Lodestone REIT Limited

Transcription

1 PROSPECTUS Lodestone REIT Limited (previously Lodestone Properties Limited) (Incorporated in the Republic of South Africa) (Registration number 2010/017830/06) JSE share code: LDO ISIN: ZAE ( Lodestone or the company ) The definitions and interpretations commencing on page 7 of this prospectus have, where applicable, been used in these cover pages. This prospectus is not an invitation to the public to subscribe for shares but is issued in compliance with the Listings Requirements and the Companies Act, for the purpose of providing information to the public regarding Lodestone and is issued in respect of: a private placement to raise up to R122.4 million by way of an offer for subscription to invited investors for up to 24 million ordinary shares in the share capital of Lodestone at an issue price of R5.10 per ordinary share; and the subsequent listing of all of the issued shares of the company in the Diversified REIT s sector on the AltX of the JSE. Opening date of the private placement on (09:00) Closing date of the private placement on (12:00)* Results of the private placement released on SENS on Proposed date of listing on the JSE from the commencement of trade on (09:00) 2015 Wednesday, 11 February Friday, 13 February Monday, 16 February Wednesday, 25 February * Invited investors must advise their CSDP or broker of their acceptance of the private placement shares in the manner and cut-off time stipulated by their CSDP or broker. A copy of this prospectus in English, accompanied by the documents referred to under Documents available for inspection as set out in paragraph 36 of this prospectus, was registered by CIPC on 6 February 2015 in terms of the Companies Act. The ordinary shares to be issued pursuant to the private placement will rank pari passu with all other ordinary shares issued by Lodestone. There are no convertibility or redemption provisions relating to any of the private placement shares offered in terms of the private placement. The private placement shares will only be issued in dematerialised form. No certificated private placement shares will be issued. There will be no fractions of private placement shares offered or issued in terms of the private placement. The private placement will not be underwritten. The listing is not conditional on raising a minimum amount in terms of the private placement. The proceeds of the private placement will be used by Lodestone to settle interestbearing debt and strengthen the balance sheet for ongoing investment activities. Applications in terms of the private placement must be for a minimum of ordinary shares. Immediately prior to the private placement and the listing: the authorised share capital of the company will comprise 1 billion ordinary shares of no par value; the issued share capital of the company will comprise ordinary shares of no par value; and the company will have no treasury shares in issue. Assuming that the private placement is fully subscribed for, immediately after the private placement and the listing: the authorised share capital of the company will comprise 1 billion ordinary shares of no par value; the issued share capital of the company will comprise ordinary shares of no par value; and the company will have no treasury shares in issue. At the date of listing, assuming the private placement is fully subscribed for, the anticipated market capitalisation of the company should be approximately R601 million.

2 The JSE has granted Lodestone a listing of all its issued shares in the Diversified REIT s sector on the AltX of the JSE, under the abbreviated name: Lodestone, JSE share code: LDO and ISIN: ZAE , with effect from the commencement of trade on Wednesday, 25 February 2015, subject to the company maintaining a spread of public shareholders acceptable to the JSE at the point of listing on the AltX being public shareholders holding not less than 10% of the issued share capital of the company to ensure reasonable liquidity. The directors, whose names are given in paragraph 2 of section one of this prospectus, collectively and individually, accept full responsibility for the accuracy of the information given herein and certify that, to the best of their knowledge and belief, no facts have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this prospectus contains all information required by law and the Listings Requirements. Each of the corporate advisor and bookrunner, the designated advisor, the independent reporting accountants and auditors, the attorneys, the independent property valuer, the transfer secretaries, the bankers and the company secretary whose names are included in this prospectus, have consented in writing and have not, prior to publication of this prospectus, withdrawn their written consent to the inclusion of their names in the capacity stated and, where applicable, to their reports being included in this prospectus. An abridged version of this prospectus was published on SENS on Wednesday, 11 February Corporate advisor, bookrunner and designated advisor Attorneys Independent reporting accountants and auditors Independent property valuer Date of issue: 11 February 2015 This prospectus is only available in English. Copies of this prospectus may be obtained from the registered office of the company, the designated advisor or the transfer secretary whose addresses are set out in the Corporate Information section of this prospectus from Wednesday, 11 February 2015 to Wednesday, 25 February 2015 and on the company s website at

