hyprop investments limited integrated annual report and … · 2019-11-25 · shareholders’...

2019 Integrated annual report and consolidated and separate financial statements

Hyprop Investments Lim

ited Integrated annual report and consolidated and separate financial statements 2019

Contents

Scope of this integrated annual report 1

Our purpose and values 2

Group snapshot 3

2019 headlines and key metrics 4

Overview 6

Key strategic objectives 8

Business model 10

Directorate 12

Risk management 14

Our market in context 18

Leadership review 21

Chairman’s report 22

Executives’ report 26

Stakeholder engagement 44

Business structure 46

This report is available online: https://www.hyprop.co.za

Capital Description Pages

F FUNDING Financial capital Financial resources deployed by the company26

and 89

P PORTFOLIO Manufactured capital Physical infrastructure used26

and 89

Pe PEOPLE Intellectual capital Organisational knowledge, systems, protocols, expertise 49

Pe PEOPLE Human capital Competency, capability and experience of the board, management and employees 48

S STAKEHOLDERS Social and relationship capital Relationship and engagement with broader society and communities impacted by the company 44

GC GLOBAL CONTRIBUTION Natural capital Company’s preservation and use of natural resources 56

Sustainability 47

People 48

Environment 56

Our communities 60

Financial and capital 60

Governance 61

Corporate governance report 62

Remuneration report 69

Social and ethics committee report 88

Consolidated and separate financial statements 89

Shareholders’ information 196

Shareholders’ analysis 196

Shareholders’ diary 197

Distribution details 197

Administration 198

Glossary 199

Cover image: Delta City Podgorica, Montenegro.

Integrated annual report and consolidated and separate financial statements 2019Hyprop Investments Limited

Scope of this integrated annual reportThis integrated annual report for the year ended 30 June 2019 presents Hyprop’s performance and activities for the financial year as well as the company’s strategy to optimise value for all our stakeholders. We aim to create value in a sustainable and responsible manner, as described in this report. Reporting scope and boundaryHyprop is a specialist shopping centre REIT, which currently operates a portfolio of premium shopping centres in South Africa, Eastern Europe and sub-Saharan Africa (excluding South Africa). Hyprop’s investments in Eastern Europe are held via a 60% interest in UK-based Hystead.

This report should be read in conjunction with the full annual financial statements for a comprehensive understanding of Hyprop and the year under review. Reporting on our sustainability initiatives covers the holding company and our South African properties.

The reporting process has been guided by the principles contained in the International Integrated Reporting Council’s (IIRC) framework and the King Code on Corporate Governance 2016 (King IVTM). The annual financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), SAICA and Financial Standards Council financial reporting guides, the JSE Listings Requirements and the South African Companies Act 2008. Accounting policies used to prepare these financial statements are consistent with those applied in the prior year, save for the adoption of new accounting standards which became effective during the year.

Our approach to materialityThis report provides information that we believe is relevant to assessing the financial position and performance of the group.

Material changesThe only material change to the size, structure or ownership of the group in the year under review is the decision to reduce the group’s exposure to sub-Saharan Africa. The process commenced in the current financial year with the disposal by AttAfrica of its interest in Achimota Retail Centre in Ghana. It is anticipated that the disposal of all of the group’s sub-Saharan African (excluding South Africa) interests will be completed by December 2020.

Six capitalsIn line with the IIRC concept of reporting in terms of the six capitals (see inside front cover) which impact on value creation and contraction in a business, the group’s activities and performance relating to the capitals are covered throughout the report.

AssuranceHyprop’s external auditor, KPMG Inc., has audited the financial statements for the year ended 30 June 2019. KPMG’s unqualified audit report is on page 101. The scope of the audit was limited to the information in the consolidated financial statements on pages 106 to 188.

ContactWe regard this report as a further valuable opportunity to connect to and communicate with our shareholders, and to respond to matters raised. We welcome your feedback on this report. Please direct this to investor relations, at [email protected].

Forward-looking statementsThis integrated annual report contains forward-looking statements that, unless otherwise indicated, reflect our expectations as at 30 June 2019. Actual results may differ materially from the group’s expectations if known and unknown risks or uncertainties affect the group’s business, or if estimates or assumptions prove inaccurate. The group cannot guarantee that any forward-looking statements will materialise and, accordingly, readers are cautioned not to place undue reliance on these statements. The group assumes no obligation to update or revise any forward-looking statements if new information becomes available, other than as stipulated by the JSE Listings Requirements.

