBENTURES Rand
Issued
14 256 000 debentures at R9.99 each 142 417 440
A shareholders’ special resolution was passed on 10 March 2011 in terms of which:
• the authorised share capital of R1 000 000, divided into 100 000 000 ordinary shares of R0.01 each was sub-divided into 400 000 000 ordinary shares of R0.0025 each and the issued share capital of R142 560, divided into 14 256 000 ordinary shares was sub-divided into 57 024 000 ordinary shares of R0.0025 each;
• the authorised share capital was increased from R1 000 000, divided into 400 000 000 ordinary shares of R0.0025 each to R5 000 000, divided into 2 000 000 000 ordinary shares of R0.0025 each,
resulting in a share capital, as follows:
SHARES Rand
Authorised
2 000 000 000 ordinary shares of R0.0025 each 5 000 000
Issued
57 024 000 ordinary shares of R0.0025 each 142 560
49
DEBENTURES Rand
Issued
57 024 000 debentures at R2.4975 each 142 417 440
General:
Other than as detailed above, no other units have been issued by VPIF. No units have been repurchased.
34. AUTHORISED AND ISSUED UNIT CAPITAL
The authorised unit capital is set out below;
Rand
Authorised
2 000 000 000 ordinary shares of R0.0025 each 5 000 000
The issued unit capital after the private placing, based on the minimum and maximum number of units to be issued assuming a mid-range price of R7.50 per unit is set out below:
Number of units Rand
Minimum number of units in issue 97 891 691 449 067 682Maximum number of units in issue 123 358 357 640 067 678
No units have been reserved for issue in terms of a Share Incentive Scheme.
There is no share premium nor are there any treasury units.
On listing, the entire issued unit capital of the Company will be listed on the JSE.
All the authorised and issued units (including the placing units) are of the same class and rank pari passu in every respect.
Where applicable, the units were created and issued in terms of the MOI and the Debenture Trust Deed.
There are no preferential conversion and/or exchange rights pertaining to any of the units. The rights to dividends, interest, profits, capital and rights on liquidation or distribution of capital assets are set out in Appendices 10 and 11.
35. VARIATION OF RIGHTS ATTACHING TO UNITS
In accordance with the MOI and the Companies Act, any variation of rights attaching to its units may only be changed by the board, in the manner contemplated in section 36(3) of the Companies Act, except to the extent that the MOI provides otherwise.
Section 36(3) of the Companies Act provides as follows:
Except to the extent that a company’s MOI provides otherwise, the company’s board may:
• increase or decrease the number of authorised shares of any class of shares;
• reclassify any classified shares that have been authorised but not issued;
• classify any unclassified shares that have been authorised;
• determine the preferences, rights, limitations or other terms of shares in a class.
36. VOTING RIGHTS
In terms of section 37(2) of the Companies Act, each share will have one voting right attaching to it, except if the Companies Act or the MOI provides otherwise.
50
37. AUTHORISATIONS RELATING TO UNITS
In terms of section 60 of the Companies Act, the directors were authorised on 24 June 2011:
• as a general authority, to allot and issue all of the authorised but unissued securities upon such terms and conditions and to such persons as they in their discretion may determine, subject to the provisions of section 41 of the Companies Act and the JSE Listings Requirements;
• by way of a general authority, to repurchase securities issued by the Company on such terms and conditions as may be determined by them (subject to the restrictions placed by the Companies Act and the JSE Listings Requirements on such general authority).
38. DEBENTURES
The debentures are governed by the Debenture Trust Deed , the salient features of which are set out in Appendix 10.
51
PART F: INFORMATION RELATING TO THE DIRECTORS AND SENIOR MANAGEMENT
39. DIRECTORS
The details and profiles of the directors, all of whom:
• are South African, other than C E Chimombe-Munyoro, who is German;
• have been appointed in terms of the MOI (refer paragraph 30 and Appendix 11);
• have confirmed that they are free of any conflict of interest between their duties as directors of the Company and their private interests. P W Mac kenzie will continue as an executive director of Vunani Properties, while R F Kane will remain on the board of Vunani Properties as a non-executive director;
• have confirmed that they have the appropriate expertise and experience to manage the Company,
are set out below:
EXECUTIVE DIRECTORS:
Robert Fletcher Kane (51) – Chief Executive Officer, BSc (Civ) Eng., MBA
Business address: 2nd Floor, 33 Church Street, Cape Town, 8001
Rob has over 25 years’ experience in all aspects of the property industry. After completing his BSc degree at the University of Cape Town, Rob was employed by Wilson Bayley Homes – Ovcon Limited as a building contractor. He gained his Pr Eng qualification in 1989 and then worked as a consultant in the United Kingdom for 18 months prior to completing a MBA at Bath University. He joined Kennedy & Donkin (UK) as the business development manager responsible for Western Europe, Scandinavia, Turkey and Africa. Rob returned to South Africa in 1996 and joined Herbert Penny as a property investment broker. Rob managed his own property development and investment broking business between 1998 and 2003. Rob joined Vunani Properties in 2004, where his responsibilities include the management of VPIF and involvement in developments in the Cape Province. Rob has been managing director of VPIF since mid- 2008. Rob is Chairman of the Cape Town City Improvement District and a board member of the Cape Town Partnership. He is an external examiner and occasional lecturer for two property courses at the University of Cape Town. He is a member of the Investment Analysts Society and South African Property Owners Association.
Marelise de Lange (38) – Financial Director, B.Com (Law) and B.Com (Hon)(Acc)
Business address: Vunani House, 151 Katherine Street, Sandown, Sandton, 2196
Marelise obtained B.Com (Law) and B.Com (Hon)(Acc) degrees and commenced her career at Absa Corporate and Merchant Bank in the Structured Finance division. She later worked at Absa Capital where she held the position of Business Manager – Structured Capital Market. In June 2008, Marelise joined International Housing Solutions, a property equity fund for affordable housing, as Financial Director where her duties included the implementation of IFRS accounting and reporting systems for the South Africa Workforce Housing Fund. Her finance and accounting experience extends over 18 years. Marelise joined Vunani in June 2009 as Group Financial Manager and is responsible for the full accounting function of the Vunani Group and, in particular, Vunani Properties.
Pieter Willem Mac kenzie (47) – BSc Building Management, MBA
Business address: Vunani House, 151 Katherine Street, Sandown, Sandton, 2196
Pete has over 20 years’ experience in all aspects of the property industry. Pete is the Managing Director of Vunani Properties and has held this position since April 2003. His responsibilities include the day-to-day management and financial control of Vunani Properties, which company focuses on both property development and investment. Pete was with Pegasus 111 Properties from January 1994 until March 2003 where he was Managing Director in his final two years, and was responsible for all construction and development activities in the Corovest Property Group. During the period January 1992 to December 1993, he was the Development Director of Dallaway Developments where he was responsible for all construction and development activities. Pete obtained a BSc degree in Building Management from the University of Cape Town in 1987 and a MBA from Wits Business School in 1998. Pete is a member of the South African Property Owners Association.
52
NON-EXECUTIVE DIRECTORS:
Pragalathan Dhanapalan Naidoo (Dempsey) (53) – Independent Non-executive Chairman, B.Sc (Hons) Civil Engineering, Pr.Eng
Business address: 25 Scott Street, Waverley, Johannesburg, 2090
Dempsey is the founder and Executive Chairman of PD Naidoo & Associates, a diversified consulting engineering group based in Johannesburg, which focuses mainly on infrastructure, mining and regeneration projects. Dempsey combines his engineering qualifications and experience with business and leadership acumen to develop and drive consistently successful major commercial undertakings, both in large corporate and professional environments. He has established a network among senior executives in major building construction companies and turn-key project managers, bankers and financiers and in the wider business community. He is the author of numerous articles relating to the engineering profession and was one of 5 finalists in the 2004 SA Entrepreneurship Award run by Ernst & Young and Rand Merchant Bank. He serves on the Engineering Council of South Africa and has held office as President of the South African Association of Consulting Engineers and is a Fellow of the South African Academy of Engineering and the South African Institute of Civil Engineering as well as holding membership of various other professional bodies. His early work experience includes industrial training with WS Atkins in Epsom, United Kingdom and he was invited to join Anglo American as an Engineer-in-Training in 1987.
Robert Reinhardt Emslie (53) – Independent Non-executive, B.Com (Hons), CA(SA)
Business address: 283 Pinto Place, Beaulieu, Kyalami, 1684
Robert qualified as a CA(SA) in 1983 after completing his Articles at Brink Roos & du Toit and worked for the Absa Group from 1987 to 2008. He was a member of the Absa Group Executive Committee from 2004 to 2008, the head of Absa Corporate and Business Bank from 2000 to 2008 and the head of Absa Africa from 2007 to 2008. He was a senior lecturer in tax and accounting at the University of the Witwatersrand from 1984 to 1987. He has been a director of two listed property funds and is currently a non-executive member of the investment and asset management committees of International Housing Solutions, a private equity fund as well as a non-executive independent board member of the Trust for Urban Housing Finance and the CEO of the asset management company of the Wingspan and Rapfund property funds. He is currently a non-executive member of a number of boards.
John Russell Macey (49) – Independent Non-executive, CA(SA), BCom (Hons) (FinAcc)
Business address: Cardiff Castle, Main Street, Kenilworth, 7800
John spent five years with Deloitte & Touche where he obtained audit, accounting, financial advisory and taxation experience. He spent five years as the financial director of Gosair Filter Systems Proprietary Limited and also lectured for nine years at the University of Cape Town in financial accounting and management accounting.
Chipo Evelyn Chimombe-Munyoro (Evelyn) (37), BA LLB. LLM (Commercial law/Maritime law)
Business address: Vunani House Block C, 151 Katherine Street, Sandown, Sandton, 2196
Evelyn is an admitted attorney of the High Court of South Africa. She was previously a director and partner of Fairbridges Attorneys. Evelyn initially served on the board of Vunani as a non-executive director and during 2006 she joined Vunani as an executive director. She has served in the capacity of a non-executive director on the boards of various JSE-listed companies and is the current chairperson of PSV Holdings Limited.
Ethan Gilbert Dube (50), MSc (Statistics), Executive MBA (Sweden)
Business address: Vunani House Block C, 151 Katherine Street, Sandown, Sandton, 2196
Ethan has an extensive corporate finance and asset management background which he gained at Standard Chartered Merchant Bank, Southern Asset Managers and Infinity Asset Management. Ethan was a founder and has been managing director of Vunani Capital (Pty) Limited (previously African Harvest Capital) since its inception in the late 1990s. He is a director of a number of JSE-listed companies, inter alia, Hyprop.
53
40. SENIOR MANAGEMENT
The senior management of the company comprises the executive directors.
41. INFORMATION CONTAINED IN THE DIRECTORS’ DECLARATIONS
All the directors have completed and signed the Director’s Declaration required in terms of Section 21 of the JSE Listings Requirements and have confirmed that they have not been:
• disqualified by any court from acting as a director of a company or from acting in the management or conduct of the affairs of any company or been the subject of any public criticisms by statutory or regulatory authorities (including recognised professional bodies);
• removed from an office of trust on the grounds of misconduct, involving dishonesty;
• convicted of an offence resulting from dishonesty, fraud or embezzlement or convicted in any jurisdiction of any criminal offence or any offence under legislation relating to the Companies Act or disqualification by a court to act as a director in terms of the Companies Act;
• adjudged bankrupt or insolvent or entered into any individual voluntary compromise arrangements or been involved in any business rescue plans and/or resolutions proposed to put any entity under business rescue and/or applications and/or notices to put any entity under business rescue, or receiverships, compulsory liquidations, creditors voluntary liquidations, administrations, company voluntary arrangements or any compromise or arrangements with creditors generally or any class of creditors of any company where he was a director with an executive function of such company at the time of or within the 12 months preceding any such event , other than in respect of Mr J R Macey who was a director of a private company which was placed into liquidation on 28 June 2011;
• involved in any compulsory liquidations, administrations or partnership voluntary arrangements of any partnership where he was a partner at the time of or within the 12 months preceding such event(s);
• involved in any receiverships of any assets or of a partnership where he was a partner at the time of or within the 12 months preceding such event; and/or
• barred from entry into any profession or occupation.
In addition, the directors have:
• undertaken to comply with the JSE Listings Requirements and to discharge their duties in ensuring such compliance while directors; and
• acknowledged that certain requirements contained in the JSE Listings Requirements affect them directly as directors in their personal capacities as well as in their capacities as directors and have undertaken to be bound by and to comply with all such requirements while they are directors.
42. OTHER DIRECTORSHIPS/PARTNERSHIPS HELD BY THE DIRECTORS DURING THE PAST FIVE YEARS
Details of all other directorships/partnerships held by the directors during the past five years are set out in Appendix 14.
43. DIRECTORS’ INTERESTS IN THE COMPANY’S SECURITIES
The table below sets out the direct and indirect beneficial holdings of the directors in the Company’s securities at the last practicable date (i.e. before the private placing):
Director Beneficial – Direct Beneficial – Indirect %
R F Kane (1) – 2 862 605 5.0%P W Mac kenzie (2) – 3 435 126 6.0%C E Chimombe-Munyoro (3) – 53 405 0.1%E G Dube (4) – 5 483 606 9.6%
– 11 834 742 20.7%
54
Notes:
(1) R F Kane has an indirect holding in VPIF through the Ludlow Trust which holds a 10% interest in Vunani Properties which in turn holds 50.2% of the units in VPIF.
(2) P W Mac kenzie has an indirect holding in VPIF through the Eagle Trust which holds a 12% interest in Vunani Properties which, in turn, holds 50.2% of the units in VPIF.
(3) C E Chimombe-Munyoro has an indirect holding in VPIF through her direct shareholding in Vunani which is the majority shareholder of Vunani Properties which, in turn, holds 50.2% of the units in VPIF.
(4) E G Dube has an indirect holding in VPIF though the End Trust and through his direct shareholding in Vunani.
There was no change in the interests of the directors in the Company’s securities between 31 December 2010, the last financial year-end of the Company, and the last practicable date.
The directors’ beneficial indirect interests in the Company’s units, after the private placing, based on the minimum and maximum number of units to be issued and assuming that they do not subscribe for any units in terms of the private placing, with reference to the notes set out above, would be:
Beneficial indirect interests
Percentage Percentage Number of based on based on units the minimum the maximum number of number of units to be units to beDirector issued issued
R F Kane 2 862 605 2.9 2.3P W Mac kenzie 3 435 126 3.5 2.8C E Chimombe-Munyoro 53 405 0.1 0.0E G Dube 5 483 606 5.6 4.5
No director has resigned in the past 18 months.
It should be noted that a possible unbundling of the Vunani Properties shareholding in VPIF is being contemplated by the board of directors and shareholders of Vunani Properties. Should this unbundling take place, the effective interests of the directors in VPIF and VPAM may change.
44. DIRECTORS’ INTERESTS IN TRANSACTIONS
The directors had no interests in transactions entered into by VPIF during the current or the preceding financial year and which remain in any respect outstanding or unperformed.
45. DIRECTORS’ REMUNERATION
45.1 Remuneration and benefits
The executive directors, whose services have been seconded to VPAM in terms of the Secondment agreement, will not be remunerated for their services as directors of the fund. An annual fee, payable monthly, shall be charged in terms of the Secondment agreement by Vunani Capital to VPAM and such fee shall include the remuneration to which the executive directors are entitled in respect of the services which they render to VPAM under the Secondment agreement. The following is a breakdown of the remuneration which the executive directors received from Vunani Capital in respect of the year ended 31 December 2010:
Retire- Basic Medical ment Executive salary Bonus Aid Travel funding Total R’000 R’000 R’000 R’000 R’000 R’000
R F Kane 862 891 46 667 – – 169 275 1 078 833P W Mac kenzie 945 899 50 000 – – 185 559 1 181 458M de Lange 767 419 83 917 60 444 – 145 887 1 057 667
2 576 209 180 584 60 444 – 500 721 3 317 958
55
The estimated annual fees to be paid to the non-executive directors in respect of the 2011 financial year will be as follows:
Independent non-executive Base rate Number of Totaldirectors Rand meetings Rand
P D Naidoo Retainer 30 000 30 000 Board meeting attendance 10 000 4 40 000 Board Chairman 40 000 40 000 Committee membership (Audit) 30 000 30 000
140 000
R R Emslie
Retainer 30 000 30 000
Board meeting attendance 10 000 4 40 000
Committee membership (Audit) 30 000 30 000
Committee chairman (Audit) 25 000 25 000
125 000
J R Macey
Retainer 30 000 30 000
Board meeting attendance 10 000 4 40 000
Committee membership 30 000 30 000
100 000
Non-executive directors – Fees for services
C E Chimombe-Munyoro 125 000
E G Dube 125 000
250 000
615 000
No change is expected to be made to the directors’ remuneration as a result of the listing.
45.2 Other payments
No consulting, technical, or other fees, directly or indirectly, have been paid to any directors of the
Company.
There is no commission, gain or profit-sharing arrangements payable to any of the directors.
There are no options or any other right given which has had the same or a similar effect in respect
of providing a right to subscribe for units neither have any units been issued to directors in terms
of a purchase or option scheme for employees.
At the last practicable date, no payment had been made to any director or any company in which
he is directly or indirectly interested or of which he is a director (“the associate company”) or to
any partnership, syndicate or other association of which he is a member (“the associate entity”),
in cash, securities or otherwise by any person either to induce him to become or qualify him
as a director, or otherwise for services rendered by him or such associate company or associate
entity in connection with the formation or promotion of the Company.
VPIF has not made any loans, which are outstanding, or furnished any security for the benefit of any
director or manager or any associate of any director or manager.
No amounts have been paid by the Company to third parties in lieu of directors’ fees.
56
46. DIRECTORS’ SECONDMENT
Each of the executive directors is a party to the Secondment agreement whose material terms are
as follows:
• the Secondment agreement commences on the listing date and continues for a period which
is co-extensive with the Asset Management agreement, the details of which are set out in
paragraph 2.7.1;
• the secondment of each of the executive directors is separately terminable in respect of the employee
in question in the case of material breach or conduct justifying summary dismissal or in circumstances
where his employment with Vunani Capital terminates for any reason during the contract period;
• each executive director is obliged to “devote so much of his time and attention during normal business
hours, and such reasonable amount of additional time as is necessary, having regard to the exigencies
of the business, to the business and affairs of VPAM and the fund ”,
each executive director, for so long as he is employed by Vunani Capital may not, whether directly
or indirectly, in whatsoever capacity, be interested or engaged in or concerned with or employed by
any business, trade, undertaking or concern involved with real estate, which falls outside of the Vunani
Group, VPIF and/or VPAM and/or outside of their respective interests, nor is he entitled, for a period
of one year following the termination, for whatsoever reason, of his employment by Vunani Capital
to be involved whether directly or indirectly, in whatsoever capacity, in any business, trade, undertaking
or concern involving any real estate related venture, which falls outside the ambit of the business and/or affairs of the Vunani Group, VPIF and/or VPAM and/or outside of their respective interests, unless otherwise expressly agreed to by VPIF and Vunani Capital in writing.
In terms of Letters of Appointment, the appointments of the non-executive directors are for one year, which will coincide with the fund’s financial year, renewable annually, subject to compliance with the MOI.
The Secondment agreement is available for inspection as set out in paragraph 52.
57
PART G: ADDITIONAL INFORMATION
47. ADVISERS’ INTERESTS
None of the advisers, as set out in the “Corporate Information” section of this Pre-Listing Statement, hold any units or have agreed to acquire any units in VPIF.
48. STRATE ELIGIBILITY
The Company has been approved as Strate eligible in terms of the Central Securities Depository Rules.
49. EXPENSES
No preliminary expenses (within the meaning of the JSE Listings Requirements) have been incurred by the Company during the three financial years preceding the last practicable date.
The directors estimate that the cost of the listing and the private placing, based on the minimum and maximum number of units to be issued will amount to approximately R11.7 million and R15.0 million, respectively, excluding VAT, which broken down as follows:
Minimum Maximum number of number of units to be units to be issued issued R’000 R’000
Expense Payable to
Listing fee JSE 165 165
Documentation fees JSE 66 66
Legal fees Edward Nathan Sonnenbergs 1 000 1 000Independent reporting accountants’ fees KPMG Inc 700 700
Independent valuer fees Mills Fitchet Magnus Penny (Pty) Limited 200 200
Printing and publication costs Ince (Pty) Limited 500 500
Corporate adviser and joint sponsor fees Vunani Corporate Finance 500 500
Independent sponsor fees Grindrod Bank Limited 200 200
Bookbuild fee Vunani Corporate Finance and(1.75% of capital raised) Investec Bank Limited
5 300 8 600
“Commitment fee” based on 50% of Hyprop’s current investment (Note 1) Hyprop 2 100 2 100
Debt restructure fee (1%) The Standard Bank of South Africa Limited 500 500
Transfer secretaries fees Computershare Investor Services (Pty) Limited 300 300
Administrative costs (Strate, SARS, etc.) Various 169 169
11 700 15 000
Note 1:
VPIF is outside Hyprop’s core retail focus. Accordingly, Hyprop wishes to reduce its holding in VPIF. As a result 50% of Hyprop’s
current holding (i.e. 14 198 97 6 VPIF units) have been included in the offer for sale set out in this Pre-Listing Statement. Hyprop
will be paid a commitment fee of 2% in respect of its remaining investment in VPIF subsequent to the private placing in terms of an
agreement between themselves and VPIF, dated 22 June 2011.
58
50. CONSENTS
Each of the legal adviser, independent reporting accountants and auditors, independent valuer, corporate adviser and joint sponsor, independent lead sponsor, debenture trustee, transfer secretaries, joint bookrunners, investment bank and the commercial banker have given and have not, prior to the last practicable date, withdrawn their written consent to the inclusion in this Pre-Listing Statement of their names and, where applicable, their reports, in the form and context in which they appear.
51. DIRECTORS’ RESPONSIBILITY STATEMENT
The directors, whose names are given in the “Corporate Information” section and paragraph 39 of this Pre-Listing Statement, collectively and individually, accept full responsibility for the accuracy of the information given in this Pre-Listing Statement 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 this Pre-Listing Statement contains all information required by law, the Companies Act and the JSE Listings Requirements.
52. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at VPIF’s registered office, as detailed in the “Corporate Information” section of this Pre-Listing Statement during normal business hours from Monday, 18 July 2011 until Thursday, 11 August 2011:
• the MOI;
• the Memoranda and Articles of Association of Cedar Park and Pacific Eagle;
• the VPIT Trust Deed;
• the Acquisition Agreement;
• the Asset Management agreement;
• the Property Management agreement;
• the Debenture Trust Deed;
• the audited financial statements of VPIF for the years ended 31 December 2010, 31 December 2009 and 31 December 2008;
• the audited financial statements of Cedar Park and Pacific Eagle for the years ended 31 December 2010, 31 December 2009 and 31 December 2008;
• the signed reports of the independent reporting accountants, the texts of which are included in this Pre-Listing Statement as Appendices 3, 5, 7 and 8;
• the signed report of the independent valuer, the text of which is included in this Pre-Listing Statement as Appendix 2;
• the detailed valuation reports on the VPIF Portfolio;
• the advisers’ consent letters as detailed in paragraph 50;
• the Secondment agreement and the non-executive directors’ letters of appointment; and
• a signed copy of this Pre-Listing Statement.
SIGNED AT JOHANNESBURG ON 28 JUNE 2011 BY R F KANE ON BEHALF OF ALL THE DIRECTORS OF VPIF IN TERMS OF POWERS OF ATTORNEYS SIGNED BY SUCH DIRECTORS.
____________________________R F KANE
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Appendix 1
THE VPIF PORTFOLIO
INFORMATION RELATING TO THE VPIF PORTFOLIO
Date of valuation: 1 January 2011
Independent external valuer: Mr M R B Gibbons of Mills Fitchet Magnus Penny Proprietary Limited (registered without restriction as a Professional Valuer in terms of the
Property Valuers Profession Act, No. 47 of 2000).
A. THE ACQUISITION PROPERTIES (transferring properties)
A.1 Overview
Property name: ATHOL RIDGE CEDAR PARK LOOP STREET
Region: Gauteng Gauteng Western CapeSector: Commercial Commercial CommercialFunder (1): Investec Bank Ltd Investec Bank Ltd Standard Bank of SA LtdVacancy (%): Nil Nil NilLease information: Refer Appendix 2 Refer Appendix 2 Refer Appendix 2Effective date of acquisition (2): Listing date Listing date Listing date
Notes:
(1) Refer paragraph 19 and Appendix 6.
(2) Assumes the Acquisition properties are transferred to VPIT immediately prior to or on the listing date.
