ifour properties limited - sharedata · 1 2004 2003 r’000 r’000 revenue and other income 229...
TRANSCRIPT
iFOUR PROPERTIES LIMITED ■ annual report 2004
contents
1 ▪ Key financial and non-financial highlights
2 ▪ Directors’ review
9 ▪ Investors distributable earnings
10 ▪ Directorate and administration
13 ▪ Statement of corporate governance
16 ▪ Responsibility for and approval of annual financial statements
16 ▪ Declaration by the company secretary
17 ▪ Report of the independent auditors
18 ▪ Directors’ statutory report
22 ▪ Income statements
23 ▪ Balance sheets
24 ▪ Cash flow statements
25 ▪ Statement of changes in equity
26 ▪ Summary of accounting policies
28 ▪ Notes to the annual financial statements
46 ▪ Property portfolio schedule
50 ▪ Notice of annual general meeting of shareholders
54 ▪ Notice of general meeting of debenture holders
55 ▪ Form of proxy for iFour shareholders
57 ▪ Form of proxy for iFour debenture holders
59 ▪ Shareholder information
1
2004 2003 R’000 R’000
Revenue and other income 229 441 139 861
Investors distributable earnings 87 036 44 818
Earnings on linked units 83 792 70 516
Net profit on disposal of investment property — 7 224
Investment properties 1 721 574 716 370
Total assets 1 780 634 772 165
Linked unitholders’ interest 726 754 304 759
Net borrowings 889 776 394 431
Weighted average units in issue 111 387 953 58 275 179
Earnings per linked unit (cents) 75,23 121,01
Investors distributable earnings per weighted average linked unit (cents) 78,14 76,91
Distribution per linked unit (cents) 78,00 75,00
JSE STATISTICS
Highest unit price traded (cents) 670 530
Lowest unit price traded (cents) 520 390
Closing unit price (cents) 615 530
Volume of units traded 30 621 320 32 875 536
% of units traded to average units in issue 27,5 56,4
RETURNS TO UNITHOLDERS
Opening unit price (cents) 530 500
Income return (cents) 78 75
Capital return (cents) 85 30
Total return (cents) 163 105
Total return for the year (%) 31 21
LINKED UNITHOLDERS’ INFORMATION
Share capital and reserves 93 125 48 717
Debenture capital 633 629 256 042
Linked unitholders’ interest 726 754 304 759
Net asset value per linked unit (cents) 507 523
(Loss)/earnings for the period (4 528) 26 810
Interest distributions 88 320 43 706
Total earnings 83 792 70 516
key financial and non-financial highlights
DISTRIBUTIONS
78 cents4% above original forecast
OCCUPANCIESIncreased to
96%
GROWTHProperties up by
140%
ANNUALISEDReturn of
26,8%
iFOUR PROPERTIES LIMITED ■ annual report 20042
directors’ review
OVERVIEW We are pleased to report that the
company has exceeded the commitments made in the
prospectus at the listing in June 2002. The property
portfolio has grown in excess of R1 billion to R1, 7 billion
at 30 June 2004 and the annualised return to unitholders
since listing is 26,8%, which is well in excess of the
13,6% targeted in the prospectus. This was in part
achieved by utilising Pangbourne’s financial resources
which is one of the significant synergistic benefits
obtained from having Pangbourne as a major stakeholder
of the company.
iFour management retains direct responsibility for asset
management, which determines the strategic
development, growth and quality of the property
portfolio of the company.
In line with its commitment to continuously reduce
costs, the company is in the final stages of securitising
its mortgage debt. Not only will this reduce the cost of
borrowings, it will also reduce reliance on traditional
mortgage financing.
PROPERTY MARKET Conditions in the
commercial property market improved during the year.
The reduction in interest rates, continued increase in
business confidence and growth prospects for the South
African economy, were the main factors contributing to
this improvement. As a consequence, rentals have
shown an upward trend and demand for space has
firmed in most sectors of the market.
RESULTS Management has delivered on
distributions to unitholders which were increased from
75 cents per unit to 78 cents per unit. The increase in
the size of the portfolio was achieved without
diluting distributable earnings and in a competitive
market evidenced by a number of new listings and a
vibrant acquisition climate.
iFour complies with South African statements of
Generally Accepted Accounting Practices and other
statutory requirements. However, as South African
property loan stock companies do not have an
international counterpart this distorts the analysis and
interpretation of the accounts. Accordingly on page 9
we have prepared a statement of distributable earnings
and a reconciliation thereof to net profit for the year.
Statistics are given per linked unit rather than
per share.
MANAGEMENT The company continued its
strategy of outsourcing its property, financial and
administration management. In September 2003,
Pangbourne Properties Limited acquired these service
contracts from JHI Limited. iFour’s management has a
close relationship with its major service provider which
ensures a high standard of service. As at 30 June 2004
Pangbourne held 48,5% of the linked units in the
company. The benefits of having a service provider
who has a vested interest in the company by owning a
significant part of the equity, has been evident.
The company continues its strategy of investing in “A” grade properties to underpin sustainable growth in distributions
3
"Investment in GROWTH nodes in which there is a continuousdemand for space ensures high occupancy levels”
Automark Toyota dealership at Longmeadow (at Modderfontein turnoff – N3)
iFOUR PROPERTIES LIMITED ■ annual report 20044
OVERVIEW OF THE PROPERTY PORTFOLIO
Asset Management Pangbourne is committed to
assisting iFour in its stated objective of growing the size
of the portfolio without sacrificing quality or diluting
returns to existing linked unitholders.
In September 2003 linked unitholders approved the
acquisition of 53 mainly “A” grade properties,
predominantly in the industrial sector, costing
R740,8 million. This was facilitated by Pangbourne
who accepted linked units to the value of R250 million
in settlement of the sale of their
24 properties. Consequently iFour’s
cash resources could be used
to purchase the remaining
29 properties from other vendors.
In addition, Pangbourne established
Sipan 1 (Pty) Limited (“Sipan”), a
special purpose vehicle to acquire
properties utilising its significant
financial resources, predominantly
cash, which placed it at a
competitive advantage. Sipan
acquired 8 “A” grade properties of
which 5 properties are in retail
centres. These properties which
met iFour’s investment criteria were
acquired by the company when
linked unitholders approved the
Sipan acquisition in June 2004.
This initiative has enabled iFour to
maintain a prudent gearing level of
52% while eliminating a time
consuming capital raising exercise
as well as the risk of dilutionary
effects of new linked units.
An additional 5 properties, costing
R82 million in total, were acquired
directly in the market during the
year under review.
Portfolio Analysis At year end
iFour owned 108 (2003: 47)
properties to the value of R1,7 billion
(2003: R0,7 billion).
Since that date a further six properties to the value of R144,9 million have been transferred to iFour.
The portfolio spread by value reflects the company’s strategy of increasing its weighting in the industrial and retail sectors, which are expected to show good growth. This has reduced the company’s investment percentage of the portfolio value in the office sector from 50% last year to 37% currently. In addition, “Other” is 3% of the portfolio and consisting mainly of the Midrand Protea Hotel on the Ben Schoeman Highway.
Retail properties have demonstrated strong growth on the back of retail sales volume increases. In this sector, iFour has focused its investments mainly on community and local neighbourhood shopping centres which dominate their catchment areas. The company has succeeded in ensuring that the level of national tenants in its retail centres does not fall below 50%. Further analysis of the retail investment shows:
● community shopping centres, 39%
● motor retail centres, and 28%
● neighbourhood shopping centres 33%
The company has identified that the industrial sector is undergoing rental growth off a low base. There is strong demand for industrial space in all prime industrial areas.
The acquisitions during the year have taken place to take advantage of the growth in this sector with the company focusing on modern warehouse and hi-technology industrial facilities. Details of industrial sector analysis are:● warehousing, 47%● hi-technology industrial, 32%● mini and midi units, and 12%● high and low grade
industrial 9%
directors’ review (continued)
5
“Properties with freeway exposure and good ACCESSIBILITY offer additional benefi ts to tenants”
Namitech – Galaxy Avenue Linbro Business Park (at Marlboro Turnoff N3)
iFOUR PROPERTIES LIMITED ■ annual report 20046
The office sector, mainly in the northern suburbs of
Johannesburg, has continued to labour under the
weight of speculative development that is slowly
working its way out of the system. In the light of this,
iFour has reduced its investment in this sector. The
analysis of office shows:
● low rise buildings, and 60%
● office parks 40%
The geographical spread by area remains predominantly
Gauteng based with investments in KwaZulu-Natal
increasing during the year. The
investment in two retail community
centres which dominate their
catchment area account for the
investment in Mpumalanga.
The lease expiry profile based on
rental income remains in line with
the company’s strategy of keeping
expiries at not greater than 20% in
each year.
Property Portfolio Valuation In
terms of the company’s accounting
policies one third of the property
portfolio was valued by an external
registered valuer and the balance
by the directors of the company at
30 June 2004. (Details are included in
Note 7 to the Financial Statements).
Increases in the market values of
the retail properties were offset by
write downs in the value of certain
office component of the portfolio. In
addition, as the bulk of the portfolio
was acquired during the year under
review little growth was shown on
these properties. The net valuation
surplus for the year was R683 000.
BORROWINGS At 30 June
2004 total interest bearing debt,
excluding debentures, amounted
to R890.6 million (2003: R395.5
million), which represents a loan-to-
value ratio of 52%.
This is in line with company policy of maintaining a loan-
to-value ratio which does not exceed 55%.
In accordance with company policy to reduce the
exposure to interest rate increases, the company has
hedged R740 million of its interest bearing debt
(excluding debentures) as follows:
● R320 million at a fixed interest rate of 12.48% NACQ
to 10 June 2008, and
● R420 million at a fixed interest rate of 10.80% NACQ
to 3 October 2005.
S E C U R I T I S AT I O N T h e
company is currently in the process
of establishing a commercial
mortgage backed securitisation
programme scheduled to take
place in the last quarter of 2004
when the company will issue
approximately R800 million of
securitised debt. The debt has
been rated by Moody’s Investor
Services Inc and approximately
65% of the debt has been rated
“AAA”. The two key benefits of
implementing this structure are:
● providing the company with
access to new sources of debt
financing, and
● reducing the future cost of debt.
CORPORATE
GOVERNANCE iFour complies
with the requirements of the King II
report on corporate governance,
as indicated more fully on pages
13 to 15 and remains committed to
fulfilling its role as a good corporate
citizen. The directors recognise the
need to conduct the affairs of the
company with integrity and
accountability in accordance with
generally accepted corporate
practices.
Government has defined BEE as “an
integrated and coherent socio-
directors’ review (continued)
7
"A prime determinant in retention of tenants is SECURITY. 52% of the properties in the portfolio are located in secure parks”
Sunnyrock – mini unit development (at Edenvale Road turnoff N12)
iFOUR PROPERTIES LIMITED ■ annual report 20048
economic process that directly contributes to the
economic transformation of South Africa”. Pangbourne,
iFour’s administrator and major service provider, has
established a Transformation Committee. The iFour board
has identified with the process and retains responsibility
for the implementation of transformation within iFour.
In the absence of a Property Charter, iFour is establishing
its criteria for a BEE scorecard, with the Department of
Trade and Industry’s scorecard being used as a guideline.
STRATEGY The company’s primary strategy
remains to ensure that a sustainable growth in
distributions is delivered to linked unitholders. This will
be achieved by ensuring properties
are properly maintained, vacancies
are kept to a minimum, and renewals
and new lettings are at market rates.
We will continue to invest in those
sectors and locations which will
provide long-term real growth in
both rental and asset value. The
quality of the portfolio will be
predominantly “A” grade buildings.
Gearing of the portfolio will be
maintained at levels below 55% of
income producing assets and
exposure to interest rate fluctuations
will be reduced by hedging a major
portion of the total borrowing.
PROSPECTS Property is linked inextricably with the
financial health of the nation. Business confidence is at a
high. Inflation is currently within target and interest rates
have stabilised for the moment. The political environment
is stable. The high value of the Rand against the major
currencies is having some negative effects on export
oriented industries while they adjust and adapt. Overall
the economy remains strong and any growth should
impact favourably on all aspects of our business.
Although management will continue to take advantage
of any strategic opportunities, the emphasis is now on
extracting value from the portfolio and maintaining
sustainable growth in distributions.
Management are confident that iFour will achieve a
distribution of 82 cents per linked unit for 2005 as
projected in the Sipan circular to linked unitholders
dated 9 June 2004.
DIRECTORATE We are pleased to welcome John
Gibbon to the board. As a retired partner of
PricewaterhouseCoopers he brings with him
considerable financial and business expertise. John has
accepted the position of Chairman of the Audit and Risk
Management Committee. Peter Moses, the former
chairman of the Committee, remains a member where we
will continue to benefit from his experience and expertise.
The appointment of John Gibbon ensures a majority of
independent non-executive directors on the board.
Messrs L I Weil, J P G de Rauville
and S H Mia resigned from the
board during the year.
Following the announcement on
20 July 2004, we are pleased to
welcome James Nunes as the new
Managing Director. James brings a
wealth of experience to the position,
thirteen years of which have been
in the property industry. He was
part of the team that managed the
listing and subsequent growth of
the company.
Anthony Diepenbroek, the former
chief executive officer, was
responsible, with James Nunes, for
bringing iFour to the market and for growing the company
to its present size. He has moved to Pangbourne as a
member of their executive team. He will remain on our
board as a non-executive director so his skills and
knowledge will remain available to us. On behalf of the
company we would like to express our appreciation for
the contribution he has made.
A J W L Richards
Chairman
J L NunesManaging Director
directors’ review (continued)
investors distributable earningsfor the year ended 30 June
GROUP
Investors distributable earnings per linked unit 2004 2003
Weighted average number of linked units in issue (units) 111 387 953 58 275 179 Investors distributable earnings per linked unit (cents) 78,14 76,91 Distribution to unitholders (cents) 78,00 75,00
GROUP
2004 2003 R’000 R’000
Revenue and other income 229 441 139 861
Gross rentals received 221 580 139 347 Other income 7 861 514
Net property portfolio costs (58 163) (34 212) Administrative costs (excluding non-cash items*) (6 208) (5 281) Interest received 2 893 2 028 Interest paid (80 927) (57 578)
Investors distributable earnings 87 036 44 818
reconciliation to (loss)/profit for the year GROUP
2004 2003 R’000 R’000
Investors distributable earnings 87 036 44 818Net revaluation of investment properties 683 24 205Net profi t on disposal of investment property — 7 224Movement of fair value in interest rate swaps (8 438) —Amortisation of listing, debenture and mortgage expenses* (1 226) (1 017)
Profi t before taxation and distribution to unitholders 78 055 75 230Debenture interest distributed to unitholders (88 320) (43 706)
(Loss)/profi t before taxation (10 265) 31 524Taxation 5 737 (4 714)
Net (loss)/profi t for the year (4 528) 26 810
Compliance with South African Statements of GAAP, which are in the process of being harmonised with International Financial Reporting Standards, and their application on the property loan stock structure, which is unique to South Africa, has made it difficult for users to interpret these financial statements. This investor information insertion is aimed at disclosing to the users the basis on which the distribution per weighted average number of linked units in issue, was calculated.