3 CORPORATE INFORMATION Registered office of the company 3rd Floor, Rivonia Village Rivonia Boulevard Rivonia, 2191 (PO Box 6063, Rivonia, 2128) Corporate advisor and bookrunner Waydale Investments Proprietary Limited trading as Java Capital (Registration number 2012/089864/07) 2 Arnold Road Rosebank, 2196 (PO Box 2087, Parklands, 2121) Attorneys Cliffe Dekker Hofmeyr Inc. (Registration number 2008/018923/21) 11 Buitengracht Street Cape Town, 8001 (PO Box 695, Cape Town, 8000) Independent property valuers Quadrant Properties Proprietary Limited (Registration number 1995/003097/07) 16 North Road, Cnr Jan Smuts Avenue Dunkeld West, 2196 (PO Box 1984, Parklands, 2121) Transfer secretary Link Market Services South Africa Proprietary Limited (Registration number 2000/007239/07) 13th Floor, Rennie House 19 Ameshoff Street Braamfontein, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000) Company secretary Leonie Gindan 4th Floor, Rivonia Village Rivonia Boulevard Rivonia, 2191 (PO Box 6063, Rivonia, 2128) Designated advisor Java Capital Trustees and Sponsors Proprietary Limited (Registration number 2006/005780/07) 2 Arnold Road Rosebank, 2196 (PO Box 2087, Parklands, 2121) Independent reporting accountants and auditors Deloitte & Touche Registered Auditors (Practise number ) Buildings 1 and 2, Deloitte Place The Woodlands 20 Woodlands Drive Woodmead, Sandton, 2196 (Private Bag X6, Gallo Manor, 2052) Bankers Investec Bank Limited (Registration number 1969/004763/06) 100 Grayston Drive Sandown, 2196 (PO Box , Sandton, 2146) Bankers The Standard Bank of South Africa Limited (Registration number 1962/000738/06) 1st Floor, 5 Simmonds Street Johannesburg, 2001 (PO Box 7725, Johannesburg, 2000) Place and date of incorporation Incorporated in the Republic of South Africa on 27 August Offers in South Africa only This prospectus has been issued in connection with the private placement in South Africa only and is addressed only to persons to whom the private placement may lawfully be made. The distribution of this prospectus and the making of an offer through this private placement may be restricted by law. Persons into whose possession this prospectus comes must inform themselves about and observe any such restrictions. This prospectus does not constitute an offer of or invitation to subscribe for and/or purchase any of the shares in any jurisdiction in which such offer, subscription or sale would be unlawful. No one has taken any action that would permit a public offering of shares in the company to occur outside South Africa. Forward-looking statements This prospectus includes forward-looking statements. Forward-looking statements are statements including, but not limited to, any statements regarding the future financial position of the group and its future prospects. These forward-looking statements have been based on current expectations and projections about future results which, although the directors believe them to be reasonable, are not a guarantee of future performance. 1

4 TABLE OF CONTENTS The definitions and interpretations commencing on page 7 of this prospectus have been used in the following table of contents. Page Corporate information 1 Salient features 4 Important dates and times 6 Definitions and interpretations 7 Prospectus Section one Information on the Lodestone group 1. Name, address and incorporation Directors, other office holders or material third parties History, state of affairs and prospects of the group Share capital of the company Options and preferential rights in respect of shares Commissions paid or payable in respect of underwriting Material contracts Interests of directors and promoters Loans and borrowings Shares issued or to be issued other than for cash Properties, assets and business undertakings acquired or to be acquired Promoters interests and amounts paid or payable to promoters Preliminary expenses and issue expenses 23 Section two Details of the private placement 14. Purposes of the private placement and the listing Salient dates and times Particulars of the private placement Minimum subscription 27 Section three Financial information 18. Adequacy of capital Report by directors as to material changes Statement as to listing on stock exchange Report by auditor of the Lodestone group Forecast statements of comprehensive income Consolidated pro forma statement of financial position Historical financial information Dividends and distributions 29 Section four Additional material information 26. Relationship information Considerations relating to Lodestone being approved as a REIT Properties, assets and business undertakings disposed of or to be disposed of Vendors Government protection and investment encouragement law 32 2

5 31. Exchange Control Regulations Corporate governance Litigation statement Directors responsibility statement Consents Documents available for inspection 33 Section five Inapplicable or immaterial matters 37. Inapplicable or immaterial matters 34 Annexure 1 Group structure 35 Annexure 2 Details of subsidiaries 36 Annexure 3 Information on the directors, management, material third parties and the property managers 37 Annexure 4 Current and past directorships 41 Annexure 5 Service contracts 46 Annexure 6 Extracts from the MOI 48 Annexure 7 Material contracts 56 Annexure 8 Details of the existing property portfolio 59 Annexure 9 Independent property valuer s summary valuation report on the property portfolio 61 Annexure 10 Capital structure 71 Annexure 11 Material borrowings and loans payable and receivable 79 Annexure 12 Details of acquisitions and vendors 84 Annexure 13 Financial information required in respect of Lodestone in terms of Regulation 79 of the Companies Act 86 Annexure 14 Report by the auditor in terms of Regulation 79 of the Companies Act in respect of Lodestone 91 Annexure 15 Forecast statements of comprehensive income of the Lodestone group 94 Annexure 16 Independent reporting accountants assurance report on the property forecast statements of comprehensive income of the Lodestone group 96 Annexure 17 Consolidated pro forma statement of financial position of the Lodestone group 100 Annexure 18 Independent reporting accountants assurance report on the compilation of the consolidated pro forma statement of financial position of the Lodestone group 104 Annexure 19 Independent reporting accountants review report on the valuation and existence of the assets and liabilities acquired 106 Annexure 20 Historical financial information 108 Annexure 21 Independent reporting accountants report on the historical financial information of Lodestone 120 Annexure 22 Lodestone group accounting policies 122 Annexure 23 Details of properties, assets and business undertakings disposed of and to be disposed of 131 Annexure 24 Corporate governance statement 134 Annexure 25 Lodestone group risk analysis 140 Page Private placement application form Attached 3

