PRE-LISTING STATEMENT

Transcription

1 Vunani Property Investment Fund Limited (formerly Vunani Property Investment Fund Proprietary Limited) (Incorporated in the Republic of South Africa) (Registration number 2005/019302/06) JSE code: VPF ISIN: ZAE The definitions commencing on page 11 hereof apply mutatis mutandis throughout this Pre-Listing Statement. PRE-LISTING STATEMENT Prepared and issued in terms of the JSE Listings Requirements relating to: A private placing of units by the Company to eligible investors by way of an: offer to subscribe for a maximum of new VPIF units with an approximate value of R497.5 million at the private placing price; and offer for sale of VPIF units with an approximate value of R166.7 million at the private placing price. The private placing will be implemented via a bookbuild exercise and it is estimated that the final private placing price pursuant to the private placing will fall within a range of between R7.00 and R8.00 per unit. For purposes of this Pre-Listing Statement, a mid-range price of R7.50 per unit has been used. Opening date of the private placing (09:00) Closing date of the private placing (12:00) by which date eligible investors must submit their applications to the Bookrunners in order to participate in the private placing Date upon which eligible investors will be notified of their selection to participate in the private placing and the number of VPIF units allocated to them and the pricing thereof Market to be advised of the fulfilment of the conditions precedent Listing date (09:00) 2011 Monday, 1 8 July Friday, 2 9 July Tuesday, 2 August Friday, 5 August Thursday, 11 August Notification of any change to the above dates will be released on SENS and published in the press. The placing units will rank pari passu in all respects with all other units issued by VPIF, including in respect of distributions. The salient terms of the debentures forming part of the VPIF units are set out in Appendix 10 hereof. This Pre-Listing Statement is not an invitation to the general public to subscribe for VPIF units but is issued in compliance with the JSE Listings Requirements for the purpose of providing information about VPIF. T he private placing is open for acceptance only to eligible investors in terms of the offer for subscription and the offer for sale. Subject to: obtaining a spread of unitholders acceptable to the JSE; the approval by Vunani shareholders of the Vunani disposal (refer definition); the minimum subscription being received; and the registration of transfer of the Athol Ridge property to VPIF. the JSE has granted VPIF a listing for all of the VPIF units in issue after the private placing, in the Real Estate Real Estate Holdings and Development sector of the JSE List, in terms of the FTSE classification, under the abbreviated name VPIF, JSE code VPF and ISIN: ZAE , with effect from the commencement of trade on Thursday, 11 August The listing is a primary listing. Capital structure Authorised: The authorised capital of VPIF is R , comprising ordinary shares with a par value of R each; each of which is linked to one debenture with a face value of R Issued capital: The issued unit capital of VPIF, before and after the private placing, comprising ordinary shares having a par value of R each: each of which is linked to one debenture with a face value of R , is set out below: Units in issue prior to the Units in issue after the private placing Units in issue after the private placing private placing at par value based on the minimum number of based on the maximum number of new units to be issued at new units to be issued at the mid -range price of R7.50 each the mid -range price of R7.50 each Value R R R

2 There is no share premium and there are no treasury units. The listing of VPIF s units on the JSE is conditional upon a minimum subscription of R366.7 million being received (refer paragraph 14 of this Pre-Listing Statement). The placing units will be allotted in multiplies of units to eligible investors. Fractions of units will not be issued. VPIF units can only be traded on the JSE in dematerialised form. Accordingly, unitholders who elect to receive VPIF units in certificated form will have to dematerialise their certificated units should they wish to trade therein. The directors, whose names are set out in the Corporate Information section of this Pre-Listing Statement, collectively and individually, accept full responsibility for the accuracy of the information given and certify that, to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement false or misleading and that they have made all reasonable enquiries to ascertain such facts and that this Pre-Listing Statement contains the information required by the Companies Act and the JSE Listings Requirements. Each of the Corporate Adviser and Joint Sponsor, Independent Lead Sponsor, independent reporting accountants and auditors, legal adviser, transfer secretaries, independent valuer, debenture trustee, investment bank, joint bookrunners and commercial banker have consented in writing to act in the capacity stated and to their names being stated and, where applicable, their reports being included in this Pre-Listing Statement. Furthermore they have not withdrawn their consents prior to the finalisation of this Pre-Listing Statement. Corporate Adviser, Joint Sponsor and Joint Bookrunner Independent Lead Sponsor Independent reporting accountants and auditors Legal adviser Independent valuer Investment Bank and Joint Bookrunner 5 July 2011 An abridged version of this Pre-Listing Statement will be released on SENS on Monday, 18 July 2011 and published in the press on Tuesday, 19 July Copies of this Pre-Listing Statement are available in English only and may be obtained during normal business hours between Monday, 18 July 2011 and Thursday, 11 August 2011 from the registered office of the Company and the offices of the Independent Lead Sponsor, Corporate Adviser and Joint Sponsor and the transfer secretaries, the addresses of which are set out in the Corporate Information section hereof. NOTES: If you are in any doubt about the contents of this Pre-Listing Statement, you should consult your CSDP, broker, attorney, accountant or other professional adviser. Private placing in South Africa only This Pre-Listing Statement is issued in connection with the private placing in South Africa only and is addressed only to person to whom the private placing may lawfully be made. The distribution of this Pre-Listing Statement may be restricted by law and any persons into whose possession it comes must inform themselves about and observe any such restrictions. This Pre-Listing Statement does not constitute an offer of or an invitation to subscribe for and/or purchase any of the units in VPIF in any jurisdiction in which such offer, subscription or sale would be unlawful. Forward-looking statements This Pre-Listing Statement includes forward-looking statements. Forward-looking statements are statements including, but not limited to, any statements regarding the future financial position of VPIF and its future prospects. The forward-looking statements have been based on current expectations and projections in respect of future results, which are not a guarantee for future performance even though the directors consider them to be reasonable. Risk factors, which may cause the actual results, performance or achievements of VPIF to be materially different from any of those expressed or implied in the forward-looking statements include, inter alia, force majeure, another global economic crisis, an unforeseen material deterioration in the South African economic system or unforeseen liquidation of a major tenant in the VPIF portfolio.

3 CORPORATE INFORMATION Directors (at listing) P D Naidoo+ (Independent Non-executive Chairman) R F Kane* (CEO) C E Chimombe-Munyoro# M de Lange* (Financial Director) E G Dube# R R Emslie+ J R Macey+ P W Mac kenzie* + Independent Non-Executive * Executive # Non-executive Company secretary and registered office M de Lange, B.Com (Law), B.Com (Hon)(Acc) Vunani House Block C Athol Ridge Office Park 151 Katherine Street Sandown, Sandton, 2196 (PO Box , Benmore, 2010) Website: Date and place of incorporation 6 June 2005 Pretoria, South Africa Corporate Adviser, Joint Sponsor and Joint Bookrunner Vunani Corporate Finance (trading as a division of Vunani Capital Proprietary Limited) (Registration number 1998/001469/07) Vunani House Block C Athol Ridge Office Park 151 Katherine Street Sandown, Sandton, 2196 (PO Box , Benmore, 2010) Independent Lead Sponsor Grindrod Bank Limited (Registration number 1994/007994/06) Building Three 1st Floor, North Wing, Commerce Square 39 Rivonia Road (corner Helling Road) Sandton, 2196 (PO Box 78011, Sandton, 2146) Investment Bank and Joint Bookrunner Investec Corporate Finance (trading as a division of Investec Bank Limited) (Registration number 1969/004763/06) 2nd Floor 100 Grayston Drive Sandown, Sandton, 2196 (PO Box , Sandton, 2146) Legal adviser Edward Nathan Sonnenbergs Incorporated (Registration number 2006/018200/21) 150 West Street Sandton, 2196 (PO Box , Sandton, 2146) Independent reporting accountants and auditors KPMG Inc (Registration number 1999/021543/21) Registered Accountants and Auditors KPMG Crescent 85 Empire Road Parktown, 2193 (Private Bag 9, Parkview, 2122) Independent valuer Mills Fitchet Magnus Penny Proprietary Limited (Registration number 1996/004736/07) 20th Floor, 1 Thibault Square Long Street Cape Town, 8001 (PO Box 4442, Cape Town, 8000) Transfer secretaries Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07) Ground Floor 70 Marshall Street Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) Commercial bank First National Bank Limited (Registration number 1929/001225/06) Carlton Centre Commissioner Street Johannesburg, 2001 (PO Box 5745, Johannesburg, 2000) Trustees of VPIT will be: P D Naidoo R F Kane C E Chimombe-Munyoro M de Lange E G Dube R R Emslie J R Macey P W Mac kenzie Debenture Trustee will be: Fluxmans Inc (Registration number 2000/024775/21) 11 Biermann Avenue Rosebank Johannesburg, 2196 (Private Bag X41, Saxonwold, 2196) 1

4 TABLE OF CONTENTS Page CORPORATE INFORMATION 1 SALIENT INFORMATION 5 SALIENT DATES AND TIMES 10 DEFINITIONS 11 PRE-LISTING STATEMENT 16 PART A: INTRODUCTION Purpose of this Pre-Listing Statement Overview of VPIF Background Company structure The South African property market Investment strategy Growth strategy Prospects Management of VPIF s assets Property management Interests of VPIF directors in the Acquisition properties Other information The VPIF Portfolio VPIF existing properties Acquisition properties Details of the VPIF Portfolio Rationale for the transaction and the listing VPIT Trust Deed 34 PART B: THE PRIVATE PLACING, LISTING AND ISSUE OF UNITS The private placing Particulars of the private placing and private placing price Particulars of the private placing Private placing price Time and date of the opening and closing of the private placing Listing of the VPIF units Conditions precedent to the listing JSE approval Listing on any other stock exchange Participation in the private placing and applications Dematerialised units Payment for and delivery of VPIF units Issue of the placing units Strate Exchange Control Regulations Minimum subscription, commissions and brokers fees Simultaneous issues, options or preferential rights in respect of units or previous offers and other terms and conditions of the private placing 38 2

