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P R O P E R T I E S

L I M I T E D

ANNUAL FINANCIAL STATEMENTS
For the 13 months ended 31 March 2012
CORPORATE INFORMATION	
Registered office

Place of incorporation

Annuity Properties Limited
(Registration number 2011/145...
CONTENTS
	

Page

Corporate information	

1

About this report	

3

Glossary of terms	

4

Directorate	

5

Directors’ res...
ABOUT THIS REPORT
This is the maiden annual report for the Company. Annuity commenced trading on 15 February 2012 when it
...
GLOSSARY OF TERMS
“Annuity “ or “the Company”

Annuity Properties Limited;

“the Board”

the Board of Directors of Annuity...
DETAILS OF ANNUITY’S BOARD OF DIRECTORS
Jabu Moleketi (Non-executive Chairperson)
MSc & PGrad Dip Econ Principles (UOL), A...
of its retail properties and were retained by Brait to source private equity transactions on their behalf. He is
also the ...
DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING
The directors are required in terms of the Companies Act to maintain ade...
CERTIFICATE BY COMPANY SECRETARY
In terms of section 88(2)(e) of the South African Companies Act, No 71 of 2008, I declare...
AUDIT AND RISK COMMITTEE REPORT

FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012

ANNUITY PROPERTIES LIMITED AUDIT AND RISK CO...
5.4	 determined the nature and extent of any non-audit services that the auditor may provide to the
Company;
5.5	 prepared...
11.	 RISK MANAGEMENT
The Audit and Risk Committee is responsible for overseeing the risk management of the Company.
12.	 R...
REPORT OF THE INDEPENDENT AUDITORS TO THE SHAREHOLDERS
REPORT ON THE FINANCIAL STATEMENTS
We have audited the annual finan...
DIRECTORS’ REPORT
The Board has pleasure in submitting the first directors’ report, which forms part of the audited financ...
DIRECTORS’ INTERESTS
The interests of the directors in the linked units of the Company as at 31 March 2012 were as follows...
SCHEDULE OF BOARD MEETINGS ATTENDED
13 March 2012
Executive directors
D Greenberg

P

S Strydom

P

DE Rubenstein

P

Non-...
receipts collected for the provision of management and administration services. In addition, APM is entitled to
a commissi...
STATEMENT OF FINANCIAL POSITION
AT 31 MARCH 2012

Notes

2012
R

February 2011
R

ASSETS
144 000 000

Investment property
...
STATEMENT OF COMPREHENSIVE INCOME

FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012

Notes

Financial
year ended
31 March 2012
...
STATEMENT OF CHANGES IN EQUITY

FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012

Stated capital
R
Balance at 1 March 2011
Issu...
STATEMENT OF CASH FLOWS

FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012

Notes

Year ended
28 February 2011
R

(3 518 396)

N...
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012

The principal accounting policies ap...
a financial instrument as a financial asset, a financial liability or as an equity instrument in accordance
with the subst...
1.3	 Investment properties
Investment properties are properties held for the purpose of earning rental income and for capi...
1.6	 Taxation
Taxation for the year comprises current and deferred taxation.
The charge for current tax is based on the re...
1.11	 Standards and interpretations applicable to the Company not yet effective
The Company has chosen not to early adopt ...
Effective for
annual periods
beginning
on or after

Standard

Details of amendment

IFRS 12: Disclosure of
Interests in Ot...
Financial
year ended
31 March 2012
R
2.

Year ended
28 February 2011
R

INVESTMENT PROPERTY
Net carrying value
Cost

144 0...
Financial
year ended
31 March 2012
R
4.

Year ended
28 February 2011
R

CASH AND CASH EQUIVALENTS
For purposes of the cash...
Financial
year ended
31 March 2012
R
7.

Year ended
28 February 2011
R

SECURED FINANCIAL LIABILITIES
Rand Merchant Bank
(...
Financial
year ended
31 March 2012
R
9.

Year ended
28 February 2011
R

DEFERRED TAXATION
Arising on the acquisition and r...
Financial
year ended
31 March 2012
R

Year ended
28 February 2011
R

14. TAXATION
Deferred

1 021 688

–

1 796 406

–

Re...
Financial
year ended
31 March 2012
R

Year ended
28 February 2011
R

16. EARNINGS, HEADLINE EARNINGS AND
ATTRIBUTABLE LOSS...
Financial
year ended
31 March 2012
R

Year ended
28 February 2011
R

18. BUSINESS COMBINATION
The Company acquired a 100% ...
Financial
year ended
31 March 2012
R

Year ended
28 February 2011
R

21. RELATED PARTIES AND RELATED PARTY
TRANSACTIONS
Pa...
Financial
year ended
31 March 2012
R

Year ended
28 February 2011
R

21. RELATED PARTIES AND RELATED PARTY
TRANSACTIONS (c...
22.	 FINANCIAL RISK MANAGEMENT
The Company’s financial instruments consist mainly of deposits with banks, interest-bearing...
Less than
one year
R

One to
five years
R

More than
five years
R

Total
R

Financial liabilities
Debentures

–

–

4 990
...
Commercial/
Western Cape
R

Total
property
portfolio
R

143 886 213

143 886 213

–

143 886 213

Straight-line rental adj...
P R O P E R T I E S

L I M I T E D

ANNUITY PROPERTIES LIMITED

(formerly Niqsha Beleggings CC)
(Incorporated in the Repub...
unit and provided further that the number of shares issued at any time may not exceed 20% of the
total number of shares in...
and further;
that for the period 1 April 2013 until the next Annual General Meeting of the Company to be
held in  2013  th...
with the instructions it contains and returning it to Link Market Services South Africa (Pty) Limited,
Thirteenth Floor, R...
P R O P E R T I E S

L I M I T E D

ANNUITY PROPERTIES LIMITED

(formerly Niqsha Beleggings CC)
(Incorporated in the Repub...
Annuity Properties Ltd FY 2012 results
Annuity Properties Ltd FY 2012 results
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Transcript of "Annuity Properties Ltd FY 2012 results"