A.2 Specific information
PROPERTY: ATHOL RIDGE
Registered legal description: Erven 132, 133, 134, the remaining extent of erf 135, Portion 1 of erf 135, Portion 3 of erf 184 and Portion 4 of erf 184, Athol Extension 12 and erf 6, Simba Township, Registration Division IR
Physical address: 151 Katherine Street, Atholl, Sandown, Gauteng
Property description and use: Buildings/Offices
Freehold/Leasehold: Freehold
GLA m2: 8.577
Weighted average gross rental per m2 for the GLA (including recoveries): R1 15.00
Approximate age of property: 10 years
Cost of acquisition and method of payment of purchase price: R105 500 000 cash on transfer
Net income for the 12-month period post the effective date: R9.6 million
Market value attributed by independent valuer: R105 500 000
PROPERTY: CEDAR PARK
Registered legal description: Unit 18 of Greenstone Hill Office Park, Ext 22, Erven 1836 and 1837
Physical address: 30 Stoneridge Drive, Greenstone Hill Office Park,
Property description and use: Buildings/Offices
Freehold/Leasehold: Freehold
GLA m2: 1.807
60
Weighted average gross rental per m2 for the GLA (including recoveries): R 8 7.00
Approximate age of property: 2 years
Cost of acquisition and method of payment of R3 966 708 for the shares and claims in thepurchase price: company
Net income for the 12-month period post the effective date: R1.0 million
Market value attributed by independent valuer: R17 700 000
PROPERTY: LOOP STREET
Registered legal description: Erven 1570, 1571, 1572, 1573 and 1574
Physical address: 14 Loop Street, Cape Town, Western Province
Property description and use: Building/Offices
Freehold/Leasehold: Freehold
GLA m2: 2. 223
Weighted average gross rental per m2 for the GLA (including recoveries): R 119
Approximate age of property: 104 years
Cost of acquisition and method of payment of R13 011 090, being R3 883 884 in respect of thepurchase price: shares and R9 127 206 in respect of the claims in the company
Net income for the 12-month period post the effective date: R3,3 million
Market value attributed by independent valuer: R37 100 000
Total value of Acquisition properties: R160 300 000
Total GLA of Acquisition properties: 12 707.09 m2
61
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e location a
nd
tenant
on long
lease
Investm
ent P
lace
Hyd
e P
ark
C
om
merc
ial
Nil
A g
rad
e location a
nd
tenants
Belv
ed
ere
S
unnin
ghill
C
om
merc
ial
Nil
A g
rad
e b
uild
ing
and
tenants
AC
S H
ouse
Riv
onia
C
om
merc
ial
Nil
A g
rad
e b
uild
ing
, 2 s
olid
tenants
on long
leases –
recently r
efu
rbis
hed
Sta
nd
ard
Ba
nk
Hyd
e p
ark
C
om
merc
ial
Nil
A+
gra
de location a
nd
tenant,
long
lease
Private
Bank
Sta
nd
ard
Ba
nk
Nort
hern
C
om
merc
ial
Nil
A g
rad
e location a
nd
tenant
Up
ing
ton
P
rovin
ce
Sta
nd
ard
Ba
nk
Kw
aZ
ulu
-Na
tal
Com
merc
ial
Nil
A g
rad
e location a
nd
tenant
Harr
ism
ith
Sta
nd
ard
Ba
nk
Kw
aZ
ulu
-Na
tal
Com
merc
ial
Nil
B+
Gra
de b
uild
ing
A G
rad
e t
enant
Sta
ng
er
Sta
nd
ard
Ba
nk
Lad
ysm
ith
Kw
aZ
ulu
-Na
tal
Mix
ed
N
il A
gra
de location a
nd
tenant
Sta
nd
ard
Ba
nk
Gaute
ng
C
om
merc
ial
10%
B
+ G
rad
e b
uild
ing
and
location,
multi-te
nante
dR
and
burg
Sta
nd
ard
Ba
nk
Gaute
ng
M
ixed
N
il B
Gra
de b
uild
ing
, A
Gra
de t
enant
Sp
ring
s
Wale
Str
eet C
ham
bers
W
este
rn C
ap
e
Mix
ed
6%
A
gra
de b
uild
ing
, A
gra
de tenants
, re
cently refu
rbis
hed
Benstr
a B
uild
ing
P
reto
ria C
BD
C
om
merc
ial
Nil
B+
gra
de b
uild
ing
, G
overn
ment
tenant
Moth
erw
ell
M
oth
erw
ell
Rura
l R
eta
il N
il A
gra
de t
enants
, w
ell-
locate
dS
hop
pin
g C
entr
e
Easte
rn C
ap
eP
ort
Eliz
ab
eth
Murr
ayfield
Foru
m
Pre
toria
Mix
ed
11%
B
+ g
rad
e b
uild
ing
, w
ell-
locate
d u
nd
er
red
evelo
pm
ent
62
B.2
Sp
ecif
ic in
form
ati
on
Pro
pert
y n
am
e
Reg
iste
red
leg
al d
escri
pti
on
P
hysic
al ad
dre
ss
Descri
pti
on
an
d u
se
Eff
ecti
ve d
ate
of
acq
uis
itio
n
Pers
eus P
ark
E
rven 4
08 a
nd
482 L
ynw
ood
Rid
ge
117 P
riory
Road
Fre
ehold
/ 29 S
ep
tem
ber
2006
Tow
nship
Reg
. D
iv. JR
, G
aute
ng
Lynnw
ood
Park
B
uild
ing
/Off
ices
Pre
toria,
Gaute
ng
Part
henon P
ark
R
em
ain
der
exte
nsio
n o
f E
rf 5
56
385 R
ossouw
Str
eet
Fre
ehold
29 S
ep
tem
ber
2006
M
urr
ayfield
Exte
ntion.
Murr
ayfield
Ext 1
Build
ing
/Off
ices
1 T
ow
nship
Reg
. D
iv. JR
P
reto
ria, G
aute
ng
Rynla
l B
uild
ing
E
rf 9
18 L
ynw
oo
d T
ow
nship
338 T
he H
illsid
e
Fre
ehold
29 S
ep
tem
ber
2006
R
eg
. D
iv. JR
, G
aute
ng
Lynw
ood
, P
reto
ria
Build
ing
/Off
ices
Gaute
ng
Lin
ger
Long
er
Port
ion 5
Erf
7 W
ierd
a V
alle
y
58 W
ierd
a R
oad
Fre
ehold
2 O
cto
ber
2006
Tow
nship
Reg
.Div
. IR
, G
aute
ng
W
ierd
a V
alle
y
Build
ing
/Resta
ura
nt
Sand
ton, G
aute
ng
Vod
acom
Park
P
ort
ion 6
of E
RF 7
60 W
ierd
a R
oad
Fre
ehold
2 O
cto
ber
2006
W
ierd
a V
alle
y T
ow
nship
W
ierd
a V
alle
y
Build
ing
/Off
ices
R
eg
. D
iv. IR
, G
aute
ng
and
S
and
ton, G
aute
ng
P
ort
ion 2
63 (
Port
ion o
f P
ort
ion 2
45)
of Farm
Syfe
rfonte
in 5
1
R
eg
. D
iv. IR
, G
aute
ng
Port
ion 2
63 (
a p
ort
ion o
f 245)
Investm
ent P
lace
Erv
en 3
25 a
nd
326 H
yd
e P
ark
Ext 56
2nd
Road
, H
yd
e P
ark
Fre
ehold
2 O
cto
ber
2006
R
eg
. D
iv. IR
, G
aute
ng
and
Port
ion 7
47
Gaute
ng
B
uild
ing
/Off
ices
of th
e farm
Zand
fonte
in 4
2
Reg
.Div
. IR
, G
aute
ng
Belv
ed
ere
E
rf 1
322 S
unnin
ghill
Ext. 1
15
Corn
er
Nanyuki and
Fre
ehold
2 O
cto
ber
2006
Tow
nship
Reg
. D
iv. IR
, G
aute
ng
S
imb
a R
oad
s
Build
ing
/Off
ices
Sunnin
ghill
, G
aute
ng
AC
S H
ouse
Port
ion 8
of E
rf 1
81
370 R
ivonia
Boule
vard
Fre
ehold
2 O
cto
ber
2006
E
denb
urg
Tow
nship
R
ivonia
, G
aute
ng
B
uild
ing
/Off
ices
R
eg
. D
iv. IR
, G
aute
ng
Sta
nd
ard
Bank
Erf
21 H
yd
e P
ark
Tow
nship
C
orn
er
Six
th S
treet and
Fre
ehold
15 N
ovem
ber
2006
Private
Bank
Reg
. D
iv. IR
. G
aute
ng
35 M
ors
im R
oad
B
uild
ing
/Off
ices
Hyd
e P
ark
, G
aute
ng
Sta
nd
ard
Bank
Erf
2271 U
pin
gto
n
Corn
er
Scott a
nd
Fre
ehold
15 N
ovem
ber
2006
Up
ing
ton
Reg
. D
iv. G
ord
onia
Road
H
ill S
treets
, U
pin
gto
n
Build
ing
/Off
ices
N
ort
hern
Cap
e
Easte
rn C
ap
e
63
Pro
pert
y n
am
e
Reg
iste
red
leg
al d
escri
pti
on
P
hysic
al ad
dre
ss
Descri
pti
on
an
d u
se
E
ffecti
ve d
ate
of
acq
uis
itio
n
Sta
nd
ard
Bank
Erf
1902 S
ituate
d in the
6 S
are
l C
illie
rs S
treet
Fre
ehold
15 N
ovem
ber
2006
Harr
ism
ith
Tow
nship
Harr
ism
ith
Harr
ism
ith, K
waZ
ulu
-Nata
l B
uild
ing
/Off
ices
R
eg
. D
iv. H
arr
ism
ith R
oad
Sta
nd
ard
Bank
Erf
146 S
tang
er
124 C
oop
er
Str
eet
Fre
ehold
15 N
ovem
ber
2006
Sta
ng
er
Reg
. D
iv. K
waZ
ulu
-Nata
l S
tang
er,
Kw
aZ
ulu
-Nata
l B
uild
ing
/Off
ices
Sta
nd
ard
Bank
The r
em
ain
der
of
262 M
urc
his
on S
treet
Fre
ehold
15 N
ovem
ber
2006
Lad
ysm
ith
Erf
726 L
ad
ysm
ith
Lad
ysm
ith, K
waZ
ulu
-Nata
l B
uild
ing
/Off
ices
R
eg
. D
iv. G
s, K
waZ
ulu
-Nata
l
Sta
nd
ard
Bank
Erf
1865 F
ern
da
le T
ow
nship
304 O
ak A
venue
Fre
ehold
15 N
ovem
ber
2006
Rand
burg
R
eg
. D
iv. IQ
. R
and
burg
, G
aute
ng
B
uild
ing
/Off
ices
Pro
vin
ce o
f G
aute
ng
Sta
nd
ard
Bank
Erf
1978 S
pring
s
33, 5th
Avenue
Fre
ehold
30 N
ovem
ber
2006
Sp
ring
s
S
pring
s, G
aute
ng
B
uild
ing
/Off
ices
Wale
Str
eet C
ham
bers
E
rf 1
0191 –
Sections 4
, 8, 9, 14, 15, 21,
Burg
and
Long
Str
eets
S
ectional title/F
reehold
29 S
ep
tem
ber
2006
29-3
6, 45, 53-5
7, 62, 64 –
69, 71, 77, 78,
Cap
e T
ow
n, W
este
rn C
ap
e
Build
ing
/Off
ices
86-8
9, 95, 102,
105-1
15, 121, 123, 129,
and
Shop
s
133, 137 –
140, 168, 171-1
77, 185, 191-1
93,
2
02, 206 –
222, 224, 226, 228, 229, 234,
238, 240, 241, 249, 259 –
261, 277, 288.
In
ad
diti
on, E
xclu
sive u
se a
rea T
2 –
T4 a
nd
T8 –
T9. A
nd
Sectio
ns
190 a
nd
227, p
lus
the
p
ark
ing
bays
in r
esp
ect of se
ctio
ns
278 ,
279, 280, 281, 282, 283 a
nd
284 o
f th
e
sectional title s
chem
e k
now
n a
s W
ale
Str
eet C
ham
bers
(d
escrib
ed
on
S
G D
iag
ram
132/1
996)
Benstr
a B
uild
ing
E
rf 1
033 A
rcad
ia R
eg
. D
iv. IR
475 C
hurc
h S
treet, A
rcad
ia
Fre
ehold
29 S
ep
tem
ber
2006
Pre
toria,
Gaute
ng
B
uild
ing
/Off
ices
Moth
erw
ell
Shop
pin
g
17676 U
mnula
Str
eet
Fre
ehold
25 M
arc
h 2
008
Centr
e, P
ort
Eliz
ab
eth
E
rf 1
7676 M
oth
erw
ell
Moth
erw
ell,
Port
Eliz
ab
eth
B
uild
ing
/Reta
il
E
aste
rn C
ap
e
Murr
ayfield
Foru
m
Port
ion 1
of E
rf 5
56
M
urr
ayfield
Ext.
1 P
reto
ria
Corn
er
Rub
ied
a a
nd
Fre
ehold
21 D
ecem
ber
2006
Rossouw
Str
eets
B
uild
ing
/Off
ices
Murr
ayfie
ld, P
reto
ria, G
aute
ng
64
Property name Weighted average gross rental per m2 Weighted for the GLA average as per the rental per m2 Valuation for the Market value Report GLA, attributed by Purchase (excluding including independent price at GLA m2 recoveries) recoveries external valuer acquisition
Perseus Park 13 ,838 R70.00 R85.00 R139 800 000 R60 700 000Parthenon Park 4 ,891 R60.00 R73.00 R3 1 200 000 R1 6 950 000Rynlal Building 5 ,874 R59.00 R82.00 R32 700 000 R16 950 000Linger Longer/Vodacom Park 5 ,448 R100.00 R238.00 R88 900 000 R49 300 000Investment Place 6 ,253 R97.00 R109.00 R86 0 00 000 R48 000 000Belvedere 10 ,873 R78.00 R91.00 R130 800 000 R70 400 000ACS House 1 ,743 R65.00 R96.00 R18 075 000 R6 800 000Standard Bank, Private Bank 2 ,038 R120.00 R143.00 R39 000 000 R23 800 000Standard Bank, Upington 1 ,181 R60.00 R66.00 R7 500 000 R 5 300 000Standard Bank, Harrismith 1 ,086 R60.00 R52.00 R6 650 000 R2 850 000Standard Bank, Stanger 1 ,253 R58.00 R69.00 R7 900 000 R 6 500 000Standard Bank, Ladysmith 2 ,397 R41.00 R57.00 R10 000 000 R 6 300 000Standard Bank, Randburg 8 ,107 R47.00 R60.00 R46 000 000 R2 7 430 000Standard Bank, Springs 1 ,916 R46.00 R56.00 R10 650 000 R8 700 000Wale Street Chambers 7 ,253 R78.00 R95.00 R55 625 000 R 31 650 000Benstra Building 7 ,818 R75.00 R91.00 R43 000 000 R 39 500 000Motherwell Shopping Centre, Port Elizabeth 3 , 219 R58.00 R75.00 R22 450 000 R14 500 000Murrayfield Forum 1 , 790 R37.00 R61.00 R6 600 000 R6 700 000
86 ,97 8 R782 850 000
Lease information
Paragraph 3. 3.7 and Appendix 2 provide information relating to leases.
65
Appendix 2
INDEPENDENT VALUATION REPORT ON THE PROPERTIES
“The DirectorsVunani Property Investment FundAthol Ridge Office Park151 Katherine StreetSandton2196 28 June 2011
Sirs,
RE: VALUATIONS
Made on account of VUNANI PROPERTY INVESTMENT FUND LIMITED (“the Fund’)
In relation to Portfolio of Properties:
I, M R B Gibbons, a duly authorised Professional Valuer, registered without restriction in terms of section 19 of the Property Valuers Professional Act, 2000 (Act No. 47 of 2000), of 20th Floor, 1 Thibault Square, Cape Town do hereby certify that to the best of my knowledge, I have valued the Properties as at 1st January 2011 in order to determine their value on a comparable sales approach, discounted cash flow or capitalisation of net income basis.
Total value of the properties: R943 150 000.00.
66
Set
out
belo
w a
re p
art
icula
rs r
ela
ting
to t
he P
rop
ert
ies,
as d
eta
iled
in t
he P
re-L
isting
Sta
tem
ent
to b
e d
ate
d o
n o
r ab
out
30 J
une 2
011,
to w
hic
h t
his
rep
ort
is
attached
and
the v
alu
es that I have a
ttrib
ute
d to them
:
W
eig
hte
d
Avera
ge
G
ross
Date
of
Eff
ecti
ve
Ren
tal p
er
ph
ysic
al
date
of
Mark
et
Natu
re o
f
m
2 fo
r th
e
Exis
tin
g
Ag
e o
f N
o.
Descri
pti
on
N
am
e
Ad
dre
ss
insp
ecti
on
valu
ati
on
valu
e
pro
pert
y
Sit
e a
rea
Flo
or
are
a
GL
A
use
bu
ild
ing
Ten
ure
1.
Erf
408 a
nd
Erf
482
Pers
eus
117 P
rior
Rd
5 –
6/0
6/2
011
01/0
1/2
011
R139 8
00 0
00
Build
ing
s –
1.0
54
6 H
a +
1
3 8
37
.56
m²
R7
0.0
0
Offic
es
20
ye
ars
F
ree
ho
ld
Lyn
wood
Rid
ge
Lyn
nw
ood
Rid
ge
Offic
es
5 7
24
m²
2.
R/E
Erf
556
Part
henon
358 R
oss
ouw
St
5 –
6/0
6/2
011
01/0
1/2
011
R31 2
00 0
00
Build
ing
s –
7 0
36
m²
4 8
91
.42
m²
R6
0.0
0
Fill
ing
3
5 y
ea
rs
Fre
eh
old
M
urr
ayf
ield
Ext
. 1
M
urr
ayf
ield
Ext
1
Fill
ing
sta
tion,
statio
n,
re
tail
and
re
tail
and
offic
es
offic
es
3.
Erf
918 L
ynw
ood
R
ynla
l 320 T
he H
illsi
de
5 –
6/0
6/2
011
01/0
1/2
011
R32 7
00 0
00
Build
ing
s –
2
16
4 m
² 5
87
4.2
4 m
² R
59
.00
R
eta
il 2
5 y
ea
rs
Fre
eh
old
To
wnsh
ip
Lyn
nw
ood
Reta
il and
a
nd
offic
es
offic
es
4.
Ptn
s 5 a
nd
6 o
f E
rf 7
Lin
ger
Long
er/
58 –
60 W
ierd
a R
d
5 –
6/0
6/2
011
01/0
1/2
011
R88 9
00 0
00
Build
ing
s –
3
96
6 m
²;
5 4
48
m²
R1
00
.00
R
est
aura
nt
15
ye
ars
F
ree
ho
ld
Wie
rda V
alle
y and
Vod
acom
W
ierd
a V
alle
y
Resta
ura
nt/
83
5 m
² a
nd
and
offi
ces
E
rf 2
63 S
yferf
onte
in
O
ffic
es
1.0
77
2 H
a
5.
E rf
325 a
nd
326
Invest
ment P
lace
2nd
Road
5 –
6/0
6/2
011
01/0
1/2
011
R86 0
00 0
00
Build
ing
s –
4
35
5 m
² +
6
25
3 m
² R
97
.00
O
ffic
es
10
ye
ars
F
ree
ho
ld
Hyd
e P
ark
Ext
. 56
H
yd
e P
ark
Offic
es
4 4
13
m²
6.
Erf
1322 S
unnin
ghill
B
elv
ed
ere
C
orn
er
Nanyu
ki
5 –
6/0
6/2
011
01/0
1/2
011
R130 8
00 0
00
Build
ing
s –
1
.62
66
Ha
1
0 8
72
.87
m²
R7
8.0
0
Offic
es
8
ye
ars
F
ree
ho
ld
Ext
115
and
Sim
ba R
oad
s
O
ffic
es
S
unnin
ghill
7.
Ptn
8 o
f E
rf 1
81
AC
S H
ouse
370 R
ivonia
Blv
rd
5 –
6/0
6/2
011
01/0
1/2
011
R18 0
75 0
00
Build
ing
s –
4
08
1 m
² 1
74
3 m
² R
65
.00
O
ffic
es
1
2 y
ea
rs
Fre
eh
old
E
denb
urg
Riv
onia
Offic
es
8.
Erf
21 H
yde P
ark
S
tand
ard
Bank
Corn
er
6th
and
5 –
6/0
6/2
011
01/0
1/2
011
R39 0
00 0
00
Build
ing
s –
3
96
6 m
² 2
03
7.9
9 m
2
R1
20
.00
O
ffic
es
8
ye
ars
F
ree
ho
ld
P
riva
te B
ank
M
ors
im R
oad
s
O
ffic
es
Hyd
e P
ark
9.
Erf
2271 U
pin
gto
n
Sta
nd
ard
Bank
Corn
er
Scott a
nd
5 –
6/0
6/2
011
01/0
1/2
011
R7 5
00 0
00
Build
ing
s –
92
9 m
² 1
18
1.2
9 m
² R
60
.00
O
ffic
es
3
5 y
ea
rs
Fre
eh
old
Up
ing
ton
Hill
Streets
, U
pin
gto
n
O
ffic
es
10.
Erf
1092 H
arr
ism
ith
Sta
nd
ard
Bank
6 S
are
l Cill
iers
5 –
6/0
6/2
011
01/0
1/2
011
R6 6
50 0
00
Build
ing
s –
1
53
9 m
² 1
08
5.9
3 m
² R
60
.00
O
ffic
es
3
5 y
ea
rs
Fre
eh
old
Harr
ism
ith
Street, H
arr
ism
ith
O
ffic
es
11.
Erf
146 S
tang
er
Sta
nd
ard
Bank
124 C
oop
er
Street
5 –
6/0
6/2
011
01/0
1/2
011
R7 9
00 0
00
Build
ing
s –
2
02
3 m
² 1
25
3 m
² R
58
.00
O
ffic
es
2
0 y
ea
rs
Fre
eh
old
Sta
ng
er
Sta
ng
er
O
ffic
es
12.
Rem
Ext
of E
rf 7
26
Sta
nd
ard
Bank
262 M
urc
his
on
5 –
6/0
6/2
011
01/0
1/2
011
R10 0
00 0
00
Build
ing
s –
4 2
46
m²
2 3
97
m²
R 41
.00
B
an
k,
2
5 y
ea
rs
Fre
eh
old
Lad
ysm
ith
Lad
ysm
ith
Street, L
ad
ysm
ith
B
ank,
Offic
es
O
ffic
es
and
reta
il
and
reta
il
13.
Erf
1865 R
and
burg
S
tand
ard
Bank
304 O
ak
Ave
nue
5 –
6/0
6/2
011
01/0
1/2
011
R46 0
00 0
00
Build
ing
s –
5 2
45
m²
8 1
07
.03
m²
R4
7.0
0
Ba
nk
20
ye
ars
F
ree
ho
ld
R
and
burg
R
and
burg
Bank a
nd
and
Offic
es
Offic
es
14.
Erf
1978 S
pring
s S
tand
ard
Bank
33, 5th
Ave
nue
5 –
6/0
6/2
011
01/0
1/2
011
R10 6
50 0
00
Build
ing
s –
98
8 m
² 1
91
5.6
3 m
² R
46
.00
B
an
k,
5 y
ears
Fre
ehold
Sp
ring
s S
pring
s
Bank
and
O
ffic
es
O
ffic
es
and
reta
il
67
W
eig
hte
d
A
vera
ge
G
ross
Date
of
Eff
ecti
ve
Ren
tal p
er
ph
ysic
al
date
of
Mark
et
Natu
re o
f
m
2 fo
r th
e
Exis
tin
g
Ag
e o
f
No
. D
escri
pti
on
N
am
e
Ad
dre
ss
insp
ecti
on
valu
ati
on
valu
e
pro
pert
y
Sit
e a
rea
Flo
or
are
a
GL
A
use
bu
ild
ing
Ten
ure
15.
Sectio
ns 4
; 8; 9; 14;
Wale
Street
37a C
hurc
h S
treet
5 –
6/0
6/2
011
01/0
1/2
011
R55 6
25 0
00
Build
ing
s –
418+
264+
26+
387+
7 2
52
.56
m2
R7
8.0
0
Offic
es
35
ye
ars
S
ec
tio
na
l
5; 21; 29 –
36; 45; 53
Cham
bers
C
ap
e T
ow
n
O
ffic
es
233+
7+
15+
a
nd
re
tail
T
itle
–
57; 62; 64 –
69; 71;
a
nd
reta
il
15+
13+
12+
12+
12+
Fre
eh
old
77; 78; 86 –
89; 95 –
11
+1
0+
38
7+
13
+1
2+
102; 105 –
115; 121;
12+
12+
13+
25+
15+
15+
123; 129; 133; 137 –
13+
13+
13+
13+
9+
13+
140; 168; 171 –
177;
15+
12+
12+
12+
13+
25
185; 186; 190 –
193;
+
25+
26+
13+
15+
15+
202; 206 –
222; 224;
13+
13+
11+
10+
12+
12
226 –
229; 234; 238;
+
13+
13+
240; 241; 249; 259 –
13+
13+
15+
15+
387+
261; 277 –
284
12+
12+
18+
and
288
13+
13+
13+
13+
11+
13
+
13
+1
3+
1
3+
12
+1
1+
11
+1
3+
14
+
38
7+
14
+1
2+
12
+1
2+
12
2
5+
13
+1
3+
13
+1
2+
12+
11+
12+
13+
13+
12
+
13+
13+
+
13+
17+
12+
13+
13+
387+
1 2
23+
387+
224+
1 2
17+
314+
504+
300+
9+
13+
12+
12+
11+
13+
+
13+
12+
13+
13+
12+
13+
4+
13 m
2
16.
Erf
1033 A
rcad
ia
Benst
ra B
uild
ing
475 C
hurc
h S
treet
5 –
6/0
6/2
011
01/0
1/2
011
R43 0
00 0
00
Build
ing
s –
3 1
90 m
2
7 8
18 m
2
R75.0
0
Offic
es
30 y
ears
Fre
ehold
A
rcad
ia
O
ffic
es
and
and
reta
il
re
tail
17.
Rem
Ext
of
Moth
erw
ell
17676 U
mnulu
5 –
6/0
6/2
011
01/0
1/2
011
R22 4
50 0
00
Build
ing
s –
1.1
954 H
a
3 2
19 m
2
R58.0
0
Reta
il 10 y
ears
Fre
ehold
E
rf 1
7676 M
oth
erw
ell
S
treet, M
oth
erw
ell
R
eta
il
18.
Ptn
1 o
f E
rf 5
56
Murr
ayf
ield
362 R
oss
ouw
5 –
6/0
6/2
011
01/0
1/2
011
R6 6
00 0
00
Build
ing
s –
3 4
71 m
2
1 7
90.2
3 m
2
R37.0
0
Offic
es
20 y
ears
Fre
ehold
M
urr
ayf
ield
Ext
. 1
Foru
m
Street, M
urr
ayf
ield
Offic
es
and
and
reta
il
re
tail
19.
Erv
en 1
32, 133 a
nd
A
thol R
idg
e
151 K
ath
erine
5 –
6/0
6/2
011
01/0
1/2
011
R105 5
00 0
00
Build
ing
s –
3 9
65 m
2 +
8 5
77.0
9 m
2
R110.0
0
Offic
es
10 y
ears
Fre
ehold
134 A
thol E
xt 1
2;
Offic
e P
ark
S
treet, A
thol
O
ffic
es
3 9
66 m
2
R
em
Ext
of E
rf 1
35
S
and
ow
n
+
3 9
65 m
2 +
A
thol E
xt 1
2; P
tn 1
+ 1
982 m
2 +
of E
rf 1
35 A
thol
+
1 9
83 m
2 +
E
xt 1
2; P
tn 3
of
+
721 m
2
E
rf 1
84 A
thol E
xt 1
2
+
721 m
2
and
Ptn
4 o
f E
rf 1
84
A
thol E
xt 1
2
68
W
eig
hte
d
A
vera
ge
G
ross
Date
of
Eff
ecti
ve
Ren
tal p
er
ph
ysic
al
date
of
Mark
et
Natu
re o
f
m
2 fo
r th
e
Exis
tin
g
Ag
e o
f
No
. D
escri
pti
on
N
am
e
Ad
dre
ss
insp
ecti
on
valu
ati
on
valu
e
pro
pert
y
Sit
e a
rea
Flo
or
are
a
GL
A
use
bu
ild
ing
Ten
ure
20.
