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Adrenna Property Group Limited FY 2012 results
 

Adrenna Property Group Limited FY 2012 results

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Adrenna Property Group Limited FY 2012 results

Adrenna Property Group Limited FY 2012 results

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Adrenna Property Group Limited FY 2012 results Adrenna Property Group Limited FY 2012 results Document Transcript

  • FIRST EDITION: MAY 2012 Directors & Administration DIRECTORS AND ADMINISTRATION Executive Directors R P Fertig (Chief Executive Officer) ^§ B W Kaiser ^ Non-Executive Directors B Mothelesi +*# M Moela +*#^§ W P Alcock (Chairman) +*§ # Independent + Member of the Audit Committee * Member of the Remuneration Committee ^ Member of the Risk Committee § Member of the Social and Ethics Committee SECRETARY AND REGISTERED OFFICE B W Kaiser 2969 William Nicol Drive (Wedgewood Link), Bryanston 2021 (P O Box 62213, Marshalltown, 2107) AUDITORS RSM Betty & Dickson (Johannesburg) Registered Auditors Executive City, Cross Str & Charmaine Ave President Ridge, Randburg 2194 (P O Box 1734 Randburg 2125) TRANSFER SECRETARIES Computershare Investor Services (Pty) Limited (Registration number 1994/03973/06) 70 Marshall Street, Johannesburg 2001 (P O Box 61051, Marshalltown 2107) PRIMARY BANKERS FNB Corporate and Transactional Banking (Registration number 1929/001225/06) 6th Floor, 4 First Place Bank City Simmonds Street, Johannesburg PO Box 7791, Johannesburg 2022 COMPANY REGISTRATION NUMBER 1998/012245/06 COUNTRY OF INCORPORATION AND DOMICILE South Africa SHARE CODE ANA ISIN CODE ZAE000163580 ADRENNAALMANAC THEANNUALREPORTOFADRENNAPROPERTYGROUPLIMITED (FORMERLYCOLLIERSSOUTHAFRICAHOLDINGSLIMITED)AND ITS SUBSIDIARIES FOR THE YEAR ENDED 29 FEBRUARY 2012. CONTENTS: DIRECTORS & ADMINISTRATION [01] STATEMENT BY THE COMPANY SECRETARY [03] REPORT OF THE AUDIT COMMITTEE [03] CORPORATE GOVERNANCE [01, 02] DIRECTORS’ REPORT [03, 04] REPORT OF THE INDEPENDENT AUDITORS [03] DIRECTORS’ RESPONSIBILITIES & APPROVAL FOR THE FINANCIAL STATEMENTS [02, 03] STATEMENT OF FINANCIAL POSITION [04] STATEMENT OF CHANGES IN EQUITY [04] STATEMENT OF COMPREHENSIVE INCOME [05] CASH FLOW STATEMENT [05] NOTES TO THE FINANCIAL STATEMENTS [05] SHAREHOLDERS ANALYSIS [14] APPENDIX A [14] PERFORMANCE ON THE JSE SECURITIES EXCHANGE SOUTH AFRICA [14] SHAREHOLDERS’ DIARY [14] APPENDIX B [14] NOTES TO THE PROXY FORM [15] PROXY FORM [CUT-OUT ON INSIDE BACK COVER] NOTICE OF ANNUAL GENERAL MEETING [15, 16] ADDITIONAL COPIES OF THIS ANNUAL REPORT AND PROXY FORM ARE AVAILABLE FROM THE COMPANY SECRETARY AT: bernard@rmsprop.co.za REVIEW The group is committed to and complies with the principles of openness, integrity, accountability, transparency and social responsibility in accordance with the Code of Corporate Practices and Conduct embodied in the King III Report. The directors have established mechanisms and policies which are appropriate to the business and risks of the group and which ensure compliance with principles of responsible corporate governance and the continuous reassessment of the quality of the company’s corporate governance practices. Changes and refinements are made from time to time to recognise, where appropriate, international trends and best practices. BOARD OF DIRECTORS Composition of the board of directors The composition of the board of directors has remained at five directors, three of whom are non-executive (two independent), whilst the remaining two are the Chief Executive Officer and the director responsible for the financial affairs of the group. The independence of the independent non-executive directors is assessed on an annual basis. Appointment of directors Nominees for directorships are evaluated and interviewed by standing executives in order to be satisfied that such nominees will be able to contribute the necessary skills to the group before being offered a position on the board of directors. Background and reference checks are performed prior to consideration of an individual for nomination. Role and function of the board of directors The board of directors is responsible for the correct management and ultimate control of the group, while emphasising the need for ethical business practices and taking into account the group’s impact on internal and external stakeholders. In order to meet their responsibility to stakeholders, the board is responsible for setting the strategic objectives of the group, determining investment and performance criteria, setting ethical values to which the group will adhere, ensuring that management aligns itself to the ethical values of the group, and promoting a stakeholder- inclusive approach of governance. The board continually monitors the relationship between management and the stakeholders of the group, and is actively working towards ensuring that the group not only survives but also thrives. To achieve this, the board assesses any risks that the group may face, ensures that the strategy formulated is aligned with the purpose of the group, and ensures that the strategy will result in sustainable outcomes. The group CEO is primarily responsible for the management of the group and liaising with the appointed operating executives. The CEO’s responsibilities include ensuring that agreed strategies are implemented. He also investigates and evaluates corporate opportunities which are then presented to the executive directors for consideration. The group financial director, who is also the company secretary, is responsible for the compliance with the requirements of the JSE Limited, South African Revenue Services and CIPC, as well as other regulatory bodies. The two independent non-executive directors are both members of and chair the audit and remuneration committees. Appraisal of directors The board performs periodic evaluations of the performance of individual directors, wherefrom any needs are identified and appropriate action plans are compiled. Training needs such as Directors’ Responsibilities, Financial Reporting and Companies Act updates are addressed through-out the year on a continuous basis. Independence of the board of directors The board of directors’ independence from the daily management team is maintained as follows: • The non-executive directors do not hold any service contracts and their remuneration is not linked to the financial performance of the group; and • all directors have access to the advice and services of the company secretary and are entitled to seek independent professional advice on the affairs of the group at the company’s expense. The independence of the independent non-executive directors was reviewed and assessed during the year under review, and no potential conflicts of interest or issues which may negatively affect independence were identified. Said independence has been confirmed by the independent non-executive directors. The board of directors meets on a formal basis quarterly, with additional meetings convened when circumstances necessitate. The group’s overall daily operations are managed and overseen by executive directors of each operating subsidiary who report to the main board at least on a monthly basis with ad hoc meetings taking place regularly. There are comprehensive management reporting disciplines in place which include the preparation of annual budgets by all operating units, which are revised on a six monthly basis. Individual and consolidated operational budgets are reviewed and approved by the board. Monthly results and the financial status of operating units are reported against approved budgets. Directors’ attendance at company meetings The table below sets out the attendance of directors at the company’s formal board meetings, held during the year. Attendance was maintained at 100%, and all directors were actively involved at board level: Meetings Director attended R P Fertig 4/4 W P Alcock 4/4 B W Kaiser 4/4 B Mothelesi 4/4 M Moela 4/4 Directors’ remuneration The chief executive officer is remunerated by the holding company. The remaining executive director was paid by a subsidiary up until the Management Buy Out (MBO) date. Subsequent to the MBO date, this director entered into a consultancy agreement with the company, as disclosed in note 15. There are no service contracts with the executive directors. Details of directors’ remuneration are set out in note 23 of this report. The remuneration of the executive directors is reviewed on an annual basis in consultation with the remuneration committee. BOARD COMMITTEES Audit committee The group audit committee is chaired by an independent non-executive director and consists of the chairman of the company and the two non-executive directors. Committee Chair B Mothelesi Members M Moela W P Alcock The report of the audit committee is set out on page 4. Remuneration/Nominations Committee The remuneration/nominations committee, which meets at least once per year, is chaired by an independent non-executive director and consists of the chairman of the company and the two non-executive directors. Committee Chair M Moela Members B Mothelesi W P Alcock Corporate Governance Corporate Governance (cont.) CONTINUED ON PAGE 02 PREPARATION AND SUPERVISION OF FINANCIAL STATEMENTS The preparation of the annual report was supervised by Bernard Kaiser, the group financial director. These annual financial statements have been duly audited as required by paragraph 30 (2)(a) of the Company’s Act of South Africa, 2008.
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 002 He is involved with the day to day corporate administration of the company, as well as advising and assisting with the group’s corporate and restructuring activities. Mr M Moela Miller Moela was born in Diepkloof, Soweto and matriculated at Bopasenatla High School in Dieploof in 1981. In 1984 Miller started working at the then Johannesburg Stock Exchange as a price recorder on the trading floor. He enrolled for a B Com (Law) degree at the then Vista University, Soweto Campus. After completion of the junior degree he enrolled for an LLB post-graduate degree at the same university. In 2002 he was admitted to practice as an Advocate of the High Court of South Africa. In the same year he enrolled for a two-year post- graduate Advanced Diploma in Company Law at the University of the Witwatersrand, completing the diploma in 2003. Miller worked at the JSE for 19,5 years. In May 2004 he joined the Board of LPC Manhattan Sponsors (Pty) Ltd. The company has merged with Arcay Sponsors and is now called Arcay Moela Sponsors (Pty) Ltd. He is a main board member of Adrenna Property Group Limited (formerly Colliers South Africa Holdings Limited) and chairs the Remuneration and Nomination Committees. Ms B Mothelesi Boitumelo Mothelesi holds a B Com Hons from UNISA having majored in Investment Management, Business Finance and Risk Management. She also holds a BCTA from the University of Natal majoring in Financial Accounting, Taxation and Auditing. She has a Treasury Operations Certificate from Association Cambiste Internationale (ACT). Boitumelo served her articles with PriceWaterhouseCoopers and has subsequently accumulated 18 years financial market experience. Boitumelo is currently employed by Standard Bank Treasury, heading the derivatives confirmations and settlements sections. She is a main board member of Adrenna Property Group Limited (formerly Colliers South Africa Holdings Limited) and chairs the Audit Committee. Mr W P Alcock Wayne Alcock is the Chief Executive Officer of the Human Resources division which was the subject of a management buy-out during the 2010 financial year. Wayne has remained on the board as a non- executive director as his in-depth knowledge of the operations of the group over the past years would be difficult to replace. Wayne was appointed as chairman of the company during the 2012 financial year. Corporate Governance (cont.) The group HR consultants attend the meeting by invitation. The chairman of the company, on account of his extensive experience in payroll administration, HR consulting and employment policies, was invited to join the committee. The remuneration philosophy of the group and the main purpose of the committee is to ensure that the company’s executive directors and senior employees are appropriately rewarded for their individual and joint contributions to the group’s overall performance. Independent external studies and comparisons are used to ensure that compensation is market and industry related. Remuneration report Details of all benefits paid to directors are set out in note 23 of this report. Following the group corporate restructure the company outsources all services and as such does not employ any staff. Individual base pay is determined in consultation with the remuneration committee, based on the qualifications and designation of the individual and their role and function within the group hierarchy. All employees are subjected to periodic performance reviews and are incentivised through corresponding increases in line with their personal performance. No salaries within the group exceed the median for the property sector, and no material ex-gratia payments of any nature are executed. RISK MANAGEMENT Risk committee A risk committee under the chairmanship of the group CEO R Fertig and including B Kaiser and M Moela, was formally established during the year under review. The committee has set a framework of financial reporting, internal and operating controls to ensure reasonable assurance as to timeous reporting of business information, safeguarding of company assets, compliance with statutory law and regulations, recording of company results and operations in terms of the company’s standards of business conduct. This includes monthly meetings with operating executives and weekly cash flow reviews. There have been no instances of non-compliance by either the group or its directors in their capacity as such. The directors are actively involved in the identification, assessment and management of risks inherent to the group. Monthly meetings of all operations are attended by the directors where risk areas are discussed and plans to address these areas are formulated. Any plans arising from these meetings are implemented as soon as possible so as to ensure the effective management of risks. The board have assessed this process and the results thereof, and are satisfied that the system has operated effectively and continues to do so. No undue, unusual or unexpected risks arose during the current year. Further information regarding Financial Risk Management is contained in the notes to the financial statements. The board of directors is responsible for monitoring the ongoing effectiveness of these controls and operating frameworks. The external auditors have unrestricted access to the directors of the group. There is a close communication between the board of directors and the external auditors. Areas of control weakness are brought to the attention of all relevant parties and remedial action is taken immediately to ensure