  1. 1. P R O P E R T I E S L I M I T E D ANNUAL FINANCIAL STATEMENTS For the 13 months ended 31 March 2012
  2. 2. CORPORATE INFORMATION Registered office Place of incorporation Annuity Properties Limited (Registration number 2011/145994/06) Boundary Place 18 Rivonia Road Illovo Sandton, 2196 (PO Box 55112, Northlands, 2116) Republic of South Africa Company secretary Bankers Mr Whitney Green Fellow of the Institute of Chartered Secretaries 21 West Street Houghton, 2041 (PO Box 260362, Excom, 2023) Standard Bank Limited (Registration number 1962/000738/06) 177 Dyer Street, Hillcrest Office Park Falcon Place, 1st Floor, Hillcrest (PO Box 12396, Hatfield, 0028) Transfer secretaries Link Market Services South Africa Proprietary Limited (Registration number 2000/007239/07) 13th Floor, Rennie House 19 Ameshoff Street Braamfontein, 2017 (PO Box 4844, Johannesburg, 2000) Independent auditors PKF (Jhb) Inc Chartered Accountants (SA) (Registration number 1994/001166/21) 42 Wierda Road West Wierda Valley Sandton, 2196 (Private Bag X10046, Sandton, 2146) Date of conversion to a public company 12 December 2011 Nedbank Limited (Registration number 1951/000009/06) Oxford Road, Illovo (PO Box 1144, Johannesburg, 2000) Debenture trustee Ironwood Trustees Proprietary Limited (Registration number 2005/012343/07) 15 Rodger Street (corner Twist Street) Rosendal Cape Town, 7530 (PO Box 4898, Tygervalley, Cape Town, 7536) 1
  3. 3. CONTENTS Page Corporate information 1 About this report 3 Glossary of terms 4 Directorate 5 Directors’ responsibility and approval 7 Certificate by Company Secretary 8 Audit and Risk Committee report 9 Independent auditors’ report 12 Directors’ report 13 Statement of financial position 17 Statement of comprehensive income 18 Statement of changes in equity 19 Statement of cash flows 20 Notes to the annual financial statements 21 Notice of annual general meeting of shareholders 39 Form of proxy 2 Attached
  4. 4. ABOUT THIS REPORT This is the maiden annual report for the Company. Annuity commenced trading on 15 February 2012 when it raised R51 million in the form of investor loans and R89 million in third party mortgage finance, which enabled the Company to, inter alia, pay the purchase consideration for its first letting enterprise acquisition amounting to R136 million. The letting enterprise, known as the Woolworths Call Centre was registered in Annuity’s name on 23 March 2012, resulting in Annuity earning rental income and incurring property expenses for the nine days from 23 March 2012 to 31 March 2012. Annuity listed on the “Real Estate – Real Estate Holdings and Development” sector of the JSE on 4 May 2012 and took transfer of two further properties, the Sasfin Head Office Building and the Oakfields Shopping Centre on this date. The audited results for the financial year ended 31 March 2012 reflect the results of the initial pre-listing fundraising and for the nine-day period from 23 March 2012, the date on which Annuity acquired the Woolworths Call Centre. This annual report has been prepared so as to comply with the Companies Act and JSE Listings Requirements and should be read in conjunction with the Company’s pre-listing statement dated 25 April 2012. The results are not considered by the Annuity Board to be an appropriate reflection of Annuity’s current profitability and financial position given that these results include only one of its properties, being the Woolworths Call Centre as set out above, for a very limited period of only nine days and will therefore be of limited value to unitholders in assessing the financial position and results of the Company. Unitholders are referred to Annuity’s PLS, which can be obtained from the Company’s registered office or on its website at www.annuityproperties.co.za, which provides more appropriate and relevant financial and other information on the Company and its property portfolio. The PLS also includes, inter alia, pro forma financial information showing the results and financial position of Annuity based on the Woolworths Call Centre transferring into Annuity’s name pre-listing and the Sasfin Head Office Building and Oakfields Shopping Centre transferring into Annuity’s name on the date of listing, which is considered far more relevant for Annuity unitholders. Unitholders are referred to Annexure 17 of the PLS which contains Annuity’s corporate governance statement and details its level of compliance with the King III Report. Annuity is still in the process of integrating the complete range of sustainability objectives into its business model. An integrated report has therefore not been produced for the nine-day period but is intended for the year ahead. Details of the Company’s share incentive scheme, which came into operation on 17 April 2012, are provided in Annexure 14 of the PLS. 3
  5. 5. GLOSSARY OF TERMS “Annuity “ or “the Company” Annuity Properties Limited; “the Board” the Board of Directors of Annuity Properties Limited; “ the Companies Act” Companies Act No 71 of 2008, as amended; “the financial year” the 13 months ended 31 March 2012; “GLA” gross lettable area; “JSE” JSE Limited; “King III Report” King Report on Corporate Governance for South Africa 2009; “pre-listing statement” or “PLS” pre-listing statement published on 25 April 2012; “unitholder” linked unitholder; and “The Woolworths Call Centre” Woolworths Financial Services Centre Property, Observatory, Cape Town, Western Cape, also known as the Old Match Factory; 4
  6. 6. DETAILS OF ANNUITY’S BOARD OF DIRECTORS Jabu Moleketi (Non-executive Chairperson) MSc & PGrad Dip Econ Principles (UOL), AMP (HBS) Jabu was Deputy Minister of Finance in South Africa from 2004 to 2008, during which tenure he also served as: (i) Chairperson of the Public Investment Corporation Limited; (ii) Chairperson of Harith Fund Management Company, which invests in infrastructure projects on the African continent (current appointment); (iii) a member of the 2010 FIFA Local Organising Committee (LOC) Board and of the Executive Committee of the LOC Board and Chairperson of the Finance and Procurement Committee of the LOC Board; (iv) the South African Government representative in the annual meeting of the Commonwealth Finance Ministers meetings and the South African Customs Union ministerial meetings; and (v) the alternative governor of the IMF representing South Africa. He was Gauteng Provincial MEC of Finance and Economic Affairs from 1994 to 2004, during which time he was the founding member of Blue IQ which included the Gautrain project. He was responsible for setting up Gauteng Shared Services from concept to actual operation. He was a member of the National Executive Committee of the ANC from 1997 to 2007. Derek Greenberg (Joint Chief Executive Officer) BSc (Eng), MBA, BCom (Acc), Valuer Derek has more than 40 years of experience in the property industry including property investment, development, project management, management, valuation, sales and leasing. Together with Lionel Levinsohn and Martin Ettin, Derek was one of the founders and Joint Chief Executive Officers of Primegro Properties Limited which listed on the JSE in October 1999 with a portfolio value of R600 million and later merged with Growthpoint Properties Limited in 2003. At the time of the merger, Primegro Properties Limited had achieved a fund size of R2,2 billion. Following the merger, Derek was appointed an executive director of Growthpoint Properties Limited. He later left this company in 2005 to form CBS Properties Limited which listed on the JSE with a portfolio value of R1,1 billion and which was subsequently sold to the Public Investment Corporation Limited at a portfolio value of R2,3 billion. Panico Theocharides (Joint Chief Executive Officer) BCom (Hons), CA(SA) Panico has more than 13 years of experience in investment banking, commencing in 1999 when he joined the corporate finance team at Anglo American Corporation of South Africa, following which he moved to Investec Corporate Finance where he became a senior advisor. He later founded Capital Hill Corporate Finance, an independent corporate finance boutique which was sold to Sasfin in 2010. Panico headed up Sasfin Corporate Finance and was previously a member of Sasfin’s Executive Committee. Panico has extensive experience in all aspects of dealmaking, structuring, negotiation and corporate finance, having been involved in more than 100 transactions, including, inter alia, the reverse listing of the Mines Pension Fund properties into Growthpoint Properties Limited, the merger between Growthpoint Properties Limited and Primegro Properties Limited, the listing of Vukile Property Fund Limited on the JSE and numerous other acquisitions by Growthpoint Properties Limited and Metboard Properties Limited. Schalk Strydom (Chief Financial Officer and Financial Director) BCom (Hons), CA(SA), Registered Auditor SA, Certificate in Forensic Accounting and Capital Gains Tax Schalk completed his articles with Fisher Hoffman Stride in Johannesburg and qualified as a CA(SA). During this time he was the auditor in charge of the audit of a property unit trust fund. He subsequently joined Strydom and Company, a specialist forensic accounting and litigation support practice. The partnership was incorporated into Strydoms Incorporated of which Schalk was the sole director and shareholder. Schalk has acted as an expert witness in arbitration and High Court proceedings on various accounting and business valuation matters as well as damages claims. Schalk has advised many clients over the years on mergers and acquisitions, restructuring and property acquisitions. Daniel Rubenstein (Executive director) BCom (Acc) Hons, CA(SA) Daniel completed his articles at PKF in Johannesburg and qualified as a CA(SA). Daniel is well networked in the industry which has resulted in his ability to source attractive property investment opportunities and raise acquisition finance, both debt and equity. Daniel established a joint venture with Nandos for the development 5
  7. 7. of its retail properties and were retained by Brait to source private equity transactions on their behalf. He is also the co-founder of Etana Financial Products, a niche financial guarantee business. Martin Ettin (Non-executive director) RA Law, LLB Martin was one of the co-founders of Primegro Properties Limited and served as an executive director of Growthpoint Properties Limited after the merger between Primegro Properties Limited and Growthpoint Properties Limited. Together with Derek Greenberg, Martin left Growthpoint Properties Limited in 2005 to form CBS Properties Limited. Prior to founding Primegro Properties Limited, Martin was the managing director of Tomkor Properties Limited and also served as a director of Premium Properties Limited, listed on the JSE. He has experience in property development in the United States of America where he served as Vice-president of Applied DNA Systems Inc, a NASDAQ quoted Company. Prior to his property experience, Martin served as an attorney in South Africa for 17 years. Eugene Loubser (Independent non-executive director) Eugene is the former Managing Director of Fedsure Properties Proprietary Limited. He served the Fedsure Group for 28 years of which 25 years were devoted full-time to their property investment interests. Eugene was previously a director of Primegro Properties Limited and served on the Property Management, Risk Management, and Remuneration Committees. He was also a director of CBS Properties Limited where he served on the Property and Risk Management Committees. Anthony Chait (Independent non-executive director) BAcc (Wits), CA(SA), HDip Tax Law (Wits), HDip Int Tax (UJ) Anthony qualified as a Chartered Accountant in 1983. He was a tax partner of Fisher Hoffman Stride, now known as PKF (Jhb) Inc, until September 1999. He then joined the listed financial services group Brait as a director in its multi-disciplinary advisory unit where he was responsible for the taxation and exchange control components of that business. He is currently the CEO of Zeridium Proprietary Limited, which he founded in 2003 which is a specialist tax and exchange control advisory consultancy. Sarah Williams (Independent non-executive director) BCom (Hons), CA(SA) Sarah completed her articles with Grant Thornton in Johannesburg and qualified as a CA(SA) in 2003. She joined Grant Thornton’s corporate finance division in 2003 where she gained invaluable experience in transaction services. Sarah joined Capital Hill in 2005, Sasfin Corporate Finance in 2010 and Forbes and Manhattan Coal Corp., as Vice-president of Finance, in 2012. She has extensive experience in Company listings, mergers and acquisitions, disposals, BEE, IPO’s debt and equity capital raisings, structuring and tax optimisation. Sarah is a JSE Approved Executive and has advised on a broad range of regulatory compliance matters including, inter alia, requirements imposed by the JSE, TRP, SARB and Companies Act. Tyrone Soondarjee (Non-executive director) BCompt (Hons), CA(SA) Tyrone was appointed as Sasfin’s Group Chief Financial Officer in 2007 and was subsequently appointed as Group financial director in 2010. Tyrone serves on the boards of various companies within the Sasfin Group, and is additionally a member of the Directors’ Strategy and Review Committee, and chairman of Premier Freight. Prior to fulfilling the above roles, Tyrone held numerous executive roles in the Deloitte & Touché group and served as the financial director for TNBS Mutual Bank. Tyrone is a qualified Chartered Accountant and holds a BCompt Honours degree from Unisa. He has a 30-year career in the professional services and banking industries. Roland Sassoon (Alternate director to Tyrone Soondarjee) Chief Executive Officer of Sasfin Bank Limited Roland was appointed as Chief Executive Officer of the Sasfin Group in 1979 and serves on the boards of various companies within the Sasfin Group. He is additionally a member of the Sasfin-MDM Private Equity Fund 1 Audit, Directors’ Strategy and Review, Group Risk and Capital Management, Asset and Liability, Transformation, Credit and Investment Review, and Information Technology Committees of Sasfin. In fulfilling his role, Roland also has direct responsibility for the Business Banking and the Treasury divisions, as well as the Freight Services unit and the Compliance and Internal Audit departments. Prior to fulfilling the above roles, Roland had 10 years experience with factoring, leasing and export shipping. 6