5 Page PART C: FINANCIAL INFORMATION Historical financial information and unaudited pro forma financial information Audited historical financial information Unaudited pro forma financial effects of the transaction Change in financial year-end Forecasts for the six months ending 30 June 2011 and the year ending 30 June Dividend and distribution policy Advances and borrowings Material commitments, lease payments and contingent liabilities Adequacy of capital Material changes Audit Committee and financial director 45 PART D: INFORMATION RELATING TO THE COMPANY Incorporation, history and nature of business Incorporation and history Nature of business Prospects Controlling and major unitholders Material contracts, promoters, service and other agreements Litigation Subsidiaries Provisions of the MOI Corporate Governance 47 PART E: CAPITAL STRUCTURE Capital at incorporation Summary of alterations to the capital and units issued in the last three years Authorised and issued unit capital Variation of rights attaching to units Voting rights Authorisations relating to units Debentures 50 PART F: INFORMATION RELATING TO THE DIRECTORS AND SENIOR MANAGEMENT Directors Senior management Information contained in the directors declarations Other directorships/partnerships held by the directors during the past five years Directors interests in the Company s securities Directors interests in transactions Directors remuneration Remuneration and benefits Other payments Directors secondment 56 PART G: ADDITIONAL INFORMATION Advisers interests Strate eligibility Expenses Consents Directors responsibility statement Documents available for inspection 58 3

6 Page APPENDICES 1. The VPIF Portfolio Independent valuation report on the Properties Independent reporting accountants report on the value and existence of the VPIF Acquisition properties Report of historical financial information of VPIF for the year ended 31 December Independent reporting accountants report on the audited historical financial information of VPIF for the year ended 31 December Unaudited pro forma financial information of VPIF at 31 December Independent reporting accountants report on the unaudited pro forma financial information of VPIF Independent reporting accountants report on the forecast financial information of VPIF Salient features of the VPIT Trust Deed Salient features of the Debenture Trust Deed Extracts from the MOI Corporate Governance Salient features of the Acquisition Agreement Other directorships of the VPIF directors for the past five years 132 APPLICATION FORM private placing (blue) Attached 4

7 SALIENT INFORMATION The salient information provides an outline of the information contained in this Pre-Listing Statement, which Pre-Listing Statement should be read in its entirety for a full appreciation hereof. THE PRE-LISTING STATEMENT This Pre-Listing Statement relates to a private placing of units in the Company by way of an: offer to subscribe for a maximum of new VPIF units with an approximate value of R497.5 million at the private placing price; and offer for sale of VPIF units with an approximate value of R166.7 million at the private placing price. No public offer is being made. INTRODUCTION Subject to listing, VPIF offers investors an opportunity to participate in the only office-dominated JSE property fund, which sector the directors believe is well-poised for recovery. The portfolio comprises 21 strategically located, high quality buildings and offers a competitive distribution yield together with a consistent growth profile. The investment strategy of VPIF has been consistent since 2007 and it has delivered exceptional growth. The investment strategy is represented by the diagram set out below. The fund intends to double its portfolio size over the next 18 months through the acquisition of well-located B+ and A grade office buildings with a stable tenant profile. The A/B+ segment of the office market is characterised by greater volumes, more arbitrage opportunities and a rental base that will be pushed higher as vacancies decline and new developments demand premium rentals. VPIF intends to source buildings in which yield enhancing refurbishments can be carried out. In the short term, the fund will avoid premium AAA grade trophy buildings, which the directors believe do not represent good value at this time. 5

8 The pricing of the private placing set out in this Pre-Listing Statement will take place through a bookbuilding exercise which will enable investors to decide on the most appropriate yield for the VPIF Portfolio. This will ensure that the placement of units is market and demand driven with a maximum level of transparency. Background to the Vunani Group The Vunani Group was established following a management buyout in 2003 by the senior executives, Ethan Dube, Butana Khoza and Mark Anderson, of the entire issued share capital of African Harvest Capital (Pty) Limited ( African Harvest Capital ), a wholly-owned subsidiary of African Harvest Limited ( African Harvest ), a company previously listed on the JSE. Vunani was incorporated in 1997 (as a wholly-owned subsidiary of African Harvest and traded under the name African Harvest Capital), specialising in BEE-related investments, corporate advisory services, private equity transactions and trading activities. It listed on the Alternative Exchange of the JSE in 2007 to raise capital and grow its financial services activities, which includes Vunani Properties. A recapitalisation of the Vunani Group took place in The Vunani Group remains a majority black owned and managed financial services group, with the original management team still in place. Vunani Properties was formed in 2003, together with its senior executives Pete Mac kenzie and Rob Kane, both of whom have considerable experience in all aspects of the property industry. This experience includes construction, property development, property asset management and finance. Vunani Properties strategy has been to grow a strong property balance sheet through long-term holdings in commercial property assets on the one hand, and property developments, which can, inter alia, enhance the value of these property assets on the other hand. The listing of VPIF represents a consolidation of all the commercial property interests held by Vunani Properties and a platform to further grow its assets. Background to VPIF In 2005 Ethan Dube joined the board of Hyprop, South Africa s largest listed retail property fund. Through this relationship, Vunani identified an opportunity to provide Hyprop with a BEE enterprise development venture while bulking up its own commercial portfolio of property assets. A win-win result for both parties as Hyprop had been contemplating a sale of its commercial office portfolio as it represented non-retail assets. The formation of VPIF was effected by combining the commercial properties owned by Vunani Properties with a commercial portfolio owned by Hyprop. At the time that this transaction was under consideration, Standard Bank Properties Proprietary Limited agreed to dispose of a portfolio of its own commercial property assets (largely incorporating bank branches in large and mid-sized towns across South Africa) to VPIF. Since its formation the fund has been managed by the same team at Vunani Properties. This will continue from listing date onwards through VPAM, a wholly-owned subsidiary of Vunani Properties. Rob Kane will continue in his role as the Chief Executive Officer of VPIF and will be supported by the Vunani Properties team, in particular its Managing Director, Pete Mac kenzie, and Marelise de Lange who has been appointed the Financial Director of VPIF. As VPIF will remain a significant and important investment holding for the Vunani Group its senior executives will remain keenly involved as evidenced by Ethan Dube s position as a non-executive director of VPIF and chairman of VPAM. The fund has historically performed well with annual compounded growth of 34.3% to December This has been achieved with limited acquisitions but primarily through tight management and yield-enhancing refurbishments. The fund now owns 21 buildings, with commercial offices comprising just over 92% of the VPIF Portfolio, and valued at R947.6 million in aggregate. This includes 3 A grade properties recently developed for tenants by Vunani Properties and acquired by the fund just prior to the listing. One of these was the Loop Street property, a benchmark green refurbishment of a 1904 listed building in the City of Cape Town, which is now on a seven-year lease with the Department of Public Works. All of Vunani s commercial property holdings will, following VPIF s listing, be held through the fund and/or VPIT and going forward any commercial property investments offered to Vunani Properties for purchase will only be transacted if they take place through the fund. 6

9 The main purpose of the listing is to provide the fund with a platform for acquisitive growth. This will initially be facilitated through the private placing and will provide it with debt capacity to acquire yield-enhancing properties. The fund will be able to utilise the expertise of its management team to add value to the VPIF Portfolio through yield-enhancing upgrades and refurbishments. An example is the current R9 million upgrade to Murrayfield Forum; a mixed use property in Murrayfield, Pretoria. In addition, all properties developed by Vunani Properties and that meet the fund s investment criteria will be offered to VPIF for purchase on a first right of refusal basis. Appropriate corporate governance structures are in place to ensure that the best interests of the fund are maintained at all times as well as to ensure no conflicts of interest arise between any related parties. The listing will also provide Vunani Properties with an opportunity to reduce a portion of equity-related debt that was associated with the establishment of VPIF as well as debt linked to the Athol Ridge property. THE PRIVATE PLACING The purpose of the private placing is to raise a minimum of R366.7 million, which will be utilised as set out in paragraph 14 of this Pre-Listing Statement. The private placing has not been underwritten. The private placing will be implemented via a bookbuild exercise. The Bookrunners will obtain indications of interest from eligible investors to acquire VPIF units and following this book-building process, the private placing price will be determined. Eligible investors wishing to participate in the private placing are required to complete the Application Form (blue) attached to this Pre-Listing Statement setting out the Rand value of the VPIF units they wish to apply for as well as the price. Subject to the conditions precedent (set out in paragraph 9.1 of this Pre-Listing Statement) being met and the determination of the private placing price, the eligible investors selected by the fund will be advised of the number of VPIF units they have been allocated. The units so allocated will be issued on the listing date upon receipt of payment in respect thereof. *Based on a mid-range private placing price of R7.50 Offer for subscription Private placing price range pursuant to the private placing R7.00 R8.00 Maximum number of VPIF units to be issued Maximum value* R497.5 million Minimum number of VPIF units to be issued Minimum value* R306.5 million PURPOSE OF THE PRE-LISTING STATEMENT AND THE LISTING The purpose of this Pre-Listing Statement is to: provide eligible investors with the relevant information regarding VPIF, the VPIF Portfolio and the directors and managers thereof; provide eligible investors with information relating to VPIF s strategy and future prospects; provide details of the private placing; and enable VPIF to obtain a listing for its units. The purpose of the listing is to: consolidate Vunani Group s property portfolio exposures into one vehicle; raise capital to enable VPIF to grow its property portfolio through acquisitions; provide investors, both institutional and private, with an opportunity to participate in the stable income streams and future capital growth of VPIF; provide a spread of investors that will provide liquidity and tradeability in the units; and enhance investor and public awareness of VPIF. PROPERTY INFORMATION VPIF offers investors a sectorally focused high quality portfolio comprising 21 quality properties with a wide geographical spread. Tenants activities are spread over a wide range of industries with a predominantly national or listed bias. The properties are graded from B to A+, with the majority being B+/A. Historically, the portfolio has performed well with low vacancies, well-managed arrears and continued tenant retention. Compound distribution growth of 18.6% per annum has been achieved since Capital value growth over the same period has been 15.7% (defined as the growth from the acquisition price at December 2006 to the independent valuation at 1 January 2011), giving a total annual compounded return of 34.3% since inception. 7