A reconciliation has been included to illustrate the accounting adjustments which were not taken into account in calculating the distribution.
9
iFOUR PROPERTIES LIMITED ■ annual report 200410
directorate and administration
managing directorJ L NUNES (55) BCompt, CA(SA)
James Nunes has 31 years financial experience, and has 13
years experience in property development as well as property
and asset management industry. Prior to joining iFour, he was the
financial director of iProp Holdings Limited (iProp).
Together with Anthony Diepenbroek, they conceptualised, formed
and listed iFour Properties utilising the core portfolio of iProp
together with properties acquired in the market and thereby
releasing value for iProp unitholders.
independent directorsDR C P DE LEEUW (68) BSc (QS), DSc (QS), DSc (honoris causa)
Corne de Leeuw is a registered quantity surveyor and a
registered valuer. He founded the C P de Leeuw Group of
quantity surveyors and valuers, which, at his retirement from this
group in March 2001, ranked amongst the largest in the world.
He served on a number of property companies, notably Richway
Retail Properties (Pty) Limited, Urban Property Consultants (Pty)
Limited, C P de Leeuw Properties (Pty) Limited and Sanlam
Properties. His specialist fields of expertise are building and
property economics, contractual aspects of building development
and property valuation.
Corne is the current president of the Africa Association of
Quantity Surveyors, a Fellow of the Royal Institute of Chartered
Surveyors and a past president of SAPOA.
J B GIBBON (63) CA(SA)
John Gibbon retired as a partner of PricewaterhouseCoopers in
2001 having been with the practice since 1964. He is a past
president of Rotary, was extensively involved in Upliftment Trusts
and is currently on the Council of the University of Port Elizabeth,
where he chairs the finance committee. While in Port Elizabeth,
John played a major role in the rescue of the private bus service
and its development into a very successful community owned
business. John is a non-executive director of Hudaco Industries
Limited and Pangbourne Properties Limited and he is also
chairman of Hudaco’s and Pangbourne Properties audit
committees.
R C JOHNSON (53) (Diploma in town and regional planning)
Robert Johnson has 33 years experience in the South African
commercial property industry, having served as an executive
director of Sage Properties Limited and, since 1980, as an
executive director of Intraprop, the developer of Illovo Boulevard.
He is also a director of Kagiso Property Holdings and has
experience in the management of listed property entities, direct
property management and property development.
E P M MOSES (70)
Peter Moses commenced his career as an accountant and later
managing director of Harding & Parker. In 1981 he joined the
property division of Barlow Rand Limited. In 1988 he was
appointed to the board of Barlow Rand Properties as marketing
director and in 1992 he was appointed as managing director. The
following year Peter was appointed to the board of RMP
Properties. Peter retired in 1996, but continued to share his
extensive experience in all facets of investment and marketing of
property as a consultant to and non-executive director of
companies. He is also a trustee of the African Game Bird
Research and Education and Development Trust.
U J VAN DER WALT (54) BEcon (Hons)
Banus van der Walt has 28 years property experience with the
Sanlam group. From 1994 to 2001, Banus was the managing
director of Gensec Properties Limited. With effect from the
commencement of 2002, he was appointed managing director of
Sanlam Property Asset Management (Pty) Limited. Banus is a
member of the executive committee of Sanlam Investment
Management (Pty) Limited and a past president of the South
African Property Owners Association (SAPOA).
PROFILES OF DIRECTORS
1.
2.
3.
6.
5.
4.
11
non-executive directorsA M A CAMPBELL (57) BBAdmin (USA)
Athol Campbell is chief executive officer of Pangbourne Properties Limited and
has served on that board since its listing in 1987. He served as executive chairman
of the Robinson Group Holdings Limited, proprietors of the Natal Mercury, and as
a non-executive director of the Sage Trust Company Limited. Mr Campbell was a
founding member of Rand Natal Trust Limited.
J A A DIEPENBROEK (47) NDT(Civil), BSc Eng (Civil), MBA
Anthony Diepenbroek has 24 years experience in real estate construction,
management, land and property development as well as property management.
He was the managing director of iProp Holdings Limited to 2002 and the chief
executive officer of iFour Properties Limited from 2002 to 2004. Anthony is a past
president of SAPOA that represents the interests of commercial property in
South Africa.
Together with James Nunes, they conceptualised, formed and listed iFour
Properties utilising the core portfolio of iProp together with properties acquired in
the market and thereby releasing value for iProp unitholders.
A J W L RICHARDS (62) BA (Dublin) (chairman)
Tony Richards was joint managing director of Pangbourne Properties Limited from
1996 to 1999 and continues to serve on that board as an executive director. Mr
Richards is also a partner in Change Partners (executive coaching) and managing
director of Paforma Property Finance (Pty) Limited. Previously he was an executive
director of Hunts Leuchers & Hepburn Limited until 1984, thereafter a member of
the Industrial Investment Company Limited board to 1990, as well as serving on
the board of Robinson Group Holdings Limited board from 1991 to 1998.
audit and risk management committee
J B Gibbon (chairman)
E P M Moses
A J W L Richards
remuneration committeeA J W L Richards (chairman)
A M A Campbell
U J van der Walt
6 8 3 9
1 4 5 27
7.
8.
9.
iFOUR PROPERTIES LIMITED ■ annual report 200412
directorate and administration (continued)
ADMINISTRATION
iFour Properties LimitedRegistration number 2001/016118/06Share code: IFR ISIN code: ZAE000039236
Registered address2nd Floor, Pangbourne House382 Jan Smuts AvenueCraighall 2196PO Box 1352Parklands 2121
Company secretaryJ J Groenewald CA(SA)2nd Floor, Pangbourne House382 Jan Smuts AvenueCraighall 2196PO Box 1352Parklands 2121
ADVISORS AND CONSULTANTS
Corporate BankersAbsa Bank LimitedStandard Bank of South Africa LimitedNedbank Limited
SponsorsPricewaterhouseCoopers Inc2 Eglin RoadPrivate Bag X36Sunninghill 2157
AuditorsPricewaterhouseCoopers Inc2 Eglin RoadPrivate Bag X36Sunninghill 2157
Transfer SecretariesComputershare Investor Services 2004 (Pty) Limited70 Marshall StreetJohannesburg 2000PO Box 61051, Marshalltown 2107
Corporate law advisors and consultantsEdward Nathan & Friedland (Pty) Ltd150 West StreetSandton 2196PO Box 783347Sandton 2196
Prinsloo, Tindle and Andropoulos Inc1st Floor25 Sturdee AvenueRosebank 2196PO Box 2589Saxonwold 2132
13
statement of corporate governance
iFour endorses the principals as embodied in the King II report on Corporate Governance. In doing so, the directors recognise the need to conduct the enterprise with integrity and in accordance with generally acceptable corporate practices. This includes timely, relevant and meaningful reporting to its linked unitholders and other stakeholders providing a proper and objective perspective of the company.
The directors have, accordingly, established mechanisms and policies appropriate to the company’s business in keeping with its commitment to best practices in corporate governance in order to ensure compliance with the King Code. The Board is satisfied that the provisions of the King II report have been complied with for the reporting period.
Board of directors
The board of directors consists of a non-executive chairman, whose role is independent from the managing director, seven non-executive directors of whom five are independent and one executive director.
The ultimate control of the business of the group rests with the board of directors who are accountable to the unitholders. The board meets at least four times a year and is responsible for the strategic direction of the group.
The board has established an audit and risk management committee and a remuneration committee to give detailed attention to certain of its responsibilities and which operate within defined written terms of reference.
All directors have access to the advice and services of the company secretary and with prior agreement of the chairman, are entitled to seek independent professional advice at the company’s cost.
The audit and risk management committee
The committee consists of two independent directors. It meets not less than twice a year. The auditors have free access to the chairman of the committee, the chairman of the board and the managing director. The committee has terms of reference, which has been approved by the board. The committee and executive directors ensure that adequate and appropriate financial and operating controls are in place, that significant business, financial and other risks have been identified and are being suitably managed, that satisfactory standards of governance reporting and compliance are in operation, and that the group’s financial statements and disclosures are in accordance with South African Generally Accepted Accounting Practices. There was a disaster recovery plan in place throughout the year. The external auditors are appointed each year based on the recommendation of the committee.
Internal control
The board of directors is responsible for the monitoring of the group’s system of internal financial and operation controls. These controls are designed to provide reasonable, but not absolute, assurance against material misstatement or loss.
Director Board
Audit and RiskManagementCommittee
RemunerationCommittee
A B A B A BC P de Leeuw 5 4A M A Campbell 5 5 2 2J P de Rauville (resigned 18 November 2004) 2 2 1 1J A A Diepenbroek 5 5J B Gibbon (appointed 15 December 2003) 2 2 1 1R C Johnson 5 5S H Mia (resigned 18 November 2004) 2 0E P M Moses 5 5 2 2J L Nunes 5 5A J W L Richards 4 4U J van der Walt 5 4 2 2L I Weil (resigned 18 November 2004) 2 1 1 1
Column A = number of meetings held Column B = number of meetings attended
Details of director’s attendance at meetings are set out below:
iFOUR PROPERTIES LIMITED ■ annual report 200414
statement of corporate governance (continued)
Risk management
The board is responsible for ensuring that appropriate
risk management processes are in place and that such
processes are managed on a day to day basis by
management. A systematic, documented assessment
of the processes and outcomes surrounding key risks
is undertaken annually.
This risk assessment addresses the company’s
exposure to:
● physical and operational risks;
● human resource risks;
● technology risks;
● business continuity and disaster recovery;
● credit and market risks; and
● compliance risks
For effectiveness, the risk management process relies
on regular review, communication, judgement and the
knowledge of the management and service providers
closest to those issues to achieve a risk management
process embedded in day-to-day activities.
The board uses generally recognised risk management
and internal control systems and frameworks to maintain
a sound system of risk management and internal
control to provide reasonable assurance of achieving
organisational objectives with respect to:
● effectiveness and efficiency of operations;
● safeguarding the company’s assets (including
information);
● compliance with applicable laws, regulations and
supervisory requirements;
● supporting business sustainability under normal as
well as adverse operating conditions;
● reliability of reporting; and
● behaving responsibly towards all stakeholders.
The risk management and internal control systems
have been in place throughout the year.
Management reporting
The group has comprehensive management reporting
disciplines in place, managed by the managing director
and management, which include the preparation of
annual budgets and three year profit and cash flow
forecasts. Individual and consolidated budgets are
reviewed by the Audit Committee and approved by the
board. Monthly results are reviewed against budgets
and prior years. Earnings and cash flow forecasts are
regularly updated and are reviewed and approved by
the board.
Internal audit
Internal audit is managed by assessing the effectiveness
of the outsourced internal audit function of the
management company. The scope of the work
undertaken, the results of the internal audit and the
corrective action taken are made to the audit committee
at each meeting. The management company’s internal
audit plan is presented to the audit committee annually.
The chairman of the audit committee has unrestricted
access to the head of internal audit.
The object of these procedures is to assist management
and the directors in the effective discharge of their
duties. The scope of the internal audit function is to
review the reliability and integrity of financial and
operating information, the systems of internal control,
the means of safeguarding assets, the effective
management of the group’s resources, and the effective
conduct of its operations. The internal audit function
was implemented in the latter part of the reporting
period.
Remuneration committee
The board has established a remuneration committee
comprising of an independent and a non-executive
director.
15
This committee meets at least once a year. It is
responsible for reviewing the compensation arrangements
for the managing director, other senior managers and
the non-executive directors. This committee also reviews
retirement benefits, management incentive scheme and
the general remuneration policy of the group. The
remuneration paid to the executive and non-executive
directors is disclosed in note 22.4 to the annual financial
statements.
The Committee and management are of the opinion that
the Company retains key individuals for the longer-term.
Long-term incentives are designed to ensure alignment
of the long-term objectives with those of unitholders.
Safety, health and environment
Management is responsible for developing framework
policies, guidelines and compliance regarding safety,
health and the environment and ensuring that the
external property managers are implementing these
effectively.
Dealings in securities
The company has a practice of prohibiting dealing in its
linked units by directors and officers for a designated
period preceding the announcement of its financial
results or in any other period considered sensitive, and
complies with the listing requirements of the JSE
Securities Exchange South Africa in this regard.
Black Economic Empowerment (“BEE”)
iFour recognises the need to ensure broader participation
of previously disadvantaged individuals in the formal
economy in order to achieve sustainable development
and prosperity, both at the corporate level and in the
national interest. To this end, iFour is working closely with
its associate, Pangbourne, and is currently exploring
opportunities to further BEE in the property industry.
Corporate social investment
As responsible corporate citizens, the directors
recognise the need for, and responsibility of, re-
investing in the community to contribute to the growth
and well-being of that community.
Management is in the process of assessing how
available resources can be utilised more effectively for
the benefit of communities served by iFour.
Code of ethics
All directors, officers and employees are required to
maintain the highest ethical standards in ensuring that
the group’s business practices are conducted in a
manner which is beyond reproach. iFour has a code of
ethics which has been adopted by the board.
iFour is committed to complying with legislation,
regulation and best practice, where appropriate, in all
jurisdictions in which it has a presence.
iFOUR PROPERTIES LIMITED ■ annual report 200416
responsibility for and approval of the annual financial statements
The company’s directors are responsible for the
preparation of the annual financial statements of the
company and group annual financial statements
set out on pages 18 to 45. These financial statements
have been prepared using appropriate accounting
policies, supported by reasonable and prudent judgement
and estimates in conformity, in all material respects, with
South African Statements of Generally Accepted
Accounting Practice. They also take into account the
nature of the business, good corporate governance and
the requirements of the South African Companies Act.
The board and management set standards and
management implements systems of internal control,
accounting and information systems aimed at providing
reasonable assurance that assets are safeguarded and
the risk of error, fraud or loss are reduced in a cost-
effective manner. The risks relating to specific events
and projects that could have an impact on the business
during the year were identified, prioritised and managed
with input from management.
The directors and the Audit Committee are satisfied
that management has maintained reliable accounting
records and an effective system of internal controls.
The financial statements have been prepared from
these records on the basis of the consistent use of
appropriate accounting policies and fairly present the
state of affairs of the company and the group. Nothing
has come to the attention of the directors to indicate that
there has been any material breakdown in the functioning
of these controls and systems during the year.
The directors are of the opinion that the group is
financially sound and operates as a going concern. The
financial statements have been prepared on this basis.
No event, material to the understanding of this report,
has occurred between the financial year end and the
date of this report.
The directors of the company accept responsibility for
these annual financial statements, which were approved
on 24 August 2004 and are signed on their behalf by:
A J W L Richards
Chairman
J L Nunes
Managing Director
25 August 2004
DECLARATION BY THE COMPANY SECRETARY IN RESPECT OF SECTION 268(g) OF THE COMPANIES
ACT, 1973
I declare that, to the best of my knowledge, the company has lodged with the Registrar all such returns as are required
of a public company in terms of the Companies Act, 1973 and that all such returns are true, correct and up to date.