  8. 8. DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING The directors are required in terms of the Companies Act to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the Company as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements. The annual financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board of Directors are setting standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Company and all employees are required to maintain the highest ethical standards in ensuring the Company’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Company is on identifying, assessing, managing and monitoring all known forms of risk across the Company. While operating risk cannot be fully eliminated, the Company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The directors have reviewed the Company’s cash flow forecast for the year to 31 March 2013 and, in the light of this review and the current financial position, they are satisfied that the Company has or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently auditing and reporting on the Company’s annual financial statements. The annual financial statements have been examined by the Company’s external auditors and their report is presented on page 12. The annual financial statements set out on pages 13 to 38 which have been prepared on the going concern basis, were approved by the Board on 13 July 2012 and were signed by: PJ Moleketi Chairman 13 July 2012 P Theocharides Joint Chief Executive Officer 13 July 2012 7
  9. 9. CERTIFICATE BY COMPANY SECRETARY In terms of section 88(2)(e) of the South African Companies Act, No 71 of 2008, I declare that to the best of my knowledge, for the year ended 31 March 2012, Annuity Properties Limited has lodged with the Companies and Intellectual Property Commission all such returns as are required of a public company in terms of the Act and that such returns are true, correct and up to date. _____________________ Whitney Thomas Green Company Secretary 13 July 2012 8
  10. 10. AUDIT AND RISK COMMITTEE REPORT FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012 ANNUITY PROPERTIES LIMITED AUDIT AND RISK COMMITTEE REPORT The information below constitutes the report of the Audit and Risk Committee in respect of the financial year ended 31 March 2012. The report has been presented as required in terms of the new Companies Act, 71 of 2008, as amended. 1. AUDIT AND RISK COMMITTEE TERMS OF REFERENCE The Audit and Risk Committee has adopted formal terms of reference. The terms of reference are reviewed annually. The Committee has conducted its affairs in compliance with these terms of reference and has discharged its responsibilities contained therein. 2. COMPOSITION AND MEETINGS The Audit and Risk Committee comprises three independent non-executive directors; Anthony Chait (committee chairperson), Eugene Loubser and Sarah Williams. A short curriculum vitae for each of these directors has been set out on page 6 of the annual report demonstrating their suitable and relevant skills and experience to fulfil their duties. The Committee meets at least three times per year and special meetings are convened as required. The external auditors and executive management are invited to attend every meeting. 3. AUDIT AND RISK COMMITTEE MEMBERS AND ATTENDANCE AT MEETINGS The Audit and Risk Committee is constituted as a statutory committee and has an independent role with accountability to both the Board and unitholders. In compliance with the recommendations of the King III Report, the Committee consists of three independent, non-executive directors selected by the Board on the recommendation of the Remuneration and Nomination Committee. The Board elects the chairperson of the Committee. The Joint Chief Executives, Financial Director, Company Secretary and representatives of the external auditors attend meetings by invitation. From time-to-time other executives of the Company attend meetings of the Audit and Risk Committee as requested. The Committee has unrestricted access to the external auditors. The chairperson of the Committee provides the Board with a verbal report of the Committee’s activities at each Board meeting and represents the Audit and Risk Committee at the annual general meeting each year. The Company Secretary is also the secretary of the Committee. 4. ROLES AND RESPONSIBILITIES The Audit and Risk Committee has an independent role with accountability to both the Board and unitholders. The Committee does not assume the functions of management, which remain the responsibility of the executive directors, officers and other senior members of management. The Committee is, inter alia, responsible for assisting the Board in discharging its duties in respect of the safeguarding of assets, accounting systems and practices, internal control processes and the preparation of accurate financial statements. 5. STATUTORY DUTIES In the conduct of its duties, the Audit and Risk Committee has performed the following statutory duties: 5.1 nominated and recommended the appointment for the ensuing year of the external auditor of the Company who is a registered auditor and who, in the opinion of the Committee, is independent of the Company; 5.2 determined the fees to be paid to the auditor and the auditor’s terms of engagement; 5.3 ensured that the appointment of the auditor complies with the Companies Act, 71 of 2008, as amended, and any other legislation relating to the appointment of the auditor; 9
  11. 11. 5.4 determined the nature and extent of any non-audit services that the auditor may provide to the Company; 5.5 prepared a report which has been included in the annual financial statements; 5.6 received and dealt with any concerns relating to the accounting practices of the Company, the content or auditing of the Company’s annual financial statements, the internal financial controls of the Company or any related matter; and 5.7 made submissions to the Board on any matter concerning the Company’s accounting policies, financial control, records and reporting. 6. EXTERNAL AUDITOR The Audit and Risk Committee has satisfied itself that the external auditor was independent of the Company, which includes consideration of compliance with criteria relating to the independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors. Requisite assurance was sought and provided by the auditor that internal governance processes within the audit firm support and demonstrate its claim to independence. The Committee, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted audit fees for the financial year ended 31 March 2012. The external auditors are invited to and attend all Audit and Risk Committee meetings and are required to meet independently with the Committee at least annually. Findings by the external auditors arising from their annual statutory audit are tabled and presented at an Audit and Risk Committee meeting following the audit. The Committee endorses action plans for management to mitigate noted concerns. The external auditor has expressed an unqualified opinion on the annual financial statements for the year ended 31 March 2012. The Committee has nominated, for election at the annual general meeting, PKF (Jhb) Inc. As the external audit firm and Mr GM Chaitowitz as the designated auditor responsible for performing the functions of auditor, for the 2013 financial year. The Audit and Risk Committee has satisfied itself that the audit firm and designated auditors are accredited as such on the JSE list of auditors and their advisers. 7. EXPERTISE AND EXPERIENCE OF FINANCIAL DIRECTOR AND THE FINANCE FUNCTION The Audit and Risk Committee has considered and is satisfied with the expertise and experience of the Financial Director. Furthermore, the Committee has considered, and has satisfied itself of, the appropriateness of the expertise and adequacy of resources of the finance function and experience of the senior members of management responsible for the finance function. 8. ANNUAL FINANCIAL STATEMENTS The Audit and Risk Committee assists the Board with all financial reporting and reviews the annual financial statements as well as the preliminary results announcements and interim financial information. The Committee has reviewed the annual financial statements of the Company and is satisfied that they comply with International Financial Reporting Standards (“IFRS”). 9. GOING CONCERN The Audit and Risk Committee reviewed a documented assessment by management of the going concern premise of the Company before concluding to the Board that the Company will be a going concern in the foreseeable future. 10. DUTIES ASSIGNED BY THE BOARD The duties and responsibilities of the members of the Committee are set out in the Audit and Risk Committee terms of reference. The Audit and Risk Committee fulfils an overseeing role regarding the Company’s integrated report and the reporting process, including the system of internal financial control. The Committee is satisfied that it has complied with its legal, regulatory and other responsibilities. 10
  12. 12. 11. RISK MANAGEMENT The Audit and Risk Committee is responsible for overseeing the risk management of the Company. 12. RECOMMENDATION OF THE ANNUAL REPORT FOR APPROVAL BY THE BOARD The Audit and Risk Committee has, at its meeting held on 25 June 2012, reviewed and recommended the annual report for approval by the Board of Directors. _____________________________ AM Chait Chairperson of the Audit and Risk Committee 13 July 2012 11
  13. 13. REPORT OF THE INDEPENDENT AUDITORS TO THE SHAREHOLDERS REPORT ON THE FINANCIAL STATEMENTS We have audited the annual financial statements of Annuity Properties Limited, which comprises the directors’ report, the statement of financial position as at 31 March 2012, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 13 to 38. DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The 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. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. AUDITORS’ 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 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 auditors’ 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 the directors, 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, the annual financial statements present fairly, in all material respects, the financial position of Annuity Properties Limited as of 31 March 2012, and of its financial performance and its cash flows for the financial year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act in South Africa. Chartered Accountants (S.A.) Registered Auditors Registration number 1994/001166/21 Per: GM Chaitowitz Sandton 13 July 2012 12