6 SALIENT FEATURES The information set out in this section of the prospectus is only an overview and is not intended to be comprehensive. It should be read in conjunction with the information contained in other sections of this prospectus. 1. INTRODUCTION Lodestone is an opportunistic property holding investment company that has been established to invest in property assets in South Africa and abroad, with a balanced strategy of investing in industrial, retail, residential and commercial properties directly and through the holding of property securities. The company s year-end was changed from 30 June to 31 March on 17 October NATURE OF BUSINESS AND BUSINESS STRATEGY Lodestone holds a diversified portfolio of 22 properties across the industrial, commercial and retail sectors. Lodestone s business strategy is to invest in yield-enhancing assets and areas that offer consistent, long-term rental growth. The asset management function is carried out internally by Lodestone s experienced and specialised management team with a view to extracting maximum value from each property. 3. PROSPECTS The board of Lodestone is confident that it will deliver growth in distribution of greater than 10% for the year ending 31 March 2016 as compared to the annualised dividend for the four months ending 31 March 2015, further details of which are set out in Annexure 15. With its opportunistic ability to invest in all real estate sectors both locally and internationally, the group will be able to add significantly to its property portfolio on a yield-enhancing basis for its investors. 4. DETAILS OF THE PRIVATE PLACEMENT The private placement will be constituted by the issue of up to 24 million ordinary shares at an issue price of R5.10 per ordinary share. The listing is conditional on the company maintaining a spread of public shareholders acceptable to the JSE at the point of listing on the AltX being public shareholders holding not less than 10% of the issued share capital of the company to ensure reasonable liquidity, by no later than 48 hours prior to the listing. There are no convertibility or redemption provisions relating to the private placement shares being offered in terms of the private placement. Private placement shares will be issued in dematerialised form only. No fractions of private placement shares will be issued pursuant to the private placement. The private placement will not be underwritten. The listing is not conditional on raising a minimum amount in terms of the private placement. 5. STATEMENT AS TO LISTING ON THE JSE The JSE has granted Lodestone a listing of all of its issued shares in the Diversified REIT s sector on the AltX of the JSE under the abbreviated name: Lodestone, JSE share code: LDO and ISIN: ZAE with effect from the commencement of trade on Wednesday, 25 February ACTION REQUIRED Applications for private placement shares by invited investors must be made in accordance with paragraph 16 of this prospectus and by completing the application form which accompanies this prospectus. Applications for private placement shares can only be made for dematerialised shares and must be submitted through a CSDP or broker in accordance with the agreement governing the relationship between the applicant and the CSDP or broker by the cut-off time stipulated by the CSDP or broker. If you are in any doubt as to what action to take, you should consult your broker, attorney or other professional advisor immediately. Applications in terms of the private placement must be for a minimum of private placement shares. 4

7 7. FURTHER COPIES OF THE PROSPECTUS Copies of the prospectus may be obtained between 08:30 and 17:00 on business days from Wednesday, 11 February 2015 to Wednesday, 25 February 2015 at the following addresses and on the company s website at Lodestone REIT Limited 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Java Capital Trustees and Sponsors Proprietary Limited 2 Arnold Road, Rosebank, Johannesburg, 2196 Link Market Services South Africa Proprietary Limited 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 An abridged version of this prospectus was released on SENS on Wednesday, 11 February

8 IMPORTANT DATES AND TIMES 1 The definitions and interpretations commencing on page 7 of this prospectus apply to these important dates and times: 2015 Abridged prospectus released on SENS on Opening date of the private placement on (09:00) Closing date of the private placement on (12:00) 2 Results of the private placement released on SENS on Notification of allotments to successful invited investors on or from Accounts at CSDP or broker updated and debited in respect of dematerialised shareholders 3 on Lodestone shares listed on the JSE from the commencement of trade on (09:00) Wednesday, 11 February Wednesday, 11 February Friday, 13 February Monday, 16 February Monday, 16 February Wednesday, 25 February Wednesday, 25 February Notes: (1) All references to dates and times are to local dates and times in South Africa. These dates and times are subject to amendment. Any such amendment will be released on SENS. (2) Invited investors must advise their CSDP or broker of their acceptance of the private placement shares in the manner and cut-off time stipulated by their CSDP or broker. (3) CSDPs effect payment on a delivery-versus-payment basis. 6