J J Groenewald
Company Secretary
25 August 2004
declaration by the company secretary
17
report of the independent auditors
TO THE SHAREHOLDERS OF iFOUR PROPERTIES
LIMITED
We have audited the annual financial statements and
group annual financial statements of iFour Properties
Limited set out on pages 18 to 45 for the year ended
30 June 2004. These annual financial statements are
the responsibility of the company’s directors. Our
responsibility is to express an opinion on these annual
financial statements based on our audit.
Scope
We conducted our audit in accordance with the
Statements of South African Auditing Standards. Those
standards require that we plan and perform the audit to
obtain reasonable assurance that the annual financial
statements are free of material misstatements. An audit
includes:
● examining on a test basis, evidence supporting the
amounts and disclosures in the annual financial
statements,
● assessing the accounting principles used and
significant estimates made by management, and
● evaluating the overall annual financial statement
presentation.
We believe that our audit provides a reasonable basis
for our opinion.
Audit opinion
In our opinion, these annual financial statements fairly
present, in all material respects, the financial position of
the company and the group at 30 June 2004, and the
results of their operations and cash flows for the year
then ended in accordance with South African Statements
on Generally Accepted Accounting Practice and in the
manner required by the Companies Act in South
Africa.
PricewaterhouseCoopers Inc
Chartered Accountants (SA)Registered Accountants and Auditors
Johannesburg
25 August 2004
iFOUR PROPERTIES LIMITED ■ annual report 200418
directors’ statutory report
The directors have pleasure in submitting their second
annual report, which forms part of the audited annual
financial statements of the group, for the year ended
30 June 2004.
NATURE OF BUSINESS
iFour is a property investment company, holding its
directly owned properties in four wholly owned
subsidiary companies. The group derives its income
from rentals received from its investment in a diversified,
“A” grade property portfolio situated mainly in Gauteng,
KwaZulu-Natal and the Western Cape.
OPERATING AND FINANCIAL REVIEW
The company concluded the acquisition of 53 properties
for R740,8 million reported in the 2003 directors’ report
and acquired a further 8 properties for R236 million to
bring the total investment properties under management
to R1 722 million. The additional purchases were
funded by the issue of 82 707 802 new linked units and
R560 million borrowings from available facilities.
The group declared total distributions for the year of
78 cents, which is ahead of the forecast of 75 cents
circulated to all unitholders on 29 August 2003.
The financial position and results of the company
are fully dealt with in the financial statements on pages
18 to 45.
Key statistics relating to the financial results for the year
are set out below:
2004 2003 R’000 R’000
Total assets 1 780 634 772 165
Interest-bearing borrowings 890 586 395 511
Share capital and reserves 93 125 48 717
Debenture capital 633 629 256 042
Revenue 221 580 139 347
Earnings before finance costs and taxation 164 527 130 780
Net financing costs (78 034) (55 550)
Debenture interest (88 320) (43 706)
Distribution per linked unit (cents) 78 75
SUBSIDIARY COMPANIES
Details of the wholly owned companies are:
2004
Issued
share Indebt- Shares
capital edness at cost
R R’000 R’000
iFour Properties SA
(Proprietary) Limited 1 319 369 —
iFour Properties Two
(Proprietary) Limited 1 17 642 —
iFour Properties Three
(Proprietary) Limited 1 367 719 —
Sipan 1
(Proprietary) Limited 1 50 426 —
iFour Executive
Unit Purchase Trust (7 500) —
2003
Issued
Share Indebt- Shares
Capital edness at cost
R R’000 R’000
iFour Properties SA
(Proprietary) Limited 1 288 329 —
iFour Properties Two
(Proprietary) Limited 1 42 005 —
The interest of the company in the aggregate profits
and losses after taxation of its subsidiary companies for
the year was Rnil (2003: R27,7 million) and R4,4 million
(2003: R nil) respectively.
SPECIAL RESOLUTIONS
Special resolutions, passed at the annual general
meeting of iFour members on 16 October 2003, were
as follows :
1. Resolved that subject to the provisions of the
Companies Act, 1973, and the Listing Requirements
of the JSE Securities Exchange South Africa (“the
JSE”), the company be authorised, up to and
including the date of the following annual general
meeting, to approve the purchase of its own shares
19
(linked to a debenture) by the company (or any
subsidiary of the company) provided that:
● the general authority shall not extend beyond 15
(fifteen) months from the date of the passing of
the resolution;
● the general authority to the repurchase by the
company (or the purchase by the subsidiary)
shall not exceed that percentage of the company’s
issued share capital permitted from time to time
by the JSE for repurchase (currently 20%);
● the repurchase by the company (or the purchase
by the subsidiary) shall not be made at a price
more than that permitted pursuant to the Listing
Requirements of the JSE;
● the repurchase will not take place within the
restricted periods provided by the Listing
Requirements of the JSE from time to time.
2. Resolved, insofar as it may be necessary to do so,
that –
2.1 pursuant to Article 39, the company ratifies the
acquisition by its wholly owned subsidiary,
iFour Properties Two (Proprietary) Limited
(“iFour Two”) from Clidet 433 (Proprietary)
Limited (“Clidet”) of –
2.1.1 the right granted by the company to
iProp Holdings Limited (“iProp”) to be
issued 300 000 fully paid shares (linked
by a debenture), at an issue price of
R5,00 per share (linked to a debenture),
on 15 March 2004, in discharge of the
balance of the promoter’s fee payable to
iProp in respect of the listing of the
company, which right has been ceded
to iProp to Clidet; and
2.1.2 the right granted by the company to
Lerix Investments (Proprietary) Limited
(“Lerix”) to be issued 6 000 000 fully
paid shares (linked to a debenture), at
an issue price of R5,00 per share (linked
to a debenture), on 15 March 2004, in
discharge of the balance of the purchase
consideration payable to Lerix for the
sale of properties to the company, as
detailed in the company’s prospectus
dated 9 May 2002, which right has been
ceded by Lerix to Clidet;
upon the terms and conditions set out in
the agreement concluded between the
company, iFour Two and Clidet dated
4 August 2003, a copy of which was
tabled at the meeting and initialled by
the chairperson for identification; and
2.2 the company may, should the directors deem
it fit, acquire from iFour Two and cancel –
2.2.1 the rights referred to in paragraphs 2.1.1
and 2.1.2; or
2.2.2 if the shares (linked to a debenture)
which are to be issued in terms of the
rights referred to in paragraphs 2.1.1
and 2.1.2 have been issued, such shares
(linked to a debenture)
at a price equal to the total consideration (after
any adjustments thereof) payable by iFour Two
to Clidet.
iFOUR PROPERTIES LIMITED ■ annual report 200420
ADMINISTRATION AND MANAGEMENT
The company employs personnel directly to perform
the asset management function for the group and to
monitor and control the outsourced functions.
MANAGEMENT BY THIRD PARTIES
Pangbourne Properties Limited has been appointed as
lead property managers from 20 September 2003. In
addition, they carry out the financial and general
administration management and secretarial functions
of the group.
There are agreements in place with Gensec Property
Services Limited, McCormick Property Development
cc and Hermans & Roman Property Solutions
(Pty) Limited to manage properties on behalf of
the group.
DIRECTORATE AND SECRETARY
Details of the directors and secretary are reflected on
pages 10 to 12.
Messrs L I Weil, S H Mia and J P G de Rauville did not
stand for re-election at the annual general meeting and
Mr J B Gibbon was appointed to the board on
15 December 2003.
In terms of Article 15.1 of the company’s articles of
association, Messrs R C Johnson, E P M Moses and
U J van der Walt retire at the next annual general meeting
but, being eligible, offer themselves for re-election.
In terms of Article 13.2 of the company’s articles of
association, Mr J B Gibbon retires at the next annual
general meeting but, being eligible, offers himself for
re-election.
DISTRIBUTIONS
The following distributions were declared during the period under review:
Distribution Distribution Distribution
number 3 number 4 number 5
Declaration date 29 August 2003 16 February 2004 28 June 2004
Last date to trade cum distribution 12 September 2003 12 March 2004 23 August 2004
Record date 19 September 2003 19 March 2004 27 August 2004
Payment date 22 September 2003 23 March 2004 30 August 2004
Debenture interest cents per unit 16,64 20,36 41,00
directors’ statutory report (continued)
DIRECTORS’ INTERESTS
At 30 June 2004, the directors’ direct and indirect beneficial interests in the combined units of the company were as follows:
Direct Indirect
Non- Non-
Director Beneficial beneficial Beneficial beneficial Total
2004 2003 2004 2003 2004 2003 2004 2003 2004 2003
J A A Diepenbroek 1 150 000 52 302 — — — 1 386 — — 1 150 000 53 688
J L Nunes 725 000 42 838 — — — 30 098 — — 725 000 72 936
E P M Moses 4 746 14 746 — — — — — — 4 746 14 746
R C Johnson — — — — 3 310 000 9 790 000 — — 3 310 000 9 970 000
Total 1 879 746 109 886 — — 3 310 000 9 821 484 — — 5 189 746 10 111 370
21
No director of iFour has any non-beneficial holdings in
iFour’s issued units.
No director of iFour has any interest in any transaction
which is, or was, of an unusual nature, or contained
unusual conditions, or which was material to iFour and
which was effected during the current financial year, or
which was effected during any earlier financial year
and which remains in any respect outstanding or
unperformed.
SHAREHOLDERS’ INFORMATION
Details of major shareholders and shareholders’ spread
appears on page 59.
THE IFOUR EXECUTIVE UNIT PURCHASE TRUST
(“the trust”)
The trust issued 1 875 000 units to employees during
the period under review. At 30 June 2004, the trust held
no unreserved units.
Loans to the trust participants and details of the iFour
Executive Unit Purchase scheme are disclosed in note
9 of the annual financial statements.
POST-BALANCE SHEET EVENT
The company announced on SENS on Monday,
19 July 2004 that Mr J L Nunes had succeeded
Mr J A A Dipenbroek as managing director. Mr
Diepenbroek has moved to Pangbourne Properties
Limited but remains a director.
Unitholders are referred to the circular dated 9 June
2004 for full details of the Sipan acquisition. Three
properties totalling R153,6 million were transferred
before 30 June 2004. The remaining five properties, to
the value of R124,69 million, will be transferred during
the early part of the new financial year. A further
property with a purchase consideration of R20,3 million
has been acquired which will be funded from current
facilities.
iFOUR PROPERTIES LIMITED ■ annual report 200422
income statementsfor the year ended 30 June
GROUP COMPANY
2004 2003 2004 2003
Notes R’000 R’000 R’000 R’000
Revenue 1 221 580 139 347 12 254 5 465
Other income 7 861 514 7 761 514
Net property portfolio costs (58 163) (34 212) — —
Administrative costs (7 434) (6 298) (6 826) (5 167)
Profi t from operations 2 163 844 99 351 13 189 812
Net revaluation of investment properties 683 24 205 — —
Net profi t on disposal of investment property — 7 224 — —
Earnings before fi nancing costs and taxation 164 527 130 780 13 189 812
Interest received 3 2 893 2 028 77 391 41 991
Interest paid 3 (80 927) (57 578) (297) (2)
Movement of fair value in interest rate swaps 16 (8 438) — — —
Debenture interest distributed to unitholders 6 (88 320) (43 706) (88 320) (43 706)
(Loss)/earnings before taxation (10 265) 31 524 1 963 (905)
Taxation 4 5 737 (4 714) 43 —
Net (loss)/earnings for the year (4 528) 26 810 2 006 (905)
(Loss)/earnings per share (cents) 5 (4,07) 46,00
Diluted (loss)/earnings per share (cents) 5 (4,06) 41,13
Headline (loss)/earnings per share (cents) 5 (3,49) 1,91
Diluted headline (loss)/earnings per share (cents) 5 (3,48) 1,71
23
balance sheets as at 30 June
GROUP COMPANY
2004 2003 2004 2003
Notes R’000 R’000 R’000 R’000
ASSETS
Non-current assets 1 735 400 716 379 759 418 330 343
Investment properties 7 1 721 574 716 370 — —
Equipment, furniture and fi ttings 8 104 9 104 9
Loans to share trust participants 9 11 592 — 11 592 —
Investments in subsidiary companies 10 — — 747 656 330 334
Deferred taxation 11 2 130 — 66 —
Current assets 45 234 55 786 2 077 3 855
Accounts receivable 12 24 563 12 418 2 009 1 546
Bank balances and cash 20 671 43 368 68 2 309
Total assets 1 780 634 772 165 761 495 334 198
EQUITY AND LIABILITIES
Share capital and reserves 93 125 48 717 71 944 21 002
Share capital and premium 13 70 843 21 907 70 843 21 907
Retained earnings/(loss) 22 282 26 810 1 101 (905)
Non-current liabilities 1 418 542 649 682 633 629 256 042
Debenture capital 14 633 629 256 042 633 629 256 042
Interest-bearing borrowings 15 776 475 390 010 — —
Fair value of interest rate swaps 16 8 438 — — —
Deferred taxation 11 — 3 630 — —
Current liabilities 268 967 73 766 55 922 57 154
Trade and other payables 17.1 44 174 12 706 1 255 1 599
Accounts payable for acquisitions 20.2 56 742 — — —
Amounts due to vendors 17.2 1 100 33 000 1 100 33 000
Current portion of interest-bearing borrowings 113 301 4 421 — —
Taxation 106 1 084 23 —
Unitholders for distribution 53 544 22 555 53 544 22 555
Total equity and liabilities 1 780 634 772 165 761 495 334 198
Net asset value per share (cents) 65 84
Net asset value per linked unit (cents) 507* 523
* The reduction in net asset value per linked unit is due to the movement in the fair value of interest rate swaps and linked unit issue costs of R17,1 million.
iFOUR PROPERTIES LIMITED ■ annual report 200424
cash flow statements for the year ended 30 June
Cash fl ows from operating activities
Cash generated from operations 20.1 180 002 137 832 13 355 34 365
Interest received 2 893 2 028 77 391 41 991
Interest paid (80 927) (57 578) (297) (2)
Taxation paid (1 000) — — —
Distributions to unitholders (57 331) (21 151) (57 331) (21 151)
Net cash infl ow from operating activities 43 637 61 131 33 118 55 203
Cash fl ows from investing activities
Additions to investment properties (614 378) (729 783) — (9)
Additions to equipment, furniture and fi ttings (112) — (112) —
Net proceeds from the sale of investment
property — 44 831 — —
Investment in, and loans to subsidiaries — — (83 521) (330 334)
Increase in loans to share trust participants (342) — (342) —
Net cash outfl ow from investing activities (614 832) (684 952) (83 975) (330 343)
Cash fl ows from fi nancing activities
Issue of linked units, net of transaction costs 80 516 277 449 80 516 277 449
Decrease in amounts due to vendors (27 092) — (31 900) —
Long-term borrowings raised 627 826 429 038 — —
Long-term borrowings repaid (132 752) (39 298) — —
Net cash infl ow from fi nancing activities 548 498 667 189 48 616 277 449
Net (decrease)/increase in cash and
cash equivalents (22 697) 43 368 (2 241) 2 309
Cash and cash equivalents
at the beginning of the year 43 368 — 2 309 —
Cash and cash equivalents
at the end of the year 20.3 20 671 43 368 68 2 309
GROUP COMPANY
2004 2003 2004 2003
Notes R’000 R’000 R’000 R’000
25
statement of changes in equity for the year ended 30 June
Share Share Retained
Number capital premium earnings Total
of shares R’000 R’000 R’000 R’000
GROUP
Units issued 58 275 179 58 23 252 — 23 310
Share issue costs — — (1 403) — (1 403)
Profi t for the period after
distributions and taxation — — — 26 810 26 810
Balance at 30 June 2003 58 275 179 58 21 849 26 810 48 717
Units issued 78 882 802 79 46 443 — 46 522
Share issue costs — — (1 933) — (1 933)
Issue of treasury units 6 300 000 6 4 341 — 4 347
Loss for the year after
distributions and taxation — — — (4 528) (4 528)
Balance at 30 June 2004 143 457 981 143 70 700 22 282 93 125
COMPANY
Units issued 58 275 179 58 23 252 — 23 310
Share issue costs — — (1 403) — (1 403)
Loss for the period after
distributions and taxation — — — (905) (905)
Balance at 30 June 2003 58 275 179 58 21 849 (905) 21 002
Units issued 78 882 802 79 46 443 — 46 522
Share issue costs — — (1 933) — (1 933)
Issue of treasury units 6 300 000 6 4 341 — 4 347
Profi t for the year after
distributions and taxation — — — 2 006 2 006
Balance at 30 June 2004 143 457 981 143 70 700 1 101 71 944
26 iFOUR PROPERTIES LIMITED ■ annual report 2004
PRESENTATION OF ANNUAL FINANCIAL STATEMENTS
The annual fi nancial statements are presented in South African Rands, the currency in which the group’s transactions are denominated.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The annual fi nancial statements and group annual fi nancial statements have, except for the revaluation of fi xed properties to fair value, been prepared on the historical cost basis.
