Vunani Property Investment Fund - JSE€¦ · P2 I Property Investment Fund integrated annual...

INTEGRATED ANNUAL REPORT 2013for the year ended 30 June

Highlights 1

Our strategy 1

Who we are 2

Property portfolio 5

Directorate 14

Chairman and CEOs report 16

Corporate governance report 22

Report to stakeholders 32

Annual financial statements 35

Unitholder information 87

Company information ibc

contents

FOR MORE INFORMATIONYou’ll find links throughout this report, to guide you to further reading or relevant information.

Reporting icons

VPIF takes pleasure in presenting its second integrated annual

report to stakeholders for the year ended 30 June 2013 in line

with the requirements of the King Code and report on corporate

governance for South Africa (King III). The integrated annual report

has been prepared to assist stakeholders in assessing the group’s

ability to create and sustain value.

This integrated annual report was compiled in terms of the discussion

paper as published by the Integrated Reporting Committee of South

Africa on 25 January 2011, which recommends that companies

should not only report on their financial performance, but also on

their sustainability by disclosing social, environmental and economic

influences, both positive and negative.

The scope and boundaries of the information contained in the

report describe our operations and property portfolios. The report is

structured to indicate the following:

aPPROACH TO INTEGRATED REPORTING

FUNDERS OF THE GROUP

(unitholders and debt funders)

OPERATING ENVIRONMENT

SERVICE PROVIDERS

TENANTS

INTEGRATED REPORTINGCorporate responsibility information is integrated throughout our integrated annual report and accounts and is highlighted with the logos below. This reflects how managing our environmental, economic and social impacts is central to how we do business. It also provides readers with insights into the critical linkages in our thinking and activity, and greater clarity on the relationship between our financial and non‑financial key performance indicators.

WHY GO ONLINE?Our corporate website contains detailed information about the company and is frequently updated as additional details become available. You can sign up for email alerts of our latest news and our current share price is displayed on the home page.

ENVIRONMENT SOCIAL

Our corporate websitewww.vpif.co.za

See page/note reference

For more informationsee website

HIGHLIGHTS

our strategy

77,25 cents DISTRIBUTION PER LIKED UNIT

(2012: 64,51 cents) (19,7% growth)

LINKED UNIT PRICE OF 1 005 cents PER LINKED UNIT (2012: 825 cents) (21,8% growth)

31,2% COMPOUND GROWTH

R216,9 million INVESTMENT PROPERTY

INCOME (2012: R165,9 million)

R154,9 million NET PROPERTY INCOME

(2012: R114,0 million)

R1,568 billion PORTFOLIO VALUE

(2012: R1,426 billion) Refer to property portfolio on pages 5 to 13

79,7% BLUE CHIP TENANTS (2012: 80,0%)

Refer to page 3.

5,6% VACANCY (2012: 5,8%)

Refer to page 6.

73% TENANT RETENTION (2012: 89%)

Refer to page 19.

4,75 YEARS WEIGHTED AVERAGE LEASE

EXPIRY (2012: 4,71 years)

145 594m2 OF GROSS LETTABLE

AREA (2012: 135 327m2)

Refer to pages 58 and 59.

GEARING OF 31,25% LOAN TO VALUE

(2012: 31,4%)

Refer to page 82.

R103,05/m2 WEIGHTED AVERAGE

RENTAL PER SQUARE METRE (2012: R102,93/m2)

Refer to pages 57 and 58.

Property Investment Fund integrated annual report 2013 I P1

VPIF’s strategy is aimed at building value for all stakeholders over the short to long term. The following success factors form the basis of our strategy:

n We conduct our business with integrity.

n We deliver on results to unitholders.

n Our tenants and clients are our most valuable assets.

n We are responsible corporate citizens and promote social and environmental sustainability.

n We aim to be a transparent sustainable investment.

Read more on page 22.

OPTIMISED INVESTMENT

RETURN

Increased shareholder

base and liquidity

Transformation

Quality portfolio growth

Decreased funding costs

Partner of choice for

tenants and investors

Sustainable and beneficial partnerships

Who we are

OUR BUSINESSVunani Property Investment Fund (VPIF or the company or the group) is a property holding and investment company formed to invest directly in income producing properties that offer attractive income and capital appreciation. We aim to be an office dominated property fund.

VPIF is governed by the listings requirements of the JSE, the Companies Act, King III and International Financial Reporting Standards (IFRS).

VPIF is the sole beneficiary of Vunani Property Investment Trust (VPIT).

SHAPING PROPERTIES

Our journey in the property sector is illustrated below:

OUR MARKETWe are a specialist fund and our three largest geographical segments are Gauteng, Western Cape and Eastern Cape.

OPERATIONSWe focus predominantly on blue chip tenants in the commercial real estate property sector in South Africa.

See more on pages 58 and 59.

2006 TO 2010

VPIF was formed in late 2006 by Vunani Limited, a black owned and managed financial services group, in collaboration with Hyprop Investments Limited at which stage two commercial portfolios were pooled into a property fund with the intention of listing the Fund.

2011 TO 2012

On 11 August 2011, VPIF was listed in the Financial Services – Real Estate sector of the JSE (JSE code: VPF). Notwithstanding the Fund’s relatively recent introduction to the listed property sector, the Manager, Vunani Property Asset Management Proprietary Limited, has a long history of success in the property sector from 2006. The company is externally managed by a proven team of experienced property and financial professionals. At the time of listing on 11 August 2011 the property portfolio comprised 21 properties in South Africa with a total GLA of 99 684m² valued at R943 million. VPIF’s market capitalisation was approximately R995 million on 30 June 2012 with 120 618 080 linked units in issue. The property portfolio was valued at R1,4 billion at year end (30 June 2012).

2013 The objective of the Fund is to grow its asset base by investing in well priced income and quality enhancing investment properties in predominantly the office sector to optimise returns over time for linked unitholders.

Subsequent to listing the Fund acquired seven additional properties, increasing the GLA to 145 594m2 valued at R1,568 billion. Post year-end the Fund’s unitholders approved (on 23 July 2013) the acquisition of 10 buildings situated in the Greenstone Hill Office Park with a combined GLA of 17 570m2.

I Property Investment Fund integrated annual report 2013P2

COMBINED PORTFOLIO VALUE

Our properties are situated in strong economic nodes and are representative of the economy of South Africa. The graph below indicates the geographical segments and tenant spread per GLA, of the portfolio at 30 June 2013.

National/government Large/listed Other

RegionsTenants

R1,568 billion

GAUTENG

EASTERN CAPE

KWAZULU-NATAL

NORTH WEST PROVINCE

WESTERN CAPE

NORTHERN CAPE PROVINCE

28,4%3,7%

3,0%

58,7%

5,4%

0,8%

See more on pages 5 to 13.

26,1%

16,2%

57,7%National/ government

Large/listed

Other


Office (91%)

Retail (5%)

Industrial (4%)

SECTORAL SPREAD

Office (94%)

Retail (5%)

Industrial (1%)

BY GLA BY REVENUE

Government/national (91%)

Listed/large entities (5%)

Other (4%)

Blue chip (74%)

TENANT SPREAD

Government/national (91%)

Listed/large entities (5%)

Other (4%)

Blue chip (80%)

Eastern Cape (5%)

Gauteng (59%)

KwaZulu-Natal (3%)

North West province (4%)

Northern province (1%)

Western Cape (28%)

Eastern Cape (6%)

Gauteng (57%)

KwaZulu-Natal (2%)

North West province (4%)

Northern province (1%)

Western Cape (30%)

SECTORAL SPREAD

BY GLA BY REVENUE

BY GLA BY REVENUE

n % of GLA Cumulative

GROUP LEASE EXPIRY PROFILE% of GLA

100

80

60

40

20

0Vacant 2014 2015 2016 >2016


Who we arecontinued


OFFICE LEASE EXPIRY PROFILE% of GLA

100

80

60

40

20

0Vacant 2014 2015 2016 >2016


RETAIL LEASE EXPIRY PROFILE% of GLA

100

80

60

40

20

0Vacant 2014 2015 2016 >2016


INDUSTRIAL LEASE EXPIRY PROFILE% of GLA

100

80

60

40

20

0Vacant 2014 2015 2016 >2016

WEIGHTED AVERAGE RENTAL PER m2 PER SECTOR R/m2

120

100

80

60

40

20

0Industrial Retail Commercial Total

INDIVIDUAL PROPERTIES VACANCY PROFILEm2

Foretrust Building

Investment Place

Vunani Chambers

Standard Bank – Randburg

Vunani Office Park

Rynlal Building

Parthenon Park

Murrayfield Forum

Benstra

0 500 1 000 1 500 2 000 2 500


property portfolio

A GRADE

BELVEDERE PLACE

LOCATIONSunninghillBlue chip tenants

TYPE

OfficeSIZE

10 874m2

GROSS RENT

R86/m2

OCCUPANCY

100%NUMBER OF TENANTS

SixPROPERTY VALUE

R135,0mKEY HIGHLIGHTTenanted by blue chip tenants, the prominent park remains fully occupied by national tenants, many of whom have been there for some time. Sunninghill as an area seems to be coming into its own after some years of flat growth.

A GRADE

ACS HOUSE

LOCATIONRivoniaBlue chip tenants

TYPE

OfficeSIZE

1 743m2

GROSS RENT

R113/m2

OCCUPANCY


TwoPROPERTY VALUE

R22,0mKEY HIGHLIGHTLocated just off Rivonia Boulevard close to the highway gives the building excellent access. The beautiful gardens and upmarket offices have retained the same tenants for many years.

A+ GRADE

STANDARD BANK PRIVATE BANK

LOCATIONHyde ParkSingle national tenant

TYPE

OfficeSIZE

2 038m2

GROSS RENT

R169/m2

OCCUPANCY


OnePROPERTY VALUE

R42,8mKEY HIGHLIGHTFinished to a premium grade standard, the excellent location and profile of the building ensures a high demand for the space.


property portfoliocontinued

A GRADE

BUSINESS CENTRE BUILDING

LOCATIONRivonia SandtonSingle tenanted

TYPE

OfficeSIZE

4 886m2

GROSS RENT

R94/m2

OCCUPANCY


OnePROPERTY VALUE

R77,5mKEY HIGHLIGHTLocated on Rivonia Boulevard close to the highway gives the building excellent access.

A GRADE

FORETRUST BUILDING

LOCATIONCape TownNational tenants

TYPE

OfficeSIZE

26 780m2

GROSS RENT

R127/m2

OCCUPANCY


ThreePROPERTY VALUE

R288,5mKEY HIGHLIGHTPWD and Nedbank occupy the building. Acquired in 2012, the 9% vacancy was not paid for. The surrounding foreshore of Cape Town is undergoing major upgrades. The property is the next target for our ‘greening’ programme.

A GRADE

LOCATIONSandtonNational tenants

TYPE

OfficeSIZE

8 625m2

GROSS RENT

R126/m2

OCCUPANCY


SevenPROPERTY VALUE

R125,0mKEY HIGHLIGHTA grade offices, recently refurbished and predominantly occupied by national tenants on long leases.

VUNANI OFFICE PARK

ENVIRONMENT


A GRADE

LOCATIONCape Town CBD National tenants

TYPE

OfficeSIZE

7 066m2

GROSS RENT

R93/m2

OCCUPANCY


TwentyPROPERTY VALUE

R55,0mKEY HIGHLIGHTRecently refurbished, the building has quality tenants, most of whom have been in the building for many years.

VUNANI CHAMBERS

A GRADE

INVESTMENT PLACE

LOCATIONSandtonBlue chip tenants

TYPE

OfficeSIZE

6 253m2

GROSS RENT

R131/m2

OCCUPANCY


ThreePROPERTY VALUE

R92,8mKEY HIGHLIGHTInvestment Place is well located on William Nicol Highway in Hyde Park. All foyers are currently being refurbished to a high standard and negotiations are in place to retenant the vacancy.

A GRADE

LION ROARS

LOCATIONPort ElizabethNational tenants

TYPE

OfficeSIZE

4 117m2

GROSS RENT

R140/m2

OCCUPANCY


FivePROPERTY VALUE

R55,0mKEY HIGHLIGHTThe prominent, attractive office park is located in the main decentralised node in PE and all tenants are national or listed.



A GRADE

STANDARD BANK HARRISMITH

LOCATIONHarrismith (KZN) National tenant

TYPE

OfficeSIZE

1 086m2

GROSS RENT

R59/m2

OCCUPANCY


OnePROPERTY VALUE

R7,0mKEY HIGHLIGHTThis attractive, prominent property is located on the busy main town square and the bank has repeatedly renewed its lease.

A GRADE

BUILDING 9, GREENSTONE OFFICE PARK

LOCATIONGreenstone HillNational tenants

TYPE

OfficeSIZE

1 827m2

GROSS RENT

R98/m2

OCCUPANCY


ThreePROPERTY VALUE

R23,0mKEY HIGHLIGHTGreenstone Office Park was completed in 2012 and comprises 15 buildings in a landscaped setting. It has excellent access and has attracted listed and national tenants with little or no vacancies. Building 9 has two national tenants on long leases.

A GRADE

MABE PARK

LOCATIONRustenburgGovernment tenants

TYPE

OfficeSIZE

1 642m2

GROSS RENT

R162/m2

OCCUPANCY


TwoPROPERTY VALUE

R26,0mKEY HIGHLIGHTLocated in the only A grade office park in Rustenburg, the two buildings each house a government department.


A GRADE

LINGER LONGER

LOCATIONSandtonSingle tenanted

TYPE

RetailSIZE

597m2

GROSS RENT

R152/m2

OCCUPANCY


OnePROPERTY VALUE

R5,0mKEY HIGHLIGHTThis site has been consolidated with the adjacent Vodacom site to give the Fund a development opportunity of 35 000m2 in a strongly growing node, two blocks from Gautrain.

A GRADE

STANDARD BANK LADYSMITH

LOCATIONLadysmith (KZN) National tenants

TYPE

OfficeSIZE

1 994m2

GROSS RENT

R68/m2

OCCUPANCY


ThreePROPERTY VALUE

R12,6mKEY HIGHLIGHTLocated on the main road in the busy town, the building is prominent and well suited to the tenant who has renewed the lease repeatedly.

A GRADE

STANDARD BANK UPINGTON

LOCATIONUpington National tenant

TYPE

OfficeSIZE

1 181m2

GROSS RENT

R77/m2

OCCUPANCY


OnePROPERTY VALUE

R9,75mKEY HIGHLIGHTThe property forms a cornerstone in the thriving town of Upington with the bank repeatedly renewing its lease.



A GRADE

XSTRATA BUILDING

LOCATIONRustenburgNational tenant

TYPE

OfficeSIZE

3 720m2

GROSS RENT

R84/m2

OCCUPANCY


ThreePROPERTY VALUE

R33,8mKEY HIGHLIGHTThe property houses the regional offices of Xstrata who recently renewed their lease. Purpose built for them, the property is fit for purpose with competitive rentals.

A GRADE

VODACOM PARK

LOCATIONSandtonNational tenant

TYPE

OfficeSIZE

5 101m2

GROSS RENT

R134/m2

OCCUPANCY


OnePROPERTY VALUE

R100,0mKEY HIGHLIGHTVodacom has occupied the park for many years and Wierda Valley is fast becoming a very desirable location, being two blocks from Gautrain and just off the congestion of Sandton Central. The property has been consolidated with the adjacent Linger Longer site which is being rezoned to give 35 000m2 bulk. The development will achieve a Green Star rating and will be tenant led.

B GRADE

BENSTRA BUILDING

LOCATIONPretoria CBDGovernment tenant

TYPE

OfficeSIZE

7 818m2

GROSS RENT

R107/m2

OCCUPANCY


ThreePROPERTY VALUE

R47,1mKEY HIGHLIGHTLocated in the Pretoria CBD ‘government district’, the tenant has again renewed the lease.

ENVIRONMENT


B GRADE

MOTHERWELL RETAIL CENTRE

LOCATIONMotherwellNational tenants

TYPE

RetailSIZE

3 764m2

GROSS RENT

R87/m2

OCCUPANCY


ThirteenPROPERTY VALUE

R37,5mKEY HIGHLIGHTThe retail centre is the nucleus of the area and repeated extensions are satisfying the huge demand. The last remaining extension will start at the end of 2014.

B GRADE

BRICKFIELD BUILDING

LOCATIONWoodstock Cape TownSingle tenanted

TYPE

IndustrialSIZE

5 251m2

GROSS RENT

R34/m2

OCCUPANCY


OnePROPERTY VALUE

R23,4mKEY HIGHLIGHTWoodstock is an industrial area which are changing and becoming a vibey upmarket commercial node.

A GRADE

14 LOOP STREET

LOCATIONCape Town CBD Government tenants

TYPE

OfficeSIZE

2 323m2

GROSS RENT

R138/m2

OCCUPANCY


TwoPROPERTY VALUE

R37,1mKEY HIGHLIGHTWinner of the 2012 Energy Efficiency Award, this 1904 building was extensively redeveloped in 2009 on ‘green principles’. The building enjoys an energy cost of 33% of the portfolio average and 4% water consumption. The A grade building is located in the new financial district of Cape Town and is fully let to a government tenant on long lease.

ENVIRONMENT

To be refurbished as above


B GRADE

PARTHENON PARK

LOCATIONPretoria EastNational tenants

TYPE

Office/retailSIZE

4 454m2

GROSS RENT

R84/m2

OCCUPANCY


SeventeenPROPERTY VALUE

R38,75mKEY HIGHLIGHTUpgraded and consolidated with Murrayfield, the offices are dominated by Impala Platinum and the retail by a suitable neighbourhood retailer mix, most of whom have been there many years.


B+ GRADE

PERSEUS PARK

LOCATIONLynnwood Ridge Pretoria Government tenants

TYPE

OfficeSIZE

13 838m2

GROSS RENT

R96/m2

OCCUPANCY


OnePROPERTY VALUE

R157,0mKEY HIGHLIGHTSITA is a long-term tenant in the building and has indicated possible interest in expanding by using the available bulk on site.

B GRADE

MURRAYFIELD FORUM

LOCATIONPretoria EastNational tenants

TYPE

Office/retailSIZE

1 417m2

GROSS RENT

R85/m2

OCCUPANCY


EightPROPERTY VALUE

R8,0mKEY HIGHLIGHTRecently upgraded, the neighbourhood centre is now stable and enjoys good visibility and access. Predominant tenant is Total on a 15 year lease.


B GRADE

RYNLAL BUILDING

LOCATIONLynnwood PretoriaMultinational tenants

TYPE

OfficeSIZE

5 887m2

GROSS RENT

R92/m2

OCCUPANCY


Twenty sevenPROPERTY VALUE

R40,0mKEY HIGHLIGHTRecently upgrades have taken vacancies from 20% to 9% and attracted a larger, more stable tenant mix willing to pay higher rentals.

B GRADE

STANDARD BANK STANGER

LOCATIONStanger (KZN) National tenant

TYPE

OfficeSIZE

1 253m2

GROSS RENT

R80/m2

OCCUPANCY


OnePROPERTY VALUE

R9,65mKEY HIGHLIGHTRecently upgraded, the property is located in the centre of the busy town. The building is prominent and well suited to the bank who has renewed the lease repeatedly.

B GRADE

STANDARD BANK SPRINGS

LOCATIONSpringsMulti tenanted

TYPE

OfficeSIZE

1 916m2

GROSS RENT

R66/m2

OCCUPANCY


TwoPROPERTY VALUE

R12,1mKEY HIGHLIGHTRecently upgraded, the property is located in the business district of Springs. The bank has renewed the lease repeatedly.

B GRADE

STANDARD BANK RANDBURG

LOCATIONRandburg Johannesburg Multi tenanted

TYPE

OfficeSIZE

8 143m2

GROSS RENT

R70/m2

OCCUPANCY


Thirty onePROPERTY VALUE

R53,0mKEY HIGHLIGHTLocated in Oak Avenue, this part of Randburg has held its value. The building is predominantly occupied by a busy Standard Bank branch who recently renewed their lease.


directorate

EXECUTIVE

1ROBERT FLETCHER KANE (53)Chief executive officerBSc (CIV) Eng, MBA

Rob has over 28 years’ experience in all aspects of the property industry. After completing his BSc degree at the University of Cape Town, he was employed by Wilson Bayly Holmes-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 an 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. He managed his own property development and investment broking business between 1998 and 2003. Rob joined Vunani Properties in 2004, where his focus has been on VPIF and Western Cape developments. He has been CEO of VPIF since mid-2008. He is Chairman of the Cape Town City Improvement District and a board member of the Cape Town Partnership. He is a member of the Investment Analysts Society and a committee member of the Western Cape South African Property Owners Association.

2MARELISE DE LANGE (41)Financial directorBCom (Law), BCom (Hons) (Acc)

Marelise obtained BCom (Law) and BCom (Hons) (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 the Vunani Group in June 2009 as group financial manager and as financial

director is responsible for the full finance and accounting function of Vunani Property Investment Fund Limited.

3PIETER WILLEM MACKENZIE (49)Executive directorBSc Building Management, MBA

Pete has over 20 years’ experience in all aspects of the property industry. He 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 focuses on both property development and investment. Pete was with Pegasus III 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 an MBA from Wits Business School in 1998. Pete is a member of the South African Property Owners Association.

NON-EXECUTIVE

4PRAGALATHAN DHANAPALAN NAIDOO (55)IndependentBSc (Hons) Civil Engineering, Pr Eng

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, in both large corporate and professional environments.

5ROBERT REINHARDT EMSLIE (55)IndependentBCom (Hons), CA(SA)

Robert Emslie is a member of a number of boards of listed and unlisted companies (mainly as an independent director). He has more than 30 years’ experience in the financial services sector and retired as a career banker in 2008. He is a qualified chartered accountant.

6JOHN RUSSELL MACEY (51)Independent BBusSci (Hons), BCom (Hons), CA(SA)

John studied at UCT and completed his articles with Deloitte in 1991. Since leaving Deloitte he has gained eight years of experience as CFO to manufacturing companies. He was also a staff member of the now College of Accounting at UCT for nine years, leaving as a tenured member of staff in 2009 to start his own advisory business. He is a qualified chartered accountant and serves on the boards and audit committees of three JSE listed companies.

7PORTIA MORWESI TAU-SEKATI (42)IndependentBA (Hons), PDM (Bus ad), Board Leadership (Gibs), African Leadership (UNISA)

Portia is currently the CEO of The Property Sector Charter Council. She has worked in various public and private entities and has extensive knowledge and is an expert in “transformation” as driven in the RSA by the BBBEE framework. She also has extensive experience in dealing with and lobbying government. Previously she served as the CEO of the National Association of Real Estate Agencies. Portia’s background is in marketing and she has held senior marketing positions both locally and abroad in companies such as Thebe Investment Corporation, Roche Pharmaceuticals and Gillette Company. She has also been appointed as a member of the company’s investment committee, social and ethics committee and remuneration and nominations committee.

8KYANSAMBO NTOMBI VUNDLA (34)IndependentBCom (Accounting), HDip Acc, CA(SA)

Kyansambo is a Chartered Accountant (SA) and is currently the CFO of Regiments Capital having previously held the position of CFO of Momentum Group Employee Benefits Division. She holds a number of directorships and memberships including Chairperson of the audit and risk committee for the Estate Agency Affairs board and she is also an independent non-executive director of Workforce Limited. Her previous memberships included audit and risk committee of the Bonitas Medial Aid Fund. She has also been appointed as a member of the company’s audit and risk committee.

9CHIPO EVELYN CHIMOMBE-MUNYORO (40)BA, LLB, LLM (Commercial Law/Maritime Law)

Evelyn is an admitted attorney of the High Court of South Africa. She was previously a director and partner at 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.

10ETHAN GILBERT DUBE (53)MSc (Statistics), Executive MBA (Sweden)

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 Proprietary 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.


EXECUTIVE1ROBERT FLETCHER KANE)Chief executive officer

2MARELISE DE LANGE1)Financial director

3PIETER WILLEM MACKENZIE9)Executive directorChairman of the social and ethics committee

NON-EXECUTIVE 4PRAGALATHAN DHANAPALAN NAIDOO)IndependentChairman of the board of directors

5ROBERT REINHARDT EMSLIEIndependentChairman of the audit and risk committee

6JOHN RUSSELL MACEYIndependent Chairman of the investment committee

7PORTIA MORWESI TAU-SEKATIIndependentChairman of the remuneration and nomination committee

8KYANSAMBO NTOMBI VUNDLAIndependent

9CHIPO EVELYN CHIMOMBE-MUNYORO)

10ETHAN GILBERT DUBE

1 2

3 4

5 6

7 8

9 10

AUDIT AND RISK COMMITTEE

INVESTMENT COMMITTEE

REMUNERATION AND NOMINATIONS COMMITTEE

SOCIAL AND ETHICS COMMITTEE

* Invitee to committee.

* *

* * * *

*


The past financial year presented Vunani Property Investment Fund (VPIF, the Fund) with a familiar set of challenges. Despite this, the Fund recorded growth in the value of its units of 21,8% to 1 005 cents per linked unit and distribution growth of 19,7% delivering 77,25 cents per linked unit. The total compounded growth delivered to its unitholders for the year was an excellent 31,2% (24,0% for the SA Property Listed Sector). Notably, this was achieved in the toughest trading conditions the Fund has experienced in its eight year history. As anticipated at the start of the year, the office market remained challenging, requiring us to be innovative so as to maintain solid growth in rental income, contain costs and retain our tenants. That said, the portfolio has emerged the year with improved key performance indicators and we are confident that 2014 will yield above market returns for our unitholders.

The single area in which we did not meet our targets was that of acquisitions. In December 2012, we set ourselves a goal of growing assets under management by R1 billion. However, the low interest rates combined with some new listings fuelled a feeding frenzy, inflating vendor expectations. This resulted in many assets being priced beyond the reach of rational investors. VPIF maintained its discipline and consequently our new acquisitions totalled a very modest R84,6 million. Although we would have preferred far stronger growth, we are reluctant to buy overpriced assets. We believe that the recent market correction will filter down to vendors, thus creating value plays for the Fund.