no loss or misstatement due to the inadequacy of the internal control environment. Details of an assessment of Financial Risks are set out in note 22 to these Financial Statements. CODE OF ETHICS The board of directors has established a Social and Ethics committee which forms the core of the values and ethics subscribed to by the group. These values and ethics are sustained by the directors’ belief in free and fair dealings in utmost good faith and respect for the law and regulations. All employees, including directors, are required to act with honesty and integrity and to maintain the highest ethical standards internally and externally. The committee’s charter includes monitoring the 10 principles set out in the United Nations Global Compact Principles and the OECD recommendations regarding corruption. The committee has three members, namely W P Alcock (Chairman), R P Fertig and M Moela. Safety, health, the environment and social responsibility The company accepts its responsibility to its employees and the community in which it operates in matters relating to the environment, health and safety. All activities are conducted in compliance with applicable laws and regulations. In this regard, the group has an internal health and safety committee, comprising staff members the activities of which are monitored by an external consultant. The company: • adopts a non-discriminatory employment practice regardless of an employee’s HIV/AIDS status. • prohibits the testing of individuals for the purpose of selection of employees • maintains confidentiality regarding an employee’s HIV/AIDS status. The company actively supports the upliftment of the previously disen- franchised by supporting desirable causes in the social welfare arena. Human resources The company has a variety of participative structures on issues which affect employees directly or materially. These structures are designed to achieve good employer/employee relations through effective sharing of relevant information, consultation and the identification and resolution of conflict. The group is committed to providing equal opportunities for its employees regardless of their ethnic origins, or gender or any other matter. A programme is in place to ensure that the employee profile will be more representative of the demographics of the country whilst maintaining the group’s high standards. The company has submitted its original Employment Equity Report and the ongoing annual revisions of the Report are submitted to the Department of Manpower in compliance with the Employment Equity Act. SUSTAINABILITY REPORTING Financial results The directors have given their commentary regarding the financial results in the Directors Report. The main contributor to the group’s continuing operating profit before tax is the fixed property investments. Significant rental revenues have been achieved and it is the opinion of the directors that these operations will be the main focal point of the group going forward. In this manner the group will ensure the maximisation of shareholder wealth. Going concern In the opinion of the directors the group has adequate resources to continue in operational existence for the foreseeable future. Financial gearing, cash flows and access to loan capital are considered to be sufficient to fund existing and future operations. For this reason, the directors continue to adopt the going concern basis in preparing the annual financial statements. Negative impacts of operations Occupancy levels of all buildings held for rental purposes have been identified as a significant factor in the level of revenue generated by the group. Any declines in tenancy will directly impact the level of operating income generated, and as the majority of the group’s assets are comprised of investment property this may lead to material fluctuations in results. As at 29 February 2012 the total occupancy level of country-wide investment properties was 94,5%. This is in line with expectations, taking into account the current economic condition. An occupancy level within a range of 90% to 95% was identified as being the group’s intended performance indicator for the year to 29 February 2012. As can be seen from the above this has been achieved and remains the target for the year to 28 February 2013. Positive impacts of operations The demand for mini factory and light industrial premises improved during the year resulting in a positive growth in earnings from this sector. To benefit from this improvement the group is evaluating an expansion of lettable space in order to further grow, as well as looking for acquisitions of additional mini factory/light industrial properties. COMMUNICATION WITH STAKEHOLDERS The company is committed to a policy of timeous and effective communication with shareholders and other stakeholders through shareholder meetings, the annual financial report and interim financial report. Matters of both financial and non-financial nature are communicated to stakeholders in a timeous and transparent fashion. No requests for information that were lodged with the group in terms of the Promotion of Access to Information Act, were refused. SHARE DEALINGS BY DIRECTORS All dealings by directors are regulated and monitored as required by the listing requirements of the JSE Limited. No director or staff member is permitted to deal in shares without prior approval from the Company Secretary/Chairman. Details of directors’ shareholdings are set out in the shareholders information section of this annual report. PROFILES OF DIRECTORS Mr R P Fertig Ricky Fertig (age 49), is the Chief Executive Officer of Adrenna Property Group Limited (formerly Colliers South Africa Holdings Limited), a property investment company operating in South Africa. After establishing a successful human resources consultancy group, Mr Fertig participated in the listing of the Quyn Group on the Johannesburg Stock Exchange in 1999. Quyn subsequently acquired the Colliers group of companies and changed its name to Colliers, which was then changed to Adrenna Property Group Limited in February 2012. Ricky has been intimately involved in the development and acquisitions/ disposals of properties over the past 10 years and is responsible for the successful growth of the portfolio of investment properties, and is currently involved in negotiations to acquire further income-producing properties. MR B W KAISER Bernard Kaiser (age 67) is a qualified accountant and is financial director of Adrenna Property Group Limited (formerly Colliers South Africa Holdings Limited), as well as the company secretary. After a career in merchant banking and stock broking, dealing with the advising and structuring of companies quoted on the Johannesburg Stock Exchange, and managing a number of successful new listings, Bernard joined the group in 1999. Directors’ Responsibilities & Approv The directors are required by the Companies Act of South Africa, 2008, 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 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 financial statements which are prepared in accordance with the listing requirements of the JSE Limited, International Financial Reporting Standards, the AC 500 standards as issued by the Accounting Practices Board and its successor, and the South African Companies Act, 2008, 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 sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of 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 group’s cash flow forecasts for the year to 28 February 2013 and, in the light of the review and the current financial position, they are satisfied that the group has or will have access to adequate resources to continue in operational existence for
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 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 controls 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 controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the annual financial statements present fairly, in all material respects, the financial position and the consolidated financial position of Adrenna Property Group Limited and its subsidiaries as at 29 February 2012, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa. JOHN JONES, CA(SA) RA RSM BETTY & DICKSON (JOHANNESBURG), REGISTERED AUDITORS EXECUTIVE CITY CROSS STREET AND CHARMAINE AVENUE, PRESIDENT RIDGE, RANDBURG 2194 PO BOX 1734 RANDBURG 2125 25 MAY 2012 JOHN JONES, CA(SA) RA We have audited the annual financial statements of Adrenna Property Group Limited and the consolidated annual financial statements of Adrenna Property Group Limited and its subsidiaries, which comprise the statement of financial position as at 29 February 2012, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, and the Directors’ Report, which appear on pages 3 to 13, together with the shareholder analysis, which appears on page 14. DIRECTOR’S RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS The company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, 2008, and for such internal control as the directors determine is necessary to enable the preparation of annual financial statements that are free from material misstatements, whether due to fraud or error. AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. 032 Report of the Independent Auditors to the Members of Adrenna Property Group Ltd pproval of the Financial Statements the foreseeable future. Although the directors are primarily responsible for the financial affairs of the group, they are supported by the group’s external auditors. The external auditors are responsible for independently reviewing and reporting on the group’s financial statements. The financial statements have been examined by the group’s external auditors and their report is presented herewith. The financial statements set out herein which have been prepared on the going concern basis, were approved by the board on 25 May 2012 and are signed on its behalf by: R P FERTIG B W KAISER Director Director Johannesburg The report of the audit committee is presented as required by sections 94(7)(f) of the Companies Act of South Africa, 2008. Functions and responsibilities of the audit committee The role of the audit committee is to assist the board in performing an objective and independent review of the functioning of the organisations’ finance and accounting control mechanisms. It exercises its functions through close liaison and communication with corporate management and the external auditors. The committee is guided by its terms of reference, dealing with membership, structure and levels of authority and has the following responsibilities: • ensuring that the appointment of an auditor complies with applicable legislation and the requirements of regulatory authorities; • nominating for the appointment of a registered external auditor and the assessment of its independence of the company; • matters relating to fi nancial accounting, accounting policies, reporting and disclosures; • external audit policy including determination of fees and terms of engagement; • review/approval of external audit plans, fi ndings, problems, reports, fees and determination and approval of non-audit services that the external auditor may provide to the company; • consulting with the external auditors alone to discuss any concerns they may have regarding their findings during the audit; • compliance with the company’s code of ethics. The audit committee addressed its responsibilities properly in terms of the charter during the 2012 financial year. No changes to the charter were adopted during the 2012 financial year. The audit committee has satisfied itself as to the financial director’s experience and expertise. The audit committee continually reassesses the charter to ensure compliance with King III and the new Companies Act, as well as reviewing the accounting policies and systems of the group with the financial manager. Members of the audit committee The audit committee consists of the chairman and the two independent non-executive directors. The external auditors, the chief executive officer, the financial director and the financial manager are all invited to attend the audit committee meetings. Frequency of meetings The committee met once during the 2012 financial year. Independence of external audit One of the responsibilities of the audit committee is the assessment of the independence of the external auditor. The committee is satisfied that the external auditor is independent of the company and group. The external auditor has also confirmed that its personnel are independent of the company. Review of finance function The audit committee has performed a review of the adequacy of the group’s finance function, and has satisfied themselves that this function is composed of individuals with the knowledge, expertise and qualifications necessary to fulfil their duties effectively. The group financial director has been approved by the audit committee, and they have satisfied themselves as to his competence to act in this role. The group financial manager is a qualified Chartered Accountant Report of the Audit Committee For the year ended 29 February 2012 with experience in the property segment, and heads up a team of knowledgeable and efficient accountants. Financial statements Management has reviewed the financial statements and group annual financial statements with the audit committee, and the audit committee has reviewed them without management or external auditors being present. The quality and the application of the accounting policies were discussed with the external auditors, The audit committee considers the annual financial statements and group annual financial statements of Adrenna Property Group Limited to be a fair presentation of its financial position on 29 February 2012 and the results of the operations, changes in equity and cash flows for the period then ended, in accordance with International Financial Reporting Standards and the Companies Act of South Africa, 2008. Furthermore, the audit committee has reviewed the disclosure of sustainability issues in the annual report and have satisfied themselves that such disclosures are reliable and do not conflict with the financial information presented. During the year the committee satisfied its responsibilities in compliance with its terms of reference and is satisfied with the independence of the external auditors. Preparation and supervision of financial statements The preparation of the annual report was supervised by Bernard Kaiser, the group financial director. These annual financial statements have been duly audited as required by paragraph 30 (2)(a) of the Company’s Act of South Africa, 2008. On behalf of the Audit Committee B MOTHELESI (CHAIRPERSON) 25 MAY 2012 Statement by the Company Secretary In my capacity as Company Secretary, I hereby confirm, in terms of the Companies Act of South Africa, 2008, that for the 12 months ended 29 February 2012, the company has lodged with the Registrar of Companies all such returns as are required of a public company in terms of this