9 DEFINITIONS AND INTERPRETATIONS In this prospectus and the annexures hereto, unless inconsistent with the context, an expression which denotes one gender includes the other genders, a natural person includes a juristic person and vice versa, the singular includes the plural and vice versa and the expressions set out in the first column bear the meaning assigned to them in the second column. A linked unit an A linked unit in the capital of Lodestone prior to the capital restructure, further details of which are set out in Annexure 10, comprising one ordinary share of no par value in the share capital of Lodestone indivisibly linked to one A debenture having a face value of R9.97; A linked unitholders the registered holders of A linked units; AltX Aucor auction agreement application form the Alternative Exchange of the JSE; Aucor Corporate Proprietary Limited t/a Aucor Properties (Registration number 1995/007015/07), a private company registered and incorporated in accordance with the laws of South Africa; the agreement dated 19 March 2014 between Lodestone Investments, Aucor and Ebrahim Ghood, acting on behalf of New Order Investments 90 Proprietary Limited, further details of which are set out in Annexure 7; the application form to be used by invited investors for purposes of subscribing for private placement shares in terms of the private placement which is attached to, and forms part of, this prospectus; attorneys or Cliffe Dekker Hofmeyr Cliffe Dekker Hofmeyr Incorporated (Registration number 2008/018923/21), a personal liability company incorporated in accordance with the laws of South Africa, full details of which are set out in the Corporate Information section; B linked unit a B linked unit in the capital of Lodestone prior to the capital restructure, further details of which are set out in Annexure 10, comprising one ordinary share with a par value of R0.01 each in the share capital of Lodestone indivisibly linked to one B debenture having a face value of R0.01; B linked unitholders the registered holders of B linked units; Broll Broll Property Group Proprietary Limited (Registration number 2008/027519/07), a private company registered and incorporated in accordance with the laws of South Africa, further details of which are set out in paragraph of this prospectus; Broll property management agreement board or directors or board of Lodestone business day capital restructure CIPC the agreement entered into on 25 August 2014 between Broll and Lodestone Investments governing the provision by Broll of property management services to Lodestone Investments in respect of properties detailed in Annexure 8; the board of directors of Lodestone as set out in paragraph 2 of section one of this prospectus; any day other than a Saturday, Sunday or official public holiday in South Africa; collectively, the redemption of the A and B debentures, the repurchase of the A and B shares and the issuance of ordinary shares, further details of which are set out in Annexure 10; the Companies and Intellectual Property Commission under the Companies Act; 7

10 common monetary area Companies Act or the Act Companies Regulations or Regulations CSDP dematerialisation dematerialised shares documents of title Exchange Control Regulations existing property portfolio or existing properties or property portfolio Financial Markets Act Fortress GLA government GR independent reporting accountants and auditors or independent reporting accountants or Deloitte & Touche independent property valuers or Quadrant Properties Income Tax Act invited investors issue price IFRS collectively, South Africa, the Kingdoms of Swaziland and Lesotho and the Republic of Namibia; the South African Companies Act (Act 71 of 2008), as amended; the Companies Regulations, 2011 promulgated in Government Gazette No in terms of section 223 of the Companies Act; a Central Securities Depository Participant in South Africa appointed by a shareholder for purposes of, and in regard to, dematerialisation and to hold and administer securities or an interest in securities on behalf of a shareholder; the process whereby certificated shares are converted to an electronic form as dematerialised shares and recorded in the sub-register of shareholders maintained by a CSDP or broker in South Africa; Lodestone shares which have been incorporated into the Strate system, title to which is no longer represented by share certificates or other physical documents of title; share certificates, certified transfer deeds, balance receipts and any other documents of title to share acceptable to the board; the Exchange Control Regulations of South Africa issued under the Currency and Exchanges Act (Act 9 of 1933), as amended; comprising the properties set out in Annexure 8; Financial Markets Act (Act 19 of 2012), as amended; Fortress Income Fund Limited (Registration number 2009/016487/06), a public company registered and incorporated in accordance with the laws of South Africa and listed on the JSE; gross lettable area being the total area of a property that can be rented to a tenant; the government of South Africa; gross rental/s; Deloitte & Touche, a partnership formed in terms of the laws of South Africa, full details of which are set out in the Corporate Information section; the independent property valuers of the company, being Quadrant Properties Proprietary Limited (Registration number 1995/003097/07), a private company registered and incorporated in accordance with the laws of South Africa, the details of which are set out in the Corporate Information section; Income Tax Act (Act 58 of 1962), as amended; those specifically identified individuals, financial institutions, selected private clients and selected retail investors to whom the offer under the private placement will be addressed and made; the price at which the private placement shares are to be issued by Lodestone pursuant to the private placement being R5.10 per ordinary share; International Financial Reporting Standards; 8