Notwithstanding the above, the Fund obtained linked unitholder approval subsequent to year end to raise up to R455 million through a rights offer; the proceeds of which will be used to fund the acquisition of quality A grade properties in Greenstone Hill Office Park and to pay down R179,1 million of existing debt. The capital raise will give VPIF an ability to acquire assets of R750 million without recourse to unitholders. This same strategy was used upon listing and enables the Fund to be nimble in the market, enhancing both the portfolio quality and distribution.

chairman and ceo’s report

REVENUES (R’million)

2011*

229,8

2012

171,9

2013

112,4

NET ASSET VALUE PER UNIT (cents)

2011*

861,9

2012

742,9

2013

751,2

* Results for 2011 annualised for comparable purposes as the results were for six months due to the year-end being changed from December to June.

OPERATING PROFIT (R’million)

2011* 2012 2013

94,3

63,8

145,6

DISTRIBUTION PER UNIT (cents)

2011 2012 2013

64,5157,34

77,25


Management have a solid pipeline of acquisitions under negotiation and we have put in place adequate resources internally to effect the deals. Consequently, we anticipate accelerated (but controlled) acquisition activity in 2014.

During the year, VPIF converted to a Real Estate Investment Trust (REIT), effective from 1 July 2013. The conversion to REIT status provides capital gains tax benefits and will be likely to attract foreign interest to the sector as it provides a familiar benchmark for international investors. Furthermore, Vunani Limited disposed of its 15,5% stake in VPIF to facilitate its other commitments. Key management however retained their shareholding and intend to follow their rights in the August capital raise.

Overall, 2013 was an excellent year for the Fund. We have developed a strong platform from which to grow and the results to date are pleasing.

OPERATING ENVIRONMENTA moribund global economy and continued uncertainty over the Eurozone formed the backdrop to the operating environment over the last year. Albeit slow, signs of recovery in both Europe and the United States indicate that the next year should see some uplift in South Africa’s main trading partners. The United States’ Federal Reserve Bank’s indication that it will reduce quantitative easing gave our bond markets (and consequently the property sector) an overdue correction. The disparity between our long bond yields and those of the property listed sector remains a concern with another correction possible in the coming months. Thus, the sector now offers investors a more stable platform going forward, with predictable income.

On a portfolio level, the market remains tough despite the continuing low interest rate environment as the South African economy continues to stumble along with little direction. The South African Reserve Bank’s June quarterly bulletin indicates a narrowing in the current account deficit to 5,8% of gross domestic product (GDP) from 6,5% in the first quarter. Investor confidence has been shaken

by domestic disruption, labour unrest and rand volatility. With the GDP growth forecast falling and a weaker economic outlook, consumer spending has slowed, making tenants cautious when assessing their requirements.

The office sector has not been immune to the dull economic forecasts, however we are comfortable that the office sector is at the bottom of the cycle and are pleased to report that VPIF has outperformed all property sectors by some margin despite these tough conditions.

We have experienced the usual upward pressures on administration and operating costs, such as municipal rates and utilities (electricity, water and waste). These costs have successfully been managed and controlled through a combination of greening initiatives and prudent management. We are pleased to report that solid advances are being made with regard to our greening initiatives, following VPIF’s receiving the 2012 Energy Efficiency Forum Award for its refurbishment of 14 Loop Street, a 1904 heritage building.

Our vacancy rate is a stable 5,6% which compares well with the industry average of 10,7%. The sector vacancies in 2014 may even be exacerbated in those nodes where speculative development will result in landlords competing for the same pool of tenants. VPIF unitholders will be pleased to know that it has little exposure to this cannibalisation.

ACQUISITIONSOur main considerations when acquiring assets will always be a keen focus on the property fundamentals and our downstream ability to manage the assets competently. Management is cognisant of the real cost of poor acquisitions, much of which is only evidenced some time later. Similarly, it is the responsibility of management to improve the quality of the portfolio and this needs to be balanced with the appetite of investors for above market distributions.

cPortfolioR1,568bn

GREENSTONE OFFICE PARK

ENVIRONMENT


Whilst there has been a fair amount of stock on offer, it has been challenging to acquire solid assets at sensible yields. VPIF will not acquire assets at the expense of quality or yield and where we do not see value.

A key component to any growth strategy is the ability to take on and then manage the new assets. We are pleased to report the management team has been increased and this will enable us to deliver a more robust acquisition performance in 2014.

It is the responsibility of management to improve the quality of the portfolio and this needs to be balanced with the appetite of investors for above-market distributions.

To date we appear to have met this responsibility, albeit at a slower pace than we would have liked. Two acquisitions were made in the reporting period:

n 5 251m2 GLA Brickfield Property in Woodstock, acquired for a purchase consideration of R20 million and an acquisition yield of 10,0%. The property is located in the rapidly developing Brickfields node and is ripe for redevelopment; and

As part of our tenant retention strategy, VPIF has carved a niche as a specialist in refurbishments, particularity green refurbishments.

Apart from a higher property valuation, the refurbishment of these buildings result in a more stable tenant profile and increasing distributions.

BUSINESS MODEL

STRATEGY

chairman and ceo’s reportcontinued

ENVIRONMENT

Office property grade Characteristics

n Increased choice.

n More arbitrage and potential to redevelopment.

n Lower rentals that will rise as vacancies and new developments command higher rentals.

Limited availability, huge competition, fully priced, very high rentals, limited growth.

n Functionally obsolete.

n Properties that will not hold their value.

n Generally in poor locations.

Rentals: R175/m2AAA GRADE

A GRADE

B+ GRADE

B GRADE

C GRADE

Rentals: R103/m2 VPIF TARGET MARKET


n Business Centre property located prominently in Rivonia Boulevard, Sandton for a purchase consideration of R64,5 million with an acquisition yield of 9,6%. The 4 886m2 GLA property is single tenanted under a 10 year triple net lease.

REFURBISHMENTS AND EXTENSIONSAs part of our tenant retention strategy, VPIF has carved a niche as a specialist in refurbishments, particularity green refurbishments. Apart from a higher property valuation, the refurbishment of these buildings result in a more stable tenant profile and increasing distributions.

Since listing, we have undertaken six refurbishments of varying sizes. In the last reporting period we calculated that for every rand spent we achieve at least three rand in value uplift. Far more important than an enhanced valuation, is the rental growth and improved quality of the offering.

The Fund completed a number of modest, but important upgrades in the reporting period and is pleased with the results.

Investment Place is currently undergoing a refurbishment project where all the foyers and washrooms are being overhauled. Tenanting commences in August 2013.

On the back of the successful 14 Loop Street refurbishment, we have made further encouraging and significant strides in developing other properties into environmentally friendly buildings. This will further enhance VPIF’s portfolio and reputation as a greening refurbishment specialist. We are now looking to leverage this expertise by implementing the same strategy on a much larger scale at the Foretrust Building, located in the fast developing node of the Cape Town Foreshore. On the basis of significant savings (as much as R15 per m2 at 14 Loop Street) we strongly believe that refurbishments according to green principles will sustain the growth of the Fund over the long term. As such, each building in our portfolio is currently being assessed by way of a rating model and we have recently appointed a consulting team of green experts to further develop our offering.

VACANCIESVPIF started the year with 23,3% of leases due to expire. It achieved a very successful 73% retention rate, with the 3 158m2 vacancy in May at Investment Place being the dominant non-renewal. Fortunately, we only have two material leases expiring in 2014 amounting to 7% of our lettable area, 5,5% of which is under a lease renewal offer. Thus, the Fund has very little exposure to expiring leases in 2014. We do not see any notable risks and are confident that there will be few if any reversions as rentals are very much in line with, if not below the market average. The overall weighted average lease expiry is 4,75 years with the average lease escalations at approximately 7,7%.

LEASE EXPIRIESVPIF started the year with 23,3% of leases due to expire. It achieved a very successful 73% retention rate, with the 3 158m2 vacancy

at Investment Place being the dominant non-renewal. Fortunately, we only have two material leases expiring in 2014 amounting to 7% of our lettable area, 5,5% of which is under a lease renewal offer. Thus, the Fund has very little exposure to expiring leases in 2014. We do not see any notable risks and are confident that there will be few if any reversions as rentals are very much in line with, if not below the market average. The overall weighted average lease expiry is 4,75 years with the average lease escalations at approximately 7,7%.

FINANCIALSOverall, VPIF produced a very pleasing set of results in the financial year ended 30 June 2013, delivering distribution growth of 19,7% and capital growth of 21,8%. The total compound growth for the period was 31,2%.

The Fund reported a strong performance and exceeded its distribution targets, with the linked unit price commensurately improving. On 3 December 2012, the Fund released a trading update announcing that the anticipated interim distribution would be 18% to 24,4% greater than the comparable interim period. VPIF declared an interim distribution of 38,0 cents per linked unit. Subsequently, on 31 May 2013, the Fund again released an additional trading statement to indicate a further 16% to 18% distribution growth on the comparable period. The board of directors declared a final distribution of 39,25 cents per linked unit, giving total distributions of 77,25 cents per linked unit. Management believes the platform is solid and that factors will continue to have an enduring and sustainable impact on future distributions.

Investment property income increased by 30,8% from R165,860 million to R216,883 million for the year to 30 June 2013.

Total property related expenses increased by 29,5% from R57,874 million to R74,948 million mainly due to a full 12 month reporting period and acquisitions made during the year. Management believes that life cycle costing and the retention of quality in both its buildings and tenants are more important considerations and therefore does not focus exclusively on expense ratios.

BORROWINGS Net borrowings at 30 June 2013 of R489,905 million equates to a gearing ratio of 31,25%, which is well within the covenants and the directors do not expect that gearing levels will exceed 40%. The blended average cost of debt is 8,7%, broken down into an average of 9,3% (inclusive of margin) for fixed debt for a remaining period of four years and floating at an average of 7,6% (inclusive of margin).

R179,1 million of the R455 million rights offer will be used to pay down the Fund’s floating debt. Coupled with this, we renegotiated our rates with Standard Bank which also significantly reduced our cost of funding in addition to bedding down a facility of R670 million.

In the near future, VPIF plans to enter debt capital markets through a domestic medium-term notes programme to raise further cash to fund acquisitions. DMTN programmes are currently more cost effective than conventional bank funding.

ENVIRONMENT


The subscription price of 987,33 cents per rights offer unit comprises a clean price of 938,07 cents and total pre-paid distributions of 49,26 cents. As a result, the rights offer units will be entitled to the full final 2013 distribution.

Proceeds of the rights offer will be used to fund the acquisition of quality A grade properties in Greenstone Hill Office Park and settle approximately R179,1 million of floating debt, giving us capacity to acquire buildings using available debt capacity. Post the acquisition, VPIF will own 11 of the 15 properties in the office park.

OUTLOOKVPIF continued to outperform the sector and delivered on its promises to all stakeholders. Positive distribution growth of the upcoming financial year is expected with distribution growth anticipated to be between 84,00 and 86,00 cents per linked unit.

As mentioned before, the outlook is tough but we trade well in a tough market.

NOTE OF GRATITUDEOur sincere thanks goes to every VPIF staff member and the property management team who gave of their very best every day and continue to shine in a dull market. Our performance is a reflection of this hard work, which is greatly appreciated by ourselves and the rest of the board of directors.

Our appreciation is also extended to our fellow executives on the board. Their commitment, depth of knowledge and skills are invaluable. Finally, we would not have a fund if it was not for the support received from all our institutional linked unitholders who have believed in our vision to build a very stable, sustainable business, and of our tenants who continue to support us.

PD Naidoo RF Kane Chairman Chief executive officer

STRATEGYVPIF will continue to focus on its chosen niche as specialists in the A+, A and B+ grade offices where arbitrage opportunities are greatest. With that said, management is open to buying assets in other classes, be they industrial or retail, provided that there is value and we are confident we can manage the assets. The Fund will remain office dominated.

We will continue to focus on growing the assets under management through strategic acquisitions that fit within the Fund investment criteria of yield and quality enhancing assets, whilst avoiding trophy assets which remain in high demand and are highly priced. The recent rerating should provide some acquisition opportunities.

The management team has an eight year proven track record of extracting value from its portfolio. Together with the green initiatives gaining traction, the Fund is well positioned for continued growth in distribution to unitholders and to ensure the long-term capital appreciation of our assets.

CORPORATE GOVERNANCEVPIF is committed to continuously improving corporate governance, in line with the recommendations by the King Code on Corporate Governance for South Africa 2009 (King III). We were delighted to announce the recent appointment of Portia Tau-Sekati and Kyansambo Vundla as independent non-executive directors. Portia was subsequently appointed to the investment, social and ethics, remuneration and nomination committees and Kyansambo to the audit and risk committee.

The board now consists of three executive directors, five independent non-executive directors and two non-executive directors.

SUBSEQUENT EVENTSPost the financial year end, VPIF received approval from the JSE to raise up to R455 million. The Fund offered a total of 48 503 939 new linked units to unitholders at a subscription price of 987,33 cents per rights offer unit (which includes the accrued distribution and antecedent). This is in the ratio of 40,21283 rights offer units for every 100 linked units held on the record date for the rights offer.

chairman and ceo’s reportcontinued

ENVIRONMENT SOCIAL

Property Investment Fund integrated annual report 2013 I P21 Property Investment Fund integrated annual report 2013 I P21

We adopt values and philosophies which are the benchmark against which we measure behaviour and the practices in our business. Our values require that directors and management operate with utmost integrity, displaying consistent and uncompromising moral strength and conduct in order to promote and maintain trust.

BENSTRA BUILDING


corporate governance reportINTRODUCTIONThe board ultimately provides leadership based on an ethical foundation, and oversees the overall process and structure of corporate governance. In formulating our governance framework, we aim to apply the highest standards of corporate governance practice, in a pragmatic manner. This enables us to:

n Build and sustain an ethical corporate culture in the company;

n Provide effective supervision and leadership based on ethical imperatives;

n Identify and mitigate significant risks, including reputational risk;

n Direct strategy and operations for sustainable business

n Exercise effective review and monitoring of our activities;

n Promote informed and sound decision making;

n Enable effectiveness, efficiency, responsibility and accountability;

n Enhance stakeholder perceptions of the business;

n Ensure the company is a responsible corporate citizen;

n Facilitate legal and regulatory compliance;

n Secure the trust and confidence of all stakeholders;

n Protect our reputation;

n Ensure sustainable business practices, including social and environmental activities;

n Disclose the necessary information to enable all stakeholders to make a meaningful analysis of our financial position and actions;

n Respond appropriately to changes in market conditions and the business environment;

n Remain at the forefront of international corporate governance practices;

n Ensure company ethics are managed effectively through the social and ethics committee; and

n Track measurements and key performance indicators for ongoing corporate social investment.

The Fund is managed externally by Vunani Property Asset Management Proprietary Limited (VPAM), in terms of the asset management agreement concluded between the parties. The day-to-day management and operational functions are performed by employees of VPAM. The Fund has no employees or personnel of its own.

VALUES AND ETHICS We adopt values and philosophies which are the benchmark against which we measure behaviour and the practices in our business. Our values require that directors and management operate with utmost integrity, displaying consistent and uncompromising moral strength and conduct in order to promote and maintain trust. Sound corporate governance is entrenched in our values, culture, processes, functions and organisational structure. Our governance

structures are designed to ensure that our values are embedded in our business and processes. We have a strong organisational culture of entrenched values, which form the cornerstone of our interactions with all stakeholders. These values are embodied in a written statement of values, which serves as our code of ethics.

SUSTAINABILITY PRACTICES Our sustainability goals reflect our culture of continuous advancement and reaffirm our belief that sustainability in its broadest sense is about managing and positioning the business for the long term. The Fund’s sustainability philosophy is based on the recognition that we are driven by our commitment to our culture and values.

Our approach to sustainability reflects our acute awareness of the need for longevity and an ingrained understanding of the practices that underpin sustainability. This approach is documented throughout the integrated report. The Fund has decided to report on a basis that integrates both financial and non-financial information in line with King III’s recommendations.

BOARD STATEMENT The Fund through its board and management is committed to complying with the disclosure and transparency rules of the JSE Limited (JSE) Listings Requirements, the Companies Act, 2008 and the King Code of Governance Principles for South Africa 2009 (King III). Consequently, all stakeholders can be assured that we are being managed ethically and in compliance with all relevant legislation, regulation and recognised best practice and that the specific requirements set out in the JSE Listings Requirements have been complied with throughout the financial year.

KING IIIThe Institute of Directors of South Africa (IoDSA) is the convener of the King Committee and the custodian of the King Reports. It is one of the main objectives of the IoDSA to promote corporate governance, and one of the best ways to do this is to enable application of the King Report on Governance in South Africa, 2009 (King III).

Challenges with King IIIThere are two primary challenges for organisations when attempting to implement King III:

n King III has to be interpreted and understood within the nature, size and complexity of an organisation; and

n There has been no credible and generally accepted national benchmark to measure and compare application of King III.

Challenges avertedTo assist with the above challenges, the IoDSA has developed the Governance Assessment Instrument (GAI), an online tool that will assist in the following ways:

n Evaluating implementation of governance structures and processes as recommended in King III;

SOCIAL


n Enabling ongoing tracking of progress on implementation of King III, understanding that it’s a process;

n Providing a simplified framework to the board for a risk-based review of the application of King III, without voluminous reading;

n Facilitating a meaningful scoring mechanism reflective of an organisation’s adoption of King III;

n Providing a framework by which governance can be assured by independent service providers;

n Giving holding companies a concise view of their subsidiaries’ governance status;

n Providing an audit programme for internal and external service providers; and

n Offering a reporting benchmark to stakeholders, that is fit for peer-to-peer comparison of organisations, enhancing confidence in governance reporting.

The GAI calculates an overall score indicating the status of application of King III as follows:

Ratings key AAA Highest application AA High application

BB Notable application B Moderate application

C Application to be improved L Low application

The Fund made use of the GAI for the purposes of assessing the level of compliance with King III, which results in the scores per category as detailed below. Details of the full checklist have been included on our website www.vpif.co.za. The Fund’s overall rating in terms of the GAI is AAA. Additional information is provided on all scores below AA.

Category Score

Board composition AAA

Remuneration AA

Governance office bearers AAA

Chairman AAA

CEO AAA

Company secretary AAA

Board roles and duties

Focal point of corporate governance AAA

Fiduciary duties AAA

Strategy AAA

Ethical leadership AAA

Corporate citizenship and leadership AAA

Risk AAA

IT governance AA

Compliance AAA

Internal audit AAA

Business rescue AAA

Accountability AA

Stakeholder relations AAA

Integrated reporting and disclosure BB

Category Score

Performance assessment AA

Board committees

Audit committee AAA

Risk committee AAA

Remuneration committee AAA

Nomination committee AAA

Social and ethics committee AAA

Group boards N/A

King III distinguishes between statutory provisions, voluntary principles and recommended practices. The King III Report provides best practice recommendations, whereas the King III Code details the principles that all entities should apply. The majority of the principles of King III are being applied and this is evidenced in the various sections of this report. The checklist of our level of compliance with King III can be found on our website. The following principles of King III are currently not being applied:

n Sustainability reporting and disclosure should be independently assured:

– Sustainability reporting and related disclosure was not independently assured by an external expert. The audit and risk committee has overseen the integrated report, including sustainability disclosures; and

– We recognise the importance of sustainability reporting and verification of our efforts in this area. This is a developmental area and we will aim to commission external verification in future.

n The evaluation of the board, its committees and individual directors should be performed annually:

– Performance evaluations have been embarked on and will be completed in the new financial year.

FINANCIAL REPORTING AND GOING CONCERN The directors are satisfied that the Fund has adequate resources to continue in business for the foreseeable future. The assumptions underlying the going concern statement are discussed at every board meeting and again at the time of the approval of the annual financial statements by the board and these include:

n Budgeting and forecasts;

n Profitability;

n Capital; and

n Solvency and liquidity.

In addition, the directors are responsible for monitoring and reviewing the preparation, integrity and reliability of the financial statements, accounting policies and the information contained in the annual report. In undertaking this responsibility, the directors are supported by an ongoing process for identifying, evaluating and managing the risks faced in preparing the financial and other information contained in this annual report. This process was in


corporate governance reportcontinued

place for the year under review and up to the date of approval of the annual report and financial statements. The process is implemented by management and independently monitored for effectiveness by the audit and risk committee and other sub-committees of the board, which are detailed on pages 27 to 31.

Our financial statements are prepared on a going concern basis, taking into consideration:

n The Fund’s strategy, prevailing market conditions and business environment;

n Nature and complexity of our business;

n Risks we assume, and their management and mitigation;

n Key business and control processes in operation;

n Access to capital;

n Needs of all our stakeholders;

n Operational soundness;

n Accounting policies adopted;

n Corporate governance practices;

n Desire to provide relevant and clear disclosures; and

n Operation of board committee support structures.

The board is of the opinion, based on its knowledge of the Fund, key processes in operation and specific enquiries, that there are adequate resources to support the Fund as a going concern for the foreseeable future. Furthermore, the board is of the opinion that the risk management processes and the systems of internal control are effective.

BOARD OF DIRECTORS The board seeks to exercise leadership, integrity and sound judgement in pursuit of strategic goals and objectives, to achieve long-term sustainability, growth and prosperity. The board is accountable for the performance and governance of the Fund.

The board subscribes to the following code of ethics:

The board of directors commits itself to ensure, that the company and its agents conduct the business according to the highest ethical standards and, in particular:

n Comply with all laws of the country that affect the company;

n Comply with the rules of the JSE Limited;

n Act in the best interests at all times of all the stakeholders;

n Be transparent in disclosing all material information that may influence investors and potential investors;

n Not act in any way that may be regarded as harmful business practice;

n Conduct the business as a responsible corporate citizen;

n Trade in securities of the company only in open periods and with the prior written permission of the chairman and/or financial director;

n Not trade in competition with the company; and

n Not hold positions that give rise to a conflict of interests and, should any potentially conflicting situations arise, make full, prior written disclosure to the board and abstain from participating in any discussions or voting on the matter, unless the board consents thereto.

The board provides leadership within a framework of prudent and effective controls which ensures risks are assessed and properly managed. The board has adopted a board charter, which provides a framework of how the board operates as well as the type of decisions to be taken by the board and those which should be delegated to management. The board meets its objectives by reviewing and guiding corporate strategy, setting the values and ethical standards, promoting high standards of corporate governance, approving key policies and objectives, ensuring that obligations to its unitholders and other stakeholders are understood and met, understanding the key risks we face, determining our risk tolerance and approving and reviewing the processes in operation to mitigate risk from materialising, including the approval of the terms of reference of key supporting board committees. To achieve its objectives, the board may delegate certain of its duties and functions to various board committees or the CEO, without abdicating its own responsibilities:

n The board has formally defined and documented, by way of terms of reference, the authority it has delegated to various actions and functions; and

n In fulfilling its responsibilities, the board is supported by management in implementing the plans and strategies approved by the board.

Furthermore, directly or through its sub-committees, the board:

n Assesses the quantitative and qualitative aspects of the Fund’s performance through a comprehensive system of financial and non-financial monitoring involving an annual budget process, detailed monthly reporting, regular review of forecasts and regular management strategic and operational updates;

n Approves annual budgets, capital plans, projections and business plans;

n Monitors compliance with relevant laws, regulations and codes of business practice;

n Ensures there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders and monitors our communication with all stakeholders and disclosures made to ensure transparent and effective communication;

n Identifies and monitors key risk areas and key performance indicators;

n Reviews processes and procedures to ensure the effectiveness of internal systems of control;

n Ensures we adopt sustainable business practices, including our social and environmental activities;

n Assisted by the audit and risk committee, ensures appropriate information technology (IT) governance processes are in place,


and ensures that the process is aligned to the performance and sustainability objectives of the board;

n Ensures the appropriate risk governance, including IT, is in place including continual risk monitoring by management and determines the levels of risk tolerance and that risk assessments are performed on a continual basis;

n Ensures the integrity of the company’s integrated report, which includes sustainability reporting;

n Ensures the induction and ongoing training and development of directors; and

n Considers succession planning.

Independence As at 30 June 2013, the board is compliant with Chapter 2, Principle 2.18 of King III in that the majority of non-executive directors are independent.

Chairman The chairman of the board, Dempsey Naidoo, is considered to be independent as contemplated by King III.

Chairman and chief executive officer The roles of the chairman and chief executive officer are distinct and separate with a clear division of responsibilities that has been approved by the board. The chairman leads the board and is responsible for ensuring that the board receives accurate, timely and clear information to ensure that directors can perform their duties effectively.

Board composition The board is of the view that the non-executive directors are independent of management and promote the interests of stakeholders. The balance of executive and non-executive directors is such that there is a clear division of responsibility to ensure a balance of power, such that no one individual or group can dominate board processes or have unfettered powers of decision making. The board believes that it functions effectively and evaluates its performance annually.

Skills, knowledge, experience and attributes of directors The board considers that the skills, knowledge, experience and attributes of the directors as a whole are appropriate for their responsibilities and our activities. The directors bring a diverse range of skills and expertise to the board including:

n International business and operational experience;

n Understanding of the economics of the property sector in which we operate;

n Knowledge of the regulatory environments in which we operate; and

n Financial, accounting, legal and property experience and knowledge.

The skills and experience profile of the board and its committees are regularly reviewed to ensure an appropriate and relevant composition from a governance, succession and effectiveness perspective.

Board’s and directors’ performance evaluationThe performance of the board, its committees and individual directors will be evaluated annually according to recognised corporate governance practices. The formal process has been approved by the remuneration and nominations committee and will be implemented early in the new financial year. The performance evaluation process will take place both informally, through personal observations and discussions, as well as more formally, through completion of questionnaires. The results will be considered and discussed by the board. The chairman will conduct face-to-face meetings with each director to discuss the results of the formal and informal evaluations and, in particular, seek comments on strengths and developmental areas of the members, the chairman and the board as a whole. Individual training and development needs will discussed with each board member.

Ongoing training and development All new and inexperienced directors are required to attend the JSE AltX induction programme which is mandatory for all new inexperienced directors to attend this course. The cost of attending appropriate external training courses is paid by the company. As the JSE AltX induction training is wide-ranging, a programme specific to the company will be formulated and implemented during the course of the 2014 financial year to cater for further continuing education and training. Following the board’s and directors’ performance evaluation process, any training needs will be communicated and the needs addressed.

Terms of appointment On appointment, non-executive directors are provided with a letter of appointment. The letter sets out, among other things, duties, responsibilities and expected time commitments, details of our policy on obtaining independent advice and, where appropriate, details of the board committees of which the non-executive director is a member. An insurance policy is in place that insures directors against liability they may incur in carrying out their duties.