10 In essence, the listing of VPIF offers a well-organised and smoothly functioning property investment vehicle to investors and is well-positioned to achieve the investment strategy set out in paragraph 2.4 of this Pre-Listing Statement. Before the transaction After the transaction VPIF Portfolio size (GLA m 2 ) m m 2 Value of VPIF Portfolio R776.5 million R947.6 million Refer to paragraphs 2 and 3 and Appendices 1 and 2 for detailed information relating to the Properties. INVESTMENT STRATEGY VPIF s investment strategy is focused on: providing unitholders with a competitive distribution yield together with a stable and consistent growth profile, which will increase the economic value attributable to unitholders; providing investors with the only office-dominated JSE property fund. The directors believe that the office sector is poised for recovery and the fund is well-positioned to deliver enhanced returns; continued grooming of the existing portfolio with a focus on tenant retention, tight management, targeted upgrades and extracting value out of unutilised bulk in the portfolio; acquiring well-located B+ and A grade office buildings with a stable tenant profile. In particular, VPIF will source buildings in which yield -enhancing refurbishments can be carried out. In the short term, the fund will avoid A Grade trophy buildings, which the directors believe are overpriced in the current market and have little opportunity for yield enhancement; acquisitions, which will take cognisance of the need for geographic and industry diversification but not, however, at the expense of yield and quality; acquisitions that will take advantage of the current office market in which recent lease negotiations have depressed property values; and utilising the Company s BEE status to retain and attract both Government and national tenants. Historically the fund has been able to secure leases for up to six years with National Government. PROSPECTS The directors believe the fund will continue to deliver solid returns and that it is well-placed to take advantage of current market conditions. The board is of the opinion that: the office market is at its lowest ebb, thereby creating embedded value for investors; office property rentals will rise disproportionally in the medium term as the current oversupply is absorbed and the lack of new developments impacts on rentals; the fund will acquire properties that enhance its stable base of well-managed, well-located buildings; the high proportion of single tenant and National Government/listed tenants will give an underlying strength to the cash flows; the current portfolio contains approximately m 2 of unutilised bulk in prime locations which value will be extracted; and the fund will continue to utilise its BEE rating to retain Government tenants and selectively acquire new Government tenanted buildings, provided those assets represent sound investments. The fund has a right of first refusal on any Vunani Properties completed developments, which currently amount to R150 million of assets. In addition, the fund has a pipeline of R450 million of assets from third party vendors. FINANCIAL INFORMATION All the financial information set out in this Pre-Listing Statement is the responsibility of the directors. Such information has been prepared for illustrative purposes only and, because of its nature, may not fairly reflect the financial position and results of the fund. VPIF s year-end has been changed from December to June. 8

11 Forecasts The table below sets out summaries of the unaudited profit forecasts of the fund for the year ending 30 June 2012 and should be read in conjunction with paragraph 17 of this Pre-Listing Statement: Based on a subscription of Based on a maximum subscription R306.5 million, which results of R497.5 million, which results in a loan to value of in a loan to value of approximately 20% at approximately 0% at a mid-range price of a mid-range price of 750 cents per unit 750 cents per unit Units in issue Distribution per unit (cents) Earnings per unit (cents) Headline earnings per unit (cents) Forward yield (based on distribution) per unit at a price of 750 cents per unit 9.4% 9.5% Pro forma financial information The table below sets out summaries of the unaudited pro forma financial information of the fund at 31 December 2010, after the transaction, and should be read in conjunction with paragraph 16.2 and Appendix 6 to this Pre-Listing Statement: Based on a subscription of Based on a maximum subscription R306.5 million, which results of R497.5 million, which results in a loan to value of in a loan to value of approximately 20% at approximately 0% at a mid-range price of a mid-range price of 750 cents per unit 750 cents per unit Number of units in issue Net asset value per unit (cents) Tangible net asset value per unit (cents)

12 SALIENT DATES AND TIMES 2011 Opening date of the private placing (09:00) Closing date of the private placing (12:00) by which date eligible investors must have submitted their applications to the Bookrunners in order to qualify to participate in the private placing Date when eligible investors will be notified of their participation in the private placing and the number of units allocated to them and the pricing thereof Market to be advised of the fulfilment of the conditions precedent Listing of VPIF units on the JSE Monday,18 July Friday, 29 July Tuesday, 2 August Friday, 5 August Thursday, 11 August The dates and times set out above are subject to change and any changes will be released on SENS and published in the press. JSE APPROVAL The JSE has granted approval for the listing of all the VPIF units in issue, after the private placing, with effect from the commencement of trade on the JSE on Thursday, 11 August 2011, subject to the conditions precedent set out below. CONDITIONS PRECEDENT TO THE LISTING The listing is subject to: VPIF obtaining a spread of unitholders acceptable to the JSE; the approval by Vunani shareholders of the Vunani disposal; the minimum subscription being received; and the registration of transfer of the Athol Ridge property to VPIF. COPIES OF THIS PRE-LISTING STATEMENT Copies of this Pre-Listing Statement, in English, may be obtained during business hours at the addresses set out in the Corporate Information section hereof between Monday, 18 July 2011 and Thursday, 11 August 2011 from: the Company; the Lead Independent Sponsor; the Corporate Adviser and Joint Sponsor; and the transfer secretaries. In addition, this Pre-Listing Statement is available in electronic form on VPIF s website ( DATE OF INFORMATION PROVIDED Unless the context clearly indicates otherwise, all information provided in this Pre-Listing Statement is provided at the last practicable date. 10

13 DEFINITIONS In this Pre-Listing Statement, unless a contrary intention clearly applies, words importing the singular include the plural and vice versa, any one gender includes the other genders, natural persons include juristic persons and vice versa and the following terms bear the meanings assigned to them below: Acquisition Agreement the agreement between Vunani Properties and VPIF, dated 20 June 2011, in terms of which, inter alia, VPIF acquires from Vunani Properties the Athol Ridge business and the entire issued share capitals of each of Cedar Park and Pacific Eagle (refer Appendix 13); Acquisition properties collectively or separately and individually, depending on the context, each of the Athol Ridge property, the Loop Street property and the Cedar Park property, details of which are set out in paragraph 3 and Appendices 1 and 2 to this Pre-Listing Statement, acquired by VPIF from Vunani Properties; allocation date the date on which the Company determines the allocation of the units to eligible investors in terms of the private placing, which date is expected to be Tuesday, 2 August 2011; Application Form the application form (blue) attached to and forming part of this Pre-Listing Statement, which, inter alia, eligible investors are required to complete and return in accordance with the instructions contained therein in order to be considered for participation in the private placing; Asset Management agreement the agreement, dated 20 June 2011, entered into between VPIF and VPAM, in terms of which VPAM is appointed to provide asset management services to VPIF, details of which are set out in paragraph 2.7 of this Pre-Listing Statement; Athol Ridge business the business comprising the letting enterprise in respect of the Athol Ridge property including leases, fixed assets, all rights, title and interests, and miscellaneous contracts and the trading liabilities in respect thereof; Athol Ridge property the immovable property on which Athol Ridge Office Park located at 151 Katherine Street, Sandown is situated, inclusive of the Athol Ridge business and owned by Vunani Properties; BBBEE Act the Broad-Based Black Economic Empowerment Act, 2003 (Act 53 of 2003), as amended; BEE Black Economic Empowerment as defined in the BBBEE Act; board or the directors the directors of VPIF as set out in the Corporate Information section of this Pre-Listing Statement; Bookrunners Investec Corporate Finance (trading as a division of Investec Bank Limited) and Vunani Corporate Finance, trading as a division of Vunani Capital Proprietary Limited); business day any day, other than a Saturday, Sunday or official public holiday in South Africa; Cedar Park Cedar Park Properties 31 Proprietary Limited (Registration number 2007/014552/07), a private company duly registered and incorporated in accordance with the laws of the RSA, a property owning company and an indirect subsidiary of Vunani and whose entire issued share capital is owned by Vunani Properties; Cedar Park property the immovable property described as Building 9 at Greenstone Hill Office Park, Emerald Boulevard, Greenstone Hill, Edenvale, which is registered in the name of Cedar Park; 11