Erv
en 1
570, 1571,
14 L
oop
Street
14 L
oop
Street
5 –
6/0
6/2
011
01/0
1/2
011
R37 1
00 0
00
Build
ing
s –
35 m
2 +
114 m
2
2 3
23 m
2
R125.0
0
Reta
il/
104 y
ears
Fre
ehold
1572, 1573 a
nd
1574
C
ap
e T
ow
n
R
eta
il/
+ 1
14 m
2 +
102 m
2
O
ffic
es
C
ap
e T
ow
n
O
ffic
es
+ 1
01 m
2
21.
Unit
18 o
f G
reenst
one
Ced
ar
Park
–
Gre
enst
one O
ffic
e
5 –
6/0
6/2
011
01/0
1/2
011
R17 7
00 0
00
Build
ing
s –
1 8
07 m
2
1 8
07 m
2
R85.0
0
Offic
es
2 y
ears
Fre
ehold
H
ill O
ffic
e P
ark
G
reenst
one
Park
Offic
es
(sectio
nal
Bld
g 9
M
od
derf
onte
in
tit
le a
rea)
Valu
ati
on
co
mm
en
tary
The t
enante
d p
rop
ert
ies h
ave b
een v
alu
ed
usin
g t
he D
iscounte
d C
ash F
low
Ap
pro
ach,
whic
h v
alu
es t
he c
ontr
acte
d incom
e a
nd
then r
evert
s t
o m
ark
et-
rela
ted
re
nta
ls. The r
evers
ion to m
ark
et, in a
ll cases h
as b
een c
alc
ula
ted
on the n
ext d
ay a
fter
the e
xp
iry o
f th
e last le
ase. A
ll of w
hic
h a
re d
iscounte
d a
t th
e a
pp
rop
riate
d
iscount ra
te.
Assu
mp
tio
ns
Not all
of th
e p
rop
ert
ies w
ere
fully
let at th
e e
ffective d
ate
of valu
ation. O
ur
assum
ptions a
re r
eflective o
f th
e m
icro
-econom
y s
urr
ound
ing
these p
rop
ert
ies. In
all
insta
nces w
e h
ave a
llow
ed
for
a n
um
ber
of
month
s a
fter
the v
alu
ation d
ate
within
whic
h n
o incom
e is b
ud
gete
d f
or
and
then o
n a
slid
ing
scale
have a
ssum
ed
cert
ain
tenancie
s a
t m
ark
et-
rela
ted
renta
ls.
The p
eriod
decid
ed
for
the v
acancie
s i
s b
ased
on o
ur
physic
al
insp
ection o
f th
e i
mm
ed
iate
surr
ound
s a
nd
the
vacancie
s (
if a
ny)
evid
ent
in s
urr
ound
ing
build
ing
s.
We h
ave r
efe
renced
pub
lished
docum
enta
tion f
rom
the S
AP
OA
/IP
D d
ata
-base (
Vacancy S
urv
eys)
and
The R
od
e R
ep
ort
. B
uild
ing
s 1
9 a
nd
21 h
ave c
ert
ain
vacancie
s w
hic
h a
re c
overe
d b
y a
tw
o-y
ear
renta
l g
uara
nte
e f
rom
the v
end
or, d
uring
whic
h it
is a
ssum
ed
th
at te
nants
will
be s
ourc
ed
.
In e
ach o
f th
e v
alu
ations w
e h
ave a
llocate
d p
rovis
ions for
Rep
airs a
nd
Main
tenance. W
ith r
eg
ard
the u
nle
t com
ponents
(as a
t th
e e
ffective d
ate
of th
e v
alu
ation)
in a
dd
itio
n to the n
on-incom
e p
rod
ucin
g m
onth
s a
llocate
d in the c
ash flo
ws, w
e h
ave furt
her
pro
vid
ed
for
Tenant In
sta
llation c
osts
and
Com
mis
sio
ns p
ayab
le to
bro
kers
. In
ad
ditio
n to a
ll of th
is w
e h
ave a
lso a
llocate
d d
efa
ult v
acancy p
rovis
ions a
s a
perc
enta
ge o
f th
e A
nnualis
ed
Gro
ss Incom
es g
enera
ted
by the p
rop
ert
ies
valu
ed
for
the F
und
.
Renta
ls u
sed
in o
ur
Dis
counte
d C
ash F
low
valu
ations a
re b
ased
on the term
s a
nd
cond
itio
ns c
ontr
acte
d in
the le
ases. O
n e
xp
iry o
f sam
e, w
e h
ave a
ssum
ed
that
they w
ill r
eve
rt to m
ark
et-
rela
ted
renta
ls. T
he m
ark
et-
rela
ted
renta
ls h
ave b
een d
ete
rmin
ed
by c
om
paring
sim
ilar
build
ing
s in
com
para
ble
are
as to the p
rop
ert
ies
valu
ed
. D
ue c
onsid
era
tion to the e
xte
nt o
f th
e lettab
le a
reas, th
eir location w
ithin
the b
uild
ing
s a
nd
pro
file
of te
nant has b
een a
pp
lied
in the d
ete
rmin
ation o
f th
e
revers
ionary
mark
et
renta
ls.
The m
ark
et
renta
ls h
ave a
lso b
een c
om
pare
d w
ith t
he f
und
am
enta
ls lis
ted
in v
arious p
ub
lished
ind
ices inclu
din
g t
he S
outh
Afr
ican
Pro
pert
y O
wners
Associa
tion (
SA
PO
A/IP
D)
ind
ex a
nd
the R
od
e R
ep
ort
.
69
Sources of information
Information relating to the Properties has been obtained and, where applicable, verified, from:
• JHI Property Managers.
• Vunani Properties.
• Vunani Property Investment Fund.
• Our physical inspection of the properties which confirmed the nature of improvements and the tenancies reflected in the lease schedules.
• A sample lease audit being undertaken by ourselves.
• Deeds Office; and Surveyor General’s Office and Local Authorities for verification of the Title Deeds, Erf diagrams, Municipal Valuations and Town Planning conditions.
• The Sellers.
• SAPOA/IPD Index with regards to vacancy surveys, comparable market rentals, operating expense profiles, annualised rental and expense growth plus the Discount and Capitalisation Rate surveys.
• Rode Report to confirm those fundamentals referred to in the point above.
Town planning restrictions/conditions and any material contravention of statutory requirements
Full town planning details and title deeds have been supplied in the detailed valuation reports including conditions and restrictions and the properties have been checked against such conditions. This is to ensure that they comply with town planning regulations and title deeds. There do not appear to be any infringements of local authority regulations or deeds by any of the properties.
The valuation has further assumed that the improvements have been erected in accordance with the relevant Building and Town Planning Regulations and on inspection it would appear that the improvement are in accordance with the relevant town planning regulations.
Details of leases/sub-leases
Property Salient Terms of LeaseNo. Tenants Rentable Area (m²) Start date Expiry date Escalation
Main-Leases
1. SITA 13 815.48 m² 01/02/2006 31/01/2012 10%
2. Impala Plats 102.89 m² + 558.26 m² + 416.87 m² + 139.89 m² 01/12/2009 30/11/2011 8%
3. Virtual Consulting 599.60 m² 01/11/2008 31/03/2012 10%
4. Vodacom 5 101 m² 01/06/2010 31/05/2015 9%
5. Telesure 2 082 m² + 599 m² + 456 m² 01/01/2010 31/12/2012 9.5%
6. Aegis BPO 2 270.8 m² + 2 203.08 m² + 837.17 m² 01/03/2008 28/02/2013 8%
7. ACS 1 743 m² 01/07/2010 30/06/2015 8%
8. Standard Bank 2 037.99 m² 01/04/2009 31/03/2014 9%
9. Standard Bank 1 181.29 m² 01/08/2009 31/07/2012 7%
10. Standard Bank 1 085.93 m² 01/01/2008 31/12/2010 0%
11. Standard Bank 1 253 m² 01/01/2009 31/12/2011 9%
12. Standard Bank 1 495 m² 01/01/2009 31/12/2011 9%
13. Standard Bank 1 233.23 m² + 1 390.59 m² 01/01/2010 31/12/2013 8%
14. Standard Bank 651m² + 955 m² 01/03/2009 29/02/2012 9%
15. City of Cape Town 4 515 m² 01/01/2010 30/06/2012 10%
16. Compensation Commissioner 7 818 m² 01/04/2010 31/05/2011 0%
17. Spar 1 512 m² 01/11/2005 30/04/2016 7%
18. X-Cellence 341 m² 01/01 /2010 31/12/2014 8.5%
19. ABSA 3 032.9 m² 01/08/2010 31/10/2017 8%
20. DPW 1 676 m² 01/12/2009 30/11/2016 8%
21. Hudaco 861 m² 01/04/2011 31/03/2018 9%
70
OPTIONS OR BENEFIT/DETRIMENT OF CONTRACTUAL ARRANGEMENTS
No valuation has been required detailing the benefit or detriment of contractual arrangements in respect of the Properties or where there may be a benefit in options held.
I am unaware of any options in favour of any parties for the purchase of any of the Properties.
As stated above there are two intra-group leases. These are rental guarantees for the vacant accommodation (at the date of valuation) within Buildings 19 and 21.
I confirm that to the best of my knowledge and belief there:
1. are no options held by any third parties to purchase any of the Properties;
2. have been no material changes between the date of the valuations and the last practicable date in any circumstances relating to the Properties, which would affect the valuation thereof.
I confirm that I have no pecuniary interest that would conflict with a proper valuation of the Properties, other than normal professional fees. With 20 years’ experience in property valuation, the undersigned is qualified to express an opinion on the value of the Properties.
Yours faithfully
MILLS FITCHET MAGNUS PENNY (PTY) LTDM.R.B. GibbonsNat. Dip. Prop. Val. MIV(SA)Professional Valuer(Registered without restriction in terms of The Property Valuers Act, No. 47 of 2000)20th Floor, 1 Thibault Square, Cape Town, 8001”
71
Appendix 3
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE VALUE AND EXISTENCE OF THE VPIF ACQUISITION PROPERTIES
“The DirectorsVunani Property Investment Fund LimitedVunani House Block CAthol Ridge Office Park151 Katherine StreetSandown, Sandton, 2196
28 June 2011
Dear Sirs
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE VALUE AND EXISTENCE OF THE PROPERTIES (I.E. THE ATHOL RIDGE PROPERTY, THE LOOP STREET PROPERTY AND THE CEDAR PARK PROPERTY) TO BE ACQUIRED BY VUNANI PROPERTY INVESTMENT FUND LIMITED (“THE ACQUISITION PROPERTY PORTFOLIO”),
AS REFLECTED IN THE UNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITION.
Introduction
We have performed our limited assurance engagement for purposes of paragraph 13.6(e) of the Listings Requirements of the JSE Limited (“JSE Listings Requirements”) with regard to:
– the existence of the Acquisition property portfolio to be acquired by VPIF;
– the value at which the properties constituting the Acquisition property portfolio are individually reflected in the unaudited pro forma statement of financial position of VPIF set out in Appendix 6 to the VPIF Pre-Listing Statement, to be dated on or about 30 June 2011 (“Pre-Listing Statement”), which is issued in connection with the listing of VPIF and the private placing; and
– whether any material undisclosed liabilities exist.
Responsibilities of the directors
The directors of VPIF are solely responsible for the compilation, contents and presentation of the unaudited pro forma statement of financial position contained in Appendix 6 to the Pre-Listing Statement and for the financial information from which it has been prepared, including the financial information relating to the Acquisition property portfolio to be acquired.
Their responsibility is to satisfy themselves that the Acquisition property portfolio to be acquired by VPIF exists, has been valued in accordance with VPIF’s accounting policies and the recognition and measurement criteria of International Financial Reporting Standards (“IFRS”) and are correctly reflected in the relevant columns of the unaudited pro forma statement of financial position of VPIF set out in Appendix 6.
Reporting accountants’ responsibility
Our responsibility is to express our limited assurance conclusion regarding the existence and value of the Acquisition property portfolio to be acquired by VPIF as reflected in the adjustment column of the unaudited pro forma statement of financial position of VPIF set out in Appendix 6, based on our independent assurance engagement.
Our independent assurance engagement has been performed in accordance with the International Standard on Assurance Engagement ISAE 3000 applicable to Assurance Engagement Other Than Audits or Reviews of Historical Financial information and paragraph 13.16(e) of the JSE Listings Requirements. This standard requires us to comply with ethical requirements and to plan and perform the assurance engagement to obtain sufficient appropriate audit evidence to support our limited assurance conclusion, expressed below. We have also considered the guidance in ISA 620 “Using the work of an expert” in respect of the valuations provided by the independent registered property valuer (“independent valuer”) in accordance with paragraphs 13.20 to 13.31 of the JSE Listings Requirements.
72
Summary of work performed
Existence and valuation of the Property Portfolio
Our procedures included making such enquiries and obtaining such representations from the directors of VPIF as we considered necessary and, in addition, we:
– physically inspected the Acquisition property portfolio to be acquired to establish its existence;
– examined the title deeds for the Athol Ridge property, the Loop Street property and the Cedar Park property;
– obtained confirmation of the existence and value of liabilities in respect of the mortgages registered over the Athol Ridge property, the Loop Street property and the Cedar Park property as at 31 December 2010;
– compared the value at which the Acquisition property portfolio is being acquired reflected in the unaudited pro forma statement of financial position to the valuations included in Appendix 6 to the Pre-Listing Statement;
– compared the value at which each property is being acquired as reflected in the unaudited pro forma financial information to the value per the purchase agreements;
– inspected the supporting documentation in respect of the transaction costs which have been capitalised in terms of paragraph 20 of IAS 40: Investment Property;
– considered the valuations provided by the independent valuer in accordance with the guidance in ISA 620 :
Using the work of an expert, and obtained evidence of the following:
• the professional competence of the independent valuer, in particular, membership of an appropriate professional body and experience and reputation in the field;
• the independence of the independent valuer, including confirmation from the valuer that there were no actual or apparent conflicts of interest that might impair, or be perceived to impair, his objectivity;
• that the scope of the independent valuer’s work was adequate for the purposes of determining the property values included in the unaudited pro forma statement of financial position; and
• the appropriateness of the independent valuer’s work as audit evidence regarding the values at which the properties are reflected in the unaudited pro forma statement of financial position.
In a limited assurance engagement, the evidence-gathering procedures are more limited than for a reasonable assurance engagement and therefore less assurance is obtained than in a reasonable assurance engagement. We believe that our evidence obtained is sufficient and appropriate to provide a basis for our conclusion.
Conclusion
Based on our work performed, nothing has come to our attention that causes us to believe that:
– the Acquisition property portfolio does not exist;
– the value at which the acquisition of the Acquisition property portfolio and the value of liabilities in respect of mortgages registered over the Acquisition property portfolio are reflected in the unaudited pro forma statement of financial position is not, in all material respects, in accordance with the accounting policies adopted by VPIF and the recognition and measurement criteria of IFRS;
– any material undisclosed liabilities exists.
Consent
We consent to the inclusion of this report and the references thereto, in the form and context in which they appear in the Pre-Listing Statement. Furthermore we confirm that we will not withdraw our consent prior to the issue of the Pre-Listing Statement.
Yours faithfully
KPMG IncRegistered Auditors
Per G ParkerChartered Accountant (SA)Registered AuditorDirector
Private Bag 9, Parkview, 2122”
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Appendix 4
REPORT OF HISTORICAL FINANCIAL INFORMATION OF VPIF FOR THE YEAR ENDED 31 DECEMBER 2010
The Group statements of financial position, comprehensive income, changes in equity and cash flow and the related accounting policies and notes for the twelve months ended 31 December 2009 and 2010 has been extracted, without adjustment, from the audited Group financial statements of VPIF. The consolidated financial statements of VPIF were reported on, without qualification, by KPMG Inc.
The audited historical financial information is the responsibility of the directors of VPIF.
The historical information relating to VPIF has been prepared in accordance with IFRS for the year ended 31 December 2010 and in terms of the Company’s current accounting policies.
The independent reporting accountants’ report on the historical financial information for the year ended 31 December 2010 is set out in Appendix 5.
COMMENTARY:
Nature of business
The Company is a property holding and investment company. There has been no change in the nature of the business of the Company, its assets or the use thereof during the past three years.
Subsequent financial information:
No financial information relating to VPIF has been made available to any party subsequent to the latest financial year-end.
General review
The fund has historically performed well with annual compounded growth of 34.3% to December 2010. This has been achieved with limited acquisitions but primarily through tight management and yield-enhancing refurbishments.
Subsequent events
Subsequent to year-end, VPIF will acquire an additional three properties from Vunani Properties, and thereafter list on the Main Board of the JSE. The combined asset value of the listed vehicle will be increased to approximately R950 million. The net proceeds on the proposed listing will be use to settle debt. The expected listing date is the first week of August 2011.
Additional information:
The Company does not have a share incentive scheme.
Other than VPIT, which is treated as a subsidiary, the Company had no other subsidiaries and is not involved in any joint ventures, partnerships and has no associates.
Segment information:
No segment information has been prepared as the company is an investment holding company and no reportable segments exist.
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Information relating to the following matters is set out elsewhere in this Pre-Listing Statement as detailed below:
Reference to paragraph in Subject the Pre-Listing Statement
Details of material loans receivable. Paragraph 19Loans made to or for the benefit of any director or manager Paragraph 45.2Details of material borrowings. Paragraph 19 and note 10 of Appendix 4Particulars of units issued Paragraph 33Directors’ emoluments Paragraph 45.1Financial statistics (e.g. net asset value, tangible net asset value, earnings, headline earnings per unit) Paragraphs 16.2 and 17 and Appendix 6Dividend and distribution policy Paragraph 18
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GROUP STATEMENT OF FINANCIAL POSITIONat 31 December 2010
Restated Restated Restated Group Group Group Notes 2010 2009 2008 R R R
ASSETS
Non-current assets 784 380 510 670 135 506 639 172 227
Investment property 3 776 522 427 664 179 009 634 950 000Plant and equipment 4 4 535 304 3 367 820 2 136 665Other non-current asset 5 3 322 779 2 394 516 1 891 401Deferred tax 11 – 194 161 194 161
Current assets 12 668 467 3 842 937 30 604 396
Trade and other receivables 6 7 782 634 1 140 094 1 120 401Cash and cash equivalents 7 4 885 833 2 702 843 29 483 995
Total assets 797 048 977 673 978 443 669 776 623
EQUITY AND LIABILITIES
Equity 292 849 397 197 305 136 176 496 539
Ordinary share capital 8 142 560 142 560 142 560Retained income/( accumulated loss) 24 020 (475 252) (47 5 252)Non-distributable reserve 292 682 817 197 637 828 176 829 231
Debentures 9 142 417 440 142 417 440 142 417 440
Linked unit holders’ interest 435 266 837 339 722 576 318 913 979
Liabilities
Other non-current liabilities 331 064 788 322 065 215 337 771 548
Other financial liabilities 10 283 210 071 289 838 707 309 107 564Deferred tax 11 47 854 717 32 226 508 28 663 984
Current liabilities 30 717 353 12 190 652 13 091 096
Loans from holding company – – 735 449Current portion of other financial liabilities 10 7 355 143 – –Trade and other payables 12 23 362 210 12 190 652 9 860 224Current tax payable – – 2 495 423
Total liabilities 361 782 140 334 255 867 350 862 644
Total equity and liabilities 797 048 978 673 978 443 669 776 623
Net asset value per unit (cents) 3 053.22 2 383.01 2 237.05Net tangible asset value per unit (cents) 3 053.22 2 383.01 2 237.05
Number of units in issue 14 256 000 14 256 000 14 256 000
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GROUP STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2010
Restated Group Group Notes 2010 2009 R R
Revenue – investment property income 13 103 753 654 87 837 747Straight-line effect of leases 3 892 514 1 075 487Other income 71 766 338 660Property expenses (39 088 429) (31 621 099)
Operating income 14 65 629 505 57 630 795Finance income 15 486 817 1 282 477Finance costs 16 (34 158 204) (34 669 389)
Net operating income 31 958 118 24 243 883Fair value adjustments 17 109 780 687 23 295 633
Profit before debenture interest and taxation 141 738 805 47 539 516Trust distributions – net rental income (9 943 353) –Debenture interest 18 (20 428 821) (23 168 396)
Net income before taxation 111 366 631 24 371 120Income tax expense 19 (15 822 370) (3 562 523)
Total comprehensive income for the year 95 544 261 20 808 597
Total comprehensive income for the year attributable to:
Equity holders of the Group 95 544 261 20 808 597
Weighted average number of units in issue 14 256 000 14 256 000Earnings per unit (cents) 883.26 308.48Distribution per unit (cents) 213.05 162.52
Units in issue 14 256 000 14 256 000
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GROUP STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2010
Group
(Accumulated
Ordinary Non- loss)/
share distributable retained
Note capital reserve income Total
R R R R
Balance at 31 December 2008 142 560 176 829 231 (475 252) 176 496 539
Total comprehensive loss for the year as restated – – 20 808 597 20 808 597
Total comprehensive loss for the year as
previously stated – – 17 701 116 17 701 116
Prior year adjustment, net of taxation 24 – – 3 107 481 3 107 481
Transfer to non-distributable reserve as restated – 20 808 597 (20 808 597) –
Transfer to non-distributable reserve as
previously stated – 17 701 116 (17 701 116) –
Prior year adjustment, net of taxation 24 – 3 107 481 (3 107 481) –
Balance at 31 December 2009 142 560 197 637 828 (475 252) 197 305 136
Total comprehensive income for the year – – 95 544 261 95 544 261
Transfer to non-distributable reserve – 95 044 989 (95 044 989) –
Balance at 31 December 2010 142 560 292 682 817 24 020 292 849 397
GROUP STATEMENT OF CASH FLOWSfor the year ended 31 December 2010
Group Group Notes 2010 2009Cash flows from operating activities R R
Cash generated by operations 20 62 274 569 60 690 503Finance income 15 486 817 1 282 477Finance costs 16 (34 158 204) (34 669 389)Debenture interest 18 (20 428 821) (23 168 396)Taxation paid 21 – (2 495 423)
Net cash inflow from operating activities 8 174 361 1 639 772
Cash flows from investing activitiesAdditions to plant and equipment (2 781 687) (1 953 557)Additions to investment property (1 670 217) (4 857 889)Additions to other non-current assets (2 265 974) (1 605 172)
Net cash outflow from investing activities (6 717 878) (8 416 618)
Cash flows from financing activitiesAdvance ( repayment) of other financial liabilities 726 507 (19 268 857)Repayment of loans from holding company – (735 449)
Net cash inflow/(outflow) from financing activities 726 507 (20 004 306)
Net increase/(decrease) in cash and cash equivalents 2 182 990 (26 781 152)Cash and cash equivalents at the beginning of the year 2 702 843 29 483 995
Cash and cash equivalents at the end of the year 4 885 833 2 702 843
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1. BASIS OF PREPARATION (GROUP AND COMPANY)
1.1 Statement of compliance
The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), the interpretations adopted by the International Accounting Standards Board (IASB) and the requirements of the Companies Act, 1973, of South Africa.
1.2 Basis of measurement
The financial statements are prepared on the historical cost basis, unless otherwise stated, and the accounting policies set out below have been applied consistently to all periods presented in these financial statements. The financial statements are prepared on the basis that the Company is a going concern.
1.3 Functional and presentation currency
These financial statements are presented in South African Rand, rounded to the nearest Rand, which is the Group’s functional currency.
1.4 Use of estimates and judgements
The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make judgements, estimates and assumptions that effect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Although, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
1.5 Change in accounting policy
Starting as of 1 January 2010, the Group has changed its accounting policies in the following areas:
Deferred taxation
The Group has elected to early adopt the amendments introduced to IAS 12: Income Taxes, that were approved by the Accounting Practices Board on 26 January 2011. In terms of the amendment, deferred tax assets and liabilities on investment property carried at fair value should be measured using the sale rate, which is currently a rate of 14%. The financial statements have been restated retrospectively to effect the change in accounting policy.
Refer to note 24 for the financial impact of the early adoption of the amendments to IAS 12.
2. ACCOUNTING POLICIES
2.1 Basis of consolidation
The Group financial statements include the assets, liabilities and results of operations of the holding company and its subsidiary.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.
Transactions eliminated on consolidation
Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
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2.2 Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated when the Group becomes party to the contractual provisions of the instrument. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group’s non-derivative financial assets comprise loans and receivables.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
Loans and receivables comprise, trade and other receivables and cash and cash equivalents.
Cash and cash equivalents comprise cash balances. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial liabilities: other financial liabilities and trade and other payables.
Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.
Ordinary share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
2.3 Investment property
Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value with any change therein recognised in profit or loss.
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The cost of investment property comprises the purchase price and directly attributable expenditure. Subsequent expenditure relating to investment property is capitalised when it is probable that there will be future economic benefits from the use of the asset. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.
After initial recognition, investment property is measured at fair value. Fair values are determined annually, either by external independent registered valuers or internal valuers on the open market value basis. The valuers use either the discounted cash flow method or the capitalisation of net income method or a combination of both methods to determine the fair value. Gains or losses arising from changes in the fair values of investment property are included in profit for the year in which they arise.
Realised gains or losses on the disposal of investment property are recognised in profit for the year and are calculated as the difference between the sale price and the fair value of the investment property as determined at the last valuation date.
When the Group begins to redevelop an existing investment property for continued future use as investment property, the property remains investment property which is measured based on the fair value model, and is not reclassified as plant and equipment during the redevelopment.
All costs directly associated with the purchase and construction of property, and all subsequent capital expenditures for development qualifying as acquisition costs, are capitalised.