The fi nancial statements have been prepared in accordance with South African Generally Accepted Accounting Practices (GAAP) and are consistent with the previous period. The principal accounting policies adopted are set out below.
Consolidation
The group annual fi nancial statements include the fi nancial statements of the company, its subsidiaries and the iFour Executive Unit Purchase Trust. The operating results of the subsidiaries are included from the effective dates of acquisition up to the effective dates of disposal. All inter-company balances and transactions are eliminated.
Investment properties
Investment properties are intially recorded at cost and subsequently stated at their fair value. Investment properties are held by the group for rental producing purposes and vacant land for development. These properties are valued every year by the directors. External valuations are obtained on a rotational basis, ensuring that every property is valued once every three years, by a member of the Institute of Valuers, on an open market basis. Any gain or loss arising on the fair value adjustment to the investment properties is included in the net profi t or loss for the period in which it arises.
Depreciation is not provided on investment properties. Expenditure incurred to install new tenants which is capitalised, is depreciated over the initial period of the lease.
The costs of repairs and maintenance to investment properties are charged against income, whereas expenditure that enhances the value of the property is capitalised.
Equipment, furniture and fi ttings
Equipment, furniture and fi ttings is stated at cost less accumulated depreciation.
Equipment, furniture and fi ttings is depreciated over the estimated useful life of the assets on a straight line basis. The principal rates used for this purpose are:
Computer equipment 33,3% straight lineFurniture and fi ttings 10,0% straight line
Leased assets
Leases of equipment, furniture and fi ttings where the group assumes substantially all the benefi ts and risks of ownership are classifi ed as fi nance leases.
Assets leased in terms of fi nance lease agreements are capitalised at amounts equal at the inception of the lease to the fair value of the leased property, or, if lower, at the present value of the minimum lease payments and are depreciated in accordance with the policies applicable to equivalent items of equipment, furniture and fi ttings.
The corresponding rental obligations, net of fi nance charges, are included in interest bearing borrowings. Lease fi nance charges are amortised over the duration of the leases by using a constant periodic rate of interest on the remaining balance of the liability for each period.
Leases under which the risks and benefi ts of ownership are effectively retained by the lessor are classifi ed as operating leases. Obligations incurred under operating leases are charged to the income statement in equal instalments over the period of the lease.
Retirement benefi t costs
Payments to defi ned contribution plans are charged as an expense as they fall due.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the costs of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.
All other borrowing costs are expensed in the period in which they are incurred.
Goodwill
Goodwill arising on consolidation and acquisitions represents the excess of the group’s interest in the fair value of the identifi able net assets of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is capitalised and amortised on a straight-line basis over its useful economic life, a period generally not exceeding 20 years.
Negative goodwill, which represents the excess of the group’s interest in the fair value of the identifi able assets and liabilities acquired over the cost of acquisition, is eliminated proportionately against the fair values of the non-monetary assets acquired. Any amount in excess of the fair values of non-monetary assets acquired is treated as negative goodwill and recognised as income on a systematic basis.
Taxation
The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. Taxation is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax liabilities are recognised for all taxable temporary differences, unless the deferred tax liability arises from:
summary of accounting policies for the year ended 30 June 2004
27
– goodwill for which amortisation is not deductible for tax purposes, or
– the initial recognition of an asset or liability in a transaction which:
– is not a business combination, and
– at the time of the transaction, affects neither accounting profi t nor taxable profi t, or
– revaluations of investment properties to the extent that taxation is not payable on the sale of the investment property.
Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profi t will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from
– negative goodwill, or
– from the initial recognition of an asset or liability in a transaction which:
– is not a business combination, and
– at the time of the transaction, affects neither accounting profi t nor taxable profi t, or
– revaluations of investment properties to the extent that tax is not claimable on the sale of the investment properties.
Investments
Investments are stated at the lower of cost or written-down value. Investments are written down in cases where there has been a permanent decline in value. Any impairment or recovery of impairment is recognised in the income statement in the period in which the diminution or recovery occurs.
Listed securities are restated to fair value annually. Fair values are based on market value at year-end and any surplus or defi cit is charged against income.
Distributions from listed securities are recognised when the right to receive income has been established. Profi ts or losses arising from the sale of investments are charged against income for the period in which they occur.
Linked unit issue costs
Linked unit issue costs are expenses of, or the commission paid, or discount allowed on, the creation or issue of any linked units of the company.
Linked unit issue costs are allocated between the share and debenture components. Issue costs relating to the shares are allocated to share premium in the period in which the cost is incurred. The portion relating to debentures are allocated to deferred debenture expenses and amortised over 25 years from the date of allotment.
Revenue
Revenue represents gross rentals, recognised on an accrual basis, and fees received from management transactions, net of value added taxation.
The company’s revenue also includes fees earned from subsidiaries.
Financial instruments
The groups principal fi nancial assets are bank balances and cash, including deposits on call and short term investments in money market instruments, short-term loans and trade receivables.
Cash and cash equivalents consist of cash resources, which comprise cash on hand, balances with bankers and investments in short-term money market instruments.
Trade receivables are carried at anticipated realisable value. An estimate is made for the provision of impairment of debt based on a review of all outstanding amounts at the year-end. Bad debts are written off during the year in which they are identifi ed.
Financial liabilities and equity instruments are classifi ed according to the substance of the contractual arrangements entered into. Interest rate swap agreements are caried at their fair value. Signifi cant fi nancial liabilities include fi nance lease obligations, interest-bearing bank loans and overdrafts, trade and other payables. The accounting policy for fi nance lease obligations is outlined above.
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Trade and other payables are stated at their nominal value.
Segmental reporting
The group earns revenue in the form of property rentals. On a primary basis the group is organised into 3 major operating segments:
– Industrial,
– Offi ce, and
– Retail
On a secondary basis, the geographical location of the properties have been identifi ed.
Segment results include revenue and expenses that are directly attributable to a segment and the relevant portion of the groups revenue and expenses that can be allocated on a reasonable basis to that segment.
Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to the segment or can be allocated to a segment on a reasonable basis. Segment assets are reported after deducting related allowances that are reported as direct offsets in the groups balance sheet. Segment assets and liabilities do not include deferred income taxes.
Comparative fi gures
Where necessary, comparative fi gures have been adjusted to conform to changes in presentation in the current year. The comparitive fi gures relate to an 18 month period. The Company traded for 12 of the 18 months. As a result of the increase in the growth of the portfolio, the prior period is non-comparable to the current year.
iFOUR PROPERTIES LIMITED ■ annual report 200428
notes to the annual financial statements for the year ended 30 June
1. REVENUE
Revenue from:
– Rentals 221 580 139 347 — —
– Fees — — 12 254 5 465
221 580 139 347 12 254 5 465
2. PROFIT FROM OPERATIONS
Profi t from operations is arrived at after takinginto account the following:
Auditors’ remuneration
– Audit fees 375 289 140 130
– Other services 700 — — —
Depreciation
– Equipment 16 1 16 1
– Furniture and fi ttings 1 — 1 —
Amortisation of listing, debenture and mortgage expenses 1 226 1 017 956 769
Tenant installation and commission amortised 1 184 161 — —
Operating lease payments – premises 304 151 304 151
– land leases 2 255 2 182 — —
Staff costs 669 418 669 418
Included in staff costs are:
Defi ned contribution plan expenses 69 201 69 201
Number of employees 5 4 5 4
3. INTEREST
Interest received
On call accounts 2 026 1 558 — —
Other 525 470 6 —
From subsidiaries — — 77 043 41 991
Executive Unit Purchase Trust 342 — 342 —
Total Interest received 2 893 2 028 77 391 41 991
Interest paid
Finance leases 7 422 8 483 — —
Mortgage loans 72 662 48 837 — —
Other 843 258 297 2
Total Interest paid 80 927 57 578 297 2
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
29
4. TAXATION
South African normal taxation (23) — (23) —
Deferred taxation – current year 1 831 (3 630) 36 —
Prior year adjustments 2 729 — 272 —
Capital gains taxation — (1 084) — —
Assessable loss – current year 1 200 — (242) —
Taxation credit/(expense) per the income statements 5 737 (4 714) 43 —
Taxation rate reconciliation
The taxation on the profi t before taxation differs from the theoretical amount that would arise using the South African taxation rate as follows:
% % % %
Statutory taxation rate 30 30 30 —
Exempt income (19) — 67 —
Disallowed expenditure 4 — (15) —
Prior year adjustments (27) — 14 —
Permanent differences 5 (30) — —
Capital gains taxation 7 15 (34) —
Property revaluation at 15% 4 — — —
Effective taxation rate 4 15 62 —
(Loss)/profi t before taxation (10 265) 31 524 1 963 (905)
Statutory taxation rate at 30% 3 080 (9 457) (589) —
Exempt income 1 981 — 1 322 —
Disallowed expenditure (384) — (296) —
Prior year adjustments 2 729 — 272 —
Permanent differences (553) 9 457 (5) —
Capital gains taxation (661) (4 714) (661) —
Property revaluation at 15% (455) — — —
Taxation credit/(expense) per the income statements 5 737 (4 714) 43 —
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
iFOUR PROPERTIES LIMITED ■ annual report 200430
5. (LOSS)/EARNINGS PER SHARE
(Loss)/earnings per share is calculated on the weighted average number of shares ranking for distribution being 111 387 953 (2003: 58 275 179) and net (loss)/earnings after tax of (R4,5 million) (2003: R26,8 million).
Headline (loss)/earnings per share have been based on the weighted average number of shares in issue during the year being 111 387 953 (2003: 58 275 179).
The diluted headline (loss)/earnings per share is calculated on the diluted weighted average number of shares in issue of 111 565 147 (2003: 64 875 179). (Refer note 13.2).
Year ended 30 June 2004
Reconciliation between (loss)/earnings and headline (loss)/earnings:
(Loss)/earnings Net (loss)/ before taxation Taxation earnings R’000 R’000 R’000
(Loss)/earnings for the year (10 265) 5 737 (4 528)
Adjustments:
Net revaluation of investment properties (683) 102 (581)
Amortisation of listing, debenture and mortgage expenses 1 226 — 1 226
Headline (loss)/earnings (9 722) 5 839 (3 883)
Year ended 30 June 2003
Reconciliation between earnings and headline earnings:
Earnings Net before taxation Taxation earnings R’000 R’000 R’000
Earnings for the period 31 524 (4 714) 26 810
Adjustments:
Revaluation of investment properties (24 205) 3 630 (20 575)
Net profi t on disposal of investment property (7 224) 1 084 (6 140)
Amortisation of listing, debenture and mortgage expenses 1 017 — 1 017
Headline earnings 1 112 — 1 112
notes to the annual financial statements for the year ended 30 June
31
6. DISTRIBUTIONS TO UNITHOLDERS
Analysis of distribution to unitholders is as follows:
– Debenture interest – special interim distribution 9 697 — 9 697 —
– Debenture interest – interim distribution 25 275 21 151 25 275 21 151
– Debenture interest – fi nal distribution 53 348 22 555 53 348 22 555
Net distribution 88 320 43 706 88 320 43 706
Distributions per linked unit are as follows:
cents cents cents cents
– Debenture interest – special interim distribution 16,64 — 16,64 —
– Debenture interest – interim distribution 20,36 36,29 20,36 36,29
– Debenture interest – fi nal distribution 41,00 38,71 41,00 38,71
78,00 75,00 78,00 75,00
The fi nal distribution declared is net of distributions receivable of R5,47 million which is recoverable from unitholders who did not rank for distribution for the period from 1 January 2004 to 30 June 2004.
7. INVESTMENT PROPERTIES
Opening balance 716 370 — — —
Additions 1 004 521 729 773 — —
Revalution adjustments 683 24 205 — —
Disposals — (37 608) — —
Closing carrying balance 1 721 574 716 370 — —
Details of the investment properties are recorded in a register which may be inspected by unitholders or their authorised agents at the company’s registered offi ce. Please refer to pages 46 to 49 where details of investment properties are listed.
Investment properties are held as security for mortgage loans. The value of encumbered investment properties is set out in note 15.
The directors value the properties annually on an open market basis, using a risk adjusted discounted cash fl ow method. Independent valuations are obtained on a rotational basis, ensuring that every property is valued once every three years. Independant valuations are performed on an open market value basis.
The independant valuations were obtained from a duly authorised valuer in terms of section 19 of the Property Valuer’s Profession Act 47 of 2000.
The recent valuations were done by JHI Real Estate Limited: Marijke Serfontein MIV(SA) – 17 years experience.