14 certificated unitholders certificated units Commission Common Monetary Area Companies Act unitholders who hold certificated units; units represented by a paper unit certificate or other physical document(s) of title, which units have not been surrendered for dematerialisation in terms of the Strate system; the Companies and Intellectual Property Commission; South Africa, the Republic of Namibia and the Kingdoms of Swaziland and Lesotho; the South African Companies Act, No. 71 of 2008, as amended, which came into effect on 1 May 2011; conditions precedent the conditions precedent to the listing as set out in paragraph 9.1 of this Pre-Listing Statement; CSDP Central Securities Depository Participant, as defined in section 1 of the Securities Services Act, appointed by individual unitholders for the purposes of, and in regard to the dematerialisation of documents of title for the purposes of incorporation into Strate; debenture an unsecured variable rate debenture in VPIF having a nominal value of R2.4975, which is indivisibly linked to one ordinary share and which is regulated in terms of the Debenture Trust Deed (refer Appendix 10); Debenture Trust Deed the Debenture Trust Deed,which regulates the relationship between the debenture holders, the trustee and the Company, in respect of the debentures, entered into between the Company and the trustee on 20 June 2011, as amended from time to time, the salient features of which are set out in Appendix 10 ; dematerialisation the process by which certificated units are converted to an electronic form as uncertified units and recorded in the sub-register of unitholders maintained by a CSDP; dematerialised unitholders unitholders who hold dematerialised units; dematerialised units units which have been incorporated into Strate and which are no longer evidenced by physical documents of title, but the evidence of ownership of which is determined electronically and recorded in the sub-register maintained by a CSDP; documents of title unit certificates and/or certified transfer deeds and/or balance receipts of any other documents of title in respect of VPIF units in certificate form; Eagle Trust the Eagle Trust IT5910/96, a trust duly established in accordance with the laws of the RSA, the trustees of which are Pieter Willem Mac kenzie and Susan Penelope Mac kenzie; eligible investors or applicants institutional investors and other entities and persons who fall within the ambit of section 96(1) of the Companies Act and includes but is not limited to persons whose ordinary business, or part of whose ordinary business, is to deal in securities, whether as principals or agents; preferential placees invited by the directors and who may participate in the private placing, by virtue of section 96(1)(b) of the Companies Act, where the total acquisition cost of VPIF units for any single addressee acting as principal, is not less than R1 million; emigrants former residents of the Common Monetary Area; Exchange Control Regulations the Exchange Control Regulations of 1961, as amended, in terms of section 9 of the Currency and Exchange Act (Act 9 of 1933), as amended; 12

15 existing properties the existing properties constituting the VPIF Portfolio, excluding the Acquisition properties; GLA the gross lettable area, being the total area of a property that can be rented to a tenant; Group VPIF, Cedar Park, Pacific Eagle and, where applicable, VPIT; Hyprop Hyprop Investments Limited (Registration number 1987/005284/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA; IFRS International Financial Reporting Standards; independent reporting accountants KPMG Inc. (Registration number 1999/021543/21); and auditors independent valuer Mills Fitchet Magnus Penny Proprietary Limited (Registration number 1996/004736/07), a private company duly registered and incorporated in accordance with the laws of the RSA; IPD Investment Property Databank, an independent provider of property statistics to the South African property industry; JHI or the Property Managers Topeka Trading 4 Proprietary Limited (Registration number 2007/021131/07), a private company and a subsidiary of Excellerate Holdings Limited, duly registered and incorporated in accordance with the laws of the RSA, trading as JHI and the property manager of the fund; JSE JSE Limited (Registration number 2005/022939/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and licensed as an exchange under the Securities Services Act; JSE Listings Requirements the Listings Requirements of the JSE, as amended from time to time; King III the Code of Corporate Practices and Conduct in South Africa representing the principles of good corporate governance as set out in the King Report, as amended or replaced from time to time; last practicable date Tuesday, 28 June 2011 being the last practicable date prior to the finalisation of this Pre-Listing Statement; listing the listing of VPIF, in terms of the JSE Listings Requirements, in the Real Estate Real Estate Holdings and Development sector of the JSE List under the abbreviated name VPIF, JSE code VPF and ISIN: ZAE , on the listing date; listing date Thursday, 11 August 2011, being the anticipated date of the listing of the VPIF units on the JSE; Loop Street property the immovable property, situated at 14 Loop Street, Cape Town, which is registered in the name of Pacific Eagle; Ludlow Trust the Ludlow Trust IT1000/2004, a trust duly established in accordance with the laws of the RSA, the trustees of which are Robert Fletcher Kane and Lisa Adele Kane; m 2 square metres; minimum subscription the approximate amount of R366.7 million to be raised in terms of the offer for subscription and the Vunani Properties offer at the private plac ing price, as further detailed in paragraph 14 of this Pre-Listing Statement; MOI Memorandum of Incorporation for a Public Company, adopted via a special resolution, passed on 24 June 2011 as amended by a further special resolution passed on 28 June 2011 and approved by the JSE on 28 June 2011, the salient features of which are summarised in Appendix II; 13

16 non-resident a person whose registered address is outside the Common Monetary Area and who is not an emigrant; offer for sale the Vunani Properties offer and the offer for sale by Hyprop of units at the private placing price; offer for subscription or the offer of a maximum of new VPIF units for subscription maximum subscription at the private placing price; Pacific Eagle Pacific Eagle Investments 204 Proprietary Limited (Registration number 2007/025771/07), a private company duly registered and incorporated in accordance with the laws of the RSA, a property owning company and an indirect subsidiary of Vunani and whose entire issued share capital is owned by Vunani Properties; placing units the VPIF units to be placed with eligible investors in terms of the private placing; Pre-Listing Statement this Pre-Listing Statement, dated 5 July 2011, including the appendices and the Application Form; private placing or offer collectively, the offer for subscription and the offer for sale; private placing price the price at which VPIF units are allocated to placees in terms of the private placing, to be determined in accordance with the provisions of paragraph 7 headed Particulars of the private placing and the private placing price ; private placing price range the proposed pricing range of the private placing, of between R7.00 and R8.00 per unit. For purposes of this Pre-Listing Statement, a mid-range price of R7.50 per unit has been used; Properties or the VPIF Portfolio the Acquisition properties and the existing properties; Property Management agreement the agreement between VPIF and JHI, dated 8 February 2011, in regard to the property management of the Properties, details of which are set out in paragraph 2.8 of this Pre-Listing Statement; R or Rand or ZAR the South African Rand, the lawful currency of the RSA; Secondment agreement a written secondment agreement entered into between Vunani Capital, VPAM and the executive directors of VPIF, in terms of which, inter alia, Vunani Capital seconds their services to VPAM, more fully dealt with in paragraph 46 of this Pre-Listing Statement; Securities Services Act the Securities Services Act, 2004 (Act 36 of 2004), as amended; SENS Securities Exchange News Service of the JSE; share or ordinary share ordinary shares in the share capital of VPIF with a par value of R each linked to a debenture; South Africa or the RSA the Republic of South Africa; Strate the settlement and clearing system used by the JSE managed by Strate Limited (Registration number 1998/022242/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and the CSDP registered in terms of the Securities Services Act; transaction the acquisition of the Acquisition properties and the private placing; transfer secretaries Computershare Investor Services Proprietary Limited (Registration number 2004/003647/07), a private company duly registered and incorporated in accordance with the laws of the RSA, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107); trustee the trustee holding office as such in terms of the Debenture Trust Deed (i.e. Fluxmans Inc); unitholder a holder of VPIF units; 14

17 unit or VPIF unit or securities one linked unit with a nominal value of R2.50, comprising one share which is indivisibly linked to one debenture, and which are not capable of disposal independently of each other; Valuation Reports the reports, abridged or detailed as appropriate, prepared by the independent valuer in respect of the VPIF Portfolio; vendor Vunani Properties; VPAM Vunani Property Asset Management Proprietary Limited (Registration number 2007/028777/07), a private company duly registered and incorporated with limited liability in accordance with the laws of the RSA and the asset manager of the fund and wholly owned by Vunani Properties; VPIF or the Company or the fund Vunani Property Investment Fund Limited (Registration number 2005/019302/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and whose units will be listed on the JSE and, where applicable, includes VPIT; VPIT the trustees of the Vunani Property Investment Trust, in whose favour the Master of the High Court has issued Letters of Authority under reference number IT6363/2006, and which is constituted in terms of and governed by the VPIT Trust Deed, and being also the registered owner of the existing Properties forming part of the VPIF Portfolio; VPIT Trust Deed the Deed of Trust registered on 3 July 2006 under Letters of Authority reference number IT6363/2006 and the Addendum thereto dated 24 June 2011, which aligns the Deed to the JSE Listings Requirements; the salient features of which are set out in Appendix 9 ; Vunani Vunani Limited (Registration number 1997/020641/06), a public company duly registered and incorporated with limited liability in accordance with the laws of the RSA and whose shares are listed on the Alternative Exchange of the JSE; Vunani Capital Vunani Capital Proprietary Limited (Registration number 1998/01469/07), a private company duly registered and incorporated with limited liability in accordance with the laws of the RSA, a whollyowned subsidiary of Vunani; Vunani disposal the dilution of Vunani s indirect interest in VPIF as a result of the private placing as set out in a circular to Vunani shareholders, dated 7 July 2011, and in terms of which there is an irrevocable undertaking representing in excess of 50% of shares in issue to vote in favour of the relevant resolutions to approve the dilution, which is the requisite majority required; Vunani Group collectively, Vunani, its subsidiaries and any other company which is controlled or jointly controlled by it; Vunani Properties Vunani Properties Proprietary Limited (Registration number 2004/006730/07), a private company duly registered and incorporated with limited liability in accordance with the laws of the RSA, a subsidiary of Vunani and the vendor of Cedar Park, Pacific Eagle and the Athol Ridge property; and Vunani Properties offer the offer for sale by Vunani Properties of VPIF units at the private placing price. 15