2.4 Plant and equipment
Recognition and measurement
Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment.
Gains and losses on disposal of an item of plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of plant and equipment, and are recognised net within other income in profit or loss.
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
The estimated useful lives for the current and comparative periods are as follows:
Plant and equipment 3 – 5 years
Computer equipment 3 years
Tenant installations Period of the lease
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
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2.5 Impairment
Financial assets
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset that can be measured reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
Non-financial assets
The carrying amount of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is an indication of impairment. If such an indication exists, then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset exceeds it recoverable amount. Impairment losses are recognised in profit or loss. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing the value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
2.6 Revenue
Rental income
Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from subleased property is recognised as other income.
2.7 Finance income and finance costs
Finance income comprises interest income on bank balances. Interest income is recognised as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on bank balances. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs may continue until the asset is substantially ready for its intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development costs financed out of general funds, the weighted average cost of borrowings.
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2.8 Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and their tax base. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the reporting date. Deferred tax is charged to profit or loss except to the extent that it relates to a transaction that is recognised directly in equity, or a business combination that is an acquisition. The effect on deferred tax of any changes in tax rates is recognised in profit or loss, except to the extent that it relates to items previously charged or credited directly to equity.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
2.9 Related party transactions
Related party transactions are transactions which result in a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Related parties refer to entities in which the Group directly or indirectly through one or more intermediaries controls or is controlled by or is in common control with. These include the holding company, subsidiaries and fellow subsidiaries.
2.10 Risk management
The Group has exposure to the following risks from its use of financial instruments:
– credit risk;
– liquidity risk;
– market risk; and
– capital risk management,
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the group’s management of capital. Further quantitative disclosures are included throughout these financial statements.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
Financial assets, which potentially subject the Group to concentrations of credit risk, consist principally of cash and cash equivalents and trade and other receivables.
The trade and other receivables relates to other receivables, prepayments and deposits. The Group considers the balance recoverable and therefore no impairment provision is required.
The Group deposits cash surpluses with major banks of high quality credit standing.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Whilst the Group manages liquidity risk by monitoring cash flows and ensuring that adequate cash is available or by maintaining or renewing borrowing facilities as appropriate.
The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
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Market risk
Market risk is the risk that changes in the market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on risk.
The Group is exposed to cash flow interest rate risk as it borrows funds at variable interest rates. The risk is managed by group policies adopted to ensure all its borrowings are at market related rates.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the Group consists of debt, which includes other financial liabilities and trade and other payables disclosed in notes 9 and 11 and equity as disclosed in the statement of financial position. The Group monitors capital on the basis of the gearing ratio.
Group Group Group 2010 2009 2008 R R R
Gearing ratio
Total debt 456 344 864 444 446 799 462 120 677Less: Cash and cash equivalents (4 885 833) (2 702 843) (29 483 995)
Net debt 451 459 031 441 743 956 432 636 682Equity 292 849 397 1 97 305 136 176 496 539
Debt to equity ratio 154% 224% 245%
3. INVESTMENT PROPERTY
Carrying value R
2010
Investment property 776 522 427
2009
Investment property 664 179 009
2010 2009 R R
Reconciliation of investment property:
– Opening carrying value 664 179 009 634 950 000– Additions 1 670 217 4 857 889– Fair value adjustments 109 780 687 23 295 633– Straight-line adjustments 892 514 1 075 487
776 522 427 664 179 009
Details of investment property:
– Land 223 028 823 223 028 823– Buildings 223 002 108 221 331 891– Fair value adjustments 319 227 931 209 447 244– Straight-line adjustments 11 263 565 10 371 051
776 522 427 664 179 009
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Investment property comprises a number of commercial properties that are leased to third parties. Each of the leases contains non-cancellable periods of between three and 10 years. Subsequent renewals are negotiated with the lessee. No contingent rents are charged.
Details of valuation
The effective date of revaluations was 1 November 2010. Revaluations are performed annually. Independent valuers are used in alternate years. In the current year the revaluations were performed independently by Mills Fitchet Magnus Penny Proprietary Limited. It is the Group’s policy to revalue properties that have been owned for longer than a year. The value of properties owned for less than a year is deemed to approximate cost. In determining the value for fair value purposes, the traditional discounted cash flow (DCF) method of valuation has been used. The discount and exit capitalisation rates are determined by reference to comparable sales and appropriate surveys prepared by RODE and benchmarked against other comparable valuations after consultation with experienced and informed people in the property industry including other valuers, brokers and investors. The discount and capitalisation rates are dependent on a number of factors, such as location, the condition of the improvements, current market conditions, the lease covenant and the risk inherent in the property.
A register of immovable property owned by Vunani Property Investment Fund Proprietary Limited is available for inspection at the registered office of the Group.
Non distributable reserve
The unrealised fair value adjustments, after tax, are transferred to a non-distributable reserve. Realised gains or losses on investment properties remain in accumulated profit/loss and are not available for distribution to shareholders.
4. PLANT AND EQUIPMENT
Accumulated Carrying Cost depreciation value R R R
2010
Plant and equipment 2 695 725 (766 593) 1 929 132Computer equipment 103 788 (103 788) –Tenant installation 4 638 638 (2 032 466) 2 606 172
7 438 151 (2 902 847) 4 535 304
2009
Plant and equipment 2 329 370 (284 797) 2 044 573Computer equipment 103 788 (101 533) 2 255Tenant installation 2 223 306 (902 314) 1 320 992
4 656 464 (1 288 644) 3 367 820
There has been no change in the nature of plant and equipment and no change in the policy regarding the use thereof.
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Reconciliation of movement in carrying value:
Opening Closing carrying carrying value Additions Depreciation value R R R R
2010
Plant and equipment 2 044 573 366 355 (481 796) 1 929 132Computer equipment 2 255 – (2 255) –Tenant installation 1 320 992 2 415 332 (1 130 152) 2 606 172
3 367 820 2 781 687 (1 614 203) 4 535 304
2009
Plant and equipment 671 585 1 557 234 (184 246) 2 044 573Computer equipment 36 851 – (34 596) 2 255Tenant installation 1 428 229 396 323 (503 560) 1 320 992
2 136 665 1 953 557 (722 402) 3 367 820
Group Group 2010 2009 R R
5. OTHER NON-CURRENT ASSETS
(consisting of debt and commissions raised on property transactions)
Debt finance fees comprise:– Opening balance 2 394 516 1 891 401– Additions 2 265 974 1 605 172– Amortisation (1 337 711) (1 102 057)
3 322 779 2 394 516
6. TRADE AND OTHER RECEIVABLES
Trade and other receivables comprise:
– Trade receivables 1 395 440 245 051 – Pre-payments 39 853 35 724 – Deposits 682 670 690 412 – Other receivables 5 944 484 276 899 – Provision for doubtful debt (279 813) (107 992)
7 782 634 1 140 094
7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise:
– Bank balances 239 840 540 077– Property bank 4 645 993 2 162 766
4 885 833 2 702 843
8. ORDINARY SHARE CAPITAL
Authorised
100 000 000 ordinary shares of R0.01 each 1 000 000 1 000 000
Issued
14 256 000 ordinary shares of R0.01 each 142 560 142 560
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85 744 000 unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.
Subsequent to year-end the authorised share capital was sub-divided into 400 000 000 ordinary shares of R0.0025 each and the issued share capital of 14 256 000 ordinary shares was sub-divided into 57 024 000 ordinary shares of R0.0025 each.
Group Group 2010 2009 R R
9. DEBENTURES
Hyprop Investments Limited – Debentures 70 923 885 70 923 885
Redeemable, linked 25 year debentures with no fixed interest rate, repayable on 30 September 2031.
Vunani Properties Proprietary Limited – Debentures 71 493 555 71 493 555
Redeemable, linked 25-year debentures with no fixed interest rate, repayable on 30 September 2031.
142 417 440 142 417 440
10. OTHER FINANCIAL LIABILITIES
Carried at amortised cost
Hyprop Investments Limited 7 355 143 7 355 143
Interest is charged at JIBAR plus 3% and the capital amount shall be repaid in full on the 5th anniversary of the advance date, October 2011. Interest is charged at JIBAR plus 3% and the capital amount shall be repaid in full on the 5th anniversary of the advance date, October 2011. The loan was advanced in November 2006.
Standard Bank Limited 283 210 071 282 483 564
Mortgage bond over land and buildings in Vunani Property Investment Trust with fixed interest rate of 11.78%, repayable on 10 October 2013 88 415 314 88 415 314Mortgage bond over land and buildings in Vunani Property Investment Trust with fixed interest fixed of 11.88%, repayable on 21 July 2013 99 417 500 99 417 500Mortgage bond over land and buildings in Vunani Property Investment Trust with a fixed interest rate of 11.87%, repayable on 20 March 2013 78 650 750 78 650 750Mortgage bond over land and buildings in Vunani Property Investment Trust with a fixed interest rate of 11.88%, repayable on 30 May 2013 16 000 000 16 000 000Mortgage bond over land and buildings in Vunani Property Investment Trust with a variable interest rate of 1% below prime, repayable on 31 May 2013 726 507 –
290 565 214 289 838 707
Less: Amounts to be settled within the next 12 months andincluded in current liabilities: (7 355 143) –
Non-current liabilities: 283 210 071 289 838 707
The Standard Bank Limited bond is secured by sureties by:
Hyprop Investments Limited 310 798 125 310 798 125
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Restated Restated
Group Group Group 2010 2009 2008 R R R
11. DEFERRED TAX
Deferred tax comprises:
– Deferred tax asset – (194 161) (194 161)– Deferred tax liability 47 854 717 32 226 508 28 663 984
47 854 717 32 032 347 28 469 823
The movement of the deferred tax position is as follows:
– Opening balance 32 032 347 28 469 823 74 419 119– Originating and reversing differences 15 822 370 6 670 005 (22 103 734)– Prior year adjustment – (3 107 481) (23 845 562)
47 854 717 32 032 347 28 469 823
Deferred tax liability comprises:
Investment property 47 854 717 32 226 508 28 663 984
Deferred tax asset comprises:
– Assessed loss – (194 161) (194 161)
12. TRADE AND OTHER PAYABLES
Group Group 2010 2009 R R
Trade and other payables comprise:
– Trade payables 1 891 662 157 868– Other payables 4 117 724 3 510 199– VAT payable 697 987 494 549– Deposits received 5 850 814 5 386 247– Accrued expense 10 804 023 2 641 789
23 362 210 12 190 652
13. REVENUE
Revenue comprises:
– Rental income 82 372 012 71 113 561– Other revenue 21 381 642 16 724 186
103 753 654 87 837 747
14. RESULTS FROM OPERATING ACTIVITIES
Results from operating activities is arrived at after taking into account:Audit fees – current year 318 060 201 790 2 951 914 1 824 460
Amortisation of debt costs 169 776 169 776Amortisation of commissions 1 167 935 932 282Depreciation on plant and equipment 1 614 203 722 402
Operating lease charges – Premises – 65 288Fees for professional and consulting services 414 014 84 091Key management personnel’s emoluments 180 550 166 719Asset management fees – Vunani Property Fund Management Trust 3 327 500 3 174 750Property management fees – JHI 3 398 321 2 912 153
88
Group Group 2010 2009 R R
15. FINANCE INCOME
Finance income comprises:
– Banks 486 817 1 282 477
16. FINANCE COSTS
Finance costs comprise:
– Interest on loan from Hyprop Investments Limited 691 503 1 086 438– Interest on Standard Bank Limited bond 33 462 786 33 556 582– Bank 3 915 26 369
34 158 204 34 669 389
17. FAIR VALUE ADJUSTMENTS
Fair value adjustments comprise:
– Investment property 109 780 687 23 295 633
18. DEBENTURE INTEREST
Debenture interest comprise:
– Debenture interest to Vunani Properties Proprietary Limited 10 255 268 11 630 535– Debenture interest to Hyprop Investments Limited 10 173 553 11 537 861
20 428 821 23 168 396
Restated Group Group 2010 2009 R R
19. INCOME TAX EXPENSE
South African normal taxation:
– Deferred taxation:Current year (15 822 370) (6 670 004)Prior period adjustment – 3 107 481
(15 822 370) (3 562 523)
Reconciliation of effective tax rate 2010 2009
Total comprehensive income for the year 95 544 261 20 808 597Total income tax expense 15 822 370 3 562 523
Profit excluding income tax 111 366 631 24 371 120
Income tax using Company’s tax rate 28.0% 31 182 657 28.00% 6 823 914Fair value gains at Capital Gains Tax (13.79)% (15 360 287) (13.38)% (3 261 391)
14.21% 15 822 370 14.62% 3 562 523
No provision has been made for tax as the Company has no taxable income. The estimated tax loss carried forward is R nil (2009: R693 432).
89
Group Group 2010 2009 R R
20. CASH GENERATED BY OPERATIONS
Profit before income tax 111 366 631 24 371 120
Adjusted for:
– Depreciation and amortisation 2 951 914 1 824 460– Finance income (486 817) (1 282 477)– Lease straight-lining adjustment (892 514) (1 075 487)– Finance costs 34 158 204 34 669 389– Debenture interest 20 428 821 23 168 396– Fair value adjustments (109 780 687) (23 295 633)
Cash generated before working capital changes 57 745 552 58 379 768
Changes in working capital:
– Increase in trade and other receivables (6 642 540) (19 693)– Increase in trade and other payables 11 171 557 2 330 428
Cash generated by operations 62 274 569 60 690 503
21. TAXATION PAID
Amount payable at beginning of year – 2 495 423Comprehensive income current taxation charge – –
Amount payable at year end – 2 495 423
22. RELATED PARTIES
Related party relationships comprise:
– Holding company Vunani Properties Proprietary Limited– Subsidiaries Vunani Property Investment Trust– Group company Hyprop Investments Limited
All the directors of Vunani Limited, Vunani Properties Proprietary Limited, Hyprop Investments Limited, fellow subsidiaries, as well as the trustees of Vunani Property Investment Trust, are considered to be key management and related parties.
Group Group 2010 2009 R R
Related party balances comprise:
– Other financial liabilities Vunani Properties Proprietary Limited – Debentures 71 493 555 71 493 555Hyprop Investments Limited – Debentures 70 923 885 70 923 885Hyprop Investments Limited 7 355 143 7 355 143
149 772 583 149 772 583
90
23. RISK MANAGEMENT
23.1 Liquidity risk
31 December 2010
Carrying Contractual Less than 2 – 5 years Greater thanRand amounts cash flows 1 year 5 years
Non-derivative financial assets 12 668 467 7 782 634 7 782 634 – –
Non-interest bearing 7 782 634 7 782 634 7 782 634 – –Variable interest rate instruments 4 885 833 – – – –
Non-derivative financial liabilities (456 344 863) (955 405 927) (84 803 646) (413 976 851) (456 625 429)
Non-interest bearing (23 362 209) (23 362 209) (23 362 209) – –Fixed interest rate instruments (282 483 564) (366 822 713) (33 462 767) (333 359 946) –Variable interest rate instruments (150 499 090) (565 221 004) (27 978 670) (80 616 905) (456 625 429)
Total Mismatch (443 676 396) (947 623 293) (77 021 012) (413 976 851) (456 625 429)
31 December 2009
Non-derivative financial assetsNon-interest bearing 1 140 094 1 140 094 1 140 094 – –Non-derivative financial liabilities (444 446 799) (998 810 519) (67 633 779) (454 612 869) (476 563 871)
Non-interest bearing (12 190 652) (12 190 652) (12 190 652) – –Fixed interest rate instruments (282 483 564) (400 285 480) (33 462 767) (366 822 713) –
Variable interest rate instruments (149 772 583) (586 334 387) (21 980 360) (87 790 156) (476 563 871)
Total Mismatch (443 306 705) (997 670 425) (66 493 685) (454 612 869) (476 563 871)
Group Group 2010 2009 R R
23.2 Market risk
The Group’s interest rate exposure is as follows:
Fixed rate instruments
Financial assets – –Financial liabilities (282 483 564) (282 483 564)
(282 483 564) (282 483 564)
Variable rate instruments
Financial liabilities (150 499 090) (149 772 583)
(150 499 090) (149 772 583)
Cash flow sensitivity analysis for variable rate instruments
A change of 50 basis points in the interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amount shown below. This analysis assumes that all other variables remain constant.
Effect on statement of comprehensive income (profit/(loss):
50 bps increase (752 495) (748 863)50 bps decrease 752 495 748 863
23.3 Credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure of credit risk was:
Trade and other receivables 7 782 634 1 140 094Cash and cash equivalents 4 885 833 2 702 843
12 668 467 3 842 937
91
23.4 Fair values
2010 2009 Carrying Carrying
Rand amount Fair value amount Fair value
Financial assets
Trade and other receivables 7 782 634 7 782 634 1 140 094 1 140 094Cash and cash equivalents 4 885 833 4 885 833 2 702 843 2 702 843
12 668 467 12 668 467 3 842 937 3 842 937
Financial liabilities
Amortised cost (456 344 863) (456 344 863) (444 446 799) (444 446 799)
At 31 December 2010 the fair values of all the financial instruments are substantially identical to the carrying amount reflected in the balance sheet.
24. PRIOR PERIOD ADJUSTMENT
The Company has elected to early adopt the amendments introduced to IAS 12 Income taxes that were approved by the Accounting Practices Board on 26 January 2011. In terms of the amendment, deferred tax assets and liabilities on investment property carried at fair value should be measured using the sale rate, which is currently a rate of 14%. The financial statements have been restated retrospectively to effect the change in accounting policy.
The effects of the restatement are as follows:
Restated Restated Group Group 2010 2009 R R
Retained earnings
Total comprehensive income for the year, as previously reported – 17 701 116Prior period adjustment – Correction of deferred tax on investment property – 3 107 481
Total comprehensive income for the year, as restated – 20 808 597
Opening retained earnings, as previously reported (475 252) (475 252)Prior period adjustment – Correction of deferred tax on investment property 26 953 043 23 845 562– Correction of transfer to non-distributable reserve (26 953 043) (23 845 562)
Opening retained earnings, as restated (475 252) (475 252)
Non-distributable reserve
Transfer from non-distributable reserve as previously reported – (17 701 116)Prior period adjustment – Correction of transfer to non-distributable reserve – (3 107 481)
Transfer from non-distributable reserve as restated – (20 808 597)
Opening non-distributable reserve, as previously reported 170 684 785 152 983 669Prior period adjustment – Correction of transfer from retained earnings 26 953 043 23 845 562
Opening non-distributable reserve, as restated 197 637 828 176 829 231
92
Appendix 5
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE AUDITED HISTORICAL FINANCIAL INFORMATION OF VPIF FOR THE YEAR ENDED 31 DECEMBER 2010
“The DirectorsVunani Property Investment Fund LimitedVunani House Block CAthol Ridge Office Park151 Katherine StreetSandown, Sandton, 2196
28 June 2011
Dear Sirs
REPORT OF THE INDEPENDENT REPORTING ACCOUNTANTS ON THE HISTORICAL FINANCIAL INFORMATION OF VUNANI PROPERTY INVESTMENT FUND LIMITED (“VPIF’)
At your request, we present our Reporting Accountants’ Report on the Report of Historical Financial Information of VPIF for the year ended 31 December 2010 (“Historical Financial Information”), set out in Appendix 4, for the purposes of complying with the Listings Requirements of the JSE Limited (the “JSE Listings Requirements”) and for inclusion in the Pre-Listing Statement, dated on or about 30 June 2011 (“Pre-listing statement”). We are the independent auditor of VPIF.
Directors’ responsibility for the financial statements
The directors of VPIF are responsible for the compilation, contents and preparation of the Pre-Listing Statement in accordance with the JSE Listings Requirements and the Companies Act of South Africa. The directors are also responsible for the fair presentation in accordance with International Financial Reporting Standards of the Historical Financial Information contained therein to which this Independent Reporting Accountants’ Report relates.
Scope of the audit – financial information for the year ended 31 December 2010
Our responsibility is to express an opinion on the historical financial information for the year ended 31 December 2010, which is included in the Pre-Listing Statement of VPIF, 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 whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial information. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial information, 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 financial information 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 financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
93
Audit opinion – historical financial information for the financial year ended 31 December 2010
In our opinion, the historical financial information fairly presents, in all material respects, the consolidated financial position of VPIF at 31 December 2010, and its consolidated financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa and JSE Listings Requirements.
Consent
We consent to the inclusion of this report and the references thereto, in the form and context in which they appear in the Pre-Listing Statement. Furthermore we confirm that we will not withdraw our consent prior to the issue of the Pre-Listing Statement.
Yours faithfully
KPMG IncRegistered AuditorsPer G ParkerChartered Accountant (SA)Registered AuditorDirector
Private Bag 9, Parkview, 2122”
94
Appendix 6
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF VPIF AT 31 DECEMBER 2010
Introduction
This appendix presents the unaudited pro forma statement of financial position of VPIF for the year ended 31 December 2010. It provides investors with information about the impact that the Acquisition properties and the issue of the minimum and maximum number of units might have had on the historical financial information of VPIF had the transaction been effected at 31 December 2010.
The unaudited pro forma statement of financial position:
• is the responsibility of the directors of the Company;
• has been prepared for illustrative purposes only and may, because of its nature, not give a true reflection of VPIF’s financial position.
Basis of preparation
The pro forma statement of financial position presented in this appendix has been based on the audited financial statements of the Company for the year ended 31 December 2010 and is presented in a manner consistent with the format and accounting policies adopted by the Company.
The adjustments to the financial information set out below illustrate the effect of the transaction on net asset value and tangible net asset value per unit as if the transaction had been effected on 31 December 2010 based on the minimum and maximum number of units.
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2010
Based on a minimum subscription of R306.5 million which results in a loan to value of approximately 20%
Audited Adjust- Actual ments Before the post Acquisition Minimum After thePRICE PER UNIT R7.50 transaction 31.12.2010 properties new units transaction R’000 R’000 R’000 R’000 R’000 Note 1 Note 2 Note 3 Note 4
ASSETS
Non-current assets 784 380 10 969 161 747 – 957 096
Investment property 776 522 10 792 160 300 – 947 614Property, plant and equipment 4 535 – 26 – 4 561Goodwill on consolidation – – 407 – 407Other non-current asset 3 323 177 – – 3 500Deferred tax – – 1 014 – 1 014
Current assets 12 669 – 265 – 12 934
Trade and other receivables 7 783 – 71 – 7 854Cash and cash equivalents 4 886 – 194 – 5 080
Total assets 797 049 10 969 162 012 – 970 030
95
Audited Adjust- Actual ments Before the post Acquisition Minimum After thePRICE PER UNIT R7.50 transaction 31.12.2010 properties new units transaction R’000 R’000 R’000 R’000 R’000 Note 1 Note 2 Note 3 Note 4
EQUITY AND LIABILITIES
Equity 292 850 (15 019) – (13 766) 264 065
Ordinary share capital 143 – – 102 245Ordinary share premium – – – – –Accumulated profit/(loss) 24 (16 560) – (13 868) (30 404)Non-distributable reserve 292 683 1 541 – – 294 224
Debentures 142 417 – – 306 406 448 823
Linked unitholders’ interest 435 267 (15 019) – 292 640 712 888
LIABILITIES
Other non-current liabilities 331 065 23 454 170 062 (292 640) 231 941
Other financial liabilities 283 210 29 643 169 655 (291 797) 190 711Deferred tax 47 855 (6 189) 407 (843) 41 230
Current liabilities 30 717 2 534 (8 050) – 25 201
Other financial liabilities 7 355 2 534 (9 889) – –Trade and other payables 23 362 – 1 711 – 25 073 Current tax payable – – 100 – 100Cash and cash equivalents – – 28 – 28
Total liabilities 361 782 25 988 162 012 (292 640) 257 142
Total equity and liabilities 797 049 10 969 162 012 – 970 030
Number of units in issue 14 256 000 97 891 691
Net asset value per unit (cents) 3 053.2 728.2Tangible net asset less deferred tax value per unit (cents) 3 388.9 768.9
Notes:
1. The “Audited Actual Before the transaction” column was extracted from the consolidated audited statement of financial position
of VPIF at 31 December 2010.
2. The “Adjustments post 31.12.2010” column takes account of post-year-end VPIF cancelled interest rate fix agreements with
The Standard Bank of South Africa Limited that would have matured during 2013, the resulting breakage costs of R23 million
being capitalised into existing debt. These breakage costs, which have been paid, are treated as pre-paid expenses and will be
charged against income over the period of the contracts. Additional refurbishments and upgrades have been carried out on one of
the properties currently owned by VPIF amounting to R9 million. The associated rental will commence in July 2011. The investment
property values are based on independent values at 1 November 2010, which were updated at 1 January 2011 by the independent
valuers and which increased the values by R1.8 million, with the resultant deferred tax provision at 14%.
3. The “Acquisition properties” column takes account of the acquisition of the two companies, both with single property assets, together
with the acquisition of a single property directly, illustrating the abbreviated statements of their audited financial position, which have
been extracted from the audited financial statements for the year ended 31 December 2010, as set out below:
96
Consoli-
R’000 Loop Street Cedar Park Athol Ridge dation Total
ASSETS
Non-current assets 37 100 18 714 105 526 407 161 747
Investment property 37 100 17 700 105 500 – 160 300
Property, plant and
equipment – – 26 – 26
Goodwill on consolidation – – – 407 407
Deferred tax – 1 014 – – 1 014
Current assets 9 256 – – 265
Total assets 37 109 18 970 105 526 407 162 012
EQUITY 3 477 (2 710) – (767) –
Other financial liabilities 20 093 14 794 121 413 13 355 169 655
Deferred tax 407 – – – 407
Current liabilities 13 132 6 886 (15 887) (12 181) (8 050)
Total liabilities 37 109 18 970 105 526 407 162 012
4. The “Minimum new units” column takes account of the minimum amount to be raised from the private placing based on a linked unit
price of R7.50 per unit amounting to R306.5 million through the issue of approximately 40.9 million new linked units, the proceeds of
which will be used to repay listing expenses of R11.7 million with the balance used to reduce debt to R187.8 million.
5. These transactions will have a continuing effect as illustrated above on the investment property as a result of the acquisitions and the
debt as a result of the funds received in terms of the private placing.
6. Linked unitholders’ interest is the interest of one linked unit with a nominal value of R2.50 comprising one share which is indivisibly
linked to one debenture, and which is not capable of disposal independently of each other.