  14. 14. DIRECTORS’ REPORT The Board has pleasure in submitting the first directors’ report, which forms part of the audited financial statements of the Company, for the financial year ended 31 March 2012. NATURE OF BUSINESS The Company was converted from a dormant close corporation named Niqsha Beleggings CC into a public company on 12 December 2011 at which time its name was also changed to Primegro Properties Limited. Thereafter on 28 March 2012 the Company was renamed Annuity Properties Limited. The Company is a variable rate property loan stock company owning a commercial property located in the Western Cape valued at R144 million known as the Woolworths Call Centre. CHANGE IN FINANCIAL YEAR The Company changed its financial year-end from end of February to end of March during the year. FINANCIAL YEAR UNDER REVIEW The Company commenced trading on 15 February 2012 when it raised R51 million in the form of investor loans and R89 million in third party mortgage finance, which enabled the Company to, inter alia, pay the purchase consideration for its first letting enterprise acquisition amounting to R136 million. The letting enterprise, known as the Woolworths Call Centre, was registered in the Company’s name on 23 March 2012, resulting in Annuity earning rental income and incurring property expenses for the nine days from 23 March 2012 to 31 March 2012. The results of the Company for the period that it traded are set out in the annual financial statements on pages 13 to 38. SHARE AND DEBENTURE CAPITAL The Company’s authorised share capital comprises of 5 000 000 000 ordinary no par value shares with a face value of one cent. Each ordinary share is indivisibly linked to one variable rate debenture with a face value of R4,99 each. The Company converted to a variable loan stock company on 7 March 2012 at which time its 1 000 issued shares were converted to 1 000 linked units. At 31 March 2012 the Company had irrevocable loans from unitholders amounting to R50 895 376, which were convertible to linked units at R4,625 (four rand sixty two and a half cents) per linked unit, at either the election of the linked unitholders or automatically at the last practicable date before the Company’s listing. These loans were all converted to linked units on 4 April 2012. DIVIDENDS AND INTEREST DISTRIBUTIONS No dividend has been declared or paid during the financial year under review. No dividend and interest distribution has been declared for the period ended 31 March 2012 since there was no distributable earnings available to distribute. DIRECTORATE Lionel S Levinsohn, Schalk Strydom and Daniel E Rubenstein were appointed directors at the Company’s incorporation on 12 December 2011. Thereafter Derek Greenberg, Phillip J Moleketi, Martin Ettin, Eugene C Loubser, Anthony M Chait, Devrajh T Soondarjee and Roland DEB Sassoon (as D Soondarjee’s alternate director) were appointed as directors on 12 March 2012. Subsequent to the financial year-end Panico Theocharides was appointed as an executive director and Sarah J Williams as a non-executive director on 2 April 2012 and 17 April 2012 respectively. Lionel S Levinsohn resigned as director on 15 March 2012. 13
  15. 15. DIRECTORS’ INTERESTS The interests of the directors in the linked units of the Company as at 31 March 2012 were as follows: Number of units indirectly held on beneficial basis at 31 March 2012 Percentage of holding at 31 March 2012 % Member’s interest on beneficial basis at 28 February 2011 R Executive directors D Greenberg DE Rubenstein 29,4 – 59 5,9 100 157 15,7 – 157 15,7 – 667 S Strydom 294 66,7 100 Non-executive directors M Ettin The number of linked units held indirectly by the directors listed above changed on 4 April 2012 when the entities holding these linked units all elected to have their irrevocable loans converted to linked units. The percentage of these holdings did not change as a result of the conversion, but did reduce significantly on 4  May 2012 when the Company listed on the JSE Limited’s “Real Estate – Real Estate Holdings and Development” sector. After listing the percentage holdings were as follows: Number of linked units held indirectly on beneficial basis after listing Percentage of holding % Executive directors D Greenberg DE Rubenstein 3,47 668 590 0,72 1 729 730 1,85 1 729 730 1,85 7 370 999 S Strydom 3 242 949 7,89 Non-executive directors M Ettin The following irrevocable loans, which were convertible to linked units, bridging loans and accrued interest were owing to entities represented by or under the control of the directors as at 31 March 2012: Loans indirectly held on beneficial basis at 31 March 2012 R Loans indirectly held on beneficial basis at 28 February 2011 R Executive directors D Greenberg 15 436 406 – S Strydom 3 112 987 – DE Rubenstein 8 034 632 – 8 034 631 – 34 618 656 – Non-executive directors M Ettin 14
  16. 16. SCHEDULE OF BOARD MEETINGS ATTENDED 13 March 2012 Executive directors D Greenberg P S Strydom P DE Rubenstein P Non-executive directors PJ Moleketi P M Ettin P DT Soondarjee P RDEB Sassoon P EC Loubser P AM Chait A P: Present A: Apology COMPANY SECRETARY The Company Secretary is Mr Whitney Green. The business and postal addresses of the Company Secretary are set out on page 1. AUDIT AND RISK COMMITTEE REPORT The Audit and Risk Committee has fulfilled its responsibilities for the period ended 31 March 2012. The Committee has further satisfied itself as to the independence of the external auditors and their suitability for reappointment for the 2013 financial year. Refer to pages 9 to 11 for the full Audit and Risk Committee report. AUDITORS PKF (Jhb) Inc will continue in office in accordance with the Companies Act, 71 of 2008, subject to the approval of the linked unitholders at the forthcoming annual general meeting. PREPARATION OF ANNUAL FINANCIAL STATEMENTS The annual financial statements have been prepared by Mr Schalk Strydom CA(SA), the Chief Financial Officer and Financial Director of the Company. DIRECTORS’ INTERESTS IN CONTRACTS The Company entered into the following contracts, in which a director has a material interest, during the year under review: Asset management Annuity Asset Managers Proprietary Limited (“AAM”), a company owned by entities controlled or represented by the executive directors and Messrs Martin Ettin, Tyrone Soondarjee and Roland Sassoon, has been appointed asset managers of Annuity. The fee payable by the Company to AAM for all asset management and operational management services is a monthly fee of 1/12 of 0,5% of the aggregate of the market capitalisation and the borrowings of the Company. The asset manager is entitled to a transaction fee of 1% of the value of all property acquisitions and disposals and to a development watching fee of 1% of the value of material property developments. Property management Annuity Property Managers Proprietary Limited (“APM”), a company owned by entities controlled or represented by the executive directors and Messrs Martin Ettin, Tyrone Soondarjee and Roland Sassoon, has been appointed as property managers of Annuity. APM is entitled to a fee equal to a percentage of all 15
  17. 17. receipts collected for the provision of management and administration services. In addition, APM is entitled to a commission equal to the SAPOA tariff in respect of new lettings and 50% in respect of renewals with existing tenants. Tenant installations above R10 000 000 will attract a fee of 2,5% if supervised by APM. Loan agreements Part of the funding of the purchase price of the Woolworths Call Centre was raised by way of irrevocable loans, which were convertible to linked units at R4,63 per linked unit, from entities represented or controlled by the executive directors and Martin Ettin. GOING CONCERN The directors are of the opinion that the Company has adequate resources to continue operating for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the Company’s financial statements. The directors have satisfied themselves that the Company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. SUBSEQUENT EVENTS The Company listed on the JSE’s “Real Estate – Real Estate Holdings and Development” sector on 4 May 2012. Prior to listing, the Company undertook a private placement by way of an offer for the subscription of up to 75 597 314 linked units at a price of R5,00 per linked unit. The offer was fully subscribed which enabled the Company to list total linked units of 93 340 341. The capital raised from the private placement together with vendor shares issued to Sasfin Financial Services Proprietary Limited enabled the Company to acquire two further properties, the Oakfields Shopping Centre and the Sasfin Head Office Building which were transferred into the Company’s name on listing date. A further property, the Cell C Building was transferred into the Company’s name on 22 June 2012. The total acquisition costs of the three properties, including transaction and debt costs amounted to R441 972 692. Detail of the Company’s listing is contained in the PLS. A further property, the Ethos Buildings was acquired by the Company subsequent to its listing for a purchase consideration of R46 000 000. Transfer of this property into the Company’s name is expected on or before 1 September 2012. Signed on behalf of the Board of Directors PJ Moleketi Chairman Illovo 13 July 2012 16
  18. 18. STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2012 Notes 2012 R February 2011 R ASSETS 144 000 000 Investment property Straight-line rental adjustment Current assets 143 886 213 – – 4 309 318 2 – 113 787 Non-current assets 100 Trade and other receivables 3 4 308 960 – Cash and cash equivalents 4 358 100 148 309 318 100 5 394 058 100 Total assets EQUITY AND LIABILITIES Stated capital 5 10 – Member’s interest 5 – 100 5 394 048 – 128 263 666 – Accumulated profit Non-current liabilities Debentures 6 4 990 – Secured financial liabilities 7 76 341 612 – Other non-current liabilities 8 50 895 376 – Deferred taxation 9 1 021 688 – 14 651 594 – 10 2 200 041 – Current portion of secured financial liabilities 7 11 854 681 – Other current liabilities 8 596 872 – 148 309 318 100 Number of linked units in issue 1 000 n/a Net asset value per linked unit (R) 5 394 n/a Current liabilities Trade and other payables Total equity and liabilities 17
  19. 19. STATEMENT OF COMPREHENSIVE INCOME FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012 Notes Financial year ended 31 March 2012 R Year ended 28 February 2011 R Revenue Property portfolio 415 418 – Contractual rental income 301 631 – Straight-line rental income accrual 113 787 – 76 375 – Total revenue 491 793 – Property expenses (90 216) – (105 642) – (1 571 455) – Recoveries Administration and corporate costs Property acquisition costs Net operating loss 11 (1 275 520) – Gain on bargain purchase 12 8 000 000 – Changes in fair value of property 12 6 610 693 Net profit before finance charges and taxation Net finance charges Finance charges 13 (421 603) – – 6 415 736 16 – (1 021 688) – 5 394 048 14 Total comprehensive income for the financial year 18 – 226 646 Profit before taxation Basic earnings per linked unit (R) – (194 957) Interest received Taxation (113 787) – 17 920 –
  20. 20. STATEMENT OF CHANGES IN EQUITY FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012 Stated capital R Balance at 1 March 2011 Issue of shares Conversion to linked units Total comprehensive income for the financial year Balance at 31 March 2012 – Member’s interest R Accumulated profit R Total R 100 – 100 (100) – 900 – – (990) – – 5 394 048 5 394 048 10 – 5 394 048 5 394 058 1 000 (990) 19
  21. 21. STATEMENT OF CASH FLOWS FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012 Notes Year ended 28 February 2011 R (3 518 396) Net cash utilised in operating activities Cash absorbed by operations Financial year ended 31 March 2012 R 17.2 – (3 519 641) – Interest received 226 646 – Finance charges (225 401) – (135 978 584) – 139 497 238 – Proceeds from issue of linked units 4 900 – Proceeds from secured borrowings 88 000 090 – Proceeds from unsecured borrowings 51 492 248 – Net cash utilised in investing activities Acquisition of businesses (net of cash acquired) Net cash generated from financing activities 18 Net movement in cash and cash equivalents 258 – Cash and cash equivalents at the beginning of the financial year 100 100 Cash and cash equivalents at the end of the financial year 358 100 20