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
iFOUR PROPERTIES LIMITED ■ annual report 200432
8. EQUIPMENT, FURNITURE AND FITTINGS
Year ended 30 June 2004
GROUP
Opening net book value 9 — 9
Additions 66 46 112
Depreciation (16) (1) (17)
Closing net carrying amount 59 45 104
Cost 75 46 121
Accumulated depreciation (16) (1) (17)
Net book value 59 45 104
COMPANY
Opening net book value 9 — 9
Additions 66 46 112
Depreciation (16) (1) (17)
Closing net carrying amount 59 45 104
Cost 75 46 121
Accumulated depreciation (16) (1) (17)
Net book value 59 45 104
Period ended 30 June 2003
GROUP
Opening net book value — — —
Additions 10 — 10
Depreciation (1) — (1)
Closing net carrying amount 9 — 9
Cost 10 — 10
Accumulated depreciation (1) — (1)
Net book value 9 — 9
COMPANY
Opening net book value — — —
Additions 10 — 10
Depreciation (1) — (1)
Closing net carrying amount 9 — 9
Cost 10 — 10
Accumulated depreciation (1) — (1)
Net book value 9 — 9
Furniture
Equipment and fittings Total
notes to the annual financial statements for the year ended 30 June
33
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
9. LOANS TO SHARE TRUST PARTICIPANTS
Loans advanced during the year 11 250 — 11 250 —
Interest raised 342 — 342 —
At year end 11 592 — 11 592 —
J A A Diepenbroek 7 110 — 7 110 —
J L Nunes 4 482 — 4 482 —
At year end 11 592 — 11 592 —
The loans to the share trust participants arise as a result of the implementation of the iFour Executive Unit Purchase Scheme. In terms of the iFour Executive Unit Purchase Scheme, the trustees of the scheme may from time to time offer units to participating scheme members. In terms of the trust deed the offer price of these units is deemed to be the ruling market price on the date of the offer. If such units are accepted by the participating member, the units are issued to the member, a loan equal to the number of units multiplied by the offer price is opened, and the units are pledged back to the trust as security for the loan.
Loans to share trust participants from the company attract interest at 11,33% which is the weighted average cost of capital of the company since the trusts formation. Loans to the trust from external sources, currently attract interest at prime less 1,5%.
One third of the number of units acquired by a member may be sold after two years have elapsed from the offer date. A further one-third after three years have so elapsed, and the fi nal third after the fourth year.
THE iFOUR EXECUTIVE UNIT PURCHASE TRUST 2004
Units
Opening balance 1 875 000
Units of participants joining the scheme (1 875 000)
Closing balance 0
There are no unreserved units remaining in the trust at 30 June.
10. INVESTMENTS IN SUBSIDIARY COMPANIES
In wholly owned subsidiary companies:
– Shares at cost (Directors’ valuation – R4) — — — —
– Amounts owing by subsidiaries — — 747 656 330 334
— — 747 656 330 334
There are no fi xed terms of repayment and interest is charged at rates between 13,88% (2003: 13,4%) and 14,6% (2003: 14,3%).
The Company’s wholly owned subsidiaries at 30 June 2004 are:
iFour Properties SA (Pty) Ltd, incorporated in the Republic of South Africa
iFour Properties Two (Pty) Ltd, incorporated in the Republic of South Africa
iFour Properties Three (Pty) Ltd, incorporated in the Republic of South Africa
Sipan 1 (Pty) Ltd, incorporated in the Republic of South Africa
iFOUR PROPERTIES LIMITED ■ annual report 200434
notes to the annual financial statements for the year ended 30 June
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
11. DEFERRED TAXATION
The movement on the net deferred taxation account is as follows:
At the beginning of the year (3 630) — — —
Current year charge 1 831 (3 630) 36 —
Prior year adjustments 2 729 — 272 —
Assessable losses 1 200 — (242) —
Net deferred tax asset/(liability) 2 130 (3 630) 66 —
The major categories of deferred taxation at 30 June are as follows:
Prepaid expenses (658) — — —
Capital gains tax on revaluation of investment properties (3 403) (3 630) — —
Finance lease liability (2 049) — — —
Wear and tear allowances (393) — — —
Fair value of interest rate swaps 2 531 — — —
Provisions 651 — 66 —
Receipts in advance 919 — — —
Assessable losses 4 532 — — —
Net deferred tax asset/(liability) 2 130 (3 630) 66 —
12. ACCOUNTS RECEIVABLE
Trade receivables 4 772 3 054 — —
Provision for impairment of debt (2 602) (470) — —
Trade receivables net of provision 2 170 2 584 — —
Tenant installation and letting commission, net of amortisation 2 621 816 — —
Prepayments and deposits 1 815 6 392 228 —
Value-added tax 254 963 254 617
Sundry debtors 9 810 1 663 1 527 929
Sundry debtors – acquisition costs 7 893 — — —
24 563 12 418 2 009 1 546
35
13. SHARE CAPITAL AND PREMIUM
13.1 Authorised
500 000 000 ordinary shares of 0,1 cent each 500 500 500 500
500 500 500 500
Issued
143 457 981 (2003: 58 275 179) ordinary shares of 0,1 cent each 143 58 143 58
Share premium 70 700 21 849 70 700 21 849
Opening balance 21 849 — 21 849 —
Arising on issues during the year 46 443 23 252 46 443 23 252
Share issue costs written off (1 933) (1 403) (1 933) (1 403)
Issue of treasury units 4 341 — 4 341 —
70 843 21 907 70 843 21 907
Each share is linked with one variable rate debenture to form one linked unit. The unissued ordinary shares of the company are under the unrestricted control of the directors until the forthcoming annual general meeting. Further details are refl ected in the statutory directors’ report.
13.2 Deferred linked units
177 194 linked units will be issued to Alex Red Property Holdings (Pty) Limited as part settlement of the purchase consideration for a property acquired. These linked units will be allotted and issued to the seller as fully paid up at the earlier of 31 August 2004, or the day which is one day after the register of iFour Properties Limited has been closed by the transfer secretaries for fi nal interest distribution for the six month period ended 30 June 2004.
14. DEBENTURE CAPITAL
143 457 981 (2003: 58 275 179) subordinated debentures of 460 cents each 659 907 268 066 659 907 268 066
Deferred debenture expenses (26 278) (12 024) (26 278) (12 024)
Opening balance (12 024) — (12 024) —
Total deferred debenture expenses incurred (15 210) (12 524) (15 210) (12 524)
Amortisation of deferred expenses for the year 956 500 956 500
633 629 256 042 633 629 256 042
In terms of the debenture trust deed, the aggregate interest entitlement of every one debenture linked to each ordinary share in respect of any fi nancial year shall be not less than 99,9% of the net income, after making provisions as the directors deem fi t. The interest is payable twice per year or in appropriate circumstances, additional special interim distributions may be declared. The debentures are redeemable after 25 years from the date of allotment.
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
36 iFOUR PROPERTIES LIMITED ■ annual report 2004
notes to the annual financial statements for the year ended 30 June
15. INTEREST-BEARING BORROWINGS15.1 Nedcor Investment Bank (“N.I.B.”) 13,5 68 780 73 201 — —The N.I.B. fi nance structure is secured by investment properties to the value of R114 million.The fi nance lease facility is amortised annually to 30 September 2009.
15.2 Nedbank Corporate 10,0 1 905 — — —The mortgage bond is secured by aninvestment property to the value of R9 million.
15.3 Standard Bank 12,48 320 000 322 310 — —The Standard Bank facility consists of R107 million maturing on 30 April 2005 and R246 million maturing on 30 April 2007. An amount of R33 million is an access bond facility and bears interest at the prime overdraft rate less 1,5%. The facility is available for future use. The Standard Bank facility of R353 million is secured by investment properties to the value of R635 million.Borrowings to the value of R320 millionhave been hedged at an interest rate of 12,48%NACQ to 10 June 2008. The fair value of this loan at 30 June 2004 is R328 million.
15.3.1 Standard Bank mortgage bond expenses
Deferred mortgage expenses (810) (1 080) — —
Total mortgage expenses incurred (1 350) (1 350) — — Mortgage expenses amortised to date 540 270 — — 15.4 Absa Bank 10,75 499 901 — — —The Absa long-term loan facilities are as follows:15.4.1 iFour Executive Unit Purchase Trust –
R7,5 million maturing on 30 June 200715.4.2 iFour Properties SA (Pty) Limited –
R350 million maturing on 31 March 200815.4.3 Sipan I (Pty) Limited –
R160 million maturing on 31 March 200815.4.4 iFour Properties Three (Pty) Limited –
R489 million maturing on 30 September 2013
Borrowings to the value of R420 million have beenhedged at 10,80% NACQ to 3 October 2005.The interest rate applicable to the remainder of the utilised facility is fl oating at prime less 1%.The Absa bank facility is secured by investment properties to the value of R964 million.
889 776 394 431 — —Less: Portion payable within 12 months (113 301) (4 421) — —
Net long-term borrowings 776 475 390 010 — —
The company has a general overdraft facility of R17,5 million at Absa which bears interest at prime.
Average GROUP COMPANY
interest 2004 2003 2004 2003
rate (%) R’000 R’000 R’000 R’000
37
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
16. FAIR VALUE OF INTEREST RATE SWAPS
Movement of fair value in interest rate swaps 8 438 — — —
Closing balance 8 438 — — —
The hedging instrument arises as a result of management’s action to remove the uncertainty of interest rate fl uctuations and to provide a guaranteed cost of borrowings against the yields of portfolios acquired. The implementation of AC 133 requires the fair valuing of interest rate contracts.
Details of the hedging instruments are disclosed in note 15.
17. ACCOUNTS PAYABLE AND ACCRUALS
17.1 Trade and other payables
Trade payables and accruals 6 902 10 265 449 1 599
Tenant deposits 6 927 2 441 — —
Interest payable 13 558 — — —
Sundry payables 16 787 — 806 —
44 174 12 706 1 255 1 599
17.2 Amounts due to vendors (Note 13.2) 1 100 33 000 1 100 33 000
18. BORROWING POWERS
The directors’ borrowing powers are limited to 55% of the market value of its investment property portfolio plus R30 million excluding the Nedcor fi nance structure and properties.
iFOUR PROPERTIES LIMITED ■ annual report 200438
Lease Finance Capital
commitments cost value
R’000 R’000 R’000
notes to the annual financial statements for the year ended 30 June
19. COMMITMENTS
19.1 Finance lease commitments
Year ended 30 June 2004:
Current 13 276 6 975 6 301
2 to 5 years 80 003 17 524 62 479
93 279 24 499 68 780
Year ended 30 June 2003:
Current 12 272 7 851 4 421
2 to 5 years 71 026 12 571 58 455
> 5 years 10 602 277 10 325
93 900 20 699 73 201
The lease payments will be funded from the proceeds of rental income from the properties which form part of this facility.
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
19.2 Operating lease commitments
Current 3 587 2 407 132 —
2 to 5 years 17 700 12 387 145 —
> 5 years 849 389 524 997 — —
870 676 539 791 277 —
The land leases above will be funded from the proceeds of rental income from the properties which form part of the lease agreements.
The above commitment excludes any option periods. The land leases run for periods in excess of 20 years and the company has the option to renew.
Leases escalate between 8 and 11%.
19.3 Capital commitments
The attention of users of the fi nancial statements are drawn to the circular dated 9 June 2004 where the group announced the purchase of Sipan 1 (Pty) Limited. Five properties with a cost of R124,69 million are still to be transferred. This will be funded from the group’s resources and through an issue of linked units to Pangbourne Properties Limited.
The group has signed an agreement for the direct purchase of a property with a cost of R20 million. This will be funded from the group’s resources and facilities.
39
20. NOTES TO THE CASH FLOW STATEMENT
20.1 Reconciliation of profi ts before taxation and distributions to unitholders, to cash generated from operations
(Loss)/profi t before taxation (10 265) 31 524 1 963 (905)
Adjusted for:
Movement of fair value in interest rate swaps 8 438 — — —
Distributions to unitholders 88 320 43 706 88 320 43 706
Depreciation 17 1 17 1
Amortisation of listing, debenture and mortgage expenses 1 226 771 956 500
Interest received (2 893) (2 028) (77 391) (41 991)
Interest paid 80 927 57 578 297 2
Profi t on sale of investment property — (7 224) — —
Profi t on settlement of debt (4 408) — — —
Revaluations of investment properties (683) (24 205) — —
Operating profi t before working capital changes 160 679 100 123 14 162 1 313
Working capital changes:
Increase in accounts receivable (12 145) (12 418) (463) (1 547)
Increase/(decrease) in accounts payable 31 468 50 127 (344) 34 599
Cash generated from operations 180 002 137 832 13 355 34 365
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
iFOUR PROPERTIES LIMITED ■ annual report 200440
notes to the annual financial statements for the year ended 30 June
20. NOTES TO THE CASH FLOW STATEMENT (continued)
20.2 Acquisition of subsidiary
On 30 June 2004, the Company acquired 100% of the share capital of Sipan 1 (Pty) Limited by way of an issue of 8,8 million linked units at R5,90 per linked unit and by taking cession of a long-term loan with a value of R64,5 million. The remaining portion of the purchase cost will be settled through the issue of units, on the transfer of the remaining properties. This interest was consolidated in the current year’s fi nancial statements.
Loan ceded from Pangbourne Properties Limited 64 519
Accounts payable for acquisitions 56 742
Linked units issued 51 920
Purchase consideration: 173 181
20.3 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with banks, deposits on call and short-term investments in money market instruments.
Cash and cash equivalents included in the cash fl ow statement comprise the following balance:
Cash on hand and balances with banks 20 671 43 368 68 2 309
Cash and cash equivalents at the end of the year 20 671 43 368 68 2 309
20.4 Non cash investing and fi nancing activities
Included in these transactions are acquisitions of investment properties for linked units, settlement of debt for linked units, the acquisition of Sipan 1 (Pty) Limited and loans made to share trust participants by way of an issue of linked units.