Board approvalThe audit and risk committee acknowledges its responsibility on behalf of the board to ensure the integrity of the Hyprop integrated annual report for the 2019 financial year. The committee has reviewed the report and believes that it appropriately and sufficiently addresses all material issues, and fairly presents the performance of Hyprop, its subsidiaries and joint ventures for the year ended 30 June 2019.

The consolidated and separate financial statements included in this report, were approved by the board on 23 October 2019.

The remainder of the integrated report was approved on 23 October 2019.

Gavin Tipper Morné WilkenChairman Chief executive officer

23 October 2019

* Copyright and trademarks are owned by the Institute of Directors Southern Africa NPC and all of its rights are reserved.

Page 1

Integrated annual report and consolidated and separate financial statements 2019

Our purpose and values

We create environments and opportunities for people to connect and have authentic and meaningful experiences

VISION

HOW W

E PLA

N TO

DO

ITWHY DO W

E EXIST

Make things happen

Responsible for our actions

Fairness, respect and

trust

Teamwork

Core values which are integral

to ourbusiness

We challenge the status

quo

To be the leading South African based REIT

through managing and developing tangible and

intangible assets

By owning and managing mixed use precincts underpinned by dominant retail centres, in key economic nodes in South Africa and Eastern Europe

SOUT

H AF

RICA

EASTERN EUROPE

NON-TANGIBLE ASSETS

VALUES INTEGRITY

C

REAT

IVITY

RESPONSIBILITY

EXECUTI

ON

COLLABORATION

Strengthenthe entertainment and restaurant o�ering, together with securing rights for mall extensions

Embrace thedigital disruption

which is transforming many traditionalmarket sectors

Reposition malls, partner with our tenants and manage the portfolio on aholistic basis


Page 2

Woodlands Boulevard, Gauteng, South Africa

Groupsnapshot

Page 3


Headlines

SOUTH AFRICA

Ç 6,5%Distributable income (yoy)*

0,8%Disposal of non-core assetLakefield office park

EASTERN EUROPE

Ç 13,5%Distributable income (yoy)*

<0,5%Very low vacancies

12 000m2

Hyper conversion at The Mall, Sofia

Vacancies reduced to

SUB-SAHARAN AFRICA (excluding South Africa)

Taken control of

asset managementProgress in reducing exposureto the region

R1,46bnInvestments impaired based on anticipated sales proceeds

GROUP

Revised

strategy under new executive team

È 1,5%Distribution per share

Strong liquidity

R8,5bnDebt refinanced/raised

Interest cover ratio of

3,98 times

Group snapshot

* Year-on-year

Page 4


Key metrics

Trading density (turnover/m2)

South Africa (R) Eastern Europe (€)

+0,6% +3,7%2018 2019

Distribution per share (cents)

Group Excluding Africa

2018 2019

-1,5% +5,9%

Rent ratio SA and e�ort ratio EE (%)

2018 2019

South Africa

+0,3% -0,3%

Eastern Europe EE e�ort ratio – includes rates

9,4% 10,6%9,1%

NAV per share (R)

IFRS Adjusted – see through

2018 2019

-7,0% -6,7%

102,98109,90

95,78 102,5

See-through loan-to-value ratio (%)

2018 2019

Total debt Total assets

32,7% 35,2%

Interest cover ratio (times)

-0,382018 2019

10,9%2 936 2 958

245 254

768745725757

4,363,98

R13,3bnR38,0bn

R12,8bn

R39,3bn

Page 5


Group snapshotOverview

South Africa

NigeriaGhana

CroatiaSerbia

BulgariaMacedonia

Montenegro

Sub-Saharan Africa 100% OWNED(excluding SA)

Hyprop Investments Mauritius – Mauritius

75%(Nigeria)

(Held-for-sale)

75%(Ghana)

45%(Ghana)

47%(Ghana)

37,5%AttAfrica

(Mauritius)

Eastern EuropeHystead – United Kingdom

60% OWNED

100%Skopje City Mall

Skopje (Macedonia)

100%Delta City Podgorica

Podgorica (Montenegro)

100%Delta City BelgradeBelgrade (Serbia)

100%The Mall

Sofia (Bulgaria) (EU)

90%City Center One WestZagreb (Croatia) (EU)

90%City Center One EastZagreb (Croatia) (EU)

2019

Distributable income

14%R266m

2019

Gross asset value

25%

R12,8bn

2019

Distributable income(R58m)

2019

Gross asset value

14%R7,2bn

Strategic objectives:• Retain dominance• Leverage SA expertise• Formalise growth strategy

2019 2018

GLA (m2) 241 326 230 584Trading densities €254/m2 €245/m2

Growth in distributable income 13,5% 69%Vacancies <0,5% 0,1%Effort ratio 10,6% 10,9%

Strategic objectives:• Implement exit strategy• Taken control of asset management• Preserve value


Page 6

South Africa

NigeriaGhana

CroatiaSerbia

BulgariaMacedonia

Montenegro

We create environments and opportunities for people to connect and have meaningful experiences by owning and managing mixed-use precincts underpinned by dominant retail centres in key economic nodes.