Based on the maximum subscription of R497.5 million which results in a loan to value of approximately 0%
Audited Adjust- Actual ments Before the post Acquisition Minimum After thePRICE PER UNIT R7.50 transaction 31.12.2010 properties new units transaction R’000 R’000 R’000 R’000 R’000 Note 1 Note 2 Note 3 Note 4
ASSETS
Non-current assets 784 380 10 969 161 747 – 957 096
Investment property 776 522 10 792 160 300 – 947 614Property, plant and equipment 4 535 – 26 – 4 561Goodwill on consolidation – – 407 – 407Other non-current asset 3 323 177 – – 3 500Deferred tax – – 1 014 – 1 014
Current assets 12 669 – 265 – 12 934
Trade and other receivables 7 783 – 71 – 7 854Cash and cash equivalents 4 886 – 194 – 5 080
Total assets 797 049 10 969 162 012 – 970 030
97
Audited Adjust- Actual ments Before the post Acquisition Minimum After thePRICE PER UNIT R7.50 transaction 31.12.2010 properties new units transaction R’000 R’000 R’000 R’000 R’000 Note 1 Note 2 Note 3 Note 4
EQUITY AND LIABILITIES
Equity 292 850 (15 019) – (20 089) 257 742
Ordinary share capital 143 – – 166 309Ordinary share premium – – – – –Accumulated profit/(loss) 24 (16 560) – (20 255) (36 791)Non-distributable reserve 292 683 1 541 – – 294 224
Debentures 142 417 – – 497 342 639 759
Linked unitholders’ interest 435 267 (15 019) – 477 253 897 501
LIABILITIES
Other non-current liabilities 331 065 23 454 170 062 (477 253) 47 328
Other financial liabilities 283 210 29 643 169 655 (475 209) 7 299Deferred tax 47 855 (6 189) 407 (2 044) 40 029
Current liabilities 30 717 2 534 (8 050) – 25 201
Other financial liabilities 7 355 2 534 (9 889) – –Trade and other payables 23 362 – 1 711 – 25 073 Current tax payable – – 100 – 100Cash and cash equivalents – – 28 – 28
Total liabilities 361 782 25 988 162 012 (477 253) 72 529
Total equity and liabilities 797 049 10 969 162 012 – 970 030
Number of units in issue 14 256 000 123 358 357
Net asset value per unit (cents) 3 053.2 727.6Tangible net asset less deferred tax value per unit (cents) 3 388.9 758.9
Notes:
1. The “Audited Actual Before the transaction” column was extracted from the consolidated audited statement of financial position
of VPIF at 31 December 2010.
2. The “Adjustments post 31.12.2010” column takes account of post-year-end VPIF cancelled interest rate fix agreements with
The Standard Bank of South Africa Limited that would have matured during 2013, the resulting breakage costs of R23 million
being capitalised into existing debt. These breakage costs, which have been paid, are treated as pre-paid expenses and will
be charged against income over the period of the contracts. Additional refurbishments and upgrades have been carried out
on one of the properties currently owned by VPIF amounting to R9 million. The associated rental will commence in July 2011.
The investment property values are based on independent values at 1 November 2010, which were updated at 1 January 2011
by the independent valuers and which increased the values by R1.8 million, with the resultant deferred tax provision at 14%.
3. The “Acquisition properties” column takes account of the acquisition of the three companies, all with single property assets, together
with the acquisition of a single property directly, illustrating the abbreviated statements of their audited financial position, which have
been extracted from the audited financial statements for the year ended 31 December 2010, as set out below:
98
Consoli-
R’000 Loop Street Cedar Park Athol Ridge dation Total
ASSETS
Non-current assets 37 100 18 714 105 526 407 161 747
Investment property 37 100 17 700 105 500 – 160 300
Property, plant and
equipment – – 26 – 26
Goodwill on consolidation – – – 407 407
Deferred tax – 1 014 – – 1 014
Current assets 9 256 – – 265
Total assets 37 109 18 970 105 526 407 162 012
EQUITY 3 477 (2 710) – (767) –
Other financial liabilities 20 093 14 794 121 413 13 355 169 655
Deferred tax 407 – – – 407
Current liabilities 13 132 6 886 (15 887) (12 181) (8 050)
Total liabilities 37 109 18 970 105 526 407 162 012
4. The “Maximum new units” column takes account of the maximum amount which could be raised from the private placing based on
a linked unit price of R7.50 per unit amounting to R497.5 million through the issue of approximately 66.3 million new linked units, the
proceeds of which will be used to repay listing expenses of R15.0 million with the balance used to reduce debt..
5. These transactions will have a continuing effect as illustrated above on the investment property as a result of the acquisitions and the
debt as a result of the funds received in terms of the private placing.
6. Linked unitholders interest is the interest of one linked unit with a nominal value of R2.50 comprising one share which is indivisibly
linked to one debenture, and which is not capable of disposal independently of each other.
99
Appendix 7
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF VPIF
“The DirectorsVunani Property Investment Fund LimitedVunani House Block CAthol Ridge Office Park151 Katherine StreetSandown, Sandton, 2196
28 June 2011
Dear Sirs
INDEPENDENT REPORTING ACCOUNTANTS’ LIMITED ASSURANCE REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF VUNANI PROPERTY INVESTMENT FUND LIMITED (“VPIF”)
We have performed our limited assurance engagement in respect of the unaudited pro forma financial information set out in Appendix 6 to the Pre-Listing Statement, to be dated on or about 30 June 2011, and to be issued in connection with the private placing by VPIF and the listing of VPIF on the JSE Limited (“JSE”) (“the transaction”).
The unaudited pro forma financial information has been prepared in accordance with the requirements of the JSE Listings Requirements, for illustrative purposes only, to provide information about how the transaction might have affected the reported historic financial information presented, had the transaction been undertaken at 31 December 2010.
Because of its nature, the unaudited pro forma financial information may not present a fair reflection of the financial position, changes in equity, results of operations or cash flows of VPIF after the transaction.
Directors’ responsibility
The directors are solely responsible for the compilation, contents and presentation of the unaudited pro forma financial information contained in the Pre-Listing Statement and for the financial information from which it has been prepared. Their responsibility includes determining that:
– the pro forma financial information has been properly compiled on the basis stated;
– the basis is consistent with the accounting policies;
– the pro forma adjustments are appropriate for the purposes of the pro forma financial information disclosed in terms of the JSE Listings Requirements.
Reporting accountants’ responsibility
Our responsibility is to express our limited assurance conclusion on the unaudited pro forma financial information included in the Pre-Listing Statement. We conducted our assurance engagement in accordance with the International Standard on Assurance Engagements applicable to Assurance Engagements Other Than Audits or Reviews of Historical Financial information and the Guide on Pro Forma Financial Information issued by The South African Institute of Chartered Accountants.
This standard requires us to comply with ethical requirements and to plan and perform the assurance engagement to obtain sufficient appropriate audit evidence to support our limited assurance conclusion, expressed below.
We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information, beyond that owed to those to whom those reports were addressed by us at the dates of their issue.
100
Sources of information and work performed
Our procedures consisted primarily of comparing the unadjusted audited historical financial information of VPIF with the source documents, considering the pro forma adjustments in light of the accounting policies of VPIF, considering the evidence supporting the pro forma adjustments, recalculating the amounts based on the information obtained and discussing the pro forma financial information with the directors of VPIF.
In arriving at our conclusion, we have relied upon financial information prepared by the directors of VPIF and other information from various public, financial and industry sources.
Whilst our work performed involved an analysis of the historical audited financial information and other information provided to us, our limited assurance engagement does not constitute either an audit or review of any of the underlying financial information undertaken in accordance with the International Standards on Auditing or the International Standards on Review Engagements and, accordingly, we do not express an audit or review opinion.
In a limited assurance engagement the evidence-gathering procedures are more limited than for a reasonable assurance engagement and therefore less assurance is obtained than in a reasonable assurance engagement. We believe that our evidence obtained is sufficient and appropriate to provide a basis for our conclusion.
Conclusion
Based on our examination of the evidence obtained, nothing has come to our attention that causes us to believe that, in terms of Sections 8.17 and 8.30 of the JSE Listings Requirements:
– the pro forma financial information has not been properly compiled on the basis stated;
– such a basis is inconsistent with the accounting policies of VPIF;
– the adjustments are not appropriate for the purposes of the pro forma financial information as disclosed pursuant to Section 8.30 of the JSE Listings Requirements.
This conclusion has been formed on the basis of, and is subject to the inherent limitations outlined elsewhere in this independent assurance report.
Consent
We consent to the inclusion of this letter and the reference to our opinion in the Pre-listing Statement to be issued by VPIF in the form and context in which it appears.
Yours faithfully
KPMG IncRegistered AuditorsPer G ParkerChartered Accountant (SA)Registered AuditorDirector
Private Bag 9, Parkview, 2122”
101
Appendix 8
INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE FORECAST FINANCIAL INFORMATION OF VPIF
“The DirectorsVunani Property Investment Fund LimitedVunani House Block CAthol Ridge Office Park151 Katherine StreetSandown, Sandton, 2196
28 June 2011
Dear Sirs
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE FORECAST INCOME STATEMENTS OF VUNANI PROPERTY INVESTMENT FUND LIMITED (“VPIF” or “the Company”)
We have examined the forecast statements of comprehensive income, the forecast vacancy profile by sector and by gross rentable area, and the forecast lease expiry profile based on existing lease agreements (collectively, “forecast information”) for both the existing properties and the Acquisition properties for the six months ending 30 June 2011 and the year ending 30 June 2012, as set out in paragraph 17 of the Pre-Listing Statement, to be dated on or about 30 June 2011 (“Pre-Listing Statement”), and the related assumptions of VPIF for the six months ending 30 June 2011 and the year ending 30 June 2012 (collectively, “forecast information”), issued in connection with the listing of VPIF on the JSE Limited (“JSE”) (“the listing”).
Directors’ responsibility
The directors are responsible for the forecast information, including the assumptions and notes on which it is based, and for the financial information from which it has been prepared. This responsibility, arising from compliance with the JSE Listings Requirements, includes:
– determining whether the assumptions, barring unforeseen circumstances, provide a reasonable basis for the preparation of the forecast information;
– whether the forecast information has been properly compiled on the basis stated; and
– whether the forecast information is presented on a basis consistent with the accounting policies of the Company.
Reporting accountants’ responsibility
Our responsibility is to provide a limited assurance report on the forecast information prepared for the purpose of complying with the JSE Listings Requirements and for inclusion in the Pre-Listing Statement. We conducted our limited assurance engagement in accordance with the International Standard on Assurance Engagements applicable to The Examination of Prospective Financial Information and the SAICA circular entitled “The Reporting Accountants’ Responsibilities in terms of Section 13 of the Listings Requirements of the JSE Limited”. This standard requires us to obtain sufficient appropriate evidence as to whether or not:
– management’s best-estimate assumptions on which the forecast information is based are not unreasonable and are consistent with the purpose of the information;
– the forecast information is properly prepared on the basis of the assumptions;
– the forecast information is properly presented and all material assumptions are adequately disclosed;
– the forecast information is prepared and presented on a basis consistent with the accounting policies of the company in question for the period concerned.
In a limited assurance engagement, the evidence-gathering procedures are more limited than for a reasonable assurance engagement and, therefore, less assurance is obtained than in a reasonable assurance engagement. We believe our evidence obtained is sufficient and appropriate to provide a basis for our limited assurance conclusion.
102
Information and sources of information
In arriving at our conclusion, we have relied on the forecast financial information prepared by VPIF management and other information from various public, financial and industry sources.
The principal sources of information used in arriving at our conclusion are as follows:
– the audited historical financial information of VPIF and the Acquisition properties for the year ended 31 December 2010;
– management prepared forecasts for the six months ending 30 June 2011 and the year ending 30 June 2012;
– discussions with management regarding the forecast information;
– discussions with management regarding the prevailing market and economic conditions;
– discussions with the independent valuer and the property managers regarding the forecast expenses;
– lease agreements for a sample of the leases relating to the VPIF Portfolio;
– valuation reports prepared by the independent valuer on the VPIF Portfolio;
– acquisition agreement of the acquired properties; and
– the Property Management agreement.
Procedures
In arriving at our conclusion, we performed the following procedures relating to rental income:
– Selections were made from the forecast contracted rental income streams per the forecast information for the VPIF Properties. The total coverage obtained was 75% and 75% of the forecast contracted rental income for the six months ending 30 June 2011 and the year ending 30 June 2012, respectively, in respect of the forecast including both transferred and transferring properties. The total coverage obtained was 74% and 72% of the forecast contracted rental income for the six months ending 30 June 2011 and the year ending 30 June 2012 in respect of the forecast excluding transferring properties.
– For that same sample of properties, forecast recoveries were compared to historical recoveries and the forecast operating expenditure for reasonableness. The terms of the leases were considered so as to ensure that the basis of the recoveries was correct.
– Forecast rental income resulting from profit warranties provided by the seller was agreed to the relevant purchase agreement.
– Existing lease agreements that will expire during the period under review were discussed with the property managers. Unless the existing tenant has indicated that it intends to vacate the premises, it has been assumed that the existing tenant will renew the lease agreement and the resultant uncontracted rental income has been included in the forecast.
– The rental income streams from the above sample were re-calculated to ensure accuracy of the information contained in the forecast information.
– The vacancy levels per the forecast information model were compared to the historical vacancy levels in the existing VPIF Properties for reasonableness. Uncontracted rental income comprises 4% and 18% of the total forecast revenue for the six months ending 30 June 2011 and the year ending 30 June 2012, respectively, in respect of the forecast information including both transferred and transferring properties. Uncontracted rental income comprises 3% and 16% of the total forecast revenue for the six months ending 30 June 2011 and the year ending 30 June 2012 in respect of the forecast information excluding transferring properties.
Expenses
For a sample of properties, forecast expenses were compared to the historical expenses. Explanations were obtained for any significant differences. The total expenses tested, in comparison to historical expenses, amounted to 89% and 94% of the total forecast expenses for the six months ending 30 June 2011 and the year ending 30 June 2012, respectively, in respect of the forecast information. The total expenses tested amounted to 88% and 95% of the total expenses for the six months ending 30 June 2011 and the year ending 30 June 2012, respectively, in respect of the forecast information excluding transferring properties.
The detailed forecast expenditure was reviewed to ensure that all material expenditure items were disclosed.
Portfolio expenses
The forecast interest expense, property management fees and other portfolio expenses were assessed for reasonableness and, where applicable, re-calculated.
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Application of accounting policies
We ascertained that the existing accounting polices had been consistently applied in the preparation of the forecast information.
Model review
In order to ensure that the forecast model for the property income and expenses was accurate and reliable, we performed a high level review to determine the consistency and mathematical accuracy of the model.
Vacancy profile and lease expiry profile
We reviewed each property worksheet prepared by management to ascertain that the vacancy profile and the lease expiry profile included in the model was derived from the correct sources. We compared the vacancy profile and lease expiry profile included in paragraphs 3.3.6 and 3.3.7 of the Pre-Listing Statement to the vacancy profile and lease expiry profile in the model and found them to be in agreement.
Accuracy of the information
We have relied on and assumed the accuracy and completeness of the information provided to us in writing, or obtained through discussions with VPIF management. While our work has involved an analysis of historical financial information and consideration of other information provided to us, our assurance engagement does not constitute an audit or review of historical financial information conducted in accordance with International Standards on Auditing or International Standards on Review Engagements.
Accordingly, we do not express an audit or review opinion thereon and assume no responsibility and make no representations in respect of the accuracy or completeness of any information provided to us, in respect of the forecast information and other relevant information included in the Pre-Listing Statement.
Conclusion
Based on our examination of the evidence obtained, nothing has come to our attention that causes us to believe that:
– the assumptions, barring unforeseen circumstances, do not provide a reasonable basis for the preparation of the forecast information;
– the forecast information has not been properly compiled on the basis stated;
– the forecast information has not been properly presented and all material assumptions are not adequately disclosed;
– the forecast information is not presented on a basis consistent with the accounting policies of VPIF.
Actual results are likely to be different from the forecast, since anticipated events frequently do not occur as expected and the variation may be material and accordingly no assurance is expressed regarding the achievability of the forecast.
Our report and the conclusion contained herein is provided solely for the benefit of the board of directors of VPIF and prospective unitholders of VPIF for the purpose of their consideration. This letter is not addressed to and may not be relied on by any other third party for any purpose whatsoever.
Consent
We consent to the inclusion of this report and the references thereto, in the form and context in which they appear in the Pre-Listing Statement. Furthermore we confirm that we will not withdraw our consent prior to the issue of the Pre-Listing Statement.
Yours faithfully
KPMG IncRegistered AuditorsPer G ParkerChartered Accountant (SA)Registered AuditorDirector
Private Bag 9, Parkview, 2122”
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Appendix 9
SALIENT FEATURES OF THE VPIT TRUST DEED
INTRODUCTION
On 11 May 2006, VPIF and Java Capital Trustees and Sponsors Proprietary Limited (“Java” and/or “the Trustee”) established a discretionary trust known as the Vunani Property Investment Trust (“the Trust”) in terms of a written deed of trust (“Trust Deed”). On 3 July 2006, the Master of the High Court (Transvaal Provincial Division) issued Letters of Authority in favour of the Trustee under reference number IT6363.2006.An Addendum to the Trust Deed was entered into on 24 June 2011 (“the Addendum”). The whole of the Addendum is conditional upon: (i) the JSE giving its written approval of the listing of VPIF’s units on the JSE and (ii) trading in VPIF’s units commencing on the JSE for the first time by not than September 2011 or such later date as is approved by VPIF. Failing such, the Addendum will not become unconditional and will cease retroactively to be of any force or effect and the parties shall be restored to the positions in which they would have been but for the Addendum.
Substitution of Trustee
The Trustee has irrevocably undertaken to pass on demand and without delay, at the request of the VPIF board, the necessary resolution in its capacity as Trustee co-opting and appointing as Trustees of the Trust, those persons who will be and/or are the South African resident directors of the VPIF board at the listing date (“the new Trustees”) and to resign as the Trustee immediately the Master of the High Court issues Letters of Authority in favour of the new Trustees in terms of section 6 of the Trust Property Control Act of 1988, as amended.
Salient extracts from the VPIT Trust Deed as amended by the Addendum are as set out below:
Interpretation:
“beneficiaries” means VPIF and any subsidiary from time to time of VPIF to whom the Trustees may elect to make any award or distribution;
“capital beneficiary” means such beneficiary to whom the Trustee, in its discretion, effects an award out of the capital of the Trust pursuant to clause 7 below and the phrase “capital beneficiaries” means all such capital beneficiaries;
“income beneficiary” means such beneficiary to whom the Trustee, in its discretion, effects an award out of the net income of the Trust in accordance with clause 7 below and the phrase “income beneficiaries” means all such beneficiaries;
“net capital gain” means, in respect of any financial year, the excess of the aggregate realised capital gains derived by the Trust over the aggregate realised capital losses suffered by the Trust which losses may in terms of prevailing tax laws be applied so as to reduce the extent of any capital gain; and
“net income” means the net income of the Trust as defined in clause 8.2.
The “Statutes” means the Trust Property Control Act, 1988 (as amended or substituted from time to time), the Companies Act, 2008 (as amended or substituted from time to time) and any other South African statute applicable to trusts from time to time.
4. OBJECTS OF THE TRUST
4.1 The investment object of the Trust is to acquire and hold for long-term investment purposes immovable property and to conduct letting businesses in respect thereof for the benefit of the beneficiaries.
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4.2 Subject to the Trustee being satisfied that it is in the interests of the beneficiaries to do so, it is the intention that the Trustee will:
4.2.1 in any one financial year distribute the net capital gain to VPIF on the basis set out in clause 7.1; and
4.2.2 pay all net income derived by the Trust from the VPIF Portfolio to the income beneficiary/ies on the basis set out in clause 7.2.
4.3 Any material change in the Trust’s objects shall constitute an amendment of the Trust Deed and shall be subject to the provisions of clause 16.
6. REMUNERATION AND REIMBURSEMENT OF EXPENSES
6.1 The Trustee shall be entitled to remuneration at market-related rates for performance of its duties as such in such amount as may be approved of by the founder (which approval shall not be unreasonably withheld or delayed).
6.2 The Trustee shall be reimbursed for all expenses incurred by it for or for the benefit of the Trust.
7. BENEFICIARIES
7.1 Capital beneficiary
7.1.1 The capital beneficiary/ies shall be discretionary beneficiaries of the Trust. The Trustee shall not be under any obligation to make any award to the capital beneficiary/ies or any of them (save only as contemplated in clause 7.1.4 below).
7.1.2 A capital beneficiary shall have no rights of any nature against the Trust or the Trustee of the assets of the Trust, save in respect of the payment of any award made by the Trustee to such capital beneficiary pursuant to the exercise by the Trustee of its discretion in favour of such capital beneficiary and then only strictly in accordance with the terms of such award.
7.1.3 Any award to the capital beneficiary shall only be made from the capital of the Trust.
7.1.4 The Trustee shall by not later than the last day in any financial year distribute the net capital gain, if any, to the capital beneficiary/ies.
7.2 Income beneficiaries
The income beneficiaries shall be discretionary income beneficiaries of the Trust. The Trustee shall not be under any obligation to make any award to the discretionary income beneficiaries or any of them.
7.3 Subject to the provisions of clause 7.1.4 and 8.3, the Trustees shall be entitled to determine, as they in their absolute discretion shall consider fit subject always to compliance with statutes and the JSE Listings Requirements:
7.3.1 to what extent the net income and the trust capital should be distributed to Beneficiaries;
7.3.2 to what extent receipts should be treated as income and to what extent they should be treated as capital,
and generally to decide, inter alia, by apportioning or allocating receipts, accruals and expenditure in such manner as they see fit, any difficulty which may arise as to what constitutes “capital” and as to what constitutes “income”, to treat any periodic receipts as income (although received from wasting assets) without being required to make provision for the amortisation thereof and any determination made by the Trustees in terms of this clause 7.3 shall be final and binding and not open to challenge by anyone.
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8. NET INCOME
8.1 All costs and expenses lawfully incurred by the Trustee in connection with the administration of the Trustee including, but without limitation:
8.1.1 any expenses incurred in running the Trust;
8.1.2 interest payable by the Trust on any loans advanced to the Trust, including but without limitation in respect of the founder loan;
8.1.3 if for any reason the Trustee is at any time required to furnish security, the costs from time to time of furnishing security;
8.1.4 the trustee’s remuneration; and
8.1.5 any income tax or other tax that may become payable by the Trustee in its representative capacity in respect of the income of the trust,
shall be paid by the Trustee out of the income of the Trust, except to the extent that the Trustee, in its discretion and in consultation with the auditors allocates any such costs and expenses to the Trust capital or that the income of the Trust is inadequate for the purposes, in which case the Trustee may use the Trust capital for those purposes.
8.2 The balance of the income remaining after the provisions of clause 8.1 have been given effect to (which is the “net income”), if any, shall be available for distribution by the Trustee to the income beneficiaries in accordance with the provisions of clause 7.2 of the Trust Deed.
8.3 Where income of the Trust is at any time derived from different sources or is of different kinds, the trustee shall be entitled for the purpose of or in allocating, distributing or applying any part of that income, to identify its source or sources and its nature and to allocate or distribute or apply it as income derived from the source or sources and of the nature so identified.
9. APPOINTMENT OF AND LOSS OF OFFICE BY TRUSTEE
9.1 There shall at all times be at least 4 (four) Trustees in office and not more than 17 (seventeen) Trustees.
9.2 If the initial Trustee ceases to hold office as such for any reason (and no additional Trustee has been co-opted by the initial Trustee with the consent of VPIF), a successor shall be appointed by the initial Trustee, with the prior consent of VPIF. Each successor appointed as a Trustee in terms hereof shall, upon its written acceptance of appointment, be vested with and bound by all the powers and duties of a Trustee appointed in terms of the Trust Deed.
9.2.1 The Trustees from time to time shall be the same persons who are from time to time the South African resident directors on the Company’s board of directors (the “ VPIF Board”).
9.2.2 No person who is not a director on the VPIF Board shall be qualified to hold office as a Trustee of the Trust.
9.2.3 Each of the Trustees shall have the power of assumption and co-option, but only in relation to a person who is a director on the VPIF Board at the relevant time.
9.3 If at any time there is no Trustee, the auditors, or if there is no auditors, the president of the Law Society of the Northern Provinces (or its successor in Gauteng) shall make the necessary appointment.
9.4 The following persons shall be disqualified from acting as Trustee:
9.4.1 in the case of a trustee who is a natural person:
9.4.1.1 any person who would be disqualified from acting as a director of a company in terms of section 218(1)(c) of the Companies Act or any corresponding statutory provision;
9.4.1.2 any person removed from an office of trust on account of misconduct;
9.4.1.3 a person whose estate has been sequestrated and has not been rehabilitated;
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9.4.1.4 a person who has been found lunatic or is of unsound mind or has been declared incapable of managing his affairs;
9.4.1.5 a person who has been convicted of any offence involving dishonesty or in connection with the promotion, management or formation of a company; and
9.4.1.6 immediately such Trustee ceases to be a director of VPIF, irrespective of the reason therefor.
9.4.2 in the case of a corporate Trustee:
9.4.2.1 a company which has been liquidated or placed under judicial management, whether provisionally or finally; and
9.4.2.2 if the Trustee or any of its directors has been convicted of any offence including dishonesty, or in connection with the promotion, management or formation of a company.
9.5 The office of a Trustee shall be vacated:
9.5.1 if the Trustee becomes disqualified in terms of clause 9.4;
9.5.2 in the case of a Trustee who is a natural person, if an application is filed for the sequestration of his estate upon which a provisional order of sequestration is subsequently granted or an application is filed for the surrender of his estate or for an administration order;
9.5.3 in the case of a corporate Trustee, if the Trustee commits an act of insolvency as defined in the insolvency law for the time being in force or if it makes any arrangement or composition with its creditors generally;
9.5.4 if the Trustee becomes disentitled in law to hold the office of Trustee;
9.5.5 30 (thirty) days after the date upon which the Trustee gives written notice to VPIF of his intention to resign, provided that such resignation shall take effect only upon the appointment of a Trustee in the place of the resigning Trustee; or
9.5.6 30 (thirty) days after the date on which VPIF (with the concurrence of the Master of the High Court and the Trust’s auditors) gives written notice to the Trustee requiring the Trustee:
9.5.6.1 to appoint a new Trustee in place of such Trustee;
9.5.6.2 upon the appointment of the new Trustee in place of the resigning Trustee, to resign as Trustee of the Trust.