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
41
Corporate
Industrial Offi ce Retail Other unallocated Total
2004 2004 2004 2004 2004 2004
R’000 R’000 R’000 R’000 R’000 R’000
21. SEGMENTAL INFORMATIONAnalysis by property usageRevenueRentals received 65 866 95 453 54 737 5 524 — 221 580
Total revenue 65 866 95 453 54 737 5 524 — 221 580
Profi t from operations 53 172 65 587 39 525 5 146 414 163 844Net revaluation of investment properties (2 281) (10 708) 10 330 3 342 — 683
Earnings before fi nancing costs and taxation 50 891 54 879 49 855 8 488 414 164 527
AssetsInvestment properties 596 991 636 114 435 818 52 651 — 1 721 574Equipment, furniture and fi ttings — — — — 104 104Other assets (unallocated) — — — — 58 956 58 956
Total assets 596 991 636 114 435 818 52 651 59 060 1 780 634
Total liabilities (unallocated) — — — — 1 687 509 1 687 509
Capital expenditure 458 243 287 921 209 047 49 310 112 1 004 633Depreciation — — — — 17 17Amortisation (unallocated) — — — — 1 226 1 226
Geographical segmentsRevenue by geographic locationThe following table shows the distribution of the company’s consolidated revenue by geographical location: 2004 2003
Gauteng 165 590 103 394Western Cape 27 113 24 049 Free State 7 751 7 712 KwaZulu-Natal 15 137 4 192Mpumulanga 5 989 —
Total revenue 221 580 139 347
Analysis of assets by geographical locationThe following table shows the carrying amount of investment propertiesby geographical area in which the assets are located:
Gauteng 1 199 971 536 950 Western Cape 191 711 111 200 Free State 40 250 40 000 KwaZulu-Natal 206 902 28 220Mpumulanga 82 740 —
Investment properties 1 721 574 716 370
Segment revenue and expenses Revenue and expenses that are directly attributable to a segment are allocated to those segments.
iFOUR PROPERTIES LIMITED ■ annual report 200442
21. SEGMENTAL INFORMATION (continued)
Analysis by property usage
Revenue
Rentals received 36 561 79 386 23 400 — 139 347
Total revenue 36 561 79 386 23 400 — 139 347
Profi t/(loss) from operations 29 474 58 789 16 872 (5 784) 99 351
Revaluation of investment properties 20 740 (3 538) 7 003 — 24 205
Profi t on disposal of investment property — 7 224 — — 7 224
Earnings/(loss) before fi nancing
and taxation 50 214 62 475 23 875 (5 784) 130 780
Assets
Investment properties 235 770 366 400 114 200 — 716 370
Equipment — — — 9 9
Other assets (unallocated) — — — 55 786 55 786
Total assets 235 770 366 400 114 200 55 795 772 165
Total liabilities (unallocated) — — — 723 448 723 448
Capital expenditure 235 770 366 400 114 200 9 716 379
Depreciation — — — 1 1
Amortisation (unallocated) — — — 771 771
22. RELATED PARTY TRANSACTIONS
All transactions are concluded on an arms length basis and are market related.
Group
22.1 Paid to Pangbourne Properties Limited
Day-to-day property portfolio, secretarial and fi nancial administration was carried out by Pangbourne Properties Limited
with effect from 20 September 2003. Messrs A M A Campbell and A J W L Richards are executive directors of Pangbourne
Properties Limited. Pangbourne Properties Limited owns 48,47% of iFour Properties Limited.
Corporate
Industrial Offi ce Retail unallocated Total
2003 2003 2003 2003 2003
R’000 R’000 R’000 R’000 R’000
notes to the annual financial statements for the year ended 30 June
43
GROUP
2004 2003
R’000 R’000
22. RELATED PARTY TRANSACTIONS (continued)
22.1 Paid to Pangbourne Properties Limited (continued)
Property management fees paid 6 262 —
Promoters’ fees 8 695 —
Operating lease premises rental 119 —
Non-executive directors’ fees paid 200 20
Rental guarantee income from purchase of property (200) —
Warehousing fee – Sipan 1 (Pty) Limited 10 200 —
Vendors of investment properties 249 556 —
Acquisition of subsidiary – Sipan 1 (Pty) Limited 173 181 —
Purchase of Property Management Contract (2 967) —
COMPANY
2004 2003
R’000 R’000
22.2 Inter-company fees
In terms of written contracts the company earned the following fees from its subsidiaries:
– Asset management fee of 0,75% (2003: 0,5%) of the value of the investment properties
iFour Properties SA (Proprietary) Limited 4 660 3 044
iFour Properties Two (Proprietary) Limited 811 538
iFour Properties Three (Proprietary) Limited 3 765 —
Sipan 1 (Proprietary) Limited 110 —
– Treasury fee of 0,3% (2003: 0,3%) on the value of the long-term borrowings
iFour Properties SA (Proprietary) Limited 954 967
iFour Properties Two (Proprietary) Limited 210 220
iFour Properties Three (Proprietary) Limited 632 —
Sipan 1 (Proprietary) Limited 16 —
– Cash management/collection fee of 0,5% (2003: 0,5%) on total collections of the subsidiary
iFour Properties SA (Proprietary) Limited 570 615
iFour Properties Two (Proprietary) Limited 82 82
iFour Properties Three (Proprietary) Limited 434 —
Sipan 1 (Proprietary) Limited 8 —
iFOUR PROPERTIES LIMITED ■ annual report 200444
notes to the annual financial statements for the year ended 30 June
COMPANY
2004 2003
R’000 R’000
22. RELATED PARTY TRANSACTIONS (continued)
22.3 Inter-company interest Interest charged on inter-company accounts: iFour Properties SA (Proprietary) Limited at 14,6% (2003: 13,4%) 34 538 37 596 iFour Properties Two (Proprietary) Limited at 14,32% (2003: 14,32%) 6 532 4 394 iFour Properties Three (Proprietary) Limited at 13,88% 35 338 —Sipan 1 (Proprietary) Limited at 14,2% 635 —
22.4 Directors’ remunerationIndependent non-executive directorsC P de Leeuw 83 27J B Gibbon 55 —R C Johnson 70 37S H Mia — 21E P M Moses 105 44R S Ntuli — 26T T Thahane — 9U J van der Walt 80 29L I Weil 39 31
Non-executive directors*A M A Campbell 80 10J P G de Rauville 25 10A J W L Richards 95 —
632 244
* These non-executive directors are executive directors representing Pangbourne Properties Limited. Directors’ fees are not paid to the individuals but are paid directly to Pangbourne Properties Limited.
Executive directorsFor managerial servicesJ A A DiepenbroekRemuneration 956 731Bonus – allocated to building acquisition costs 231 —Bonus – other 125 —Retirement funding – defi ned contribution 158 172Medical aid 27 24Other allowances 6 181
1 503 1 108
J L Nunes Remuneration 712 629Bonus – allocated to building acquisition costs 186 —Bonus – other 90 —Retirement funding – defi ned contribution 184 191Medical aid 28 25Other allowances 10 52
1 210 897
Please refer to note 9 for details on loans to share trust participants.
Details of directors’ service contractsJ A A Diepenbroek and J L Nunes have entered into six-month service contracts.
45
22. RELATED PARTY TRANSACTIONS (continued)
22.5 Amounts owing at 30 JunePangbourne Properties Limited 55 835 — — —
– Warehousing fee – Sipan 1 (Pty) Ltd 10 200– Property acquisition – Sipan 1 (Pty) Ltd 39 800– Promoters’ fees – Sipan 1 (Pty) Ltd 2 762– Other amounts 3 073
23. FINANCIAL INSTRUMENTS
Exposure to credit and interest rate risk arises in the normal course of the company’s business.
Interest rate risk
The company manages the interest rate risk by fi xing the interest rate for the major portion of its borrowings taking
advantage of interest rate movements. The company removes the uncertainty of interest rate fl uctuations and provides a
guaranteed cost of borrowings against the yields of portfolios acquired. All interest rate swap contracts are fair valued.
Credit risk
A credit policy is in place and the exposure to credit risk is managed on an ongoing basis. The carrying amount of each
fi nancial asset in the balance sheet represents the maximum credit risk exposure.
Fair values
Financial liabilities and equity instruments are classifi ed according to the substance of the contractual arrangements
entered into.
Liquidity risk
The group manages liquidity risk by strict monitoring of daily cash balances and utilising forecasted cash fl ows. The group’s
borrowing powers are limited in terms of the articles of the company and all borrowings are approved by the board of
directors.
24. RETIREMENT BENEFIT COSTS
The company’s employees are members of defi ned contribution retirement plans to which either the company and/or the
employee contribute a fi xed percentage to recognised retirement annuity funds of the employee’s choice. The company has
no obligation to fund post-employment medical aid expenses.
25. CONTINGENT LIABILITIES
Guarantees and sureties in respect of the subsidiaries amount to R1 739 million (2003: R460 million) in respect of the
mortgage facilities granted to the subsidiaries.
26. POST-BALANCE SHEET EVENTS
There have been no material post-balance sheet events up to the date of authorisation of the issue of the fi nancial
statements by the directors.
GROUP COMPANY
2004 2003 2004 2003
R’000 R’000 R’000 R’000
iFOUR PROPERTIES LIMITED ■ annual report 200446
1 108 Elizabeth Avenue (previous name – Strauss Scher) Sandton Office 2 15 Wellington Road * Parktown Office 3 24 Sturdee Avenue * Rosebank Office 4 35 Intersite Springfield Industrial 5 5 Wessels Road * Rivonia Office 6 547 Richards Drive Halfway House Industrial 7 Absa Towers * Vanderbijlpark Office 8 ACA Crown City Industrial 9 AECI Coatings * Linbro Business Park Industrial 10 Air Affairs Bryanston Office 11 Albany Bakery * Kokstad Industrial 12 Alert City West, Johannesburg Industrial 13 AMS House Midrand Office 14 Anderbolt McCarthy * Boksburg Industrial 15 APV SA Limited Midrand Industrial 16 BB Transport * Spartan Industrial 17 BDO Spencer Steward Pietermaritzburg Office 18 Bloemfontein Value Mart * Bloemfontein Retail 19 Bowline 1 & 2 Corporate Park, Midrand Industrial 20 Cable Feeder Founders View Industrial 21 Capstone Longmeadow Business Industrial 22 Catwalk Halfway House Industrial 23 Chislehurston (previous name – 30 Impala Road) Sandton Office 24 CIB House * Bedfordview Office 25 Computerkit Woodmead Office 26 Corporate Landing Corporate Park, Midrand Office 27 Crossroads * KwaMahlanga Retail 28 Culemborg Motor City Cape Town Retail 29 Dauphin Seatings Industria Industrial 30 De Beers * Ormonde Office 31 DPI * Pinetown Industrial 32 Dunkley Construction Bryanston Office 33 Eastside Corporate Park Midrand Industrial 34 Eli Lilly Bryanston Office 35 ETF House Bryanston Office 36 Fedics Park Randburg Office 37 FH Bertling Jet Park Industrial 38 Founders Hill * Edenvale Industrial 39 Fourways Office Park * Fourways Office 40 Fourways Value Centre * Fourways Retail 41 GEA Midrand Industrial 42 Givauden, Bauer, Starchoice * Linbro Business Park Industrial 43 Goodwood Pinetown Industrial 44 Grand Central Park Midrand Industrial 45 Grand Central Shopping Centre Eerste Rivier, Cape Town Retail 46 Hawthorne Place Pinetown Industrial 47 Heritage House Newlands, Cape Town Office 48 Hi Fi Corporation Longmeadow Business Industrial 49 I Fusion * Midrand Office 50 Jasco Durban North Industrial 51 Johnson Wax Fairlands, Johannesburg Office 52 Kaefer Germiston Industrial 53 Kathea House Rivonia Office 54 Kent Road 3 (previous name – Khrohne Building) Midrand Industrial 55 KLM House * Sandton Office 56 Kya Sands * Kya Sands Industrial 57 Liberty Pietermaritzburg Office 58 Longmeadows Toyota Longmeadow Business Retail
Usage
Property name Location type
property portfolio scheduleat 30 June 2004
*Indicates that the Property was externally valued at 30 June 2004.
47
Low Rise Office Gauteng 2 099 0,41 Low Rise Office Gauteng 2 961 0,58 Low Rise Office Gauteng 2 147 0,42 Hi-tech Industrial KwaZulu-Natal 9 321 1,83 Office Park Gauteng 4 840 0,95 Mini Units Gauteng 3 300 0,65 Low Rise Office Gauteng 4 232 0,83 Warehousing Gauteng 8 338 1,64 Hi-tech Industrials Gauteng 1 345 0,26 Low Rise Office Gauteng 1 173 0,23 Warehousing KwaZulu-Natal 3 043 0,60 Warehousing Gauteng 3 347 0,66 Low Rise Office Gauteng 3 562 0,70 Motor Gauteng 3 026 0,59 Warehousing Gauteng 1 204 0,24 Warehousing Gauteng 1 800 0,35 Low Rise Office KwaZulu-Natal 1 918 0,38 Community Shopping Centre Free State 12 130 2,38 Warehousing Gauteng 2 810 0,55 Warehousing Gauteng 1 800 0,35Warehousing Gauteng 6 850 1,35 Warehousing Gauteng 1 000 0,20 Low Rise Office Gauteng 1 709 0,34 Office Park Gauteng 1 465 0,29 Office Park Gauteng 978 0,19 Office Park Gauteng 9 035 1,78 Community Shopping Centre Mpumalanga 11 064 2,17 Motor Western Cape 24 212 4,76 Low Grade Industrials Gauteng 3 476 0,68 Low Rise Office Gauteng 6 188 1,22 Warehousing KwaZulu-Natal 1 357 0,27 Office Park Gauteng 615 0,12 Hi-tech Industrials Gauteng 9 395 1,85 Low Rise Office Gauteng 2 415 0,47 Offce Park Gauteng 488 0,10 Low Rise Office Gauteng 5 503 1,08 Warehousing Gauteng 3 754 0,74 Warehousing Gauteng 3 516 0,69 Office Park Gauteng 11 501 2,26 Neighbourhood Shopping Centre Gauteng 7 970 1,57 Hi-tech Industrials Gauteng 3 203 0,63 Warehousing Gauteng 5 778 1,14 Warehousing KwaZulu-Natal 3 134 0,62 Mini Units Gauteng 5 033 0,99 Community Shopping Centre Western Cape 13 689 2,69 Warehousing KwaZulu-Natal 2 446 0,48 Low Rise Office Western Cape 3 007 0,59 Warehousing Gauteng 7 263 1,43 Low Rise Office Gauteng 3 150 0,62 High Grade Industrial KwaZulu-Natal 2 783 0,55 Low Rise Office Gauteng 1 716 0,34 High Grade Industrial Gauteng 3 931 0,77 Low Rise Office Gauteng 832 0,16 Mini Units Gauteng 1 517 0,30 Low Rise Office Gauteng 1 505 0,30 High Grade Industrials Gauteng 3 184 0,63 Office Park KwaZulu-Natal 1 777 0,35 Motor Gauteng 2 420 0,48
Property Gross % Gross
sub-category Geographical lettable lettable
split distribution area area
iFOUR PROPERTIES LIMITED ■ annual report 200448
59 LV Switchgear * Longmeadow Business Industrial 60 Mahogany Ridge Pinetown Industrial 61 Metal Box Epping, Cape Town Industrial 62 Metro * Pinetown Industrial 63 Mettle and IQ Building Illovo Office 64 Midrand Protea Hotel Midrand Hotel 65 Mineag House Bryanston Office 66 Monarch Midrand Industrial 67 Mondi House Parktown Office 68 Morkels Pretoria Industrial 69 Morone Mall * Burgersfort Retail 70 MTN Mount Edgecombe Office 71 Muirfield Fourways Office 72 Namitech Linbro Business Park Industrial 73 North Ridge Road * Durban Office 74 Oak Place * Randburg Office 75 Oakfields Randburg Office 76 Omnigraphics * Linbro Business Park Industrial 77 Park Central Johannesburg Retail 78 Pebble Beach (previous name – Building 9) Fourways Office 79 Pleasure Foods Centurion Office 80 Quality Sugars * Bryanston Office 81 Searle Reuven, Johannesburg Industrial 82 Seatings Industria Industrial 83 Shoprite Claremont Claremont, Cape Town Retail 84 Siemens Linbro Business Park Industrial 85 SLK Isando Industrial 86 Sonopress Kya Sands Industrial 87 Soyatech Linbro Business Park Industrial 88 Stalcor Pinetown Industrial 89 Sunnyrock Close Germiston Industrial 90 SupaQuick Centre Umhlanga Retail 91 Suzuki Germiston Industrial 92 Trentyre * Kya Sands Industrial 93 Triton Spartan Industrial 94 Troika Edenvale Industrial 95 Turnberry * Fourways Office 96 Umgeni Products Chakashead Industria Industrial 97 UPS Express Isando Industrial 98 Virgin Active Roodepoort Leisure 99 Voltex Bedfordview Office 100 Wedgefield Office Park Bryanston Office 101 Wesbank Bedfordview Office 102 Western Province Cellars * Nelspruit Industrial 103 Wierda Road East Sandton Office 104 Woodmead Square Woodmead Retail 105 Woodmead Super Value Mall * Woodmead Retail 106 WSP House Sunninghill Office 107 Xerox House Durban Industrial 108 ZA Trans * Isando Industrial
Usage
Property name Location type
*Indicates that the property was externally valued at 30 June 2004.