18 Vunani Property Investment Fund Limited (formerly Vunani Property Investment Fund Proprietary Limited) (Incorporated in the Republic of South Africa) (Registration number 2005/019302/06) JSE code: VPF ISIN: ZAE PRE-LISTING STATEMENT PART A: INTRODUCTION 1. PURPOSE OF THIS PRE-LISTING STATEMENT This Pre-Listing Statement relates to a private placing of units by the Company by way of the: offer for subscription; and offer for sale. No public offer is being made. In accordance with the JSE Listings Requirements, this Pre-Listing Statement contains details of the private placing, together with relevant information relating to VPIF and the Properties. The purpose of this Pre-Listing Statement is to: provide eligible investors with the relevant information regarding VPIF, the VPIF Portfolio and the directors and managers thereof; provide eligible investors with information relating to VPIF s strategy and future prospects; provide details of the private placing; and enable VPIF to obtain a listing for its units. Subject to listing, VPIF offers investors an opportunity to participate in the only office-dominated JSE property fund, which sector the directors believe is well-poised for recovery. The portfolio of 21 high quality buildings have a solid tenant profile and offer a competitive distribution yield together with a stable and consistent growth profile. Since inception the fund has been managed by the same management team. The fund intends to double its portfolio size over the next 18 months through the acquisition of welllocated B+ and A grade office buildings with a stable tenant profile. This segment of the office market is characterised by greater volumes, more arbitrage opportunities and a rental base that will be pushed higher as vacancies decline and new developments demand premium rentals. VPIF intends to source buildings in which yield-enhancing refurbishments can be carried out. In the short term, the fund will avoid premium A grade trophy buildings, which the directors believe do not represent good value at this time. In essence, the listing of VPIF offers a well-organised and smoothly functioning property investment vehicle to investors and is well-positioned to achieve the investment strategy set out in paragraph

19 2. OVERVIEW OF VPIF 2.1 Background Background to the Vunani Group The Vunani Group was established following a management buyout in 2004 by the senior executives, Ethan Dube, Butana Khoza and Mark Anderson, of the entire issued share capital of African Harvest Capital, a wholly-owned subsidiary of African Harvest, a company previously listed on the JSE. Vunani was incorporated in 1997 (as a wholly-owned subsidiary of African Harvest and trading under the name African Harvest Capital), specialising in BEE-related investments, corporate advisory services, private equity transactions and trading activities. It listed on the Alternative Exchange of the JSE in 2007 to raise capital and grow its financial services activities, which includes Vunani Properties. A recapitalisation of the Vunani Group took place in The Vunani Group remains a majority black-owned and managed financial services group, with the original management team still in place. Vunani Properties was formed in 2003, together with its senior executives Pete Mac kenzie and Rob Kane, both of whom have considerable experience in all aspects of the property industry. This experience includes property construction, property development, property asset management and finance. Vunani Properties strategy has been to grow a strong property balance sheet through long-term holdings in commercial property assets on the one hand, and property developments, which can, inter alia, enhance the value of these property assets, on the other hand. The listing of VPIF represents a consolidation of all the commercial property interests previously held by Vunani Properties and a platform to further grow its assets. Background to VPIF In 2005 Ethan Dube joined the board of Hyprop, South Africa s largest listed retail property fund. Through this relationship Vunani identified an opportunity to provide Hyprop with a BEE enterprise development venture while bulking up its own commercial portfolio of property assets. A win-win result for both parties as Hyprop had been contemplating a sale of a commercial office portfolio as it represented non-retail assets. The formation of VPIF was effected by combining the commercial properties owned by Vunani Properties with a commercial portfolio owned by Hyprop. The current shareholding of VPIF is 50.2% Vunani and 49.8% Hyprop. At the time that this transaction was under consideration, Standard Bank Properties Proprietary Limited agreed to dispose of a portfolio of its own commercial property assets (largely incorporating bank branches in large and mid-sized towns across South Africa) to VPIF. Since its formation the fund has been managed by the same team. This will continue with effect from the listing date, through VPAM, a wholly-owned subsidiary of Vunani Properties. Rob Kane will continue in his role as the Chief Executive Officer of VPIF and will be supported by the Vunani Properties team, in particular its Managing Director, Pete Mac kenzie, and Marelise de Lange who has been appointed as Financial Director of VPIF. As VPIF will remain a significant and important investment holding for the Vunani Group its senior executives will remain keenly involved as evidenced by Ethan Dube s position as a non-executive director of VPIF and chairman of VPAM. The fund has historically performed well with annual compounded growth of 34.3% to December It is significant that this growth has been achieved in particularly tough trading conditions. The growth has been achieved with limited acquisitions but primarily through tight management and yield-enhancing refurbishments. The fund now owns 21 buildings, with commercial offices comprising just over 92% of the VPIF Portfolio, and valued at R947.6 million in aggregate. This includes 3 properties recently developed for tenants by Vunani Properties and acquired by the fund just prior to or at the listing date. All the Acquisition properties are A grade properties and are predominantly leased by national tenants on long leases. One of these is the Loop Street property, a benchmark green refurbishment of a 1904 listed building in the City of Cape Town, which is now on a seven-year lease with the Department of Public Works. 17

20 Vunani s commercial property holdings will, following VPIF s listing, be held through the fund in respect of the Acquisition properties and through VPIT in respect of the existing properties and going forward any future purchases will be transacted through the fund. The main purpose of the listing is to provide the fund with a platform for acquisitive growth. This will initially be facilitated through the private placing and will provide the fund with debt capacity to acquire yield-enhancing properties. The fund will not take on development risk, however, it will be able to utilise the expertise of its management team to add value to the VPIF Portfolio through yield-enhancing upgrades and refurbishments. An example is the current R9 million upgrade to Murrayfield Forum; a mixed use property in Murrayfield, Pretoria. In addition, all properties developed by Vunani Properties and that meet the fund s investment criteria will be offered to VPIF for purchase on a first right of refusal basis. Appropriate corporate governance structures are in place to ensure that the best interests of the fund are maintained at all times as well as to ensure no conflicts of interest arise between any related parties. The listing will also provide Vunani Properties with an opportunity to reduce a portion of equityrelated debt that was associated with the establishment of VPIF as well as debt linked to the Athol Ridge property. The location of the properties comprising the VPIF Portfolio reflects the economic bias in South Africa with most of the properties located in Johannesburg and Pretoria followed by Cape Town. The remainder of the properties are situated in economically strong, large and mid-sized towns giving a geographical diversification. The portfolio comprises 92% offices with the balance being ancillary retail and one rural retail centre that has been a sound investment and has significant expansion potential. 2.2 Company structure VPIF is a variable loan stock company with its sole assets being the Properties; the Acquisition properties will be held by VPIF, with the existing properties being held by VPIT in terms of the VPIT Trust Deed. The JSE has approved the existing properties being held by VPIT and VPIT will be fully bound by the JSE Listings Requirements as if it were a subsidiary of VPIF, subject to there being only one beneficiary of VPIT, namely VPIF. After listing VPIF will be structured as follows: Based on the minimum Based on the number of units to maximum number be issued of units to be issued Number of Number of units % units % Vunani Properties Hyprop Investors* Directors (as detailed in paragraph 43) included in the Vunani Properties number * Once the bookbuild process has been completed and, if necessary, a SENS announcement will be released relating to the investment by any material unitholders in VPIF. 1. Assuming Hyprop does not dispose of any units. 2. Assuming Hyprop disposes of 50% of its units. 18

21 2.3 The South African property market The South African property market has shown resilience in the global economic crisis and has held its own when compared with other off-shore markets. Locally, South African property has performed well since 1999 as shown below: South African property stocks have delivered a total annual return of 14.1% (2009) and 29.6% (2010), which compares well with the All Share Index of 18% (2010). However, South African property fundamentals have seen sustained pressure in the last two years as evidenced by the industry experiencing rising vacancies and arrears. Speculative developments led to oversupply and a struggling economy has put pressure on tenants to meet rental obligations. Further downward pressure was exerted on rentals due to increasing consumption costs, particularly in electricity and rates. The recovery has been slower than expected but the directors believe the market is at the bottom of the cycle; tenants will begin to feel the economy pick up towards the end of 2011; and that the oversupply of office accommodation will be absorbed in the medium term. Thereafter, the lack of new developments will exert upward pressure on rentals in Furthermore, new developments will require rentals in excess of R140m 2 R160/m 2 gross in order to be viable. This will enable existing buildings (such as those owned by VPIF) to command rental premiums. The table below gives the historical performance of the office market. The cyclical nature of the total returns is evident as is the impending improvement of the market. 19

22 The latest IPD data indicates that the South African property market turned the corner in Q However, the directors are aware of the need to carefully manage the fund s existing tenant base for the remainder of calendar 2011 until the upturn in the economy is felt by tenants. Lease renewals towards the last quarter of 2011 and into 2012 will likely reflect the improving economy. 2.4 Investment strategy VPIF s investment strategy is focused on: providing unitholders with a competitive distribution yield together with a stable and consistent growth profile, which will increase the economic value attributable to unitholders; providing investors with the only office -dominated JSE property fund. The directors believe that the office sector is poised for recovery and the fund is well -positioned to deliver enhanced returns; continued grooming of the existing portfolio with a focus on tenant retention, tight management, targeted upgrades and extracting value out of unutilised bulk in the portfolio; acquiring well-located B+ and A grade office buildings with a stable tenant profile. In particular, VPIF will source buildings in which yield-enhancing refurbishments can be carried out. In the short term, the fund will avoid A Grade trophy buildings, which the directors believe are overpriced in the current market and have little opportunity for yield enhancement; acquisitions, which will take cognisance of the need for geographic and industry diversification but not, however, at the expense of yield and quality; acquisition that will take advantage of the current office market in which recent lease negotiations have depressed property values; and utilising the Company s BEE status to retain and attract both Government and national tenants. Historically the fund has been able to secure leases for up to six years with National Government. The diagram below explains the fund s target market for acquisitions. The directors believe the Premium Grade sector of the market is over traded with limited stock. As such the value proposition is limited. The directors will focus on the B+ and A grade market, which is characterised by greater volumes, more arbitrage opportunities and a rental base that will be pushed higher as vacancies decline and newer developments demand premium rentals. 20