10. ACCOUNTING MATTERS, AUDITING AND BANKING
10.3 The books of the Trust shall be audited. The Trustee shall prepare a set of financial statements of the Trust in respect of each financial year, which statements shall be signed by the Trustee and reported on by the auditors.
10.6 Without in any way derogating from the obligation of the Trustee to prepare a set of annual financial statements of the trust in respect of each financial year under clause 10.3, to the extent that the financial year end of the trust is different from the financial year end of the Company, the Trustee shall be obliged to cause an additional set of annual financial statements for the trust to be prepared as at each financial year end of the Company and for the period covered by the financial statements required to be prepared by the Company, so as to facilitate the consolidation of the financial position of the trust with that of the Company and its subsidiary companies in existence from time to time. The trust shall be entitled to recover from the Company the cost of preparation of the additional set of financial statements.
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12. EXEMPTION FROM ANY OBLIGATION TO FURNISH SECURITY
12.1 The Trustee shall be exempt from any obligation to furnish security in connection with its appointment and/or for the due administration of the Trust to the Master of the High Court or any other person, body or authority, as provided for in the statutes or any other law now in force or to come into force relating to Trusts and the protection of Trust property, and the Master and any such other person, body or authority are hereby directed to dispense with and not to require such security.
13. TRUSTEE’S POWERS
13.1 The Trustee shall, having regard to the Trust’s objects, have all powers enjoyed by Trustees under the common law or by statute, for the benefit and purposes of the Trust to do whatever may be effected by a natural person with full legal capacity (subject to restrictions imposed in the Trust Deed) to enable it to give effect to the Trusts’ objects and the provisions of the Trust Deed including, but without limitation, the following:
13.1.1 to conclude asset management agreements;
13.1.2 to conclude lease agreements;
13.1.3 to conclude the agreement governing the VPIF loan and such other loan agreements, credit enhancement agreements or other agreements ordinarily concluded in the running of a property letting business;
13.1.4 save as otherwise expressly provided for in the Trust Deed, to deal from time to time with the Trust fund as it in its discretion may deem to be in the best interests of the Trust and/or a beneficiary and for that purpose to exercise all powers relative thereto as if the Trustee was the absolute owner of such fund and generally to perform all acts to the same extent and with the same effect as the founder might have done if the Trust Deed had not been executed, and the Trustees’ decisions and actions, whether actually made or taken in writing or implied from its acts, shall be conclusive and binding on all beneficiaries;
13.1.5 to borrow from time to time such sums of money on such terms and conditions as it in its discretion considers fit, with power from time to time to consent to any variations or alterations of the terms of any such borrowing and to secure any such borrowing or any other obligations of the Trust by the mortgage, pledge or cession of any asset constituting portion of the Trust’s funds and, if the Trustee in its discretion considers it fit, to borrow afresh on security or otherwise for the purpose of repaying any such mortgage, pledge or cession;
13.1.6 subject to the statutes, to open and operate (either themselves or by a person or persons authorised by them) accounts in registered banks and other financial institutions;
13.1.7 subject to clause 8.1, to reimburse itself from the Trust fund for all expenses which may be incurred by it in or about the execution of the trusts and powers conferred upon it, and, without detracting from the aforegoing, to employ professional advisers, consultants, agents and other people whomsoever to carry out the objects of the Trust and to pay their fees, commissions, remuneration and other charges out of the Trust fund and to confer upon any agents so appointed the right to exercise any discretion which may be vested in the Trustee;
13.1.8 to call in, recover, collect and sue for all moneys owing to the Trust, to institute or defend legal proceedings and to sign all deeds, powers of attorney and other documents that may be necessary for those purposes;
13.1.9 to sign and execute transfers and cessions of property, bonds, consents to cancellations of bonds, leases, servitudes and other deeds and powers of attorney relating thereto, and generally all documents of any nature whatsoever as may be necessary from time to time in connection with the acquisition, realisation, disposal or encumbrance of assets of or for the Trust and the carrying out of the terms of the Trust Deed;
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13.1.10 to conclude agreements for the acquisition of immovable property and to take up any rights attaching to any shares, debentures, participatory interests in collective investment schemes or any other securities (collectively “shares”) which may be held by the Trust;
13.1.11 to exercise the voting power attached to any shares in any such manner as it in its discretion may consider in the best interests of the Trust;
13.1.12 to deposit with and to allow to remain in the possession of a registered financial institution or a trust company or trust companies or other depository or depositories, whether in the RSA or elsewhere as the Trustee in its discretion may think fit, any shares and other assets at any time held by the Trust;
13.1.13 to insure the assets, income and liabilities of the Trust on such terms as it in its discretion deems fit, with the specific power of insuring, at the cost of the Trust, itself in respect of actions and omissions as Trustee of the Trust against any ordinarily insurable personal liability on its part, whether under any of the statutes or common law;
13.1.14 to enter into contracts on behalf of the Trust and to adopt and accept for the Trust’s benefits under contracts entered into for the benefit of the Trust, whether before or after its creation.
13.2 The Trustee shall not (without the express written approval of VPIF) have the power to reinvest any net income.
13.3 Without in any way derogating from the provisions of clauses 13.1 and 13.2, the Trustees shall have all the powers that are required or allowed in law, including all such powers as are vested in them, whether under the Statutes, the Company’s incorporation documents or by common law, as attach to the directors of the Company.
13.4 The Trustees shall have the same fiduciary duty to the trust as that which they would have had, had the Trust been a public limited liability company incorporated in terms of the Companies Act, in force from time to time, and the Trustees were directors of such company. Accordingly all the provisions of the Companies Act in force from time to time as well as the common law pertaining to the fiduciary duties of directors, shall apply mutatis mutandis to each of the Trustees.
13.5 Notwithstanding any of the provisions to the contrary contained in this Trust Deed, the Trustees shall be obliged to take all such steps as are necessary or requisite so as to ensure that the trust conforms with the JSE Listings Requirements, in the same way as a board of directors of a subsidiary of a listed company would have been obliged to conform with such JSE Listings Requirements.
14. DISCRETIONARY NATURE AND PROTECTION OF BENEFICIARIES’ INTERESTS
Until any benefit or award vests in a beneficiary, nothing herein contained nor any resolution, deed or act of the Trustee shall create or confer upon any person any right or claim to any benefit or award or delivery of any assets hereunder.
15. TERMINATION OF TRUST
The Trust shall endure until the Company is finally liquidated, wound-up or deregistered, as the case may be, alternatively when VPIF and the Trustee (if there is more than one Trustee, 75% (seventy-five per cent) of the number of Trustees then holding office) agree to terminate the trust.
16. AMENDMENT OF TRUST
The provisions of the Trust Deed may be varied only in writing by VPIF and the Trustee, but if there is more than one Trustee, then with the approval of 75% (seventy-five per cent) of the number of Trustees then holding office.
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Appendix 10
SALIENT FEATURES OF THE DEBENTURE TRUST DEED
EXTRACTS FROM THE DEBENTURE TRUST DEED
1. DEFINITIONS
“1.2.14 “Ordinary Resolution” means a resolution passed at a properly constituted meeting of Debenture Holders, upon a show of hands, by a majority of the Debenture Holders voting in person or by proxy, or, if a poll is duly demanded, by a majority of the votes cast at such poll by Debenture Holders voting in person or by proxy;”
“1.2.16 “Prime Rate” means the prime rate of interest from time to time as charged by SBSA to its most favoured corporate customers, as certified by a manager of SBSA, whose authority and designation it shall not be necessary to prove;”
“1.2.17 “Record Date” shall bear the meaning ascribed thereto in section 1 of the Companies Act as read with the JSE Listings Requirements, subject to the following:
1.2.17.1 the references in section 1 and 59 of the Companies Act to “shareholders” and “shareholdings” shall be deemed to be a reference to “Debenture Holders” and “debenture holdings”; and
1.2.17.2 the Record Date must fall on a Friday, unless the Friday is a public holiday, in which event the Record Date shall fall on the last trading day of the week;”
“1.2.22 “Special Resolution” means a resolution passed at a properly constituted meeting of Debenture Holders, upon a show of hands, by a majority consisting of not less than 75% (seventy-five percent) of the Debenture Holders present in person or by proxy or, if a poll is duly demanded, by a majority consisting of not less than 75% (seventy-five percent) of the votes cast at such poll by Debenture Holders voting in person or by proxy;”
“2. CREATION OF THE DEBENTURES AND SUBSCRIPTION THEREFOR
2.1 The Board:
2.1.1 may authorise the Company to create and issue secured or unsecured debt instruments at any time, including additional Debentures, except to the extent provided otherwise by the Company’s Memorandum of Incorporation and any such debt instrument shall be subject to the JSE Listings Requirements;
2.1.2 shall be required to determine whether each such debt instrument is secured or unsecured; and
2.1.3 shall have all powers vested in them under the Companies Act as read with the Company’s Memorandum of Incorporation, including the power to consolidate, subdivide and redeem the Debentures or any of them, subject to compliance with the Company’s Memorandum of Incorporation, the JSE Listings Requirements and this Deed;
2.2 The Company has created a total of 2 000 000 000 (two billion) Debentures, and of these Debentures, 57 024 000 (fifty-seven million and twenty-four thousand) Debentures have prior to the date of coming into existence of this Debenture Trust Deed, been allotted and issued, in equal shares, to the existing Linked Unit Holders, in the form of Linked Units.
2.3 The Debentures may be issued to such persons and on such terms and conditions and with such rights and restrictions attaching thereto as the board shall determine, upon and subject to the terms of this Deed, provided that such Debentures shall be offered to the existing Debenture Holders pro rata to their holding of Debentures in question in the Company, unless:
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2.3.1 sued in relation to the acquisition of properties (whether directly or indirectly);
2.3.2 by way of an issue of Linked Units for cash or in discharge of liabilities, on terms approved by not less than 75% (seventy-five percent) of the Linked Unit Holders present or represented at a meeting of the Linked Unit Holders convened to approve such issue; or
2.3.3 save as is contemplated in clauses 2.3.1 and 2.3.2 hereof, otherwise empowered by a general meeting of the registered holders of securities in the Company.
2.4 Subject to the provisions of the JSE Listings Requirements, no Debenture may be issued, sold or transferred unless linked indivisibly to a share so as to form a Linked Unit, unless shareholders holding at least 90% (ninety percent) of the issued share capital in the Company and Debenture Holders holding at least 90% (ninety percent) of the issued Debentures in the Company, agree otherwise.
2.5 Subject to the provisions of the Companies Act, the Company may pay commission not exceeding 10% (ten percent) of the issue price to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares, Debentures or Linked Units of the Company, or for his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares, Debentures or Linked Units of the Company.
2.6 The capital amount of the loan to the Company assuming that all the Debentures, which are created, are issued at their face value, will be R4 995 000 000 (four billion nine hundred and ninety-five million Rand).
2.7 No amounts other than repayments of principal and interest are payable by the Company to the Debenture Holders.
2.8 All subscription monies payable in respect of the debentures shall be paid to or for the benefit of the Company in the manner prescribed in the Pre-Listing Statement.”
“5. OBLIGATION TO PAY PRINCIPAL AND INTEREST
The Company binds itself to pay to the Debenture Holders or to the Trustee on behalf of and in trust for such holders, the respective sums which shall become due to such holders for principal and interest upon the Debentures at the times at which those sums become due in terms of this Deed.”
“6. INTEREST
6.1 The Debentures will bear interest at a variable rate per annum as calculated and determined in accordance with the provisions of this clause 6.
6.2 Each Debenture shall confer on the holder thereof the right to receive interest which shall be calculated:
6.2.1 in respect of each half-yearly period determined by reference to clause 6.7 and in this regard, the aggregate amount available for distribution as Interest shall, in respect of the relevant half year accounting period be based on the unaudited interim financial statements of the Company and in respect of the full year, the audited financial statements for the financial year of the Company concerned;
6.2.2 be calculated in accordance with the following formula in respect of each half-yearly period as aforesaid:
“the distributable income for the half-yearly period concerned divided by the number of Debentures in issue on the applicable Record Date.”
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6.3 For the purposes of the above, “distributable income” shall be determined by the board in accordance with the following formula:
DI = A – B – C – D + E – F
Where:
DI = distributable income;
A = gross income generated by the Company including recoveries;
B = operating expenses of the Company taking into account management fees as well as allowances for non-cash flow items in respect of:
(i) tenant installations, amortised on the straight-line basis over the period of each relevant lease;
(ii) depreciation on capital expenditure, at rates and over periods determined in accordance with IFRS; and
(iii) commission payable to leasing agents, amortised over the period of each relevant lease;
C = i nterest costs incurred by the Company, but excluding interest paid or payable on the Debentures);
D = any taxation payable by the Company, excluding deferred taxation;
E = any normal taxation credits received or receivable excluding deferred taxation ; and
F = any dividends declared on the Ordinary Shares.
6.4 In arriving at the distributable income, the Board shall exclude exceptional, extraordinary or abnormal items and all profits and losses of a capital nature.
6.5 In the event of the board being in doubt as regards the determination of distributable income, the board shall refer the matter to an appropriate independent advisor appointed by the board, acting as an expert and not as an arbitrator, whose decision shall be final and binding, in the absence of manifest error, on the board. In the event of a dispute as to the appropriateness of the advisor, the chairman of the Company board shall determine the adviser.
6.6 In the aggregate, not less than 100% (one hundred percent) of the distributable income for each financial year shall be paid to the Debentures Holders in accordance with the above provisions, provided that the board shall, for the purposes of calculation, be entitled in their discretion (subject to the Statutes, and if the Debentures are listed on the JSE, the JSE Listings Requirements) to ignore or round off downward fractions of a cent in effecting payment of any interest on any Debentures.
6.7 Interest shall be paid on Debentures at half-yearly periods ending on 30 June and 31 December in each financial year of the Company, and will be payable on the earlier of the date upon which dividends in respect of the Ordinary Shares are payable or 4 (four) months after the end of each financial year of the Company, or the half-yearly periods of 30 June and 31 December, as the board in its discretion determines.
6.8 The first payment of interest shall be in respect of the period from the Listing Date to 31 December 2011.
6.9 Only Debenture Holders registered as such on the relevant Record Date shall be entitled to the payment of interest.
6.10 If at the relevant Record Date, the Company’s Debentures are listed on the JSE, the Company shall be obliged to publish notice of the relevant Record Date in compliance with the JSE Listings Requirements.
6.11 Interest less any withholding tax thereon, if any, required to be deducted by the Company, shall be paid by cheque drawn on a bank in South African currency without provision for exchange or bank commission and at the risk of Debenture Holders.
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6.12 If the Company changes the date upon which its financial year ends, the Company is authorised by the Debenture Holders to change the dates by reference to which the interest is calculated, falls due, accrues and becomes payable, provided that:
6.12.1 the rights of the Debenture Holders to interest on their Debentures shall not be diminished or adversely affected by such changes;
6.12.2 the changes are approved by the Trustee, which approval shall not unreasonably be withheld;
6.12.3 the Company shall forthwith notify Debenture Holders by circular of the changes made.”
“8. REPAYMENT AND REDEMPTION OF DEBENTURES
8.1 The debentures shall become repayable at their nominal value forthwith, subject to clause 9.4.1, if a final order of a competent court is made or an effective resolution is passed for the winding up of the Company, or if the Company commits a material breach of a material obligation under this Trust Deed or if the Company commits an act of default as specified in this Trust Deed which is not remedied by the Company, or if not remedied, sanctioned or condoned, as the case may be, by the Debenture Holders under the terms of this Deed.
8.2 The debentures shall be redeemable as follows:
8.2.1 each issue of Debentures governed by this Deed shall be redeemable at the instance of the Debenture Holders at any time after 25 (twenty-five) years after the date of allotment of the relevant Debentures;
8.2.2 the Debenture Holders may exercise the right to require the Debentures to be redeemed in accordance with clause 8.2.1, only by Special Resolution;
8.2.3 upon the passing of the Special Resolution referred to in clause 8.2.2, the Debentures shall be redeemed by the Company at their nominal value on the 5th (fifth) anniversary of the date upon which the Special Resolution referred to in clause 8.2.2 is passed;
8.2.4 the procedure to be followed by the Company in regard to the redemption shall be determined by the Company at the appropriate time and be approved by the Trustee, which approval shall not unreasonably be withheld or delayed, and if the Debentures are listed, by the JSE;
8.2.5 any such redemption by the Company shall have the effect of cancelling the Debentures redeemed and such Debentures may not be re-allotted or reissued.
8.3 The Company shall have the right at any time to purchase Debentures which do not form part of Linked Units or subject to compliance with the Companies Act, and the requirements of the JSE, as Linked Units. Any repurchases shall have the effect of cancelling the Debentures purchased and shall be deemed to have been repaid in full by the Company. Such Debentures may not be re-allocated or re-issued and the Company shall promptly notify the Trustee and the JSE of the purchases made.
8.4 The rights of Debenture Holders to repayment of the capital are subordinated to the claims of the creditors of the Company and the Trustee is hereby authorised to do all such things as may be necessary or appropriate to give effect to the aforesaid subordination in terms of this Deed.”
“9. SUMMARY REPAYMENT OF DEBENTURES
9.1 The Debentures, together with all interest accrued thereon and all other moneys payable in terms of this Deed, if any, shall become immediately repayable on the happening of any of the following events (without, for the avoidance of doubt, any notice of any nature whatsoever (not limited eiusdem generis) having to be given by the Trustee, other than in the case where one of the following events expressly includes a notice by the Trustee as forming part of the event):
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9.1.1 the Company defaults in the payment of any interest or principal moneys on the Debentures and continues such default for more than 21 (twenty-one) days after receipt by it of a written notice from the Trustee demanding that the payment be made;
9.1.2 if the Company commits any breach of any of its obligations under this Deed (other than a default in payment as set out in clause 9.1.1 or any of the other breaches contemplated in this clause 9.1) and, within 21 (twenty-one) days after receipt by the Company of a notice in writing from the Trustee requiring the breach to be remedied, shall fail to remedy the breach if in the circumstances operating at the time it can reasonably be remedied within that period or, if it cannot in those circumstances reasonably be remedied within that period, shall fail within that period to initiate all proper steps towards its remedy and thereafter to pursue them until the remedy is complete, or, if it is a breach that cannot be remedied, shall fail within that period to initiate and thereafter to pursue all proper steps designed to cause it to cease and to prevent its recurrence;
9.1.3 a final order shall be made or an effective resolution passed for the winding-up of the Company;
9.1.4 any final court order is issued placing the Company under business rescue proceedings;
9.1.5 the board of the Company resolves to commence business rescue proceedings as a result of which a business rescue practitioner is appointed in respect of the Company;
9.1.6 any material Assets of the Company are attached under a writ of execution issued out of any court and the writ is not satisfied within 14 (fourteen) days after the attachment came to the notice of the board, or application to rescind is not made within 30 (thirty) days after the attachment came to the notice of the board and such application to rescind is not proceeded with timeously or is refused, provided that the refusal by a court to grant an application for rescission shall not be deemed to be a refusal until it becomes final and not subject to appeal or further appeal, provided that in any event the provisions of this clause 9.1.5 shall only apply if the effect of any such attachment is likely to have a material effect on the Company’s financial position;
9.1.7 the Company makes any alteration to the provisions of its memorandum of incorporation which, in the opinion of the Trustee, adversely affects the interests of Debenture Holders or could do so;
9.1.8 the Company defaults or threaten to default in the payment of its liabilities generally;
9.1.9 the Company offers or agrees to enter into any general composition or compromise or arrangement with all its creditors;
9.1.10 the Company reduces its issued share capital or stated capital account (other than a reduction which does not involve any distribution or payment in cash or in kind by the Company to its shareholders or any of them or the redemption of any preference shares issued or to be issued by the Company with redemption rights or a reduction of the stated capital account for any purpose permitted by the Companies Act);
9.1.11 the Company disposes of or attempts to dispose of the whole or substantially the whole of its undertaking, or the whole or the greater part of its assets otherwise than in compliance with the provisions of section 115 of the Companies Act;
9.1.12 the Company reduces its share premium account (other than a reduction permitted by the Companies Act or which does not involve any distribution or payment in cash or in kind by the Company to its members or any of them) or for its winding up for the purposes of reorganisation or reconstruction;
9.1.13 the Company is granted a final order or passes an effective resolution to approve and implement any fundamental transaction as contemplated in the Companies Act, including any amalgamation, demerger, merger or corporate reconstruction without the sanction of a Special Resolution; or
9.1.14 the Company ceases to carry on its business.
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9.2 Upon the happening of any of the events specified in clause 9.1 coming to the notice of the Trustee, the following shall apply:
9.2.1 the Trustee may in its discretion require the Debentures together with interest accrued thereon and any other monies payable in terms of this Deed, to be repaid and may otherwise enforce this Deed or it may determine not to do so without first referring to the Debenture Holders or may determine not to do so if in the sole discretion of the Trustee, it considers that the event does not adversely affect the interests of the Debenture Holders;
9.2.2 if the Trustee determines not to do so without reference to the Debenture Holders, it shall forthwith convene a meeting of Debenture Holders who may by:
9.2.2.1 Ordinary Resolution:
9.2.2.1.1 direct enforcement, in which event the Trustee shall enforce this Deed; and/or
9.2.2.1.2 give other directions, including directions as to enforcement if certain conditions are not fulfilled,
and the Trustee shall obey those directions to the extent to which they are not in conflict with this Deed or are capable of being carried out, provided that before carrying out the directions the Trustee may require that provision be made by the Debenture Holders (but without in any way releasing the Company of its obligation to do so) to furnish it with the necessary funds to enable it to meet the expense of giving effect to the directions;
9.2.2.2 Special Resolution sanction the conduct of the Company.
9.3 The Trustee shall not be required to take any steps to ascertain whether any event, upon the happening of which the Debentures are liable to become repayable, shall have occurred, and unless and until the Trustee shall have been served with express written notice of such happening in the manner prescribed in clause 3 6, the Trustee shall be entitled to assume that no such event has taken place.
9.4 For the purposes of clause 9.1:
9.4.1 an order of court shall not be deemed to be final unless, the order being appealable, the period for noting appeal shall lapse without appeal or appeal having been noted it shall be abandoned or not proceeded with within the period prescribed by the rules of court, provided that the periods in question are to be extended to the extent (if any) that the court may permit on application by the Company against which the order is given;
9.4.2 any attachment referred to in clause 9.1.5 shall be deemed to have come to the notice of the board within 7 (seven) days after its making unless the contrary shall be shown. The period of 7 (seven) days referred to in clause 9.1.5 shall be extended pending any proceedings begun to set aside the writ or remove the attachment until 7 (seven) days following a final and un-appealable judgment refusing such setting aside or removal. The term “writ of execution” in clause 9.1.5 does not include a writ of attachment ad fundandam jurisdictionem or ad confirmandam jurisdictionem.
9.5 A Debenture Holder shall not be entitled to enforce its rights under this Deed nor under its Debentures in any manner contemplated by the Companies Act, but all rights of enforcement shall vest in the Trustee in accordance with the provisions of this Deed.
9.6 Subject to the provisions of sections 43(7) and 43(8) of the Companies Act, the Trustee shall not be responsible for any loss to any Debenture Holder or the Company or any other person resulting from the exercise or non-exercise of the powers, authorities or discretions vested in the Trustee in terms of this Deed.”
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“11. ADDITIONAL POWERS OF TRUSTEE
11.1 The Trustee shall have at all times the following powers, in addition to the powers by law conferred on trustees:
11.1.1 power to waive or condone (but so far only as in its opinion the interests of the Debenture Holders shall not be prejudiced thereby) on such terms and conditions as the Trustee may think fit, any breach by the Company of any of the conditions hereof, but subject to any prior directions given by Special Resolution of the Debenture Holders precluding such waiver or condonation in respect of any particular type of breach or generally;
11.1.2 power instead of acting personally to employ as far as may be reasonably necessary and pay an admitted attorney, whether practising or non-practising, or any other person to transact any business or do any act of whatsoever nature required to be done pursuant to this Deed, including the receipt and payment of money and any payment made in terms of this clause 11.1.2 shall be refunded to the Trustee by the Company, provided that a Trustee engaged in any profession shall be entitled to charge and be paid by the Company all professional charges for any business or act done by it or its firm in connection with the trust;
11.1.3 power to take and act upon any expert or professional advice;
11.1.4 generally, without imposing any obligation on the Trustee in that regard, power to make any payment, incur any disbursements or expense or to perform any act which the Company should have paid, incurred or performed in discharge of its obligations under the provisions of this Deed (provided that such payment, disbursement, expense or act is not being disputed by the Company);
11.1.5 power to demand, claim, sue for and recover from the Company any moneys, costs, charges or expenses (with interest thereon compounded monthly in arrear at the Prime Rate) paid or incurred by the Trustee in satisfying any liability incurred by it in the execution of any of the trusts, powers and provisions of this Deed or in satisfying any obligations which the Company and/or its Subsidiaries has failed to discharge in terms of this Deed;
11.1.6 power to delegate any person to perform all or any acts or exercise all or any discretions which it is entitled to perform or exercise under this Deed;
11.1.7 power to borrow money on behalf of the Debenture Holders and chargeable against the capital and interest accruing to the Debenture Holders, for the purpose of providing funds which in the Trustee’s opinion are reasonably necessary to enable it to exercise any powers conferred by this Deed;
11.1.8 notwithstanding the provisions hereof, the Trustee shall be entitled, if it so deems fit, to convene a meeting of Debenture Holders to obtain from them a specific mandate in regard to anything which the Trustee might do or refrain from doing, whether or not such act is within the Trustee’s discretion and the Company shall, if so required by the Trustee, convene such meeting at the Company’s cost and expense.
11.2 The Trustee shall not be bound to exercise and shall not be liable for the non-exercise of any such power unless it has a direction of the Debenture Holders given by resolution requiring it to exercise such power but it may exercise any power if it so determines without such direction. The Trustee shall convene a meeting of Debenture Holders to enable any such direction to be given.