Independent advice Through the company secretaries, individual directors are entitled to seek professional independent advice on matters related to the exercise of their duties and responsibilities at the expense of the Fund. No such advice was required during the 2013 financial year.

Remuneration The executive directors who are employed by VPAM will not be remunerated directly by the Fund for their services, as the Fund pays the asset management fee to VPAM. The remuneration paid to directors for the year ending 30 June 2013 is set out on pages 73 and 74 of the financial statements. The proposed



remuneration of non-executive directors for the year ending 30 June 2014 is set out below:

R per annum

Chairman of the board 243 800

Chairman of the audit and risk committee 212 000

Chairman of the investment committee 212 000

Chairman of the remuneration and nominations committee 212 000

Other non-executive directors 180 200

Directors’ dealings The directors’ report, as set out on page 38, contains details of units held in the Fund by directors. Directors’ dealings in the securities of the Fund are subject to a policy based on regulatory requirements and governance best practice. Any transactions in the securities of the Fund require the prior approval of the chairman. In the event that the chairman wishes to trade in units, the prior written approval of the CEO or in his absence the financial director is required.

Conflicts of interest Given the close association with Vunani Properties Proprietary Limited (VP), the Fund may participate in transactions in respect of which VP may have an interest, whether direct or indirect, or via a relationship of some nature with another party. Conflicts of interest are discussed at every relevant committee and board meeting and such interest disclosed. In the event that the Fund is presented with

Board meetings The board of the Fund meets at least four times annually. Five board meetings were held during the reporting period. The chairman is responsible for setting the agenda for each meeting, in consultation with the chief executive officer. Comprehensive information packs on matters to be considered by the board are provided to directors in advance of the meetings.

an investment proposal involving a property owned (in whole or in part), directly or indirectly, by VP or any other related party, such interest will be fully disclosed to the Fund and will be referred to the investment committee and the board. The investment committee and the board must approve any such proposals referred to it before the investment is made. During the year, Greenstone Hill Office Park was presented to the investment committee. The conflicted parties were recused from the meetings after which the remaining members of the committee recommended the acquisition to the board for approval. At the board the same members were also recused from participating in the decision.

COMPANY SECRETARY The appointed company secretary is Probity Business Services Proprietary Limited and is represented by Neville Toerien and Walter Mapanzure. The representatives are professionally qualified

Meetings/committees Term BoardAudit

and risk Investment

Remunerationand

nomination

Social and

ethics

DIRECTORSExecutive

RF Kane 5 years 5/5 4/4# 3/3 1/1# 1/1

M de Lange 2 years 5/5 4/4# 4/4# 1/1# 1/1#

PW Mackenzie 7 years 5/5 1/3 1/1

Independent non-executive

PD Naidoo (Chairman) 2 years 5/5 3/3 4/4 1/1

RR Emslie 2 years 5/5 4/4 4/4

JR Macey 2 years 5/5 4/4 4/4

PM Tau-Sekati (appointed 1 March 2013) 3 months 2/2 2/2 1/1 1/1

KN Vundla (appointed 1 March 2013) 3 months 2/2 1/1

Non-executive

EG Dube 2 years 4/5 2/3 1/1

CE Chimombe-Munyoro 2 years 3/5 3/3 1/1

# Attended by invitation.


and have the required experience gained over a number of years of professional practice. Their services will also be evaluated by the board members during the annual board evaluation process. In compliance with the JSE Listings Requirements, the board has considered and is satisfied that Neville and Walter are competent, have the relevant qualifications and experience and maintain an arm’s-length relationship with the board. In addition, the board confirms that neither Neville nor Walter have ever served as directors on the board, nor do they take part in board deliberations but only advise on matters of governance, form or procedure.

BOARD COMMITTEES AND RESPONSIBILITIES Committees are established by the board to assist the board in the discharge of its duties.

Board committees have unrestricted access to company information and any resources required to help them fulfil their responsibilities, including professional advice which is paid for by the company.

Every board committee has a board-approved term of reference. The board determines and amends the scope and responsibilities of the committees, as well as the appointment of new committee members.

The CEO and financial director are present at all board committee meetings in order to promote sound corporate governance and optimise the sharing of information. The company secretary attends all board committee meetings.

Board of directorsn Approves the Fund’s strategy;

n Ensures that the Fund complies with all applicable laws;

n Is responsible for the governance of risk, including that of information technology (IT);

n Acts as focal point for, and custodian of, corporate governance;

n Provides effective leadership based upon an ethical foundation;

n Approves the terms of reference of board committees;

n Assesses the going-concern fundamentals;

n Ensures that adequate controls are in place; and

n Ensures the Fund operates as a responsible corporate citizen.

Audit and risk committeeThe audit and risk committee comprises three independent non-executive directors. The CEO, financial director and internal and external auditors are present at meetings, by standing invitation.

The committee members are:RR Emslie (Chairman)JR MaceyKN Vundla

The committee invitees are:RF Kane (CEO)M de Lange (FD)LA Rowan (JHI)M Lever (Excellerate – internal audit)D Thompson (KPMG – external audit)A de Bruyn (KPMG – external audit)N Toerien (Probity Business Services – company secretary)W Mapanzure (Probity Business Services – company secretary)

The committee maintains an active working relationship with the board. The committee is governed by its terms of reference, the Act and the King III Report and Code of Governance. The terms of reference are aligned to both the King III Report and Code and the new Companies Act.

The committee meets quarterly with ad hoc meetings arranged as and when necessary. To assist the board in its supervisory and governance responsibilities, the responsibilities of the committee include the following:

n Ensuring adequate processes are in place to safeguard the company’s assets;

n Ensuring adequate accounting records are maintained;

n Reviewing reports and financial statements and integrated report prior to recommendation to the board for approval;

n Reviewing the appropriateness of accounting policies and their application;

n Overseeing the external audit process;

n Considering the external audit scope;

n Ensuring the effectiveness of internal controls is regularly reviewed and effective systems of internal control are maintained;

n Ensuring an open channel of communication is maintained between directors and accounting staff, as well as external auditors;

n Ensuring an external auditor is appointed at all times to determine the scope for each external audit. The committee reviews and sets auditors’ fees for the annual audit;

n Reviewing internal audit plans, reports, capacity and capability;

n Ensuring compliance with legal requirements, accounting standards and the JSE Listings Requirements;

n The adoption and implementation of an appropriate risk management policy specifically for REITs which will be in accordance with industry practice and prohibit the entering into of any derivative transactions which are not in the normal cause of business;

n Ensuring the finance functions of the Manager, as they pertain to the Fund, are adequately skilled, resourced and experienced; and

n Ensuring that the external auditors are independent.



Remuneration and nominations committeeAs the operations of the Fund are undertaken by the Manager, the Fund does not have any employees. The remuneration and nominations committee therefore does not make decision relating to the remuneration of executive directors. The executive directors are employed by the Manager and are not remunerated for their services as directors of the Fund. The board does however, assess and comment on the suitability of executive remuneration. The remuneration of the non-executive directors is determined by the committee and recommended to the board and unitholders for approval. The level of fees paid to non-executive directors is reviewed by the remuneration and nominations committee on an annual basis. For details regarding fees paid during the current and prior year, refer to note 30 to the financial statements. There are no service contracts for non-executive directors. For details pertaining to direct or indirect beneficial holdings in units of the Fund in the current or prior year, refer to page 38. The fees paid to non-executive directors are approved annually in advance of the annual general meeting.

The committee members are:PM Tau-Sekati (Chairman)PD NaidooEG Dube

The committee invitees are:RF Kane (CEO)M de Lange (FD)N Toerien (Probity Business Services – company secretary)W Mapanzure (Probity Business Services – company secretary)

Although King recommends that the remuneration section of the committee be chaired by an independent non-executive director and the nominations section be chaired by the chairman of the board, the Fund chose to have the combined committee chaired by an independent non-executive director. The chairman of the board is an active member of the committee. The nominations responsibilities of the committee include:

n Identifying and nominating suitable candidates to fill vacancies on the board;

n Determining and evaluating the adequacy, efficiency and appropriateness of the corporate governance structure and practices;

n Establishing and maintaining a board directorship continuity programme to:

– review the performance of and planning for, successors to the executive directors and chairperson of the board;

– ensure the continued presence of non-executive director;

– conduct an annual self-assessment of the board; and

– regularly review the structure, size and composition (including the skills, knowledge and experience) of the board;

n Making recommendations to the board with regard to any proposed board changes; and

n Making recommendations to the board for the retention of a current director.

Social and ethics committee (SEC)The committee members are:PW Mackenzie (Chairman)RF Kane (CEO)CE Chimombe-MunyoroPM Tau-Sekati

The committee invitees are:M de Lange (FD)N Toerien (Probity Business Services – company secretary)W Mapanzure (Probity Business Services – company secretary)

The statutory duties of the committee are discharged in terms of sections 72 (4) and (5) of the Companies Act, 2008, read with regulation 43 of the Companies Regulations 2011, which states that all listed companies must establish a social and ethics committee. The committee has adopted a formal terms of reference which has been approved by the board and will be reviewed on a periodic basis. The committee is responsible for, inter alia:

n Monitoring the group’s activities against global responsibility protocols, including the UN Global Compact Code and the principles of the Organisation for Economic Development Guidance (OEDG). The company supports and respects the principles as set out in the UN Global Compact Code, OEDG’s recommendation on the prevention of corruption and the International Labour Organisation’s directive on decent work and working conditions as it relates to our suppliers.

n Monitoring compliance with the BBBEE Act. The Fund recognises that integrating transformation into business practice is crucial for the sustainability of the company. The company supports the Property Transformation Charter and is committed to transformation. It is our intention to develop strategies that address each and every element of the proposed Property Transformation Charter and thereby really contribute to the overall transformation of the company.

n Monitoring of corporate citizenship, consumer relations, and the Fund’s impact on the environment, health and public safety as it relates to the properties we own. The group aims to be a good corporate citizen. For the year ended 30 June 2013 we have donated R75 000 to the Tomorrow Trust and R75 000 to Salvazione Christian School. The funds donated to the Tomorrow Trust were used specifically for Ms Lesego Lethlape, a tertiary student who is in her third year of BCom studies. The social and ethics committee has approved further funds to be made available to the Tomorrow Trust for Lesego’s continued education as well as the Salvazione Christian School.

ENVIRONMENT SOCIAL


The Tomorrow Trust provides holistic support to orphans and vulnerable children/youth through their educational journey that enables them to make choices that empower them to reach their full potential as self-sustaining and proactive members of society. The organisation currently provides educational support for over 1 080 children from Grade R to Grade 12 and a further 169 youth in post-secondary studies.

The Salvazione Christian School is a registered independent school that receives a state subsidy which sadly does not even cover the teachers’ salaries. Limited school fees are collected from families who are able to afford them. As such the school relies heavily on donations from individuals and corporate sponsors to cover the ever increasing cost of running the school. The Slovo Park Educational Trust was formed and has over the past eight years been raising funds to support the school financially.

n We have donated approximately 100 chairs from a now converted auditorium in one of our buildings to the Diepsloot Methodist Church of Southern Africa.

Investment committeeThe committee members are:JR Macey (Chairman)RF Kane (CEO)RR EmsliePD NaidooPM Tau-SekatiCE Chimombe-MunyoroEG Dube

The committee invitees are:M de Lange (FD)PW MackenzieN Toerien (Probity Business Services – company secretary)W Mapanzure (Probity Business Services – company secretary)

The investment committee roles and responsibilities include:

n To review and approve any proposed

– acquisitions or disposals of investment properties or related investments; and

– redevelopment opportunities;

n Ensuring all investments approved are in the best interests of the Fund; and

n Assessing the risk that might exist and conflicts of interest that may arise.

RISK MANAGEMENT The board is responsible for the entire risk management process and the systems of internal control. A number of committees and forums assist in this regard. The strategic intent of our risk management process is to create an environment in which risk management is applied at a consistently high level across the group, enabling the board to take informed decisions, achieve business objectives and maximise returns for linked unitholders.

Potential strategic risks are identified annually by the group’s executive team. The risks facing the company as individually identified by each member of the audit and risk committee are identified as the key risks. The key risks collectively identified by all the members are assessed in terms of their probability, as well as their potential impact on the group as a whole.

The key strategic risks identified by the audit and risk committee are listed below, together with the appropriate mitigation strategies and relevant performance measures.

ENVIRONMENT SOCIAL

Key risk identified Potential impact Mitigation of potential risk Measurement

Above average cost inflation from utilities, local councils and other property related expenses

Reduced net property related income as the rental escalations do not cover the cost increases. This will lead to increased tenant defaults and vacancies.

The risks associated with the increased cost of assessment rates, electricity, water and sewerage etc. are transferred to the tenant in terms of the lease agreement.

The non-recoverable component is managed by negotiating contracts with service providers.

Gross expenditure (excluding recoveries)

% of gross

rental income R’m

Electricity 15,2 26,04

Water 1,2 2,02

Sewerage and refuse 1,2 2,09

Assessment rates 7,3 12,54

Security 2,3 3,90



Key risk identified Potential impact Mitigation of potential risk Measurement

Tenant failuresMonies owing are irrecoverable.

Large vacancies that cannot be filled.

Re-letting of current space at lower rental than the current or market rental.

A large percentage of tenants are made up of government, large nationals or listed tenants.

Continuous assessment of geographical diversification.

Adequate quality checks of potential tenants at inception of leases.

Top 10 tenants by revenue per month R’m

Government of SA 4,63

SITA 1,31

Standard Bank of SA 1,04

Vodacom 0,69

Business Centre 0,46

Absa Bank 0,45

Aegis BPO Holdings SA 0,43

City of Cape Town 0,39

Hutch GOBA 0,36

Vunani Capital 0,24

Increased vacancies and periods to re-let

Increase in working capital management.

Increased costs in filling of vacant space.

Competition driving down market rentals and decreasing income.

Focus on tenant retention and tight management.

Vacancies in GLA

% of total GLA

Office 5,4

Retail 0,2

Total 5,6

Liquidity risk in being unable to refinance major loan exposures and increased cost of debt

Inability to refinance or roll over debt.

Refinancing at higher borrowing costs.

Increased cost of debt impacts negatively on the income available for distribution.

Cash flows are managed on a monthly basis to ensure adequate resources to meet funding requirements.

Focused and prudent debt management.

Staggered expiry of debt facilities

Measure %

Loan to value 31,25

Loan covenant 40,00

Unutilised borrowings 8,75

Increasing arrearsMonies owing are irrecoverable.

Increase in working capital requirements.

Tenant credit worthiness is assessed at the inception of the lease.

Lease agreements incorporate annual escalations over the period of the lease.

Value of arrears R’000

Commercial 3 079

Retail 1 055

Industrial 15

Total 4 149

StaffingReduced capability and/or capacity to readily react to opportunities that arise in the market place.

Operational instability and/or inexperience resulting in poor tenant service levels/delivery.

Loss of credibility by external stakeholders.

The remuneration and nominations committee oversees the staffing capacity at the external management company to ensure consistent performance.

One asset manager per R1,4 billion of assets under management.

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INTERNAL AUDIT n The board, via the audit and risk committee, ensures that

internal audits are effective and risk based;

n The Head of internal audit engagement partner reports to the audit and risk committee quarterly, on the design and operating effectiveness of the Fund’s internal controls;

n Internal audit is strategically positioned to achieve its goals;

n The internal audit function is outsourced and appropriately resourced for the complexity and volume of work required;

n The Head of internal audit reports back to the audit and risk committee;

n Internal audit conducts a formal risk assessment of the Fund each year, to formulate a comprehensive risk-based audit plan. The assessment and programme are validated by executive management and approved by the audit committee; and

n Internal audit also liaises with the external auditors to enhance efficiencies. The annual plan is reviewed regularly to ensure it remains relevant.

EXTERNAL AUDITKPMG Inc. are the auditors of the Fund. Their independence is reviewed by the audit and risk committee annually. The audit and risk committee meets with the external auditors to review the scope of the external audit, budgets, the extent of non-audit services and all other audit matters. The external auditors are invited to attend audit and risk committee meetings and have access to the chairman of the audit committee.

COMPLIANCE The Fund is subject to external regulation and supervision by various supervisory authorities. The primary regulator is the JSE, given that the Fund is listed. Other regulatory bodies include the South African Financial Intelligence Centre (FIC), the National Consumer Commission and the Competition Commission. We strive to have open and active dialogue with regulators and supervisors. We embrace our responsibility to conduct business in accordance with the governing laws and regulations. Recent developments affecting compliance in the sector include:

REIT legislation On 1 April 2013, National Treasury introduced the South African Real Estate Investment Trust (REIT) tax dispensation which will consolidate the existing Property Loan Stocks (PLS) and Property Unit Trust (PUT) structures. The purpose of the REIT dispensation is to provide certainty in respect of the taxation of the current South African property investment structures and to bring such structures on par with leading international norms. This will, in effect, see distributions as tax deductible in the REIT itself. Additionally, capital gains tax will no longer apply to the REIT on disposal of capital assets. Thus the deferred tax on the fair value adjustments made in the prior and current financial years has been reversed. The Fund made the required application to the JSE to be listed as a REIT on 21 June 2013 and was granted REIT status effective 1 July 2013.

The key REIT requirements, from both a JSE and tax perspective, are as follows:

JSE REIT requirements Fund’s compliance

R300 million of property R1,568 billion property value

Total consolidated liabilities not to exceed 60% of gross asset value

Total consolidated liabilities (R581 million) equals 35,8% of gross asset value (R1,621 billion)

Earn 75% of revenue from property rental

Revenue excluding straight-line rental adjustment comprises 100% revenue from property rental

Distribute at least 75% of distributable profits being gross income, as defined in terms of the Income Tax Act; less deductions and allowances that are permitted to be deducted by a REIT in terms of the Income Tax Act, other than the qualifying distribution, as defined in terms of section 25BB of the Income Tax Act, being qualifying distributions form part of distributable profit

VPIF distributes at least 97,2%

Property Sector Charter The Property Sector Charter (Charter) came into effect on 1 June 2012. The board recognises that the objectives of the Charter are vital to the overall sustainability of the Fund. It is a stated intention, to develop strategies that address each of the key components of the Charter. The social and ethics committee is responsible for overseeing implementation of the objectives of the Charter. The Fund is required to comply fully with the Charter in its own right and has recently assessed its present status in relation to the scorecard and is a level 5 contributor.

Consumer protectionThe Consumer Protection Act (CPA) does not apply to juristic persons or corporate entities with a net asset value exceeding R2 million. The CPA therefore has minimal impact on the majority of our leases; however some leases are affected and are catered for accordingly.

Competition Commission All medium and large transactions require notification to the Competition Commission. The Greenstone transaction (subsequent to year end) has been submitted to the commission for approval. No other transactions required approval during the year ended 30 June 2013.

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report to stakeholders

Our sustainability goals reflect our culture of continuous advancement and reaffirm our belief that sustainability in its broadest sense is about managing and positioning the business for the long term whilst being conscious of the impact of our operations on the environmental and social hinterland. The Fund’s sustainability philosophy is based on the recognition that we are driven by our commitment to our culture and values. Our approach to sustainability reflects our acute awareness of the need for longevity and an ingrained understanding of the practices that underpin sustainability. This approach is documented throughout the integrated report.

In line with JSE Rules and Regulations the company publishes all announcements on SENS. Financial results announcements are also posted on the company’s website and published in the business press, as well as sent to investors. The executive directors are available to answer queries from stakeholders at all times and meet regularly with industry analysts. Wherever possible the executive directors also engage with the financial press to ensure accurate reporting. In addition, unitholders are actively encouraged to attend the company’s annual general meetings to foster ongoing personal interaction with management.

FINANCIAL RESULTSSummary of financial performance

Group

30 June 2013

Cents

30 June 2012

Cents%

change

Distribution per linked unit 77,25 64,51 19,7

Unit price 1 005 825 21,8

Total growth 31,2

Basic earnings per linked unit 196,17 85.69 128,9

Headline earnings per linked unit 97.44 3.81 2 457,5

Net asset value per linked unit 861,9 742.9 16,0

Tangible net asset value less deferred tax per linked unit 858,1 809.7 6,0

The Fund’s distributable profit amounted to R93,2 million (77,25 cents per linked unit) for the year ended 30 June 2013 which is a 19,7% increase in distributions to linked unitholders from the previously reported 64,51 cents per linked unit for the year ended 30 June 2012. The distribution represents a 9,4% income return on the unit price of 825 cents per linked unit as at 30 June 2012. The price per unit increased 21,8% to 1 005 cents per linked unit.

The property portfolio performed well in a difficult economic environment during the year. On a like-for-like basis (existing portfolio) total revenue (including recoveries) increased by 14,1% year-on-year. The acquisitions accounted for R5,7 million of the total revenue. Property expenses of R74,9 million increased by

29,5% compared to that of the prior period of R57,9 million. The increase is due to the new acquisitions, a full 12 months expenses relating to prior year acquisitions and market related increases.

Finance costs, net of finance income, have increased by R16,1 million, from R23,0 million to R39,2 million. The increase was attributable to the finance costs on the new acquisitions as well as a full 12 month period of finance cost compared to that of the prior year where a significant amount of debt was settled subsequent to the listing.

BORROWINGSThe Fund’s finance strategy is one of prudence and aims to minimise funding costs and refinance risk. The business objectives that are necessary to implement this strategy can be summarised as follows:

n Diversify funding structures (including debt capital markets);

n Keep the loan-to-value (LTV) below 40%;

n Spread expiry terms of all interest bearing debt; and

n Hedge or fix at least 70% of interest bearing debt.

In terms of the finance strategy approved by the board, the average weighted all-in cost of the debt remained constant at 8,7%, inclusive of margins and costs. A bank facility of R324,2 million was extended to 31 August 2013 after which R179,082 million is expected to be repaid following the rights offer. The bank has indicated its intention to renew the remaining facility for an additional three years as well as approved total facilities of R670 million. The company’s borrowing capacity is unlimited in terms of its memorandum of incorporation (MOI). The board’s policy is to limit the loan-to-value (LTV) ratio to 40%. The Fund’s LTV ratio at 30 June 2013 was 31,25% compared to 29,06% as at 30 June 2012. The Fund has unutilised bank facilities of R137,2 million.

In terms of REIT requirements from both a JSE and tax perspective, the total consolidated liabilities may not exceed 60% of the gross asset value.

VALUATION OF PORTFOLIOThe accounting policies of the Fund require that an independent valuer value the entire portfolio every year to fair market value. The independent valuer has valued the Fund’s property portfolio at R1,568 billion as at 30 June 2013. This is a R36,3 million positive revaluation of the existing assets.

PROPERTY PORTFOLIO OVERVIEW Market overviewGlobal markets continue to underperform in 2013. The US appears to be showing signs of recovery and Europe has only now lifted out of recession. South Africa takes much of its lead from these two continents and our economy continues to struggle. Locally, deteriorating labour relations and weak leadership sapped further energy from our economy. The weak fundamentals within South

ENVIRONMENT SOCIAL


Africa have dampened demand, with most tenants adopting a conservative approach. This stance is likely to continue for the next 12 months. The national office vacancy rate remained stable at 10,7% in 2013. Despite a somewhat gloomy year, the South African Listed Property Index (SAPY) returned 24,0% for the 12 months to 30 June 2013, outperforming SA Equities (21,0%), SA Bonds (6,3%) and SA Cash (5,3%).

Tenants are using the soft rental market to ‘trade up’, thereby reducing vacancies in the better properties and worsening rates further down the ladder. Market consensus is that leases are taking longer to sign with tenants being considerably more sophisticated in their negotiations and many have done their homework before coming to the negotiating table. Those asset managers that drove their rentals hard in the good times are seeing large downward rental reversions. Tenants occupying space in portfolio’s that are either under-rented, or at market, are having to cope with some disappointment when their rentals continue to escalate. Competitors with large vacancies continue to offer material incentives to hoover up prospective tenants thus requiring a nimble approach to lease negotiations.

Operating costs continue to exert pressure on income growth. Whilst utility bills and rates and taxes can generally be passed onto tenants, the long-term trend is exerting pressure on tenants who will push back on rentals, given that the other two variables are outside of a landlord’s control.

On a more positive note, the flattening of the vacancy rate combined with the increased developer activity indicates the office market is bottoming out and the recovery is in sight, albeit a slow one. The speed and extent of the recovery will be dependent upon the economy.

Portfolio overviewThose stakeholders who have endured the gloomy paragraphs above will be pleased to know the Fund ended in better shape than it started. The group property portfolio at 30 June 2013 consisted of 28 properties with a total market value of R1,568 billion and gross lettable area of 145 594m2. The geographical and sectoral distribution of the group’s portfolio is indicated on pages 58 and 59 respectively.

The portfolio is well-represented in most of the South African provinces. 92,5% of the gross income is derived from Gauteng, Western Cape and the Eastern Cape. In terms of the group’s sectoral split, the group reinforces its strategy to operate as an office dominated fund with currently 93,5% of the gross income being derived from the office sector.

The portfolio tenant profile is set out on page 59. Our weighted average lease expiry is 4,75 years. National, listed and government comprise 79,7% of our total tenant base by revenue with only 5,6% of vacancies. The top 10 tenants account for 64,3% of GLA. Government is the single largest tenant, occupying 24,9% of total GLA.

GROWTH ACTIVITYIt is the group’s strategy to actively grow the portfolio. In doing so, we remain committed to being an office dominated fund. We are exploring acquisitions to complement our existing portfolio but are cognisant of the need to maintain quality and resist the urge to acquire assets at any cost. We also remain open for acquisitions in other sectors should the right opportunity present itself. Our growth strategy incorporates activities such as extensions and upgrades, individual property acquisitions and portfolio acquisitions.

MANAGEMENT OF EXISTING PORTFOLIOThe Fund has a very hands-on management style and we continuously strive to improve our existing portfolio through upgrades. The upgrades completed in the last reporting period resulted in rental uplift and an increased lettable area – the effect of which is income growth. Similarly, refurbishments completed this year will enhance performance next year.

SERVICE PROVIDERSFrom inception in 2006 the group has used an outsourced asset management and property management service model. Given the health of the Fund, it is believed that this is still the best model. This structure allows the property managers to focus more on the operational management of the properties while the asset managers are focused on strategic initiatives involving the property portfolio.

