Premium Properties Limited - Octodec · 2019. 12. 9. · Premium Properties Limited (Registration number 1994/003601/06) Audited Consoiidated Annua! Financial Statements for the year

Premium Properties Limited(Registration number 1994/003601/06)

Audited Consolidated Annual Financial Statementsfor the year ended 31 August 2015

Premium Properties Limited(Registration number 1994/003601/06)Audited Consolidated Annual Financial Statements for the year ended 31 August 2015

General Information

Country of incorporation and domicile

Nature of business and principal activities

Directors

Registered office

Business address

Postal address

Holding company

Bankers

Auditors

Secretary

Company registration number

Level of assurance

Preparer

South Africa

Property investment deriving income from rentals

JP WapnickAK SteinP Kruger

101 Du Toit StreetPretoria0001

101 Du Toit StreetPretoria0001

PO Box 15Pretoria0001

Octodec Investments Limitedincorporated in South Africa

Nedbank Limited

Deloltte & loucheChartered Accountants (S.A.)Registered Auditors

City Property Administration (Pty) Ltd

1994/003601/06

These consolidated annual financial statements have beenaudited in compliance with the applicable requirements of theCompanies Act 71 of 2008 (the Act).

The consolidated annual financial statements wereinternally compiled by:D Van Der Merwe under the supervision of AK Stein

CA(SA)

Issued 29 February 2016

1

Premium Properties Limited(Registration number 1994/003601/06)Audited Consoiidated Annua! Financial Statements for the year ended 31 August 2015

Index

The reports and statements set out below comprise the audited consolidated annual financial statements presented to theshareholder:

Index Page

Directors' Responsibilities and Approval 3

Independent Auditor's Report 4 - 5

Directors' Report 6 - 8

Statements of Financial Position 9

Statements of Profit and Loss and Other Comprehensive Income 10

Statements of Changes in Equity 11-12

Statements of Cash Flows 13

Accounting Policies 14 - 24

Notes to the Audited Consolidated Annual Financial Statements 25 - 51


Directors' Responsibilities and Approval

The directors are required in terms of the Companies Act 71 of 2008 (the Act) to maintain adequate accounting records andare responsible for the content and integrity of the consolidated annual financial statements (i.e consolidated and companyannua! financial statements) and related financial information included in this report. It is their responsibility to ensure thatthe consolidated annual financial statements fairly present the state of affairs of the group and company as at 31 August2015 and the results of its operations and cash flows for the period then ended, in conformity with International FinancialReporting Standards and the Act. The external auditors are engaged to express an independent opinion on the auditedconsolidated annual financial statements.

The consolidated annual financial statements are prepared in accordance with International Financial Reporting Standardsand the Act and are based upon appropriate accounting policies consistently applied and supported by reasonable andprudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by thegroup and company and place considerable importance on maintaining a strong control environment. To enable thedirectors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error orloss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly definedframework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk.These controls are monitored throughout the group and company and all employees are required to maintain the highestethical standards in ensuring the group and company's business is conducted in a manner that in all reasonablecircumstances is above reproach. The focus of risk management in the group and company is on identifying, assessing,managing and monitoring all known forms of risk across the group and company. While operating risk cannot be fullyeliminated, the group and company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systemsand 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 ofinternal control provides reasonable assurance that the financial records may be relied on for the preparation of theconsolidated 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 and company's cash flow forecast for the year to 31 August 2016 and, in the light ofthis review and the current financial position, they are satisfied that the group and company has or has access to adequateresources to continue in operational existence for the foreseeable future.

The externa! auditors are responsible for independently auditing and reporting on the consolidated annual financialstatements. The consolidated annual financial statements have b^en examined by the group and company's externalauditors and their report is presented on pages 4 to 5.

nsolidated annual financial statements set out on pages 6ere approved by the board on 29 February 2016 and wen

o 51, which have been prepared on the going concernsigned on its behalf by;

AK Stein

Certification by company secretary

In terms of section 88(2)(e) of the Companies Act, 1 certify th^Premium Properties Limited has lodged with the Companiesand Intellectual Property Commission of South Africa all the retttro^^requiredyOf a public company by the Companies Actand that all such returns appear to be true, correct and up to date.

Elize GreeffCity Property Administration Proprietary LimitedCompany Secretary29 February 2016

3

DeloitteDeloitte & ToucheRegistered AuditorsAudit-Gauteng

Buildings 1 and 2Deloitte PlaceThe WoodlandsWoodlands DriveWoodmead SandtonPrivate Bag X6Gallo Manor 2052South AfricaDocex 10 Johannesburg

RIverwalk Office Park,Block B41 Matroosberg RoadAshlea Gardens X6Pretoria, 0081PO Box 11007Hatfield 0028South AfricaDocex 6 Pretoria

www.deloitte.com

Tel: +27 (0)11 806 5000 Tel: +27 (0)12 482 0000Fax; +27 (0)11 806 5111 Fax: +27 (0)12 460 3633

INDEPENDENT AUDITOR'S REPORT

TO THE SHAREHOLDER OF PREMIUM PROPERTIES LIMITED

We have audited the consolidated and separate financial statements of Premium Properties Limited set out onpages 9 to 51, which comprise the statements of financial position as at 31 August 2015, and the statements ofprofit and loss and other comprehensive Income, statements of changes in equity and statements of cash flowsfor the year then ended, and the notes, comprising a summary of significant accounting policies and otherexplanatory information.

Directors' Responsibility for the Financial Statements

The company's directors are responsible for the preparation and fair presentation of these consolidated andseparate financial statements in accordance with International Financial Reporting Standards and therequirements of the Companies Act of South Africa, and for such internal control as the directors determine isnecessary to enable the preparation of consolidated and separate financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditor's Responsibiiity

Our responsibility is to express an opinion on these consolidated and separate financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgement, including the assessment ofthe,risks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity's internal control.

Naiional Executive; *LL Bam Chief Executive 'AESwiegers Chief Operating Officer 'GMPinnock Audit*N Sing RiskAdvisory 'NBK^derTax TPPiilayConsuid'ng SGwalaSPaaS 'K Black Ciients 6 industries'JKMazzocco Talent 6 Transformation 'f/U Jarvis Finance *M Jordan Strategy *MJ Comber Reputations Risk'TJ Brov/n Chairman of the Board

A full list of partners and directors Is available on request ' Partrter and Registered Auditor

B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code

Associate of Deloitte Africa, a Member of Deloitte Touche Tohmatsu Limited

4

An audit also Includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the financialstatements.

Other matter paragraph

The financial statements of the prior period were audited by the predecessor auditor. The opinion expressed bythe predecessor auditor was an unmodified opinion and the date of the report was on 6 February 2015.

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

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, theconsolidated and separate financial position of Premium Properties Limited as at 31 August 2015, and itsconsolidated and separate financial performance and consolidated and separate cash flows for the year thenended in accordance with International Financial Reporting Standards and the requirements of the CompaniesAct of South Africa.

Other report required by the Companies Act

As part of our audit of the consolidated and separate financial statements for the year ended 31 August 2015 wehave read the Directors' Report as well as the company secretary report for the purpose of identifying whether thereare material inconsistencies between these reports and the audited consolidated and separate financial statements.These reports are the responsibility of the respective preparers. Based on reading these reports we have notidentified material inconsistencies between these reports and the audited consolidated and separate financialstatements. However, we have not audited these reports and accordingly do not express an opinion on thesereports.

Deloltte & Touch©Registered AuditorPer: P KlebPartner29 February 2016

Opinion

5


Directors' Report

The directors have pleasure in submitting their report on the consolidated annual financial statements of Premium PropertiesLimited for the year ended 31 August 2015.

1. Nature of business

Premium Properties Limited is a REIT which was listed on the JSE under the "Financials - Real Estate Holdings" sector,investing in retail, commercial, industrial and residential properties and deriving income from the rental of its properties and Itsinvestments. On 22 September 2014, it was delisted from the JSE and it became a wholly owned subsidiary of OctodecInvestments Limited effective from 1 September 2014. Octodec Investments Limited Is a listed REIT and their compliance withGovernance can be found in the Integrated Report of Octodec Investments Limited. The group and company operate in SouthAfrica.

There have been no material changes to the nature of the group and company's business from the prior year.

2. Review of financial results and activities

The consolidated annual financial statements have been prepared In accordance with International Financial ReportingStandards and the requirements of the Companies Act 71 of 2008 (the Act), The accounting policies have been appliedconsistently compared to the prior year.

Full details of the financial position, results of operations and cash flows of the group and company are set out in theseconsolidated annual financial statements.

3. Share capital

There have been no changes to the authorised or issued share capital during the year under review, other than the debenturesand debenture premium amounting to R686 million being converted to stated capital on 27 August 2015, which resulted in anIncrease In equity of R686 million and a reduction in total liabilities of R686 million.

4. Dividends

The dividend has been declared and paid as reflected on the statement of changes in equity.

5. Directorate

The directors in office at the date of this report are as follows:

DirectorsS WapnickMZ PollackDP CohenON KempPJ Strydom

Resigned 17 February 2015Resigned 17 February 2015Resigned 17 February 2015Resigned 17 February 2015Resigned 17 February 2015

JP WapnickAK SteinPO GoldhawkMJ Lemming

Resigned 3 September 2014Resigned 3 September 2014Resigned 3 September 2014Appointed 24 July 2015

SG MorrisP Kruger

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Directors' Report

6. interests in subsidiaries and associates

Details of material interests in subsidiaries and associates are presented in the consolidated annual financial statements innotes 5, 6 and 7.

The interest of the group and company in the profits and losses of its subsidiaries and associates for the year ended 31 August2015 are as follows:

2015 2014R'OOD R'OOO

SubsidiariesCentpret Properties Proprietary Limited 360 620 119815Centuria 369 Proprietary Limited (95) (1 403)Landjack Properties Proprietary Limited 2415 44Savyon Buildings Proprietary Limited 209 604 62 952AssociatesIPS Investments Proprietary Limited 114 329 134 810

686 873 316 218

7. Events after the reporting period

The following loans have since been consolidated by Nedbank and Standard Bank into new loans in the name of the holdingcompany, Octodec Investments Limited.

The directors are not aware of any other material events which occurred after the reporting date and up to the date of thisreport.

Lender Expiry date 2015R'OOO

Nedbank Limited 01 September 2015 38 457Nedbank Limited 01 September 2015 1 912Nedbank Limited 01 September 2015 3 157Nedbank Limited 01 November 2015 124 480Standard Bank of South Africa Limited 27 November 2015 337 684

505 690

8. Going concern

The directors believe that the group and company have adequate financial resources to continue in operation for theforeseeable future and accordingly the consolidated annual financial statements have been prepared on a going concernbasis. The directors have satisfied themselves that the group and company are in a sound financial position and that they haveaccess to sufficient borrowing facilities to meet their foreseeable cash requirements. The directors are not aware of any newmaterial changes that may adversely impact the group and company. The directors are also not aware of any material non¬compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the group andcompany.