  22. 22. NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE THIRTEEN MONTHS ENDED 31 MARCH 2012 The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to all the years presented. 1. ACCOUNTING POLICIES The financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (“IFRS”), the AC 500 series issued by the Accounting Practices Board, the JSE Listings Requirements and the requirements of the South African Companies Act, No 71 of 2008. The financial statements are prepared on the historical cost basis, except for investment properties and certain financial instruments which are carried at fair value, and incorporate the principal accounting policies set out below. The Company early adopted IAS 12: Income Taxes and has been applying the rebuttable presumption that the investment property will be recovered in its entirety through sale. The financial statements are prepared on a going concern basis. 1.1 Business combinations All business combinations are accounted for applying the acquisition method as at the acquisition date which is the date on which control is transferred to the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the cost to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments. The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3: Business Combinations are recognised at their fair value except for non-current assets (or disposal Company) that are classified as held-for-sale in accordance with IFRS 5: Non-current Assets Held-For-Sale and discontinued operations, which are recognised at fair value less cost to sell. Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date. On acquisition, the Company assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for company purposes. This excludes lease agreements and insurance contracts, whose classification remains as per the inception date. Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. If the consideration is lower than the fair value of the net assets of the business acquired the difference is recognised in profit or loss as gain on bargain purchase. Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed. 1.2 Financial instruments Financial instruments are contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments are recognised on the statement of financial position when the Company becomes party to the contractual provisions of the instrument. The Company initially recognises 21
  23. 23. a financial instrument as a financial asset, a financial liability or as an equity instrument in accordance with the substance of the contractual arrangement. The Company 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 entity is recognised as a separate asset or liability. The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expired. Financial assets and liabilities are initially measured at fair value. Subsequent to initial recognition, these instruments are measured as follows: Financial assets • Trade and other receivables Trade and other receivables are initially recognised and subsequently measured at fair value, including transaction costs, and are subsequently measured at amortised cost using the effective interest rate method. Trade and other receivables are presented net of an allowance for impairment. The allowance for impairment is raised base on the difference between the carrying value of the receivables and the present value of expected future cash flows using the discount rate calculated at initial recognition. Movements in the provision are recognised in profit and loss. Unrecoverable amounts are written off against the allowance account. Subsequent recoveries of previously written off amounts are credited to profit and loss. • Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Cash and cash equivalents are highly liquid, short-term investments that are readily convertible to known amounts of cash. These investments are subject to insignificant risk in change in value. Cash and cash equivalents are measured at amortised cost that approximates fair value. Financial liabilities • Debenture capital and interest-bearing borrowings Debenture capital is recognised at amortised cost. Interest-bearing borrowings are recognised at amortised cost using the effective interest rate method. • Derivative instruments The Company uses derivative financial instruments to hedge its exposure to interest rate risks. Derivative instruments are initially recognised and subsequently measured at fair value at each reporting date. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. • Trade and other payables Trade and other payables are initially recognised at cost and subsequently measured at amortised cost. Offset • Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when the Company 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. Where the carrying amounts of short-term financial instruments carried at amortised cost approximate their amortised cost value and the impact of discounting is not considered to be material, no discounting is applied. 22
  24. 24. 1.3 Investment properties Investment properties are properties held for the purpose of earning rental income and for capital appreciation. Investment properties are initially recorded at cost and include transaction costs on acquisition. Subsequent expenditure to add to or replace a part of the property is capitalised at cost. Investment property are valued annually and adjusted to fair value as at Statement of Financial Position date. Independent valuations are obtained on a rotational basis, ensuring that every property is valued by an independent valuer once in every three years. The directors value the remaining properties annually on an open-market basis. Any gain or loss arising from a change in the fair value of the investment property is included in net profit for the period to which it relates. Gains and losses on the disposal of investment properties are recognised in net profit and are calculated as the difference between the sale price and the carrying value of the property. 1.4 Property, plant and equipment Property, plant and equipment are tangible assets that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and (b) are expected to be used during more than one period. Items of property, plant and equipment are initially recorded at cost, being the cash price equivalent at the recognition date. Expenditure on additions and improvements to property, plant and equipment including the cost of related interest is capitalised as the expenditure is incurred. Subsequent to initial recognition, items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment. Depreciation is charged to profit and loss so as to allocate the cost of assets less their residual values over their useful lives. The estimated useful lives of the assets are: Computer equipment Computer software Furniture and fixtures Motor vehicles Office equipment 3 years 5 years 3 years 5 years 5 years The useful lives and residual values are reassessed at the end of each reporting period and adjusted if necessary. 1.5 Revenue recognition (a) Property portfolio revenue Property portfolio revenue comprises gross rental income and operating cost recoveries from the letting of investment properties, net of value added tax. Rental lease income is recognised on a straight-line basis over the term of the lease. Contingent rents (turnover rentals) are included in revenue when the amount can be reliably measured. Recoveries of costs from lessees, where the entity merely acts as an agent and makes payment of these costs on behalf of lessees, are offset against the relevant costs. (b) Interest income Interest income is recognised as it accrues, using the effective interest rate method. 23
  25. 25. 1.6 Taxation Taxation for the year comprises current and deferred taxation. The charge for current tax is based on the results for the period as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantially enacted at reporting date. Deferred income tax is provided using the comprehensive liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred taxation assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arose as a result of a transaction, other than a business combination, that does not impact accounting or taxable profit or loss. Deferred taxation is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled. Deferred taxation on the fair value adjustment on investment properties has been provided at the capital gains tax rate to the extent that there are not sufficient tax losses to shield the charge. Taxation is recognised in profit and loss unless it relates to a transaction that is recognised in equity or other comprehensive income, in which case the taxation is recognised in equity or other comprehensive income. 1.7 Impairment The carrying value of assets is reviewed for impairment at each reporting date. Goodwill is assessed for impairment at least annually. Assets are impaired when events or changes in circumstances indicate that their carrying value may not be recoverable. If such indication exists and where carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amounts. Recoverable amounts are determined as the higher of fair value less costs to sell or value in use. Impairment losses and the reversal of impairment losses are recognised in the statement of comprehensive income. Impairments to goodwill are never reversed. 1.8 Letting costs Installations and lease commissions are carried at cost less accumulated depreciation. Depreciation is provided to write down the cost, less residual value, by equal instalments over the period of the lease. 1.9 Operating segments An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. The operating results are reviewed regularly by management to make decisions about and to assess the performance of the segment. 1.10 Key estimates and assumptions Estimates and assumptions, an integral part of financial reporting, have an impact on the amounts reported for the Company’s assets, liabilities, income and expenses. Judgement in these areas is based on historical experience and reasonable expectations relating to future events. Actual results may differ from these estimates. Information on the key estimations and uncertainties that have the most significant effect on amounts recognised are set out in the following notes to the financial statements: • accounting policies – notes 1.3,1.6 and 1.7; • investment property valuation – note 2; and • deferred taxation – note 13. 24
  26. 26. 1.11 Standards and interpretations applicable to the Company not yet effective The Company has chosen not to early adopt the following standards and interpretations which have been published and are mandatory for the Company’s accounting periods beginning on or after 1 April 2012 or later periods: Standard IFRS 7: Financial Instruments: Disclosures Details of amendment •   Amendments require additional disclosure on transfer transactions of financial assets, including the possible effects of any residual risks that the transferring entity retains. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period Effective for annual periods beginning on or after 1 July 2011 •   Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations 1 January 2013 IFRS 9: Financial Instruments •   New standard that forms the first part of a three-part project to replace IAS 39: Financial Instruments: Recognition and Measurement 1 January 2015 IFRS 10: Consolidated Financial Statements •   New standard that replaces the consolidation requirements in SIC-12 Consolidation – Special Purpose Entities and IAS 27: Consolidated and Separate Financial Statements. Standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess 1 January 2013 IFRS 11: Joint Arrangements •   New standard that deals with the accounting for joint arrangements and focuses on the rights and obligations of the arrangement, rather than its legal form. Standard requires a single method for accounting for interests in jointly controlled entities 1 January 2013 25
  27. 27. Effective for annual periods beginning on or after Standard Details of amendment IFRS 12: Disclosure of Interests in Other Entities •   New and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles 1 January 2013 IFRS 13: Fair Value Measurement •   New guidance on fair value measurement and disclosure requirements 1 January 2013 IAS 1: Presentation of Financial Statements •   New requirements to group together items within OCI that may be reclassified to the profit or loss section of the income statement in order to facilitate the assessment of their impact on the overall performance of an entity IAS 19: Employee Benefits •   Amendments to the accounting for current and future obligations resulting from the provision of defined benefit plans 1 July 2012 1 January 2013 IAS 27: Consolidated and separate financial statements •   Consequential amendments resulting from the issue of IFRS 10,11 and 12 IAS 28: Investments in Associates •   Consequential amendments resulting from the issue of IFRS 10,11 and 12 1 January 2013 IAS 32: Financial Instruments: Presentation •   Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the net related credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations 1 January 2013 1 January 2013 The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Company. 26