Our asset management function is outsourced to Vunani Property Asset Management Proprietary Limited and the property management primarily to JHI Properties Proprietary Limited (JHI Properties). The relationships are managed through monthly management meetings, daily contact and service level agreements with specific performance clauses.

The property managers are responsible for daily property operations such as leasing, invoicing of tenants, debt collection, maintenance, tenant interaction, financial administration and the management of relationships with third party service providers and local government. Our JHI Properties team has a proven track record and has successfully managed the group’s portfolio since the inception.

The company further communicates with stakeholders through its membership of the following industry associations and organisations:

n South African REIT Association (SAREIT);

n Institute of Directors – Global Assessment Instrument;

n South African Council of Shopping Centres (SACSC); and

n South African Property Owners Association (SAPOA).


TENANTSOur focus remains to provide quality environment for our tenants at competitive rates.

The success of our business is closely linked to that of our tenants. We continuously utilise our financing facilities to invest in the upgrade of our portfolio, providing a quality environment for our tenants. We aim to do this at every price point and the improved facilities attract new customers and retain existing ones.

When we acquire a property, we perform a rigorous due diligence to assess the long-term demand for the premises, age, accessibility and suitability for tenants. We take a long-term view of these properties and, as such, are committed to ensuring that they provide a solid platform from which our tenants can build their own businesses.

Although many of our tenants felt the impact of the global financial crisis, we have been protected from the impact due to the high percentage of national tenants in our offices. A further consideration is a detailed vetting of our new tenants. Our tenant retention of 73% validates our strategy in what was a tough and competitive market.

OPERATING ENVIRONMENT TransformationThe Fund recognises that integrating transformation into business practice is crucial for the sustainability of the company. The Fund supports the Property Transformation Charter and is committed to transformation. We have develop strategies that address each and every element of the proposed Property Transformation Charter and thereby really contribute to the overall transformation of the company. The social and ethics committee is responsible for driving the company’s B-BBEE scorecard. One of the objectives is to implement a plan in line with the Property Charter recommendations. The company has achieved a level 5 B-BBEE rating.

Preferential procurementSouth African business prospects and sustainability are dependent on greater participation in the economy by those who were previously disadvantaged. Our primary objective is to give small businesses development support, to unlock procurement opportunities and create a platform for exposure that will lead to other growth opportunities. The Fund has put in place a process of verifying all supplier B-BBEE certificates.

ENVIRONMENTAL SUSTAINABILITY The Fund acknowledges that environmental responsibility is an integral part of its future success. As such, we have begun a sustainability project not only to better understand and reduce the impact of our properties on the environment, but also to selectively introduce technologies that will ensure more efficient use of utilities thereby benefiting our tenants. We have embarked on a process of rating each of our buildings to identify those that can benefit from greening initiatives without major capital spend or material changes. These buildings will further be analysed to identify opportunities for new initiatives and technologies. Our pilot project, 14 Loop Street, won the Energy Efficiency Forum Award 2012 and achieved significant consumption savings. It is this knowledge that we will roll out to the entire portfolio. The viability and appropriateness of such initiatives and technologies has been proven at 14 Loop Street.

Of critical importance is ensuring that whilst our environmental responsibilities are discharged, we must invest in projects that will be financially viable; as such, the Fund is doing an analysis to identify those areas that will benefit most, in the short to medium term, from investment in new technologies. The short-term focus, during the pilot project, will be on initiatives at a relatively low cost producing immediate return, the ‘low hanging fruit’. In line with the medium to long term, relatively higher cost technologies will be investigated with an aim to introduce them and produce higher returns.

report to stakeholderscontinued

ENVIRONMENT SOCIAL

Directors’ responsibility statement 36Certification by the company secretary 36Directors’ report 37Report of the audit and risk committee 39Independent auditor’s report 41Statements of financial position 42Statements of comprehensive income 43Statements of changes in equity 44Statements of cash flows 45Notes to the financial statements 46

2013

ANNUAL FINANCIAL STATEMENTS

The financial statements of Vunani Property Investment Fund Limited have been audited in compliance with section 30 of the Companies Act of South Africa, as published on 26 August 2013. The financial director, Marelise de Lange, BCom (Law), BCom (Hons) (Acc) was responsible for the preparation of the financial statements.

VUNANI OFFICE PARK


DIRECTORS’ RESPONSIBILITY STATEMENT

The directors are responsible for the preparation and fair presentation of the consolidated and separate annual financial statements of Vunani Property Investment Fund Limited, comprising the statements of financial position at 30 June 2013, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. In addition, the directors are responsible for preparing the directors’ report.

The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.

The directors have made an assessment of the ability of the company and its subsidiaries to continue as going concerns and have no reason to believe that the businesses will not be going concerns in the year ahead.

The auditor is responsible for reporting on whether the consolidated and separate financial statements are fairly presented in accordance with the applicable financial reporting framework.

APPROVAL OF CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTSThe consolidated and separate annual financial statements of Vunani Property Investment Fund Limited, as identified in the first paragraph, were approved by the board of directors on 16 August 2013 and signed by:

M de LangeFinancial director

16 August 2013

CERTIFICATION BY THE COMPANY SECRETARY

In terms of the Companies Act 71 of 2008 (the Act), and for the period ended 30 June 2013, we certify that Vunani Property Investment Fund Proprietary Limited has lodged all returns and notices required by the Act with the Registrar of Companies and that all such returns and notices appear to be true, correct and up to date.

Probity Business Services Proprietary LimitedCompany secretary

16 August 2013Sandton

M de Lange

appear to be true, correct and up to date.

Probity Business Services Proprietary Limited


DIRECTORS’ REPORT

The directors have pleasure in presenting their third annual report on the activities of the group and company for the year ended 30 June 2013.

MAIN BUSINESS AND OPERATIONSVunani Property Investment Fund Limited (VPIF) is a variable rate property loan stock company which owns 28 directly owned properties in South Africa. VPIF invests in rental-generating properties within the commercial property market sector. In order to maintain the quality and increase the long-term value of the portfolio the properties are maintained, upgraded and where necessary refurbished.

On 11 August 2011, VPIF successfully listed on the main board of the Johannesburg Stock Exchange Limited (JSE). VPIF raised R448,338 million through the issue of 63 594 080 new linked units. The proceeds were utilised to settle outstanding debt, pay for listing costs, and the purchase considerations for the acquisitions of properties.

During the year, VPIF has stayed true to its strategy to acquire high yielding, accretive, quality assets.

The operating results and state of affairs of the group and company are fully set out in the attached financial statements and do not in our opinion require any further comment.

CAPITAL STRUCTUREThe linked unit structure comprises ordinary shares that are indivisibly linked to debentures on a one for one basis. Collectively the linked shares and debentures comprise the linked units which are traded as indivisible units.

The authorised capital comprises 2 000 000 000 ordinary shares of R0,0025 each. Each linked unit comprises one share of R0,0025 each linked to one debenture of R2,4975 each.

Upon listing as described above, 63 594 080 new linked units were issued at a price of R7,05 per linked unit. At year end there were 120 618 080 linked units in issue. No new linked units have been issued since listing.

The Fund has embarked on a rights offer to raise R455 million. The rights offer opened on 5 August and closes on 26 August 2013. The proceeds of the rights offer will be used, inter alia, as follows:

n To settle the purchase consideration in respect of the acquisition of the Greenstone Properties R267,884 million

n To settle the cost of the rights offer R8,084 million

n To settle floating debt (variable interest rate debt) (Facility 1 and 2) R179,082 million

The rights offer will result in 48 503 939 million additional linked units to be issued at a subscription price of 987,33 cents per linked unit.

The subscription price of 987,33 cents per rights offer unit comprised a clean price of 938,07 cents per rights offer unit, determined as at 4 July 2013 being the day before the declaration announcement and total pre-paid distributions of 49,26 cents per rights offer unit.

In March this year, the Real Estate Investment Trust (REIT) legislation was formally adopted. The Fund was granted REIT status by the JSE Limited effective 1 July 2013. The introduction of REIT legislation is seen as a very positive development for the sector. It not only removes any tax uncertainty that pertained to the property loan stock structure but also brings the property sector in line with most major global property markets and creates a legal structure that is well understood by most international investors. With the conversion to REITs, South Africa is expected to become the eighth largest REIT market in the world and we expect that to be positive for capital inflows into the sector over time.

MANAGEMENT AND ADMINISTRATIONThe asset management function is performed by Vunani Property Asset Management Proprietary Limited and the day-to-day property management function is performed by JHI Properties Proprietary Limited.

SPECIAL RESOLUTIONSThe following special resolutions were passed during the year:

n Resolution authorising the remuneration payable to non-executive directors (19 October 2012);

n Resolution authorising the repurchase of company linked units (19 October 2012);

n Resolution authorising intra-group financial assistance in terms of the Companies Act 2008 (19 October 2012); and

n Resolution authorising the issue of additional units in terms of section 41(3) of the Companies Act (30 May 2013).

DIRECTORSDetails of directors, including their full names, ages, qualifications and brief curriculum vitae, are set out on page 14 of this integrated annual report.

In terms of the Memorandum of Incorporation (MOI) of the company, one third of the directors have to retire annually by rotation. RR Emslie, EG Dube, CE Chimombe-Munyoro and PD Naidoo are to retire by rotation at the forthcoming annual general meeting in terms of clause 21.2 of the company’s MOI. These directors, being eligible, shall offer themselves for re-election at the forthcoming annual general meeting.

During the year Mr PD Naidoo resigned as member of the audit and risk committee in order to fully comply with the requirements of the King Code of Corporate Governance. There were no other changes to the functions or responsibilities of the individual directors during the year.


DIRECTORS’ REPORTcontinued

The composition of the board of directors and board committees are as follows:

Board compositionDate of appointment

Audit and risk committee

Investment committee

Remuneration and nominations committee

Social and ethics committee

Independent non-executive directorsPD Naidoo (Chairman) 11 August 2011 Member Member

RR Emslie 11 August 2011 Chairman MemberJR Macey 11 August 2011 Member ChairmanPM Tau-Sekati 11 March 2013 Member Chairman MemberKN Vundla 11 March 2013 Member

Non-executive directorsEG Dube 11 August 2011 MemberCE Chimombe-Munyoro 11 August 2011 Member

Executive directors

RF Kane 7 August 2008

M de Lange 11 August 2011

PW Mackenzie 11 November 2005 Chairman

The balance of the units were distributed to shareholders.

During the year under review PW Mackenzie disposed of his unbundled units.

DirectorOpening balance

Acquired/ (disposed) of during

the yearClosing

balance

RF Kane 1 815 131 (1 048 474)# 623 839PW Mackenzie 2 178 160 (2 178 160)# –EG Dube 3 138 655 (3 138 655)# –CE Chimombe-Munyoro 17 098 (17 098)# –RR Emslie – 35 000 35 000

7 149 044 (6 347 387) 658 839

# In 2010, Vunani Limited (VL) and Vunani Capital Proprietary Limited (VC), a wholly owned subsidiary of VL, entered into debt restructuring agreements with their major lenders (the VL Debt Restructure). The VL Debt Restructure provided for a moratorium period on debt and interest payments and allowed VL and VC to settle a substantial portion of their debt obligations on a sustainable basis with their lenders. When the moratorium period ended, VL agreed with its lenders to settle its remaining debt obligations through the proceeds of the disposal of the VPIF Investment. VL is the controlling shareholder in VP.

The company’s business and postal address is as follows:

Physical and registered address:Vunani House, Vunani Office Park151 Katherine Street, Sandton 2196

Postal address:PO Box 652419, Benmore 2010

The company’s registration number is 2005/019302/06.

DIRECTORS’ REMUNERATIONThe executive directors, whose services have been seconded to Vunani Property Asset Management Proprietary Limited (VPAM) in terms of the secondment agreement, will not be remunerated for their services as directors of the Fund. The executive directors’ remuneration is paid from the asset management fee that is earned from the company. For details of both executive and non-executive remuneration, refer to note 30 in the financial statements.

COMPANY SECRETARY Probity Business Services Proprietary Limited, represented by Neville Toerien and Walter Mapanzure, acts as the company secretary for VPIF in compliance with the King Code of Corporate Governance.

DIRECTORS’ INTERESTS IN LINKED UNITSThe interest of directors in the linked units of the company as at 30 June 2013 was as follows:

Number of linked units held

Total number of

linked units heldDirector

Beneficially direct

Beneficially indirect

RF Kane – 623 839 623 839

RR Emslie 35 000 – 35 000

35 000 623 839 658 839

There have been no changes in these holdings from 30 June 2013 to date of this report.

Movement of directors’ interests (disposed of) in linked unitsThe shareholders of VP approved the sale and unbundling of the VPIF Investment and the proceeds from the VPIF Investment disposal were used to repay loans in VP including an inter-company loan with VC.


REPORT OF THE AUDIT AND RISK COMMITTEE

The audit and risk committee has pleasure in submitting this report to linked unitholders as required by the Companies Act, No 71 of 2008 (the Companies Act) and as recommended by the King III Code of Governance Principles for South Africa (the King III Code). The activities of the audit and risk committee (the committee) are determined by its terms of reference and mandate as set out on pages 27, 39 and 40.

Audit and risk committee members:

n RR Emslie (Chairman);

n PD Naidoo (resigned from committee 3 April 2013);

n JR Macey; and

n KN Vundla (appointed to committee 3 April 2013).

Audit and risk committee attendees:

n RF Kane (CEO);

n M de Lange (FD);

n KPMG Inc. (external auditors) represented by D Thompson and A de Bruyn;

n Probity Business Services (company secretary) represented by N Toerien and W Mapanzure;

n Excellerate Holdings (internal auditors) represented by M Lever; and

n JHI Properties (property managers) represented by LA Rowen.

The committee is satisfied that it has considered and discharged its responsibilities in terms of its mandate and terms of reference, the King III Code and the Companies Act. The committee carried out its duties by, inter alia, reviewing the following:

n Internal audit reports;

n Financial management reports;

n External audit reports; and

n Management’s risk assessment.

The abovementioned information, together with interaction with the external and internal auditors, management and other invitees attending meetings, enabled the committee to conclude that the risk management process and systems of internal financial control have been designed and were operating effectively during the year. The committee is satisfied with the following:

FINANCIAL REPORTINGn Accounting policies applied;

n Key judgements including the valuations of investment properties;

n Impact of future financial reporting standards;

n Going-concern assessment of the Fund including a solvency and liquidity test on the company in terms of sections 4 and 46 of the Companies Act and concluded that the company will satisfy the test after payment of final distribution. The committee can also confirm that the test was performed at the interim distribution stage;

n Corporate governance application;

n Budgets and forecasts prepared and approved;

n Funding structures in place; and

n Tax status of the Fund and subsidiaries.

RISK AND INTERNAL CONTROLn Key risks facing the Fund;

n Annual report on the effectiveness of internal controls;

n Insurance cover of the Fund;

n B-BBEE progress made; and

n Information technology aspects outsourced to the Manager.

INTERNAL AUDITn Engagement of the internal audit services;

n Assessment of the internal audit effectiveness;

n Internal audit plans on a three-year rolling period; and

n Review of findings and recommendations made by internal audit and management responses.

EXTERNAL AUDITn Review of the independence of the external auditor, including

the pre-approval of the non-audit services provided;

n Approval of the audit budget for the year;

n Annual audit planning, conclusions and final opinion reports;

n Audit engagement letters; and

n Management report items identifying the effectiveness of controls and recommendations for corrective action.

STATUTORY DUTIESIn the conduct of its statutory duties, the committee:

n Has been satisfied that the external auditor, KPMG, is independent of the company in terms of the Companies Act. Assurance was sought and provided by KPMG that internal corporate governance processes within KPMG support its claim to independence;

n Agreed, in consultation with executive management, to the engagement letter, audit plan and budgeted fees for the 2013 year. Actual fees are envisaged to be in line with those agreed to in the audit fee budget;

n Approval of non-audit service arrangements with KPMG. The nature and extent of these services has been reviewed to ensure the fees for these services do not become so significant as to impact any perception on their independence;

n Is of the opinion that significant internal financial controls are effective, based on control processes in place, assurances obtained from management and the issues raised by the internal and external auditors in their various management reports;


REPORT OF THE AUDIT AND RISK COMMITTEEcontinued

n Is satisfied that the internal audit function is adequately resourced and is operating effectively in terms of both the mandate and agreed audit plan;

n Has considered and has satisfied itself of the appropriateness of the expertise and adequacy of resources of the finance function of the company. The committee confirms the company’s financial director, M de Lange, has the necessary expertise and experience to carry out her duties;

n Recommended the integrated annual report to the board for approval, based on processes and assurances obtained;

n Through its review of the 2014 budget and discussions with management, reported to the board it supported management’s view that the company will be a going concern in the foreseeable future; and

n Reviews the key risks facing the company on an ongoing basis. The risk analysis and the company’s response to these risks can be found on pages 29 and 30 of this report. The committee is reasonably satisfied adequate controls are in place to mitigate the identified key risks.

RR EmslieChairman of the audit and risk committee

16 August 2013Sandton


INDEPENDENT AUDITOR’S REPORT

To the shareholders of Vunani Property Investment Fund Limited

REPORT ON THE FINANCIAL STATEMENTS We have audited the consolidated and separate financial statements of Vunani Property Investment Fund Limited, which comprise the statements of financial position at 30 June 2013, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 42 to 86.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Vunani Property Investment Fund Limited at 30 June 2013, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

OTHER REPORTS REQUIRED BY THE COMPANIES ACT As part of our audit of the financial statements for the year ended 30 June 2013, we have read the directors’ report, the audit and risk committee’s report and the company secretary’s certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports.

KPMG Inc.Registered Auditor

Per DD ThompsonChartered Accountant (SA)Registered AuditorDirector

16 August 2013

KPMG Crescent85 Empire RoadParktownJohannesburg2193


Note

GROUP COMPANY

2013R’000

2012R’000

2013R’000

2012R’000

ASSETSNon-current assets 1 586 016 1 441 059 694 274 529 188

Investment property 5 1 567 667 1 426 394 687 913 513 352

Property, plant and equipment 6 6 734 6 936 1 387 749

Other non-current assets 7 7 028 7 729 387 345

Deferred tax 16 4 587 – 4 587 –

Investment in subsidiaries 8 – 14 742

Current assets 34 882 33 972 519 848 558 160

Trade and other receivables 10 11 261 13 893 21 573 40 386

Income tax receivable 66 37 – –

Cash and cash equivalents 11 23 555 20 042 5 521 4 049

Loan to subsidiaries 8 – 38 851

Loan to group entity 9 492 754 474 874

Total assets 1 620 898 1 475 031 1 214 122 1 087 348

EQUITY AND LIABILITIESEquity 452 524 307 190 70 001 22 686

Ordinary share capital 12 301 301 301 301

Accumulated loss (46 061) (56 500) (12 458) (17 242)

Non-distributable reserves 13 498 284 363 389 82 158 39 627

Debentures 14 587 029 588 918 587 029 588 918

Linked unitholders’ interest 1 039 553 896 108 657 030 611 604

Other liabilities

Other non-current liabilities 219 905 203 606 219 905 119 746

Other financial liabilities 15 219 905 123 110 219 905 112 233

Deferred tax 16 – 80 496 – 7 513

Current liabilities 361 440 375 317 337 187 355 998

Current portion of other financial liabilities 15 275 796 306 296 275 796 306 296

Trade and other payables 17 85 644 69 021 61 391 49 702

Total liabilities 581 345 578 923 557 092 475 744

Total equity and liabilities 1 620 898 1 475 031 1 214 122 1 087 348

Units in issue (’000) 120 618 120 618

Net asset value per linked unit (cents) 861,9 742,9

Net tangible asset value less deferred tax per linked unit (cents) 858,1 809,7

STATEMENTS OF FINANCIAL POSITIONas at 30 June


Note

GROUP COMPANY

2013R’000

2012R’000

2013R’000

2012R’000

Investment property income 18 216 883 165 860 87 958 37 775

Straight-line rental adjustment 5 12 957 5 994 12 405 5 259

Revenue 229 840 171 854 100 363 43 034

Property expenses 19 (74 948) (57 874) (24 362) (26 177)

Net property income 154 892 113 980 76 001 16 857

Other income 20 1 967 926 2 917 –

Other operating expenses (3 169) (15 274) (3 016) (1 509)

Asset management fees (8 120) (5 359) (8 120) (4 930)

Operating profit 21 145 570 94 273 67 782 10 418

Finance income 22 1 616 2 005 78 732 62 574

Finance cost amortisation 23 – (45 694) – –

Finance costs 24 (40 821) (25 085) (39 621) (6 379)

Fair value adjustments 25 45 405 106 835 19 840 38 795

Profit before debenture interest and income tax 151 770 132 334 126 733 105 408

Distributions 26 (93 174) (77 813) (93 174) (75 489)

Trust distributions – net rental income – (2 324) – –

Debenture interest (93 174) (75 489) (93 174) (75 489)

Profit before amortisation of debenture premium 58 596 54 521 33 559 29 919

Amortisation of debenture premium 14 1 889 1 679 1 889 1 679

Profit before income tax 60 485 56 200 35 448 31 598

Income tax 27 84 849 (35 098) 11 867 (7 513)

Profit for the year 145 334 21 102 47 315 24 085

Total comprehensive income for the year 145 334 21 102 47 315 24 085

Basic and diluted earnings per linked unit (cents) 32 196,17 85,69

Distribution per linked unit (cents) 32 77,25 64,51

STATEMENTS OF COMPREHENSIVE INCOMEfor the year ended 30 June


Ordinaryshare

capitalR’000

Non-distributable

reserveR’000

(Accumu-lated loss)/

retained earnings

R’000Total

R’000

GROUP

Balance at 30 June 2011 142 277 505 8 282 285 929

Transactions with owners of the company recognised directly in equity

Issue of linked units 159 159

Transfer to non-distributable reserve 85 884 (85 884) –

Total comprehensive income for the year

Profit for the year 21 102 21 102

Balance at 30 June 2012 301 363 389 (56 500) 307 190

Transactions with owners of the company recognised directly in equity




Balance at 30 June 2013 301 498 284 (46 061) 452 524

COMPANY

Balance at 30 June 2011 142 – (1 700) (1 558)

Transactions with owners of the company, recognised directly in equity

Issue of linked units 159 159




Balance at 30 June 2012 301 39 627 (17 242) 22 686

Transactions with owners of the company, recognised directly in equity




Balance at 30 June 2013 301 82 158 (12 458) 70 001

STATEMENTS OF CHANGES IN EQUITYfor the year ended 30 June


Note

GROUP COMPANY

2013R’000

2012R’000

2013R’000

2012R’000

Cash flows from operating activities

Cash generated by operations 28 147 770 89 544 64 622 6 176

Finance income received 1 616 2 005 58 612 29 340

Finance costs paid 24 (40 821) (25 085) (39 621) (6 379)

Trust distributions – net rental income – (2 324) – –

Debenture interest paid (86 810) (34 516) (86 810) (34 516)

Income tax paid (262) (62) (234) –

Net cash inflow/(outflow) from operating activities 21 493 29 562 (3 431) (5 379)

Cash flow from investing activities

Additions to property, plant and equipment (2 272) (2 507) (1 040) (925)

Additions to investment property (5 486) (7 141) (55 941) –

Additions to other non-current assets (1 020) (5 566) (230) (352)

Proceeds on sale of subsidiaries 12 291 –

Acquisition of businesses 31 (84 583) (479 711) (84 583) (480 036)

Loans repaid by/(advanced to) subsidiaries 26 560 (38 851)

Repayment of loan to group entity 32 465 –

Loan to group entity – (333 292)

Net cash outflow from investing activities (93 361) (494 925) (70 478) (853 456)

Cash flow from financing activities

Proceeds from issue of linked units – 448 339 – 448 339

Advance of other financial liabilities 118 781 73 747 118 781 447 825

Repayment of other financial liabilities (43 400) (40 655) (43 400) (33 300)

Net cash inflow from financing activities 75 381 481 431 75 381 862 864

Net increase in cash and cash equivalents 3 513 16 068 1 472 4 029

Cash and cash equivalents at the beginning of the year 20 042 3 974 4 049 20

Cash and cash equivalents at the end of the year 23 555 20 042 5 521 4 049

STATEMENTS OF CASH FLOWSfor the year ended 30 June


NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2013

1. BASIS OF PREPARATION 1.1 Reporting entity Vunani Property Investment Fund is a company listed on

the Johannesburg Stock Exchange and is domiciled in the Republic of South Africa. The group consolidated financial statements comprise those of the company and the companies in which the company holds a controlling interest. Where reference is made to group it should be interpreted as group or company as the context requires.

1.2 Statement of compliance The financial statements have been prepared in accordance

with International Financial Reporting Standards (IFRSs), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, and the requirements of the Companies Act of South Africa.

1.3 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.

1.4 Functional and presentation currency These financial statements are presented in South African

Rand which is the company’s functional currency, rounded to the nearest thousand unless stated otherwise.

1.5 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 affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

n Note 5 – valuation of investment property.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes:

n Note 10 – impairment losses on trade receivables

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 subsidiaries.

Subsidiaries Subsidiaries are entities controlled by the group. The financial

statements of subsidiaries are included in the 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. Investments in subsidiaries are recognised at cost less accumulated impairment losses in the company’s separate financial statements.

Business combinations All business combinations are accounted for by applying the

acquisition method in terms of IFRS 3. The group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree, less the net recognised amounts of the identifiable assets acquired and liabilities assumed, all measured as at the acquisition date.

Acquisition from entities under common control A business combination involving entities or businesses under

common control is a business combination of which all of the combining entities or businesses ultimately are controlled by the same party or parties both before and after the combination, and that control is not transitory for acquisitions under common control. The investments are recognised at the carrying amounts recognised previously in 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 financial statements. In the company’s separate financial statements, the investments in subsidiaries are carried at cost less any accumulated impairment. The cost of an investment in a subsidiary is the aggregate of (1) the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company; plus (2) any costs directly attributable to the purchase of the subsidiary.

2.2 Financial instruments Financial instruments are contracts that give rise to financial

assets in one entity and a financial liability or equity instrument in another entity.


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.

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, cash and cash equivalents, loans to subsidiaries and loan to group entities.

Refer to note 10 for composition of trade and other receivables, note 8 for loans to subsidiaries and note 9 for loan to group entity (company).

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 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.