11 Java Capital collectively, Waydale Investments Proprietary Limited trading as Java Capital (Registration number 2012/089864/07), the corporate advisor and Java Capital Trustees and Sponsors Proprietary Limited (Registration number 2006/005780/07), the designated advisor, further details of which are set out in the Corporate Information section; JHI JHI Properties Proprietary Limited (Registration number 2007/021131/07), a private company registered and incorporated in terms of the laws of South Africa, further details of which are set out in paragraph of this prospectus; JHI property management agreement JSE King III last practical date the listing Listings Requirements Lodestone or the company Lodestone group or the group the agreement entered into on 26 August 2014 between JHI and Lodestone Investments governing the provision by JHI of property management services to Lodestone Investments in respect of properties detailed in Annexure 8; Johannesburg Stock Exchange, being the exchange operated by the JSE Limited (Registration number 2005/022939/06), licensed as an exchange under the Financial Markets Act, as amended and a public company registered and incorporated in accordance with the laws of South Africa; the Code of Corporate Practices and Conduct in South Africa representing principals of good corporate governance as laid out in the King Report, as amended from time to time; the last trading date before the finalisation of this prospectus, being Friday, 23 January 2015; the listing of all of the shares of Lodestone in the AltX sector of the JSE; the Listings Requirements, as issued by the JSE from time to time; Lodestone REIT Limited (previously Lodestone Properties Limited) (Registration number 2010/017830/06), a public company registered and incorporated in accordance with the laws of South Africa; collectively Lodestone and its wholly owned subsidiaries; Lodestone Investments Lodestone Investments Proprietary Limited (Registration number 2005/043144/07), a private company registered and incorporated in accordance with the laws of South Africa and a wholly owned subsidiary of the company, further details of which are set out in Annexure 2; Lodestone Investments 2 m 2 square metres; Makhado Square acquisition agreement Makhado Square addendum agreement MOI ordinary shares or shares press Lodestone Investments 2 Proprietary Limited (Registration number 2008/029004/07), a private company registered and incorporated in accordance with the laws of South Africa and a wholly owned subsidiary of the company, further details of which are set out in Annexure 2; the agreement dated 27 May 2014 between Municipal Employees Pension Fund and Lodestone Investments, further details of which are set out in Annexure 7; the agreement dated 20 June 2014 between Municipal Employees Pension Fund and Lodestone Investments, further details of which are set out in Annexure 7; the memorandum of incorporation of the company, extracts of which are set out in Annexure 6; the ordinary shares in the capital of Lodestone of no par value; the Business Day newspaper; 9

12 private placement private placement shares promoter property management agreements property managers prospectus R or Rand or ZAR REIT RMS RMS property management agreement SARB SENS the private placement to raise approximately R122.4 million by Lodestone by way of an offer to invited investors to subscribe for up to 24 million ordinary shares at an issue price of R5.10 per ordinary share; the 24 million ordinary shares in the share capital of Lodestone to be offered and issued in terms of the private placement; the party(ies) responsible for the formation of a company to be listed, or acquired by an existing issuer, and who earn(s) a fee therefrom, in cash or otherwise; collectively, the Broll property management agreement, the RMS property management agreement and the JHI property management agreement; each of Broll, JHI and RMS in respect of different portfolios of properties in the existing property portfolio; this bound document inclusive of all annexures and accompanying specimen application form dated 11 February 2015, prepared in compliance with the Companies Act and the JSE Listings Requirements; the South African Rand, the lawful currency of South Africa; a public company listed as a Real Estate Investment Trust on the JSE; RMS Property and Facilities Management Proprietary Limited (Registration number 1990/000630/07), a private company registered and incorporated in terms of the laws of South Africa, further details of which are set out in paragraph of this prospectus; the agreement entered into on 1 July 2011 between RMS and Lodestone Investments governing the provision by RMS of property management services to Lodestone Investments in respect of properties detailed in Annexure 8; South African Reserve Bank; Stock Exchange News Service of the JSE; shareholders or Lodestone shareholders holders of Lodestone shares as recorded in the share register of the company; Siyabuswa Land disposal agreement subsidiaries Strate transfer secretaries or Link Market Services VAT yield the agreement dated 9 June 2014 between Lodestone Investments, Aucor and Broad Brush Inv 207 Proprietary Limited, further details of which are set out in Annexure 7; collectively, Lodestone Investments and Lodestone Investments 2, further details of which are set out in Annexure 2; Strate Proprietary Limited (Registration number 1998/022242/07), a private company which is registered in terms of the Financial Markets Act, as amended, responsible for the electronic settlement system of the JSE; Link Market Services South Africa Proprietary Limited (Registration number 2000/007239/07), a private company registered and incorporated in South Africa, full details of which are set out in the Corporate Information section; value added tax as defined in the Value Added Tax Act, 1991, as amended; and the distribution available to a holder of a share in any future 12-month period or any financial year, as the case may be, divided by the current market price of that share. 10