11.3 The powers contained in this clause shall be in addition to the powers exercisable by the Trustee in terms of the other provisions of this Deed.”
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“15. CESSATION OF OFFICE OF THE TRUSTEE AND APPOINTMENT OF A NEW TRUSTEE
15.1 The Trustee and each of its successors shall remain in office until it ceases to hold office in terms of clause 15.2.
15.2 The Trustee shall cease to hold office if:
15.2.1 it shall have resigned by having given at least 60 (sixty) Business Days written notice to the Company. Such resignation shall be effective without any leave of any court or any other person. At the expiration of such period of notice the Trustee shall be discharged from the trusts hereof and shall not be responsible for any loss or costs occasioned by its resignation; or
15.2.2 being a natural person, its estate shall be sequestrated as insolvent or it shall be placed under curatorship or, being a corporation, shall be wound up or placed (provisionally or finally) in liquidation or under judicial management; or
15.2.3 it becomes disqualified in law to hold the office of trustee; or
15.2.4 it shall be removed from office by an Ordinary Resolution.
15.3 The provisions of clauses 15.1 and 15.2 shall apply to every successive Trustee.
15.4 If the Trustee or any subsequent Trustee ceases to hold office, the Company may appoint any person, including a juristic person, as new trustee for the Debenture Holders, if:
15.4.1 the person:
15.4.1.1 is not a director or prescribed officer of the Company, or a person related or inter-related to the Company, a director or a prescribed officer; and
15.4.1.2 does not have any interest in, or relationship with, the Company that might conflict with the duties of a trustee; and
15.4.2 the board is satisfied that the person has the requisite knowledge and experience to carry out the duties of a trustee.
15.5 Any new trustee appointed for the purpose of this Deed must:
15.5.1 satisfy the requirements of clause 15.4.1;
15.5.2 be approved by the holders of at least 75% by value of the Debentures then in issue, present at a meeting called for that purpose; and
15.5.3 be approved by the board, whose approval the board undertakes shall not be unreasonably withheld or delayed, except for a reason stipulated under clause 15.4.2.
15.6 The certificate of the auditors of the said professional company or its successors, as existing immediately prior to the death or cessation of office of the present Trustee or of any successor (being such a member) as to the identity of the professional company whose member is to be appointed and of the membership of such member shall be conclusive evidence of that identity.
15.7 The Trustee or its estate shall not be liable for any loss occasioned by the death, resignation or cessation of office.”
“17. INDEMNITY
Subject to the provisions of sections 43(7) and 43(8) of the Companies Act and the Trust Property Control Act, 1988 (if applicable) the Company indemnifies the Trustee and any officer, employee or representative of the Trustee against all proceedings, claims, costs or demands of any nature whatever in respect of anything done or not done in terms of this Deed, including, but not limited to, any liability arising out of any mistake or error of judgment of the Trustee or any such other person, provided that:
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17.1 the Trustee and such other person shall not be indemnified against any liability arising out of breach of trust if the Trustee fails to exercise that degree of care and diligence required of it as Trustee, having regard to the provisions of this Deed; but
17.2 the Trustee and such other person may be released from any liability contemplated in clause 17.1, either in respect of specific acts or omissions or on the Trustee ceasing to act, by a Special Resolution.”
“ 30. FURTHER RIGHTS OF DEBENTURE HOLDERS
The Company shall not undertake a capitalisation issue to its ordinary shareholders and any other equity shareholders who may be entitled thereto, of securities other than Ordinary Shares, or a capitalisation issue which is paid-up, other than out of the share premium account of the Company, without the prior written consent of the Trustee, which consent the Trustee undertakes shall not unreasonably be withheld or delayed, and shall not be withheld if the proposed capitalisation issue does not adversely affect the interests of Debenture Holders.”
“3 1. AMENDMENT OF TRUST DEED
3 1.1 Save as provided in clause 3 1.2, the terms of this Deed may be amended only by the parties to it but subject to first obtaining either:
3 1.1.1 the consent in writing of the holders of 75% (seventy-five percent) of the Debentures; or
3 1.1.2 the sanction of a Special Resolution of Debenture Holders.
3 1.2 The terms of this Deed may be amended by agreement between the Trustee and the Company:
3 1.2.1 to such extent only as may be necessary to comply with the requirements of the JSE if the Debentures are or are to be listed;
3 1.2.2 to correct any manifest typographical or descriptive error.”
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Appendix 11
EXTRACTS FROM THE MOI
1. INTERPRETATION
In this MOI words that are defined in the Companies Act but not defined in this MOI will bear the same meaning in this as in the Companies Act. Read where necessary with definitions in the JSE Listings Requirements. For ease of reading, such terms have been capitalised in this MOI:
1. unless the context otherwise requires:
1.1 “Companies Act” means the Companies Act, No. 71 of 2008, as amended or any legislation which replaces it;
1.2 “Company” means Vunani Property Investment Fund Limited (Registration number 2005/019302/06) or by whatever other name it may be known from time to time;
1.3 “Debentures” means the unsecured, variable rate debentures in the Company having a nominal value of R2,4975 (two comma four nine seven five Rand), and which debenture is indivisibly linked to one Share, the terms of which are governed by the Debenture Trust Deed;
1.4 “Debenture Trust Deed” means the written debenture trust deed entered into on or about June 2011 between the Company and Fluxmans Inc (Registration number 2000/024775/21) (as trustee for the Debenture holders), governing the terms and conditions of the Debentures;
1.5 Deliver” means deliver in the manner in which the Company is entitled to give notice or deliver documents in accordance with clause 33 (Notices) and the Companies Act;
1.6 “Effective Date” means 1 May 2011;
1.7 “Electronic Address” means in regard to Electronic Communication, any email address furnished to the Company by the Holder;
1.8 “Gazette” means the Government Gazette of the Republic of South Africa;
1.9 “Holders” means registered holders of Securities of the Company from time to time;
1.10 “Ineligible or Disqualified” means ineligible or disqualified as contemplated in the Companies Act and, in addition as contemplated in clause 22 which shall apply not only to Directors and Alternate Directors but also to members of Board committees and members of Audit committees and Prescribed Officers and the secretary of the Company;
1.11 “JSE” means the exchange operated by JSE Limited (Registration number 2005/022939/06) (or any other name by which it may be known in the future) or its successor body;
1.12 “JSE Listings Requirements” means the listings requirements from time to time for companies listed on the JSE;
1.13 “Linked Units” means one ordinary Share linked to one Debenture;
1.14 “Linked Unit Holders” means the holders of Linked Units;
1.15 “MOI” means this Memorandum of Incorporation;
1.16 “Participant” means a depository institution accepted by a Central Securities Depository as a participant in the Securities Services Act;
1.17 “Republic” means the Republic of South Africa;
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1.18 “Regulations” means regulations published pursuant to the Companies Act;
1.19 “Securities Services Act” means the Securities Services Act, No. 36 of 2004 (as amended from time to time) or any Act which replaces it;
1.20 “SENS” means the Securities Exchange News Service, or its successor;
1.21 “Uncertificated Securities” means securities as defined in the Securities Services Act which are by virtue of the Companies Act transferable without a written instrument and are not evidenced by a certificate; and
1.22 “Writing” includes Electronic Communication but as regards any Holder entitled to vote, only to the extent that such Holder has notified the Company of an Electronic Address.
4. POWERS AND CAPACITY OF THE COMPANY
4.1 The Company has the powers and capacity of an Individual save to the extent that a Juristic Person is incapable of exercising any such power, or having any such capacity.
4.2 Save to the extent otherwise permitted by the Companies Act, the Shareholders may not ratify any action by the Company or the Directors that is inconsistent with any such limit, restriction or qualification applicable to such action.
4.3 Notwithstanding the omission from this MOI of any provision to that effect, the Company may do anything which the Companies Act empowers a company to do, if so authorised by this MOI.
5. AMENDMENTS TO THE MOI
5.1 Save for correcting errors substantiated as such from objective evidence or which are self-evident errors (including, but without limitation eiusdem generis, spelling, punctuation, reference, grammar or similar defects) in the MOI, which the Board is empowered to do, all other amendments of the MOI shall be effected in accordance with section 16(1) of the Companies Act and a Special Resolution passed by the Holders of the ordinary Shares. The Board shall publish a copy of any such correction effected by the Board on the Company’s web site.
5.2 In accordance with the JSE Listings Requirements, an amendment to the MOI shall be deemed to include, but not be limited to the:
5.2.1 creation of any class of Shares;
5.2.2 variation of any preferences, rights, limitations or other Share terms attaching to any class of Shares;
5.2.3 conversion of one class of Shares into one or more other classes;
5.2.4 increase in the number of authorised Securities;
5.2.5 consolidation of Securities;
5.2.6 sub-division of Securities;
5.2.7 change of name of the Company;
5.2.8 conversion of Shares from par value to no par value.
6. THE MAKING OF RULES
The Board shall not have the capacity to make any Rules relating to the governance of the Company in respect of matters that are not addressed in the Act or MOI.
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7. AUTHORISED SECURITIES AND ALLOTMENT AND ISSUE
7.1 The Company is authorised to issue 2 000 000 000 (two billion) Linked Units (which includes Linked Units already issued at any time).
7.2 The Board shall not have the power to amend the authorisation (including increasing or decreasing the number) and classification of Shares (including determining rights, limitations, preferences or other terms) as contemplated in section 36(2)(b) or 36(3) of the Companies Act.
7.3 To the extent that the Company immediately before the Effective Date has authorised but unissued Linked Units in its capital of a class of which there are Linked Units, the unissued Linked Units of that class may be issued by the directors at par or at a premium or at a discount.
7.4
7.4.1 All Securities of a class shall rank pari passu in all respects.
7.4.2 All or any of the rights, privileges or conditions for the time being attached to any class of Securities of the Company may (unless otherwise provided by the terms of issue of the Securities of that class) whether or not the Company is being wound up, be varied in any manner with the consent in Writing of the Holders of not less than 75% (seventy five per cent) of the issued Securities of that class, or with the sanction of a Special Resolution passed at a separate meeting of the Holders of that class.
7.4.3 The Holders of that class of Securities shall also be entitled to vote with the Holders of the ordinary Shares as regards the passing of any resolution required to be passed for such variation by the Holders of the ordinary Shares, provided that:
7.4.3.1 a Holder of that class of Securities shall have so many votes as determined in accordance with the provisions of clause 19.32 below;
7.4.3.2 the total voting rights of all of the Holders of that class of Securities shall not exceed 25% (twenty-five percent) of the total voting rights of all Persons entitled to vote at such a meeting;
7.4.3.3 the votes of the Holders of that class of Securities shall not carry any special rights or privileges;
7.4.3.4 no resolution of Shareholders of the Company shall be proposed or passed, unless a special resolution of the Holders of the Shares in that class approved the amendment. The provisions of this MOI relating to Shareholders Meetings shall mutatis mutandis apply to any such separate meeting, except that:
7.4.3.4.1 the necessary quorum shall be the Holders of that class present in person, or represented by proxy and holding at least 25% (twenty-five percent) of the Shares of that class;
7.4.3.4.2 if at any adjourned meeting of such Holders, the required quorum contemplated in clause 7.4.3.4 is not present, those Persons entitled to vote who are Present shall be a quorum.
7.5 Notwithstanding any implication in this MOI to the contrary, the Board may not authorise any financial assistance in any way whatsoever by the Company for the purposes of, or in connection with, the acquisition of its Securities or those of a related or inter-related company without complying with section 44(3) of the Companies Act.
8. AUTHORITY TO ISSUE SECURITIES
8.1 The Board shall not have the power to issue authorised Securities (other than as contemplated in clause 8.5) without the prior approval contemplated in clause 8.2 and the approval of the JSE (to the extent legally necessary).
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8.2 As regards the issue of Shares:
8.2.1 no Share may be issued, sold or otherwise transferred unless it is indivisibly linked to a Debenture issued in terms of the Debenture Trust Deed and no Debenture may be issued, sold or otherwise transferred unless it is indivisibly linked to a Share so as to form a Linked Unit (unless the Holders otherwise agree in accordance with the requirements as set out in the Companies Act and the Listings Requirements).
8.2.2 directors shall not have the power to allot or issue a Share, as contemplated in sections 41(1) and (3) of the Companies Act, without the prior approval of a Special Resolution; and
8.2.3 the Directors shall not have the power to allot or issue any Shares without the prior approval of an Ordinary Resolution of the Holders and to the extent necessary the approval of the JSE.
8.3 No special privileges may be granted to secured and unsecured debt instruments as contemplated in section 43(3) of the Companies Act.
8.4 Any such approval may be in the form of a general authority to the Directors, whether conditional or unconditional, to allot or issue any such Securities contemplated in clauses 8.1, 8.2.2 and 8.2.3 in their discretion, or in the form of a specific authority in respect of any particular allotment or issue of such Securities contemplated in clauses 8.2.2 and 8.2.3. Such authority shall endure for the period provided in the Ordinary or Special Resolution in question but may be revoked by Ordinary Resolution or Special Resolution, as the case may be, at any time.
8.5 The Board may issue capitalisation Shares or offer a cash payment in lieu of awarding a capitalisation Share, in accordance with section 47 of the Companies Act.
8.6 No Shares of a class which is listed may be issued other than as fully paid.
21. FIRST DIRECTORS, ELECTION OF DIRECTORS AND ALTERNATE DIRECTORS AND CASUAL VACANCIES
21.1 The minimum number of Directors shall be not less than 4 (four). Any failure by the Company at any time to have the minimum number of Directors, does not limit or negate the authority of the Board, or invalidate anything done by the Board or the Company.
21.2 At the Annual General Meeting held in each year 1/3 (one-third) of the Directors, or if their number is not a multiple of 3 (three), then the number nearest to, but not less than 1/3 (one-third) shall retire from office. The Directors so to retire at each Annual General Meeting shall be those who have been longest in office since their last election. As between Directors of equal seniority, the Directors to retire shall, in the absence of agreement, be selected from among them by lot: Provided that, notwithstanding anything herein contained, if, at the date of any Annual General Meeting any Director will have held office for a period of 5 (five) years since her/his last election or appointment she/he shall retire at such Meeting, either as one of the Directors to retire in pursuance of the foregoing or additionally thereto. A retiring Director shall act as a Director throughout the Meeting at which she/he retires. The length of time a Director has been in office shall be computed from the date of her/his last election. Retiring Directors shall be eligible for re-election. No Person other than a Director retiring at the Meeting shall, unless recommended by the Directors for election, be eligible for election to the office of Director at any Annual General Meeting unless, not less than 7 (seven) days nor more than 14 (fourteen) days before the day appointed for the Meeting, there shall have been given to the secretary notice In Writing by some Holder duly qualified to be present and vote at the Meeting for which such notice is given of the intention of such Holder to propose such Person for election and also notice In Writing signed by the Person to be proposed of her/his willingness to be elected. If at any Annual General Meeting, the place of any retiring Director is not filled, she/he shall if willing continue in office until the dissolution of the Annual General Meeting in the next year, and so on from year to year until her/his place is filled, unless it shall be determined at such Meeting not to fill such vacancy.
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21.3 Each of the Directors and the Alternate Directors, other than a Director contemplated in clause 21.9, shall be elected (which in the case of a vacancy arising shall take place at the next Annual General Meeting), in accordance with clause 21.6, to serve for a term of 5 (five) years as a Director or Alternate Director. An Alternate Director shall serve in the place of 1 (one) or more Director/s named in the resolution electing her/him during the Director’s/s’ absence or inability to act as Director. If a Person is an Alternate Director to more than 1 (one) Director or if an Alternate Director is also a Director, she/he shall have a separate vote, on behalf of each Director he/she is representing in addition to his/her own vote, if any.
21.4 There are no general qualifications prescribed by the Company for a Person to serve as a Director or an Alternate Director in addition to the requirements of the Companies Act. The Board with the assistance of the nominations committee must make recommendations to the Holders regarding the eligibility of Persons nominated for election as Directors, taking into account their past performance and contribution, if applicable. A brief curriculum vitae of each Person standing for election or re-election as a Director at a Meeting or the Annual General Meeting, must accompany the notice of the Meeting.
21.5 No Director shall be entitled to appoint any Person as an Alternate Director to himself/herself.
21.6 In any election of Directors and Alternate Directors, the election is to be conducted as follows:
21.6.1 a series of votes of those entitled to exercise votes regarding such election, each of which is on the candidacy of a single individual to fill a single vacancy, with the series of votes continuing until all vacancies on the Board at that time have been filled; and
21.6.2 in each vote to fill a vacancy:
21.6.2.1 each voting right entitled to be exercised may be exercised once; and
21.6.2.2 the vacancy is filled only if a majority of the voting rights exercised support the candidate.
21.7 No Person shall be elected as a Director or Alternate Director, if she/he is Ineligible or Disqualified and any such election shall be a nullity. A Person who is Ineligible or Disqualified must not consent to be elected as a Director or Alternate Director nor act as a Director or Alternate Director. A Person placed under probation by a court must not serve as a Director or an Alternate Director unless the order of court so permits.
21.8 No election of a Director shall take effect until he/she has delivered to the Company a Written consent to serve.
21.9 Any casual vacancy occurring on the Board may be filled by the Board, but so that the total number of the Directors shall not at any time exceed the maximum number fixed, if any, but the Individual so appointed shall cease to hold office at the termination of the first Shareholders Meeting to be held after the appointment of such Individual as a Director unless he/she is elected at such Shareholders Meeting.
21.10 The continuing Directors (or sole continuing Director) may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to this MOI as the minimum, the continuing Directors or Director may act only for the purpose of summoning a Shareholders Meeting or filling vacancies as soon as possible but in any event not later than 3 (three) months from the date that the number falls below the minimum. The failure by the Company to have the minimum number of Directors during the three month period does not limit or negate the authority of the Board of Directors or invalidate anything done by the Board of Directors or the Company.
21.11 If there is no Director able and willing to act, then any Holder entitled to exercise voting rights in the election of a Director may convene a Shareholders Meeting for the purpose of appointing Directors.
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23. REMUNERATION OF DIRECTORS AND ALTERNATE DIRECTORS AND MEMBERS OF BOARD COMMITTEES
23.1 The Directors or Alternate Directors or members of Board committees shall be entitled to such remuneration for their services as Directors or Alternate Directors or members of Board Committees as may have been determined from time to time by Special Resolution within the previous 2 (two) years. In addition, the Directors and Alternate Directors shall be entitled to all reasonable expenses in travelling (including hotels) to and from meetings of the Directors and Holders, and the members of the Board committees shall be entitled to all reasonable expenses in travelling (including hotels) to and from meetings of the members of the Board committees as determined by a disinterested quorum of Directors.
23.2 A Director may be employed in any other capacity in the Company or as a director or employee of a company controlled by, or itself a subsidiary of, the Company and in that event, his/her appointment and remuneration in respect of such other office must be determined by a disinterested quorum of Directors.
25. GENERAL POWERS AND DUTIES OF DIRECTORS
25.1 Subject to any provision of the Companies Act, the JSE Listings Requirements and this MOI to the contrary, the powers of management granted to the Directors in terms of section 66(1) of the Companies Act are not limited.
25.2 The Directors may:
25.2.1 establish and maintain any non-contributory or contributory pension, superannuation, provident and benefit funds for the benefit of; and
25.2.2 give pensions, gratuities and allowances to and make payments for or towards the insurance of,
any persons who are employees or ex-employees (including Directors or ex-Directors) of the Company, or of any company which is or was a subsidiary of the Company or is or was in any way allied to or associated with it or any such subsidiary, and the wives, widows, families and dependants of such persons.
25.3 The Board must appoint a chief executive officer and an executive financial Director. The Board may from time to time appoint one or more of the Directors to the office of managing Director or manager (provided always that the number of Directors so appointed as managing Director or joint managing Directors and/or the holders of any other executive office including a chairperson who holds an executive office but not a chairperson who is a non-executive Director shall at all times be less than ½ (one-half) of the number of Directors in office) for such period (not exceeding 5 (five) years) and at such remuneration (whether by way of salary or commission, or participation in profits or partly in one way and partly in another) and generally on such terms they may think fit, and it may be made a term of his/her appointment that she/he be paid a pension, gratuity or other benefit on his/her retirement from office. The Board may from time to time entrust to and confer upon a managing Director or manager for the time being such of the powers vested in the Directors as they may think fit, and may confer such powers for such time and to be exercised for such objects and upon such terms and with such restrictions as they may think expedient; and they may confer such powers either collaterally or to the exclusion of, and in substitution for, all or any of the powers of the Directors, and may from time to time revoke or vary all or any of such powers. A managing Director appointed pursuant to the provisions hereof shall not be regarded as an agent or delegate of the Directors and after powers have been conferred upon him/her by the Board in terms hereof he/she shall be deemed to derive such powers directly from this clause.
27. PERSONAL FINANCIAL INTERESTS OF DIRECTORS
27.1 For the purposes of this clause 27 (Personal Financial Interests of Directors), “Director” includes an Alternate Director, a Prescribed Officer, and a person who is a member of a committee of the Board, irrespective of whether or not the Person is also a member of the Board.
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27.2 If a Person is the only Director, but does not hold all of the Beneficial Interests of all of the issued Securities of the Company, that Person may not:
27.2.1 approve or enter into any agreement in which the Person or a Related Person has a Personal Financial Interest; or
27.2.2 as a Director, determine any other matter in which the Person or a Related Person has a Personal Financial Interest,
unless the agreement or determination is approved by an Ordinary Resolution after the Director has disclosed the nature and extent of that Personal Financial Interest to those entitled to vote on such Ordinary Resolution.
27.3 At any time, a Director may disclose any Personal Financial Interest in advance, by delivering to the Board, or Holders (if the Company is one contemplated in clause 27.2), a notice in Writing setting out the nature and extent of that Personal Financial Interest, to be used generally by the Company until changed or withdrawn by further Written notice from that Director.
27.4 If a Director (whilst the Company is not a company contemplated in clause 27.2), has a Personal Financial Interest in respect of a matter to be considered at a meeting of the Board, or Knows that a Related Person has a Personal Financial Interest in the matter, the Director:
27.4.1 must disclose the Personal Financial Interest and its general nature before the matter is considered at the meeting;
27.4.2 must disclose to the meeting any material information relating to the matter, and Known to the Director;
27.4.3 may disclose any observations or pertinent insights relating to the matter if requested to do so by the other Directors;
27.4.4 if present at the meeting, must leave the meeting immediately after making any disclosure contemplated in clause 27.4.2 or 27.4.3;
27.4.5 must not take part in the consideration of the matter, except to the extent contemplated in clause 27.4.2 or 27.4.3;
27.4.6 while absent from the meeting in terms of this clause 27.4:
27.4.6.1 is to be regarded as being present at the meeting for the purpose of determining whether sufficient Directors are present to constitute a quorum; and
27.4.6.2 is not to be regarded as being present at the meeting for the purpose of determining whether a resolution has sufficient support to be adopted; and
27.4.7 must not execute any document on behalf of the Company in relation to the matter unless specifically requested or directed to do so by the Board.
27.5 If a Director acquires a Personal Financial Interest in an agreement or other matter in which the Company has a material interest, or Knows that a Related Person has acquired a Personal Financial Interest in the matter, after the agreement or other matter has been approved by the Company, the Director must promptly disclose to the Board, or to the Holders entitled to vote (if the Company is a company contemplated in clause 27.2), the nature and extent of that Personal Financial Interest, and the material circumstances relating to the Director or Related Person’s acquisition of that Personal Financial Interest.
27.6 A decision by the Board, or a transaction or agreement approved by the Board, or by the Holders (if the Company is a company contemplated in clause 27.2), is valid despite any Personal Financial Interest of a Director or Person Related to the Director, only if:
27.6.1 it was approved following the disclosure of the Personal Financial Interest in the manner contemplated in this clause 27 (Personal Financial Interests of Directors); or
27.6.2 despite having been approved without disclosure of that Personal Financial Interest, it has subsequently been ratified by an Ordinary Resolution following disclosure of that Personal Financial Interest or has been declared to be valid by a court in terms of section 75(8) of the Companies Act.
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31. DISTRIBUTIONS
31.1 The Company may:
31.1.1 make Distributions from time to time, provided that:
31.1.1.1 any such Distribution:
31.1.1.1.1 is to be payable to Shareholders registered as such at a date subsequent to the date of declaration or date of confirmation of the Distribution, wh ichever is the later;
31.1.1.1.2 is pursuant to an existing legal obligation of the Company, or a court order; or
31.1.1.1.3 has authorised by the Board, by resolution and, save in the case of a pro rata payment to all Shareholders (except one which results in Shareholders holding Shares in an unlisted entity) or cash dividends paid out of retained income or capitalisation issues or scrip dividends incorporating an election to receive either capitalisation Shares or cash, it has been sanctioned by Ordinary Resolution;
31.1.1.1.4 made by the Company in general meeting, is not larger than that declared by the Directors;
31.1.1.2 it reasonably appears that the Company will satisfy the solvency and liquidity test in the Companies Act immediately after completing the proposed Distribution; and
31.1.1.3 the Board, by resolution, has acknowledged that it has applied the solvency and liquidity test in the Companies Act and reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after completing the proposed Distribution;
31.1.1.4 no obligation is imposed, if it is a distribution of capital, that the Company is entitled to require it to be subscribed again;
31.1.2 must, before incurring any debt or other obligation for the benefit of any Holders, comply with the requirements in clause 31.1.1 ,
and must complete any such Distribution fully within 120 (one hundred and twenty) Business Days after the acknowledgement referred to in clause 31.1. 3, failing which it must again comply with the aforegoing.
31.2 No notice of change of address or instructions as to payment given after the determination of a dividend or other Distribution by the Company in terms of clause 31.1.1.1, shall become effective until after the dividend or other Distribution has been made, unless the Board so determines at the time the dividend or other Distribution is approved.
31.3 All unclaimed:
31.3.1 monies (including, but not limited to Distributions other than dividends) due to Holders shall be held in trust indefinitely until lawfully claimed;
31.3.2 dividends (but not any other distribution which shall be held by the Company until lawfully claimed) remaining unclaimed for a period of not less than 3 (three) years from the date on which it became payable may be forfeited by resolution of the Directors for the benefit of the Company.
31.4 The Company shall be entitled at any time to delegate its obligations in respect of unclaimed dividends or other unclaimed Distributions, to any one of the Company’s bankers from time to time.