9. Auditors

Deloitte & Touche were appointed as auditors for the group and company for 2015.

At the AGM, the shareholder will be requested to reappoint Deloitte & Touche as the independent external auditors of thecompany and to confirm Mr Patrick Kleb as the designated lead audit partner for the 2016 financial year.

7


Directors' Report

10. Secretary

The company secretary is City Property Administration Proprietary Limited.

Postal addressPO Box 15Pretoria0001

Business address101 Du Toit StreetPretoria0001

11. Management contract and administration

The group and company's investment properties continue to be managed (in terms of an agreement) by City PropertyAdministration Proprietary Limited, the entire share capital of which is effectively owned by the Wapnick family.

12. Audit committee

The company does not have its own audit committee as the audit committee of the holding company. Octodec InvestmentsLimited, oversees Premium Investments Limited and its subsidiaries. The shareholders are referred to the audit committeereport included in the holding company's financial statements.

Premium Properties Limited(Registration number 1994/003601/06)Audited Consolidated Annuai Financial Statements for the year ended 31 August 2015

Statements of Financial Position as at 31 August 2015Consolidated Company

2015 2014 2015 2014Note(s) R'OOO R'OOO R'OOO R'OOO

Assets

Non-Current AssetsInvestment property 3 5 298 749 4 860 151 553 891 500 618Plant and equipment 4 4 955 6105 659 777Investments In subsidiaries 5 - - 5 5Investments in associate 6 422 741 667 826 1 296 709Loans to group companies 7 - - 2 395 205 2 239 945Loan to holding company 8 177 093 - 177 093 -

Operating lease assets 11 59 222 55 256 4 380 4 232Lease costs capitalised 12 25 693 17 638 3 570 913

5 988 453 5 606 976 3 134 804 3 043199

Current AssetsTrade and other receivables 13 29 829 36 203 7 540 7 707Cash and cash equivalents 14 48 121 649 42 121 643

29 877 157 852 7 582 129 350Total Assets 6 018 330 5 764 828 3 142 386 3 172 549

Equity and Liabilities

EquityShare capital 15 690 947 4 472 690 947 4 472Non - distributable reserves 16 2 936 250 2 622 449 538 981 491 473Distributable reserves 50 427 38 981 30 905 29 817

3 677 624 2 665 902 1 260 833 525 762

Liabilities

Non-Current LiabilitiesDebenture capital and premium 17 - 686 475 - 686 475Borrowings 18 1 322 570 1 147 894 1 162 570 863 409Deferred taxation 10 12 502 6 460 - -

Derivative financial instruments 9 6 253 16 896 6 253 16 8961 341 325 1 857 725 1 168 823 1 566 780

Current LiabilitiesBorrowings 18 848 597 973 082 682 503 928 886Trade and other payables 19 141 390 140 976 20 833 23 978Dividends payable - 127 143 - 127 143Bank overdraft 14 9 394 - 9 394 -

999 381 1 241 201 712 730 1 080 007Total Liabilities 2 340 706 3 098 926 1 881 553 2 646 787

Total Equity and Liabilities 6 018 330 5 764 828 3 142 386 3 172 549

9


Statements of Profit and Loss and Other Comprehensive IncomeConsolidated Company

12 months 6 months 12 months 6 monthsended ended ended ended2015 2014 2015 2014

Note(s) R'OOO R'OOO R'OOO R'OOO

Revenue 20 762 900 369 057 83 483 42 852Other income - 49 - 3Operating expenses (330 761) (170 971) (45 693) (27 646)Operating profit 21 432 139 198 135 37 790 15 209Investment revenue 22 2 839 2 000 348 273 192 904Fair value adjustments 23 255 625 81 154 47 508 (299)Income from equity accounted investments 28 51 623 141 616 - 43 307Finance costs 24 (182 937) (209 389) (156 975) (187 776)Profit before taxation 559 289 213 516 276 596 63 345Taxation 25 (6 042) - - -

Profit for the year 553 247 213 516 276 596 63 345Other comprehensive income - - - -

Total comprehensive income for the year 553 247 213 516 276 596 63 345

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Statements of Cash FlowsConsolidated Company

12 months 6 months 12 months 6 monthsended ended ended ended2015 2014 2015 2014

Note(s) R'ODO R'OOO R'OOO R'OOO

Cash flows from operating activities

Cash generated from/(used in) operations 26 447 138 210 870 37 353 (3 029)interest income 2 839 2 000 663 61 954Dividends received 22 - - 347 610 130 950Finance costs (182 937) (82 873) (156 975) (61 260)Distribution to linked unitholders 27 (355 143) (132 474) (355 143) (132 474)Income from associate 28 - 43 307 - 43 307

Net cash from/(used In) operating activities (88 103) 40 830 (126 492) 39 448

Cash flows from/(used In) investing activities

Development of investment property 3 (183 832) (91 969) (16 409) (7 363)Acquisition of investment property 3 (9 785) - - -

Loans advanced to subsidiaries - - (155 355) (348 457)Lease cost additions (19 082) (10 897) (5 133) (330)Net movement in loan to associate 296 709 (41 307) 296 709 (41 307)Net movement in loan to holding company (177 093) - (177 093) -

Net cash from/(used in) investing activities (93 083) (144173) (57 281) (397 457)

Cash flows from/(used In) financing activities

Net movement in other financial liabilities 50 191 217221 52 778 471 887

Net cash from/(used in) financing activities 50191 217 221 52 778 471 887

Total cash movement for the year (130 995) 113 878 (130 995) 113 878Cash at the beginning of the year 121 649 7 771 121 643 7 765

Total cash at end of the year 14 (9 346) 121649 (9 352) 121 643

13


Accounting Policies

1. Presentation of consolidated annual financial statements

The consolidated annual financial statements have been prepared in accordance with International Financial ReportingStandards and the Act. The consolidated 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 theprincipal accounting policies set out below. They are presented in South African Rands rounded to the nearest thousand.

These accounting policies are consistent with the previous period.

1.1 Consolidation

Basis of consolidation

The company accounts for business combinations by applying the acquisition method as at the acquisition date and measuresgoodwill as the fair value of the consideration transferred including the recognised amount of any non-controlling interest in theacquires, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, allmeasured at the acquisition date.

The company controls an entity when It has power over the entity, it is exposed to, or has rights to, variable returns from itsinvolvement with the entity and has the ability to affect those through its power over the entity. The acquisition date Is the dateon which control is transferred to the acquirer. Judgement Is applied In determining the acquisition date and determiningwhether control is transferred from one party to another.

Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the company to the previousowners of the acquiree, and equity interests issued by the company. Consideration transferred also includes the fair value ofany contingent consideration.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a presentobligation and arises from a past event, and its fair value can be measured reliably.

The company measures any non-controlling interest at its proportionate Interest in the identifiable net assets of the acquiree.

Transaction costs that the company incurs in connection with a business combination, such as finder's fees, legal fees, duediligence fees, and other professional and consulting fees, are expensed as Incurred, except transaction costs associated withthe issue of debt or equity interests, which are capitalised as part of the cost of the acquisition.

Investment In associates

An associate is an entity over which the company has significant influence and which is neither a subsidiary nor a jointventure. Significant influence is the power to participate in the financial and operating policy decisions of the Investee but isnot control or joint control over those policies.

An investment in associate is accounted for using the equity method. Under the equity method, investments in associatesare carried in the consolidated statements of financial position at cost adjusted for post-acquisition changes in the group'sshare of net assets of the associate, less any impairment losses.

Losses in an associate in excess of the company's interest in that associate are recognised only to the extent that thecompany has incurred a legal or constructive obligation to make payments on behalf of the associate.

Any goodwill on acquisition of an associate Is Included in the carrying amount of the investment, however, a gain onacquisition is recognised immediately in profit or loss.

Profits or losses on transactions between the group and an associate are eliminated to the extent of the company's interesttherein.

When the company reduces its level of significant influence or loses significant influence, the company proportionatelyreclassifies the related items which were previously accumulated in equity through other comprehensive income to profit orloss as a reclassification adjustment. In such cases, if an investment remains, that investment is measured to fair value,with the fair value adjustment being recognised in profit or loss as part of the gain or loss on disposal.

In the company's financial statements, investments in associates are carried at cost less any accumulated impairmentlosses.

14

Premium Properties Limited(Registration number 1994/003601/06)Audited Consoiidated Annual Financial Statements for the year ended 31 August 2015

Accounting Policies

1.1 Consolidation (continued)

Investments in subsidiaries

Subsidiaries are those entities controiied by the company. The financial results of subsidiaries' are included in the consoiidatedfinancial statements from the date that control commences until the date that control ceases.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Transactions which result in changes in ownership levels, where the company has control of the subsidiary both before andafter the transaction, are regarded as equity transactions and are recognised directly in the statement of changes in equity.

The difference between the fair value of consideration paid or received and the movement in non-controlling interest for suchtransactions is recognised in equity attributable to the owners of the parent.

Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fairvalue with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controllinginterest.

In the company's financial statements, investments in subsidiaries are stated at cost, less any accumulated impairment losses.

A list of the groups' subsidiaries is set out in note 38 on page 51.

1.2 Significant judgements and sources of estimation uncertainty

In preparing the consoiidated annual financial statements, management is required to make estimates and assumptionsthat affect the amounts represented in the consolidated annual financial statements and related disclosures. Use ofavailable information and the application of judgement is inherent In the formation of estimates. Actual results in the futurecould differ from these estimates which may be material to the consoiidated annua! financial statements. Significantjudgements include:

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loansand receivables (including trade and other receivables, bank balances and cash), are measured at amortised cost using theeffective Interest method, less any impairment. An estimate is made for credit losses based on a review of all outstandingamounts at year-end. Bad debts are written off to profit or loss during the year in which they are identified. Interest earned ontrade receivables and cash and cash equivalents is recognised on an accrual basis using the effective interest method, exceptfor short-term receivables when the effect of discounting is immaterial.

15


Accounting Policies

1.2 Significant judgements and sources of estimation uncertainty (continued)

Fair value measurement

The group and company measure financial instruments, such as derivatives and investment properties, at fair value at eachreporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. The fair value measurement is based on the presumption that the transaction toseii the asset or transfer the liability takes place either;

- in the principal market for the asset or liability; or- in the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the group and company.

The fair value of an asset or a liability Is measured using the assumptions that market participants would use when pricing theasset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highestand best use or by selling it to another market participant that would use the asset in its highest and best use.