property portfolio schedule (continued)
at 30 June 2004
49
Warehousing Gauteng 910 0,18 Warehousing KwaZulu-Natal 1 765 0,35 High Grade Industrial Western Cape 12 921 2,54 Warehousing KwaZulu-Natal 9 380 1,84 Low Rise Office Gauteng 6 137 1,21 Other Gauteng 10 524 2,07 Office Park Gauteng 440 0,09 Hi-tech Industrials Gauteng 3 098 0,61 Low Rise Office Gauteng 6 191 1,22 Warehousing Gauteng 4 500 0,88 Community Shopping Centre Mpumalanga 13 482 2,65 Low Rise office KwaZulu-Natal 8 930 1,75 Office Park Gauteng 2 785 0,55 Hi-tech Industrials Gauteng 7 845 1,54 Low Rise Office KwaZulu-Natal 3 345 0,66 Low Rise Office Gauteng 5 527 1,09 Low Rise Office Gauteng 4 471 0,88 Hi-tech Industrials Gauteng 5 776 1,13 Neighbourhood Shopping Centre Gauteng 8 592 1,69 Office Park Gauteng 1 869 0,37 Office Park Gauteng 1 530 0,30 Office Park Gauteng 557 0,11 Low Grade Industrials Gauteng 7 115 1,40 Low Grade Industrials Gauteng 5 289 1,04 Neighbourhood Shopping Centre Western Cape 4 615 0,91 Hi-tech Industrials Gauteng 4 640 0,91 Warehousing Gauteng 27 283 5,36 Hi-tech Industrials Gauteng 2 917 0,57 Hi-tech Industrials Gauteng 2 900 0,57 Warehousing KwaZulu-Natal 4 294 0,84 Mini Units Gauteng 15 038 2,95 Motor KwaZulu-Natal 1 914 0,38 Warehousing Gauteng 3 192 0,63 Motor Gauteng 1 227 0,24 Warehousing Gauteng 2 238 0,44 Mini Units Gauteng 7 148 1,40 Office Park Gauteng 1 476 0,29 Warehousing KwaZulu-Natal 4 181 0,82 Warehousing Gauteng 1 750 0,34 Other Gauteng 2 500 0,49 Low Rise Office Gauteng 4 729 0,93 Office Park Gauteng 851 0,17 Office Park Gauteng 653 0,13 Warehousing Mpumalanga 1 110 0,22 Low Rise Office Gauteng 4 358 0,86 Neighbourhood Shopping Centre Gauteng 2 485 0,49 Neighbourhood Shopping Centre Gauteng 7 090 1,39 Office Park Gauteng 1 920 0,38 Hi-tech Industrials KwaZulu-Natal 1 240 0,24 Warehousing Gauteng 11 000 2,16
508 984 100,00
Property Gross % Gross
sub-category Geographical lettable lettable
split distribution area area
iFOUR PROPERTIES LIMITED ■ annual report 200450
Notice is hereby given that the second annual general
meeting of shareholders of iFour Properties Limited
(“iFour”) or (“the company”) will be held in the company’s
Board Room, 2nd Floor, Pangbourne House, 382 Jan
Smuts Avenue, Craighall, on Thursday, 14 October 2004
at 14:00 for the following business:
1. Annual financial statements
To receive and consider the audited annual financial
statements for the year ended 30 June 2004.
2. Directors’ remuneration
To consider and, if deemed fit, to pass with or
without modification, the following resolution:
“Resolved that fees of R631 614, payable to the
directors for their services for the year ended
30 June 2004, be approved”.
Directors’ remuneration (for executive directors as
well as non-executive directors) are disclosed in
note 22.12 of the annual financial statements.
Details of the iFour Executive Unit Purchase
Scheme are disclosed in note 9 of the annual
financial statements.
3. Re-election of directors
3.1 To consider the re-appointment of Mr R C Johnson
who retires in terms of the Company’s Articles of
Association.
R C Johnson (53) (Diploma in town and regional
planning)
Robert Johnson has 33 years experience in the
South African commercial property industry, having
served as an executive director of Sage Properties
Limited and, since 1980, as an executive director
of Intraprop, the developer of Illovo Boulevard. He
is also a director of Kagiso Property Holdings and
has experience in the management of listed
property entities, direct property management and
property development.
3.2 To consider the re-appointment of Mr E P M Moses
who retires in terms of the Company’s Articles of
Association.
E P M Moses (70)
Peter Moses commenced his career as an
accountant and later managing director of Harding
& Parker. In 1981 he joined the property division of
Barlow Rand Limited. In 1988 he was appointed to
the board of Barlow Rand Properties as marketing
director and in 1992 he was appointed as managing
director. The following year Mr Moses was
appointed to the board of RMP Properties. Mr
Moses retired in 1996, but continued to share his
extensive experience in all facets of investment and
marketing of property as a consultant to and non-
executive director of companies. He is also a
trustee of the African Game Bird Research and
Education and Development Trust.
3.3 To consider the re-appointment of Mr U J van der
Walt who retires in terms of the Company’s Articles
of Association.
U J van der Walt (54) BEcon (Hons)
Banus van der Walt has 28 years property
experience with the Sanlam group. From 1994 to
2001, Banus was the managing director of Gensec
Properties Limited. With effect from the
commencement of 2002, he was appointed
managing director of Sanlam Property Asset
Management (Pty) Limited. Banus is a member of
the executive committee of Sanlam Investment
Management (Pty) Limited and a past president of
the South African Property Owners Association
(SAPOA).
3.4 To consider the re-appointment of Mr J B Gibbon
who retires in terms of the Company’s Articles of
Association.
J B Gibbon (63) CA(SA)
John Gibbon retired as a partner of
PricewaterhouseCoopers in 2001 having been with
the practice since 1964. He is a past president of
Rotary, was extensively involved in Upliftment
Trusts and is currently on the Council of the
University of Port Elizabeth, where he chairs the
finance committee. While in Port Elizabeth,
notice of annual general meeting of shareholders
51
Mr Gibbon played a major role in the rescue of the
private bus service and its development into a very
successful community owned business. Mr Gibbon
is a non-executive director of Hudaco Industries
Limited and Pangbourne Properties Limited and is
also chairman of Hudaco’s and Pangbourne’s
Audit Committees.
4. Re-appointment of auditors
To consider the re-appointment of
PricewaterhouseCoopers Inc. as auditors of the
company until the conclusion of the next annual
general meeting.
5. Auditors’ remuneration
To authorise the directors to fix and pay the
auditors’ remuneration for the year ended
30 June 2004.
6. Issue of shares
To consider and, if deemed fit, to pass with or
without modification, the following resolution as an
ordinary resolution:
“Resolved that the directors be and are hereby
authorised to allot and issue all or any portion of
the unissued ordinary shares of 0,1 cent each in
the capital of the company, at such time or times to
such persons, company or companies and upon
such terms and conditions as they may determine,
subject to the requirements of the Companies Act,
1973, and the JSE Securities Exchange South
Africa (“the JSE”), provided that each ordinary
share is linked to a debenture of R4,60, such
authority to expire at the next annual general
meeting of the company.”
7. Issue of shares for cash
To consider and, if deemed fit, to pass with or
without modification, the following resolution:
“Resolved that the directors of the company be
given the general authority in terms of the Listings
Requirements of the JSE to issue shares for cash
as and when situations arise subject to the following
limitations:
● that each ordinary share is linked to a debenture
of R4,60;
● that this authority shall be valid until the
company’s next annual general meeting provided
that it shall not extend beyond 15 months from
the date of this annual general meeting;
● that a paid press announcement giving full
details, including the impact on net asset value
and earnings per linked unit, will be published at
the time of any issue representing, on a
cumulative basis, within one financial year, 5% or
more of the number of ordinary shares in issue
prior to the issue;
● that issues in the aggregate in any one financial
year will not exceed 15% the number of ordinary
shares of the company’s issued share capital.
The number of ordinary shares which may be
issued shall be based on the number of ordinary
shares in issue, aggregated (where applicable)
with any ordinary shares that may be issued in
future arising from the conversion of options/
convertible securities, at the date of such
application, less any ordinary shares issued, or
to be issued in future arising from options/
convertible securities issued, during the current
financial year, provided that any ordinary shares
to be issued pursuant to a rights issue (which
has been announced and is irrevocable and fully
underwritten) or acquisition (which has had final
terms announced) may be included as though
they were shares in issue at the date of
application;
● that, in determining the price at which an issue
of linked units will be made in terms of this
authority, the maximum discount permitted will
be 10% of the weighted average traded price of
the linked units on the JSE, as determined over
the 30 business days prior to the date that the
price of the issue is determined or agreed by the
directors of the company; and
● that the issue must be made to public
shareholders as defined in paragraphs 4.25 to
4.27 of the Listings Requirements of the JSE,
unless the JSE otherwise agrees.”
iFOUR PROPERTIES LIMITED ■ annual report 200452
In terms of the rules of the JSE, this resolution requires a majority of 75% or more of votes cast by shareholders present or represented by proxy to be cast in favour of this resolution.
8. General authority to repurchase shares
To consider and, if deemed fit, to pass with or without modification, the following as a special resolution:
“Resolved that subject to the provisions of the Companies Act, 1973, the Company’s articles of association and the Listings Requirements of the JSE, the board of directors of the company be authorised, up to and including the date of the following annual general meeting, to approve the repurchase by the company of its own shares provided that:
● the general authority shall not extend beyond 15 months from the date of the passing of this resolution;
● the general authority to the repurchase by the company shall not exceed 20% in aggregate of the company’s issued share capital in a financial year (or such other percentage permitted from time to time by the JSE for repurchase);
● the repurchase by the company shall not be made at a price more than that permitted pursuant to the Listings Requirements of the JSE;
● the repurchase is effected through the order book operated by the JSE trading system, without prior understanding or arrangement between the company and the counter party;
● the repurchase will not take place during a period within which repurchases are prohibited in terms of the Listings Requirements of the JSE;
● details of the directors and management (pages 10 and 11), major shareholders and debenture holders (page 59), directors’ interests in securities (page 20), share capital and debenture capital of the company (page 35), the directors’ responsibility statement (page 16) are dealt with in detail elsewhere in the annual report; and
● a paid press announcement containing full details of such acquisition will be published as soon as
the company has acquired securities constituting,
on a cumulative basis, 3% of the number of
securities in issue prior to the acquisition.”
The reason for and effect of this resolution is to
enable the board of directors, up to the earlier of the
date of the next annual general meeting or 15
months from the date of the passing of this
resolution, to approve the repurchase by the
company of its shares as part of the purchase of its
linked units, subject to the limitations included in the
resolution and provided that after such repurchase,
the company will still comply with the shareholder
spread requirements set out in the Listings
Requirements of the JSE. For the purposes hereof,
the company may, at any point in time, only appoint
one agent to effect repurchases on its behalf. At
present the JSE does not allow repurchases to be
made at a price greater than 10% above the
weighted average of the market value of the linked
units for the 5 business days immediately preceding
the date on which the transaction is effected. The
directors of iFour are of the opinion that opportunities
to repurchase the company’s linked units, which
could enhance the earnings per linked unit and/or
net asset value per linked unit, may present
themselves in the future. Accordingly, in order that
the group be placed in a position to be able to utilise
the provisions of the Companies Act, 1973, it is
proposed that the board of directors of the company
be authorised to authorise the company, by way of
general authority, to acquire, as part of the purchase
of its linked units, the maximum shares permitted by
the JSE, which is currently 20% in aggregate of the
issued shares of the company in a financial year.
The directors of the company (whose names
appear on pages 10 and 11 of the annual report)
are not aware of any legal or arbitration proceedings,
including proceedings that are pending or
threatened, that may have or had in recent past,
(being at least the previous 12 months), a material
effect on the company’s position.
Other than the facts and developments reported
on in the annual report, there have been no
material changes in the affairs of financial position
notice of annual general meeting of shareholders (continued)
53
of the company, or subsidiaries, since the date of
signature of the audit report and up to the date
of notice.
The directors of iFour are of the opinion that, taking
into account the maximum number of linked units
that could be repurchased:
● the company and the group would be in a
position to repay their debts in the ordinary
course of business for a period of 12 months
after the date of the notice of this annual general
meeting (“the next year”);
● the assets of the company and the group,
recognised and measured in accordance with
the accounting policies used in the company’s
latest audited annual group financial statements,
would be in excess of the liabilities of the
company and the group for the next year;
● the ordinary capital and reserves of the company
and the group for the next year will be adequate
for ordinary business purposes; and
● the working capital of the company and the
group will be adequate for the next year for
ordinary business purposes.
VOTING AND PROXIES
iFour shareholders holding certificated linked units and
iFour shareholders who have already dematerialised their
iFour linked units and who have elected own-name
registration in a sub-register through a CSDP, who are
unable to attend the general meeting of shareholders but
wish to be represented thereat, must complete and return
the form of proxy, in accordance with the instructions
contained therein, to the company’s transfer secretaries,
Computershare Investor Services 2004 (Proprietary)
Limited, Ground Floor, 70 Marshall Street, Johannesburg
(PO Box 61051, Marshalltown, 2107), to be received by
no later than 14:00 on Tuesday, 12 October 2004.
iFour shareholders who have already dematerialised
their iFour linked units through a CSDP or broker and who
have not elected own-name registration and who wish to
attend the general meeting of shareholders must instruct
their CSDP or broker to issue them with the necessary
authority to attend. Should iFour shareholders who have
already dematerialised their iFour linked units wish to vote
and are unable to attend the meeting and wish to be
represented thereat by way of proxy, must provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between them and their CSDP or broker.
In respect of dematerialised linked units, it is important to ensure that the person or entity (such as a nominee) whose name has been entered into the relevant sub-register maintained by a CSDP completes the form of proxy in terms of which he/she appoints a proxy to vote at the annual general meeting of shareholders.
On a show of hands, every shareholder present in person or by proxy shall have only one vote irrespective of the number of shares he/she holds or represents, provided that a proxy shall in respect of the number of shareholders he/she represents have only one vote.