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Appendix 12
CORPORATE GOVERNANCE
The King III approach is to “apply or explain” as opposed to the previous approach of “comply and explain”.
The directors are fully committed to ensuring that the Company is fully compliant with the principles of King III and, in so doing, will conduct the business with integrity in accordance with generally acceptable corporate policies. The directors will accordingly establish the following mechanisms and policies appropriate to the Company’s business in keeping with King III, which will be reviewed by the directors from time to time:
CHAPTER 1: ETHICAL LEADERSHIP AND CORPORATE CITIZENSHIP
Code of conduct and ethics-related policies
Leadership based on ethical foundations
Corporate citizenship policies
Management of Group’s ethics
CHAPTER 2: BOARDS AND DIRECTORS
Board Charter
Holding of quarterly meetings
Adoption of ethical strategy to ensure sustainable outcomes
Adherence by directors to legal standards and act in the best interest of the Company
Procedures implemented to take independent advice
Policy for dealings in securities by directors, officers and selected employees
Continual monitoring of solvency and liquidity
The Chairman of the Board is an independent non-executive
The Board is the central point for and custodian of corporate governance
Strategy, risk, performance and sustainability are inseparable
Framework for delegation of authority has been established
Board policy in place to ensure balance of power and no one director has unfettered powers of decision-making
Directors appointed through a formal process
Formal induction and training of directors
Board assisted by competent and suitably qualified Company secretary
Regular performance evaluations of the Board, its committees and individual directors undertaken
Appointment of well-structured relevant committees and oversight of key functions
Remuneration policy approved by shareholders
Remuneration of directors and senior executives disclosed
Formalisation of role of CEO
Succession plan for CEO and other senior executives and officers
Majority of Board members are non-executives, the majority of whom are independent
Minimum of two executive directors – CEO and CFO
Third of directors rotate annually
Appointment letters for non-executive directors
Formal terms of reference for Board committees
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CHAPTER 3: AUDIT COMMITTEE
Establishment of an effective and independent Audit Committee
Three independent non-executive members
Chairman of the Board not a member of the Audit Committee
Committee comprises suitably skilled and experienced members
Overseas integrated reporting
Satisfies itself of the expertise, resources and experience of the Group’s finance function
Oversees internal audit
Integral to the risk management process
Report to Board and shareholders on how it discharged its duties
Members keep up-to-date with developments in their areas of responsibility
Permitted to consult with specialists or consultants
Approval of internal audit plan
Approval of terms of engagement and remuneration of external auditor
Policy for non-audit services and approval of contracts for non-audit services
CHAPTER 4: GOVERNANCE OF RISK
Risk management policy established including governance of risk and setting levels of risk tolerance
Charter established
Frameworks and methodologies implemented to increase the probability of anticipating unpredictable risks
Management implements appropriate risk responses
Board given assurance of the effectiveness of the risk management process
Sufficient risk disclosure to stakeholders
CHAPTER 5: GOVERNANCE OF INFORMATION TECHNOLOGY
IT governance on Board agenda
IT charter and policies established
IT internal control framework adopted and implemented
IT strategy integrated into Company’s strategy
IT is an integral part of the Group’s risk management
IT assets are effectively managed
Risk Committee has ensured that IT risks are adequately addressed
IT assets are managed effectively
CHAPTER 6: COMPLIANCE WITH LAWS, RULES, CODES AND STANDARDS
Board ensure compliance by the Group with all relevant laws
Legal compliance policy established and applied
Compliance incorporated into Code of Conduct
Board has considered the appointment of a compliance officer
CHAPTER 7: INTERNAL AUDIT
Effective risk-based internal audit
Board approved internal audit charter
Internal audit independent from management and an objective provider of assurance
Internal audit forms an integral part of the combined assurance model
Audit Committee agrees the internal audit plan
Internal audit reports at all Audit Committee meetings
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CHAPTER 8: GOVERNING STAKEHOLDER RELATIONSHIPS
Equitable treatment of stakeholders
Transparent and effective communication to stakeholders
Company’s reputation and link with stakeholder relationships a regular Board item
Policies for management of stakeholder relationships formulated
Formal dispute resolution processes for internal and external disputes
CHAPTER 9: INTEGRATED REPORTING AND DISCLOSURE
Controls in place to verify and safeguard the integrity of the content of the annual report
Board delegated authority to the Audit Committee to evaluate sustainability disclosures
Sustainability reporting and disclosure independent assured.
The current corporate governance situation:
Board of directors
The Board has a collective responsibility to ensure good governance and ensure that the Company:
• operates ethically, with integrity and as a responsible corporate citizen;
• considers the interests of the community within which it operates;
• integrates governance, strategy risk, performance and sustainability;
• complies with laws and regulations;
• identifies and manages risk and designs, implements and monitors a risk management plan;
• employs structure and processes to ensure the integrity of its integrated reporting;
• establishes a charter setting out its responsibilities;
• monitors the relationship between management and stakeholders.
The Board currently comprises 8 directors, 3 executive directors, 3 independent non-executive directors and 2 non-executive directors. The Chairman, Mr P D Naidoo, is an independent non-executive director. Mr R F Kane is the CEO. Ms M de Lange is the executive financial director. A formal process will be established for the appointment and development of directors and the annual evaluation thereof and such appointment process will be formal and transparent and a matter for the Board as a whole, and no nomination committee will be appointed until considered necessary. The Board will ensure that there is an appropriate balance of power and authority on the Board, such that no one individual or block of individuals has unfettered powers of decision-making. The directors have been appointed and future directors will be nominated based on their differing expertise, financial and commercial experience and knowledge, property industry knowledge, the impact they will have and the time they have to devote to the role. The all directors will be subject to retirement by rotation and re-election in terms of the Company’s MOI at least once every three years.
The Board will give strategic direction to the fund and will be responsible, inter alia, for:
• the day-to-day management of the fund’s business, strategy and key policies;
• ensuring that the decisions of the Board are implemented;
• approving investment and development opportunities as submitted by the Investment Committee in terms of pre-established criteria;
• approving the fund’s financial objectives and targets;
• ensuring the integrity of the financial reporting.
The positions of Chairman and CEO are separately held with a clear division of duties.
The Board will meet at least 4 times a year and additional meetings will be convened if circumstances dictate.
Board committees will be established, with terms of reference which will be reviewed annually, to undertake certain responsibilities as detailed below and a competent Company secretary will assist the Board.
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Audit and Risk Committee
Members:
R R Emslie (Chairman);
P D Naidoo; and
J R Macey.
This committee’s terms of reference will include:
• the appointment and/or termination of the external auditors, including consideration of their independence and determining the scope of the audit;
• determining the audit fees of the external auditors;
• setting a policy in regard to non-audit services provided by the external audit;
• evaluating the effectiveness of the external audit;
• considering on an annual basis, and satisfying itself, of the appropriateness of the expertise and experience of the financial director.
The Board has delegated the risk management function to the Audit Committee. The Audit Committee will review and monitor the total process of risk management from design through to implementation and integration into the daily activities of the Company.
The duties of an audit committee are extensive and a comprehensive charter will be established for the operations of this committee to ensure that it complies with its statutory duties in terms of the Companies Act, apart from the requirements of the Board.
The internal audit function will be augmented so that assurance over the Company’s governance, risk management and systems of internal controls is provided. One of the functions of the internal audit process will be to provide the Board and the Audit Committee with a written assessment of the system of internal controls and risk management.
Company secretary
All directors have access to the advice of the Company secretary and through his or her office to independent professional advice, at the Company’s expense.
The company secretary is responsible for providing the chairman and directors, individually and collectively, with advice on corporate governance, compliance with legislation and ensuring compliance with the JSE Listings Requirements.
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Appendix 13
SALIENT FEATURES OF THE ACQUISITION AGREEMENT
1. For the purpose of facilitating the consolidation of the property holdings of Vunani Properties into one vehicle, being VPIF, the Acquisition agreement, in terms of which VPIF acquires:
1.1 the Athol Ridge Property, incorporating Athol Ridge business; and
1.2 the entire issued share capital of each of Cedar Park and Pacific Eagle,
has been entered into.
2. The salient features of the Acquisition agreement are as follows:
2.1 VPIF acquires from Vunani Properties all shares in and claims on loan account which Vunani Properties has against Cedar Park for a purchase price of R3 966 708. The face value of Vunani Properties’ claims on loan account against Cedar Park amounted at 31 December 2010 to R6 676 512;
2.2 VPIF acquires from Vunani Properties all shares in and claims on loan account against Pacific Eagle for a purchase price of R13 011 090 in circumstances where Vunani Properties’ claims on loan account against Pacific Eagle at 31 December 2010 total R9 127 206;
2.3 the effective date of the aforementioned acquisitions is a date which coincides with the date when the Acquisition agreement becomes unconditional and which date may not be later than two business days prior to the listing date, referred to hereinafter as the “Closing Date”;
2.4 The Acquisition Agreement is subject to the following conditions precedent:
• the listing on the listing date on the securities exchange of the of JSE of all VPIF units then in issue;
• Investec as mortgagee under the Designated Bond giving its written consent to the substitution of the Purchaser for the Seller as debtor under the Designated Bond, with effect on and as from the date of registration of transfer of the Athol Ridge property into the name of the Purchaser, the Purchaser and the Seller hereby consenting to such substitution by their signature of this agreement. For purposes of clarity, in event that VPIF is not listed and Athol Ridge is not transferred to VPIF, then this substitution of debtor shall lapse and be of no further force or effect.
2.5 provision is made for an adjustment account to be prepared in respect of the extent to which the face value of the claims which Vunani Properties has against each of Cedar Park and Pacific Eagle at the Closing Date differs from the face value of those claims at 31 December 2010;
2.6 the acquisition by VPIF of the entire issued share capital of each of Cedar Park and Pacific Eagle is indivisibly linked in the Acquisition agreement to the purchase by VPIF from Vunani Properties of the Athol Ridge property, and the aforementioned transactions are deemed to constitute a single indivisible and composite transaction as between VPIF and Vunani Properties;
2.7 the purchase price for the Athol Ridge property amounts to R104 435 067 (inclusive of VAT thereon at the rate of 0%) plus an additional amount, if any, which may be payable in terms of an adjustment account to be prepared following the listing date, to take account of, inter alia, rental income, tenants’ deposits, municipal levies, rates, taxes and charges for electricity and water etc for any period before or after the date of registration of the Athol Ridge property into the name of VPIF, dependent upon whether the amount concerned had already been paid, alternatively was outstanding at the Closing Date, in circumstances where such fact was not known and/or had not been taken into account as at the Closing Date;
2.8 to the extent that liabilities to third parties in respect of the Athol Ridge property are secured by mortgage bonds registered against the title deeds of the Athol Ridge property in an amount in excess of the purchase price of R104 435 067 payable in respect of the Athol Ridge property, Vunani Properties will remain responsible for discharging the aforesaid excess;
2.9 all conditions precedent to which the Acquisition agreement is subject are required to be fulfilled by not later than noon on 1 September 2011 or such later date as may be agreed in writing by VPIF;
2.10 the agreement provides for occupation of the Athol Ridge property, subject to all leases in place at the transfer date, to be given to VPIF on the transfer date. Until the arrival of the transfer date, Vunani Properties shall remain responsible to maintain the Athol Ridge property in good order and repair, fair wear and tear excepted; and
2.11 the Acquisition agreement contains numerous warranties given to VPIF by Vunani Properties which are usual and normal in relation to a transaction for the acquisition of immovable property such as the Athol Ridge property.
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Appendix 14
OTHER DIRECTORSHIPS OF THE VPIF DIRECTORS FOR THE PAST FIVE YEARS
EVELYN CHIMOMBE-MUNYORO
Name of company Registration number
Dormell Properties 190 (Pty) Limited 2002/012660/07Rapitrade 216 (Pty) Limited 2003/016897/07Dormell Properties 190 (Pty) Limited 2002/012660/07Vunani Property Asset Managers (Pty) Limited 2006/016645/07Chevron Africa – Pakistan Services (Pty) Limited 2004/019993/07Dormell Properties 356 (Pty) Limited 2004/020868/07Fairbridge Arderne and Lawton Inc. 1985/000003/21Outtabounds Events Management (Pty) Limited 2006/024032/07PSV Holdings Limited 1998/004365/06Placecol Holdings Limited 2003/025374/06*Brikor Limited 1998/013247/06Vunani Limited 1997/020641/06
MARELISE DE LANGE
Name of company Registration number
MGM Property Development CC 2005/0912440/23Vunani Property Asset Management (Pty) Limited 2007/028777/07
ROBERT REINHARDT EMSLIE
Name of company Registration number
ANDB Family Investments CC 2009/197550/23EEE Family Investments CC 2008/091816/23EJB Family Investments CC 2008/091662/23Les Family Investments CC 2008/091710/23ROE Family Investments CC 2008/108312/23RYE Family Investments CC 2008/108316/23Trust for Urban Housing Finance (association under Section 21) 1993/000217/08TUHF (Pty) Limited 2007/025898/07TUHF Bridge (Pty) Limited 2006/014097/07TUHF Holdings (Pty) Limited 2007/024010.07African Dawn Capital Limited 1998/020052/06*Ambit Properties Limited 2001/007003/06*Blue Financial Services Limited 1996/006595/06Navigator Property Investments (Pty) Limited 2000/025080/07*Propell Sectional Title Solution (Pty) Limited 1999/004482/07*Suiderland Development Corporation (Pty) Limited 1966/004422/06Paramount Property Holdings Limited Deregistered*SilverBridge Holdings (Pty) Limited 1995/006315/06
ETHAN GILBERT DUBE
Name of company Registration number
Amber Falcon Properties 131 (Pty) Limited 2007/012923/07Anchor Park Investments 81 (Pty) Limited 2007/028767/07Aquarella Investments 507 (Pty) Limited 2007/032654/07Before Sunset Properties 37 (Pty) Limited 2006/022469/07Blue Moonlight Properties 248 (Pty) Limited 2006/022708/07
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ETHAN GILBERT DUBE (continued)
Name of company Registration number
Busaf Bauer (Pty) Limited 1996/003481/07Cape Brewing Company (Pty) Limited 2007/014161/07*Capital Land Developments (Pty) Limited 2007/016889/07*Cedar Park Properties 31 (Pty) Limited 2007/014552/07Civils 2000 Holdings (Pty) Limited 2008/025555/07Glenhove Fund Managers (Pty) Limited 2001/027181/07Imvuno Fund Managers (Pty) Limited 2008/025474/07Integrated Managed Investments (Pty) Limited 2001/026050/07Jala Group (Pty) Limited 2009/011731/07Kagiso Hedge Fund (Pty) Limited 2003/014213/07Kliprivier Property Development (Pty) Limited 2006/016645/07Mapitso Consortium Investments (Pty) Limited 2009/006501/07Mapitso Funding SPV (Pty) Limited 2009/008318/07Mayborn Investments 17 (Pty) Limited 2007/026789/07Mazars Corporate Finance (Pty) Limited 2003/029561/07*Newshelf 1073 (Pty) Limited 2010/018675/07Newshelf 1075 (Pty) Limited 2010/018672/07Nomad Trading 1064 CC 2007/249338/23Northern Ocean Investments 48 (Pty) Limited 2007/031692/07Pacific Heights Investments 118 (Pty) Limited 2007/023713/07Quintofor Investments (Pty) Limited 2009/016684/07Rapicorp 59 (Pty) Limited 2006/006572/07Rapicorp 60 (Pty) Limited 2006/006490/07Route Broad Base Investors (Pty) Limited 2007/034571/07Selectra Investments 49 (Pty) Limited 2008/025085/07Solethu Investments (Pty) Limited 2008/015473/07Tutuni Investments 14 (Pty) Limited 2007/029830/0738 North Investments (Pty) Limited 2010/044294/23Vunani Limited and its subsidiaries 1997/020641/06Black Wattle Colliery (Pty) Limited 1994/002802/07Coresource Investments (Pty) Limited 1998/022198/07*Denbridge Investments (Pty) Limited 2003/012366/07Dougall Insurance Brokers (Pty) Limited 2005/018355/07*Erf 8105 Kronenzicht Investments (Pty) Limited 1997/054839/07Erf 8106 Kronenzicht (Pty) Limited 1998/021338/07Woodcove Cascades CC 1994/027593/23Gidani (Pty) Limited 2005/007741/07Hyprop Investments Limited 1987/005284/06Peregrine Quant (Pty) Limited 1999/015894/07Peregrine Holdings Limited 1994/006026/06Petroport N3 Heidelberg (Pty) Limited 2004/023418/07Tubuka Financial Solutions (Pty) Limited 2006/021193/07Edge Capital (Pty) Limited 1999/022409/07Edge Holding Company (Pty) Limited 1999/014685/07Edge Investments (Pty) Limited 1997/020882/07Woodcove Cascades CC 1994/017593/23*Lexshell 630 Investments (Pty) Limited 2004/011262/07Intralot South Africa (Pty) Limited 2005/024878/07Izinyoni Trading 215 (Pty) Limited 2003/000822/07Newfunds (Pty) Limited 2005/034899/07*South Ocean Holdings Limited 2007/002381/06Southern Palace Investments 359 (Pty) Limited 2006/005359/07Vector Equities (Pty) Limited 1997/004788/07Vector Nominees (Pty) Limited 2003/028941/07Wolfsberg Arch Investments (Pty) Limited 2003/007988/07Blue Moonlight Properties 248 (Pty) Limited 2006/022708/07
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ETHAN GILBERT DUBE (continued)
Name of company Registration number
Loato Properties (Pty) Limited 2006/022207/07Alert Steel Holdings Limited 2003/005144/06*Esor Limited 1994/000732/06Workforce Group Limited 2006/018145/06*Interwaste Holdings Limited 2006/037223/06*Brikor Limited 1998/013247/06*BSI (SA) Limited 2001/023164/06*Vunani Property Asset Management (Pty) Limited 2007/028777/07
ROBERT FLETCHER KANE
Name of company Registration number
Lexshell 638 Investments (Pty) Limited 2004/021697/07Baycove Properties 2 (Pty) Limited 2005/018800/07Cedar Park Properties 31 (Pty) Limited 2007/014552/07Clidet No. 417 (Pty) Limited 2002/018774/07*Copper Ridge Properties (Pty) Limited 2004/006037/07*Crimson Moon Investments 31 CC 2003/087100/23*Dreamworks Investments 125 (Pty) Limited 2002/000256/07Eris Property Developments No. 3 (Pty) Limited 2007/016889/07*Greenstone Hill Office Park (Pty) Limited 2006/004975/07Kareebosch Estate (Pty) Limited 2006/004559/07*One Vision Investments 54 (Pty) Limited 2004/004363/07*One Vision Investments 6 (Pty) Limited 2003/007144/07*Orion Properties 14 (Pty) Limited 2005/041384/07Pacific Eagle Properties 204 (Pty) Limited 2007/025771/07Richmond Trading 103 CC 2004/000480/23*Selectria Investments 49 (Pty) Limited 2008/025085/07Southern Spirit Properties 142 (Pty) Limited 2005/017626/07Sovereign Seeker Investments 30 (Pty) Limited 2004/007327/07*VTV Community Ecosystems (Pty) Limited 2007/033673/07*Vunani Properties (Pty) Limited 2004/006730/07Vunani Properties Investment Fund Limited 2005/019302/06Wolfsberg Arch Investments (Pty) Limited 2003/007988/07Vunani Property Asset Management (Pty) Limited 2007/028777/07
JOHN RUSSELL MACEY
Name of company Registration number
Workforce Holdings Limited 2006/018145/06Vunani Limited 1997/020641/06
PIETER WILLEM MACKENZIE
Name of company Registration number
About Choices Investments CC 2001/046731/23*Adorn Developments (Pty) Limited 1997/017029/07Basfour (Pty) Limited 1998/016166/07*Corovest Property Group Limited 1988/002010/06Dallaway Properties (Pty) Limited 1990/001947/07*Dreamworks Investments 125 (Pty) Limited 2002/000256/07Lerella Investments CC 2000/013247/23*Lexshell 638 (Pty) Limited 2004/021697/07Main Street 100 (Pty) Limited 2002/021739/07Mesquite Investments CC 1987/004046/23Old Town Investments 71 CC 2000/058119/23*P3 Properties (Pty) Limited 1993/002859/07
135
PIETER WILLEM MACKENZIE (continued)
Name of company Registration number
P7 Investments (Pty) Limited 1998/012243/07*Petprops 45 CC 1996/047339/23Vunani Properties (Pty) Limited 2004/006730/07Vunani Property Investment Fund Limited 2005/019302/06Mitja Investments No 29 (Pty) Limited 1999/006784/07Vunani Property Asset Management (Pty) Limited 2007/028777/07
PRAGALATHAN DHANAPALAN NAIDOO
Name of company Registration number
PDNA Academy (Pty) Limited 2008/003007/07Bokamoso Asset Management (Pty) Limited 2005/033960/07Bokamoso Property Fund (Pty) Limited 2005/034037/07Bokamoso Property Managers (Pty) Limited 2005/034214/07Chiefton SA (Pty) Limited 1999/005556/07ERF 1422 Durban (Pty) Limited 2002/005881/07Gensec Eiendomsdienste Limited 1987/004302/06Econogistics (Pty) Limited 2006/036151/07PD Naidoo & Associates Consulting Engineers (Pty) Limited 1997/014139/07PDNA Da Vinci Academy (Pty) Limited 2008/018705/07PDNA Equity Investments (Pty) Limited 2008/019963/07PDNA Holdings (Pty) Limited 1999/003069/07PDNA Industrial Projects (Pty) Limited 2002/026749/07PDNA Investments (Pty) Limited 2002/005883/07PDNA Property Investments (Pty) Limited 2005/010034/07PDNA Resources (Pty) Limited 2005/016825/07N3 Toll Concession (Pty) Limited 1998/020534/07N3 Engineering Consultants Consortium (Pty) Limited 1999/006567/07Micawber 534 (Pty) Limited 2006.034198/07Imbe Exploration Company (Pty) Limited 2002/029333/07Saayman IP Company (Pty) Limited 2002/025849/07Uculand (Pty) Limited 2005/034149/07
* No longer a director/member.
136
Vunani Property Investment Fund Limited(formerly Vunani Property Investment Fund Proprietary Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/019302/0 6)
JSE code: VPF ISIN: ZAE000157459
(“VPIF” or “the Company”)
APPLICATION FORM TO PARTICIPATE IN THE PRIVATE PLACING
Please note that the definitions set out in the Pre-Listing Statement, of which this Application Form forms part, apply mutatis mutandis
to this Application Form.
A private placing of units by the Company by way of an:
• offer to subscribe for a maximum of 66 334 357 new VPIF units with an approximate value of R497.5 million at the private
placing price; and
• offer for sale of 22 232 113 VPIF units with an approximate value of R166.7 million at the private placing price
The private placing will be implemented via a bookbuild exercise and it is estimated that the final private placing price pursuant to the
private placing will fall within a range of between R7.00 and R8.00 per unit. For purposes of the Pre-Listing Statement, a mid-range price
of R7.50 per unit has been used.
Applications in terms of the private placing may only be made by eligible investors.
Please refer to the instructions set out overleaf prior to the completion of this Application Form.
This Application Form, when completed, should be sent to:
Attention Mr V Dabengwa
Vunani Corporate Finance (trading as a division of Vunani Capital Proprietary Limited)
Vunani House Block C
Athol Ridge Office Park
151 Katherine Street
Sandown, Sandton, 2196
(P O Box 652419, Benmore, 2010) Fax number: (011) 784 1989 email: [email protected]
The Application Form must be received by the Bookrunners by no later than 12:00 on Friday, 29 July 2011.
NO LATE APPLICATIONS WILL BE ACCEPTED.
Reservation of rights
The directors of the fund reserve the right to:
• accept or refuse any application(s), either in whole or in part or to pro rate any or all application(s) in such manner as they may,
in their sole and absolute discretion, determine; and
• accept or reject, either in whole or in part, any applications should any terms contained in the Pre-Listing Statement not be complied
with and/or if any instructions forming part of this Application Form are not properly complied with.
To the directors
Vunani Property Investment Fund Limited
I/We, the undersigned, confirm that I/we have full legal capacity to contract and, having read the Pre-Listing Statement, hereby
irrevocably apply for and request you to accept my/our application in respect of the undermentioned units.
I/We understand that the allotment and issue of the VPIF units in terms of the Pre-Listing Statement is conditional on the granting
of a listing of the fund’s units, by no later than Thursday, 11 August 2011, or such extended date as the Committee of the Issuer Services
Division of the JSE may determine, provided that such extended date falls within 30 days from the anticipated listing date and the
minimum subscription is attained.
Eligible investors must make arrangements with their CSDP or broker for payment to be made as stipulated in the agreement governing
their relationship with their CSDP or broker, in respect of the units allocated to them in terms of the private placing by the settlement date,
expected to be Wednesday, 10 August 2011.
Dated 2011
Telephone (office hours) ( )
Mobile:
e-mail address
Signature
Assisted by: (where applicable)
Surname of individual or Name of corporate body Mr Mrs
Miss
Other
First names in full (in individual)
Postal address (preferably PO Box address). A unit certificate
(if applicable) will be sent to this address
ostal code
Total number of units applied for (figures only)
Applications in terms of the private placing may be made
only in multiples of 1 000 units
Price : R _________
The following section must be completed by the CSDP or broker with their stamp and signature affixed thereto:
CSDP or Broker name
CSDP or Broker contact person
CSDP or Broker contact telephone number
CSA or bank CSD account number
Scrip account number
Settlement bank account number
CSDP/Broker’s signature and stamp
INSTRUCTIONS:
1. Copies or reproduction of the Application Form will be accepted at the discretion of the directors of the fund.
2. Applications are irrevocable and may not be withdrawn once submitted.
3. Please refer to the terms and conditions of the private placing set out in paragraph 10 of the Pre-Listing Statement. Applicants
should consult their broker, banker, CSDP or other professional adviser in case of doubt as to the correct completion of this
Application Form.
4. Applicants must submit only one Application Form.
5. No receipts will be issued for Application Forms.
6. All alterations to this Application Form must be authenticated by a full signature.
7. In determining the basis of allocation, the date that the eligible investor applied for units will be taken into account.
139
140 PRINTED BY INCE (PTY) LTD Ref. No. W2CF 124 66