The group and company use valuation techniques that are appropriate in the circumstances and for which sufficient data isavailable to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservableinputs.All assets and liabilities for which fair value is measured or disclosed In the financial statements are categorised within the fairvalue hierarchy, described as follows, based on the lowest level input that Is significant to the fair value measurement as awhole:- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities; or- Level 2 - Valuation techniques for which the lowest level Input that is significant to the fair value measurement Is directly orindirectly observable; or- Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement isunobservable.

Investments In associates

Refer to note 6 for the directors' consideration of why IPS Investments Proprietary Limited is recognised as an associate.

Investment property

In the application of the accounting policies, management is required to make estimates and assumptions about the fair valueof investment properties that are not readily apparent from other sources. The estimates and assumptions are based onhistorical experience and other factors that are considered to be relevant. The fair values of investment properties aredetermined after taking into account prevailing market rentals and occupation levels. An appropriate capitalisation rate is usedthat reflects the risk associated with the particular building. Actual results may differ from these estimates.

Derivatives

The group and company uses derivative financial instruments to manage its exposure to interest rate risk arising from itsfinancing activities. In accordance with its treasury policy, the group and company does not hold or issue derivative financialinstruments for trading purposes. However, as the hedge relationship is not designated as a hedge for accounting purposes,the derivatives are accounted for as trading instruments.

Derivative financial instruments are initially recognised at fair value at the date the derivative contracts are entered into and aresubsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profitor loss.

The fair value of interest rate swaps is the estimated amount that the entity would receive or pay to terminate the swap at thereporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties.

16


Accounting Policies

1.2 Significant judgements and sources of estimation uncertainty (continued)

Plant and equipment

As described in 1.4 below, the group and company reviews the estimated useful life of the plant and equipment at the end ofeach reporting period. Judgements regarding the existence of impairment indicators are based on market conditions andoperational performance of the business. Future events could cause management to conclude that impairment Indicators exist.

Residual values

The group and company is required to measure the residual value of an item of plant and equipment. An estimate Is made ofthe amount It would receive currently for the asset if the asset was already of the age and condition expected at the end of itsuseful life. IAS 16 requires residual values to be estimated first at the date of acquisition and thereafter to be reviewed at eachreporting date. If these change from the prior period, the depreciation charge is adjusted prospectively.

Useful life

The useful life of an asset is the period over which the group and company expects to use the asset, and not necessarily theasset's economic life. Useful lives of assets are reviewed annually, if these change from the prior period, the depreciationcharge is adjusted prospectively. The group and company uses the following indicators to determine useful lives:

- expected usage of assets;- expected physical wear and tear; and- technical or commercial obsolescence.

Provisions

Provisions are required to be recorded when the group and company have a present legal or constructive obligation as a resultof past events, for which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can bemade of the amount of the obligation. Best estimates, being the amount that the group and company would rationally pay tosettle the obligation, are recognised as provisions at the reporting date.

17


Accounting Policies

1.3 Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that areassociated with the investment property will flow to the entity, and the cost of the investment property can be measured reliably.

Investment properties are initially recognised at cost, including transaction costs. Subsequent to initial recognition, investmentproperties are measured at fair value. Subsequent expenditure relating to investment properties that have been recognised areadded to the carrying amount of the investment properties when it is probable that future economic benefits, in excess of theoriginally assessed standard of performance of the existing investment properties, will flow to the enterprise. Ail othersubsequent expenditure is expensed in the period in which it is incurred.

Leasehold property comprising of buildings erected on land secured by means of long-term land leases is classified asinvestment property. Operating lease payments, which are based on a percentage of rental income, are charged to thestatement of profit and loss as Incurred.

Fair value

At the reporting date all investment properties are measured at fair value as determined by the directors. The investmentcommittee considers the valuations to determine the appropriate valuation techniques and inputs for fair value measurements.

In estimating the fair value of investment properties, the group and company uses market-observable data to the extent it isavailable. Independent valuations are obtained on a rotational basis to determine the reasonableness of the directors'valuations, ensuring that every property is valued every three years. The chief financial officer reports the investmentcommittee's findings to the board of directors to explain the cause of fluctuations in the fair values of the investment properties.

Information about valuation techniques and Inputs used in determining the fair value of the investment properties are disclosedin note 1.2. These fair values of property exclude accrued operating lease income. A gain or loss arising from a change in fairvalue is included in net profit or loss for the period in which It arises and is transferred to a non-distributable reserve in thestatement of changes in equity.

1.4 Plant and equipment

Plant and equipment are recognised at cost less accumulated depreciation and accumulated impairment losses. The cost of anitem of plant and equipment is recognised as an asset when it is probable that future economic benefits associated with theitem will flow to the entity and the cost of the item can be measured reliably. Subsequent expenditure relating to an item ofplant and equipment that has already been recognised is added to the carrying amount of the asset to the extent that it isprobable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, willflow to the enterprise.

The residual value and the useful life of each asset are reviewed at each financial year-end. Each part of an item of plant andequipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

Depreciation is based on the cost of the asset less its residual value and recognised on a straight-line basis, over the currentestimated useful lives of the assets and is recognised in the statement of profit and loss or other comprehensive Income.

The estimated useful lives of items of the assets for the current and comparative periods are:

Item Average useful lifeFurniture and fittings 6 yearsLifts 12 yearsAir conditioning equipment 6 yearsSecurity equipment 5-6 years

The gain or loss arising from the disposal or retirement of an asset is determined as the difference between the sales proceedsand the carrying amount of the asset and is recognised in the statement of profit and loss and other comprehensive income.

18


Accounting Policies

1.5 Financial instruments

Classification

The group and company classifies financial assets and financial liabilities into the following categories:• Derivative financial instruments - Financial assets at fair value through profit or loss (FVTPL)• Loans to and from group companies and trade receivables - Loans and receivables• Derivative financial instruments - Financial liabilities at fair value through profit or loss• Borrowings and trade payables - Financial liabilities measured at amortised cost

The classification depends on the nature and purpose of the financial instruments and is determined by management at thetime of initial recognition.

Initial recognition and measurement

Financial instruments are recognised initially when the group and company becomes a party to the contractual provisions of theinstruments.

Financial assets and liabilities are initially measured at fair value. All transaction costs directly attributable to the acquisition orissue of financial assets and liabilities (other than financial assets and financial liabilities at fair value through profit and loss)are added to or deducted from the cost value of the financial assets or financial liabilities, as appropriate, on initial recognition.Transaction costs directly attributable to the acquisition of financial instruments at fair value through profit or loss are expensedimmediately in profit and loss.

The effective interest method is a method of calculating the amortised cost of a financial asset or liability and of allocatinginterest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cashreceipts or payments (including all fees, transaction costs and other premiums or discounts) through the expected life of thefinancial asset or liability, to the net carrying amount on initial recognition.

Derecognition

The group and company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or ittransfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially ail therisks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is createdor retained by the entity is recognised as a separate asset or liability.

The group and company derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of theconsideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensiveincome and accumulated in equity is recognised in profit and loss.

Derivative financial Instruments

The group and company use derivative financial instruments to manage their exposure to interest rate risk arising from theirfinancing activities. In accordance with its treasury policy, the group and company do not hold or issue derivative financialinstruments for trading purposes. However, as the hedge relationship is not designated as a hedge for accounting purposes,the derivatives are accounted for as trading instruments.

Derivative financial instruments are initially recognised at fair value at the date the derivative contracts are entered into and aresubsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profitor loss.

The fair value of interest rate swaps is the estimated amount that the entity would receive or pay to terminate the swap at thereporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties.

19


Accounting Policies

1.5 Financial instruments (continued)

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loansand receivables (including trade and other receivables, bank balances and cash), are measured at amortised cost using theeffective interest method, less any impairment. An estimate is made for credit losses based on a review of all outstandingamounts at year-end. Bad debts are written off to profit or loss during the year in which they are identified. Interest earned ontrade receivables, cash and cash equivalents is recognised on an accrual basis using the effective interest method, except forshort-term receivables when the effect of discounting is immaterial.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end ofeach reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of oneor more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investmenthave been affected.

Objective evidence of impairment for a portfolio of receivables includes the group and company's past experience of collectingpayments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observablechanges in local economic conditions that result in default on receivables.

Other financial liabilities

Financial liabilities are classified as either financial liabilities at 'FVTPL' or'other flnancia! liabilities.' Other financial liabilities(including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interestmethod.

The effective interest method is a method of caiculating the amortised cost of a financial asset or liability and of allocatinginterest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cashreceipts or payments (including all fees, transaction costs and other premiums or discounts) through the expected life of thefinancial asset or liability, to the net carrying amount on initial recognition.

The fair values of financial instruments measured at amortised cost are disclosed should it be determined that the carryingvalue of these instruments does not reasonably approximate their fair value at each reporting date.

Fair value measurement

The group and company measures financial instruments, such as derivatives and certain investments and investmentproperties, at fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. The fair value measurement is based on the presumption that the transaction tosell the asset or transfer the liability takes place either;

• in the principal market for the asset or liability: or

• in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the group and company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing theasset or liability, assuming that market participants act in their economic best interest. A fair vaiue measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highestand best use or by selling it to another market participant that would use the asset in its highest and best use.

Fair value for measurement and/or disclosure purposes in these financial statements is determined on the above basis, exceptfor leasing transactions that are within the scope of IAS 17 Leases.

The group and company use valuation techniques that are appropriate in the circumstances and for which sufficient data isavailable to measure fair vaiue, maximising the use of relevant observable inputs and minimising the use of unobservableinputs.


Accounting Policies

1.5 Financial instruments (continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fairvalue hierarchy, described as follows, based on the lowest level Input that is significant to the fair value measurement as awhole:

• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities; or

• Level 2 ~ Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly orindirectly observable; or

• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement isunobservable.

1.5 Taxation

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 respectof current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recoveredfrom) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of thereporting period.

Deferred tax assets and liabilities

A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxableprofit will be available against which the unused tax losses 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 isrealised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the endof the reporting period.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it isno longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

No deferred tax is recognised on the fair value of investment property. Investment property will be realised through sale, andsubsequent to the conversion to a REIT, capital gains tax is no longer applicable in terms of section 25BB of the Income TaxAct.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against currenttax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority oneither the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

21


Accounting Policies

1.6 Taxation (continued)

Tax expenses

Current and deferred taxes are recognised as income or an expense and inciuded in profit or loss for the period, except to theextent that the tax arises from:

• a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or• a business combination.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that arecredited or charged, in the same or a different period, to other comprehensive income.

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 in equity.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before tax' as reported in thestatement of profit and loss and other comprehensive income because of items of income or expense that are taxable ordeductible in other years and items that are never taxable or deductible. The group and company's current tax is calculatedusing tax rates that have been enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carryingamounts in the consolidated financial statements.