The group has the following non-derivative financial liabilities: other financial liabilities (refer to note 15), trade and other payables (refer to note 17) and debentures (refer to note 14).

Such financial liabilities are recognised initially at fair value less 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.

Derivative financial instruments The group utilises derivative financial instruments to hedge

its exposure to interest rate risks arising from operational, financing and investment activities. The group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at fair value. Attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value. The gain or loss on measurement to fair value is recognised immediately in profit or loss.

Offset Financial assets and financial liabilities are offset and the net

amount reported in the statement of financial position when the group has a legally enforceable right to set off the recognised amounts, and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

2.3 Investment property Investment property is property (land and buildings) 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.

On initial recognition, the investment property is measured at cost. 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 it will result in future economic benefits which are probable and such expenditure can be measured reliably. 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. These gains or losses are transferred to non-distributable reserves in the statement of changes in equity.


NOTES TO THE FINANCIAL STATEMENTSfor the year ended 30 June 2013continued

2. ACCOUNTING POLICIES continued 2.3 Investment property continued

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. These gains or losses are transferred to non-distributable reserves in the statement of changes in equity.

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 property, plant and equipment during the redevelopment.

2.4 Property, plant and equipment Recognition and measurement Items of property, 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. Subsequent expenditure on items of property, plant and equipment is capitalised when it is probable that future economic benefits from the use of the asset will be increased and such expenditure can be measured reliably. All other subsequent expenditure is recognised in profit or loss in the period in which it is incurred.

When parts of an item of property, plant and equipment have different useful lives and a cost that is significant in relation to the total cost of the item, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of the item of property, plant and equipment, and are recognised net within other income in profit or loss.

Depreciation Depreciation is calculated by allocating the depreciable

amount, which is the cost of an asset, or other amount substituted for cost, less its residual value on a systematic basis over the useful life of the asset.

Depreciation is recognised in profit or loss on a straight-line basis over the current estimated useful lives of each significant part of an item of property, 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:

Equipment 3 – 5 years Computer equipment 3 years Tenant installations Period of the initial lease

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

2.5 Impairment Non-derivative financial assets A financial asset is considered to be impaired at financial

period end if objective evidence indicates that one or more events occurred after initial recognition that have had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortised cost is measured 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 assessed for impairment on an individual basis. The remaining financial assets together with individual significant assets found not to be impaired, are assessed collectively in groups that share similar credit risk characteristics. This impairment testing is performed annually at the end of each financial period.

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 investment property 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 its 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 Letting commissions Letting commissions are capitalised and amortised over the

lease period. The carrying value of letting commissions is included with other non-current assets.

2.7. Provisions A provision is recognised if, as a result of a past event, the

group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

2.8 Revenue Revenue comprises rental income and recovery of expenses,

excluding VAT. 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. The recovery of expenses is recognised when the related expenses are incurred.

2.9 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 and long-term loans. 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. For purposes of the company, finance income is regarded as a form of revenue.

2.10 Borrowing costs Borrowing costs directly attributable to the acquisition,

construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised to the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. Other borrowing costs are expensed in the period in which they are incurred.

2.11 Income tax The charge for current taxation is based on the taxable

income for the year using the rates enacted or substantively enacted at reporting date and any adjustment for tax payable or receivable for previous years.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date, and the expected manner of realisation or settlement.

Temporary differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The amount of deferred tax provided is based on the tax rates and tax laws that have been enacted by the reporting date.

A deferred tax liability is recognised for all taxable temporary differences except to the extent that the deferred tax liability arises from:

n the initial recognition of goodwill; or

n temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future and the parent is able to control the timing of the reversal of the temporary difference; or

n the initial recognition of an asset or liability in a transaction which:

– is not a business combination; and

– at the time of the transaction affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that:

n is not a business combination; and

n at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

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 other comprehensive income or equity. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current liabilities and assets, and they relate to taxes levied by the same authority on the same taxable entity, or on different tax entities, but they intend to settle current liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.



2. ACCOUNTING POLICIES continued 2.12 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.

2.13 Earnings per linked unit The group presents basic, diluted and headline earnings

per linked unit for its linked units. Basic earnings per linked unit is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of linked units outstanding during the year, adjusted for own linked units held.

Diluted earnings per linked unit is determined by adjusting the profit or loss attributable to linked unitholders and the weighted average number of linked units outstanding, adjusted for own linked units held, for the effects of all dilutive potential linked units, which comprise convertible notes and linked unit options granted to employees. Headline earnings per linked unit is calculated by dividing the headline profit or loss attributable to linked unitholders of the company by the weighted average number of linked units outstanding during the year, adjusted for own linked units held.

2.14 Segment reporting An operating segment is a component of the group that

engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the group’s other components. All operating segments’ operating results are reviewed regularly by the group’s CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly head office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

3. RISK MANAGEMENT The group and company have exposure to the following risks

from its use of financial instruments:

n Credit risk;

n Liquidity risk; and

n Market risk.

This note presents information about the group’s and company’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.

Trade and other receivables include other receivables and deposits less impairment losses.

Exposure to credit risk is influenced mainly by the individual characteristics of each tenant. The wide-spread tenant base reduces credit risk. Management has established a credit policy under which each new tenant is analysed individually for creditworthiness before the group’s standard payment terms and conditions are offered which include, in the majority of cases, the provision of a deposit of at least one month’s rental. When available, the review includes external ratings.

In monitoring tenant credit risk, tenants are grouped according to their credit characteristics, including whether they are an individual or legal entity, industry, size of business and existence of previous financial difficulties.

The group and company establish an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.

The main component of this allowance is a specific loss component that relates to individually significant exposures.

The group and company deposit cash surpluses with major banks of high quality credit standing to address the related credit risk.

Liquidity risk Liquidity risk is the risk that the group and company will not

be able to meet their financial obligations as they fall due. 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 and company’s approach to managing liquidity risk is to ensure, as far as possible, that they will always have sufficient liquidity to meet liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s or company’s reputation.

Surplus cash is however utilised to reduce the other financial liabilities to optimise the borrowing costs. The facility is


however an access facility and the surplus can be redrawn at any time should it be required to settle financial obligations.

Market risk Market risk is the risk that changes in the market prices,

interest rates, foreign exchange rates and equity prices will affect the income or value of 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 and company are exposed to interest rate risk as they borrow funds at variable interest rates. The risk is managed by group policies adopted to ensure all its borrowings are at market related rates.

The group is not exposed to currency risk or equity price risk.

Fair values A number of the group’s accounting policies and disclosures

require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the methods below. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Investment property An external, independent valuation company, having

appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the group’s investment property portfolio every year. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation.

Valuations reflect, when appropriate: the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant

accommodation, and the market’s general perception of their creditworthiness; the allocation of maintenance and insurance responsibilities between the group and the lessee; and the remaining economic life of the property.

Derivatives The fair value of interest rate swaps is based on banker quotes.

Non-derivative financial assets and liabilities Fair value, which is determined for disclosure purposes, is

calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Capital risk management The group’s objectives when managing capital are to

safeguard the company and its subsidiaries’ ability to continue as going concerns in order to provide returns for unitholders 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, trade and other payables and debentures disclosed in notes 15, 17 and 14 and equity as disclosed in the statement of financial position. The group monitors capital on the basis of the gearing ratio.

The group considers the equity attributable to linked unitholders as the permanent capital of the group.

The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

GROUP

2013R’000

2012R’000

Gearing ratio

Total debt 1 168 374 1 087 345

Less: Cash and cash equivalents (23 555) (20 042)

Net debt 1 144 819 1 067 303

Equity 452 524 307 190

Debt to equity ratio (%) 253 347



4. STANDARDS NOT YET ADOPTED

Statement

Effect for accounting periods beginning on or after Summary of key points

Impact on the group

IFRS 9Financial instruments

1 January 2015 (i.e. for the financial year ending 30 June 2016)

n IFRS 9 Financial instruments was issued in November 2009 and amended in October 2010. The standard introduces new requirements for the classification and measurement of financial assets and financial liabilities.

n IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial instruments: Recognition and measurement to be subsequently measured at amortised cost or fair value.

n The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability, designated as at fair value through profit or loss, attributable to changes in the credit risk of that liability.

n The requirements in IAS 39 relating to derecognition of financial assets and financial liabilities have been incorporated unchanged into the new version of IFRS 9.

The impact on the group has not yet been estimated.

The standard has not yet been completed and the mandatory effective date may be changed.

IFRS 7Amendment disclosures – offsetting financial assets and financial liabilities


The amendments contain new disclosure requirements for financial assets and financial liabilities that are offset in the statement of financial position; or are subject to enforceable master netting arrangements or similar agreements.

No material impact is expected for the group.

IFRS 10 Consolidated financial statements


IFRS 10 supersedes IAS 27 Annual and separate financial statements and SIC 12 Consolidation – special purpose entities. It introduces a new, principle-based definition of control which will apply to all investees to determine the scope of consolidation.


IFRS 12Disclosure of interests in other entities


n IFRS 12 combines the disclosure requirements for subsidiaries, joint arrangements, associates and structured entities within a comprehensive disclosure standard.

n It aims to provide more transparency on ‘borderline’ consolidation decisions and enhance disclosures about unconsolidated structured entities in which an investor or sponsor has involvement.


IFRS 13Fair value measurement


n The new IFRS specifies how an entity should measure fair value and disclose fair value information.

n IFRS 13 has been developed to: – establish a single source of guidance for all fair value

measurements; – clarify the definition of fair value and related guidance; and – enhance disclosures about fair value measurements (the

new disclosures increase transparency about fair value measurements, including the valuation techniques and inputs used to measure fair value).



4. STANDARDS NOT YET ADOPTED continued

Statement

Effect for accounting periods beginning on or after Summary of key points

Impact on the group

IAS 32 Offsetting financial assets and financial liabilities

1 July 2014 (i.e. for the financial year ending 30 June 2015)

The amendments clarify that an entity currently has a legally enforceable right to set-off if that right is:n not contingent on a future event; andn enforceable both in the normal course of business and in the

event of default, insolvency or bankruptcy of the entity and all counterparties.


The following revised amendments to standards and interpretations are not applicable to the business of the group and will therefore have no impact on future financial statements:

n IFRS 1 Amendment to government loans;

n IFRS 11 Joint arrangements;

n IAS 19 Employee benefits: Defined benefit plans;

n IAS 27 Separate financial statements;

n IAS 28 Investments in associates and joint venture;

n IAS 36 Recoverable amount disclosures for non-financial assets;

n IFRIC 20 Stripping costs in the production phase of a surface mine; and

n IFRIC 21 Levies.

5. INVESTMENT PROPERTY

CostR’000

Cumulative fair value

adjustmentsR’000

Cumulative straight-line

rental adjustments

R’000

Carrying valueR’000

GROUP

30 June 2013

Investment property 1 065 467 470 949 31 251 1 567 667

30 June 2012

Investment property 973 471 434 629 18 294 1 426 394

Reconciliation of movement in carrying value of investment property:

30 June 2013

Opening carrying value 973 471 434 629 18 294 1 426 394

Additions through business combinations 84 583 – – 84 583

Other additions 7 413 – – 7 413

Straight-line rental adjustment – – 12 957 12 957

Fair value adjustments – 36 320 – 36 320

Closing carrying value 1 065 467 470 949 31 251 1 567 667



5. INVESTMENT PROPERTY continued

CostR’000

Cumulative fair value

adjustmentsR’000

Cumulative straight-line

rental adjustments

R’000


GROUP

30 June 2012

Opening carrying value 451 824 319 021 11 592 782 437

Additions through business combinations 514 506 – 709 515 215




Closing carrying value 973 471 434 629 18 294 1 426 394

COMPANY

30 June 2013

Investment property 601 582 68 667 17 664 687 913

30 June 2012


Reconciliation of movement in carrying value of investment property:

30 June 2013

Opening carrying value 461 058 47 035 5 259 513 352





Closing carrying value 601 582 68 667 17 664 687 913

30 June 2012

Opening carrying value – – – –




Closing carrying value 461 058 47 035 5 259 513 352

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. Investment properties are encumbered as per note 15.

Details of valuation The effective date of revaluations was 30 June 2013. The revaluations were performed independently by MRB Gibbons (National

Diploma in Property Valuation, MIV(SA)) of Mills Fitchet Magnus Penny Proprietary Limited, who has the appropriate experience in valuing investment property in the locations where the investment property is situated. It is the group’s policy to revalue all properties. 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 the Investment Property Databank (IPD) 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. Investment property’ direct property expenses are R74,95 million (2012: R57,874 million).



Register of investment property

Name of property

GLA* of property

in m2 Address of property

GAUTENG PROVINCE Perseus Park 13 838 Erf 408 and 482 Lynnwood Ridge, Township Reg. Div. JR, Gauteng

Parthenon Park 4 454 Remainder extension of Erf 556 Murrayfield Extension 1 Township Reg. Div. JR

Rynlal Building 5 887 Erf 918 Lynnwood Township Reg. Div. JR, Gauteng

Linger Longer 597 Portion 5 Erf 7 Wierda Valley, Township Reg.Div. IR, Gauteng

Vodacom Park 5 101 Portion 6 of Erf 7 Wierda Valley Township Reg. Div. IR, Gauteng and Portion 263 (Portion of Portion 245) of Farm Syferfontein 51, Reg. Div. IR, Gauteng Portion 263 (a portion of 245)

Investment Place 6 253 Erf 325 and 326 Hyde Park Ext 56, Reg. Div. IR, Gauteng and Portion 747 of the farm Zandfontein 42, Reg.Div. IR, Gauteng

Belvedere 10 874 Erf 1322 Sunninghill Ext. 115, Township Reg. Div. IR, Gauteng

ACS House 1 743 Portion 8 of Erf 181 Edenburg Township Reg. Div. IR, Gauteng

Standard Bank, Private Bank 2 038 Erf 21 Hyde Park Township, Reg. Div. IR. Gauteng

Standard Bank, Randburg 8 143 Erf 1865 Ferndale Township Reg. Div. IQ., Province of Gauteng

Standard Bank, Springs 1 916 Erf 1978 Springs

Benstra Building 7 818 Erf 1033 Arcadia Reg. Div. IR, Tshwane

Murrayfield Forum 1 417 Portion 1 of Erf 556, Murrayfield Ext. 1 Pretoria

Greenstone Hill Building 9 1 827 Unit 18 of Greenstone Hill Office Park, Ext 22, Erf 1836 and 1837

Vunani Office Park 8 625 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

Business Centre 4 886 Erf 155 Edenburg

85 417

EASTERN CAPE PROVINCE Motherwell Shopping Centre, Port Elizabeth 3 764 Erf 17676 Motherwell

Lion Roars Office Park 4 117 Erf 11322 and 1698, Walmer, Port Elizabeth

7 881

* GLA – Gross lettable area.




Register of investment property continued

Name of property

GLA* of property

in m2 Address of property

WESTERN CAPE PROVINCEVunani Chambers 7 066 Erf 10191 – sections 4, 8, 9, 14, 15, 21, 29-36, 45, 53-57, 62, 64-69, 71, 77,

78, 86-89, 95, 102, 105-115, 121, 123, 129, 133, 137-140, 168, 171-177, 185, 191-193, 202, 206-222, 224, 226, 228, 229, 234, 238, 240, 241, 249, 259-261, 277, 288. In addition, Exclusive use area T2-T4 and T8-T9 and sections 190 and 227, plus the parking bays in respect of sections 278, 279, 280, 281, 282, 283 and 284 of the sectional title scheme known as Wale Street Chambers (described on SG Diagram 132/1996) Cape Town

14 Loop Street 2 323 Erf 1570, 1571, 1572, 1573 and 1574, Western Cape

Foretrust 26 780 Erf 172 Roggebaai, City of Cape Town

Brickfield 5 251 Erf 13753 Salt River

41 420

NORTHERN CAPE PROVINCEStandard Bank Upington 1 181 Erf 2271 Upington, Reg. Div. Gordonia Road, Northern Cape

1 181

KWAZULU-NATAL PROVINCEStandard Bank, Harrismith 1 086 Erf 1902 situated in the Township Harrismith, Reg. Div. Harrismith Road

Standard Bank, Stanger 1 253 Erf 146 Stanger, Reg. Div. KwaZulu-Natal

Standard Bank, Ladysmith 1 994 The remainder of Erf 726 Ladysmith, Reg. Div. Gs, KwaZulu-Natal

4 333

NORTH WEST PROVINCE Mabe Park 1 642 Erf 114 Waterval East Extension 4, RustenburgXstrata 3 720 Portion 19 of Erf 1833 Rustenburg Extension 4

5 362145 594





Name of property Address of property

GLA* of property

in m2

Weighted average

gross rental

R/m2

Inde-pendent

valuation as at

30 June 2013R’000

Valua-tion per square

metreR

Pur-chase price

R’000Effective date of acquisition

GAUTENG PROVINCEPerseus Park Lynnwood Ridge 13 838 95,8 157 000 11 346 60 700 29 Sept 2006

Parthenon Park Murrayfield, Tshwane 4 454 84,0 38 750 8 700 12 900 29 Sept 2006

Rynlal Building Lynnwood 5 887 92,4 40 000 6 795 16 950 29 Sept 2006

Linger Longer Wierda Valley, Sandton 597 152,5 5 000 8 375 5 000 2 Oct 2006

Vodacom Park Wierda Valley, Sandton 5 101 134,0 100 000 19 604 44 300 2 Oct 2006

Investment Place Hyde Park, Sandton 6 253 130,9 92 800 14 841 48 000 2 Oct 2006

Belvedere Sunninghill 10 874 86,4 135 000 12 415 70 400 2 Oct 2006

ACS House Edenburg, Rivonia 1 743 113,2 22 000 12 622 6 800 2 Oct 2006

Standard Bank, Private Bank

Hyde Park, Sandton 2 038 168,9 42 800 21 001 23 800 15 Nov 2006

Standard Bank, Randburg Ferndale, Randburg 8 143 70,3 53 000 6 509 24 500 15 Nov 2006

Standard Bank, Springs Springs 1 916 65,6 12 150 6 341 8 700 30 Nov 2006

Benstra Building Arcadia, Tshwane 7 818 106,6 47 100 6 025 41 200 29 Sept 2006

Murrayfield Forum Murrayfield, Tshwane 1 417 85,5 8 000 5 646 6 700 21 Dec 2006

Greenstone Hill Building 9 Greenstone Hill, Edenvale 1 827 98.0 23 000 12 589 18 000 11 Aug 2011

Vunani Office Park Athol, Sandton 8 625 126.1 125 000 14 493 104 400 11 Aug 2011

Business Centre Edenburg, Rivonia 4 886 94.0 77 500 15 862 64 500 6 Nov 2012

85 417 979 100 556 850

EASTERN CAPE PROVINCEMotherwell Shopping Centre, Port Elizabeth Motherwell 3 764 87,4 37 500 9 963 14 500 25 Mar 2008

Lion Roars Office Park Walmer, Port Elizabeth 4 117 139,7 55 000 13 359 52 100 6 Dec 2011

7 881 92 500 66 600

WESTERN CAPE PROVINCEVunani Chambers CBD, Cape Town 7 066 92,6 55 000 7 784 14 100 29 Sept 2006

14 Loop Street CBD, Cape Town 2 323 138,4 37 100 15 971 37 100 11 Aug 2011

Foretrust Roggebaai, Cape Town 26 780 126,9 288 500 10 773 249 500 14 Feb 2012

Brickfield Salt River, Cape Town 5 251 33,8 23 400 4 456 20 000 7 Aug 2012

41 420 404 000 320 700

NORTHERN CAPE PROVINCEStandard Bank Upington Upington 1 181 77,2 9 750 8 256 4 660 15 Nov 2006

1 181 9 750 4 660






Name of property Address of property

GLA* of property

in m2

Weighted average

gross rental

R/m2

Inde-pendent

valuation as at

30 June 2013R’000

Valua-tion per square

metreR

Pur-chase price

R’000Effective date of acquisition

KWAZULU-NATAL PROVINCEStandard Bank, Harrismith Harrismith 1 086 59,5 7 000 6 446 2 500 15 Nov 2006

Standard Bank, Stanger Stanger 1 253 79,8 9 650 7 702 5 700 15 Nov 2006

Standard Bank, Ladysmith Ladysmith 1 994 68,5 12 600 6 319 5 500 15 Nov 2006

4 333 29 250 13 700

NORTH WEST PROVINCEMabe Park Rustenburg 1 642 162,5 26 000 15 834 24 000 6 Dec 2011

Xstrata Rustenburg 3 720 84,2 33 800 9 086 28 982 15 Dec 2011

5 362 59 800 52 982

145 594 103,1 1 574 400 1 015 492


Portfolio information

Rentable area (GLA)

m2

Rentable area (GLA)

%

Revenue per month

R’000Revenue

%

Geographical profile30 June 2013

Eastern Cape Province 7 881 5,4 904 6,5Gauteng Province 85 417 58,7 7 938 56,9KwaZulu-Natal Province 4 333 3,0 301 2,2North West Province 5 362 3,7 580 4,2Northern Cape Province 1 181 0,8 91 0,6Western Cape Province 41 420 28,4 4 135 29,6

145 594 100,0 13 949 100,0

30 June 2012

Eastern Cape Province 7 881 5,8 861 6,5

Gauteng Province 80 585 59,5 7 713 58,6

KwaZulu-Natal Province 4 333 3,2 278 2,1

North West Province 5 362 4,0 534 4,1

Northern Cape Province 1 181 0,9 83 0,6

Western Cape Province 35 985 26,6 3 694 28,1

135 327 100,0 13 163 100,0



Portfolio information continued

Rentable area (GLA)

m2

Rentable area (GLA)

%

Revenue per month

R’000Revenue

%

Sectoral profile

30 June 2013

Office 132 247 90,8 13 046 93,5

Retail 8 096 5,6 727 5,2

Industrial 5 251 3,6 178 1,3

145 594 100,0 13 951 100,0

30 June 2012

Office 127 180 94,0 12 440 94,5

Retail 8 147 6,0 723 5,5

135 327 100,0 13 163 100,0

Rentable area (GLA)

m2

Rentable area (GLA)

%

Revenue per month

R’000Revenue

%

Tenant spread

30 June 2013

(A) National/government 79 250 57,7 8 891 63,8

(B) Listed/large entities 22 324 16,2 2 224 15,9

(C) Other 35 873 26,1 2 834 20,3

137 447 100,0 13 949 100,0

30 June 2012

(A) National/government 79 188 62,1 8 476 64,4

(B) Listed/large entities 22 565 17,7 2 268 17,2

(C) Other 25 723 20,2 2 419 18,4

127 476 100,0 13 163 100,0

Tenants are classified as follows:

(A): Large national tenants, large listed tenants, government and major franchises;

(B): National tenants, listed tenants, franchises and medium to large professional firms; and

(C): Other.




Portfolio information continued

30 June 2013 30 June 2012

Rentable area (GLA)

m2

Rentable area (GLA)

%

Rentable area (GLA)

m2

Rentable area (GLA)

%

Vacancy profile

Office 7 797 95,7 7 672 97,7

Retail 350 4,3 179 2,3Industrial – – – –

8 147 100,0 7 851 100,0

Vacant%

2014%

2015%

2016%

2017%

Lease expiry profile per annum

30 June 2013Rentable area (GLA) 5,6 17,0 29,5 10,5 37,4

Revenue – 19,5 29,8 11,4 39,3

30 June 2012

Rentable area (GLA) 5,8 23,3 7,7 28,8 34,4

Revenue – 23,9 8,4 28,7 39,0

6. PROPERTY, PLANT AND EQUIPMENT

CostR’000

Accumulated depreciation

R’000


GROUP

30 June 2013

Equipment 6 154 (2 688) 3 466

Computer equipment 104 (104) –

Tenant installation 9 336 (6 068) 3 268

15 594 (8 860) 6 734

30 June 2012

Equipment 4 696 (1 727) 2 969

Computer equipment 104 (104) –

Tenant installation 8 522 (4 555) 3 967

13 322 (6 386) 6 936


6. PROPERTY, PLANT AND EQUIPMENT continued

Reconciliation of movement in carrying value of property, plant and equipment

Opening carrying

valueR’000

Acquisition through

businesscombination

R’000

Other additions

R’000Depreciation

R’000

Closing carrying

valueR’000

GROUP

30 June 2013

Equipment 2 969 – 1 458 (961) 3 466

Computer equipment – – – – –

Tenant installation 3 967 – 814 (1 513) 3 268

6 936 – 2 272 (2 474) 6 734

30 June 2012

Equipment 1 992 236 1 430 (689) 2 969

Computer equipment – – – – –

Tenant installation 3 946 729 1 077 (1 785) 3 967

5 938 965 2 507 (2 474) 6 936

CostR’000

Accumulated depreciation

R’000


COMPANY

30 June 2013

Equipment 1 402 (263) 1 139

Tenant installation 563 (315) 248

1 965 (578) 1 387

30 June 2012

Equipment 729 (35) 694

Tenant installation 196 (141) 55

925 (176) 749

Reconciliation of movement in carrying value of property, plant and equipment

Opening carrying

valueR’000

Other additions

R’000Depreciation

R’000

Closing carrying

valueR’000

30 June 2013

Equipment 694 673 (228) 1 139

Tenant installation 55 367 (174) 248

749 1 040 (402) 1 387

30 June 2012

Equipment – 729 (35) 694

Tenant installation – 196 (141) 55

– 925 (176) 749



GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

7. OTHER NON-CURRENT ASSETS Other non-current assets consist of debt and commissions raised on property transactions as well as a loan to the Vunani Chambers’ Body Corporate in order to refurbish the existing lifts.

Opening balance 7 729 3 102 345 –

Acquisition through business combination – 519 – –

Other additions 1 020 5 566 230 352

Amortisation (1 721) (1 458) (188) (7)

Closing balance 7 028 7 729 387 345

COMPANY

30 June2013

R’000

30 June2012

R’000

8. INVESTMENT IN SUBSIDIARIESShares at cost

Cedar Park – 5 998

Pacific Eagle – 12 980

– 18 976

Impairment allowance – (4 236)

– 14 742

Loans to subsidiaries



– 38 851

Shares at cost – 14 742

Loans to subsidiaries – 38 851

– 53 593

The loans to subsidiaries have been repaid as part of a transfer effected in terms of section 47 of the Income Tax Act (Act No. 58 of 1962). Accordingly the assets and liabilities held in Cedar Park and Pacific Eagle have been transferred to Vunani Property Investment Fund Limited, the holding company. The effective dates of the transfer of the property in Pacific Eagle and Cedar Park were 3 August and 21 September 2012 respectively.