13 Lodestone REIT Limited (previously Lodestone Properties Limited) (Incorporated in the Republic of South Africa) (Registration number 2010/017830/06) JSE share code: LDO ISIN: ZAE ( Lodestone or the company ) Directors of the company JS Cooper (Managing director) IF Pick (Financial director) G Trope (Executive director) HA Zolty (Executive director) CB Hallowes (Independent non-executive director) AL Manickum (Independent non-executive director) (Chairman) N Shongwe (Independent non-executive director) MC McNamara (Independent non-executive director) JJ van Wyk (Independent non-executive director) PROSPECTUS SECTION ONE INFORMATION ON THE LODESTONE GROUP 1. NAME, ADDRESS AND INCORPORATION 1.1 Lodestone REIT Limited (previously Lodestone Properties Limited) (Registration number 2010/017830/06) was incorporated as a public company on 27 August The company s year-end was changed from 30 June to 31 March on 17 October The addresses of the company s registered office and the transfer secretary s registered office is set out in the Corporate Information section. 1.4 The group structure is set out in Annexure 1 and the names, registration numbers, places of incorporation, dates of incorporation, nature of business and issued capital of each of Lodestone s subsidiaries are set out in Annexure DIRECTORS, OTHER OFFICE HOLDERS OR MATERIAL THIRD PARTIES 2.1 Directors of the company The board is currently made up of nine directors of which five are non-executives (all of whom are independent) and four are executive directors. 11

14 2.1.1 The full names, ages, business addresses, qualifications, positions and experience of the directors of Lodestone are outlined below: Name and age Jason Scott Cooper (45) Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience National Diploma Marketing and Sales Managing director Name and age Inge Frances Pick (35) Jason has been involved in commercial property for 18 years working as a corporate broker and private investor. He spent 13 years at JHI heading the broking division. Since 2008 he has been involved in building a private portfolio. In April 2010 he joined Lodestone as head of the industrial portfolio. He was appointed managing director in February Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience BCom (Acc), BCom (Hons)(Acc), CA(SA) Financial director Name and age Gidon Trope (34) Inge completed her articles with Deloitte and was seconded to the Deloitte New York office for two years. Upon her return, she was promoted to senior manager at Deloitte. Inge joined the Resilient group in 2009 holding the position of financial manager and company secretary of Pangbourne Properties Limited ( Pangbourne ). She was involved in the Pangbourne Capital Property Fund ( Capital ) merger and was subsequently appointed as the financial manager and company secretary of Capital. She was involved in the internalisation of Capital and was the financial manager and company secretary of Capital Property Fund Limited until her appointment as the financial director of Lodestone in October Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience BSc (Property) Executive director Gidon started his career at Broll in the retail leasing and development division specifically focusing on retail leasing of new and existing developments in South Africa as well as in several African countries including Ghana, Nigeria, Tanzania, Zambia and Namibia. Gidon later joined Retail Africa as a senior leasing manager working on a number of new convenience and community retail centres in and around South Africa. From June 2010 Gidon has been responsible for Lodestone s retail portfolio. Name and age Herman Allan Zolty (34) Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience BSc (Property) Executive director Since completing his degree at UCT in 2001, Herman has been involved in various sectors of the property industry. His experience ranges from property management to valuations and finance. His primary role at Lodestone since June 2010 was to lead the company s acquisition and disposal strategy. 12

15 Name and age Craig Brabazon Hallowes (45) Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience BA, LLB, ILPA-CPF, LLM (Taxation), MBA (with distinction) Independent non-executive director Prior to listing and then joining Rockcastle Global Real Estate Company Limited as chief executive officer, Craig was the managing director of Siyathenga Property Fund Limited, an executive director of Pangbourne and Property Fund Managers Limited, the management company of Capital and was actively involved in the turnaround of both Capital and Pangbourne. Craig is currently a director of Grindrod Index Tracker Managers Proprietary Limited. Craig worked at Bowman Gilfillan Attorneys, qualified as an attorney and practiced for a number of years, concentrating on the fields of commerce and litigation. He then joined Investec and Investec Asset Management where he held various managerial positions. Craig is an executive director of Fortress. Name and age Annalese Lucille Manickum (50) Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience National Diploma Financial Accounting, South African Institute of Management (SAIM) Business Management/Property Development Programme (PDP) Independent non-executive director (Chairman) Annalese is currently the managing member of Prominent Properties CC, which undertakes property management, property development and consulting for JSE-listed clients. She was previously a senior portfolio manager at JHI Real Estate Limited. Annalese has more than 18 years experience in the property industry, representing clients including the Public Investment Corporation, Cenprop, Capital and UAL. Annalese has broad experience in financial and property-related fields. Name and age Ndhlabole Shongwe (50) Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience BAdmin and BA Hons (Public Management & Development) (Cum Laude) Independent non-executive director Ndhlabole started his career in the property industry 10 years ago after a career in local government. His focus is on the retail sector and he has put together a private portfolio of properties in conjunction with some of the major roleplayers in the industry. He currently manages his private property portfolio, which includes site visits and attending meetings with property managers. Ndhlabole operates from his home address. For any business dealing with Lodestone, he will be based at the offices of Lodestone. Name and age Michael Charles McNamara (51) Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience National Higher Diploma Civil Engineering Independent non-executive director Mike started his career with Rand Roads (a division of LTA) in 1984 as a student. In 1989 he joined Uhlmann Witthaus and Prins Consulting Engineers where he was appointed the Town Engineer of Mabopane in the then Republic of Bophuthatswana. 13