1.7 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease isclassified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Operating leases - lessor

Contractual rental income is recognised on a straight-line basis over the period of the lease term.An adjustment is made to contractual rental income earned to bring to account in the current period the difference between therental income that the group and company is currently entitled to and the rental for the period calculated on a smoothedstraight- line basis.Income from leases is disclosed under revenue in the statement of profit and loss and other comprehensive income.

Lease costs capitalised

initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased assetand recognised as an expense over the lease term on the same basis as the lease income. These include tenant installationcosts and commission paid in respect of the securing of leases.

1.8 Impairment of assets

The group and company assess at each end of the reporting period whether there is any indication that an asset may beimpaired. If any such indication exists, the group and company estimates the recoverable amount of the asset.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is notpossible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit towhich the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value inuse.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to itsrecoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately inprofit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

22


Accounting Policies

1.8 Impairment of assets (continued)

The group and company assesses at each reporting date whether there is any Indication that an impairment loss recognised inprior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, therecoverable 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 isrecognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluationincrease.

1.9 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 itsliabilities.

incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,from the proceeds.

1.10 Debenture capital and premium

Debenture capita! relating to the 2014 year is recorded at the proceeds received net of direct issue costs. Subsequently, thedebenture premium is amortised over a period of 25 years from date of issue.

The capital structure, whereby the linked units were converted to an all-equity structure, was approved at the meeting ofshareholders and debenture holders on 27 August 2015.

1.11 Segmental reporting

The group determines and presents operating segments based on information that is provided internally to the chief operatingdecision-maker, namely the chief financial officer. Segment results that are reported to the chief operating decision-makerinclude items directly attributable to a segment, as well as those that can be allocated on a reasonable basis. On a primarybasis the operations are organised into five major operating segments:

- Industrial;

- Office;

- Retail; and

- Residential.

The chief operating decision-maker however assesses each investment property on an individual basis in making decisionsabout its performance. Any capital expenditure relating to investment property will be accounted for as under note 1.3(Investment properties) and will be shown separately under note 3 (Investment properties) of the financial statements.It is the group's investment philosophy to invest predominantly in properties in the Gauteng area, therefore the group can onlyreport on a primary segment basis.

1.12 Provisions and contingencies

Provisions are recognised when:• the group and company have 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.

If the group and company have a contract that is onerous, the present obligation under the contract is recognised andmeasured as a provision.

Contingencies is the possible obligation that arises from a past event and which existence will be confirmed only by theoccurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group and company.

23


Accounting Policies

1.12 Provisions and contingencies (continued)

Contingencies of the group and company consist mainly of guarantees and sureties provided for the obligations of the groupand company to other third parlies.

Contingencies are not recognised in the statement of financial position but are disclosed in the notes to the consolidatedannual financial statements.

1.13 Revenue recognition

Rental income and recoveries:

Revenue is measured at the fair value of the consideration received or receivable.

Revenue comprises revenue from rental income and related recoveries and excludes value added taxation. The rental Incomeis recognised on the straight-line basis over the lease term. Turnover-based rental is recognised when it is due in terms of thelease agreement. Recoveries are recognised on the accrual basis.

Income from investments:

Interest Income from a financial asset Is recognised when it is probable that the economic benefits will flow to the group andcompany and the amount of Income can be measured reliably, interest income is recognised on a time proportion basis thattakes into account the effective yield on the asset.

Dividends are recognised when the shareholder's right to receive payment has been established and the amount of income canbe measured reliably.

1.14 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets thatnecessarily take a substantial period of time to get ready for their Intended use or sale, are added to the cost of those assets,until such time as the assets are substantially ready for their intended use.

investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets isdeducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised In profit and loss in the period In which they are incurred.

1.15 Reserves

Realised profits on the disposal of investment properties, although legally distributable, are transferred to a non-distributablereserve, as it is the group and company's policy to regard such profits as not being available for distribution. Gains and losseson revaluation of investment property and on Interest rate derivatives are similarly transferred to a non-distributable reserve asare reserves from associates.

24


Notes to the Audited Consolidated Annual Financial Statements

2. New Standards

2.1 Standards effective and adopted In the current year

In the current year, the group and company have adopted the following standards that are effective for the current financialyear and that are relevant to its operations:

Standard: Effective date: Impact:Years beginning on orafter

• Amendment to IAS 38: Intangible Assets: Annual 01 July 2014 There was no impact onimprovements project the financial statements.

• Amendments to IFRS 10, IFRS 12 and IAS 27: Investment 01 January 2014 There was no impact onEntities the financial statements.

• Amendment to IAS 32: Offsetting Financial Assets and 01 January 2014 There was no impact onFinancial Liabilities the financial statements.

• Amendment to IAS 39: Novation of Derivatives and 01 January 2014 There was no impact onContinuation of Hedge Accounting the financiai statements.

• Amendment to IAS 36: Recoverable Amount Disclosures for 01 January 2014 There was no impact onNon-Financial Assets the financial statements.

2.2 Standards not yet effective

The group and company have chosen not to early adopt the following standards, which have been published and aremandatory for the group and company's accounting periods beginning on or after 01 September 2015 or later periods:

Standard: Effective date: Expected Impact:Years beginning on orafter

• IFRS 9: Financial Instruments (Re-issue of a complete 01 January 2018 Unlikely there will be astandard incorporating all the changes) material impact

• IFRS 15; Revenue from Contracts with Customers 01 January 2018 Unlikely there will be amaterial impact

• Amendment to IFRS 11: Accounting for Acquisitions of 01 January 2016 Unlikely there will be aInterests in Joint Operations material impact

• Amendments to IAS 16 and IAS 38: Clarification of 01 January 2016 Unlikely there will be aAcceptable Methods of Depreciation and Amortisation material impact

• Amendments to IFRS 10 and IAS 28: Sale or Contribution 01 January 2016 Unlikely there will be aof Assets between an Investor and its Associate or Joint material impactVenture

• Amendment to IAS 27: Equity Method in Separate Financial 01 January 2016 Unlikely there will be aStatements materia! impact

• Amendments to IFRS 10, 12 and IAS 28; Investment 01 January 2016 Unlikely there will be aEntities. Applying the consolidation exemption material impact

• Amendments to IAS 16 and IAS 41: Agriculture: Bearer 01 January 2016 Unlikely there will be aPlants material impact

• Amendment to IFRS 5; Non-current Assets Held for Sale 01 January 2016 Unlikely there will be aand Discontinued Operations: Annual Improvements project material impact

• Amendment to IFRS 7; Financial Instruments: Disclosures: 01 January 2016 Unlikely there will be aAnnual Improvements project material impact

• Amendment to IAS 19: Employee Benefits: Annual 01 January 2016 Unlikely there will be aimprovements project material impact

• Disclosure Initiative: Amendment to IAS 1: Presentation of 01 January 2016 Unlikely there will be aFinancial Statements material impact

• Amendment to IAS 34: Interim Financial Reporting. Annual 01 January 2016 Unlikely there will be aimprovements project material impact

25


Notes to the Audited Consolidated Annual Financial StatementsConsolidated Company

2015 2014 2015 2014R '000 R '000 R '000 R '000

3. Investment property

At fair value Opening Acquisitions Developments Fair value Closingcarrying value adjustments carrying value

Consolidated 2015 4 860 151 9 785 183 832 244 981 5 298 749Consolidated 2014 4 660 602 - 91 969 107 580 4 860 151Company 2015 500 618 - 16 409 36 864 553 891Company 2014 467 128 - 7 363 26 127 500 618

Fair value informationThe fair value of the group and company's investment property as at 31 August 2015 was arrived at on the basis of avaluation technique using a net income capitalisation method, carried out at that date by taking into account prevailingmarket rentals, occupation levels and capitalisation rates. The range of annual capitalisation rates applied to the propertyportfolio is between 8% (2014:8%) and 12% (2014:12,5%) with a weighted annual average of 9,4% (2014:9,4%).

The second key input used in the valuation calculation is the long term net operating income margin of which the expenseratio is the significant unobservable input. The range of the expense ratios used was from 5,7% to 51,9% (2014: 5,5% to44,3%) with a weighted average of 25% (2014: 24,8%).

The third key input used in the valuation calculation is the long range vacancy factor. The expected long range vacancyfactor takes into account historic and future expected vacancy trends. The long range vacancy factor indicates the expectedvacancy to be applied over the long term that best approximates the actual experience. The range of long range vacancyfactors used was from 0,0% to 40,0% (2014: 0,0% to 50,0%) with a weighted average of 6.3% (2014:8,6%).

Relationship of unobservable Inputs to fair valueAn increase of 1% in the capitalisation rate, while holding all other variables constant, would result in a decrease in thecarrying amount of investment property of R515 million. A decrease of 1 % in the capitalisation rate, while holding all othervariables constant, would result in an increase in the carrying amount of investment property of R638 million.

An increase of 1% in the weighted average of the expense ratios used to calculate the long-term net operating incomemargin, while holding ail other variables constant, would result In a decrease in the carrying amount of Investment propertyof R71 million. A decrease of 1% in the weighted average of the expense ratios used to calculate the long-term netoperating income margin, while holding all other variables constant, would result in an increase in the carrying amount ofinvestment property of R71 million.

Fair value hierarchy

The fair value hierarchy reflects the significance of the inputs used in making fair value measurements. The level withinwhich the fair value measurement is categorised in its entirety shall be determined on the basis of the lowest level input thatis significant to the fair value measurement in its entirety.

The different levels have been defined as follows:Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilitiesLevel 2: Input other than quoted prices inciuded within Level 1 that are observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices)Level 3: Input for the asset or liability that is not based on observable market data (unobservable input)

Investment properties have been categorised as a level 3 and there have been no significant transfers made between ievel1,2 or 3 during the year under review.

In estimating the fair value of the properties, the highest and best use is their current use.

There have been no changes in Judgements or estimates of amounts or valuation techniques as reported in previousreporting periods.

26



' 2015 2014 2015 2014

R'OOO R'OOO R'OOO R'000

3. Investment property (continued)

The investment properties are valued bi-annually and the valuations are determined by the directors. Over a 3 year cycle,all properties are valued on a rotational basis by independent external valuers. The properties were valued by Van ZylValuers CC, (Gert Van Zyl), Amanda de Wet Consultants and investors CC (Amanda De Wet) and Quadrant Properties(Pty) Ltd (Peter Parfitt) who are registered valuers in terms of Section 19 of the Property Valuers Profession Act ("Act 47 of2000") and have extensive experience in commercial property valuations. The valuers' valuation at 31 August 2015 of R2,6billion, representing 47,4% of the portfolio, was 0,6% less than the directors valuation. The directors are confident, taking allfactors into account, that their valuations represent fair market value. None of the investment properties were externallyvalued at 31 August 2014. investment properties are leased out under operating leases.