23 2.5 Growth strategy The directors will focus on: sustaining income growth and capital appreciation; and growing the portfolio while maintaining the quality thereof as well as the yield. The directors ability to extract further value from the existing asset base and also make yieldenhancing acquisitions is core to VPIF s strategy. A number of privately held portfolios have been identified for acquisition amounting to R450 million. In addition, the fund has a right of first refusal on any Vunani Properties completed commercial developments, currently amounting to R150 million. With capacity to take on debt, VPIF will be able to utilise a combination of cash and equity in concluding transactions. The fund will not undertake new developments within the fund but will outsource such function so as to avoid any negative impact on distributions and diversion of the fund s focus on core activities. This includes the undeveloped bulk within the VPIF portfolio comprising approximately m 2. The undeveloped bulk (which relates to the unutilised development rights which are of no value) has been included at zero value in the valuation of the fund. The undeveloped bulk relates to the Perseus Park and the Linger Longer properties. Perseus Park is close to the rapidly developing office node on the N1/Lynwood Road interchange. Development of the bulk may be for the current tenant, The State Information Technology Agency ( SITA ), or for a third party. The Linger Longer site is being rezoned as it is strategically located to Sandton s Gautrain station. As such, it is within the zone designated by the local authority for additional bulk. The current concept is to consolidate Linger Longer with the adjacent Vodacom property to build a super-basement of parking with offices above. Within the current VPIF Portfolio, there are further yield-enhancing refurbishments to be undertaken at Rynlal, Wale Street, Benstra and Motherwell. These will typically be tenant driven. 2.6 Prospects The directors believe the fund will continue to deliver solid returns and that it is well -placed to take advantage of current market conditions. The board is of the opinion that: the office market is at its lowest ebb, thereby creating embedded value for investors; office property rentals will rise disproportionally in the medium term as the current oversupply is absorbed and the lack of new developments impacts on rentals; the fund will acquire properties that enhance its stable base of well -tenanted, well -located buildings; the high proportion of single tenant and National Government/listed tenants will give an underlying strength to the cash flows; the current portfolio contains approximately m 2 of unutilised bulk in prime locations which value will be extracted; the fund will continue to utilise its BEE rating to retain Government tenants and selectively acquire new Government tenanted buildings, provided those assets represent sound investments. 2.7 Management of VPIF s assets The fund will be managed by VPAM in accordance with the terms of the Asset Management agreement, which is available for inspection as set out in paragraph 52. The VPAM management team, set out in paragraph 2.7.2, has remained unchanged since inception and each of the executives has substantial technical and financial skills to enable VPAM to maximise the long-term success of the fund Asset Management agreement The Asset Management agreement shall be for an initial period of seven years following the listing date, renewable for subsequent 5-year periods in accordance with the provisions of that agreement. The agreement may be terminated on the expiry of three months written notice. In terms of the JSE Listings Requirements, where an Asset Management agreement is entered into or renewed, such agreement cannot be entered into or renewed: 21

24 without a majority of the votes cast by unitholders (excluding any parties or their associates who are party to or have an interest in the agreement); and without providing therein for the right of unitholders, in a general meeting called by them or held by the Company, to cancel the agreement at any time before its expiry date, subject to a majority of the votes cast by unitholders (excluding any parties or their associates who are party to or have an interest in the contract). In the event that VPAM is not in default but an independent majority of the unitholders decide to terminate the Asset Management agreement, if VPAM so requires, the fund shall be obliged to purchase the VPAM business at fair market value which is defined as the asset management fee which would be payable to VPAM for the year following the date of termination. The fair market value is determined by multiplying the last monthly asset management fee payable prior to the date of termination by 12, capitalised at the rate equivalent to the forward yield of VPIF determined at the date of termination. Further termination rights and rights of default are contained in the Asset Management agreement Information relating to VPAM Name: Vunani Property Asset Management Proprietary Limited Legal form: A private company (Registration number 2007/028777/07), duly registered and incorporated with limited liability in accordance with the laws of the RSA Business address: Vunani House Block C, Athol Ridge Office Park, 151 Katherine Street, Sandown Shareholder: Wholly-owned by Vunani Properties, the shareholders of which are: Vunani 78%, Ludlow Trust 10%, Eagle Trust 12% Terms of contract Set out in paragraphs and and remuneration: Directors Name Professional Relevant Appointments to other qualifications experience listed property entities E G Dube MSc (Statistics) Refer paragraph 39 below Hyprop Executive MBA R F Kane B.Sc (Civ) Eng., MBA Refer paragraph 39 below None M de Lange B.Com (Law), B.Com Refer paragraph 39 below None (Hon)(Acc) B M Khoza B Com PG Dip Refer curriculum vitae None (Accounting) CA(SA) below P W Mac kenzie BSc Building Refer paragraph 39 below None Management, MBA Butana Mangaliso Khoza (42), B Com PG Dip (Accounting) CA(SA) Business address: Vunani House Block C, 151 Katherine Street, Sandown, Sandton, 2196 Butana completed articles with KPMG Inc in 1994 and spent six months in their office in Vancouver, Canada. He then joined Southern Asset Management and later transferred to Futuregrowth, then a division of Southern Life. He left Southern Life to establish African Harvest Capital with E G Dube. Butana served in a number of senior executive roles at African Harvest Capital. He is chairman of Vunani Securities. From August 2007, Butana assumed responsibility for the development of the Vunani Group s alternative asset management products, incorporating the jointly owned Collective Investment Scheme, which houses Exchange Traded Fund among other products and Vunani Private Equity Partners Proprietary Limited Asset management services VPAM will render the following services as the fund may reasonably direct in order to ensure that the operating standard is achieved and maintained: 22

25 Operating standard: VPAM shall strategically manage the VPIF Portfolio in an efficient manner, in good faith and diligently in accordance with sound, reasonable and prudent asset management practices and in keeping with directives issued by the fund from time to time. Strategy: VPAM will prepare and present a strategic plan to the fund prior to the commencement of each financial year. This strategic plan will be reviewed bi-annually and the progress in implementation will be reported on quarterly within 60 days after the end of each quarter, unless VPIF agrees otherwise. VPAM will from time to time recommend general strategies to maximise the performance of the VPIF Portfolio and strategies regarding property acquisitions, disposals, new developments, funding the expansion of the VPIF Portfolio and interest rate strategies in respect of the fund s liabilities. VPAM will also recommend such other strategies deemed to be in the best interests of the fund. Marketing: VPAM will market the fund to investors, analysts, bankers, financiers, the press and the investment community generally. Strategic research: VPAM will conduct or use available research into the relative investment merits of the various sectors and geographical localities of the property market. Succession plan: A human resources plan will be submitted to the fund for its approval from time to time to ensure the adequate management and staffing of VPAM with a view to ensuring that VPAM maintains the requisite skills and expertise to conduct the business of the fund. Asset management services: VPAM will perform the following asset management services: Formalise a strategic plan for the property portfolio and make recommendations regarding portfolio re-engineering, streamlining and risk balancing within the portfolio. Scrutinise the maintenance plan prepared for each property and revise the programme and budget in terms of affordability, if deemed necessary. Perform quarterly performance analyses of property managers and for the property portfolio as a whole in terms of performance against budgets and relevant industry benchmarks, with a focus on gross revenue growth, expense control and management of a comprehensive utility cost programme (i.e. actual recoveries to actual costs). Perform risk and exposure analyses on a semi-annual basis and review the perceived potential and current risks to which each property is or might be exposed and to which the fund is or might be exposed and report thereon. Forecast building lifecycles and revise the business plan for each property on an annual basis. Make recommendations regarding improvements to the property portfolio and, more specifically, regarding upgrades, renovations, developments, selling of assets and acquisitions on a quarterly basis or as VPAM deems fit in its reasonable discretion. Conduct viability and feasibility studies to appraise upgrades, development and acquisition opportunities. Have annual independent property valuations for multi- and single tenant buildings prepared. Manage marketing strategy at property management level to include target market identification, compilation of tenant mix, tenant procurement and selection of objectives. Make use of market research and available surveys, together with market intelligence to ensure that the property managers implement at property level, a relevant marketing strategy for all rentable premises, including rent reviews with lease renewals. Advise on long-term loan funding structures, maintaining debt to open market value ratios and implementing approved interest rate hedging strategies. Manage the appointment process and assess the performance of property managers against agreed industry benchmarks and constantly review and advise on any contractual issues relating to property managers. In all instances, act in the best interests of the fund. 23