  28. 28. Financial year ended 31 March 2012 R 2. Year ended 28 February 2011 R INVESTMENT PROPERTY Net carrying value Cost 144 000 000 – – – 144 000 000 – Movement for the financial year Investment properties at the beginning of financial year Acquisition Fair value adjustment Balance at the end of the financial year (113 787) 143 886 213 Straight-line rental adjustment – – Reconciliation to independent valuation Investment property at valuation – 144 000 000 (113 787) 143 886 213 – – – Full details of the investment property owned by the Company is contained in the register of investment properties, kept in terms of Regulation 25(3)(a)(i) of the Companies Act, No 71 of 2008, which is open for inspection by members at the registered office of the Company (see page 1). In terms of the accounting policy, the portfolio is valued annually by the directors on an open-market basis. Independent valuations are obtained on a rotational basis, ensuring that every property is valued by an independent valuer once every three years. The property was valued by JHI Properties Proprietary Limited, a registered valuer in terms of section 19 of the Property Valuers Profession Act No 47 of 2000. The valuation was done inter alia for the purpose of listing the Company. The valuation was performed using the discounted cash flow methodology. This method is based on an open market basis with consideration given to the future earnings potential and applying an appropriate discounting rate to the property. Investment properties are encumbered as set out in note 8. Financial year ended 31 March 2012 R 3. Year ended 28 February 2011 R TRADE AND OTHER RECEIVABLES Deposits 2 000 000 – 109 117 – 1 716 978 – Other receivables from vendor 357 406 – Value added taxation 125 459 – 4 308 960 – Prepayments Funds held on Attorneys Trust Account None of the above receivables are past due. The funds held in trust by the Company’s attorneys were held in terms of section 78(2A) of the Attorneys Act, 53 of 1979. The deposits were utilised to discharge a portion of the acquisition prices of property acquisitions after 31 March 2012. 27
  29. 29. Financial year ended 31 March 2012 R 4. Year ended 28 February 2011 R CASH AND CASH EQUIVALENTS For purposes of the cash flow statement, cash and cash equivalents comprise: Bank balances 358 100 10 – – 100 Balance at the beginning of the financial year 100 100 Shares issued during the year 900 – (990) – Cash is invested with Nedbank Limited. 5. STATED CAPITAL Authorised 5 000 000 000 ordinary no par value shares Issued 1 000 ordinary shares Member’s interest Movement in share capital/member’s interest for the financial year Converted to debentures Balance at the end of the financial year 10 100 The unissued shares are under the control of the directors until the next annual general meeting. Each share is irrevocably linked to one debenture, together comprising one linked unit. The member’s interest was converted to share capital on 12 December 2011 when the close corporation was converted to a public company. Financial year ended 31 March 2012 R 6. Year ended 28 February 2011 R DEBENTURES Authorised and issued 1 000 variable rate subordinated debentures 4 990 – Debentures issued during the financial year 4 990 – Balance at the end of the financial year 4 990 – Movement for the year The debentures are unsecured and subordinated in favour of the unsubordinated creditors of the Company. Interest, calculated in terms of a distributable earnings formula, will accrue to the debenture holder for the first time on 30 September 2012, payable within four months from this date and thereafter every six months. The debentures are redeemable at the instance of the debenture holder by special resolution after 7 March 2062. 28
  30. 30. Financial year ended 31 March 2012 R 7. Year ended 28 February 2011 R SECURED FINANCIAL LIABILITIES Rand Merchant Bank (a division of FirstRand Bank Limited) The loan bears interest at 8,83% p.a. and is repayable on 1 April 2015. 60 130 636 – The loan bears interest at 255 bps over the 1 month JIBAR rate and is repayable on 1 April 2015. 17 033 618 – The loan bears interest at 255 bps over the 1 month JIBAR rate and is repayable on 23 March 2013. 12 023 730 – 89 187 984 – 89 187 984 – Secured financial liabilities net of transaction costs Loans Transaction cost (991 691) – 88 196 293 Current portion Non-current portion – (11 854 681) – 76 341 612 – The borrowings are secured by mortgage bonds over investment properties valued at R144 million (note 2). The fee and cost, in respect of secured financial liabilities raised, are amortised over the period of the loans (note 13). The current portion was repaid subsequent to year-end from capital raised by the Company on its listing. Financial year ended 31 March 2012 R 8. Year ended 28 February 2011 R OTHER NON-CURRENT LIABILITIES Unitholders’ loans Non-current portion – 596 872 – 50 895 376 – 51 492 248 Current portion 51 492 248 – The above loans are unsecured and bear interest up to the date of transfer of the Woolworths Call Centre property at the rate equivalent to the interest earned on the section 78(2A) deposit account held at the Company’s attorneys. The non-current portion of the loans are irrevocable and only repayable if resolved as such by the Board of Directors. These loans are convertible to linked units at R4,625 (four rand sixty two and a half cents) per linked unit at the election of the lenders at any time. The loans will automatically convert to linked units at the last practicable date before listing. The lenders all elected to convert these loans to linked units on 4 April 2012. 29
  31. 31. Financial year ended 31 March 2012 R 9. Year ended 28 February 2011 R DEFERRED TAXATION Arising on the acquisition and revaluation of investment property and the raising of the straight-line rental income accrual 1 021 688 – – – 1 012 332 – Movement for the financial year Balance at beginning of financial year Gain on bargain purchase Change in fair value of investment property (21 219) – Straight-line rental income accrual 31 860 – Estimated tax losses to be utilised in future (1 285) – 1 021 688 – 21 416 – 189 473 – 1 989 152 – 2 200 041 – 105 000 – 9 031 – 8 000 000 – 10. TRADE AND OTHER PAYABLES Tenant deposits Accrued expenses Other payables 11. NET OPERATING LOSS Net operating loss includes the following charges: Audit fees – current financial year Property management fees 12. CHANGES IN FAIR VALUE OF PROPERTY Gain on bargain purchase Fair value adjustment on property (113 787) – 7 886 213 – 8 218 – Interest charged – secured financial liabilities 187 984 – Interest paid – unitholder loans 225 401 – 421 603 – 13. FINANCE CHARGES Amortisation of debt transaction cost 30
  32. 32. Financial year ended 31 March 2012 R Year ended 28 February 2011 R 14. TAXATION Deferred 1 021 688 – 1 796 406 – Reconciliation of taxation charge Profit before tax at 28% Taxation effect of: Gain on bargain purchase at 18,6% Fair value adjustment to investment property at 18,6% Property acquisition costs Debt transaction costs Permanent differences – Other expenses not deductible for tax purposes (748 160) – 10 641 – 146 962 – (186 462) – 2 301 – 1 021 688 – 15. DIRECTORS’ EMOLUMENTS No directors’ emoluments or benefits of any nature were paid during the financial year. Financial year ended 31 March 2012 R Year ended 28 February 2012 R 16. EARNINGS, HEADLINE EARNINGS AND ATTRIBUTABLE LOSS Number of linked units in issue used for the calculation of attributable loss per linked unit 1 000 – Weighted average number of linked units in issue used for the calculation of earnings and headline earnings per linked unit 301 – Profit for the financial year attributable to equity holders 5 394 048 – Earnings 5 394 048 – Add back fair value adjustments (6 895 100) – Gain on bargain purchase net of deferred taxation (6 987 668) – Gain on bargain purchase (8 000 000) – 1 012 332 – 92 568 – Fair value adjustment resulting from straight-line rental accrual 113 787 – Deferred taxation (21 219) – Reconciliation of earnings, headline earnings and attributable loss Deferred taxation Fair value adjustment net of deferred taxation 31
  33. 33. Financial year ended 31 March 2012 R Year ended 28 February 2011 R 16. EARNINGS, HEADLINE EARNINGS AND ATTRIBUTABLE LOSS (continued) Headline loss attributable to linked unitholders Straight-line rental income accrual (net of deferred taxation) Straight-line rental income accrual Deferred taxation Amortisation of debt transaction costs Once off property acquisition costs (1 501 052) – (81 927) – (113 787) – 31 860 – 8 218 – 1 571 455 – Loss attributable to linked unitholders (3 306) – Basic and diluted earnings per linked unit (R) 17 920 – Attributable Headline loss and diluted headline loss per linked unit (R) (4 987) – (3) – Attributable loss per linked unit (R) 17. NOTES TO THE CASH FLOW STATEMENT 17.1 The following convention applies to figures other than adjustments Outflows of cash are represented by figures in brackets. Inflows of cash are represented by figures without brackets. Financial year ended 31 March 2012 R Year ended 28 February 2012 R 17.2 Cash absorbed by operations Profit before taxation 6 415 736 – Non-cash items (8 000 000) – Changes in fair value of property (7 886 213) – (113 787) – 194 957 – Adjusted for: Straight-line rental income accrual Net finance charges Operating loss before working capital changes (1 389 307) – Working capital changes (2 130 334) – Trade and other receivables (4 308 960) – 2 178 626 – (3 519 641) – Trade and other payables Cash absorbed by operations 32
  34. 34. Financial year ended 31 March 2012 R Year ended 28 February 2011 R 18. BUSINESS COMBINATION The Company acquired a 100% interest in all the assets and some liabilities of Woolworths Call Centre Letting Enterprise with effect 23 March 2012. The letting enterprise was acquired as a going concern and was paid for in cash. Details of the net assets acquired are as follows: Investment property at acquisition price Trade and other payables Purchase consideration settled in cash (136 000 000) 21 416 (135 978 584) – – – The investment property was recognised at its fair value of R144 000 000 as set out in note 2 above, resulting in a gain on bargain purchase of R8 000 000. The net operating income (excluding the straight-lining of income accrual) earned by the Company from this property during the financial year was R287 790. This was earned during the last nine days of the financial year. Based on the net operating income for the nine days the Company would have earned R11 671 483 if the property was owned for a 12 month period. Financial year ended 31 March 2012 R Year ended 28 February 2012 R 19. COMMITMENTS Capital commitments Acquisition agreements entered into in respect of investment properties. The transactions are, inter alia, conditional upon the Company listing on the JSE. Annuity Properties Limited successfully listed on the JSE on 4 May 2012 and raised the necessary funding on its listing to acquire these properties. 441 972 692 – – Receivable within one year 12 633 638 – – Receivable two to five years 76 383 744 – – Receivable beyond five years 71 457 620 – 160 475 002 – 20. MINIMUM LEASE PAYMENTS RECEIVABLE Minimum lease payments comprises contractual rental income from investment properties due in terms of signed lease agreements 33
  35. 35. Financial year ended 31 March 2012 R Year ended 28 February 2011 R 21. RELATED PARTIES AND RELATED PARTY TRANSACTIONS Parties are considered related if one party has the ability to exercise control or significant influence or joint control over the other party in making financial or operational decisions. Related parties with whom the Company transacted during the financial year were: Annuity Asset Managers Proprietary Limited Transaction fees 1 360 000 – 1 360 000 – 14 998 640 – 371 471 – 66 295 – 12 998 821 – 57 455 – 2 499 773 – 11 049 – 2 999 728 – 13 259 – 2 499 773 – 11 049 – 7 899 275 – 35 357 – Relationship: Common directors Amount owing to Annuity Asset Managers Proprietary Limited at financial year-end (included in trade and other payables) Greenacre SA Investments LLC Irrevocable loan Bridging loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder Levfrie Trust Irrevocable loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder The Martin Ettin Family Trust Irrevocable loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder Barbara Ettin Revocable Trust Irrevocable loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder Seahorse SA Investments LLC Irrevocable loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder Daniel Rubenstein Family Trust Irrevocable loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder 34