9. LOAN TO GROUP ENTITYVunani Property Investment Trust 492 754 474 874

The loan does not bear interest but all profits of the Trust are accounted for as financial income in the company due to the company being the sole beneficiary of the Trust.


GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

10. TRADE AND OTHER RECEIVABLESTrade and other receivables comprise:

Trade receivables 4 188 5 551 254 3 925

Prepayments 30 482 30 164

Deposits 1 323 923 621 185

Other receivables 8 200 8 018 20 668 36 640

Allowance for impairment (2 480) (1 081) – (528)

11 261 13 893 21 573 40 386

Reconciliation of movement in allowance for impairment

Opening balance (1 081) (693) (528) –

Utilised 408 657 528 –

Provision created (1 807) (1 045) – (528)

Closing balance (2 480) (1 081) – (528)

The individually impaired receivables relate mainly to non-national tenants which have been summonsed for non-payment of rentals, or who have vacated the premises due to difficult economic conditions. A portion of the impaired receivables is expected to be recovered. The ageing of the provision for bad debts in respect of the impaired receivables is as follows:

30 June 2013 30 June 2012

GrossR’000

ImpairmentR’000

GrossR’000

ImpairmentR’000

GROUP

Not past due 1 002 (252) 3 390 (268)

Past due: 0 – 30 days 283 (249) 672 (177)

Past due: 31 – 60 days 369 (324) 461 (158)

Past due: 61 – 90 days 344 (260) 389 (129)

Past due: 91 – 120 days 2 190 (1 395) 639 (349)

4 188 (2 480) 5 551 (1 081)

COMPANY

Not past due 253 – 2 787 (146)

Past due: 0 – 30 days 1 – 444 (146)

Past due: 31 – 60 days – – 342 (130)

Past due: 61 – 90 days – – 339 (106)

Past due: 91 – 120 days – – 13 –

254 – 3 925 (528)

At the reporting date there were no specific concentrations of credit risk.

Trade receivables that are due and that are subject to a dispute are not considered impaired until the resolution of the dispute. As of 30 June 2013 group trade receivables of R0,9 million (2012: R1,3 million) were past due but not impaired. From a company perspective, no trade receivables were past due but not impaired at 30 June 2013; however at 30 June 2012, R0,8 million were past due but not impaired. These related to a number of independent customers for whom there is no recent history of default.



GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

11. CASH AND CASH EQUIVALENTSCash and cash equivalents comprise:

Bank balances 359 1 520 47 1 133

Property bank 23 196 18 522 5 474 2 916

23 555 20 042 5 521 4 049

12. ORDINARY SHARE CAPITALAuthorised

2 000 000 000 ordinary shares of R0,0025 each 5 000 5 000 5 000 5 000

Issued

120 618 080 ordinary shares of R0,0025 each 301 301 301 301

The linked unit structure comprises ordinary shares that are indivisibly linked to debentures on a one for one basis. Collectively the linked shares and debenture comprise the linked units which are traded as indivisible units.

13. NON-DISTRIBUTABLE RESERVEThe unrealised fair value adjustments on investment property, interest rate swaps and straight-line rental adjustments, after tax, are transferred to a non-distributable reserve. Realised gains/losses on investment properties remain in retained earnings but are not available for distribution to shareholders.

14. DEBENTURES AND DEBENTURE PREMIUM120 618 080 unsecured, unsubordinated variable rate debentures of R2,4975 each 301 244 301 244 301 244 301 244

Debenture premium 289 353 289 353 289 353 289 353

Amortisation of debenture premium (3 568) (1 679) (3 568) (1 679)

587 029 588 918 587 029 588 918

In terms of the Debenture Trust Deed, interest on the debentures is calculated in accordance with a distributable income formula. The debentures may only be redeemed by the debenture holder at any time after 25 years after the date of allotment by the passing of a special resolution. The debentures shall be redeemed at their nominal value on the fifth anniversary of the special resolution referred to above.

The debenture premium is amortised over 25 years and discounted at a rate equivalent to the 25 year South African Government Bond (R208) as at 30 June 2013 plus an appropriate risk premium.

The Fund was granted REIT status effective 1 July 2013. As provision has been made within the legislation to allow for the linked unit structure to continue, the Fund will delay the collapsing of our capital structure until we have received certainty on the tax implications.


GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

15. OTHER FINANCIAL LIABILITIESCarried at amortised cost

Standard Bank Limited loan 533 305# 447 825# 533 305# 447 825#

Capitalised interest rate swap unwind cost – 45 694 – –

Amortisation of unwind cost – (45 694) – –

533 305 447 825 533 305 447 825

Carried at fair value through profit or loss

Standard Bank Limited

Interest rate swap 1 3 013 6 834 3 013 –

Interest rate swap 2 1 398 4 043 1 398 –

Interest rate swap 3 1 385 4 004 1 385 4 004

539 101 462 706 539 101 451 829

Less: Redraw portion of facility* – (15 400) – (15 400)

Less: Amounts to be settled within 12 months and included in current liabilities (319 196) (324 196) (319 196) (324 196)

219 905 123 110 219 905 112 233

Amounts to be settled within 12 months and included in current liabilities 319 196 324 196 319 196 324 196

Less: Redraw portion of facility* (43 400) (17 900) (43 400) (17 900)

275 796 306 296 275 796 306 296

* Excess cash is paid into the facilities on a monthly basis and when required for the distribution, the cash can be accessed without penalty from the facility.

# Standard Bank Limited loan consists of the following interest bearing facilities:

Variable base rate

All in cost

%

Loan utilised

R’000Maturity

date

GROUP

30 June 2013

Facility 1 3m JIBAR 1,51 282 500 31 Aug 13


Facility 3 3m JIBAR 2,51 200 000 14 Feb 17

533 305

30 June 2012

Facility 1 3m JIBAR 1,51 282 500 31 May 13



447 825



15. OTHER FINANCIAL LIABILITIES continued

Variable base rate

All in cost

%

Loan utilised

R’000Maturity

date

COMPANY

30 June 2013




533 305

30 June 2012




447 825

Interest rate swaps

Fixed base rate

%Inception

dateMaturity

date

Nominal amount

R’000

GROUP30 June 2013Interest rate swap 1 7,26 12 Dec 11 14 Dec 16 150 000Interest rate swap 2 7,12 23 Mar 12 22 Mar 17 103 000Interest rate swap 3 7,12 23 Mar 12 22 Mar 17 102 000

355 000

30 June 2012Interest rate swap 1 7,26 12 Dec 11 14 Dec 16 150 000Interest rate swap 2 7,12 23 Mar 12 22 Mar 17 103 000Interest rate swap 3 7,12 23 Mar 12 22 Mar 17 102 000

355 000

COMPANY30 June 2013Interest rate swap 1 7,26 12 Dec 11 14 Dec 16 150 000Interest rate swap 2 7,12 23 Mar 12 22 Mar 17 103 000Interest rate swap 3 7,12 23 Mar 12 22 Mar 17 102 000

355 000

30 June 2012

Interest rate swap 7,12 23 Mar 12 22 Mar 17 102 000

102 000

The interest rate swap agreements have the effect of swapping the variable base rates with the fixed base rates as indicated above.


15. OTHER FINANCIAL LIABILITIES continued

The loan is secured by a mortgage bond over land and buildings in respect of all investment properties with the exception of the following properties which are unencumbered:

n Lion Roars Office Park;

n Vunani Office Park;

n Building 9, Greenstone Hill Office Park;

n Xstrata;

n Mabe Park;

n Brickfields; and

n Business Centre.

VPIF has embarked on a rights offer to raise R455 million. The proceeds of the rights offer will be used, inter alia, as follows

To settle the purchase consideration in respect of the acquisition of the Greenstone properties R267,884 millionTo settle the cost of the rights offer R8,084 millionTo settle floating debt (variable interest rate debt) (Facility 1 and 2) R179,082 million

Due to the proposed rights offer, VPIF has not extended Facility 1 and Facility 2 beyond 31 August 2013. The bank has approved new facilities post the settlement for a further three years.

16. DEFERRED TAXGROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

Deferred tax (assets) and liabilities comprise:

Investment property – 80 840 – 8 748

Straight-line rental adjustment – 5 122 – 1 472

Income received in advance (3 326) (1 333) (3 326) (1 053)

Interest rate swap (1 623) (4 167) (1 623) (1 121)

Commission 874 – 874 –

Impairment allowance (521) – (521) –

Prepayments 9 – 9 –

Other – 34 – (533)

(4 587) 80 496 (4 587) 7 513

The movement in deferred tax during the year is as follows:

Opening balance 80 496 45 874 7 513 –

Recognised in profit or loss (85 083) 35 073 (12 100) 7 513

Acquisition through business combination – (451) – –

Closing balance (4 587) 80 496 (4 587) 7 513

The Fund’s application to the JSE Limited for REIT status was approved on 24 June 2013. The conversion to a REIT is effective from 1 July 2013. As such, the group will not be liable for capital gains tax. Deferred tax on investment properties and the related straight-line rental adjustment has been reduced to nil as capital gains tax will no longer apply.



GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

17. TRADE AND OTHER PAYABLESTrade and other payables comprise:

Trade payables 142 115 162 109

Other payables 97 2 469 57 2 247

Unitholder for distribution 47 339 40 973 47 339 40 973

VAT payables 1 333 1 676 619 678

Income received in advance 13 542 4 763 6 598 1 212

Deposits received 7 746 6 697 1 040 336

Accrued expenses 15 445 12 328 5 576 4 147

85 644 69 021 61 391 49 702

18. INVESTMENT PROPERTY INCOMEInvestment property income comprises:

Rental income 171 153 131 860 71 391 31 382

Recoveries of utilities from tenants 45 730 34 000 16 567 6 393

216 883 165 860 87 958 37 775

19. PROPERTY EXPENSESProperty expenses comprise:

Rental paid 559 523 164 –

Rates and taxes 12 542 9 185 6 453 2 793

Electricity consumption 26 036 18 888 8 534 3 426

Water consumption 2 016 1 653 499 287

Other municipal charges 2 328 1 938 467 321

Property management fees – JHI 6 791 5 265 2 605 975

Amortisation and depreciation 4 195 3 932 590 183

Amortisation of debt cost – 43 – –

Commissions amortised 1 721 1 415 188 7

Depreciation of property, plant and equipment 2 474 2 474 402 176

Impairment allowance 1 807 1 045 (528) 528

Security 3 900 3 337 1 068 672

Cleaning 1 994 1 564 602 329

Insurance 817 671 394 183

Other property related expenses* 11 963 9 873 3 514 16 480

74 948 57 874 24 362 26 177

* Other property related expense includes consumables, gardening and landscaping, repairs and maintenance and valuation costs.


GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

20. OTHER INCOMEOther income comprises:

Gain on bargain purchase – 830 – –

Sundry income 40 96 12 –

Dividends received – – 5 356 –

Profit/(loss) on sale of subsidiaries* 1 927 – (2 451) –

1 967 926 2 917 –

* The profit and loss relates to the transfer of the assets and liabilities in Cedar Park and Pacific Eagle in terms of s47 of the Income Tax Act (Act No. 58 of 1962).

21. OPERATING PROFITOperating profit is arrived at after taking into account:

Audit fees 602 752 611 678

Fees for professional and consulting services 224 14 689 196 14 454

Travel 15 – 15 –

Directors’ emoluments ( refer note 30) 1 074 585 1 074 585

22. FINANCE INCOMEFinance income comprises interest received from:

Banks 1 616 2 005 85 775

Vunani Property Investment Trust 78 138 58 790

Cedar Park 310 1 153

Pacific Eagle 199 1 856

1 616 2 005 78 732 62 574

23. FINANCE COST AMORTISATIONFinance cost amortisation comprises:

Unwinding cost on interest rate swap ( refer note 15) – 45 694 – –

24. FINANCE COSTSFinance costs comprise interest paid on:

Loan from Hyprop Investments Limited – 71 – –

Standard Bank Limited loan (variable) 40 494 20 250 39 512 6 208

Interest rate swap – 4 593 – –

Banks 97 171 73 171

Tax penalties 230 – 36 –

40 821 25 085 39 621 6 379

25. FAIR VALUE ADJUSTMENTSFair value adjustments comprise:

Interest rate swap 9 085 (7 582) (1 792) (4 004)


Impairments – (1 190) – (4 237)

45 405 106 835 19 840 38 795



GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

26. DISTRIBUTIONSDebenture interest comprises:

Debenture interest to:

Linked unitholders pre-listing – 1 949 – 1 949Vunani Properties Proprietary Limited – 978 – 978Hyprop Investments Limited – 971 – 971

Linked unitholders post-listing 93 174 73 540 93 174 73 54093 174 75 489 93 174 75 489

Trust distribution to: Linked unitholders pre-listing – 2 324 – –

Vunani Properties Proprietary Limited – 1 167 – –Hyprop Investments Limited – 1 157 – –

93 174 77 813 93 174 75 489

Refer note 32 for the calculation of distributable earnings.

27. INCOME TAXSouth African normal taxation

Current taxation:

Current year 234 25 234 –

Deferred taxation: (85 083) 35 073 (12 101) 7 513

Current year 879 20 198 (1 881) 7 513

Rate change (85 962) 14 875 (10 220) –

(84 849) 35 098 (11 867) 7 513

30 June 2013 30 June 2012

% R’000 % R’000

GROUP

Reconciliation of effective tax rate

Profit before income tax – 60 485 – 56 200

Income tax using statutory tax rate 28,0 (16 936) 28,0 (15 736)

Unrecognised deferred tax assets – – (8,7) 4 886

Utilisation of unrecognised deferred tax assets (3,9) 2 386 – –

Fair value adjustments – – 19,2 (10 790)

Impairment of goodwill – – 0,6 (333)

Tax rate change (141,1) 85 962 26,5 (14 875)

Exempt income – – (0,8) 470

Non-deductible expenses 0,3 (158) – –

Non-taxable income (24,6) 14 867 – –

Other 2,0 (1 272) (2,3) 1 280

Income tax at effective tax rate (140,3) 84 849 62,5 (35 098)


30 June 2013 30 June 2012

% R’000 % R’000

27. INCOME TAX EXPENSE continued

COMPANY

Reconciliation of effective tax rate

Profit before income tax – 35 448 – 31 598

Income tax using statutory tax rate 28,0 (9 926) 28,0 (8 847)

Unrecognised deferred tax assets – – 47,7 (15 070)

Utilisation of unrecognised deferred tax assets (6,9) 2 443 – –

Previous unrecognised deferred tax assets – – 1,9 (603)

Fair value adjustments – – (12,7) 4 023

Tax rate change (28,8) 10 220 – –

Exempt income – – (1,5) 470

Non-deductible expenses 2,2 (790) – –

Non-taxable income (32,9) 11 665 – –

Deductible Trust expenses (0,3) 111 (39,6) 12 514

Other 5,2 (1 856) – –

Income tax at effective tax rate (33,5) 11 867 23,8 (7 513)

Deferred tax assets have not been recognised in respect of estimated tax losses of R45,1 million (2012: R53,8 million). These tax losses will be available for set-off against future taxable income. Deferred tax assets have not been recognised in respect of these estimated losses because it is not probable that future taxable profit will be available against which the company can utilise the benefits thereon.

The estimated tax losses will be available to the respective subsidiaries and to the company indefinitely per the Income Tax Act as long as the entities are trading. There is currently no intention for the subsidiaries to cease any trading activities apart from Cedar Park and Pacific Eagle.

GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

28. CASH GENERATED BY OPERATIONSProfit before income tax 60 485 56 200 35 448 31 598

Adjusted for:

Amortisation and depreciation 4 195 3 932 590 (183)

Amortisation of debenture premium (1 889) (1 679) (1 889) (1 679)

Gain on bargain purchase – (830) – –

(Profit)/loss on sale of subsidiaries (1 927) – 2 451 –

Dividends received – – (5 356) –

Finance income (1 616) (2 005) (78 732) (62 574)

Straight-line rental adjustment (12 957) (5 994) (12 405) (5 259)

Finance cost amortisation – 45 694 – –

Finance costs 40 821 25 085 39 621 6 379

Trust distributions – net rental income – 2 324 – –

Debenture interest 93 174 75 489 93 174 75 489

Fair value adjustments (45 405) (106 835) (19 840) (38 795)

Cash generated before working capital changes 134 881 91 381 53 062 5 342

Changes in working capital:

Decrease/(increase) in trade and other receivables 2 632 (7 655) 6 235 (6 198)

Increase/(decrease) in trade and other payables 10 257 5 818 5 325 7 032

Cash generated by operations 147 770 89 544 64 622 6 176



GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

29. COMMITMENTSOperating leases – as lessor (income)

Minimum lease payments due

within one year 169 514 129 887 76 222 58 431

in second to fifth year inclusive 362 324 367 114 260 909 246 894

after five years 70 884 53 984 46 178 23 648

Contractual cash inflows 602 722 550 985 383 309 328 973

Straight-line rental adjustments (31 251) (18 295) (17 664) (5 259)

Future book revenue 571 471 532 690 365 645 323 714

Operating lease income represents rentals received by the group for certain of its office properties. Leases are negotiated for an average term of four years. Rentals on the office properties escalate at an average rate of 7,7% per annum.

30. RELATED PARTIES Related party relationships include:

Subsidiaries Vunani Property Investment Trust (VPIT) Cedar Park Properties 31 Proprietary Limited (Cedar Park) Pacific Eagle Properties 204 Proprietary Limited (Pacific Eagle)

Asset management company Vunani Property Asset Management Proprietary Limited (VPAM)

Directors

Refer to the directors’ remuneration on pages 73 and 74.

COMPANY

30 June2013

R’000

30 June2012

R’000

Related party balances comprise:

Current assets

Loan to:

VPIT ( refer note 9) 472 634 474 874



472 634 513 725

Interest due from:

VPIT 20 120 30 225



20 120 33 234


COMPANY

30 June2013

R’000

30 June2012

R’000

30. RELATED PARTIES continued

Related party transactions comprise:

Finance income

Interest received from:

VPIT 78 138 58 790

Cedar Park 310 1 153

Pacific Eagle 199 1 856

78 547 61 799

GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

Asset management fees

Fees paid to:

VPAM 8 120 5 359 8 120 4 930

Directors’ remuneration

Directors’ fees

R’000Salaries

R’000

Provident fund and

medical aid contributions

R’000Bonuses

R’000Total

R’000

GROUP

30 June 2013

Independent non-executive directors

PD Naidoo (Chairman) 230 – – – 230

RR Emslie 200 – – – 200

JR Macey 200 – – – 200

PM Tau-Sekati* 52 – – – 52

KN Vundla* 52 – – – 52

Non-executive directors

CE Chimombe-Munyoro 170 – – – 170

EG Dube 170 – – – 170

Executive directors

RF Kane (CEO) – 1 256 244 1 515 3 015

M de Lange (FD) – 899 234 434 1 567

PW Mackenzie – 1 306 252 1 515 3 073

1 074 3 461 730 3 464 8 729

* Appointed 11 March 2013.



30. RELATED PARTIES continued

Directors’ remuneration continued

Directors’ fees

R’000Salaries

R’000

Provident fund and

medical aid contributions

R’000Bonuses

R’000Total

R’000

GROUP

30 June 2012

Independent non-executive directors

PD Naidoo (Chairman) 129 – – – 129

RR Emslie 116 – – – 116

JR Macey 116 – – – 116

Non-executive directors

CE Chimombe-Munyoro 112 – – – 112

EG Dube 112 – – – 112

Executive directors

RF Kane (CEO) – 1 051 205 375 1 631

M de Lange (FD) – 849 218 110 1 177

PW Mackenzie – 1 168 200 375 1 743

585 3 068 623 860 5 136

The executive directors, whose services have been seconded to Vunani Property Asset Management Proprietary Limited (VPAM) in terms of the secondment agreement, will not be remunerated for their services as directors of the Fund. The executive directors’ remuneration is paid from the asset management fee that is earned from the company.

31. BUSINESS COMBINATIONS 2012/2013 On 7 August 2012, the Fund acquired the property known as Brickfield, situated at 5-9 Brickfield Road, Salt River with a gross lettable

area measuring 5 251m2. The purchase price was settled in cash.

The property known as Business Centre with a gross lettable area measuring 4 886m2 was acquired on 6 November 2012 and is situated at 377 Rivonia Boulevard, Sandton. The purchase price was settled in cash.

The table below indicates the net assets acquired on the above mentioned business combinations:

BrickfieldR’000

Business Centre

R’000Total

R’000

GROUP

Net assets acquired

Investment property 20 004 64 579 84 583

Settlement of cost of investment

Cash paid 20 004 64 579 84 583


31. BUSINESS COMBINATIONS continued 2012/2013 continued

BrickfieldR’000

Business Centre

R’000Total

R’000

COMPANY

Net assets acquired

Investment property 20 004 64 579 84 583


Cash paid 20 004 64 579 84 583

After tax profits since acquisition 1 751 3 998 5 749

Full year after tax profits 1 880 6 157 8 037

2011/2012 On 11 August 2011, the Fund acquired the entire issued share capital of Cedar Park and Pacific Eagle for R6,0 million and R13,0 million

respectively. Cedar Park’s only asset is a commercial building situated at Greenstone Hill Office Park, Emerald Boulevard, Greenstone Hill with a gross lettable area measuring 1 807m2 and Pacific Eagle’s only asset is a commercial building situated at 14 Loop Street, Cape Town with a gross lettable area measuring 2 323m2. The purchase price was settled through the issue of linked units in the Fund at a price equal to the listing price.

The property known as Athol Ridge Office Park (subsequently renamed to Vunani Office Park) situated at 151 Katherine Street with a gross lettable area of 8 577m2 was acquired on the same date for an amount of R104,5 million.

On 6 December 2011, VPIF took transfer of the Lion Roars and Mabe office parks. The Lion Roars Office Park was acquired for an amount of R52,1 million and is situated at 53 Heugh Road, Walmer, Port Elizabeth with a gross lettable area of 4 280m2. Mabe Office Park was acquired for an amount of R24,1 million and is situated at 91 Ridder Street, Ooseinde, Rustenburg with a gross lettable area of 1 642m2.

The Fund also acquired the building known as the Xstrata building on 15 December 2011 for a purchase consideration of R29 million. The building is situated at 12 Kgwebo Avenue, Waterfall East extension 4, Rustenburg with a gross lettable area of 3 720m2.

On 14 February 2012, the Fund took transfer of the property known as the Foretrust building after receiving approval from its linked unitholders to acquire the property for an amount of R251,1 million. The property is situated at Martin Hammerschlag Way, Cape Town with a gross lettable area measuring 26 809m2.

The table below indicates the net assets acquired on the above mentioned business combinations:

Cedar ParkR’000

Pacific EagleR’000

Athol RidgeR’000

Lion RoarsR’000

GROUP

Net assets acquiredInvestment property 17 057 37 100 104 692 52 186Property, plant and equipment 965 – – –Other non-current assets 519 – – –Cash and cash equivalents 155 170 – –Trade and other receivables 50 23 – –Other financial liabilities (14 665) (22 513) – –Deferred tax 1 226 (775) – –Trade and other payables (499) (195) – –Net assets acquired 4 808 13 810 104 692 52 186Goodwill 1 190 – – –Gain on bargain purchase – (830) – –Cost of investment 5 998 12 980 104 692 52 186Less: Cash acquired (155) (170) – –

5 843 12 810 104 692 52 186



31. BUSINESS COMBINATIONS continued 2011/2012 continued

Cedar ParkR’000

Pacific EagleR’000

Athol RidgeR’000

Lion RoarsR’000

COMPANY

Investment in subsidiaries 5 998 12 980 – –

Investment property – – 104 692 52 186

5 998 12 980 104 692 52 186


Cash paid/(received) 2 031 (31) 104 692 52 186

Linked units issued 3 967 13 011 – –

5 998 12 980 104 578 52 186

After tax profits since acquisition 36 298 9 530 3 323

Full year after tax profits 49 216 10 891 6 646

XstrataR’000

Mabe ParkR’000

ForetrustR’000

TotalR’000

GROUP

Net assets acquired


Property plant and equipment – – – 965

Other non-current assets – – – 519

Cash and cash equivalents – – – 325

Trade and other receivables – – – 73

Other financial liabilities – – – (37 178)

Deferred tax – – – 451

Trade and other payables – – – (694)

Net assets acquired 29 025 24 057 251 098 479 676

Goodwill – – – 1 190

Gain on bargain purchase – – – (830)

Cost of investment 29 025 24 057 251 098 479 711

COMPANY

Investment in subsidiaries – – – 18 978


29 025 24 057 251 098 480 036


Cash paid/(received) 29 025 24 057 251 098 463 058

Linked units issued – – – 16 978

29 025 24 057 251 098 480 036

After tax profits since acquisition 1 646 1 583 10 132 26 548

Full year after tax profits 3 292 3 166 27 019 51 279


GROUP

30 June2013

Cents

30 June2012

Cents

32. BASIC, DILUTED, HEADLINE EARNINGS AND DISTRIBUTION PER LINKED UNITBasic earnings per linked unit 196,17 85,69

Headline earnings per linked unit 97,44 3,81

Distribution per linked unit 77,25 64,51

Basic earnings per linked unit The calculation of basic earnings per linked unit was based on the earnings attributable to linked unitholders of R236,619 million (2012:

R97,236 million), and a weighted average number of linked units outstanding of 120 618 080 (2012: 113 474 635).

Headline earnings per linked unit The calculation of headline earnings per linked unit was based on headline earnings attributable to linked unitholders of R117,532 million

(2012: R4,322 million), and a weighted average number of linked units outstanding of 120 618 080 (2012: 113 474 635).

Diluted basic earnings and diluted headline earnings per linked unit There were no dilutive instruments in issue at year end.

Distribution per linked unit The calculation of distribution per linked unit was based on the distributable earnings attributable to linked unitholders of R93,174 million

(2012: R77,813 million), and an issued number of linked units outstanding of 120 618 080 (2012: 120 618 080).