26 Operational management: VPAM will manage the day-to-day operations of the fund, as follows: Management and supervision of bank statements and reconciliation thereof. Financial control: Cash flow management. Bank accounts. Bank exposure limits policy. Overdraft and funding facilities. System and internal controls review. Deposits/Securities. Tender documentation. Annual insurance review. Manage insurance claims processing and settling. Manage the process of risk assessment of tenants, including the taking of any legal action when required. Monitoring and reporting on changes to regulatory requirements. Appraisal of project definition and design concepts. Manage the function/process of project quality, cost and time control as well as building inspections. Zoning and town planning controls. Retain responsibility for audits and inspections regarding compliance requirements in respect of national building regulations, including local authority laws and the Occupational Health and Safety Act. Rates and tax objections. Replacement costing. Ensure compliance with regulatory and statutory requirements and authorities. Corporate governance controls. Marketing of the fund s image. Control professional appointments of auditors, corporate advisers, legal advisers, sponsors (if applicable), insurers, consultants and service providers. Retain responsibility for communication including communication and announcements, on a regular basis in respect of financial results, informal press and SENS releases (if applicable) and annual reports. Preparation of all trustee and committee documentation and documentation pertaining to the fund for the directors of the fund. Manage the business process according to VPIF board approved and authorised levels of authority Fees payable to VPAM The monthly remuneration payable by the fund to VPAM for all asset management and operational management services rendered by it in terms of the Asset Management agreement shall be 1 th / 12 of 0.5% (one-twelfth of zero comma five percent) of the aggregate of the market capitalisation of the fund determined by multiplying the number of linked units in issue at month-end by the monthly weighted average price thereof and the borrowings of the fund, less cash or cash equivalents, payable monthly in arrears. There will be no transaction fees payable to VPAM. The asset management fee will exclude any expenses that are directly related to the operation of the fund, including but not limited to: auditing fees; company secretarial fees; independent valuation fees; financing costs and finance raising fees; professional or advisory fees; and development management fees. 24

27 In addition to the Asset Management fee, the fund shall pay a Property Management fee, the amount of which shall be agreed from time to time between the fund and the Property Managers in consideration for the performance of the property management services. Letting commissions will be payable to VPAM or its sub-contractors for the successful conclusion of new leases and renewal of leases and will be in keeping with generally accepted tariffs, as follows: (a) 5% of the first 2 years rental on the space let; (b) 2.5% on the next 3 years rental on the space let to new tenants; (c) 1.5% on the next 3 years rental on the space let to new tenants; (d) 1% on the balance thereafter, with a minimum of one month s rental. If an existing lease is renewed, or should an existing tenant expand its premises or relocate within the relevant property, then the commission payable shall be 30% of the amounts set out in (a) to (d). Further increased commission may need to be paid in order to secure tenants from time to time. Any such increase in commission payable shall be agreed by the parties. 2.8 Property management The management of the properties within the VPIF Portfolio has been capably undertaken by JHI since inception. The JHI team works seamlessly with VPAM. The original Property Management agreement with JHI was signed on 13 December 2006 and Addenda thereto have been signed, the latest of which is dated 8 February The effective date of the current agreement is 1 January 2011 and it will remain in force for one year, whereafter it will be renewed subject to continued satisfactory performance and subject to the right of either party to terminate it on three months written notice. The Property Management agreement with JHI governs the entire VPIF Portfolio for a fee of 2.85% ( in cluding Value Added Tax ( VAT ) of gross monthly collections. However, under the umbrella of JHI, the Benstra and Motherwell properties are governed by separate management agreements, which are materially the same as the JHI agreement, with First Property Trust and Ramprop, respectively, due to those companies being best suited to manage those assets in the areas in which they are situated. JHI is a well-established property services company with more than a century of experience. The JHI directors are: J E Wellsted, M van der Walt, G G Hulley, J Boshoff and D Subramanian. JHI s business address is: JHI Place, 2 Norwich Close, Sandton. None of the VPIF directors have any beneficial interest, direct or indirect in JHI. Vunani Capital and the chairman of the fund previously held a 20% interest and a 10% interest in JHI, respectively, but this was disposed of during the last 18 months. The directors of JHI do not have any beneficial interest, direct or indirect, in the VPIF Portfolio and there is no relationship between the JHI directors and any other person, where a duty in relation to that other person conflicts or may conflict with JHI and this situation prevailed over the past two years. No placing units will be issued to JHI. The Property Management agreement is available for inspection as set out in paragraph 52. The property management services set out below have been sub-contracted to JHI in terms of the Property Management agreement and include but are not limited to instituting systems and procedures with a view to ensuring that: rental, operating costs and VAT recoveries are collected timeously and tenants deposits are accounted for; all property expenses are paid timeously, including without limitation, stamp duties and relevant property taxes; the landlord s rights are enforced against defaulting tenants; the buildings on the Properties are adequately insured against all relevant risks; routine inspections of all the buildings and Properties take place with a view to ensuring the continued maintenance thereof and that authorised capital expenditures are carried out; 25

28 tenant complaints and requirements are timeously and efficiently dealt with. Tenant complaints that are not resolved timeously are to be brought to the attention of the fund; all tenants are informed of all rules, regulations and notices issued by the fund; income and expenditure budgets are prepared for each property during the last 3 months of the preceding financial year in respect of the current budget period; monthly income and expenditure accounts are prepared for each property; lease expiries and renewals are dealt with expeditiously and anticipated vacancies are reported on and filled where possible prior to their occurrence. A rolling 12-month lease expiry table will be kept up to date comprising GLA and the Rand value of leases; best endeavours are made to let vacant space immediately and space which is to become vacant before leases expire; leases are entered into in accordance with the letting policies of the fund from time to time and all necessary documentation in this regard is timeously prepared and executed; contracts are entered into with suppliers of services to buildings at competitive rates having due regard to the quality of service provided; the Properties are generally efficiently and properly maintained. Secretarial and accounting will be performed as follows: surplus funds are to be invested in accordance with the directions of the fund; full, accurate and up -to -date books of account and other records relating to the management of each property are to be maintained in such manner and format as may from time to time be acceptable to the fund and its auditors: such books of account and other records to be available at reasonable times for inspection, examination, audit and transcription by the fund; maintenance of the fund s secretarial documentation including minutes and resolutions; providing information to the fund s auditors for the annual audit; attending to the annual audit and preparation of the annual financial statements; taking minutes at meetings; preparing and timeously circulating agenda, reports, minutes and other documentation required for board meetings of the fund, including round robin resolutions; attending to the requirements of the JSE, including without limitation, procuring the preparation and distribution of circulars, payments of distributions and the convening of general meetings of unitholders; and liaison with the sponsors, corporate advisers, legal advisers, auditors and other professional advisers on all relevant matters. Compliance matters will be dealt with as follows: Action to be taken as may be necessary to ensure full compliance by the fund with all the legal, statutory, JSE and secretarial obligations and the insurance requirements of each property in the VPIF Portfolio. The Property Managers shall ensure compliance by the fund with all labour (if applicable), insurance, tax and other laws relating to the fund as directed by VPAM ; and VPAM shall notify VPIF of any violation of any statutory obligations which come to its attention and use its best endeavours to remedy such violation. 2.9 Interests of VPIF directors in the Acquisition properties The VPIF directors interests in the Acquisition properties are as follows: P W Mac kenzie has, through the Eagle Trust, a 12% interest in Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle. R F Kane has, through the Ludlow Trust, a 10% interest in Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle. E G Dube has, through the END Trust, a 24.6% interest in Vunani, which in turn owns 78% of Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle. C E Chimombe-Munyoro has, through the Anbesa Investment Trust, a 0.2% interest in Vunani, which in turn owns 78% of Vunani Properties, which in turn owns 100% of Athol Ridge, Cedar Park and Pacific Eagle Details of the date and cost of the Acquisition properties is set out in Appendix Other information Distributions Distributions will be made to unitholders bi-annually as described in paragraph

29 Properties acquired in the last three years Details of the immovable properties owned by the fund are set out in paragraph 3 and Appendix 1. Other than the Acquisition properties dealt with in paragraph 3.1, none of the Other Properties were acquired within the last three years, however, the initial price thereof and the date of acquisition are set out in Appendix Properties disposed of in the last three years The fund disposed of the Yorkor property in Pretoria for R27,5 million in cash on 18 December 2008 to Martycel Properties CC (the member being Mr S P Smit), 638 Rudolf Street, Constantia Park, Pretoria. The most recent valuation in respect of that property reflected a value of R14 million. VPIF intends to grow the portfolio but it will from time to time trade out those properties that are unlikely to retain their value or where the fund can make an attractive arbitrage Acquisition of subsidiaries Other than as set out in paragraphs 3.2 and 29 below, the application for the listing of the units does not coincide, directly or indirectly, with the acquisition by the fund of securities in or the business undertaking of any other company, which company or business undertaking will become a subsidiary of or part of the business of the fund in the long term Independent reporting accountants report The independent reporting accountants have issued a report regarding the value and existence of the Acquisition properties, which report is set out in Appendix THE VPIF PORTFOLIO 3.1 VPIF existing properties The following are regarded as the predominant properties in the VPIF Portfolio: Athol Ridge Office Park, Sandton; Pacific Eagle, 14 Loop Street, Cape Town; Cedar Park, Greenstone Hill Office Park, Greenstone Hill, Gauteng; Standard Bank Private Bank, Hyde Park; Vodacom Park, Sandton; Investment Place, Sandton; Wale Street Chambers, Cape Town; Standard Bank office/retail branches in the following economically strong towns: Harrismith, KwaZulu-Natal; Ladysmith, KwaZulu-Natal; Stanger, KwaZulu-Natal; Upington, Northern Cape; Perseus Park, East Pretoria; Benstra Building, Pretoria; and Belvedere, Sunninghill. 3.2 Acquisition properties The following transactions were effected as part of an internal restructuring within the Vunani Group and will result in VPIF acquiring 3 A+ grade quality, well-located properties, with long leases with blue-chip tenants from Vunani Properties. Where applicable, these transactions have been approved by the shareholders of Vunani, and will take effect simultaneously with the listing: VPIF will acquire the entire issued ordinary share capital of Cedar Park, which owns the Cedar Park property, as a going concern, based on the aggregate net asset value thereof for R3.9 million; 27