  36. 36. Financial year ended 31 March 2012 R Year ended 28 February 2011 R 21. RELATED PARTIES AND RELATED PARTY TRANSACTIONS (continued) Vexma Properties 183 Proprietary Limited Irrevocable loan Interest accrued on irrevocable loan 2 999 728 – 13 259 – 1 999 819 – 8 839 – 1 999 819 – 8 839 – 100 000 – 100 000 – 333 300 – 95 856 – Relationship: Joint controlling unitholder Verilyte Properties CC Irrevocable loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder J Greenberg Irrevocable loan Interest accrued on irrevocable loan Relationship: Joint controlling unitholder S Strydom Bridging loan Relationship: Executive director of the Company DE Rubenstein Bridging loan Relationship: Executive director of the Company LS Levinsohn Bridging loan Relationship: Director of Annuity Asset Managers Proprietary Limited SM Levinsohn Bridging loan Relationship: Director of Annuity Asset Managers Proprietary Limited 35
  37. 37. 22. FINANCIAL RISK MANAGEMENT The Company’s financial instruments consist mainly of deposits with banks, interest-bearing liabilities, unitholders’ loans, trade and other receivables, trade and other payables and debentures. Book value approximates fair value in respect of these financial instruments. Exposure to market, credit and liquidity risks arises in the normal course of business. The table below sets out the classification of each class of financial asset and liability and their fair values at 31 March 2012: Financial Financial assets at liabilities at amortised cost amortised cost R R Total R Financial assets Trade and other receivables 4 074 384 358 Cash and cash equivalents 4 074 384 358 4 074 742 – 4 074 742 4 990 4 990 Secured financial liabilities 88 196 293 88 196 293 Unitholders’ loans 51 492 248 51 492 248 2 200 041 2 200 041 141 893 572 141 893 572 Total financial assets Financial liabilities Debentures Trade and other payables – Total financial liabilities Interest rate risk The Company manages its exposure to changes in interest rates by fixing interest rates, by way of fixed interest rate facilities, in respect of the majority of borrowings. At financial year-end, interest rates in respect of 67% of borrowings were fixed. The rate of interest, applicable to the fixed interest rate agreement, was 8,83% at financial year-end and 8,02% on the floating rate agreements. An increase of 1% in the prime interest rate will result in an increase of R290 000 per annum in respect of the floating portion of the debt. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial commitments as and when they fall due. This risk is managed by holding cash balances and a revolving loan facility and by regularly monitoring cash flows. The Company will utilise undrawn facilities and cash on hand to meet its short-term funding requirements. Refer to note 23 for available facilities. A maturity analysis of the Company’s financial assets and liabilities and its exposure to interest rate risk at financial year-end are set out in the table below: Less than one year R One to five years R More than five years R Total R Financial assets Trade and other receivables Cash and cash equivalents Total financial assets 36 4 074 384 4 074 384 358 358 4 074 742 – – 4 074 742
  38. 38. Less than one year R One to five years R More than five years R Total R Financial liabilities Debentures – – 4 990 4 990 11 854 681 76 341 612 – 88 196 293 596 872 – 50 895 376 51 492 248 Trade and other payables 2 200 041 – – 2 200 041 Total financial liabilities 14 651 594 76 341 612 50 900 366 141 893 572 Secured financial liabilities Unitholders’ loans Credit risk Credit risk arises from the risk that a tenant may default or not meet its obligations timeously. The financial position of the tenants is monitored on an ongoing basis. Allowance is made for specific doubtful debts and credit risk is therefore limited to the carrying amount of the financial asset at financial year-end. Management does not consider there to be any credit risk exposure at financial year-end that requires impairment. The carrying value of receivables is considered to reasonably approximate fair value. 23. CAPITAL MANAGEMENT The Company’s borrowings, excluding debentures, are limited to 70% of the valuation of the investment property portfolio in terms of the existing debt covenants. As at 31 March 2012, the Company did not have any unutilised loan facilities in place. Management is committed to a gearing level of a maximum of 70%. As at 31 March 2012, the unutilised borrowing capacity of the Company was as follows: Investment properties at valuation 144 000 000 70% thereof 100 800 000 Total borrowings 88 196 293 Unutilised borrowing capacity 12 603 707 Commercial/ Western Cape R Total property portfolio R Admin R Total R 24. SEGMENTAL REPORT Revenue from property portfolio 415 418 415 418 – 415 418 Rental income 301 631 301 631 – 301 631 Straight-line rental income accrual 113 787 113 787 – 113 787 76 375 76 375 – 76 375 Total revenue 491 793 491 793 – 491 793 Property expenses (90 216) (90 216) – (90 216) Recoveries Administration and corporate costs – – Changes in fair value of investment property 7 886 213 7 886 213 – 7 886 213 (1 571 455) (1 571 455) – (1 571 455) (196 203) (196 203) 1 246 (194 957) Property acquisition costs Net finance charges Segment profit before taxation 6 520 132 6 520 132 (105 642) (104 396) (105 642) 6 415 736 37
  39. 39. Commercial/ Western Cape R Total property portfolio R 143 886 213 143 886 213 – 143 886 213 Straight-line rental adjustment 113 787 113 787 – 113 787 Other assets 353 557 353 557 3 955 761 4 309 318 Total assets 144 353 557 144 353 557 3 955 761 148 309 318 Total liabilities 137 571 455 137 571 455 5 338 815 142 910 270 Admin R Total R 24. SEGMENTAL REPORT (continued) Investment property 25. PROPERTY PORTFOLIO INFORMATION AT 31 MARCH 2012 Woolworths Call Centre – Cape Town – Offices and Call Centre “A” Tenants “C” Tenants Total 11 000 Rentable area (m ) 2 320 11 320 Weighted average monthly rental per m 91 2 Vacancy percentage Lease expiry profile 0% 0% Lease expiring on 30 September 2021 0% Lease expiring on 28 February 2013 Weighted average rental escalation 7,03% Annualised property yield 8,80% 26. UNITHOLDERS IN THE UNLISTED COMPANY AT 31 MARCH 2012 Number of linked units held at 31 March 2012 Percentage holding at 31 March 2012 Barbara Ettin Revocable Trust 59 5,90% Daniel Rubenstein Family Trust 157 15,70% Greenacre SA Investments LLC 294 29,40% 39 3,90% 255 25,50% Seahorse SA Investments LLC 49 4,90% The Martin Ettin Family Trust 49 4,90% Verilyte Properties CC 39 3,90% Vexma Properties 183 Proprietary Limited 59 5,90% 1 000 100,00% Joshua Greenberg Levfrie Trust The 1 000 linked units in issue at 31 March 2012 were issued to S Strydom, LS Levinsohn and DE Rubenstein at face value of R1 000 during the financial year for cash. 38
  40. 40. P R O P E R T I E S L I M I T E D ANNUITY PROPERTIES LIMITED (formerly Niqsha Beleggings CC) (Incorporated in the Republic of South Africa) (Registration number 2011/145994/06) Share code: ANP     ISIN: ZAE000165643 (“Annuity” or “the Company”) NOTICE TO MEMBERS Notice is hereby given to all unitholders recorded in the Company’s securities register on Friday, 6 July 2012 that the inaugural annual general meeting of Annuity will be held at Sasfin Head Office, 29 Scott Street, Waverley, Johannesburg, 2090 on Wednesday, 29 August 2012 at 15:00, or any adjourned or postponed date and time determined in accordance with the provisions of the Companies Act, No 71 of 2008, as amended (“Companies Act”), which meeting is to be attended, participated in and voted at by unitholders recorded in the Company’s securities register on Friday, 17 August 2012, for purpose of considering and, if deemed fit, passing, with or without modification, the ordinary and special resolutions set out below, subject to the requirements of the Companies Act, the JSE Limited (“JSE”) Listings Requirements and the Company’s Memorandum of Incorporation (“MOI”): 1. AS ORDINARY RESOLUTIONS 1.1 Adoption of annual financial statements To receive, consider and adopt the audited annual financial statements of the Company for the financial year ended 31 March 2012 together with the reports of the Directors and auditors thereon, and the report of the Audit and Risk Committee. 1.2 Reappointment of auditor To reappoint PKF (Jhb) Inc as auditor of the Company on the recommendation of the Audit and Risk Committee, for the period until the Company’s next annual general meeting and to note that the individual registered auditor who will perform the function of auditor during the financial year ending 31 March 2013 is Mr Garron Chaitowitz. 1.3 Election of members to Audit and Risk Committee To elect, by individual resolutions, on the Board’s recommendation, the following independent non-executive directors as members of the Audit and Risk Committee of the Company: 1.3.1 Mr AM Chait (Committee Chairperson) 1.3.2 Mr EC Loubser 1.3.3 Mrs SJ Williams 1.4 Re-election of directors To re-elect, by individual resolutions, the following non-executive directors who are to retire by rotation but, being eligible, offer themselves for re-election: 1.4.1 Mr M Ettin 1.4.2 Mr DT Soondarjee Biographical details of all directors of the Company are contained on pages 5 and 6 of the annual report. 1.5 To place the unissued ordinary shares in the Company under the control of the directors, by resolving that: “The unissued shares in the Company’s authorised capital be and are hereby placed under the control of the directors of the Company who are authorised to allot and issue any such shares at their discretion, subject at all times to the provisions of the Companies Act; as amended, the Company’s MOI and the JSE Listings Requirements, provided that each ordinary share of one cent be issued together with one unsecured variable-rate subordinated debenture of 499 cents each as a linked 39
  41. 41. unit and provided further that the number of shares issued at any time may not exceed 20% of the total number of shares in issue determined immediately prior to each issue of new shares.” Note: This authority shall be restricted to the issue of linked units to finance the acquisition of property assets. No issue of shares will be made that could effectively transfer control of the Company without the prior approval of unitholders in general meeting. 1.6 To grant, by way of an ordinary resolution, a general authority for an issue of linked units for cash, by resolving that: “Subject to the provisions of the Companies Act, the MOI of the Company and the JSE Listings Requirements, the directors be and they are hereby authorised by way of a general authority, to issue ordinary shares of one cent each (ordinary shares) together with an unsecured variable-rate subordinated debenture of 499 cents each (debenture) for cash as and when suitable situations arise, subject to the following limitations: 1. that each ordinary share be linked to one debenture to form a linked unit (“the linked unit”); 2. this authority shall not extend beyond 15 months from the date of this Annual General Meeting; 3. an announcement giving full details, including the impact on net asset value and earnings per linked unit, will be published at the time of an issue representing, on a cumulative basis within one year, 5% or more of the number of linked units in issue prior to such issues; 4. that, in determining the price at which an issue of linked units may be made in terms of this authority, the maximum discount permitted will be 10% of the weighted average traded price, adjusted for any cum distribution portion if applicable of the linked units in question, measured over the 30 business days prior to the date on which the price of such issue is determined or agreed by the directors; 5. that issues of linked units shall be made to public subscribers and not to related parties as defined in the JSE Listings Requirements; 6. that the linked units which are the subject of the issue for cash will be of a class already in issue; 7. the number of securities which are the subject of the general issue of shares for cash may not, in the aggregate, in any one financial year exceed 10% (ten per cent) of the Company’s relevant number of equity securities in issue of that class. The number of securities which may be issued shall be based on the number of securities of that class in issue added to those that may be issued in future arising from the conversion of options/convertible securities, at the date of such application: • less any securities of the class issued, or to be issued in future arising from options/convertible securities issued, during the current financial year; and • plus any securities of that class to be issued pursuant to a rights issue which has been announced, is irrevocable and is fully underwritten; or pursuant to an acquisition, the final terms of which has been announced, as though they were securities in issue at the date of application; 8. for purposes of determining the number of securities which may be issued in any one year, account must be taken of the dilution effect in the year of issue of options/convertible securities, by including the number of any equity securities which may be issued in future arising out of an issue of such option/convertible securities; 9. the equity securities which form the subject of the issue for cash of a particular issue, will be aggregated with any securities that are compulsory convertible into securities of that class and, in the case of the issue of compulsory convertible securities, aggregated with the securities of that class into which they are compulsory convertible.” 2. AS SPECIAL RESOLUTIONS 2.1 Special Resolution Number 1: approval of non-executive directors’ fees Non-executive directors’ fees for the financial year ending 31 March 2013: “Resolved that the payment of non-executive directors’ fees in respect of the financial year ending 31 March 2013 be and it is hereby approved on the following basis: PJ Moleketi R128 000 M Ettin R 76 000 EC Loubser R 82 000 AM Chait R 82 000 SJ Williams R 82 000 40