Act and that all such returns are true, correct and up to date. B W KAISER (COMPANY SECRETARY) 25 MAY 2012 The directors have pleasure in presenting their report for the twelve months ended 29 February 2012. NATURE OF BUSINESS The group invests in income producing fixed property. CORPORATE RESTRUCTURE During the year under review the directors resolved that the interests of shareholders would be best served if they were to be invested in a pure property owning entity whose only assets would be income producing properties. In this regard the directors proceeded with a corporate restructure which entailed the disposal by the group of what was classified as non-core assets to a consortium comprising three directors of the company, W P Alcock, R P Fertig and B W Kaiser and an executive withwwin the group I K Setzkorn (the MBO consortium) for a consideration of R1,250,000.00 payable over a period of 12 months together with interest at the prime overdraft rate as quoted by First National Bank Limited. In terms of the rules of the Johannesburg Stock Exchange Limited (the JSE) the disposal was classified as a small related party transaction. In compliance with the JSE rules the MBO consortium secured the services of a JSE approved independent advisor to prepare a report regarding the fairness or otherwise of the MBO transaction. The independent advisor, Mazars Corporate Finance (Pty) Limited determined the transaction as being fair. The non-core assets disposed of comprised the service companies including the loss making auction and residential operations. In addition certain properties which were, at the time of the MBO, classified as “properties for sale” were included in the MBO transaction. The effective date of the MBO was 1 September 2011 and the effects on the net assets and earnings of the group are disclosed in the attached Consolidated Statement of Financial Position at 29 February 2012 and the Statement of Comprehensive Income for the year ended 29 February 2012 wherein the earnings and net assets relating to the MBO are disclosed separately under the heading “disposal group”. The loss attributable to the disposal group is a significant amount in that, at the time of the MBO, the directors deemed it prudent to provide for all possible impairments and write downs on assets in order to ensure sustainability going forward for both Adrenna and the MBO group. The primary reason for the restructure was to ensure that the group would become a pure property holding entity which could then expand its portfolio through acquisitions of additional income producing properties as well as to ensure that the listed entity was not handicapped by having loss making entities within it’s group structure. At the same time as the corporate restructure dealt with above the company entered into an agreement with Colliers International in terms of which Colliers South Africa Holdings, its subsidiaries and affiliations would withdraw from the Global Colliers Affiliation Agreement. Part of the agreement entailed the discontinuance of the use of the Colliers name. Accordingly at a general meeting of shareholders held on 8 February 2012 the company’s name formally changed to Adrenna Property Group Limited. The change of name was officially registered by the Companies and Intellectual Property Commission on 9 February 2012. Directors’ Report for the year ended 29 February 2012 CONTINUED ON PAGE 04
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 004 Statement of Financial Position For the year ended 29 February 2012 ASSETS Non-current assets Property, plant and equipment 2 – 5 197 – – Investment properties 3 190 053 228 583 – – Investments in subsidiaries 4 – – 11 891 14 591 Investments and loans 5 – 15 746 – – Operating lease debtors 14 3 020 – – – Deferred taxation 6 5 344 15 340 205 655 198 417 264 866 12 096 15 246 Current assets Amounts owing by group companies 7 – – 13 099 33 480 Investments and loans 5 12 359 – 11 963 – Inventory 8 10 188 44 750 – – Accounts receivable 9 1 905 6 937 2 782 – Operating lease debtors 14 705 696 – – Cash and cash equivalents 10 227 3 596 – 141 25 384 55 979 27 844 33 621 Total assets 223 801 320 845 39 940 48 867 EQUITY AND LIABILITIES Capital and reserves Stated capital (2011: share capital) 11 567 558 567 559 Share premium 11 – 8 – 8 Reserves 87 012 122 652 16 658 16 513 Non-controlling interest – 17 559 – – Shareholders’ interest 87 579 140 777 17 225 17 080 Non-current liabilities Borrowings 12 80 346 105 076 – – Deferred taxation 6 22 354 20 303 – – 102 700 125 379 – – Current liabilities Current portion of borrowings 12 17 557 32 419 – – Amounts owing to group companies 7 – – 9 092 31 086 Investments and loans 5 1 727 – 1 234 – Accounts payable 9 2 370 8 592 554 25 Operating lease creditors 14 – 20 – – Taxation 222 1 931 189 676 Bank overdraft 10 11 646 11 727 11 646 – 33 522 54 689 22 715 31 787 Total equity and liabilities 223 801 320 845 39 940 48 867 AUDITED AUDITED GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 NOTES R’000 R’000 R’000 R’000 Statement of Changes in Equity For the year ended 29 February 2012 STATED CAPITAL Ordinary stated capital Balance at beginning of period 558 558 559 559 Transfer of share premium 8 – 8 – Disposal of subsidiary holding treasury shares 1 – – – Balance at end of period 567 558 567 559 SHARE PREMIUM Balance at the beginning of the period 8 8 8 8 Transfer to stated capital account (8) – (8) – Balance at the end of the period – 8 – 8 RESERVES Retained income Balance at the beginning of period: 122 652 122 348 16 513 16 916 Comprehensive (loss)/income attributable to ordinary shareholders (53 199) 304 145 (403) Reduction of non-controlling interest due to MBO 17 559 – – – Balance at the end of the period 87 012 122 652 16 658 16 513 Total equity and reserves attributable to ordinary shareholders 87 579 123 218 17 225 17 080 Non-controlling interests Balance at beginning of period 17 559 17 559 – – Waiver of rights to non-controlling interest (17 559) – – – Balance at end of period – 17 559 – – Total equity and reserves 87 579 140 777 17 225 17 080 AUDITED AUDITED GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 NOTES R’000 R’000 R’000 R’000 At the same meetings of shareholders the company’s authorised and issued ordinary share capital was converted from shares having a par value to shares without a par or nominal value in accordance with the Companies Act, 2008. EVENTS AFTER THE REPORTING PERIOD The directors are not aware of any matter or circumstance arising since the end of the financial year that may require adjustment of the annual financial statements. ACCOUNTING POLICIES Accounting policies are consistent with the previous period, except for policies adopted as a result of the adoption of a new standard or interpretation, as detailed in Note 1(S). NON-CURRENT ASSETS Apart from the disposal of non-core subsidiaries as detailed in Note 21, the major changes to non-current assets during the year under review were as follows: GROUP COMPANY 2012 2012 R’000 R’000 Acquisition of investment property 54 – Disposal of investment property (25 043) – Fair value adjustments to investment property 2 359 – SHARE CAPITAL The company’s authorised and issued ordinary share capital was converted from shares having a par value into shares of no par value during the year under review. Other than for the conversion, there was no change in the share capital of the company. Details are set out in note 11 to the annual financial statements. GENERAL REVIEW AND FINANCIAL RESULTS The environment within which the group operates remained depressed during the year under review. While market conditions have stabilised, your directors do not anticipate a serious recovery to occur within the next 18 to 24 months. Notwithstanding the foregoing, it is pleasing to note that the continuing operations of the group achieved operating income before interest and fair value adjustments of R9,2 million, compared to a profit in 2011 of R6,3 million (including the MBO entities). The group maintained the percentage of borrowings directly related to fixed properties at 51,5% (2011: 52,4%), well within its target maximum of 60%. DIVIDENDS Taking into account the negative impacts of the weak trading conditions in the property industry, your directors have resolved to retain cash in the group, so as to bolster and grow the annuity income operations for the benefit of shareholders. DIRECTORS’ INTERESTS The direct and indirect interests of the directors in the issued share capital of the company at 29 February 2012 was as follows: 2012 2011 Beneficial – Direct 6 176 290 6 176 290 Beneficial – Indirect 5 431 061 5 431 061 11 607 351 11 607 351 DIRECTORS AND SECRETARY For directors’ interests in contracts see related party contracts in note 15: Executive directors Non-executive directors R P Fertig (CEO) W P Alcock (Chairman) B W Kaiser Independent non-executive Secretary directors B W Kaiser B Mothelesi M Moela Rotation of directors Messrs W P Alcock and M Moela retire by rotation but have offered themselves for re-election. LITIGATION Parties alleging to be clients have instituted action against a subsidiary company in the amount of R3,6 million (excluding interest). These claims are being opposed and your directors have been advised that the company has a good prospect of successfully opposing these claims. The maximum estimated costs of defending these claims has been set at R300 000. Details of all contingencies have been disclosed in note 13. HOLDING AND SUBSIDIARY COMPANIES The company is not a subsidiary of any other company. Details of investments in and loans to subsidiaries (before intercompany adjustments) are set out in Appendix A to the financial statements. During the year under review the following special resolutions were passed: 1. Adrenna Property Group Limited Resolution: Change of name from Colliers South Africa Holdings Limited Date lodged: 8 February 2012 Date registered: 9 February 2012 2. Adrenna Property Group Limited Resolution: Conversion of authorised and issued ordinary shares having a par value of 1 cent each to shares of no par value Date lodged: 23 February 2012 Date registered: 24 February 2012 The subsidiaries of the company did not pass any special resolutions during the year under review. GOING CONCERN The financial statements have been prepared on the going-concern basis, since the directors have every reason to believe that the company has adequate resources in place to continue as a going concern in the foreseeable future. Based on the promising performance of the investment properties within the portfolio the directors are confident that sufficient third party rentals will be generated to cover the operating costs incurred. Directors’ Report for the year ended 29 February 2012 (continued)
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012054 Statement of Comprehensive Income For the year ended 29 February 2012 Notes to the Financial Statements For the year ended 29 February 2012 REVENUE 16 26 324 67 042 4 053 726 Operating income/(loss) before interest and revaluations 17 9 243 6 333 2 507 (650) Fair value adjustment on investment properties 2 697 2 207 – – Investment income 18 62 1 026 23 4 Finance costs 19 (8 106) (12 015) (484) (47) Net income/(loss) before taxation 3 896 (2 449) 2 046 (693) Taxation 20 (186) 2 606 (451) 290 Income/(loss) after taxation from continuing operations 3 710 157 1 595 (403) (Loss)/income after taxation from disposal group 21 (56 909) – – – (Loss)/income for the year (53 199) 157 1 595 (403) Non-controlling interest – (150) – – (Loss)/income attributable to ordinary shareholders (53 199) 307 1 595 (403) Total net (loss)/profit (53 199) 157 1 595 (403) Other comprehensive income Foreign currency translation reserve – (6) – – Sale of group companies – – (1 450) – Total comprehensive (loss)/income attributable to: Ordinary shareholders (53 199) 304 145 (403) Non-controlling interests – (153) – – (53 199) 151 145 (403) Basic earnings/(loss) per share (cents) 24 Continuing operations 6,6 0,54 Disposal group (101,7) – – – There was no dilution in basic or headline earnings per share during the current year. CashFlowStatement For the year ended 29 February 2012 Cash generated by operations 25.1 5 339 8 657 (1 196) 1 136 Finance costs (8 106) (12 015) (484) (47) Investment income 62 1 026 23 4 Taxation (paid)/refunded (1 926) 2 207 (487) 47 (4 631) (125) (2 144) 1 140 Cash flows from investing activities Acquisition of property, plant and equipment 2 (27) (454) – – Purchase of investment property 3 (54) (28 585) – – Disposal of investment property 3 799 12 459 – – Movement in outside shareholders’ interest 4 191 2 847 – – Movement in financial assets – (8 955) – 782 Cash balance pertaining to disposal group 21 (2 578) – – – 2 331 (22 688) – 782 Cash flows from financing activities Proceeds from/(repayment of) loans – – (20 760) – Proceeds from/(repayment of) borrowings (988) 10 120 – – Net movement in loans with group companies – – 20 381 (4 284) Net movement in investments in subsidiaries – – (9 264) 1 490 (988) 10 120 (9 643) (2 794) Movement in cash and cash equivalents (3 288) (12 693) (11 787) (872) Cash and cash equivalents at beginning of period (8 131) 4 562 141 1 013 Cash and cash equivalents at the end of the period 25.2 (11 419) (8 131) (11 646) 141 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Presentation of Annual Financial Statements The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board and its successor, and the Companies Act of South Africa, 2008. The annual financial statements have been prepared on the historical cost basis, except for the measurement of investment properties and certain financial instruments at fair value and incorporate the principal accounting policies set out below. These accounting policies are consistent with previous years, except for changes due to the first time adoption of standards and interpretations as detailed in section S. (i) Significant judgements In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Judgement was applied in the following areas: • classification and valuation of investment properties; • residual values and useful lives of property, plant and equipment; • impairment of assets; • provisions for taxation and deferred taxation; • trade and other receivables and/or loans and receivables. B. Investments in Subsidiaries Group Annual Financial Statements The group annual financial statements include those of the holding company and its subsidiaries. Intercompany transactions are eliminated on consolidation. The results of the subsidiaries are included from the effective dates control is acquired to the dates such control is relinquished. The results of foreign subsidiaries are included in the consolidated group annual financial statements as follows: • items of income or expense are consolidated using the average rate of exchange for the period under review; and • items recorded in the statement of financial position are consolidated using the ruling rate of exchange as at the year-end date. The effects of exchange rate differences are recognised in the Foreign Currency Translation Reserve through Other Comprehensive Income. Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. On acquisition the group recognises a subsidiary’s identifiable assets, liabilities and contingent liabilities at fair value except for assets classified as held-for-sale, which are recognised at fair value less costs to sell. Company annual financial statements In the company’s separate annual financial statements, investments in subsidiaries are carried at cost less any accumulated impairment. In the company’s separate annual financial statements, investments in foreign subsidiaries are recorded at the translated cost using the ruling exchange rate on the date of acquisition. The cost of an investment in a subsidiary is the aggregate of: • the fair value, at the date of exchange, of assets acquired, liabilities incurred or assumed, and equity instruments issued by the company; plus • any costs directly attributable to the purchase of the subsidiary. Any adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably. C. Investment properties (i) Initial measurement Investment property is recognised as an asset when it is probable that the future economic benefits that are associated with the investment property can be measured reliably. Investment property is initially recognised at cost. Transaction costs are included in the initial measurement. Costs include costs incurred initially and costs incurred subsequently in respect of additions and improvements. (ii) Fair value Subsequent to initial measurement investment property is measured at fair value. The group’s investment property is revalued annually to open market value, with changes in the carrying value recognised through the statement of comprehensive income. Rent receivable is spread on a straight-line basis over the period of the lease. The carrying value of the investment property excludes any amount reported as a separate asset as a result of recognising rental income on this basis. (ii) Own occupancy Where the area occupied by the group is insignificant in relation to the total area of a property owned, the entire property is classified as an investment property. D. Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment is recognised as an asset, when: • it is probable that future economic benefits associated with the item will flow to the company; and • the cost of the item can be measured reliably. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently in respect of additions and replacements. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. Depreciation is provided on all property, plant and equipment other than freehold land, to write down the cost, less residual value, on a straight-line basis over their useful lives as follows: ITEM USEFUL LIFE Furniture and fixtures 6 years Motor vehicles 10 years Computer equipment 3 – 5 years Depreciation methods, residual values and useful lives are reassessed at each accounting date. The depreciation charge for each period is recognised through the statement of comprehensive income, unless it is included in the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included through the statement of comprehensive income when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. AUDITED AUDITED GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 NOTES R’000 R’000 R’000 R’000 AUDITED AUDITED GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 NOTES R’000 R’000 R’000 R’000
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 006 Notes to the Financial Statements For the year ended 28 February 2012 continued E. Joint ventures Joint ventures are those entities in respect of which there is a contractual agreement whereby the group and one or more other venturers undertake an economic activity, which is subject to joint control. Joint ventures are accounted for by means of the proportionate consolidation method whereby the attributable share of each of the assets, liabilities, income and expenses and cash flows of the jointly- controlled entities is combined on a line-by-line basis with similar items in the group’s annual financial statements. The consolidated cash flow statement includes the group’s share of the cash flows of the jointly controlled entities. A proportionate share of intercompany items is eliminated. F. Inventory Land acquired for future development and sale in the ordinary course of business is reflected under current assets and is valued at the lower of cost or net realisable value for each specific property. G. Goodwill Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets acquired, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged through the statement of comprehensive income. Goodwill is initially measured at cost, being the excess of the cost of the business combination over the company’s interest of the net fair value of the identifiable assets, liabilities and contingent liabilities. Where the fair value of identifiable assets, liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is credited in full to the statement of comprehensive income. Subsequently goodwill, acquired in a business combination, is carried at cost less any accumulated impairment. Internally generated goodwill is not recognised as an asset. H. Financial instruments (i) Initial recognition The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial assets and financial liabilities initially are recognised at fair value on the company’s balance sheet when the company becomes party to the contractual provisions of the instrument. Financial assets and liabilities are recognised at fair value. In the case of financial assets or liabilities not classified at fair value through the statement of comprehensive income, transaction costs that are directly attributable to the acquisition or issue of the financial instrument are added to the fair value. Cash and cash equivalents are designated at fair value through the statement of comprehensive income. (ii) Subsequent measurement After initial recognition financial assets are measured as follows: • Loans and receivables are measured at amortised cost using the effective interest method; • If the market for a financial asset (and for unlisted securities) is not active, fair value is established by using valuation techniques. These include the use of recent arm’s length transactions, references to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs; • Other financial assets, including derivatives and cash and cash equivalents, are measured at fair values, without any deduction for transaction costs which may incur on sale or other disposal. After initial recognition financial liabilities, including accounts payable, are measured at amortised cost using the effective interest method. (iii) Gains and losses A gain or loss arising on a financial asset or financial liability is recognised as follows: • A gain or loss on a financial asset or financial liability as at fair value is recognised through the statement of comprehensive income. • Financial assets and financial liabilities carried at amortised cost; a gain or loss is recognised through the statement of comprehensive income when the financial asset or financial liability is derecognised or impaired, and through the amortisation process. (iv) Financial liabilities Financial liabilities at amortised cost include interest bearing loans and borrowings, and are recognised initially at fair value less attributable transaction costs. Subsequent to the initial recognition, interest bearing loans and borrowings are stated at amortised cost, with any difference between cost and redemption value being recognised through the statement of comprehensive income over the year of borrowings on an effective interest basis. (v) Amounts owing to/from group companies These include current accounts to holding companies, fellow subsidiaries, joint ventures and associates. These are carried at fair value through profit or loss. This classification has changed since the prior year, and was effected to ensure improved compliance with International Financial Reporting Standards. (vi) Derecognition The group derecognises financial assets if the contractual rights to cash flows have expired or are transferred without the retention of any risk or reward. The group derecognises financial liabilities when the obligations thereto have been discharged, cancelled or expired. I. Share capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. If the company reacquires its own equity instruments, those treasury shares are deducted from equity. No gain or loss is recognised through the statement of comprehensive income on the purchase, sale, issue or cancellation of the company’s own equity instruments. Consideration paid or received is recognised directly in equity. J. Provisions and contingencies Provisions are recognised when: • the group has a present obligation as a result of a past event; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the obligation. The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised, when it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset. Provisions are not recognised for future operating losses. If an entity has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. Contingent assets and contingent liabilities are not recognised. K. Taxation (I) Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. (ii) Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from: • the initial recognition of goodwill; or • the initial recognition of an asset or liability in a transaction which: – is not a business combination; and – at the time of the transaction, affects neither accounting profit or taxable profit(tax loss). A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures, except to the extent that both of the following conditions are satisfied: • the parent, investor or venturer is able to control the timing of the reversal of the temporary difference; and • it is probable that the temporary difference will not reverse in the foreseeable future. A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that: • is not a business combination; and • at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax asset is recognised for all deductible temporary differences arising from investments in subsidiaries, branches and associates, and interest in joint ventures, to the extent that it is probable that: • the temporary difference will reverse in the foreseeable future; and • taxable profit will be available against which the temporary difference can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date and take into account the manner of realisation of the assets. (iii) Tax expenses Current and deferred taxes are recognised as income or an expense and included through the statement of comprehensive income for the period, except to the extent that the tax arises from: • a transaction or event which is recognised, in the same or a different period, directly in equity, or • a business combination. Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly to equity. L. Impairment of assets The group assesses at each balance sheet date whether there is any indication that an asset other than goodwill may need to be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. Goodwill is tested for impairment annually. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately through the statement of comprehensive income. Any impairment loss of a revalued asset is treated as a revaluation decrease. The group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately through the statement of comprehensive income. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase. M. Leases (i) Leases as Lessor A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. (ii) Finance leases The group recognises finance lease receivables on the balance sheet. Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the company’s net investment in the finance lease. (iii) Operating leases Operating lease income is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. Income for leases is disclosed under revenue through the statement of comprehensive income. (iv) Leases as Lessee Leases are classified as finance leases whenever the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Finance leases are recognised as assets and liabilities in the balance sheets at amounts equal to the fair value of the leased property or, if lower, the present value on the minimum lease payments.
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012076 Notes to the Financial Statements For the year ended 28 February 2012 continued The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease. Any initial direct costs are added to the amount recognised as an asset. The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease terms so as to produce a constant rate of expense on the remaining balance of the liability. Operating lease payments are recognised as an expense on a straight- line basis over the lease term. N. Employee Benefits (i) Short-term employee benefits The cost of short-term employee benefits (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses and non-monetary benefits such as medical care) are recognised in the period in which the service is rendered and are not discounted. The expected cost of the compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance. (ii) Retirement benefits The group has a defined contribution provident fund which is administered independently of the finances of the group by a registered private fund administrator. This defined contribution provident fund is subject to the Pensions Fund Act. Membership of the fund is optional for all employees employed at the time of inception of the fund but compulsory for all new employees. Current contributions to the provident fund are charged against income statement as an expense. O. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale) are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. P. Segment reporting The group’s primary reporting basis is business segments. The group is organised in four main operating segments, namely Investment Property Holding, Property Related Services, Property Held for Resale and Head Office Administration. Financial information about business segments is presented in the schedule in note 26. Segmental results include revenue and expenses directly attributable to a segment. Segment assets and liabilities comprise those assets and liabilities that are directly attributable to the segment. Q. Revenue When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: • the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the company; • the stage of completion of the transaction at the balance sheet date can be measured reliably; and • the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. When the outcome of a transaction involving the disposal of property becomes unconditional and there is reasonable certainty as to its conclusion, the related net revenue is recognised. Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. R. Non-current assets held for sale and disposal groups Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets held for sale (or disposal group) are measured at the lower of its carrying amount and fair value less costs to sell. A non-current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of a disposal group classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale are recognised in profit or loss. S. New standards and interpretations Standards and interpretations effective and adopted in the current year In the current year, the group has adopted the following standards and interpretations that are effective for the current year and that are relevant to its operations: • IAS 24 Related Party Disclosures (Revised) The revisions to IAS 24 include a clarification of the definition of a related party as well as a partial exemption for related party disclosures between government-related entities. In terms of the definition, the revision clarifies that joint ventures or associates of the same third party are related parties of each other. To this end an associate includes its subsidiaries and a joint venture includes its subsidiaries. The effective date of the amendment is for years beginning on or after 1 January 2011. The company has adopted the amendment for the first time in the 2012 annual financial statements. The impact of the amendment is not material. • 2010 Annual Improvements Project: Amendments to IFRS 7 Financial Instruments: Disclosures Additional clarification is provided on the requirements for risk disclosures. The effective date of the amendment is for years beginning on or after 1 January 2011. The company has adopted the amendment for the first time in the 2012 annual financial statements. The impact of the amendment is not material. • 2010 Annual Improvements Project: Amendments to IAS 1 Presentation of Financial Statements The amendment now requires that an entity must present, either in the statement of changes in equity or in the notes, an analysis of other comprehensive income by item. The effective date of the amendment is for years beginning on or after 1 January 2011. The company has adopted the amendment for the first time in the 2012 annual financial statements. The impact of the amendment has not had a material impact on the results of the company, but has resulted in more disclosures than would have previously been provided in the annual financial statements. Standards and Interpretations early adopted The group has chosen not to early adopt any new standards and interpretations. Standards and interpretations not yet effective and relevant The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group’s accounting periods beginning on or after 1 March 2011 or later periods: • IFRS 9 – Financial Instruments The effective date of this standard is for annual periods beginning on or after 1 January 2015. The group expects to adopt the standard for the first time in the 2016 financial statements. Standards and interpretations not yet effective or relevant All other standards and interpretations published for the group’s accounting periods beginning on or after 1 January 2012 or later periods were considered and it was noted that they were not relevant to the operations of the group. 2. PROPERTY, PLANT AND EQUIPMENT Computer equipment – – – 1 317 (690) 627 Furniture and fittings – – – 2 313 (1 521) 792 Motor vehicles – – – 5 430 (1 652) 3 778 – – – 9 060 (3 863) 5 197 The carrying value of property, plant and equipment can be reconciled as follows: Notes to the Financial Statements For the year ended 28 February 2012 (cont.) 2012 2012 2012 2011 2011 2011 ACCUMULATED ACCUMULATED NET GROUP R’000 COST DEPRECIATION BOOK VALUE COST DEPRECIATION BOOK VALUE Computer equipment 627 27 (457) (197) – Furniture and fittings 792 – (639) (153) – Motor vehicles 3 778 – (3 593) (185) – 5 197 27 (4 689) (535) – Computer equipment 695 408 (11) (465) 627 Furniture and fittings 1 294 46 (205) (343) 792 Motor vehicles 3 516 600 – (338) 3 778 5 505 1 054 (216) (1 146) 5 197 Plant and Equipment and Motor Vehicles with a book value of R nil (2011: R1 265 971) secure instalment sale agreements (refer note 12). DEPRECIATION OPENING DISPOSALS OF OF ASSETS BALANCE AT ASSETS AS PART RELATED TO CARRYING OF DISPOSAL DISPOSAL CARRYING 2012 R’000 AMOUNT ADDITIONS GROUP GROUP AMOUNT OPENING BALANCE AT CARRYING CARRYING 2011 R’000 AMOUNT ADDITIONS DISPOSALS DEPRECIATION AMOUNT
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 08 0 COMPANY COMPANY 2012 2011 R’000 R’000 GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 6. DEFERRED TAXATION The major components of the deferred tax assets and liabilities, together with movements during the year, are analysed as follows: Deferred tax asset Tax losses available for set off against future taxable income 205 655 205 655 Reconciliation of deferred tax asset At beginning of the year 655 366 Increase in tax losses available for set off against future taxable income – 289 Decrease in tax losses available for set off against future taxable income (450) – Deferred tax asset 205 655 BALANCE AT DISPOSAL CHARGE TO BALANCE AT 01-03-2011 OF MBO INCOME FOR 29-02-2012 GROUP 2012 R’000 COMPANIES THE PERIOD R’000 Deferred tax asset Finance lease 222 (222) – – Assessed losses 16 461 (12 418) (1 666) 2 377 Operating leases - (70) 35 (35) Provisions 233 (233) – – Investment property (925) (1 814) 5 741 3 002 Investment in subsidiary 2 (2) – – Property, plant and equipment (653) 653 – – 15 340 (14 106) 4 110 5 344 Deferred tax liability Operating leases - 184 826 1 010 Valuation surpluses 1 231 17 100 3 013 21 344 Property, plant and equipment 19 072 (19 072) – – 20 303 (1 788) 3 839 22 354 CHARGE TO BALANCE AT INCOME FOR BALANCE AT 01-03-2010 THE PERIOD 28-02-2011 GROUP 2011 R’000 R’000 R’000 Deferred tax asset Finance lease 212 10 222 Assessed losses 9 833 6 628 16 461 Provisions 863 (630) 233 Investment property 1 468 (2 393) (925) Investment in subsidiary 3 (1) 2 Property, plant and equipment 128 (781) (653) 12 507 2 833 15 340 Deferred tax liability Operating leases 150 (150) – Valuation surpluses 19 346 (18 115) 1 231 Assessed loss – 19 072 19 072 19 496 807 20 303 At balance sheet date the company had a computed unutilised tax loss of R0,7 million (2011: R3,2 million) available for set-off against future profits. Based on the performance of the company’s subsidiaries and the ability of the holding company to charge administration and management fees, the directors are confident that the company will generate sufficient taxable profits against which to utilise the assessed loss. This is supported by the significant utilisation of the loss during the current year. As such, a deferred tax asset relating to the assessed loss has been accounted for. At balance sheet date the group had computed unutilised tax losses of R8,5 million (2011: R62 million), available for set-off against future profits. Based on the excellent performance of the investment properties within the group’s portfolio, the directors are confident that the group will generate sufficient tax profits against which to utilise the assessed loss. This is supported by a significant utilisation of the existing loss during the current year. As such, deferred tax assets relating to these assessed losses have been accounted for. Investment Property GROUP GROUP 2012 2011 R’000 R’000 GROUP GROUP 2012 2011 R’000 R’000 3. INVESTMENT PROPERTY Balance at the beginning of the year 228 583 209 276 Additions in the course of operations 54 – Disposals in the course of operations (685) (11 485) Net gain from fair value adjustment revaluations 2 359 2 207 Acquisitions – 28 585 Disposal of investment property forming part of disposal group (40 258) – Balance at the end of the year 190 053 228 583 Investment properties were valued at 29 February 2012 on the open market basis by the professional valuators at Quadrant Property Group who are registered with the South African Institute of Valuers. Quadrant Property Group are independent from Adrenna Property Group Limited. The properties were valued utilising a market orientation approach which considers and analyses each property in relation to the greater comparable market and takes into account locality, improvements, market demand, tenants and lease details. Thereafter a open market valuation is determined which takes into account existing use value and alternative use value by the capitalisation of net rentals at market related rates. Investment properties are encumbered as per note 12. Further information relating to investment properties is contained in Appendix B. The following amounts included in the income statement relate to these properties: Investment in Subsidiaries GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 4. INVESTMENTS IN SUBSIDIARIES investments in subsidiaries – – 11 891 14 591 – – 11 891 14 591 Details of investments are available for inspection at the registered office of the company. Refer to Appendix A for details relating to the investments in and loans to subsidiaries. Rental income 20 428 21 416 Direct operating expenses arising from income generating property 15 222 13 151 There are no contractual obligations at year end to purchase, construct or develop additional investment property. No contractual obligations exist at year end to repair, maintain or enhance existing investment property. Deferred Taxation Investments & Loans 5. INVESTMENTS AND LOANS Loans owed by third parties Quintonox Investments (Pty) Ltd – 2 716 – – Bosse & Associates (Pty) Ltd – 1 533 – – Equity Estates (Pty) Ltd – 4 905 – – RMS Corporate Solutions (Pty) Ltd 11 963 – 11 963 – Gascon (Pty) Ltd 395 203 – – First Propman Empowerment Trust – 1 400 – – Second Propman Empowerment Trust – 1 400 – – Other loans 1 1 008 – – Investments Madikwe Game Lodge/Cabana Beach – 782 – – Other investments – 2 000 – – Less: impairments – (201) – – 12 359 15 746 11 963 – Terms and conditions: – The loan owed by RMS Corporate Solutions (Pty) Ltd is unsecured and non-interest bearing with no fixed terms of repayment. – The loan owed by Gascon (Pty) Ltd is unsecured and bears interest at the prime lending rate. The loan is repayable in full on 1 September 2012. Loans owed to third parties RMS Corporate Solutions (Pty) Ltd 1 727 – 1 234 – 1 727 – 1 234 – Terms and conditions: – The loan owed to RMS Corporate Solutions (Pty) Ltd is unsecured and non-interest bearing with no fixed terms of repayment. The carrying values of loans approximates their fair values. No adjustments to fair value have been made in current or prior periods. Notes to the Financial Statements for the year ended 28 February 2012
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 20128 09 Amounts Owing Notes to the Financial Statements For the year ended 28 February 2012 continued GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 8. INVENTORY Developed property held for resale – valued at the lower of cost or estimated realisable value 10 188 44 750 – – 10 188 44 750 – – Inventory is held as security over a portion of the loan with Investec Private Bank as disclosed in note 12. 9. ACCOUNTS RECEIVABLE AND PAYABLE Receivables and payables are analysed below: Accounts receivable Value added taxation 113 740 – – Trade receivables 238 4 180 1 693 – Deposits and prepayments 448 396 – – Debtor arising from MBO 1 085 – 1 085 – Other receivables 21 1 621 4 – 1 905 6 937 2 782 – The carrying values of trade receivables approximate their fair values. The debtor arising from the MBO is repayable in 12 instalments commencing 1 January 2012, and bears interest at the prime lending rate. Accounts payable Trade payables 762 3 855 316 6 Value added taxation 496 2 105 232 9 Accruals for leave pay and bonuses – 665 – – Deposits and prepayments 985 862 – – Other payables 127 1 105 6 10 2 370 8 592 554 25 Other payables comprise miscellaneous minor items. 10. CASH AND EQUIVALENTS/BANK OVERDRAFT 10.1 Cash and equivalents is actual cash on hand or in the bank. 10.2 Bank overdraft is the actual overdraft utilised at the bank. See note 25.2 for further details. 11. STATED CAPITAL Authorised 200 784 314 ordinary shares of no par value 2 008 2 008 2 008 2 008 9 215 686 convertible, redeemable preference shares of 1 cent each 92 92 92 92 Issued 55 914 802 (2011: 55 914 802) ordinary shares of no par value 559 559 559 559 Transfer of share premium 8 – 8 – Less: Held by subsidiary company (2011: 166 344) ordinary shares of no par value – (1) – – 567 558 567 559 Share premium 8 8 8 8 Transfer of share premium (8) – (8) – – 8 – 8 Details regarding the movement in share capital and share premium for the period under review are provided in the statement of changes in equity. 7. AMOUNTS OWING BY/(TO) GROUP COMPANIES Somerset Mall Developments (Pty) Limited – – 13 099 20 477 Consani Industrial Park (Pty) Ltd – – (9 092) (5 835) Erf 68 Illovo (Pty) Limited – – – 10 878 Benwool Property (Pty) Limited – – – 3 321 RMS Corporate Solutions (Pty) Limited – – – (25 251) Less: Impairment – – – (1 196) – – 4 007 2 394 Amounts owing by group companies – – 13 099 33 480 Amounts owing to group companies – – (9 092) (31 086) – – 4 007 2 394 These amounts reflect fluctuating current accounts which vary according to the cash flow requirements of the individual group company. These amounts are interest-free and have no fixed terms of repayment. Accounts Receivable & Payable; Cash & Equivalents; Stated Capital GROUP GROUP 2012 2011 R’000 R’000 Borrowings 12. BORROWINGS SECURED: 12.1 Absa Trust Limited – 1 360 12.2 Investec Private Bank 13 329 14 203 Theloanisforafixedperiodexpiringon31August2012.Interestiscurrently charged at Investec Bank’s prime rate. The loan is secured by a mortgage bond over the remainder of erf 2505, Hout Bay, having a carrying value of R33 million, together with a continuing personal surety by Mr RP Fertig to the value of R18 million. 12.3 Imperial Bank Limited – 1 469 12.4 ABSA Bank Limited 84 574 84 705 The loan is an interest only loan at prime less 1% until 31 August 2012 and is thereafter payable in 120 equal monthly instalments together with interest at prime less 1.5%. The loan is secured by a mortgage bond over Erf 21212, and Erf 34754, Goodwood, Cape, having a carrying value of R175 million. 12.5 ABSA Bank Limited – 3 373 12.6 ABSA Bank Limited – 1 017 12.6 Commitments under instalment sale agreements – 1 052 12.8 Nationwide Building Society – 13 546 Total secured loans 97 903 120 725 UNSECURED Sundry – 1 270 Maqhiugana (Pty) Limited – 15 500 Total unsecured loans – 16 770 Total borrowings 97 903 137 495 Borrowings repayable after 12 months – classified as non-current liabilities 80 346 105 076 Borrowings repayable within 12 months – classified as current liabilities 17 557 32 419 97 903 137 495 The total borrowings do not exceed the borrowing powers of the company as set out in its memorandum and articles which are unlimited. There has been a significant decrease in the level of borrowings due to the disposal of related borrowings encompassed in the MBO and the disposal of a foreign subsidiary at the beginning of the financial year.