GROUP

30 June2013’000

30 June2012’000

Weighted average number of linked units

Issued at the beginning of the year 120 618 57 024

Issued during the year – 56 451

Weighted average number of linked units at the end of the year 120 618 113 475

Earnings

Profit attributable to equity holders 145 334 21 102

Adjust for:

Trust distributions – net rental income – 2 324

Debenture interest 93 174 75 489

Amortisation of debenture interest (1 889) (1 679)

Earnings attributable to linked unitholders 236 619 97 236



32. BASIC, DILUTED, HEADLINE EARNINGS AND DISTRIBUTION PER LINKED UNIT continued

GROUP

30 June2013

R’000

30 June2012

R’000

Headline earnings

Profit attributable to equity holders 145 334 21 102

Adjust for:

Trust distributions – net rental income – 2 324

Impairment of goodwill – 1 190

Debenture interest 93 174 75 489

Profit on sale of subsidiaries (1 927) –

Amortisation of debenture interest (1 889) (1 679)

Revaluation of investment property

Gross revaluation (36 320) (115 607)

Deferred taxation (80 840) 21 503

Headline earnings attributable to linked unitholders 117 532 4 322

Distributable earnings

Revenue 216 883 165 860

Property expenses (74 948) (57 874)

Other income 1 967 926

Less: Gain on bargain purchase – (830)

Other operating expenses (3 169) (15 274)

Add back: Listing costs – 13 469

Asset management fees (8 120) (5 359)

Net finance cost (39 205) (23 080)

Finance income 1 616 2 005

Finance cost (40 821) (25 085)

Taxation (234) (25)

Distributable earnings 93 174 77 813

Reconciliation of earnings to distributable earnings

Earnings attributable to linked unitholders 236 619 97 236

Straight-line rental adjustment (12 957) (5 994)

Gain on bargain purchase – (830)

Listing costs – 13 469

Finance cost amortisation – 45 695

Fair value adjustments (45 405) (106 836)

Deferred tax (85 083) 35 073



32. BASIC, DILUTED, HEADLINE EARNINGS AND DISTRIBUTION PER LINKED UNIT continued

GROUP

30 June2013

R’000

30 June2012

R’000


Units in issue (’000) 120 618 120 618

Distribution per linked unitholder (cents) 77,25 64,51


Less: Distributions to linked unitholders pre-listing – (4 273)

Less: Distributions to linked unitholders (payment 1) (45 835) (32 570)

Available for distribution (payment 2) 47 339 40 970

Units in issue (’000) 120 618 120 618

Distribution per linked unitholder (cents) 39,25 33,97

33. OPERATING SEGMENTS The group has seven reportable segments based on the geographic split of the country which are the group’s strategic business

segments. For each strategic business segment, the group’s CEO (the chief operating decision maker) reviews internal management reports on at least a monthly basis. All segments are located in South Africa. There are no single major customers.

The following summary describes the operations in each of the group’s reportable segments:

Head officeR’000

GautengR’000

KwaZulu-NatalR’000

Northern province

R’000

30 June 2013

Extracts from the statement of comprehensive income

Investment property income – 135 597 3 556 1 093Straight-line rental adjustment – 3 261 31 64Property expenses (504) (51 277) (1 044) (209)Segment results (504) 87 581 2 543 948

Extracts from the statement of financial position

Investment property

Opening balance – 864 439 29 552 9 495

Additions through business combinations – 64 579 – –

Other additions – 4 767 – –

Straight-line rental adjustment – 3 261 31 64

Cumulative fair value adjustments – 36 845 (346) 187

Closing balance – 973 891 29 237 9 746



33. OPERATING SEGMENTS continued

Western CapeR’000

EasternCapeR’000

NorthWest

R’000Total

R’000

30 June 2013


Investment property income 57 032 11 938 7 667 216 883

Straight-line rental adjustment 8 266 713 622 12 957

Property expenses (17 619) (2 800) (1 495) (74 948)

Segment results 47 679 9 851 6 794 154 892


Investment property

Opening balance 376 310 89 599 56 999 1 426 394


Other additions 2 402 244 – 7 413


Cumulative fair value adjustments (4 406) 1 943 2 097 36 320

Closing balance 402 576 92 499 59 718 1 567 667

Head officeR’000

GautengR’000

KwaZulu-NatalR’000

Northern province

R’000

30 June 2012


Investment property income – 121 832 3 269 1 001

Straight-line rental adjustment – 1 869 32 (57)

Property expenses (1 353) (43 196) (894) (171)

Segment results (1 353) 80 505 2 407 773


Investment property

Opening balance – 672 258 24 542 7 693

Additions through business combinations – 121 749 – –

Other additions – 3 565 – –

Straight-line rental adjustment – 1 869 32 (57)

Cumulative fair value adjustments – 64 998 4 978 1 859

Closing balance – 864 439 29 552 9 495


33. OPERATING SEGMENTS continued

Western CapeR’000

EasternCapeR’000

NorthWest

R’000Total

R’000

30 June 2012


Investment property income 28 284 7 567 3 907 165 860


Property expenses (10 124) (1 458) (678) (57 874)

Segment results 21 672 6 323 3 653 113 980


Investment property

Opening balance 55 944 22 000 – 782 437

Additions through business combinations 288 198 52 185 53 083 515 215

Other additions 320 3 256 – 7 141


Cumulative fair value adjustments 28 336 11 944 3 492 115 607

Closing balance 376 310 89 599 56 999 1 426 394

34. RISK MANAGEMENT34.1 Liquidity risk

Carrying amounts

R’000

Un-discounted contractual cash flows

R’000

Less than 1 yearR’000

2 – 5 yearsR’000

Greater than

5 yearsR’000

GROUP

30 June 2013

Non-derivative financial liabilities (1 167 041) (1 020 506) (299 751) (428 467) (298 353)

Non-interest bearing (84 311) (84 311) (84 311) – –

Fixed interest rate instruments (5 796) (5 796) (5 796) – –

Variable interest rate instruments (1 076 934) (930 399) (209 644) (428 467) (298 353)

30 June 2012

Non-derivative financial liabilities (1 085 669) (807 481) (450 945) (67 183) (289 353)




COMPANY

30 June 2013






34. RISK MANAGEMENT continued

34.1 Liquidity risk continued

Carrying amounts

R’000

Un-discounted contractual cash flows

R’000

Less than 1 yearR’000

2 – 5 yearsR’000

Greater than

5 yearsR’000

COMPANY

30 June 2012





GROUP

30 June2013

R’000

30 June2012

R’000

Permitted borrowings for the group

Value of property portfolio ( refer note 5) 1 567 667 1 426 394

40% of portfolio value 627 067 570 558

Other financial liabilities (gross) (533 305) (447 825)

Less redraw portion 43 400 33 300

Other financial liabilities (net) (489 905) 414 525

Unutilised borrowing capacity 137 162 122 733

Loan to value (gross debt) (%) 34,02 31,40

Loan to value (net debt) (%) 31,25 29,06

34.2 Market risk 34.2.1 Interest rate risk The group is exposed to interest rate risk as it borrows funds at variable interest rates.

GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

Interest rate exposure is as follows:

Fixed rate instruments

Financial liabilities (5 796) (14 881) (5 796) (4 004)

Variable rate instruments

Financial assets 28 114 25 060 498 275 478 924

Financial liabilities (1 076 934) (1 003 443) (1 076 934) (1 003 443)

(1 048 820) (978 383) (578 659) (524 519)




34.2 Market risk continued

34.2.1 Interest rate risk continued

GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

Cash flow sensitivity analysis for variable rate instrumentsA change of 50 basis points in the interest rates at year end would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.

Effect on equity and profit or loss

50 basis points increase (5 244) (5 159) (2 893) (2 809)

50 basis points decrease 5 244 5 159 2 893 2 809

The Fund is exposed to interest rate risk and adopts a policy of ensuring that at least 70% to 80% of its exposure to changes in interest rates on borrowings is on a fixed basis. This is achieved by entering into fixed rate swap instruments. All such transactions are carried out within the guidelines set by the audit and risk committee. As a consequence, the Fund is exposed to fair value interest rate risk in respect of the fair value of its interest rate financial instruments, which will not have an impact on distributions. Short-term receivables and payables and investments are not directly exposed to interest rate risk.

34.2.2 Credit risk The carrying amount of financial assets below represents the maximum credit exposure. The maximum exposure of credit risk

was:

GROUP COMPANY

30 June2013

R’000

30 June2012

R’000

30 June2013

R’000

30 June2012

R’000

Trade and other receivables 11 261 13 893 21 573 40 386

Cash and cash equivalents 23 555 20 042 5 521 4 050

Other non-current assets 4 560 5 018 – –

Loan to group entity – – 492 754 474 874

Loans to subsidiaries – – – 38 851

39 376 38 953 519 848 558 161





34.2.3 Fair values

30 June 2013 30 June 2012

Carrying amount

Fairvalue

Carrying amount

Fairvalue

R’000 R’000 R’000 R’000

GROUP

Financial assets



34 816 34 816 33 935 33 935

Financial liabilities

Amortised cost (1 161 245) (1 161 245) (1 070 788) (1 070 788)

Fair value through profit or loss (5 796) (5 796) (14 881) (14 881)

(1 167 041) (1 167 041) (1 085 669) (1 085 669)

COMPANY

Financial assets



Loan to Vunani Property Investment Trust 492 754 492 754 474 874 474 874

Loan to Cedar Park – – 14 882 14 882

Loan to Pacific Eagle – – 23 969 23 969

519 848 519 848 558 161 558 161

Financial liabilities

Amortised cost (1 137 706) (1 137 706) (1 052 467) (1 052 467)

Fair value through profit or loss (5 796) (5 796) (4 004) (4 004)

(1 143 502) (1 143 502) (1 056 471) (1 056 471)

The fair value of trade receivables approximates its carrying amount as it is short-term in nature. The fair values of all financial instruments with the exception of linked debentures, interest rate swaps and fixed rate financial liabilities are substantially the same as the carrying amounts reflected on the statement of financial position. It is impractical to determine the fair value of the linked debentures.

Fair value hierarchy The group measures fair values using the following hierarchy that reflects the significance of the inputs used in making the

measurements:

n Level 1: Quoted prices (unadjusted) in an active market for an identical instrument;

n Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data; and

n Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation.




34.2.3. Fair values continued

Fair value hierarchy continued This category also includes instruments that are valued based on quoted prices for similar instruments where significant

unobservable adjustments or assumptions are required to reflect differences between the instruments.

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments the group determines fair values using valuation techniques. Valuation techniques include net present value and discounted cash flow models and comparison to similar instruments for which market observable prices exist. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date, which would have been determined by market participants acting at arm’s length.

The group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, like interest rate swaps that use only observable market data and require little management judgement and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity securities, exchange traded derivatives and simple over the counter derivatives like interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determination of fair values.

The table below analyses financial instruments carried at fair value, by valuation method:

Level 1R’000

Level 2R’000

Level 3R’000

TotalR’000

GROUP

30 June 2013

Financial instrument

Interest rate swap – 5 796 – 5 796

30 June 2012



COMPANY

30 June 2013



30 June 2012



35. GOING CONCERN The financial statements have been prepared on a going concern basis and nothing has come to the attention of the directors to indicate

that the company and its subsidiaries would not remain going concerns for the foreseeable future.



36. EVENTS AFTER THE REPORTING DATE On 23 July 2013, the unitholders of the Fund voted in favour of the Greenstone Hill acquisition. The acquisition comprises 10 buildings in

total. The Fund will therefore acquire the entire share capital and claims of Greenstone Hill Office Park Proprietary Limited in which eight of the buildings are housed and two properties which are directly owned by Barrow Properties Proprietary Limited.

The Fund has further embarked on a rights offer to raise R455 million. The proceeds of the rights offer will be used, inter alia, as follows:

To settle the purchase consideration in respect of the acquisition of the Greenstone Properties R267,884 million

To settle the cost of the rights offer R8,084 million

To settle floating debt (variable interest rate debt) (Facility 1 and 2) R179,082 million

DetailsDescription of property Buildings 2, 4, 5, 6 and 10 – 15 of the sectional title schemes known as Greenstone Hill Office

Park SS1149/2008 and SS599/2009, and associated exclusive use areas, situated at Erf 1841 Greenstone Hill Extension 22 Township, Gauteng.

Region Gauteng

Sector Commercial

Vacancy 525m2

Gross lettable area (GLA) 17 571m2

Property description and use Buildings/offices

37. DIVIDENDS No dividends were declared during the period (2012: Rnil).

38. MAJOR BENEFICIAL UNITHOLDERS 5% and more of the linked units in issue

Number of linked units

% of total issued

linked units

Coronation Fund Managers 17 836 083 14,79

Stanlib 14 355 065 11,90

Old Mutual Group 11 030 803 9,15

Momentum 9 397 999 7,79

Government Employees Pension Fund 9 167 005 7,60

Investment Solutions 8 220 840 6,82

Nedbank Group 6 763 386 5,61

Investec 6 328 458 5,25

Total 83 099 639 68,91


Unitholder information 88Notice of annual general meeting 90Explanatory notes to resolutions 95Form of proxy 97Notes to the form of proxy 99

2013

unitholder information

BELVEDERE PLACE


UNITHOLDER INFORMATIONas at 30 June 2013

Numberof linked

unitholdings

% of total linked

unitholdersNumber of

linked units

% of total issued

linked units

ANALYSIS OF UNITHOLDING 1 – 1 000 95 16,75 19 889 0,02

1 001 – 10 000 186 32,80 839 981 0,70

10 001 – 100 000 170 29,98 6 006 189 4,98

100 001 – 1 000 000 85 14,99 25 746 281 21,35

1 000 001 and more 31 5,48 88 005 740 72,95

567 100,00 120 618 080 100,00

MAJOR BENEFICIAL UNITHOLDERS(3% and more of the linked units in issue)


Stanlib 14 355 065 11,90

Old Mutual Group 11 030 803 9,15

Momentum 9 397 999 7,79

Government Employees Pension Fund 9 167 005 7,60

Investment Solutions 8 220 840 6,82

Nedbank Group 6 763 386 5,61

Investec 6 328 458 5,25

Absa Group 5 549 795 4,60

Liberty Group 3 814 366 3,16

Transnet Retirement Funds 3 733 244 3,10

Total 96 197 044 79,77

MAJOR INSTITUTIONAL UNITHOLDERS(3% and more of the linked units in issue)


Stanlib Asset Management 23 628 792 19,59

Old Mutual Investment Group 11 694 493 9,70

Investec Asset Management 11 084 578 9,19

Public Investment Corporation 9 103 125 7,55

Momentum Investments 8 727 786 7,24

Absa Asset Management 6 430 785 5,33

Grindrod Asset Management 4 998 312 4,14

110 467 179 91,59

UNITHOLDER SPREADNon-public

Directors and associates of directors 2 0,35 658 839 0,55

Public linked unitholders 565 99,65 119 959 241 99,45

567 100,00 120 618 080 100,00


Number of linked

unitholdings

% of total linked

unitholdersNumber of

linked units

% of total issued

linked units

DISTRIBUTION OF UNITHOLDERSCollective investment schemes 79 13,93 75 171 478 62,32

Retirement benefit funds 93 16,40 24 644 300 20,43

Assurance and insurance companies 17 3,00 13 252 651 10,99

Trusts 71 12,52 1 882 107 1,56

Retail linked unitholders 235 41,45 1 815 964 1,51

Foundations and charitable funds 13 2,29 1 078 632 0,89

Private companies 25 4,41 1 017 463 0,84

Medical aid funds 9 1,59 922 500 0,76

Hedge funds 2 0,35 180 429 0,15

Stockbrokers and nominees 3 0,53 170 332 0,14

Managed funds 3 0,53 174 837 0,14

Public entities 2 0,35 156 100 0,13

Close corporations 12 2,12 126 976 0,11

Scrip lending 2 0,35 23 361 0,02

Investment partnerships 1 0,18 950 0,01

567 100,00 120 618 080 100,00

UNITHOLDER DIARYFinancial year end 30 JunePublication of financial results 26 August 2013Integrated annual report posted to unitholders 26 August 2013Annual general meeting 27 September 2013

CASH DISTRIBUTIONDistribution declaration date 19 August 2013Last date to trade in order to participate in cash distribution 13 September 2013Linked units trade “ex-distribution” 16 September 2013Record date 20 September 2013Payment date 23 September 2013


NOTICE OF ANNUAL GENERAL MEETING

VUNANI PROPERTY INVESTMENT FUND LIMITEDApproved as a REIT by the JSEIncorporated in the Republic of South AfricaRegistration number 2005/019302/06JSE code: VPFISIN: ZAE000157459(the company)

This document is important and requires your immediate attention

If you are in any doubt about what action you should take, consult your broker, central securities depository participant (CSDP), legal advisor, banker, financial advisor, accountant or other professional advisor immediately.

If you have disposed of all your linked units in the company, please forward this document together with the enclosed form of proxy to the purchaser of such linked units or the broker, banker or other agent through whom you disposed of such linked units.

Included in this document are:

n The notice of general meeting, setting out the resolutions to be proposed thereat, together with explanatory notes. There are also guidance notes if you wish to attend the meeting or to vote by proxy.

n A proxy form for use by linked unitholders holding the company’s linked units in certificated form or recorded in sub-registered electronic form in “own name”.

Unitholders on the company share register who have dematerialised their linked units through STRATE, other than those whose shareholding is recorded in their “own name” in the sub-register maintained by their CSDP, and who wish to attend the meeting in person, will need to request their CSDP or broker to provide them with the necessary authority to do so in terms of the custody agreement entered into between the dematerialised linked unitholders and their CSDP or broker.

A unitholder (including certificated linked unitholders and dematerialised linked unitholders who hold their linked units with “own name” registration) entitled to attend and vote at the meeting may appoint one or more proxy or proxies to attend, participate and vote in his/her/its stead. A proxy does not have to be a unitholder of the company. The appointment of a proxy will not preclude the unitholder who appointed that proxy from attending the annual general meeting and participating and voting in person thereat to the exclusion of any such proxy. A form of proxy for use at the meeting is attached.

NOTICE TO LINKED UNITHOLDERS: ANNUAL GENERAL MEETING (AGM) Notice is hereby given to linked unitholders as at 16 August 2013, being the record date to receive notice of the AGM in terms of section 59(1)(a) of the Companies Act, 71 of 2008, as amended (the Companies Act) that the AGM of linked unitholders of the company will be held in the boardroom, Vunani House, 151 Katherine Street, Sandton at 11:00 on Friday, 27 September 2013 to (i) deal with such other business as may lawfully be dealt with at the meeting; and (ii) consider and, if deemed fit to pass, with or without modification, the following ordinary and special resolutions, in the manner required by the Companies Act, as read with the JSE Limited listing requirements (the JSE Listings Requirements), which meeting is to be participated in and voted by linked unitholders as at the voting record date of 20 September 2013 in terms of section 62 (3) (a), read with section 59 of the Companies Act.

NB: Section 63(1) of the Companies Act – identification of meeting participants

Kindly note that, meeting participants (including proxies) are required to provide reasonably satisfactory identification before being entitled to attend or participate in linked unitholders’ meetings. Forms of identification include valid identity documents, drivers’ licences and passports.

When reading the resolutions below, please refer to the explanatory notes for AGM resolutions on pages 95 and 96.

1. Presentation of annual financial statements The consolidated audited financial statements of the company

and its subsidiaries (as approved by the board of directors of the company), including the directors’ report and the external auditor’s report for the year ended 30 June 2013, have been distributed as required and will be presented to linked unitholders.

The complete annual financial statements are attached.

2. Ordinary resolution number 1 Confirmation of PM Tau-Sekati as a director “Resolved that the appointment of PM Tau-Sekati, as newly

appointed director, who offers herself for confirmation in this capacity, be approved. Please refer to page 14 of the annual report for a brief biography.”

3. Ordinary resolution number 2 Confirmation of KN Vundla as a director “Resolved that the appointment of KN Vundla, as newly

appointed director, who offers herself for confirmation in this capacity, be approved. Please refer to page 14 of the annual report for a brief biography.”


4. Ordinary resolution number 3 Re-election of RR Emslie as a director “Resolved that the appointment of RR Emslie, who retires as

a director of the company by rotation in accordance with the company’s Memorandum of Incorporation, and being eligible, offers himself for reappointment in this capacity, be approved. Please refer to page 14 of the attached annual report for a brief biography.”

5. Ordinary resolution number 4 Re-election of EG Dube as a director “Resolved that the appointment of EG Dube, who retires as


6. Ordinary resolution number 5 Re-election of CE Chimombe-Munyoro as a director “Resolved that the appointment of CE Chimombe-Munyoro,

who retires as a director of the company by rotation in accordance with the company’s Memorandum of Incorporation, and being eligible, offers herself for reappointment in this capacity, be approved. Please refer to page 14 of the attached annual report for a brief biography.”

7. Ordinary resolution number 6 Re-election of PD Naidoo as a director “Resolved that the appointment of PD Naidoo, who retires as


8. Ordinary resolution number 7 Election of audit and risk committee member: section

94(2) of the Companies Act “Resolved that RR Emslie be elected as a member and

chairperson of the audit and risk committee, with immediate effect, in terms of section 94(2) of the Companies Act.”


94(2) of the Companies Act “Resolved that JR Macey be elected as a member of the

audit and risk committee, with immediate effect, in terms of section 94(2) of the Companies Act.”


94(2) of the Companies Act “Resolved that KN Vundla be elected as a member of the

audit and risk committee, with immediate effect, in terms of section 94(2) of the Companies Act.”

11. Ordinary resolution number 10 Appointment of auditor in terms of sections 61(8)(c) and

90 of the Companies Act “Resolved that DD Thompson of KPMG Inc. be and are

hereby re-appointed as auditor of the company (for its financial year to end on 30 June 2014) and that their appointment be of full force and effect until the conclusion of the company’s next annual general meeting.”

12. Ordinary resolution number 11 General authority to directors to allot and issue authorised

but unissued linked units “Resolved that the authorised but unissued linked units of

the company be and are hereby placed under the control of the directors of the company until the next annual general meeting, who are authorised to allot or issue any such linked units at their discretion, subject at all times to the provisions of the Companies Act, the company’s MOI and the Listings Requirements, provided that each ordinary share of R0,0025 each be issued together with an unsecured variable-rate unsubordinated debenture of R2,4975 each as a linked unit and provided further that the number of linked units issued at any time may not exceed 10% of the total number of linked units in issue determined immediately prior to each issue of new linked units.”

13. Ordinary resolution number 12 Signature of documentation “Resolved that, the directors be and are hereby authorised

to do such things and sign any documents and to take any steps as may be necessary or expedient to give effect to and implement all resolutions passed at this meeting.”

14. Special resolution number 1 Remuneration payable to non-executive directors “It is hereby resolved as a special resolution in terms of section

66(9) of the Companies Act as read with section 65(11)(h) and subject to the provisions of the company’s Memorandum of Incorporation and the JSE Listings Requirements in force from time to time, that the company be and it is hereby authorised to pay remuneration to its non-executive directors for their service as directors and that the board of directors of the company be and it is hereby authorised to determine the basis for such compensation as follows:

Chairman of the board R243 800 per annum Chairman of the audit and risk committee R212 000 per annum Chairman of the investment committee R212 000 per annum Chairman of the nominations committee R212 000 per annum Other non-executive directors R180 200 per annum

In respect of the period between 1 July 2013 and 27 September 2013, the company approves the payment to its non-executive directors of remuneration totalling R355 100 for their services as directors over the aforementioned period.”


NOTICE OF ANNUAL GENERAL MEETINGcontinued

Special resolution number 1 is proposed in order to comply with the requirements of the Companies Act. The aforementioned rates have been proposed in order to ensure that the remuneration of non-executive directors remains competitive in order to enable the company to attract persons of the calibre, capability, skill and experience required in order to make a meaningful contribution to the company. The remuneration proposed is considered to be fair and reasonable and in the best interests of the company.

15. Special resolution number 2 Repurchase of company linked units “It is hereby resolved as a special resolution that subject to the

company’s Memorandum of Incorporation, the Companies Act and the JSE Listings Requirements in force from time to time, the company and/or a subsidiary of the company be and it is hereby authorised to repurchase or purchase, as the case may be, linked units issued by the company from any person, upon such terms and conditions and in such manner as the directors of the company or the subsidiary may from time to time determine, including that such securities be repurchased or purchased from share premium or capital redemption reserve fund, and subject further to the restriction that the repurchase or purchase, as the case may be, by the company and/or any of its subsidiaries, of linked units in the company of any class under this authority shall comply with following:

n That the repurchase of securities be effected through the order book operated by the JSE trading system and be done without any prior understanding or arrangement;

n Between the company and the counter party;

n That this general authority be valid only until the next annual general meeting or the variation or revocation of such general authority by special resolution at any subsequent general meeting of the company, provided that it shall not extend beyond 15 months from the date of this resolution;

n That an announcement be made giving such details as may be required in terms of the JSE Listings Requirements when the company has cumulatively repurchased 3% of the initial number (the number of that class of security in issue at the time that the general authority is granted) of the relevant class of securities and for each 3% in aggregate of the initial number of that class acquired thereafter, in compliance with JSE Listings Requirements;

n At any point in time the company may only appoint one agent to effect any repurchase on the company’s behalf;

n Repurchases may not be made by the company and/or its subsidiaries during a prohibited period as defined in the JSE Listings Requirements unless a repurchase programme is in place where the dates and quantities of securities to be traded during the relevant period are fixed and full details of the programme have been disclosed in

an announcement over SENS prior to the commencement of the prohibited period;

n The repurchase of linked units shall not, in the aggregate, in any one financial year, exceed 20% of the company’s issued capital and a maximum of 10% in aggregate of the company’s issued capital may be repurchased in terms of the Act, by the subsidiaries of the company, at the time this authority is given;

n The repurchase of securities may not be made at a price greater than 10% above the weighted average of the market value of the securities as determined over the five business days immediately preceding the date on which the transaction is effected;

n The company may not enter the market to proceed with the repurchase of its securities until the company’s sponsor has confirmed the adequacy of the company’s working capital for the purpose of undertaking a repurchase of securities in writing to the JSE; and

n The board of directors must pass a resolution that they authorised the repurchase and that the company passed the solvency and liquidity test as set out in section 4 of the Companies Act, 71 of 2008, as amended, and that since the test was done there have been no material changes to the financial position of the group.”