  42. 42. and further; that for the period 1 April 2013 until the next Annual General Meeting of the Company to be held in  2013  the payment of non-executive directors’ fees be and it is hereby approved on the following basis: R Board, per meeting, per non-executive director 10 000 Board, per meeting, per Chairperson 17 000 Subcommittees, per meeting, per non-executive director 5 000 Subcommittees, per meeting, Chairperson 7 000” Reason for and the effect of this special resolution: To approve the basis and authorise the payment of non-executive directors’ fees for the financial year ending 31 March 2013 and for the period 1 April 2013 until the date of the next Annual General Meeting in terms of the requirement of Section 66(9) of the Companies Act. 2.2 Special Resolution Number 2 Financial assistance to related or interrelated companies “Resolved that, to the extent required by Section 45 of the Act, the Board (or any person/s authorised by the Board to do so), be and is hereby authorised, as it in its discretion thinks fit but subject to the provisions of Section 45 of the Companies Act and the JSE Listings Requirements, to provide direct or indirect financial assistance as contemplated in Section 45 of the Companies Act 2008, indirectly by way of a loan (on an interest free or market related interest basis), guarantee, the provision of security or otherwise, to any of its future subsidiaries and/or any juristic person that the Company may directly or indirectly control in future, for any purpose in the normal course of the Company’s business. The Board will, before making any such financial assistance available, satisfy itself that: (i) immediately after providing the financial assistance the Company will satisfy the solvency and liquidity test in the Companies Act; and (ii) the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company. The authority granted to the Board shall endure for 2 (two) years following the date on which this special resolution is passed”. Reason for and the effect of this special resolution: To the extent necessary under Section 45 of the Companies Act 2008, as amended, to approve and also authorise the Board to give effect to any financial assistance deemed appropriate to implement during the ensuing two years. The Company does not currently have any subsidiaries nor does it control any juristic person. It  is  however possible that future property acquisitions could include subsidiary structures and hence it is desirable to put this authority in place. APPROVALS REQUIRED FOR RESOLUTIONS Ordinary Resolutions Numbers 1.1 to 1.5 contained in this notice of Annual General Meeting require the approval by more than 50% of the votes exercised on the resolutions by unitholders present or represented by proxy at the Annual General Meeting, subject to the provisions of the Companies Act the MOI of the Company and the JSE Listings Requirements. Ordinary Resolution Number 1.6 and Special Resolution Numbers 1 and 2 contained in this notice of Annual General Meeting require the approval by at least 75% of the votes exercised on the resolutions by unitholders present or represented by proxy at the Annual General Meeting, subject to the provisions of the Companies Act the MOI of the Company and the JSE Listings Requirements. Who may attend and vote: The record date in terms of section 59 of the Companies Act for unitholders to be recorded on the securities register of the Company in order to be able to attend, participate in and vote at the Annual General Meeting is Friday, 17 August 2012, and the last day to trade in the Company’s shares in order to be recorded on the securities register of the Company in order to be able to attend, participate in and vote at the Annual General Meeting is Friday, 10 August 2012. If you hold dematerialised linked units which are registered in your name or if you are the registered holder of certificated linked units: • You may attend the Annual General Meeting of unitholders in person. • Alternatively, you may appoint a proxy or proxies, who need not be a unitholder of the Company to represent you at the Annual General Meeting of unitholders by completing the attached form of proxy in accordance 41
  43. 43. with the instructions it contains and returning it to Link Market Services South Africa (Pty) Limited, Thirteenth Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2017 (PO Box 4844, Johannesburg, 2000) (“transfer secretaries”) to be received not later than 48 hours prior to the Annual General Meeting (excluding Saturdays, Sundays and public holidays). Any form of proxy not handed in by this time may be handed to the chairperson of the Annual General Meeting immediately before the appointed proxy exercises any of the unitholder’s rights at the Annual General Meeting. If you hold dematerialised linked units which are not registered in your name and: • Wish to attend the Annual General Meeting of unitholders, you must obtain the necessary letter of representation from your Central Securities Depository Participant (“CSDP”), broker or nominee. • Do not wish to attend the Annual General Meeting of unitholders but would like your vote to be recorded at the Annual General Meeting, you should contact your CSDP, broker or nominee and furnish them with your voting instructions. • You must not complete the attached form of proxy. A unitholder who is entitled to attend and vote at the Annual General Meeting is entitled, by completing the attached form of proxy and delivering it to the Company in accordance with the instructions on that proxy form, to appoint one or more proxies to attend, participate in and vote at the Annual General Meeting in that unitholder’s place. A proxy need not be a unitholder of the Company. Equity securities held by a share trust or scheme will not have their votes taken into account for the purposes of resolutions passed in terms of the Listings Requirements. Shares held as treasury shares may also not vote. Electronic participation: Unitholders wishing to participate electronically at the Annual General Meeting are required to deliver written notice to the Annuity Company Secretary, with a copy to the Transfer Secretaries, at the applicable addresses as set out below, by no later than at 15:00 on Friday, 24 August 2012, stating that they wish to participate via electronic communication at the Annual General Meeting (“the electronic notice”). Any reference to “unitholder” in this paragraph includes a reference to that unitholder’s proxy. Note that unitholders will merely be able to participate, but not vote, via electronic communication. In order for the electronic notice to be valid it must contain: (a) if the unitholder is an individual, a certified copy of his/her 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 and the relevant resolution must set out who from the relevant entity is authorised to represent the relevant entity at the Annual General Meeting via electronic communication; (c) a valid email address and/or facsimile number (the contact address/number). By no later than 48 hours prior to the time of the Annual General Meeting, the Company shall use its reasonable endeavours to communicate with each unitholder who has delivered a valid electronic notice, by notifying such unitholder at its contact address/number of the relevant details through which the unitholder can participate via electronic communication. The Company reserves the right not to provide for electronic participation at the Annual General Meeting in the event that it proves not practical to do so. The costs of accessing any means of electronic participation provided by the Company will be borne by the unitholder so accessing the electronic participation. By order of the Board of Directors of the Company WT Green Company Secretary 13 July 2012 Registered office: Annuity Properties Limited Boundary Office Park 18 Rivonia Road Illovo, Sandton (PO Box 55112, Northlands, 2116) 42 Transfer office: Link Market Services South Africa (Pty) Limited Thirteenth Floor, Rennie House 19 Ameshoff Street Braamfontein, 2017 (PO Box 4844, Johannesburg, 2000) REF. W2CF14718
  44. 44. P R O P E R T I E S L I M I T E D ANNUITY PROPERTIES LIMITED (formerly Niqsha Beleggings CC) (Incorporated in the Republic of South Africa) (Registration number 2011/145994/06) Share code: ANP     ISIN: ZAE000165643 (“Annuity” or “the Company”) FORM OF PROXY FOR ANNUAL GENERAL MEETING Only for use by certificated unitholders and dematerialised unitholders with “own name” registration. All other dematerialised unitholders must contact their CSDP, broker or nominee to make the relevant arrangements concerning voting and/or attendance at the Annual General Meeting. This form of proxy relates to the inaugural Annual General Meeting of Annuity unitholders to be held at Sasfin Head Office, 29 Scott Street, Waverley, Johannesburg, 2090 on Wednesday, 29 August 2012 at 15:00, or any adjourned or postponed date and time determined in accordance with the provisions of the Companies Act, No 71 of 2008, as amended (“Companies Act”), which meeting is to be attended, participated in and voted at by unitholders recorded in the Company’s securities register on Friday, 17 August 2012 with the last day to trade in order to be able to attend and vote at the Annual General Meeting being Friday, 10 August 2012. For instructions on the use of this form of proxy and a summary of the rights of the unitholder and the proxy, please see the instructions and notes at the end of this form. I/We (full names) of (address) being a unitholder/s of the Company and being the registered owner/s of Company, hereby appoint (see note 1): linked units in the 1. or failing him/her, 2. or failing him/her, 3. or failing him/her, the chairperson of the Annual General Meeting as my/our proxy to attend, speak and to vote or abstain from voting on my/our behalf at the Annual General Meeting or at any adjournment or postponement thereof. I/We desire my/our proxy to vote as follows (see note 2): Indicate with a cross how you wish your votes to be cast. If you do not do so, the proxy may vote or abstain at his discretion. 1.1 1.2 1.3 1.3.1 1.3.2 1.3.3 1.4 1.4.1 1.4.2 1.5 1.6 1.7 1.8 Resolution In favour of Adoption of annual financial statements Re-appointment of auditor Election of Audit Committee AM Chait EC Loubser SJ Williams Re-election of directors who are to retire by rotation: M Ettin DT Soondarjee To place 20% of the authorised but unissued shares under the control of the directors General authority for an issue of shares for cash Special resolution 1: approval of non-executive directors’ fees for the financial year ending 31 March 2013 and up to the next annual general meeting Special resolution 2: financial assistance to future related and interrelated companies Against Abstain My/our proxy may not delegate his/her authority to act on my/our behalf to another person. Please see notes on the reverse side hereof for further instructions. Signed this Signature day of 2012 Number of linked units

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