  • 10 ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 110 Notes to the Financial Statements For the year ended 28 February 2012 continued GROUP GROUP 2012 2011 R’000 R’000 GROUP GROUP 2012 2011 R’000 R’000 2012 2011 R’000 R’000 Lease Commitments Revenue Related PartiesContingent Liabilities & Encumbrances 14. LEASE COMMITMENTS/OPERATING LEASE DEBTORS 14.1 Payable Operating lease commitments for the group in terms of premises and equipment – 2 997 – within 12 months – 1 528 – exceeding 12 months and less than 60 months – 1 469 14.2 Operating lease creditors – due within 12 months – 20 – exceeding 12 months and less than 60 months – – No arrangements exist for the leasing of assets/premises from third parties. 14.3 Receivable In terms of premises 84 811 85 217 – within 12 months 16 059 10 240 – exceeding 12 months and less than 60 months 36 357 34 298 – exceeding 60 months 32 395 40 679 Operating lease commitments receivable relate to negotiated rentals which escalate at rates of between 6% and 11%. The leases extend over periods ranging from 12 months to 120 months with and without renewable clauses. 14.4 Operating lease debtors – due within 12 months 705 696 – exceeding 12 months and less than 60 months 1 597 – – exceeding 60 months 1 423 – Total 3 725 696 15. RELATED PARTIES Group 15.1 During the year the group had the following related party transactions: 15.1.1 Consultancy agreement with Devex Bridge Development (Pty) Limited and Collian Properties cc, two entities controlled by a director, Mr R P Fertig, in terms of which operating subsidiaries paid fees totalling R180 000 (2011: R420 000) to these two entities. 15.1.2 Consultancy agreement with Propconsult (Pty) Limited, a company controlled by a director, Mr BW Kaiser, in terms of which the company paid fees totalling R210 000 (2011: nil). 15.2 Identification of other related parties Investments and subsidiaries – refer Appendix A. Joint ventures – refer note 5. 15.3 Key Management The key management of the group consists of the executive directors (whose remuneration is disclosed in note 23). 15.4 Transactions with related parties No intercompany transactions were disclosed as these eliminate on consolidation. 15.5 Transactions with related parties Management fees were received from group companies to the value of R4 million (2011: R726 000) as summarised below. Company Related party transactions Secretarial and tax fees received from related parties – 66 Administration fees received from related parties 1 010 660 Management fees received from related parties 1 300 – Asset management fees received from related parties 1 693 – Total related party fees 4 003 726 15.6 Related party balances Loan accounts owing to and by related parties are disclosed in Appendix A to these financial statements. GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 16. REVENUE The main categories of income comprise the following: Property management fees – 17 740 3 043 – Administration fees – 6 534 1 010 726 Commission and project co-ordination fees – 14 905 – – Rentals and operating cost recoveries 26 324 21 416 – – Property sales – 6 447 – – 26 324 67 042 4 053 726 EXPENSES Expenses by nature are summarised below: Audit fees 432 1 886 346 643 Bad debts 477 475 28 – Legal fees 253 684 74 39 Depreciation and amortisation – 1 347 – 1 196 Staff costs 290 15 106 8 78 Director’s remuneration 519 6 106 519 270 Operating lease payments – 6 198 – – Commission 416 10 017 – – Consulting and professional fees 390 3 017 210 956 Cost of investment properties sold 4 7 073 – – Restructuring costs 340 – 340 – Loss on disposal of investments – – 1 450 – Write-down of inventory 4 439 – – – General operating costs 9 615 23 081 1 317 635 17 175 74 990 4 292 3 817 Classified as: Cost of sales 4 7 073 – – Operating costs 17 171 67 917 4 292 3 817 17 175 74 990 4 292 3 817 13. CONTINGENT LIABILITIES AND ENCUMBRANCES Group: Suretyships by Adrenna Property Group Limited in favour of Momentum Life, limited to a maximum of R1 million. 1 000 1 000 A claim was made due by Wild & Marr Pty (Ltd) due to a default in its obligations by Ikusasa Communications (Pty) Limited to the extent of R1 617 896, including legal costs. This claim has now expired. – 1 618 An action was instituted against a subsidiary company in the amount of R3,6 (excluding interest). This action is being opposed and a counter claim lodged. Your directors have been advised that the company has a good prospect of successfully opposing this action. The maximum estimated costs of defending these claims has been set at R300 000. 3 900 4 860 Adrenna Property Group Limited has signed a suretyship in favour of First National Bank in respect of facilities provided by First National Bank, Wesbank, Rand Merchant Bank, FirstCard and/or the respective Property Financing Divisions and/or any other division of the Bank in respect of facilities and/or guarantees granted to the company and/or its subsidiaries totalling R12 million. Adrenna Property Group Limited, RMS Corporate Solutions Pty (Ltd), RMS Auctions Pty (Ltd), RMS Property and Facilities Management Pty (Ltd) and RMS Resdiential Pty (Ltd) have signed cross-suretyships in favour of the bank. Save for Adrenna Property Group Limited, these entities are part of the MBO group and these cross-suretyships will be removed when the facility is renewed. 12 000 20 693
  • ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 20120 Notes to the Financial Statements For the year ended 28 February 2012 continued GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 17. OPERATING INCOME/(LOSS) BEFORE INTEREST AND REVALUATIONS Operating income/(loss) before interest and revaluations is arrived at after taking the following into account: Audit fees – current year 432 1 886 346 643 Depreciation – owned assets – 1 347 – – Legal fees 253 684 74 39 Operating lease payments – premises – 6 198 – – – equipment – – – – Profit on disposal of financial assets – 856 – – Consulting and professional fees 390 3 017 210 956 Total staff costs 809 21 212 527 348 Contributions to retirement funds – 2 570 – – Impairment of investments – (201) – – Profit on sale of rights – 2 061 – – Write-down of inventory 4 439 – – – Profit on sale of investment property (115) (1) – – 18. INVESTMENT INCOME Interest received – cash 62 1 026 23 4 19. FINANCE COSTS Interest paid Interest paid – overdraft 484 1 476 484 – Interest paid – secured loans 7 622 10 447 – – Interest paid – instalment finance – 37 – – Interest paid – SARS – 54 – – Interest paid – other – 1 – 47 8 106 12 015 484 47 110 Loss after taxation from disposal group (continued) For the year ended 29 February 2012 GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 AUDITED GROUP 2012 LOSS ARISING FROM DISPOSAL GROUP R’000 RECONCILIATION OF TAX RATE % % % % 20. TAXATION SA normal – current 457 (580) – – – deferred (271) (2 026) 451 (290) 186 (2 606) 451 (290) 21. LOSS AFTER TAXATION FROM DISPOSAL GROUP Revenue 19 821 Operating loss before interest and revaluations (14 857) Fair value adjustments on investment properties (224) Investment income 171 Finance costs (883) Net loss before taxation (15 793) Loss on disposal (26 271) Taxation (14 845) Loss after taxation from disposal group (56 909) During the year under review the directors resolved that the interests of shareholders would be best served if they were to be invested in a pure property-owning entity whose only assets would be income-producing properties. In this regard the directors proceeded with a corporate restructure which entailed the disposal of what was classified as non-core assets. The non-core assets disposed of comprised the service companies and certain properties which were, at the time of the disposal, classified as “properties for sale”. 21. LOSS AFTER TAXATION FROM DISPOSAL GROUP (CONTINUED) The consideration for the disposal group was determined as R 1,250,000 payable over a period of 12 months together with interest at the prime overdraft rate as quoted by First National Bank Limited. The effective date of the disposal was 1 September 2011, at which date control over the following assets and liabilities (excluding cash and cash equivalents) were lost: Tax on net income at standard rate 28,0 28,0 28,0 28,0 Exempt income – 80,4 (60,9) 60,5 Arising from deferred tax not raised previously (23,2) – – – Prior year over-provision 0,8 (48,9) – – Increase in capital gains tax rate 48,9 – – – Capital gains tax adjustment – (10,7) – – Deferred tax not raised – (74,6) – – Disallowable charges (49.7) (80,6) 108,5 (46,6) Effective tax rate 4,8 (106,4) 75,6 41,9 The capital gains tax rate applicable to companies was amended on 1 March 2012. At this date the inclusion rate increased from 50% to 66,6% thus changing the effective capital gains tax rate from 14% to 18,6%. ASSETS AND LIABILITIES OF DISPOSAL GROUP (EXCLUDING CASH AND CASH EQUIVALENTS) R’000 ASSETS AND LIABILITIES Non-current assets of disposal group Investment property 40 259 Property, plant and equipment 4 689 Loans to third parties 5 029 Investments in financial assets 901 Deferred tax 2 360 53 238 Current assets of disposal group Inventory 23 517 Trade and other receivables 7 912 Operating lease debtors 55 Tax receivable 48 Cash and cash equivalents 2 579 34 111 Non-current liabilities of disposal group Borrowings 36 626 Deferred tax 3 861 40 487 Current liabilities of disposal group Current portion of borrowings 1 977 Trade and other payables 11 005 Loans from third parties 5 007 Operating lease creditors 38 Tax payable 1 314 19 341 Nett assets disposed of 27 521 Proceeds from disposal (1 250) Loss on disposal 26 271 The figures reflected above include the loss on disposal of MBO companies effective 1 September 2011 as well as the disposal of foreign investment property operations effective 1 March 2011. 22. FINANCIAL RISK MANAGEMENT Financial risk factors The group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The group’s financial risk management programme focuses on the unpredictability of the financial markets and seeks to minimise potential adverse effects on the group’s financial performance. Interest rate risk The group has no significant interest-bearing assets and interest rate risk is primarily related to borrowings. As the group’s borrowings bear interest at variable rates, it does not have any fair value exposure but it is exposed to future cash flow risks. Had interest rates for the year been 0.5 percentage points higher or lower and been applied to the period end interest bearing debt of R110 million (2011: R149 million), the after tax interest expense for the year would have been higher or lower by R0,4 million (2011: R0,54 million). The group analyses the impact on profit and loss of defined interest rate shifts, taking into consideration refinancing and alternative financing. The analysis is only for liabilities that represent the major interest-bearing positions. The group does not hedge exposure to interest rate risk. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, flexibility of funding is maintained through ensuring availability under committed credit lines. Financial assets by category Loans carried at amortised cost 12 359 15 746 – – Receivables carried at amortised cost 1 792 6 197 2 782 – Financial assets at Fair Value through profit/loss – – 25 062 33 480 Financial assets at cost less accumulated impairment – – – 14 591 Cash and cash equivalents 227 3 596 – 141 14 378 25 539 27 844 48 212 Financial liabilities by category Loans carried at amortised cost 98 395 137 495 – – Payables carried at amortised cost 1 874 6 487 322 16 Financial liabilities at Fair Value through profit/loss – – 10 326 31 086 Bank overdraft 11 646 11 727 11 646 – 111 915 155 709 22 294 31 102 Financial Risk Management GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 CONTINUED ON PAGE 12
  • 12 1 ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. All deposits are held with major South African banks. Creditworthiness of local trade debtors is assessed when credit is first extended and is reviewed on a regular basis thereafter. Credit risk management The group manages its credit risk exposure by strict controls over the granting of credit and collection of receivables. Trade and other receivables Trade receivables (excluding value added taxation) 266 4 419 1 721 – Provision for impairment of receivables (28) (239) (28) – 238 4 180 1 693 – Sundry receivables 1 554 2 017 1 089 – Amounts owing by group companies – – 13 099 33 480 1 792 6 197 15 881 33 480 There is no significant concentration of risk in respect of any particular customer or industry segment in that no individual customer represents more than 5% of the total. Trade and other receivables with a book value of RNil million (2011: RNil million) (including inter-company debtors) have been ceded as security for borrowing facilities. The fair values of financial instruments approximates their carrying cost. Trade receivables other than an amount of R28 000 at 29 February 2012 (2011: 239 000) were neither overdue nor impaired. The credit quality of these debtors is sound. No collateral is held in respect of the impaired trade receivables. Liquidity risk management The group’s policy is the ensure it has access to sufficient funds for the foreseeable future. The group’s facility utilisation at the period end was: Total borrowing facilities 110 903 184 838 Less: Non-current borrowings (80 346) (105 076) Current borrowings (17 557) (32 419) Drawn overdraft facilities (11 646) (11 727) Committed undrawn facilities – – Available 1 354 35 616 Financial liabilities with contractual maturity dates beyond a year from 29 February 2012 comprise non- current borrowings. The group’s policy is to ensure that the major portion of its borrowing relates directly to and is secured by investment properties. Non-current borrowings Secured Loans 80 346 119 673 – – Finance leases and ISAs – 1 052 – – Unsecured loans 492 16 770 – – Current portion included in current borrowings 17 557 (32 419) – – 98 395 105 076 – – As all borrowings bear interest at market rates their fair value approximates their carrying value. The fair value of accounts payable approximates their carrying cost. Intermsofthecompany’sarticlesofassociationtheborrowingpowersofthegroup aresubjecttoanyregulationsmadebythecompanyinageneralmeetingtorestrict the borrowing powers, failing which they are at the discretion of the directors. To date no such regulation has been imposed. The group’s net debt to equity at the period end was as follows: Non-current borrowings 80 346 105 076 Current borrowings including bank overdrafts 29 203 44 146 Unsecured loans 492 – Total borrowings 110 041 149 222 Less: cash and cash equivalents (227) (3 596) Committed undrawn facilities – – Net borrowings 109 814 145 626 Net debt to equity 142,8% 103,4% Capital management The group’s objectives when managing capital (being shareholders funds and borrowings) are to maintain the optimum mix of liquidity and low cost of capital and to be able to finance future growth. The group does not target specific capital ratios, with current and future borrowings being evaluated against the group’s expected operating cash flows and capital investment needs. Capital adequacy and liquidity are managed by monitoring net debt to equity, interest cover and debt service ratios. The group targets a borrowing level on its investment and other fixed properties of less than 60%. Direct borrowings against fixed properties is currently 51,5% (2011: 50,3%). 