For the purpose of considering special resolution number 2 and in compliance with JSE Listings Requirements, the information listed below has been included in the company’s annual financial statement, of which this notice of annual general meeting forms part, at the places indicated below:

n Directors and management – refer to page 14 of the integrated annual report;

n Major linked unitholders – refer to page 88 of the integrated annual report;

n Directors’ interests and securities – refer to page 38 of the integrated annual report; and

n Share capital of the company – refer to page 64 of the integrated annual report.

Directors’ report The directors, whose names are set out on page 14 of the

integrated annual report, collectively and individually accept full responsibility for the accuracy of the information contained in this special resolution and so 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 in this regard.

Litigation statement The directors are not aware of any legal or arbitration

proceedings (including any such proceedings that are pending or threatened of which the company is aware) which 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.


Material change At the date of completing this notice, there have been no

material changes in the financial or trading position of the company and its subsidiaries that have occurred since 30 June 2013.

At the present time the directors have no specific intention with regard to the utilisation of this authority, which will be used only if circumstances are appropriate.

The directors are of the opinion that, after considering the effect of the maximum repurchase permitted and for a period of 12 months after the date of this notice:

n The group and company will be able, in the ordinary course of business, to pay its debts;

n The assets of the group and company will be in excess of the liabilities of the group and company, the assets and liabilities being recognised and measured in accordance with the accounting policies used in the latest annual financial statements;

n The ordinary share capital and reserves of the group and company are adequate for ordinary business purposes;

n The working capital of the group and company will be adequate for ordinary business purposes; and

n The directors have passed a resolution authorising the repurchase, resolving that the group and company has satisfied the solvency and liquidity test as defined in the Companies Act and resolving that since the solvency and liquidity test had been applied, there have been no material changes to the financial position of the group and company.

16. Special resolution number 3 Financial assistance “Resolved that subject to the company’s Memorandum

of Incorporation and subject to the requirements of the Companies Act and the JSE Listings Requirements in force from time to time, it is hereby resolved as a special resolution that the board of directors of the company may authorise the company to provide direct or indirect financial assistance by way of loan, guarantee, the provision of security or otherwise to:

n any of its present or future subsidiaries and/or any other company or corporation that is or becomes related or inter-related to the company for any purpose or in connection with any matter, including but not limited to, the subscription of any option, or any securities issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company; and

n any of its present or future directors or prescribed officers (or any person related to any of them or to any company or corporation related or inter-related to any of them) or to any other person who is a participant in any of the company’s share or other employee incentive schemes, for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by

the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company, where such financial assistance is provided in terms of any such scheme that does not satisfy the requirements of section 97 of the Companies Act, such authority to endure until the next annual general meeting of the company.”

17. Voting procedures and electronic participation 17.1 On a show of hands, every unitholder present in person or

represented by proxy and entitled to vote shall have only one vote irrespective of the number of linked units such unitholder holds. On a poll, every unitholder present in person or represented by proxy and entitled to vote shall be entitled to one vote for every share held or represented by that unitholder. On a poll taken at any such meeting the unitholder entitled to more than one vote need not, if he votes, use all of his votes, or cast all the votes he uses in the same way. Unitholders who have dematerialised their linked units, other than those linked unitholders who have dematerialised their linked units with “own name” registration, should contact their CSDP or broker in the manner and time stipulated in the agreement entered into between them and their CSDP or broker:

17.1.1 to furnish them with their voting instructions; or

17.1.2 in the event that they wish to attend the general meeting, to obtain the necessary letter of representation to do so.

17.2 Unitholders wishing to participate electronically in the AGM are required to deliver written notice to the company at 151 Katherine Street, Sandown, Sandton (marked for the attention of the company secretary) by no later than 10:00 on 25 September 2013 that they wish to participate via electronic communication at the AGM (the Electronic Notice). In order for the Electronic Notice to be valid, it must contain: (a) if the unitholder is an individual, a certified copy of his identity document and/or passport; (b) if the unitholder is not an individual, a certified copy of a resolution by the relevant entity and a certified copy of the identity documents and/or passports of the persons who passed the relevant resolution. The relevant resolution must set out who from the relevant entity is authorised to represent the relevant entity at the AGM via electronic communication; (c) a valid email address and/or facsimile number (the Contact Address/Number); and (d) if the unitholder wishes to vote via electronic communication, set out that the unitholder wishes to vote via electronic communication. By no later than 10:00 on 25 September 2013, the company shall use its reasonable endeavours to notify a unitholder at its contact address/number who has delivered a valid electronic notice of the relevant details through which the unitholder can participate via electronic participation.

18. Threshold for resolution approval18.1 For all ordinary resolutions to be approved by linked unitholders,

each resolution must be supported by more than 50% of the voting rights exercised on the resolution concerned.

18.2 For special resolutions numbers 1, 2 and 3 to be approved by linked unitholders, each resolution must be supported by


NOTICE OF ANNUAL GENERAL MEETINGcontinued

at least 75% of the voting rights exercised on the resolution concerned.

19. Proxies 19.1 A unitholder entitled to attend and vote at the meeting is

entitled to appoint one or more proxies to attend, participate in and vote at the meeting in the place of the unitholder. A proxy need not also be a unitholder of the company.

19.2 Unitholders who have not dematerialised their linked units or who have dematerialised their linked units with “own name” registration, and who are entitled to attend and vote at the AGM, are entitled to appoint one or more proxies to attend, speak and vote in their stead. A proxy need not be a unitholder and shall be entitled to vote on a show of hands or poll. It is requested that proxy forms be forwarded so as to reach the transfer secretaries no later than 11:00 on 25 September 2013. If linked unitholders who have not dematerialised their linked units or who have dematerialised their linked units with “own name” registration and who are entitled to attend and vote at the AGM do not deliver proxy forms to the transfer secretaries by 11:00 on 25 September 2013, such linked unitholders will nevertheless at any time prior to the commencement of the voting on the resolutions at the AGM be entitled to lodge the form of proxy in respect of the AGM, in accordance with the instructions therein with the chairperson of the AGM. Proxy forms must only be completed by linked unitholders who have not dematerialised their linked units or who have dematerialised their linked units with “own name” registration.

By order of the board

RF Kane Chief executive officer

16 August 2013

Business address and registered office Vunani House Vunani Office Park 151 Katherine Street Sandton

South African transfer secretaries Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07) 70 Marshall Street, Johannesburg 2001 PO Box 61051, Marshalltown 2107 Fax number +27 11 688 5238

Unitholder communication Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07) 70 Marshall Street, Johannesburg 2001PO Box 61051, Marshalltown 2107Fax number +27 11 688 5238


EXPLANATORY NOTES TO RESOLUTIONSproposed at the annual general meeting of the company

1. ORDINARY RESOLUTION NUMBERS 7 TO 9

Election of audit and risk committee 1.1 In terms of the Companies Act, the audit and risk committee is

no longer a committee of the board but a committee elected by linked unitholders at each AGM.

1.2 In terms of the regulations promulgated in terms of the Companies Act, at least one third of the members of the company’s audit committee at any particular time must have academic qualifications, or experience, in economics, law, corporate governance, finance, accounting, commerce, industry, public affairs or human resource management. Confirmation is hereby provided of compliance in such regard.

2. ORDINARY RESOLUTION NUMBERS 3 TO 6

Re-election of directors Resolutions 3 to 6 provide for the re-election of retiring directors

in accordance with the Memorandum of Incorporation.

3. ORDINARY RESOLUTION NUMBER 10 Approval of reappointment of external auditors

In compliance with section 90 of the Companies Act, KPMG Inc. is proposed to be reappointed as auditor for the financial year ending 30 June 2013 and until the conclusion of the next annual general meeting.

4. ORDINARY RESOLUTION NUMBER 11 General authority to directors to allot and issue authorised

but unissued linked units

4.1 In terms of article 8 of the company’s Memorandum of Incorporation, read with the JSE Listings Requirements, the linked unitholders of the company may authorise the directors to, inter alia, issue any unissued linked units and/or grant options over them as the directors in their discretion think fit.

4.2 The directors have decided to seek annual renewal of its authority in accordance with best practice. The directors have no current plans to make use of this authority but wish to ensure by having it in place that the company has necessary flexibility in managing the company’s capital resources and to enable the company to take advantage of any business opportunity that may arise in future.

4.3 In terms of the JSE Listings Requirements, when linked units are issued for cash (or the extinction of a liability, obligation or commitment, restraint or settlement of expenses), the linked unitholders have to authorise the issue.

5. ORDINARY RESOLUTION NUMBER 12 Signature of documentation

Directors are authorised to do such things and sign any documents and to take any steps as may be necessary or expedient to give effect to and implement all resolutions passed at this meeting.

6. SPECIAL RESOLUTION NUMBER 1 Remuneration payable to non-executive directors

6.1 In terms of sections 66(8) and 66(9) of the Companies Act, which took effect on 1 May 2011, the remuneration may only be paid to directors for their services as directors in accordance with the special resolution approved by the linked unitholders within the previous two years and if not prohibited in terms of a company’s memorandum of incorporation. In terms of clause 23 of the company’s Memorandum of Incorporation, directors shall be entitled to such remuneration as may be determined by the company in general meeting by an ordinary resolution. Although the company has been advised that, in terms of the transitional provisions of the Companies Act, clause 91 of the Memorandum of Incorporation could possibly prevail in the interim in respect of this apparent conflict between such article and the Companies Act, the board of directors nonetheless wishes to comply with the provisions of the Companies Act and as such the resolution is proposed as a special resolution.

6.2 Special resolution number 1 is required to obtain the approval of the company, in general meeting, of the revised remuneration payable to the non-executive directors for the 12 month period in question. Increases in remuneration are only implemented after formal approval by linked unitholders.

7. SPECIAL RESOLUTION NUMBER 2 General authority for the company and/or a subsidiary of

the company to repurchase or purchase, as the case may be, linked units in the company

7.1 The reason for and effect of this resolution is to grant the company and its subsidiaries a general authority to facilitate the acquisition by the company and/or its subsidiaries of the company’s own linked units. Any decision by the directors, after considering the effect of an acquisition of the company’s issued linked units, to use the general authority to acquire linked units of the company will be taken with regard to the prevailing market conditions and other factors and provided that, after such acquisition, the directors are of the opinion that:

7.1.1 the company and its subsidiaries will be able to pay their debts in the ordinary course of business;

7.1.2 recognised and measured in accordance with the accounting policies used in the latest audited annual financial statements, the assets of the company and its subsidiaries will exceed the liabilities of the company and its subsidiaries;

7.1.3 the share capital and the reserves of the company and its subsidiaries will be adequate for the purposes of the business of the company and its subsidiaries;

7.1.4 the working capital of the company and its subsidiaries will be adequate for the purpose of the company and its subsidiaries, for the period of twelve months after the date of the notice of AGM.

7.2 The directors are of the opinion that it would be in the best interests of the company to provide such general authority and thereby allow the company or any subsidiary of the company to be in a position to repurchase or purchase, as the


EXPLANATORY NOTES TO RESOLUTIONSproposed at the annual general meeting of the companycontinued

case may be, the linked units issued by the company through the order book of the JSE, should the market conditions and price justify such action.

7.3 This general approval shall be valid until the earliest of the next annual general meeting of the company, or the variation or revocation of such general authority by special resolution passed at any subsequent general meeting of the company, provided that the general authority shall not be extended beyond fifteen months from the date of passing the special resolution. The resolution is required to be passed, if voted on by a poll, by not less than 75% of the total votes to which the linked unitholders present in person or by proxy at the meeting are entitled.

8. SPECIAL RESOLUTION NUMBER 3 General authority for the company to provide financial

assistance to its subsidiaries and other related and inter-related companies and corporations and to directors, prescribed officers and other persons participating in share or other employee incentive schemes

8.1 Notwithstanding the title of section 45 of the Companies Act, being “Loans or other Financial Assistance to Directors”, on a proper interpretation, the body of the section may also apply to financial assistance provided by a company to related or inter-related companies, incorporations, including, inter alia, its subsidiaries for any purpose.

8.2 Furthermore, section 44 of the Companies Act may also apply to the financial assistance so provided by a company to related or inter-related companies, in the event that financial assistance is provided for the purpose of, or in connection with, the subscription of any option, or any securities, issued or to be issued by the company or a related or inter-related company, or for the purchase of any securities of the company or a related or inter-related company.

8.3 Both sections 44 and 45 of the Companies Act provide, inter alia, that the particular financial assistance must be provided only pursuant to a special resolution of the linked unitholders, adopted within the previous two years, which approved such assistance either for the specific recipient, or generally for a category of potential recipients, and the specific recipient falls within that category and the board of directors must be satisfied that:

8.3.1 immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test; and

8.3.2 the terms under which financial assistance is proposed to be given are fair and reasonable to the company.

8.4 The company is not precluded from providing financial assistance to its subsidiaries or directors as contemplated in sections 44 and 45 of the Companies Act. The company would like the ability to provide financial assistance, if necessary, also in other circumstances, in accordance with section 45 of the Companies Act. Further, it may be necessary or desirable for

the company to provide financial assistance to related or inter-related companies and corporations to subscribe for options or securities or purchase securities of the company or other companies related or inter-related to it. Under the Companies Act, the company will however require the special resolution referred to above to be adopted. In the circumstances and in order to, inter alia, ensure that the company’s subsidiaries and other related and inter-related companies and corporations have access to financing and/or financial backing from the company (as opposed to banks), it is necessary to obtain the approval of linked unitholders as set out in special resolution number 3.

9. VOTING AND PROXIES 9.1 Every holder of linked units present in person or by proxy at

the meeting, or in the case of a body corporate represented at the meeting, shall be entitled to one vote on a show of hands and on a poll shall be entitled to one vote for every share held.

9.2 A unitholder (including certificated linked unitholders and dematerialised linked unitholders who hold their linked units with “own name” registration) entitled to attend and vote at the meeting may appoint one or more proxies to attend, participate and vote in his/her/its stead. A proxy does not have to be a unitholder of the company. The appointment of a proxy will not preclude the unitholder who appointed that proxy from attending the annual general meeting and participating and voting in person thereat to the exclusion of any such proxy. A proxy form for use at the meeting is attached.

9.3 It is requested that duly completed proxy forms or powers of attorney be lodged at the registered office of the company or with the company’s South African transfer secretary, at Computershare Investor Service Proprietary Limited, 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107) not less than 48 hours before the time appointed for holding the AGM. If linked unitholders who have not dematerialised their linked units or who have dematerialised their linked units with “own name” registration, and who are entitled to attend and vote at the AGM do not deliver forms of proxy to the transfer secretaries by the time referred to as aforesaid, such linked unitholders will nevertheless at any time prior to the commencement of the voting on the resolutions at the AGM be entitled to lodge a form of proxy in respect of the AGM, in accordance with the instructions with the chairperson of the AGM.

9.4 The attention of linked unitholders is directed to the additional notes relating to the form of proxy attached, which notes are set out in the proxy form.

9.5 Dematerialised linked unitholders other than dematerialised linked unitholders who hold their linked units with “own name” registration, who wish to attend the AGM must contact their CSDP or broker who will furnish them with the necessary authority to attend the AGM or they must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between such unitholder and its CSDP or broker.


FORM OF PROXY

VUNANI PROPERTY INVESTMENT FUND LIMITEDApproved as a REIT by the JSEIncorporated in the Republic of South AfricaRegistration number 2005/019302/06JSE code: VPFISIN: ZAE000157459(the company)

To be completed by registered dematerialised linked unitholders with “own name” registration only.

For use in respect of the annual general meeting to be held at the company’s offices, Vunani House, Vunani Office Park, 151 Katherine Street, Sandown, Sandton on Friday, 27 September 2013 at 11:00.

Linked unitholders who have dematerialised their linked units with a CSDP or broker, other than with “own name” registration, must arrange with the CSDP or broker concerned to provide them with the necessary Letter of Representation to attend the general meeting or the linked unitholders concerned must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the unitholder and the CSDP or broker concerned.

I/We (full name in block letters)

of (address)

Telephone (work) Telephone (home)

being the holder(s) of linked units in the company, appoint (see note 1):

or failing him/her,

or failing him/her,

the chairman of the annual general meeting,

as my/our proxy to act on my/our behalf at the general meeting which is to be held for the purpose of considering and, if deemed fit, passing, with or without modification, the ordinary resolutions to be proposed thereat and at any adjournment thereof and to vote for or against the ordinary resolutions or to abstain from voting in respect of the linked units registered in my/our name/s, in accordance with the following instructions (see note 2):

Number of votes(one vote per linked unitholder)

For Against Abstain

ORDINARY RESOLUTION NUMBER 1Confirmation of PM Tau-Sekati as a director

ORDINARY RESOLUTION NUMBER 2 Confirmation of KN Vundla as a director

ORDINARY RESOLUTION NUMBER 3 Re-election of RR Emslie as a director

ORDINARY RESOLUTION NUMBER 4 Re-election of EG Dube as a director

Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable.


FORM OF PROXYcontinued

Number of votes(one vote per linked unitholder)

For Against Abstain

ORDINARY RESOLUTION NUMBER 5 Re-election of CE Chimombe-Munyoro as a director

ORDINARY RESOLUTION NUMBER 6 Re-election of PD Naidoo as a director

ORDINARY RESOLUTION NUMBER 7 Election of audit committee member: section 94(2) of the Companies Act (RR Emslie)

ORDINARY RESOLUTION NUMBER 8 Election of audit committee member: section 94(2) of the Companies Act (JR Macey)

ORDINARY RESOLUTION NUMBER 9Election of audit committee member: section 94(2) of the Companies Act (KN Vundla)

ORDINARY RESOLUTION NUMBER 10 Appointment of auditor in terms of section 61(8)(c) of the Companies Act (KPMG)

ORDINARY RESOLUTION NUMBER 11 General authority to directors to allot and issue authorised but unissued linked units

ORDINARY RESOLUTION NUMBER 12 Signature of documentation

SPECIAL RESOLUTION NUMBER 1 Remuneration payable to non-executive directors

SPECIAL RESOLUTION NUMBER 2 Repurchase of company linked units

SPECIAL RESOLUTION NUMBER 3 Financial assistance

Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable.

Each unitholder is entitled to appoint one or more proxies (who need not be a unitholder of the company) to attend, speak, and on a poll, vote in place of that unitholder at the general meeting.

Signed at on 2013

Signature(s)

Capacity

Please read the notes on the next page.


NOTES TO THE FORM OF PROXY

1. A member may insert the name of a proxy or the names of two alternate proxies of the member’s choice in the space(s) provided, with or without deleting “the chairman of the annual general meeting”. The person whose name stands first on the form of proxy and who is present at the general meeting will be entitled to act as proxy to the exclusion of those whose names follow.

2. A member should insert an “X” in the relevant space according to how he wishes his votes to be cast. However, if a member wishes to cast a vote in respect of a lesser number of linked units than he owns in the company, he should insert the number of linked units held in respect of which he wishes to vote. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the general meeting as he deems fit in respect of all the member’s votes exercisable at the general meeting. A member is not obliged to exercise all of his votes, but the total of the votes cast and abstentions recorded may not exceed the total number of the votes exercisable by the member.

3. The completion and lodging of this form of proxy will not preclude the relevant member from attending the general meeting and speaking and voting in person to the exclusion of any proxy appointed in terms hereof, should such member wish to so do.

4. The chairman of the general meeting may reject or accept any form of proxy, which is completed and/or received, other than in compliance with these notes.

5. Unitholders who have dematerialised their linked units with a CSDP or broker, other than with “own name’ registration, must arrange with the CSDP or broker concerned to provide them with the necessary Letter of Representation to attend the general meeting or the linked unitholders concerned must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the unitholder and the CSDP or broker concerned.

6. Any alteration to this form of proxy, other than the deletion of alternatives, must be signed, not initialled, by the signatory/ies.

7. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity (e.g. on behalf of a company, close corporation, trust, pension fund, deceased estate, etc.) must be attached to this form of proxy, unless previously recorded by the company or waived by the chairman of the general meeting.

8. A minor must be assisted by his/her parent or guardian, unless the relevant documents establishing his/her capacity are produced or have been recorded by the company.

9. Where there are joint holders of linked units:

n Any one holder may sign the form of proxy; and

n The vote of the senior joint holder who tenders a vote, as determined by the order in which the names stand in the company’s register of members, will be accepted.

10. To be valid, the completed forms of proxy must either (a) be lodged so as to reach the transfer secretaries by no later than the Relevant Time; or (b) be lodged with the chairperson of the general meeting prior to the general meeting so as to reach him by no later than immediately prior to the commencement of voting on the ordinary resolutions to be tabled at the general meeting.

11. The proxy appointment is revocable by the linked unitholders giving written notice of the cancellation to the company prior to the general meeting or any adjournment thereof. The revocation of the proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the linked unitholders as of the later of: (i) the date stated in the written notice, if any; or (ii) the date on which the written notice was delivered as aforesaid.

12. If the instrument appointing a proxy or proxies has been delivered to the company, any notice that is required by the Act or the articles to be delivered by the company to linked unitholders must (as long as the proxy appointment remains in effect) be delivered by the company to: (i) the unitholder; or (ii) the proxy or proxies of the unitholder has directed the company to do so, in writing and pay it any reasonable fee charged by the company for doing so.

SUMMARY OF THE RIGHTS ESTABLISHED IN TERMS OF SECTION 58 OF THE COMPANIES ACT, 71 OF 2008 (ACT) For purposes of this summary, “unitholder” shall have the meaning ascribed thereto in the Act 1. At any time, a unitholder of a company is entitled to appoint

an individual, including an individual who is not a unitholder of that company, as a proxy, to participate in, and speak and vote at, a linked unitholders meeting on behalf of the unitholder, or give or withhold written consent on behalf of such unitholder in relation to a decision contemplated in section 60 of the Act.

2. A proxy appointment must be in writing, dated and signed by the relevant unitholder, and such proxy appointment remains valid for one year after the date upon which the proxy was signed, or any longer or shorter period expressly set out in the appointment, unless it is revoked in a manner contemplated in section 58(4)(c) of the Act or expires earlier as contemplated in section 58(8)(d) of the Act.

3. Except to the extent that the Memorandum of Incorporation of a company provides otherwise:

3.1 a unitholder of the relevant company may appoint two or more persons concurrently as proxies, and may appoint more than one proxy to exercise voting rights attached to different securities held by such unitholder;

3.2 a proxy may delegate his authority to act on behalf of a unitholder to another person, subject to any restriction set out in the instrument appointing the proxy; and

I Property Investment Fund integrated annual report 2013P100 I Property Investment Fund integrated annual report 2013P100

NOTES TO THE FORM OF PROXYcontinued

3.3 a copy of the instrument appointing a proxy must be delivered to the relevant company, or to any other person on behalf of the relevant company, before the proxy exercises any rights of the unitholder at a linked unitholders meeting.

4. Irrespective of the form of instrument used to appoint a proxy, the appointment of the proxy is suspended at any time and to the extent that the unitholder who appointed that proxy chooses to act directly and in person in the exercise of any rights as a unitholder of the relevant company.

5. Unless the proxy appointment expressly states otherwise, the appointment of a proxy is revocable. If the appointment of a proxy is revocable, a unitholder may revoke the proxy appointment by cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and the company.

6. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the relevant unitholder as of the later of the date: (a) stated in the revocation instrument, if any; or (b) upon which the revocation instrument is delivered to the proxy and the relevant company as required in section 58(4)(c)(ii) of the Act.

7. If the instrument appointing a proxy or proxies has been delivered to the relevant company, as long as that appointment remains in effect, any notice that is required by the Act or the relevant company’s Memorandum of Incorporation to be delivered by such company to the unitholder, must be delivered by such company to the unitholder, or to the proxy or proxies, if the unitholder has directed the relevant company to do so in writing and paid any reasonable fee charged by the company for doing so.

8. A proxy is entitled to exercise, or abstain from exercising, any voting right of the relevant unitholder without direction, except to the extent that the Memorandum of Incorporation, or the instrument appointing the proxy provide otherwise.

9. If a company issues an invitation to linked unitholders to appoint one or more persons named by such company as a proxy, or supplies a form of instrument for appointing a proxy:

9.1 such invitation must be sent to every unitholder who is entitled to notice of the meeting at which the proxy is intended to be exercised;

9.2 the invitation, or form of instrument supplied by the relevant company, must: (a) bear a reasonably prominent summary of the rights established in section 58 of the Act; (b) contain adequate blank space, immediately preceding the name or names of any person or persons named in it, to enable a unitholder to write in the name and, if so desired, an alternative name of a proxy chosen by such unitholder; and (c) provide adequate space for the unitholder to indicate whether the appointed proxy is to vote in favour or against the applicable resolution/s to be put at the relevant meeting, or is to abstain from voting;

9.3 the company must not require that the proxy appointment be made irrevocable; and

9.4 the proxy appointment remains valid only until the end of the relevant meeting at which it was intended to be used, unless revoked as contemplated in section 58(5) of the Act.

P101 Property Investment Fund integrated annual report 2013 I

VUNANI PROPERTY INVESTMENT FUND LIMITED(formerly Vunani Property Investment Fund Proprietary Limited)Incorporated in the Republic of South AfricaRegistration number: 2005/019302/06JSE code: VPFISIN: ZAE000157459

BUSINESS ADDRESS AND REGISTERED OFFICE Vunani House Vunani Office Park151 Katherine StreetSandton

SOUTH AFRICAN TRANSFER SECRETARIESComputershare Investor Services Proprietary Limited(Registration number: 2004/003647/07)70 Marshall Street, Johannesburg 2001PO Box 61051, Marshalltown 2107Fax number +27 11 688 5238

UNITHOLDER COMMUNICATION Computershare Investor Services Proprietary Limited(Registration number: 2004/003647/07)70 Marshall Street, Johannesburg 2001PO Box 61051, Marshalltown 2107Fax number +27 11 688 5238

DEBENTURE TRUSTEEFluxmans Inc.Registration number: 2000/024775/2111 Bierman AvenueRosebank, Johannesburg 2196Private Bag X41, Saxonwold 2196

AUDITORSKPMG Inc.Registration number: 1999/001543/21Registered Accountants and AuditorsKPMG Crescent, 85 Empire RoadParktown 2193Private Bag 9, Parkview 2122

SPONSORGrindrod Bank LimitedRegistration number: 1994/007994/061st Floor, Building 3North wing, Commerce Square39 Rivonia Road (corner Helling Road)Sandton 2196PO Box 78011, Sandton 2146

COMPANY information

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