Encumbered as security

Investment property to the value of R3,2 billion (2014: R2,8 billion) has been mortgaged in favour of Nedbank Limited forloan facilities granted to the group and company. (Refer to note 18)

Investment property to the value of R1,1 billion (2014: R1,0 billion) has been mortgaged in favour of Standard Bank of SALimited for loan facilities granted to the group and company. (Refer to note 18)

A register containing Information regarding the investment properties owned by the group and company is available forInspection at the registered office of the company.

4. Plant and equipment

2015 2014CostR'OOO

Accumulated Carrying valuedepreciation R'OOO

R'OOO

CostR'OOO

Accumulated Carrying valuedepreciation R'OOO

R'OOO

Consolidated 12817 (7 862) 4 955 14 191 (8 086) 6 105

Company 1 419 (760) 659 1 489 (712) 777

Reconciliation of plant and equipment

Consolidated 2015

Openingbalance

R'OOO6 105

DepreciationR'OOO

(1 150)

TotalR'OOO

4 955

Consoiidated 2014 6 726 (621) 6 105

Company 2015 777 (118) 659

Company 2014 838 (61) 777



2015R'OOO

2014R'OOO

2015R'OOO

2014R'OOO

5. Investments in subsidiaries

The carrying amount of subsidiaries are shown at cost. There were no impairment losses recognised refer to note 38 fordetails.

Company

Holding Holding Carrying Carrying2015 2014 amount 2015 amount 2014

R'OOO R'OOO

4 673 (2014: 4 673) Shares at cost 100.00 % 100.00 %

The aggregate net profits aftertax of the subsidiaries amounts to R686 million (2014: R316 miiiion). The group has pledgedand ceded the shares and loan accounts of certain of its subsidiary companies to secure banking facilities granted to thegroup. (Refer to note 18)

6. Investments in associate

Consolidated

Shares at costReserves since acquisitionLoan to associate

Ownership Ownership Carrying Carryinginterest interest amount 2015 amount 20142015 2014 R'OOO R'OOO50.00 % 50.00 % 1 1

-% -% 422 740 371 117- % - % - 296 708

422 741 667 826

Company

Shares at costLoan to associate

Ownership Ownership Carrying Carryinginterest interest amount 2015 amount 20142015 2014 R'OOO R'OOO50.00 % 50.00 % 1 1

- % - %

1296 708296 709

28



2015 2014R '000 R '000

2015 2014R '000 R '000

6. Investments in associate (continued)

Details of the associate Is as follows:

Country of Methodincorporation

Ownership interest

2015 2014

IPS Investments Proprietary Limited Republic of Equity 50% 50%South Africa

The country of incorporation is the same as the principal place of business of the associate. The percentage voting rights isequal to the percentage ownership.

IPS Investments Proprietary Limited (IPS) is a property investment company, deriving income from rentals and jointventures.

The company has a 50% voting right in IPS. An assessment was made as to whether joint control exists. Joint control existswhen there is a contractual arrangement in place that gives both parties unanimous consent. The company has assessedthis and concluded that joint control does not exist since there is no contractual agreement in place that obliges both partiesto unanimously consent. As the company has neither control nor joint control over IPS, it can be concluded that it hassignificant influence over IPS. IPS is therefore accounted for as an associate in the financial statements since significantinfluence exists and equity accounting was employed.

29



2015 2014R'OOO R'OOO

2015R'OOO

2014R'OOO

6. investments in associate (continued)

Summarised financial Information of material associate

Summarised Statement of Profit or Loss and Other Comprehensive Income

12 monthsended 31

August 2015R'OOO

6 monthsended 31

August 2014R'OOO

RevenueOther income and expenses

306 482(85 347)

141 596(24 352)

Profit before taxationTaxation

221 1357 523

117244152 375

Profit for the year 228 658 269 619

Total comprehensive Income 228 658 269 619

Summarised Statement of Financial Position

2015R'OOO

2014R'OOO

AssetsNon-currentCurrent

2 367 77915 287

2 199 31032 823

Total assets 2 383 066 2 232 133

LiabilitiesNon-current (excluding shareholders loan)Current

1 309 077228 507

781 188115 295

Total liabilities 1 537 584 896 483

Total net assets 845 482 1 335 650

Reconciliation of net assets to equity accounted investments in associate50% interest in associates reserves

Investment at beginning of periodLoan to associateShare of profitDividends received from associate

667 826(296 708)

51 623

528 21041 307

134 809(36 500)

Investment at end of period 422 741 667 826

30



2015 2014 2015 2014R'OOO R'OOO R'OOO R "000

7. Loans to group companies

Subsidiaries

Loans to subsidiaries - - 2 395 205 2 239 945

The loans are unsecured, Interest free, and are repayable by mutual consent, with payments not expected within twelvemonths.

The carrying amount of the loans approximates fair value. A schedule of the company's interest in subsidiaries is set out Innote 38.

Shares and loan accounts of certain subsidiary companies have been pledged and ceded to secure banking facilitiesgranted to the group.

8. Loan to holding company

Octodec Investments Limited 177 093 - 177 093This loan is unsecured, interest free and Is notrepayable within the next twelve months.

Included In the loan to Octodec Investments Limited is an amount of R15,9 million which relates to residential deposits heldIn a separate bank account in the name of the holding company.

9. Derivative financial instruments

At fair value through profit or loss - designatedInterest rate derivatives 6 253 16 896 6 253 16 896

Fair value information

The notional principal amount of the outstanding contracts was R1,15 billion (2014; R1,15 billion).

The fair values of the interest rate swaps are determined on a mark-to-market valuation calculated by the various financialinstitutions with whom the swaps are held and then discounting the estimated future cashflows based on the terms andmaturity of each contract and using the market interest rate indicated on the SA swap curve.

Definition of the 'interest rate curve": The interest rate curve is the SA swap curve which represents a benchmark interestrate curve for ail JIBAR- related transactions in the market. JIBAR itself is a benchmark short-term interest rate and, assuch, the swap curve gives a representation of future expectations of JIBAR. It is constructed using both short-datedfinancial instruments such as forward rate agreements, as well as longer-dated instruments such as swaps, where themovements in the curve are reflected through price changes of the underlying instruments.

Fair value hierarchy of financial assets at fair value through profit or loss

Derivative financial instruments have been categorised as a level 2 and there have been no significant transfers madebetween level 1,2 or 3 during the year under review. (Refer to note 3 for definition of levels)

31

Premium Properties Limited(Registration number 1994/003601/06)Audited Consolidated Annual Financial Statements forttie year ended 31 August 2015


2015R'OOO

2014R'OOO


10. Deferred taxation

Deferred tax liability

Accelerated capital allowancesOther timing differencesTax losses carried forwardWear and tear allowances

(18 451)1 734

11 846(7 631)

(18 451)90

11 901-

Total deferred tax liability (12 502) (6 460) -

Reconciliation of deferred tax asset / (liability)

At beginning of yearTax losses available for set off against future taxableincomeOther timing differencesWear and tear allowances

(6 460)(55)

1 644(7 631)

(6 460)

-

(12 502) (6 460) -

Recognition of deferred taxation

The group and company achieved Real Estate Investment Trust (REIT) status on 1 September 2013 and investment propertyallowances are no longer claimed. The deferred taxation provided for on capital allowances relates to prior allowances claimedwhich will be recouped on disposal of investment property.

Deferred taxation has not been provided on the straight-lining of rental income as this will be included in future distributionswhich are fuily deductible for tax purposes.

11. Operating lease assets

Straight-lining of operating leasesOpening carrying valueArising during the year

55 2563 966

53 0282 228

4 232 3 885148 347

59 222 55 256 4 380 4 232

12. Lease costs capitalised

Lease costs consist of lease expenses and tenant installation costs which are amortised over the period of the lease.

Lease costsOpening balanceAdditionsAmortisation

17 63819 082

(11 027)

16 90210 897

(10 161)

913 1 0995 133 330(2 476) (516)

25 693 17638 3 570 913

32



2015 2014 2015 2014R'OOO R'OOO R'OOO R'OOO

13. Trade and other receivables

Trade receivables (net of impairment) 10 556 9 631 1 287 1 772Prepayments 4 081 4 677 1 941 640Deposits 1 115 1 270 14 15VAT 29 1 831 - 1 748Sundry receivables 4 935 9 341 2 141 2 568Municipal recoveries 23 066 21 029 3 794 2 916Unallocated trade receipts (13 953) (11 576) (1 637) (1 952)

29 829 36 203 7 540 7 707

Fair value of trade and other receivables

All trade and other receivables are short term in nature. The carrying amount of trade receivables is considered areasonable approximation of fair value. Trade and other receivables have been categorised as a level 2 and there havebeen no significant transfers made between level 1, 2 or 3 during the year under review. Interest is charged at prime plus4% (2014: 4%) on arrear balances if appropriate.

Trade and other receivables past due but not Impaired

Before accepting any new tenant, the group and company use an internal credit scoring system to assess the potentialtenant's credit quality. Amounts not settled by the first of the month are considered past due. Included in the group andcompany's trade receivable balance are tenant balances with a carrying amount of R10,6 million (2014; R9,6 million),(Company: R1,3 million) (2014: R1,8 million) which are past due at reporting date and not provided for as there has notbeen significant change in the credit quality and the amounts are still considered recoverable.

The ageing of the receivables set out below are disclosed before the allocation of unallocated receipts and provision forimpairments.

Gross trade receivablesCurrent 7 352 6 421 936 1 11430 days 2 725 2 567 321 41160 days 1 105 1 196 118 19990 days 704 789 76 28120 days 4 038 5 733 417 1 065

15 924 16 706 1 868 2 817

Trade and other receivables impaired

Ail of the group and company's trade and other receivables have been reviewed for impairment. Certain trade receivableswere found to be impaired and a provision of R5,3 million (2014: R7,0 million) (Company R0,6 million) (2014: R1,0 million)has been recorded accordingly.

Reconciliation of provision for impairment of trade and other receivables

Opening balance 7 075 6 198 1 045 1 523Provision for impairment 5 369 7 075 581 1 045Amounts written off as uncollectable (4 132) (1 987) (740) (787)Reversal of provision (2 943) (4 211) (305) (736)

5 369 7 075 581 1 045

33



2015R'OOO

2014R'OOO

2015R'OOO

2014R'OOO

14. Cash and cash equivalents

Cash and cash equivalents consist of;

Cash on handBank balancesBank overdraft

642

(9 394)

6121 643 42

(9 394)121 643

(9 346) 121 649 (9 352) 121 643

Current assetsCurrent liabilities

48(9 394)

121 649 42(9 394)

121 643

(9 346) 121 649 (9 352) 121 643

15. Share capital

Authorised200 000 000 ordinary shares of no par value (2014: 200000 000 ordinary shares of 1 cent each)

2 000 2 000 2 000 2 000

Reconclltatlon of number of shares issued:Reported as at 1 September 2014Conversion of debentures and share premium

1 568689 379

1 5682 904

1 568689 379

1 5682 904

690 947 4 472 690 947 4 472

43 226 891 unissued ordinary shares are under the control of the directors in terms of a resolution of shareholders passedat the last annual general meeting and subject to the conditions contained in the Memorandum of Incorporation and the Act.This authority remains in force until the next annual general meeting.