24. (LOSS)/EARNINGS PER SHARE/DIVIDENDS PER SHARE 24.1 Earnings/(Loss) per share/dividends per share Number of ordinary shares in issue at beginning of period (000’s) 55 915 55 915 Less treasury shares (000’s) – (133) Number of ordinary shares in issue at end of period (000’s) 55 915 55 782 Weighted average number of shares in issue (000’s) 55 915 55 782 Basic earnings per share Net profit/(loss) per statement of comprehensive income Attributable to continuing operations 3 710 304 Attributable to discontinued operations (56 909) – Basic earnings/(loss) per share (cents) – Attributable to continuing operations 6,6 0,54 – Attributable to disposal group (101,7) – Headline earnings/(loss) per share (cents) Net profit/(loss) per statement of comprehensive income – Attributable to continuing operations 3 710 304 – Attributable to disposal group (56 909) – Profit on sale of investment property – Attributable to continuing operations (115) (1) – Attributable to disposal group – – Loss on sale of property, plant and equipment – Attributable to continuing operations – – – Attributable to disposal group 156 – Profit on sale of rights – (2 061) Impairments – Attributable to continuing operations – – – Attributable to disposal group 19 384 201 Reversal of provisions – Attributable to continuing operations (100) – – Attributable to disposal group (775) – Forgiveness of debt – Attributable to continuing operations – – – Attributable to disposal group (872) – Revaluation of investment property (net of taxation) – Attributable to continuing operations (2 000) – – Attributable to disposal group – (1 898) Headline earnings/(loss) per share (cents) – Attributable to continuing operations 1 495 3 455 – Attributable to disposal group (39 016) – Headline loss per share (cents) – Continuing operations 2,7 (6,19) – Disposal group (69,78) – There was no dilution in basic or headline earnings per share Dividends per share No dividends were declared during the period – – 24.2 Net asset value per share Shares in issue at end of period (000) 55 915 55 782 Net asset value per share (cents) 156,6 220,9 Net tangible asset value per share (cents) 156,6 220,9 2012 2011 R’000 R’000 Notes to the Financial Statements For the year ended 29 February 2012 (cont.) 23. DIRECTORS’ EMOLUMENTS 2012 Non-executive directors W P Alcock – – – – – – B Mothelesi 12 120 – – – 120 M Moela 12 120 – – – 120 Total (A) 240 – – – 240 Executive directors R P Fertig 12 – 607 93 – 700 B W Kaiser 6 – 352 62 – 414 Total (B) – 959 155 – 1 114 Total emoluments (A + B) 240 959 155 – 1 354 2011 Non-executive directors W P Alcock 12 – – – – – B Mothelesi 12 135 – – – 135 M Moela 12 135 – – – 135 Total (A) 270 – – – 270 Executive directors R P Fertig 12 – 1 076 250 – 1 326 B W Kaiser 12 – 1 410 246 – 1 656 Total (B) – 2 486 496 – 2 982 Total emoluments (A + B) 270 2 486 496 – 3 252 There are no directors’ service contracts in place. R P Fertig’s emoluments were paid by the company and a prior subsidiary. B W Kaiser’s emoluments were paid by a prior subsidiary. RETIREMENT, MEDICAL, ACCIDENT REMUNE- AND DEATH OTHER MONTHS FEES RATION BENEFITS BENEFITS GROUP NAME PAID R’000 R’000 R’000 R’000 R’000 Financial Risk Management (cont.) GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 2012 2011 R’000 R’000
  • 2 13 ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 25. NOTES TO CASH FLOW STATEMENT 25.1 Cash generated by operations Income/(loss) before taxation from continuing operations 3 896 (2 449) 2 046 (693) Loss before taxation from discontinued operations (42 064) – (1 450) – Adjusted for: non-cash items and separately disclosable items Interest paid 8 106 12 015 484 47 Interest received (62) (1 026) (23) (4) Depreciation and amortisation 535 1 147 – – Profit of sale on investment property (115) – – – Profit on disposal of financial assets – (2 917) – – Revaluation of investment property (2 359) (2 207) – – Impairment/(revaluation) of investments and loans – (201) – 1 196 Movement in operating lease assets and accruals (3 066) 142 – – Loss on sale of disposal group 26 269 – – – Other non-cash items – (564) – – Changes in working capital (Increase)/decrease in accounts receivable (1 630) 4 605 (2 782) 571 Increase/(decrease) in accounts payable 4 784 (5 087) 529 19 Movement in inventories 11 045 5 199 – – 5 339 8 657 (1 196) 1 136 25.2 Cash and cash equivalents Cash and cash equivalents comprise: Bank and cash balances on hand 227 3 596 – 141 Bank overdrafts (11 646) (11 727) (11 646) – (11 419) (8 131) (11 646) 141 GROUP GROUP COMPANY COMPANY 2012 2011 2012 2011 R’000 R’000 R’000 R’000 Notes to the Financial Statements For the year ended 28 February 2012 continued Segmental Reporting For the year ended 29 February 2012 26. SEGMENTAL RESULTS Revenue Total revenue generated 26 324 – – – 26 324 20 303 38 236 4 654 3 848 67 041 Operating income/(loss) before interest and revaluations 11 985 – – (2 742) 9 243 11 334 7 840 (3 753) (9 088) 6 333 Fair value adjustments 2 697 – – – 2 697 2 207 – – – 2 207 Investment income 39 – – 23 62 62 536 2 424 1 024 Finance costs (7 622) – – (484) (8 106) (9 414) (594) (436) (1 569) (12 013) Net income/(loss) before taxation 7 099 – – (3 203) 3 896 4 189 7 782 (4 187) (10 233) (2 449) Taxation 265 – – (451) (186) 1 079 2 294 (1 733) 965 2 605 Profit/(loss) for the year from continuing operations 7 364 – – (3 654) 3 710 5 268 10 076 (5 920) (9 267) 157 Other comprehensive income Foreign currency translation reserve – – – – – (5) – – – (5) Total comprehensive (loss)/income attributable to: Ordinary shareholders (7 281) (8 072) (12 338) (23 979) (51 670) 5 479 10 012 (5 920) (9 267) 304 Non-controlling interests – – – – – (216) 63 – – (153) (7 281) (8 072) (12 338) (23 979) (51 670) 5 262 10 076 (5 920) (9 267) 151 Other information Segment assets – Continuing operations 211 570 – – 12 231 223 801 268 468 11 696 12 832 27 847 320 843 Consolidated total assets 211 570 11 089 23 830 12 231 223 801 268 468 11 696 12 832 27 847 320 843 Segment liabilities – Continuing operations 125 318 – – 11 304 136 622 120 841 7 978 37 220 14 027 180 066 Consolidated total liabilities 125 318 10 509 19 740 11 304 136 622 120 841 7 978 37 220 14 027 180 066 A geographical segmental report is not presented as the majority of the group’s continuing operations are carried out in the Western Cape area. With the disposal of the MBO companies in the 2012 year, operations are now focused solely within the property sector. The Property Holding segment is sub-divided into two significant and distinct segments, as noted below. Segmental aggregation is based on the main sources of revenue generated prior to the MBO from Investment Property Holding, Property Related Services, Property Sales and Head Office Administration. Segmental aggregation relating to continuing operations is based on the main sources of activity, namely investment property holding and head office administration. 2012 (R’000) 2011 (R’000) INVESTMENT PROPERTY PROPERTY HEAD INVESTMENT PROPERTY PROPERTY HEAD PROPERTY RELATED HELD FOR OFFICE PROPERTY RELATED HELD FOR OFFICE HOLDING SERVICES RESALE ADMIN TOTAL HOLDING SERVICES RESALE ADMIN TOTAL
  • 14 1 ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 NUMBER OF NUMBER OF SHAREHOLDERS TOTAL SHAREHOLDERS IN SA OTHER THAN SA SHAREHOLDERS NOMINAL NOMINAL NOMINAL NUMBER % NUMBER % NUMBER % NUMBER OF % OF SHARES SHARES % OF BENEFICIAL HOLDINGS NON-BENEFICIAL HOLDINGS ORDINARY NAME OF DIRECTOR DIRECT INDIRECT DIRECT INDIRECT SHARES Shareholder Analysis WESTERN CAPE B. ANALYSIS 1. Gross lettable area (sq. metres) Industrial 47 594 Retail 824 48 418 2. Annual rental income (R000) (excluding effects of straight-lining of rental income) Industrial 15 912 Retail 1 151 17 063 3. Vacancy (sq. metres) Industrial 2 241 Retail 193 2 434 4. Average rent per occupied square metre (Rand) Industrial 29,24 Retail 152,01 5. Average escalation % Industrial 8 Retail 8 6. Tenant profile % Industrial A 77,95 B 22,05 C – Retail A – B 100 C – A – Large listed companies, SA Government and large franchisees B – Other listed companies and other large companies. C – Other 7. Lease Expiry % Area 19 42 6 1 27 Revenue 22 35 6 2 35 8. Weighted averages Industrial 29,24 8 Retail 152,01 8 9. Average annualised property yield: 10,1% SHAREHOLDER SPREAD Public 709 97,0 19 216 728 99,6 Directors and associates 3 0,4 – – 3 0,4 TOTAL 712 97,4 19 216 731 100,0 MAJOR SHAREHOLDERS – HOLDINGS OVER 5% Diamond Edge Business Opportunities 14 000 000 25,04 Pershing Securities 8 456 000 15,12 RP Fertig 8 673 101 15,51 J Alcock 4 690 000 8,39 INTERESTS OF DIRECTORS The details of the beneficial and non-beneficial interest of the directors (whether directly or indirectly) in the share capital of the company are: 2012 R P Fertig 3 502 040 5 171 061 – – 15,51 B W Kaiser 2 484 250 260 000 – – 4,91 W P Alcock 190 000 – – – 0,34 B Mothelesi – – – – – M Moela – – – – – 6 176 290 5 431 061 – – 20,76 2011 R P Fertig 3 502 040 5 171 061 – – 15,51 B W Kaiser 2 484 250 260 000 – – 4,91 W P Alcock 190 000 – – – 0,34 B Mothelesi – – – – – M Moela – – – – – 6 176 290 5 431 061 – – 20,76 There have been no changes in the interests of directors between the year end and the date of this report. 1 – 1 000 162 22,16 92 532 0,17 1 001 – 10 000 407 55,68 1 551 396 2,77 10 001 – 100 000 115 15,73 3 861 140 6,91 100 001 – 1 000 000 37 5,06 11 564 981 20,68 1 000 001 – and over 10 1,37 38 844 755 69,47 TOTAL 731 100,00 55 914 804 100,00 % OF % NUMBER OF SHARE NUMBER OF ISSUED RANGE OF SHAREHOLDERS SHAREHOLDERS HOLDERS OF SHARES SHARES Appendix A: Subsidiary Companies COMPANY 2012 Consani Industrial Park (Pty) Limited 200 100% 11 891 (9 092) 2 799 Somerset Mall Developments (Pty) Limited * 100 100% 0 13 098 13 098 11 891 4 006 15 897 COMPANY 2011 Consani Indsutrial Park (Pty) Limited 200 100% 11 891 (5 835) 6 057 Colliers Property Investments Two (Pty) Limited 200 100% 0 – 0 Erf 68 Illovo (Pty) Limited 4 000 100% 4 10 878 10 882 Somerset Mall Developments (Pty) Limited 100 100% 0 20 477 20 477 Colliers RMS Nelspruit (Pty) Limited 1 000 100% 1 3 321 3 322 Colliers RMS (Pty) Limited 101 100% 2 695 (25 251) (22 557) Less: provision against loans (1 196) (1 196) 14 591 2 394 16 985 • Cost of shares in Somerset Mall Developments (Pty) Limited equals R100. Intercompany loans are interest free and have no fixed terms of repayment. All of the above companies are incorporated in South Africa. ISSUED EFFECTIVE COST OF INDEBTED- SHARE % SHARES NESS TOTAL CAPITAL HOLDING R’000 R’000 R’000 Appendix B: Investment Properties APPENDIX B: INVESTMENT PROPERTIES A. DETAILS 1. Retail portion of mixed use development situated on erven 2299 and 2300 as well as consolidated erf 9642 Hout Bay Western Cape having a total lettable retail area of 824m2 let at a weighted average of R152 per m2. 5 948 11 038 (1 774) 15 212 2. Industrial complex situated on erven 21212, 13336, 13337 and 34754 Goodwood Western Cape having a total lettable area of 47594m2 let at a weighed average R29 per m2. 22 900 61 426 90 515 174 841 28 848 72 464 88 741 190 053 LAND BUILDING FAIR VALUE TOTAL BOOK COST COST ADJUSTMENT VALUE GROUP 2012 R 000 R 000 R 000 R 000 Shareholders Diary Number of Employees during 2012: 3 (2011: 161) Financial Year-end: February Annual General Meeting: July Interim Report for 31 August: October/November Announcement of Annual Results: May Annual Financial Statements: May Ruling price – 1 March 2011 68 Ruling price – 29 February 2012 38 Range – highest price 75 – lowest price 30 Volume of shares traded in financial period 1 558 475 Value traded in financial period R680 672 SHARE PRICE (CENTS) Performance on the JSE Securities Exchange South Africa 2013 2014 2015 2016 2017+ RENT PER m2 (RAND) ESCALATION BY SECTOR (%)