16 In 1994 Mike started Agmac Construction cc of which he is the managing member. A wide range of projects have been completed ranging from prestigious residential homes, leisure resorts and lodges to shopping malls. For the past four years, the focus has been on the construction of shopping malls. In 2004 Mike and his partners formed a property development company which has successfully completed a number of small developments. The company still holds interests in some of these developments. Mike has recently registered a construction company in Nigeria which is involved in the construction of a mall in that country. Name and age Jacques Johannes van Wyk (38) Business address 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 Qualification Position Experience BCompt (Honours), CA(SA) Independent non-executive director All of the directors are South African nationals. Jacques started his career with auditing and consulting at KPMG. In 2002 he joined the corporate finance division of the then Nedcor Investment Bank and left the bank after the listing of Resilient Property Income Fund Limited in Jacques is former financial director of Resilient Property Income Fund Limited, Diversified Property Fund Limted and Pangbourne. He currently manages a private investment portfolio. Jacques operates from his home address. For any business dealing with Lodestone, Jacques will be based at the office of Lodestone. 2.2 Directors of major subsidiaries The company has two subsidiaries, further details of which are set out in Annexure The directors of the subsidiaries are Jason Cooper, Inge Pick, Gidon Trope and Herman Zolty The full names, ages, business addresses, qualifications, capacities and positions of Jason Cooper, Inge Pick, Gidon Trope and Herman Zolty are set out in paragraph 2.1 above. 2.3 Lodestone advisors and company secretary The names and business addresses of the company s advisors are set out in the Corporate Information section Leonie Gindan is the company secretary whose name and business address are set out in the Corporate Information section. Leonie obtained a diploma in computer science from Boston City Campus in The company s advisors and the company secretary do not have any interests in Lodestone shares, other than as disclosed in Annexure Additional information related to the directors Annexure 3 contains the following additional information in respect of the directors: directors emoluments; borrowing powers of the group exercisable by the directors; interests in shares and transactions; interests of directors and promoters; and directors declarations Annexure 4 contains details of directors other directorships and partnerships in the previous five years. 14

17 2.4.3 The salient terms of the service contracts of the executive directors are set out in Annexure 5. All employees of the Lodestone group, including the executive directors, are employed via the main operating subsidiary of the group, being Lodestone Investments The provisions of the MOI with regard to the following are set out in Annexure 6: powers of the company; issue of shares and variation of rights; votes of shareholders; shareholder resolutions; composition and powers of the board of directors; directors compensation and financial assistance; borrowing powers; and distributions. 2.5 Asset management The asset management function of the group is undertaken internally by its executive management, who are very experienced in this regard, who will implement the company s investment and growth strategy as described in paragraph 3.2 below. Part of the asset management role of the executive management of Lodestone is to seek new investment opportunities for the company, to consider ways of optimising the performance of existing assets and, where necessary, to work on the disposal of assets which no longer contribute to the company s income growth strategy. 2.6 Property management The property management function of the group, which relates to multi-tenanted properties, is outsourced on market-related terms to Broll, JHI and RMS, further details of which are set out in Annexure 8. All internally managed properties are single tenanted Broll Broll s directors are K Gerber, L Michau, R Hunting, D Alcock, J Broll, R du Plooy, E Badenhorst, M Horne, H Rix, H Wallace and D MacKay Broll s business address is 27 Fricker Road, Illovo, Sandton, The shareholders of Broll are Rowmoor Investment 579 Proprietary Limited (70%), Tactical Software Systems (20%) and management (10%) Neither Broll nor its members have any beneficial interest, direct or indirect, in relation to any property held by the Lodestone group or property to be acquired by the group nor are they contracted to become a tenant of any part of the property of the group Broll does not have any beneficial interest, direct or indirect, in any securities or participatory interests to be issued by the company in order to finance the acquisition of any properties Broll is appointed as property manager for the period from 1 July 2014 ( the commencement date ) to 30 June 2015 with effect from the commencement date The Broll property management agreement or, any portion thereof, will be terminated on one month s written notice in the following circumstances: in the event that the shares of Lodestone Investments are sold or Lodestone Investments selling the property or business associated with managing the property; in the event of ownership and/or holding and/or control of the manager changing in a material way, unless the company has approved such change; in the event of the company disposing of any property managed under the Broll property management agreement. In this regard cession of Broll s services and remuneration pertaining to that property will be subject to one month s written notice. 15