Issued156 773 109 ordinary shares of no par value (2014:156773 109 ordinary shares of 1 cent each)Share premium

690 947 1 568

2 904

690 947 1 568

2 904

690 947 4 472 690 947 4 472

During the 2015 year, the ordinary shares were converted to shares of no par value and the linked units forming part ofdebenture capital and debenture premium were converted to stated capital (see note 17).

16. Non - distributable reserves

Fair value adjustments of investment properlySurplus on disposal of investment properties andamortisation of debenture premiumFair value adjustments of interest rate derivativesAssociate reserves

2 347 939172 451

22 861392 999

2 102 958172 451

12217334 823

326 879189 241

22 861

290 015189 241

12 217

2 936 250 2 622 449 538 981 491 473

34



2015R'OOO

2014R'OOO

2015R'OOO

2014R'OOO

17. Debenture capital and premium

Non-current liabilities 686 475 686 475

Until conversion on 27 August 2015In terms of the debenture trust deed, the aggregate interest entitlement of every debenture linked to each ordinary share in

respect of any financial year shall be 200 times the dividend declared on each ordinary share for the same period. Theaggregate dividend entitlement shall not be less than 85% of the company's profit after taxation, available for distribution.The interest is payable twice a year. Each debenture is linked to a share of the company and is treated as a single linkedunit for trading on the JSE and income distribution purposes. The debentures are redeemable, in terms of the trust deed,with the first redemption date on 5 July 2019 and the last on 29 February 2036.

The capital structure of Premium, whereby the linked units were converted to an all-equity structure, was approved at themeeting of shareholders and debenture holders on 27 August 2015.

Reconciliation of debentures and premiumIssued 156 773 109 (2014: 156 773 109) unsecuredvariable debentures of 149 cents each at the beginningof the yearDebenture premium at the beginning of the yearAmortisation of debenture premium during the yearTransfer of debenture capital and premium to statedcapital on 27 August 2015.

233 597

452 878

(686 475)

233 597 233 597

464 494(11 616)

686 475

452 878

(686 475)

233 597

464 494(11 616)

686 475

35




2015R'OOO

2014R'OOO

18. Borrowings

Held at amortised costUnsecured loans

Domestic medium term note programme (DMTN)These notes are unsecured. The maturity dates arebetween September 2015 and May 2016 and bearinterest at various JIBAR iinked interest rates. PMM 16which had a fixed rate of 7,225% and matured on 2September, has since been refinanced by PMM 20 forR55 million maturing 2 March 2016 and PMM 21 forR95 million maturing 2 September 2016. PMM 18 whichmatured on 4 November 2015 has since beenrefinanced by PMM 22 for R185 million maturing 4 May2016.

680 591 928 886 680 591 928 886

Secured loans

(a) Nedbank limitedThe loan expiry date is September 2015. Interest ischarged at 2.15% below the prime overdraft rate. Theloan is secured by mortgage bonds over variousproperties. The loan has since been consolidated byNedbank into a new loan in the name of the holdingcompany, Octodec Investments Limited.

38 457 38 458

(b) Nedbank LimitedThe loan expiry date is September 2015. Interest ischarged at 2.15% below the prime overdraft rate. Theloan is secured by mortgage bonds over variousproperties and guarantees from various subsidiaries.The loan has since been consolidated by Nedbank intoa new loan in the name of the holding company,Octodec investments Limited.

1 912 2 835 1 912 2 835

(c) Nedbank LimitedThe loans expire September 2015. Interest is chargedat 2.15% below the prime overdraft rate. The loans aresecured by mortgage bonds over various properties.The loans have since been consolidated by Nedbankinto a new loan in the name of the holding company,Octodec investments Limited.

3 157 5 738

(d) Nedbank LimitedThe loan expiry date is June 2017. Interest is chargedat 1,77% below the prime overdraft rate. The loan issecured by mortgage bonds over various properties.

345 565 281 373 345 565 281 373

(e) Nedbank LimitedThe loan expiry date is June 2017. interest is chargedat 1,67% below the prime overdraft rate. The loan issecured by mortgage bonds over various propertiesand guarantees from various subsidiaries.

318 564 321 590 318 564 321 590

36



2015R'OOO

2014R'OOO

2015 2014R '000 R "000

18. Borrowings (continued)(f) Nedbank LimitedThe loan expiry date is May 2018. Interest is charged ata fixed rate of 12.15% per annum. The loan is securedby mortgage bonds over various properties andguarantees from various subsidiaries.

160 000 160 000 -

(g) Nedbank LimitedThe loan expiry date is May 2017. Interest is charged at1,63% below the prime overdraft rate. The loan issecured by mortgage bonds over various properties.

160 757 - 160 757

(h) Nedbank LimitedThe loan expiry date is November 2015. Interest ischarged at 1% below the prime overdraft rate. The loanis secured by mortgage bonds over variousproperties.The loan has since been consolidated byNedbank into a new loan in the name of the holdingcompany, Octodec Investments Limited.

124 480 124 485

(i) Standard Bank of South Africa LimitedThe loan expiry date is October 2016. Interest ischarged at 1,75% below the prime overdraft rate. Theloan is secured by mortgage bonds over variousproperties and guarantees from various subsidiaries.The loan has since been consolidated by StandardBank Into a new loan in the name of the holdingcompany, Octodec Investments Limited.

337 684 257 611 337 684 257 611

2 171 167 2 120 978 1 845 073 1 792 295

The weighted average annual cost of borrowings after taking the interest rate swaps into account was 8,7% (2014: 8,4%)[Company: 8,4% (2014: 8,1%)] which was 0,8% [Company: 1,1%] below the prime overdraft rate at year-end. Thecompany's total hedged borrowings, after taking the effect of the interest rate swap agreements into account, were at 68.0%(2014: 68,6%). [Company: 71,3% (2014: 72,2%) ]. The remaining loans were at variable interest rates at a weightedaverage annual interest rate of 7,7% (2014: 8,6%) [Company: 7,6% (2014: 8,8%)]

Details of unsecured loans are as follows:

Domestic medium term note programme

PMMIOPMM17PMM18PMM19

IssuanceMonths

612612

Maturity date

02 September 201506 March 201604 November 201513 May 2016

Spread tothree-monthJIBAR/flxedrate

7,225%120 bps90 bps130 bps

Facility grantedR'GOO

160 000265 000194 00050 000

669 000

37



2015R'OOO

2014R'OOO

2015R'OOO

2014R'OOO

18. Borrowings (continued)Non-current liabilitiesAt amortised cost 1 322 570 1 147 894 1 162 570 863 409

Current liabilitiesAt amortised cost 848 597 973 082 682 503 928 886

2171167 2 120 976 1 845 073 1 792 295

Fair value of the financial liabilities carried atamortised costNedbank loans at fixed ratesLoans at variable interest rates

169 5652 011 167

175 4281 960 976 1 845 073 1 792 295

2 180 732 2136 404 1 845 073 1 792 295

Fair value informationThe valuation technique used to calculate the fair values of the fixed interest rate loans, was the discounted cashflowmethod.

Key InputsThe average annual discount rate used to discount the cash flows on the fixed interest loans was 9,6% (2014: 9,05%)based on the quoted swap rate at year-end for the loans with similar maturities. The average credit risk margin used was1,25% (2014:1,34%) based on the group and company's most recent fixed rate loan agreements with Nedbank Limited.

Fair value hierarchyLong term loans have been categorised as a level 2 and there have been no significant transfers made between level 1,2 or3 during the year under review.

19. Trade and other payables

Trade payables 47 662 65 380 10 158 13 898Repairs and maintenance - work in progress 5 630 7 381 636 805VAT 9 058 1 361 231 -

Sundry creditors - utilities and assessment rates 18 104 21 952 2 424 2 902Interest payable 830 1 578 56 94Tenant installations 17 985 - 1 905 -

Deposits received 40 179 36 773 4916 4 604Commission and collection fees payable 1 942 6 551 507 1 675

141 390 140 976 20 833 23 978

Fair value of trade and other payables

The carrying amount of trade and other payables approximate its fair value. Trade and other payables have beencategorised as a level 2 and there have been no significant transfers made between level 1. 2 or 3 during the year underreview. The group and company has financial policies in place to ensure that all payables are paid within this creditframework. Amounts are settled within payment terms to ensure that no interest is payable.

38




20. Revenue earned on contractual basis

Rental Income 608 435 295 360 62 016 32 898Straight-lining of operating leases 3 966 2 228 155 347Recoveries 150 499 71 469 21 312 9 607

762 900 369 057 83 483 42 852

Minimum future rentals receivable- within one year 445 779 377 220 50 473 42 119- in second to fifth year inclusive 567 354 514 444 46 366 52 506- after five years 51 267 91 891 2 544 3 761

1 064 400 983 555 99 383 98 386

Rental receivable represents contractual rental income excluding other recoveries for leases in existence at year-end.

21. Operating profit

Operating profit for the year is stated after accounting for the following:

Fees for managerial services:Administrative services - 12 235 - 12 235Collection charges 51 654 24 951 5 286 2 488Commission paid 5217 4 273 550 478

56 871 41 459 5 836 15 201

Operating lease chargesPremises• Contractual amounts 577 323 10 57Equipment• Contractual amounts 80 5 - -

657 328 10 57

Amortisation of debenture premium (11 616) (11 616)Amortisation of lease costs 11 026 10 161 2 476 516Assessment rates 16 754 8 477 2 236 1 088Auditor's remuneration - external audit fee - 1 973 - 1 973Depreciation on property, plant and equipment 1 151 621 118 61Directors fees - 1 700 - 1 700Employee costs 14 166 6 310 1 512 735impairment on loans to group companies - - 95 1 403Repairs and maintenance 38 016 18 833 5 364 1 072Security costs 28 702 12 875 3 840 1 655

39




22. Investment revenue

Income from subsidiariesDividends received - - 347 610 130 950Interest received - - - 61 063

- - 347 610 192 013

Interest revenueBank 302 689 302 689Interest charged on trade and other receivables 2 467 279 356 202Other interest 70 32 5 -

2 839 2 000 663 8912 839 2 000 348 273 192 904

23. Fair value adjustments

Investment properties 244 981 107 580 36 864 26 127Interest rate derivatives 10 644 (26 426) 10 644 (26 426)

255 625 81 154 47 508 (299)

24. Finance costs

Debentures 126 516 _ 126 516Non-current borrow/ings 189 448 82 918 156 702 61 156Bank 266 2 266 2Less interest capitalised (6 895) (1 697) - -

Late payment of tax 15 - - -

Other interest paid 103 1 650 7 102182 937 209 389 156 975 187 776

Interest has been capitalised on qualifying projects at a rate of 9% per annum.