30 VPIF will acquire the entire issued ordinary share capital of Pacific Eagle, which owns the Loop Street property, as a going concern, based on the aggregate net asset value thereof for R13 million; VPIF will acquire the Athol Ridge property, as a going concern, for an aggregate amount of R104.4 million. The funds raised in respect of the private placing will be utilised as set out in paragraph 14. The Acquisition properties are being acquired at the value determined by the independent valuer on 1 January 2011, such value being in line with the directors valuation. Notwithstanding the transfer dates of the Acquisition properties, VPIF shall be deemed to have acquired possession thereof with effect from the Closing Date as defined in the Acquisition Agreement, which date may not be later than two business days prior to the listing date and from which date VPIF shall be entitled to all benefits and income arising therefrom and from which date the Acquisition properties shall be held by VPIF at its risk and expense. At the last practicable date, clearance had not been obtained for the transfer of the Athol Ridge property valued at R104.4 million (11% of the VPIF Portfolio). Every effort will be made to secure the required clearance and registration as soon as possible. Vunani Properties has warranted that it has the absolute right and has obtained the relevant authority from the bondholder in respect thereof to sell the property and the directors are not aware of any reason for this property not to be transferred to the fund. Having regard to the fact that the acquisition of the Athol Ridge property is an internal transaction, no provision has been made in the forecast financial information set out in paragraph 17 below for the possibility of it not transferring to the fund. Unitholders will be advised, via a SENS release, once all the Acquisition properties have been transferred to VPIF. The Competition Authorities have been consulted regarding the transactions set out above and have indicated that they consider the transactions to be an internal restructuring and therefore not notifiable in terms of the provisions of the Competition Act, 1998 (Act 89 of 1998), as amended. Settlement of the consideration relating to the Acquisition properties will take place immediately prior to or on the listing date or as soon as transfer has taken place. No promoter has been involved in these transactions. The salient features on the Acquisition Agreement are set out in Appendix 13. The Acquisition Agreement is available for inspection as set out in paragraph 52. Details of the vendor Vendor s information Address Shareholders Vunani Properties Vunani House, 151 Katherine Street, Sandown Vunani 78% Directors: Ludlow Trust 10% E G Dube Eagle Trust 12% B M Khoza P W Mac kenzie R F Kane W G Frawley 28

31 Guarantees, warranties, restrictions and income tax considerations The Acquisition Agreement contains warranties normal for acquisitions of this nature. Save for the rental guarantee detailed in paragraph 3.3.9, no other financial guarantees have been given by the vendor pursuant to the book debts and/or other assets. The Acquisition Agreement does not preclude the vendor from carrying on business in competition with VPIF or impose any other restrictions on the vendor. Accordingly, no cash payments have been made in respect of restraints of trade. There is a liability for accrued taxation, which was taken into account in arriving at the purchase consideration of Pacific Eagle. Goodwill arises in respect of the transaction as detailed in Appendix Details of the VPIF Portfolio The market value of the VPIF Portfolio, in terms of an independent valuation, is R with an effective GLA of m 2. Details of the VPIF Portfolio are set out in Appendix 1. Analyses of the VPIF Portfolio by market value, sector, tenancy, geographical spread by lease expiry profile and weighted average yield at 1 April 2011 are set out below. All graphs are related to the 12-month forecast period to 30 June Geographic spread The majority of the properties comprising the VPIF Portfolio are situated in Gauteng Province. Going forward the fund expects to acquire more geographically diversified properties however this will depend on the investment opportunities that become available Sectoral spread The sectoral spread of the VPIF Portfolio reflects a heavy concentration towards the office sector due to the historical focus and strategy of the fund. There are only two dedicated retail properties, Motherwell which performs exceptionally well, and Linger Longer, which will be redeveloped into a large office block. The sectoral bias will be retained as it is this focus that has enabled the fund to perform well. 29

32 3.3.3 Contracted vs. Uncontracted rental income The VPIF Portfolio rental income has historically been stable given the quality of the buildings and the high percentage of tenant retention. However, the lease expiries in 2012 will provide opportunity for upward rental revision, given the strengthening rental market. Uncontracted rental income is defined as that income for which there are no leases in place. For the two reporting periods, 2011 and 2012, uncontracted rental comprises 4% and 18% of revenue, respectively. The uncontracted figure must be compared with the portfolio vacancy of 4.8% (2% excluding developments in progress). The uncontracted rental is made up of 2 leases: 14% of GLA is occupied by SITA at Perseus Park, Pretoria. SITA have indicated they want to renew with a long lease and these negotiations are in progress. The directors are confident that SITA will renew the lease; 4.5% of GLA is occupied by the City of Cape Town in Wale Street Chambers. The City has progressively taken up all available space in the building and has committed to renew. Negotiations are in progress and the directors are confident that the lease will be renewed Tenant spread The VPIF Portfolio has a strong tenant base which is weighted toward Government, national and listed tenants, which jointly comprise 74% of GLA. The total number of tenants in the VPIF Portfolio is approximately 182. For the graphs below the following key applies: A : Government, large national tenants, listed tenants, and major franchises. These include, inter alia, SITA, The Compensation Commission; Vodacom Limited, The Standard Bank of South Africa Limited, ABSA Limited and the SA Post Office. B : National tenants, listed tenants, franchisees, and medium to large professional firms. These include, inter alia, Aegis BPO Holdings Limited, GOBA Limited, Pam Golding Properties Limited, Life Sense and Alliance Media. C : Other comprises all other tenants that do not fall into the above categories, of which there are approximately 100 tenants. 30

33 3.3.5 Single vs. Multi-tenanted buildings 39% of gross income is generated from single-tenanted properties and the balance is generated from multi-tenanted properties Vacancy profile by sector The total vacant GLA in the VPIF Portfolio amounts to m² or 4.83%. It should be noted that 2% of the VPIF Portfolio is currently being redeveloped and tenanting of this space will commence in Q giving an effective vacancy of 2.8%. Vunani Properties has provided a 2-year rent guarantee at market-related rentals on 1.8% of the GLA in respect of vacancies in the Athol Ridge property and the Cedar Park property. The directors consider this prime space is being marketed at realistic rentals and believe it will be let in the short term. The vacancies in the VPIF Portfolio are well below the national average reported by IPD. 31

34 3.3.7 Lease expiry The lease expiry profile reflects current leases expiring as a percentage of both GLA and current income receivable for the VPIF Portfolio. Current leases include the rental guarantee from Vunani Properties as detailed in paragraph The fund is likely to benefit from lease expiries in 2012 in respect of which upward rentals are anticipated. # Expiring leases in 2012 include the following (% GLA): SITA 14.0% Management is in negotiations with SITA who has indicated it will renew the lease. City of Cape Town 4.5% Management has a letter of commitment from the City of Cape Town to renew the lease and negotiations are in progress. Compensation Fund 7.8% Compensation Fund has extended its lease until March 2012 and have requested a lease proposal for conversion of the building to a Green Building. Pam Golding 1.5% Pam Golding will renew the lease and negotiations are in progress. Hillside Tavern 0.5% Hillside Tavern has indicated it wants another five-year lease. Standard Bank, Springs 1.9% SBSA will renew the lease following a major upgrade of the branch. Standard Bank, Ladysmith 1.4% SBSA will renew the lease. Negotiations are in progress. Standard Bank, Stanger 1.3% SBSA will renew the lease. Negotiations are in progress. Impala Platinum 1.9% Impala Platinum is a long-term tenant and it is considered unlikely it will not renew the lease. Total committed leased area 34.8% 32

35 $ Expiring leases in 2013 include the following (% GLA): Standard Bank, Upington 1.2% Management is confident that SBSA will renew the lease. Standard Bank, Randburg 0.9% Management is confident that SBSA will renew the lease. Aegis 5.3% Aegis is expanding and management is confident it will renew. Telesure 3.1% Telesure is expanding and management is confident it will renew. Amethyst 1.7% Management is confident it will renew. Total lease GLA, which management is confident will be renewed 12.2% Total GLA = m Rental escalations, rental per m 2 and average annual property yield The weighted average rental per m 2 (excluding vacancies) for the VPIF Portfolio by sector is as follows: Commercial: R91 m 2. Retail: R89 m 2. The weighted average rental escalation (by GLA) for the VPIF Portfolio* is: Office: 8.9%. Retail: 8.1%. The forward annualised property yield to 30 June 2012 is 10% (refer paragraph 17). * Excludes leases expiring before Rental guarantee Vunani Properties has warranted in favour of VPIF that: the monthly gross rental income to accrue to VPIF, whether directly or indirectly, from the lettable office space in the Cedar Park property existing as at the listing date, over the two-year period immediately following the listing date, (and covering a lettable floor area of 261 m² at R95 m 2 gross, as well as six covered and 10 open parking bays) shall not be less than R , exclusive of VAT thereon for the first year and for the second year, an annual escalation of 8% on the aforesaid rental. Gross rental income for purposes of this warranty comprises the leased rental, including rates and taxes (but not increases in rates and taxes), insurance, maintenance, but excluding consumption charges (including electricity, water and sewerage) and any VAT thereon. If the aggregate 33