18 Broll s functions as property manager includes, inter alia, the letting of properties, preparation of leases, preparation of invoices, monthly statements and rent rolls, the distribution of monthly invoices and statements, the collection of all amounts due by tenants, maintenance of financial and operational controls, balances and reconciliations, compilation of monthly management reports, manage budgeted disbursements, credit control for and in respect of the properties managed by it, reports, the management of legal matters, the compilation of financial reports and budgets, liaison with local authorities, maintenance of insurance, receipting of all income and tenant deposits, maintenance of books of account and compliance with the Occupational Health and Safety Act, JHI JHI s directors are JE Wellsted, M van der Walt and NNN Radebe JHI s business address is Norwich Place East, 2 Norwich Close, Sandton, South Africa, JHI is a wholly owned subsidiary of Excellerate Property Services Proprietary Limited (formerly Nervada Trading Proprietary Limited) Neither JHI nor its directors have any beneficial interest, direct or indirect, in relation to any property held by the Lodestone group or property to be acquired by the group nor are they contracted to become a tenant of any part of the property of the group JHI does not have any beneficial interest, direct or indirect, in any securities or participatory interests to be issued by the company in order to finance the acquisition of any properties JHI is appointed as property manager for the period from 1 September 2014 ( the commencement date ) to 1 September 2016 and thereafter for an indefinite period, terminable on three calendar months written notice by either JHI or Lodestone Investments JHI s functions as property manager includes, inter alia, the compiling of budgets, the dispatching of tax invoices and the collection of income, the monitoring of arrears in rentals, the collection of debt and outstanding arrears, the management of and adherence to legal processes, the assessment of prospective tenants, lease management, leasing, compliance with the Occupational Health and Safety Act, 1993, maintenance, procurement, project management, the drafting of service level agreements, the appointment of sub-contractors, account payments, compiling reports and control procedures RMS RMS directors are WH Ward and BW Kaiser RMS business address is 2969 William Nicol Drive, Sandton, RMS is a wholly owned subsidiary of RMS Corporate Solutions Proprietary Limited Neither RMS nor its members have any beneficial interest, direct or indirect, in relation to any property held by the Lodestone group or property to be acquired by the group nor are they contracted to become a tenant of any part of the property of the group RMS does not have any beneficial interest, direct or indirect, in any securities or participatory interests to be issued by the company in order to finance the acquisition of any properties RMS is appointed as property manager for the period from 1 July 2014 ( the commencement date ) for a period of three years The RMS property management agreement will be terminated on one month s written notice in the following circumstances: in the event that the ownership in Lodestone Investments, or the executive management of the company, is changed, or the existing shareholders sell their shares in Lodestone Investments, or Lodestone Investments selling the properties or the business associated with managing the property, or any portion thereof; in the event of ownership and/or holding and/or control of the manager changing in a material way, unless the company has approved such change; 16

19 in the event of the company disposing of any property managed under the RMS property management agreement. In this regard cession of RMS services and remuneration pertaining to that property will be subject to one month s written notice RMS functions as property manager includes, inter alia, the letting of properties, preparation of leases, preparation of invoices, monthly statements and monthly reports, the collection of all amounts due by tenants, credit control, repairs, the management of all legal matters pertaining to the properties, the compilation of financial reports and budgets, liaison with local authorities, maintenance of insurance, receipting of all income and tenant deposits, maintenance of books of account and compliance with the Occupational Health and Safety Act, HISTORY, STATE OF AFFAIRS AND PROSPECTS OF THE GROUP 3.1 History of Lodestone Lodestone is an opportunistic property holding and investment company that was established to invest in property assets through the ownership or lease of immovable property in South Africa and abroad with a balanced strategy of investing in industrial, retail, residential and commercial properties directly and through the holding of property securities. There was an understanding between Fortress and Lodestone that Fortress had a right of first refusal over any potential acquisitions identified by Lodestone. This right of first refusal was cancelled with effect from 1 December The historical trading results of the company are set out in Annexure 13. The company undertakes asset management of its investment properties and property letting enterprises internally. Each of the subsidiaries has been established to carry on business as an investment property holding and letting enterprise. 3.2 Investment and growth strategy The company s primary objective is to identify value-enhancing opportunities within the commercial, industrial, residential and retail sectors via direct property and listed equity investments, both locally and abroad, to create a stable and diverse portfolio of assets capable of generating secure and escalating free cash flows. This is achieved by its experienced and hands on management team focusing on proactive portfolio management and aggressive cost containment. 3.3 Prospects The board of Lodestone is confident that it will deliver growth in distribution of greater than 10% for the period ending 31 March 2016 as compared to the annualised dividend for the four months ending 31 March 2015, further details of which are set out in Annexure 15. With its opportunistic ability to invest in all real estate sectors both locally and internationally, the group will be able to add significantly to its property portfolio on a yieldenhancing basis for its investors. 3.4 The existing property portfolio Lodestone holds a diversified portfolio of 22 properties across the industrial, commercial and retail sectors. The properties are situated in areas with high growth potential. The company also invests in property securities. In this regard, the company held and subsequently disposed of securities in Rockcastle Global Real Estate Company Limited, further details of which are set out in Annexure 12 and Annexure 23. The group s property portfolio, valued as at 1 December 2014 in aggregate at R , consists of 22 properties with a GLA of m 2. A detailed list of the properties comprising the property portfolio appears in Annexure 8. 17