40




25. Taxation

Major components of the tax expense (Income)

DeferredDeferred tax 6 042 - - -

Reconciliation of the tax expense

Reconciliation between accounting profit and tax expense.

Accounting profit 559 289 213516 276 596 63 345

Tax at the applicable tax rate of 28% (2014: 28%) 156 601 59 784 77 447 17 737

Tax effect of adjustments on taxable incomeFair value adjustments (71 554) (22 723) (13 302) 83Fair value adjustments - equity accounted earnings (16 289) (33 010) - -

Other non-taxable amounts credited to the statement of (862) (8 619) (41) (13 568)profit and loss and other comprehensive incomeNon-deductible amounts debited to the statement of 2 759 2 772 1 028 876profit and loss and other comprehensive incomeAmounts not credited to the statement of profit and loss 5 155 6 821 1 033 868and other comprehensive incomeSpecial allowances not claimed in the statement of (7 442) (2 224) (1 009) (174)profit and loss and other comprehensive incomeDoubtful debt allowance - prior year (1 813) (1 733) (293) (426)Reversal of allowances/deductions granted in previous 453 39 73 107yearsIncome taxed in prior years now reversed (4 994) (4 911) (868) (520)Qualifying distribution (63 840) (176) (63 840) (176)Assessed losses utilised (228) (4 807) (228) (4 807)Distributions in excess of taxable income 8 096 8 787 - -

6 042

No provision has been made for 2015 current taxation as the group and company have no taxable income. The estimatedtaxation loss available for set off against future taxable income of the company is R17,8 million (2014: R18,6 million).

The group and company achieved REIT status on 1 September 2013. As from 1 September 2013, any existing loss can nolonger be increased with future tax losses incurred.

41



2015 2014 2015 2014R'OGO R'OOO R'OOO R'OOO

26. Cash generated from operations

Profit before taxation 559 289 213 516 276 596 63 345Adjustments for:Depreciation and amortisation 12 177 10 782 2 594 577Income from equity accounted investments (51 623) (141 616) - (43 307)Dividends received - - (347 610) (130 950)Interest received - investment (2 839) (2 000) (663) (61 954)Finance costs 182 937 209 389 156 975 187 776Fair value adjustments (255 625) (81 154) (47 508) 299Debenture premium amortisation - (11 616) - (11 616)Movements in operating lease assets and accruals (3 966) (2 228) (148) (347)Impairment of investments in subsidiaries - - 95 1 403Changes in working capital:Trade and other receivables 6 374 2 437 167 (2 543)Trade and other payables 414 13 360 (3 145) (5 712)

447 138 210 870 37 353 (3 029)

27. Distribution to linked unitholders

Balance at beginning of the year (127 143) (131 815) (127 143) (131 815)Dividends (228 000) (1 286) (228 000) (1 286)Debenture interest - (126 516) - (126 516)Balance at end of the year - 127 143 - 127 143

(355143) (132 474) (355143) (132 474)

28. Income from equity accounted investments

Interest received - 6 807 - 6 807Dividends received - 36 500 - 36 500

- 43 307 - 43 307Share of equity accounted earnings - loss (6 553) (19 585) - -

Share of equity accounted earnings - fair value 58 176 117894 - -

reserves/revaluations

51 623 141 616 - 43 307

29. Commitments

Authorised capital expenditure

An amount of R278 million (2014: R166,9 million) has been committed by the group and company in respect of capitalexpenditure relating to the improvement and acquisition of certain properties. These developments will be financed by wayof existing facilities as well as additional funding from the group and company's bankers.

30. Contingencies

The company has provided the following guarantees and sureties:

- R100 000 in favour of City Power Johannesburg for the provision of certain services to subsidiaries.- R4 922 666 in favour of the City of Tshwane Metropolitan Municipality for the provision of certain services to subsidiaries.- R255 million to Nedbank Limited for loan facilities granted to IPS investments Proprietary Limited and its subsidiaries.- R81,5 million to Standard Bank Properties for loan facilities granted to IPS Investments Proprietary Limited.

42



2015 2014 2015 2014R'OOO R'OOO R'OOO R'000

31. Related parties

A related party is a person or entity that is related to Premium Properties Limited and its subsidiaries.

A person or a close member of that person's family is related to the entity if:• they have control or joint control of the reporting entity;• they have significant influence over the reporting entity; or• they are a member of the key management personnel of the reporting entity.

Related parties where control existed during the year are as follows:

Key management: Directors - S Wapnick, JP Wapnick, DP Cohen, GH Kemp, MZ Pollack, PJ Strydom, AK Stein, POGoldhawk, MJ Learning, SG Morris, P Kruger.

Holding company: Octodec Investments Limited

Related parties over which significant influence is exercised:

Management company: City Property Administration Proprietary Limited

Related parties with whom the entity transacted during theCity Property Administration Proprietary LimitedRelationship A company which manages the group and company's

property portfolio and over which significant influenceis excercised by JP Wapnick.

Pricing policy - Fixed percentage of collections made.- Commissions based on a percentage of propertyacquisitions, properly sales and major repairs andrenovations.- Fixed percentage of the aggregate of the entity'saverage market capitalisation and total indebtednessto banks and other financial Institutions in respect ofmortgage bond loans and other unsecured loans.

Management fee 0,5% of the average market capitalisation (based ondaily closing price) plus secured and unsecuredloans.

Collection fees- Commercial- Residential- Offices

Major repairs and renovations

Letting fees- Commercial

- Residential

5% plus VAT of gross receipts7,5% plus VAT of gross receipts7,5% plus VAT of gross receipts for lettable unitssmaller than 500 square meters and the remainder at5% plus VAT of gross receipts.

5% plus VAT of cost between R30 000 andRIO million and 3% of cost above R10 million.

50% plus VAT of the SAPOA tariff in respect of newcommercial leases and R1 000 plus VAT or 50% plusVAT of the first month's rental, whichever is the lesserin respect of existing leases.R1 000 plus VAT In respect of new residential leases.

43



2015 2014R '000 R '000

2015R'OOO

2014R'OOO

31. Related parties (continued)SubsidiariesRelationship 100% shareholding of all subsidiaries

IPS Investments Proprietary LimitedRelationship 50% shareholding in associate

Bubbles and Stitches Close CorporationRelationship Close family member of key management

Tugendhaft Wapnick Banchetti & PartnersRelationship Partnership in which director has significant influence

Related party balances

Loan accounts - Owing by related partiesCentpret Properties Proprietary LimitedCenturia 369 Properties (Proprietary) LimitedLandjack Properties (Proprietary) LimitedSavyon Building (Proprietary) Limited

-1 286 683

42 8905 252

1 091 678

1 180 60443 0955214

1 024 229

Amounts included in Trade receivable (TradePayable) regarding related partiesCity Property Administration Proprietary Limited (1 941) (5 871) (507) (998)

Related party transactions

City Property Administration Proprietary LimitedCollection fees paidCommission paidCapitalised commission paid on investment propertyAsset management feeRental income received

51 654 24 9513 153 2 4781 848 626

12 235(204) (191)

5 286498

1 357

2 488428

5012 235

Bubbles and Stitches Close CorporationRental income received (139) (91) - -

Tugendhaft Wapnick Banchetti & PartnersProfessional fees paid 125 15 125 15

Interest receivedSubsidiaries - - 61 063

Dividends receivedSubsidiaries - 347 610 130 950

Director's emoluments

Refer to note 32 for the remuneration paid to the directors.

44

Premium Properties Limited(Registration number 1994/003601/06)Audited Consolidated Annua! Financial Statements for the year ended 31 August 2015


2015 2014 2015 2014R '000 R '000 R '000 R '000

32. Directors' emoluments

In the prior year the directors were paid by the company as well as the holding company, Octodec Investments Limited.Premium Properties Limited and its subsidiaries made no direct payments to the directors during the current year underreview. Their directors' fees are set out in the tables below:

Directors fees Company6 months

R'GOOS Wapnick 275JP Wapnick 143DP Cohen 143GH Kemp 143MZ Pollack 143PJ Strydom 143AK Stein 143PO Goldhawk 189MJ Leeming 189SG Morris 189

1 700

Directors' fees Octodec OctodecInvestments Investments

Limited Limited12 months 6 months

R'OOO R'OOO8 Wapnick 1 025 275JP Wapnick 667 143DP Cohen 667 143GH Kemp 652 143MZ Pollack 667 143PJ Strydom 715 143AK Stein 667 143PO Goldhawk - 189MJ Leeming - 189SG Morris - 189

5 060 1 700

There are no service contracts in place with the executive directors of Premium Properties Limited. The proportionate salariespaid by City Property Proprietary Limited for the executive directors of Premium Properties Limited, who are employed by CityProperty Proprietary Limited are set out below. These amounts are based on an approximation of the time spent on the group,Octodec Investments Limited, in relation to their employment at City Property Proprietary Limited for the year ended31 August 2015.

45



2015R'OOO

2014R'OOO

2015R'OOO

2014R'OOO

32. Directors' emoluments (continued)

Directors' remuneration - executive

2015

JP WapnickAK SteinP Kruger

SalaryR'OOO

26181 801

150

Pension fundcontributions

R'OOO

40

TotalR'OOO

26181 841

1504 569 40 4 609

2014

JP WapnickAK Stein

SalaryR'OOO

1 9631 273

Pension fundcontributions

R'OOO

23

TotalR'OOO

1 9631 296

3 236 23 3 259

46



2015 2014 2015 2014R '000 R '000 R '000 R '000

33. Risk management

Capital risk management

The group and company's policy is to maintain an adequate capital base so as to maintain creditor confidence and tosustain future development of the business. The capital comprises shareholders' equity, including capital and reserves. Thelevel of distributions paid is determined with reference to the liquidity and solvency of the group and company as well asconsideration of budgets and forecasts. There were no changes in the group and company's approach to capitalmanagement during the year.

Consistent with others in the industry, the group and company monitors gearing on the basis of the loan to value ratio. Thisratio is calculated as net debt divided by total investments. Net debt is calculated as total borrowings (as detailed in note18) plus bank overdraft less cash equivalents. Non-current assets as shown on the face of the statement of financialposition equals total investments.