  • 4 15 ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 ANNUAL GENERAL MEETING TO BE HELD IN THE BOARDROOM AT 2969 WILLIAM NICOL DRIVE (WEDGEWOOD LINK) BRYANSTON, SANDTON, ON TUESDAY 16 JULY 2012, AT 10:00am. A member entitled to attend and vote is entitled to appoint a proxy to attend, speak and vote in his stead and such proxy need not be a member of the company. I, of being a member of the above company, hereby appoint of or, failing him/her of or, failing him/her, the chairman of the annual general meeting, as my proxy to vote or abstain from voting on my behalf at the annual general meeting of the company to be held on Tuesday 16 July 2012, at 10:00 and at any adjournment thereof as follows: IN FAVOUR AGAINST ABSTAIN Ordinary Business OF 1. Resolution to adopt the financial statements. 2. Resolution to sanction the declaration of no dividends. 3. Resolution to re-elect Mr WP Alcock as a director of the company. 4. Resolution to re-elect Mr M Moela as a director of the company. 5. Resolution to appoint the auditors of the company. 6 Resolution to authorise the directors to fix the auditors’ remuneration. 7. Resolution placing the unissued shares under the control of the directors. 8. Resolution authorising the issue of shares for cash. 9. Special resolution 1: to determine the remuneration of the directors. 10. Special resolution 2: permitting the company to repurchase shares. 11. Special resolution 3: authorising the granting of loans/other financial assistance to subsidiaries/group companies. Signed this day of 2012. Signature of member Assisted by (where applicable) Proxy Form For use by shareholders of Adrenna Property Group Limited (formerly Colliers South Africa Holdings) $$ NOTES 1. Indicate instruction to proxy by way of a cross in the spaces provided above. 2. Unless otherwise instructed, a proxy may vote as he/she thinks fit. 3. This proxy form and the general or special power of attorney or other authority, if any, must be signed, dated and returned so as to reach the registered office of the company at least forty-eight hours before the meeting. 4. Members who have dematerialised their shares in the company and are registered in their own names are members who appointed Computershare Custodial Services as their Central Securities Depository Participants (CSDP) with the express instruction that their uncertificated shares are to be registered in the electronic sub-register of members in their own name. INSTRUCTIONS ON SIGNING AND LODGING THIS FORM OF PROXY: 1. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space/s provided overleaf, with or without deleting ‘the chairman of the meeting’, but any such deletion must be initialled by the shareholder. Should this space be left blank, the proxy will be exercised by the chairman of the meeting. The person whose name appears first on the form of proxy and who is present at the meeting to act as proxy to the exclusion of those whose names follow. 2. A shareholder’s voting instructions to the proxy must be indicated by the insertion of an “X” or, alternatively, the number of shares such shareholder wishes to vote, in the appropriate spaces provided. Failure to do so will be deemed to authorise the proxy to vote or to abstain from voting at the meeting as he/she thinks fit in respect of all the shareholder’s shares. A shareholder or his/her proxy is not obliged to use to use all the shares held by the shareholder, but the total number of shares, or those in respect of which abstention is recorded, may not exceed the total number of shares held by the shareholder. 3. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the transfer secretaries. 4. To be valid the complete form of proxy must be lodged with the transfer secretaries of the company, Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001, (P O Box 61051, Marshalltown, 2107), to be received by them not later than Friday 13 July 2012. 5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy unless previously recorded by the transfer secretaries or waived by the chairman of the meeting. 6. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms thereof, should such shareholder wish to do so. 7. The completion of any blank spaces overleaf need not be initialled. Any alterations or corrections to this form of proxy must be initialled by the signatory/ies. 8. The chairman of the meeting may accept any form of proxy which is completed, other than in accordance with these instructions and notes, provided that the chairman is satisfied as to the manner in which shareholder wishes to vote. Notes to the Proxy Form Notes and instructions to the Proxy Form PLEASE NOTE: ADDITIONAL COPIES OF THE PROXY FORM ARE AVAILABLE FROM THE COMPANY SECRETARY AT: bernard@rmsprop.co.za Notice of Annual General Meeting Adrenna Property Group Limited (formerly Colliers South Africa Holdings Limited) (Incorporated in the Republic of South Africa) (Registration number 1998/012245/06) (Share code: ANA, ISIN code: ZAE000163580) (Previously COL ISIN code: ZAE000099461) NOTICE IS HEREBY GIVEN THAT AN ANNUAL GENERAL MEETING OF MEMBERS OF ADRENNA PROPERTY GROUP LIMITED WILL BE HELD IN THE BOARDROOM AT 2969 WILLIAM NICOL DRIVE (WEDGEWOOD LINK) BRYANSTON, SANDTON ON 16 JULY 2012 AT 10:00 FOR THE FOLLOWING PURPOSES: 1. To receive and adopt the annual financial statements for the 12 months ended 29 February 2012. 2. To sanction the decision of the directors not to pay any dividends. 3. To re-elect Mr W Alcock who retires from the board of directors in terms of the company’s articles of association and who, being eligible, offers himself for re-election. 4. To re-elect Mr M Moela who retires from the board of directors in terms of the company’s articles of association, and who, being eligible, offers himself for re-election. 5. To appoint the auditors of the company and to authorise the directors to fix the auditors’ remuneration 6. To place the unissued shares under the authority of the directors and to grant authority to the directors to issue shares as set out in ordinary resolutions numbers 7 and 8 below. 7. To determine the remuneration of the directors for services as directors 8. To authorise the directors to grant loans, provide guarantees and/or other financial assistance to subsidiary and/or other group companies. 9. To authorise the repurchase of shares by the company as set out in special resolution number 2 below. 10. To transact any other business capable of being transacted at an annual general meeting. Note: Resolutions numbered 1 to 7, inclusive, are ordinary resolutions and require a 50% majority vote of shareholders present in person or represented by proxy. Ordinary resolution number 8 as well as resolutions numbered 9 to 11, inclusive, which are special resolutions require a 75% majority vote. ORDINARY RESOLUTION 1 “Resolved that the Financial Statements for the year ended 29 February 2012 be adopted.” ORDINARY RESOLUTION 2 “Resolved that the decision of the directors not to pay any dividends in respect of the year ended 29 February 2012 be sanctioned.” ORDINARY RESOLUTION 3 “Resolved that W Alcock be re appointed as a Director of the company.” ORDINARY RESOLUTION 4 Resolved that M Moela be reappointed as a Director of the company ORDINARY RESOLUTION 5 “Resolved that Messrs. RSM Betty and Dickson (Johannesburg) be re-appointed as auditors to the company and its subsidiaries.” ORDINARY RESOLUTION 6 “Resolved that the directors be authorised to fix the remuneration of the auditors. ORDINARY RESOLUTION 7 “Resolved that all the authorised but unissued securities of the company be and they are hereby placed under the control of the directors of the company as a general authority to them to allot and issue the same at their discretion in terms of and subject to the provisions of Section 48 of the Companies Act and the listing requirements of the JSE Limited.” ORDINARY RESOLUTION 8 “Resolved that, subject to: 2.1 the passing of ordinary resolution number 7 above; and 2.2 not less than 75 per cent of those shareholders of the company present in person or by proxy and entitled to vote at the meeting at which this resolution is proposed voting in favour of this resolution; the directors of the company be and they are hereby authorised and empowered, by way of a general authority, to allot and issue for cash, without restriction, all or any of the authorised but unissued securities in the capital of the company placed under their control as they in their discretion may deem fit, subject to the provisions of the listing requirements of the JSE Limited.” The restrictions placed by the JSE Limited on such general authority for allotments and issues for cash are as follows: • The authority is valid until the next annual general meeting but in any event not later than 15 months from the date of meeting. • Any such issue must be of a class of securities already in issue and can only be made to public shareholders as defined in the listing requirements. • Issues in the aggregate in any one financial year will not exceed 15% of the number of securities of the company’s issued share capital. • A paid press announcement giving full details, including the impact on net asset value and earnings per share, will be published at the time of any issue representing, on a cumulative basis within a financial year, 5% or more of the number of securities in issue. • In determining the price at which the issue of securities will be made, the maximum discount permitted will be 10% of the average closing price of the securities as determined over the 30 days prior to either the date of the paid press announcement or, where no announcement is required and none has been made, the date of issue of such securities. • Subject to the approval of not less than 75% of the votes cast by shareholders present or represented by proxy and entitled to vote thereat.
  • 16 ANNUAL REPORT OF ADRENNA PROPERTIES LIMITED ANNUAL FINANCIAL STATEMENTS 2012 SPECIAL RESOLUTION 1 “Resolved that the directors be authorised to remunerate the directors of the company either on a monthly basis or on a per meeting basis, as determined by an independent quorum of directors for services as directors subject to an annual limit of R250 000 per annum per director. This authority, unless renewed timeously will expire on 15 July 2014. SPECIAL RESOLUTION 2 Repurchase of securities To consider and, if deemed fit, pass with or without notification the following resolution was passed as a special resolution: “RESOLVED THAT: the acquisition by the company of shares issued by it, as provided for in the company’s Articles of Association, on such terms and conditions as may be determined by the directors and the acquisition by any subsidiary of the company of shares issued by the company on terms and conditions as determined by the directors. (a) the general authority granted to the directors shall be valid only until the company’s next annual general meeting and shall not extend beyond 15 (fifteen) months from the date of this resolution; (b) the general authority for the company or by its subsidiaries to acquire its securities shall be limited to a maximum of 20% of the company’s issued securities in any applicable class in any one financial year; (c) any repurchase may not be made at a price more than 10% above the weighted average of the market value of the security for 5 (five) business days immediately preceding the date of such repurchase (inclusive of any specific authority); (d) should the company either directly or indirectly through its subsidiaries cumulatively repurchase 3% of its own securities in terms of this general authority it shall make an announcement in accordance with the listing requirements of the JSE Limited (“JSE”). (e) the repurchase will be affected through a single agent appointed for this purpose using the order book operated by the JSE trading system without any prior understanding or arrangement. (f) the repurchase will only be effected if it does not contravene the JSE Limited’s shareholder spread requirements. (g) the repurchase will not be effected during a prohibited period as defined by the JSE Limited. Reasons for and effects of special resolution number 1 is to enable the directors of the company up to and including the date of the next annual general meeting of the company to approve the acquisition by the company, of its own securities and which will, upon registration, have that effect. The board of directors may use the authority granted under special resolution number 1 where circumstances such as market conditions, revenue dispensations or any other circumstances which may be in the best interests of the company and its shareholders, in the opinion of the directors, warrant the use of such authority. The directors, at the time of taking an executive decision to effect a repurchase on the open market, will: • provide the JSE with the latest audited annual financial statements or reviewed interim financials; • provide the JSE with a forecast balance sheet, income statement and cash flow statement covering the 12-month period subsequent to the date of the latest audited financial statements or reviewed interim results, as the case may be, which forecasts will be reviewed by the auditors of the company. The directors are of the opinion, after considering the possible effects on an acquisition by the company of its own securities, that: • the company shall be able, in the ordinary course of its business, to pay its debts; • the consolidated assets of the company, fairly valued in accordance with Generally Accepted Accounting Practice, are in excess of the consolidated liabilities of the company; • the company shall have adequate working capital for its operations in the following year; and • the company shall have adequate capital. For the purposes of considering the special resolution for the company or as a subsidiary of the company to repurchase shares issued by the company, the information below has been included in the annual report in which this notice of annual general meeting is included: Directors and administration – inside front cover of the report Major shareholders – page 14 of the report Directors’ interests – page 14 of the report Share capital – page 10 of the report Litigation – other than for the claim as set out in note 14 to the Annual Financial Statements to which the notice is attached, the directors are not aware of any legal or arbitration proceeding, including proceedings that are pending or threatened, that may or have in the previous 12 months had a material affect on the group’s financial position. Directors’ responsibility statement on page 4 of the report. SPECIAL RESOLUTION 3 “Resolved that the directors be authorised to grant loans, provide guarantees or other financial assistance to subsidiary and/or other group companies on terms and conditions as determined by the directors subject to: a) The directors, prior to granting such loan, providing guarantees or providing other financial assistance, are satisfied that the requirements of the solvency and liquidity tests are complied with; are b) The terms of the loan, guarantee or financial assistance are fair and reasonable to the company This authority, unless renewed timeously will expire on 15 July 2014” Directors’ responsibility The directors of the company whose names are set out inside the back cover of the annual financial statements to which this notice is attached, collectively and individually accept full responsibility for the accuracy of the information given, and certify that to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that this circular contains all information required by law and the Listings Requirements. Voting and proxies Every holder of ordinary shares present in person or by proxy at the meeting, or in the case of a body corporate represented at the meeting shall be entitled to one vote on a show of hands and on a poll shall be entitled to one vote for every ordinary share held. A proxy form is enclosed for those members who wish to be represented at the meeting but are unable to attend. In order to be effective, a duly completed proxy form must be deposited at the registered office of the company not less than forty-eight hours before the time for holding the meeting. BY ORDER OF THE BOARD B W KAISER, COMPANY SECRETARY BRYANSTON DESIGNED AND PRODUCED BY DMCB DESIGN & PHOTOGRAPHY: 082 926 0559 Notice of Annual General Meeting Adrenna Property Group Limited (formerly Colliers South Africa Holdings Limited) (Incorporated in the Republic of South Africa) (Registration number 1998/012245/06) (Share code: ANA, ISIN code: ZAE000163580) (Previously COL ISIN code: ZAE000099461)