On a poll, every shareholder of iFour present in person or represented by proxy shall be entitled to that proportion of the total votes in the company which the aggregate amount of the nominal value of the shares held by him/her bears to the aggregate amount of the nominal value of all the shares issued by the company.
A resolution put to the vote shall be decided on a show of hands, unless before or on the declaration of the results of the show of hands, a poll shall be demanded by any person entitled to vote at the meeting and, unless a poll is so demanded, a declaration by the chairman that a resolution has, on a show of hands been carried, or carried unanimously, or by a regular majority, or lost, and an entry to that effect in the minute book of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of, or against, such resolution.
By order of the board
iFour Properties Limited
J J Groenewald
Company Secretary
Johannesburg
22 September 2004
iFOUR PROPERTIES LIMITED ■ annual report 200454
Notice is hereby given that a general meeting of debenture
holders of iFour Properties Limited (“iFour” or “the company”)
will be held in the company’s Board Room, Pangbourne
House, 382 Jan Smuts Avenue, Craighall, Johannesburg on
Thursday, 14 October 2004 at 14:30 or immediately following
the annual general meeting of shareholders which has been
convened for 14:00 on that day, for the following business:
1. EXTRAORDINARY RESOLUTION NUMBER 1
“Resolved that the directors be and are hereby
authorised to allot and issue all or any portion of the
unissued ordinary shares of 0,1 cent each in the capital
of the company, at such time or times to such persons,
company or companies and upon such terms and
conditions as they may determine, subject to the
requirements of the Companies Act, 1973, and the
JSE, and provided that each ordinary share is linked to
one debenture of R4,60, and that this authority shall be
valid only until the date of the next annual general
meeting of shareholders unless it is varied or revoked
by any general meeting of the debenture holders prior
to such annual general meeting of shareholders.”
VOTING AND PROXIES
iFour debenture holders holding certificated linked
units who are unable to attend the general meeting of
debenture holders but wish to be represented thereat and
iFour debenture holders who have already dematerialised
their iFour debentures and who have elected own-name
registration in a sub-register through a CSDP, must
complete and return the form of proxy, in accordance with
the instructions contained therein, to the company’s
transfer secretaries, Computershare Investor Services
2004 (Proprietary) Limited, Ground Flooor, 70 Marshall
Street, Johannesburg (PO Box 61051, Marshalltown,
2107), to be received by no later than 14:30 on Tuesday,
12 October 2004.
iFour debenture holders who have already dematerialised
their iFour linked units through a CSDP or broker and who
have not elected own-name registration and who wish to
attend the general meeting of debenture holders must
instruct their CSDP or broker to issue them with the
necessary authority to attend. Should iFour debenture
holders who have already dematerialised their iFour linked
units wish to vote and are unable to attend the meeting
and wish to be represented thereat by way of proxy, must
provide their CSDP or broker with their voting instructions
in terms of the custody agreement entered into between
them and their CSDP or broker.
In respect of dematerialised linked units, it is important to
ensure that the person or entity (such as a nominee)
whose name has been entered into the relevant sub-
register maintained by a CSDP completes the form of
proxy in terms of which he/she appoints a proxy to vote
at the general meeting of debenture holders.
On a show of hands, every debenture holder present in
person or as a representative of a company or other body
corporate shall have only one vote irrespective of the
number of debentures he/she holds or represents,
provided that a proxy shall in respect of the number of
debenture holders he/she represents have only one vote.
On a poll, every iFour debenture holder present in person or
as a representative of a company or other body corporate
or by proxy shall have one vote for every iFour debenture of
which he/she is the registered holder or representative.
A resolution put to the vote shall be decided on a show of
hands, unless before or on the declaration of the results
of the show of hands a poll shall be demanded by the
chairman or any one or more of the debenture holders
present in person or by proxy or, being a company or
other body corporate, by its duly authorised representative
and entitled in the aggregate to not less than 10% of the
total votes of all debenture holders entitled to be present
and vote at the meeting.
Unless a poll is demanded, a declaration by the chairman
that on a show of hands a resolution has been carried, or
carried by a particular majority, or lost, shall be conclusive
evidence of the fact, without proof of the number of votes
cast in favour of or against such resolution.
By order of the board
iFour Properties Limited
J J Groenewald
Company Secretary
Johannesburg
22 September 2004
notice of general meeting of debenture holders
55
FORM OF PROXY FOR iFOUR SHAREHOLDERSFor use only by iFour shareholders holding certificated iFour linked units, Central Securities Depository Participants’ (“CSDPs”) nominee companies, brokers’ nominee companies and iFour shareholders who have dematerialised their linked units and who have elected own-name registration at the annual general meeting of shareholders of iFour to be held in the board room, iFour, 2nd Floor, Pangbourne House, 382 Jan Smuts Avenue, Craighall, Johannesburg, 2196 at 14:00 on Thursday, 14 October 2004 (“the general meeting of shareholders”).
iFour shareholders who have already dematerialised their linked units through a CSDP or broker must not complete this form of proxy and must provide their CSDP or broker with their voting instructions, except for iFour shareholders who have elected own-name registration in the sub-register through a CSDP or broker, which iFour shareholders must complete this form of proxy and lodge it with the transfer secretaries to be received by no later than 14:00 on Tuesday, 12 October 2004.
I/We (BLOCK LETTERS please)
of
Telephone work ( ) Telephone home ( )
being the holder/s or custodians of shares hereby appoint (seen note 1 overleaf):
1. or failing him/her
2. or failing him/her
3. the chairman of the general meeting of shareholders,
as my/our proxy to act for me/us at the annual general meeting of shareholders for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at each adjournment or postponement thereof, and to vote for and/or against the resolution and/or abstain from voting in respect of the iFour shares registered in my/our name (see note 2 overleaf) as follows:
Please indicate with an X For Against Abstain 1. To receive and consider the annual financial statements for the
year ended 30 June 2004. 2. To approve the directors’ remuneration for the year ended
30 June 2004 3. Re-appointment of directors 3.1 To re-appoint Mr R C Johnson 3.2 To re-appoint Mr E P M Moses 3.3 To re-appoint Mr U J van der Walt 3.4 To re-appoint Mr J B Gibbon 4. To re-appoint PricewaterhouseCoopers Inc. as auditors 5. To authorise the directors to fix and pay the auditors’ remuneration 6. To authorise the directors to issue shares 7. To authorise the directors to issue shares for cash 8. To authorise the directors to repurchase shares 8.1 Repurchase on the open market and repurchase on a pro rata basis
and generally to act as my/our proxy at the said annual general meeting of shareholders. (Tick whichever is applicable. If no directions are given, the proxy holder will be entitled to vote or to abstain from voting, as that proxy holder deems fit.)
Signed at on 2004
Signature Assisted by (where applicable)
Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder/s of iFour) to attend, speak and vote in place of that shareholder at the annual general meeting of shareholders.
Please read the notes on the reverse side hereof
iFOUR PROPERTIES LIMITED
(“iFour”)
(Incorporated in the Republic of South Africa)
(Registration number 2001/016118/06)
Share code: IFR
ISIN: ZAE000039236
iFOUR PROPERTIES LIMITED ■ annual report 200456
1. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space/s provided, with or without deleting “the chairman of the annual general meeting of members”, but any such deletion must be initialled by the shareholder. Any insertion or deletion not complying with the aforegoing will be deemed not to have been validly effected. The person whose name stands first on the form of proxy and who is present at the annual general meeting of shareholders will be entitled to act as proxy to the exclusion of those whose names follow.
2. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate box provided. So as to provide for voting on a show of hands or on a poll, as the case may be, shareholders are requested to complete the form of proxy by stating the number of shares held by them. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting of shareholders as he/she deems fit in respect of all the shareholder’s votes exercisable thereat. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholder or by his proxy, or to cast all those votes in the same way, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or by the proxy.
3. Forms of proxy must be lodged with, posted or faxed to the company’s transfer secretaries to be received by no later than 14:00 on Tuesday, 12 October 2004.
4. The completion and lodging of this form of proxy by iFour shareholders holding certificated linked units, CSDP’s nominee companies, brokers’ nominee companies and iFour shareholders who have dematerialised their linked units and who have elected own-name registration in the sub-register through a CSDP, will not preclude the relevant iFour shareholder from attending the annual general meeting of shareholders and speaking and voting in person thereat to the exclusion of any proxy appointed in terms thereof.
5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative or other legal capacity (such as power of attorney or other written authority) must be attached to this form of proxy unless previously recorded by iFour.
6. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.
7. The chairman of the annual general meeting may accept or reject any form of proxy which is completed and/or received otherwise than in accordance with these notes, provided that the chairman is satisfied as to the manner in which the shareholder concerned wishes to vote.
8. On a show of hands, every shareholder present in person or by proxy shall have only one vote irrespective of the number of shares he/she holds or represents, provided that a proxy shall in respect of the number of shareholders he/she represents have only one vote.
9. On a poll, every shareholder of iFour present in person or represented by proxy shall be entitled to that proportion of the total votes in the company which the aggregate amount of the nominal value of the shares held by him/her bears to the aggregate amount of the nominal value of all the shares issued by the company.
10. A resolution put to the vote shall be decided on a show of hands, unless before or on the declaration of the results of the show of hands a poll shall be demanded by any person entitled to vote at the meeting.
11. Unless a poll is demanded, a declaration by the chairman that a resolution has, on a show of hands been carried, or carried unanimously, or by a regular majority, or lost, and an entry to that effect in the minute book of the company, shall be conclusive evidence of the fact, without proof of the number or proportion of votes recorded in favour of, or against, such resolution.
12. If a poll is demanded, the resolution put to the vote shall be decided on a poll.
Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall StreetJohannesburg 2001
PO Box 61051Marshalltown 2107South Africa
Fax (011) 370-5390
notes
57
FORM OF PROXY FOR iFOUR DEBENTURE HOLDERS
For use only by iFour debenture holders holding certificated iFour linked units, Central Securities Depository Participants’
(“CSDPs”) nominee companies, brokers’ nominee companies and iFour debenture holders who have dematerialised their
linked units and who have elected own-name registration at the annual general meeting of iFour debenture holders to be
held in the board room, iFour, 2nd Floor, Pangbourne House, 382 Jan Smuts Avenue, Craighall, Johannesburg at 14:30 on
Thursday, 14 October 2004 or immediately after the conclusion of the annual general meeting of shareholders, whichever
is the earlier, which will take place at the same venue, on the same day at 14:00 (“the general meeting of debenture
holders”).
iFour debenture holders who have already dematerialised their linked units through a CSDP or broker must not complete
this form of proxy and must provide their CSDP or broker with their voting instructions, except for debenture holders who
have elected own-name registration in the sub-register through a CSDP or broker, which debenture holders must complete
this form of proxy and lodge it with the transfer secretaries to be received by no later than 14:30 on Tuesday, 12 October
2004.
I/We (BLOCK LETTERS please)
of
Telephone work ( ) Telephone home ( )
being the holder/s or custodians of debentures hereby appoint (seen note 1 overleaf):
1. or failing him/her
2. or failing him/her
3. the chairman of the general meeting of debenture holders,
as my/our proxy to act for me/us at the annual general meeting of debenture holders for the purpose of considering
and, if deemed fit, passing, with or without modification, the resolution to be proposed thereat and at each
adjournment or postponement thereof, and to vote for and/or against the resolution and/or abstain from voting in
respect of the iFour debentures registered in my/our name (see note 2 overleaf) as follows:
Please indicate with an X For Against Abstain
1. Extraordinary resolution number 1 to authorise the
directors to issue shares
and generally to act as my/our proxy at the said annual general meeting of debenture holders. (Tick whichever is
applicable. If no directions are given, the proxy holder will be entitled to vote or to abstain from voting, as that proxy holder
deems fit.)
Signed at on 2004
Signature Assisted by (where applicable)
Each debenture holder is entitled to appoint one or more proxies (who need not be a debenture holder/s of iFour) to
attend, speak and vote in place of that debenture holder at the general meeting of debenture holders.
Please read the notes on the reverse side hereof
iFOUR PROPERTIES LIMITED
(“iFour”)
Incorporated in the Republic of South Africa
(Registration No. 2001/016118/06)
Share code: IFR
ISIN: ZAE000039236
iFOUR PROPERTIES LIMITED ■ annual report 200458
1. A debenture holder may insert the name of a proxy or the names of two alternative proxies of the debenture holder’s choice in the space/s provided, with or without deleting “the chairman of the general meeting of debenture holders”, but any such deletion must be initialled by the debenture holder. Any insertion or deletion not complying with the aforegoing will be deemed not to have been validly effected. The person whose name stands first on the form of proxy and who is present at the general meeting of debenture holders will be entitled to act as proxy to the exclusion of those whose names follow.
2. A debenture holder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that debenture holder in the appropriate box provided. So as to provide for voting on a show of hands or on a poll, as the case may be, debenture holders are requested to complete the form of proxy by stating the number of debentures held by them. Failure to comply with the above will be deemed to authorise the proxy to vote or to abstain from voting at the general meeting of debenture holders as he/she deems fit in respect of all the debenture holders’ votes exercisable thereat. A debenture holder or the proxy is not obliged to use all the votes exercisable by the debenture holder or by his proxy, or to cast all those votes in the same way, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the debenture holder or by the proxy.
3. Forms of proxy must be lodged with, posted or faxed to the company’s transfer secretaries to be received by no later than 14:30 on Tuesday, 12 October 2004.
4. The completion and lodging of this form of proxy by debenture holders holding certificated linked units, CSDP’s nominee companies, brokers’ nominee companies and debenture holders who have dematerialised their linked units and who have elected own-name registration through a CSDP or broker, will not preclude the relevant debenture holder from attending the general meeting of debenture holders and speaking and voting in person thereat to the exclusion of any proxy appointed in terms thereof.
5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative or other legal capacity (such as power of attorney or other written authority) must be attached to this form of proxy unless previously recorded by iFour.
6. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.
7. On a show of hands, every debenture holder present in person or as a representative of a company or other body corporate shall have only one vote irrespective of the number of debentures he/she holds or represents, provided that a proxy shall, irrespective of the number of debenture holders he/she represents, have only one vote.
8. On a poll, every iFour debenture holder present in person or as a representative of a company or other body corporate or by proxy shall have one vote for every iFour debenture of which he/she is the registered holder or representative.
9. A resolution put to the vote shall be decided on a show of hands, unless before or on the declaration of the results of the show of hands a poll shall be demanded by the chairman or any one or more of the debenture holders present in person or by proxy or, being a company or other body corporate, by its duly authorised representative and entitled in the aggregate to not less than 10% of the total votes of all debenture holders entitled to be present and vote at the meeting.
10. Unless a poll is demanded, a declaration by the chairman that on a show of hands a resolution has been carried, or carried by a particular majority, or lost, shall be conclusive evidence of the fact, without proof of the number of votes cast in favour of or against such resolution.
If a poll is demanded, the resolution put to the vote shall be decided on a poll.
Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall StreetJohannesburg 2001
PO Box 61051Marshalltown 2107South Africa
Fax (011) 370-5390
notes