The loan to value ratio at 2015 and 2014 respectively was as follows:

Total borrowings Note18 2 171 167Less: Cash and cash equivalents Note 14 (9 346)

2 120 976121 649

1 845 073(9 352)

1 792 295121 643

Net debt 2 180 513 1 999 327 1 854 425 1 670 652Total investments 5 988 453 5 606 976 3134 799 3 043 199

Loan to value ratio 36,4% 35,6% 59,2% 54,9%

Financial risk management

Financial covenants

The following financial covenants apply in respect of the consolidated financial position of the group and company:

Nedbank Limited- Net rental income (gross rental income less property operating expenses, administration costs and management fees, butexcluding rental income attributable to existing vacancies) before net interest paid, tax, depreciation and amortisation,income from revaluation of properties and any abnormal items divided by net interest paid (all interest paid on third partydebt, but excluding interest and distributions payable to shareholders, less any interest earned), shall be at least 2,0 times.- The total debt (all interest-bearing debt excluding tenant deposits, tax payable and trade creditors, but including allfinancial liabilities arising from underlying interest rate derivatives) expressed as a percentage of total assets (value of directinvestment in property holdings plus investments held in unlisted companies) - shall not exceed 60%

Standard Bank of South Africa Limited- The loan to value ratio shall not exceed 55% (Loan to value shall mean the ratio of the outstanding balance under thefacilities granted by Standard Bank to the value of the properties bonded to Standard Bank)- The group and company's overall debt shall not exceed 50% of total assets- The ratio of earnings before net interest payable, taxation and any non-cash items in respect of the investment propertiesto gross interest payable in respect of loan facilities, shall not be less than 2.0 times- The ratio of net rental income (ail rental income from properties bonded to Standard Bank less all property-relatedexpenses) to all interest payable in respect of the facilities granted by Standard Bank, shall not be less than 1,8 times

47



33. Risk management (continued)

Liquidity risk

The group and company's liquidity risk is that it may have insufficient funds available to meet future commitments. Cashflovi/s are monitored on a monthly basis to ensure that cash resources are adequate to meet funding requirements

The table below analyses the group and company's financial liabilities into relevant maturity groupings based on theremaining period at the statements of financial position to the contractual maturity date.

Consolidated

At 31 August 2015 R'GOO R'OOO R'QODLess than 1 Between 1 Between 2

year and 2 years and 5 yearsBorrowings 848 597 1 162 570 160 000Trade and other payables 140 231

At 31 August 2014 Less than 1 Between 1 Between 2year and 2 years and 5 years

Borrowings 973 082 127 320 1 020 574Trade and other payables 140 975Distribution to unitholders 127 143

Company

At 31 August 2015

BorrowingsTrade and other payables

At 31 August 2014

BorrowingsTrade and other payablesDistribution to unitholders

Interest rate risk

Less than 1year928 88623 978

127 143

Less than 1year682 50320 837

Between 1and 2 years

2 835


1 162 570


860 574

At 31 August 2015, the group and company had borrowings of R2,1 million (2014: R2,1 million) [Company: R1,8 million (2014: R1,9 million)] at various interest rates. The all-in weighted average cost of borrowings, including the cost of interestrate swaps, was at 8,7% per annum ( 2014:8,4%), [Company 8,4% (2014: 8,1%)] and 68,0% (2014: 68,6%), [Company71,3% (2014: 72,2%)] of borrowings at year-end were fixed, interest rate trends are constantly monitored and appropriatesteps taken to ensure the group and company's exposure to interest rate movements is managed. The policy is to manageinterest rate risk exposure on long-term financing by entering into fixed interest contracts as well as swap rate contracts.

Calculations of the fair values for the interest rate swaps are obtained from the applicable banks. These fair values forinterest rate swaps are determined based on a mark-to-market valuation by discounting estimated future cash flows basedon the terms and maturity of each contract and using market interest rates for a similar instrument at the reporting date.

At 31 August 2015, the group and company was exposed to changes in interest rates through bank borrowings.Theseborrowings were 32% (2014: 31,4%), [Company 28,7% (2014: 27,8%)] of total borrowings. A breakdown of the borrowingsis detailed in note 18.

The group and company analyses its interest rate exposure on a dynamic basis and calculates the impact on profit and lossof a defined interest rate shift by using different scenarios. The scenarios are calculated only for liabilities that represent themajor interest-bearing obligations and the impact on post-tax profit. A 0,5% shift in interest rates would represent amaximum increase or decrease of R2,5 million (2014: R2,4 million) in post- tax profits per annum. The calculations aredone monthly to verify that the maximum loss potential is within limits.

48

Premium Properties Limited(Registration number 1994/003601/06)Audited Consoildated Annual Financial Statements for the year ended 31 August 2015


33. Risk management (continued)

Fixed-rate borrowings expiry Nominal All-in Nominal All-inamount weighted amount weighted

R'OOO average R'OOO averageInterest rate Interest rateper annum per annum

% %May 2018 160 000 12.15 % - - %September 2015 165 796 7.23 % 165 796 7.23 %Variable rate borrowings before interest rate derivatives 1 845 371 7.70 % 1 679 277 7.61 %

2171 167 8.70 % 1 845 073 9.65 %

Interest rate derivative maturity Amount Average all-in Amount Average all-inR'OOO margin R'OOO margin

over/(below) over/(below)variable rate variable rateper annum per annum

% %February 2017 650 000 1.53 % 650 000 1.53 %May 2017 50 000 2.12 % 50 000 2.12 %June 2017 100 000 2.00 % 100 000 2.00 %July 2017 100 000 1.59 % 100 000 1.59 %August 2017 350 000 1.50 % 350 000 1.50 %September 2017 100 000 1.31 % 100 000 1.31 %January 2018 150 000 1.43 % 150 000 1.43 %April 2018 200 000 (0.44)% 200 000 (0.44)%May 2018 50 000 2.13 % 50 000 2.13 %July 2018 400 000 1.39 % 400 000 1.39 %August 2018 150 000 1.20 % 150 000 1.20 %November 2018 500 000 0.88 % 500 000 0.88 %January 2019 750 000 0.41 % 750 000 0.41 %Fixed-rate borrowings 325 796 - % 165 796 - %

3 875 796 1.08 % 3 715 796 1.08 %

Cash flow interest rate risk

Financial Instrument Current Due in less Due in one to Due in two to Due in three Due after fiveinterest rate than a year two years three years to four years years

R'OOO R'OOO R'OOO R'OOO R'OOOBond over property - floating 7.70 % 157 878 169 612 181 963 178 786 537 186rateFixed interest rate loan 12.15% 19 440 19 440 19 440 -

Credit risk

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade receivables. Thegroup and company only deposits cash with major banks with high quality credit standing and limits exposure to any onecounter-party.

Trade receivables consist of a large spread of tenants. The group and company monitors the financial position of its tenantson an ongoing basis. Provision is made for both specific and general bad debts and at year-end the board does notconsider there to be any material credit risk exposure. The carrying amount of financial assets represents the maximumcredit exposure,

49



2015R'OOO

2014R'OOO

2015R'OOO

2014R'OOO

34. Going concern

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern, Thisbasis presumes that funds will be available to finance future operations and that the realisation of assets and settlement ofliabilities, contingent obligations and commitments will occur in the ordinary course of business.

The directors are aware that the group and company's current liabilities exceed its current assets by R969 million(company: R705 million). The group and company are expected to continue to generate positive cash flows on their ownaccount for the foreseeable future. The group and company participates in the centralised treasury arrangements andshares banking facilities with the holding company and fellow subsidiaries.

Refer to note 35 below on how the group and company have re-negotiated the short term borrowings.

35. Events after the reporting period

The Nedbank Limited loans which expired in September 2015 and the Standard Bank of South Africa Limited loans whichexpired in November 2015, have been consolidated into new loans in the name of Octodec investments Limited.The directors are not aware of any other events subsequent to 31 August 2015, not arising in the normal course ofbusiness, which are likely to have a material effect on the financial information contained in the annual financial statements.

36. Categories of financial Instruments - assets

Fmanclal assets at fair value through profit and lossCash and cash equivalentsLoans and receivables at amortised costTrade and other receivablesLoans to subsidiariesLoans to holding company

48

28 664

177 093

121 649

36 203

42

7 5422 395 200

177 093

121 643

7 7072 239 945

205 805 157 852 2 579 877 2 369 295

37. Categories of financial Instruments - liabilities

Financial liabilities at fair value through profit andlossDerivative financial instruments 6 253 16 896 6 253 16 896Financial liabilities at amortised costOther flnancial liabilities 2 171 167 2 120 976 1 845 073 1 792 295Trade and other payables 140 231 140 976 20 837 23 978Debentures and premium - 686 475 - 686 475Bank overdraft 9 394 - 9 394 -

2 327 045 2 965 323 1 881 557 2 519 644

50



2015 2014 2015 2014R '000 R '000 R '000 R '000

38. Schedule of Interest in subsidiaries

Name of subsidiary (Pty) Ltd Number of Number of Loan amount Loan amountshares shares R'OOO R'OOO

Bartlucia Investments Share Block 200 200 - -

Brianley Properties Share Block 100 100 - -

Centpret Properties 1 1 1 276 080 1 180 604Centuria 369 120 120 29 591 29 897Du Proes Share Block 200 200 - -

Filkem House Share Block 400 400 - -

Hacklu Enterprises Share Block 200 200 - -

Landjack Properties 1 1 5 085 5214L P A Beleggings Share Block 1 000 1 000 - -

Notrevlis Share Block 100 100 - -

Prinsman Share Block 1 000 1 000 - -

Prinsproes Properties Share Block 150 150 - -

Rezmep Investments Share Block 100 100 - -

Roslev Properties Share Block 100 100 - -

Savyon Building 1 1 1 084 444 1 024 230Tomzeil Share Block 1 000 1 000 - -

4 673 4 673 2 395 200 2 239 945

The company holds 100% of all shares in the subsidiaries.

39. Segmental reporting

The group earns revenue in the form of property rentals. On a primary basis the group is organised into five major operatingsegments:- Office- Retail- Industrial- ResidentialFurther segmental results cannot be allocated on a reasonable basis due to the "mixed use" of certain of the properties. It isthe group and company's policy to invest predominantly in properties situated in the Gauteng area, therefore the companyhas not reported on a geographical basis.

Rental income by sector

OfficesRetailIndustrialResidentialRecoveries and other income

2015R'GOO

183 052205 962

30 989188 432154 465762 900

2015%30.00 %33.90 %5.10 %

31.00 %- %

100.00 %

2014R'OOO

92 510100 548

15 33886 96573 696

369 057

2014%31.00 %34.00 %5.00 %

30.00 %- %

100.00 %

51

Documents

Premium Properties Limited - Octodec · 2019. 12. 9. · Premium Properties Limited (Registration number 1994/003601/06) Audited Consoiidated Annua! Financial Statements for the year