South Africa 100% OWNED

Western Cape Gauteng

80% 75,16%


R1 695m

2019

86%

Gross asset value

R31,2bn61%2019

Strategic objectives:• Assess and reposition malls• Increase trading densities• Increase non-GLA revenue

2019 2018

GLA (m2) 706 626 722 460Trading densities R2 958/m2 R2 936/m2

Growth in distributable income 6,5% 4.1%Vacancies 0,8% 1,9%Rent ratio 9,4% 9,1%

(unless otherwise indicated)

Page 7


SOUTH AFRICAEASTERN EUROPE

NON-TANG

IBLE A

SSET

S

SA

EE

GROUP

NT

G

Repositionour malls

Improve dominance

Group snapshotKey strategic objectives

Reduce LTV and restore investment-grade credit

rating

Transform traditional

market sectors

Three-year strategic plan that will see Hyprop adapt

to the rapidly evolving retail landscape, disruptive technologies and market

conditions.


Page 8

SOUTH AFRICA

EASTERN EUROPE

NON-TANG

IBLE A

SSET

S

SA

EE

GROUP

NT

G

SOUTH AFRICA

Mixed-use precinctsIncrease non-GLA revenueAssess and reposition mallsDrive positive growth in trading densities

Provide a range of retail, entertainment and related services to residents and workers within mixed-use precincts

Optimise tenant mix based on market needs

Improve mall relevance through the introduction of new brands to South Africa and our malls

Reduce occupancy costs, including cost savings from environmentally friendly projects

Identify alternative uses for assets to improve performance

EASTERN EUROPE

Improve dominanceLeverage SA expertiseFormalise growth strategy

Provide a range of retail, entertainment and related services to residents and workers within mixed-use precincts

Asset management initiatives and mall extensions to grow portfolio value and optimise tenant mixes

Apply SA skills and expertise to drive returns and improve operating efficiencies

Higher levels of collaboration between divisions and malls, which should result in improved efficiencies

NON-TANGIBLE ASSETS

Embrace digital disruptionFormalise and implement non-tangible asset strategy

Embrace and develop relevant non-tangible assets affecting our markets

Use of technology to improve efficiencies

Improve interaction with shoppers whose needs and shopping habits are changing the way we and our tenants approach our businesses

Embrace online retailers and provide facilities for them to distribute their products via our malls

Invest in the development of technologies in the retail, property and infrastructure spaces that will have a direct impact on our business

SA

EE

NT

GROUP

Reduce LTV ratio and restore investment grade credit ratingCash-backed distributionsNew skills at board and operational levelImprove stakeholder communication

Evaluate alternative ways to restore investment grade credit rating (reduce the group’s LTV ratio)

Strengthen the balance sheet by optimising capital allocation and distribution ratio

Distributions only paid from cash-backed earnings

Maintain adequate liquidity/borrowing capacity to refinance short-term debt

Appoint staff with appropriate skills to ensure strategy implementation

Improve collaboration between malls and regions

G

Page 9


P

F

Pe

GC

S

FUNDING

PORTFOLIO

GLOBAL CONTRIBUTION

STAKEH

OLDER

S

PEOP

LE

Manufactured capitalOur portfolio of property and investment assets valued at R51 billion

Financial capitalHyprop’s capital structure and our established relationships with investors, banks and other funders across the globe

Human and intellectual capitalOur teams throughout the group and their respective skills, knowledge and expertise, working in a collaborative culture, supported by Hyprop’s ongoing investment in skills development, systems and processes

Social and relationship capitalOur interactions with stakeholders inform group strategy

Natural capitalOur role as a good global citizen, understanding our impact beyond our property assets, and our responsibility to reduce our environmental footprint

Our business model has been fine-tuned to

give effect to our revised business

strategy

In expanding, enhancing, diversifying and optimising

our portfolio to deliver sustainable returns

we take into account our full universe of stakeholders.

Group snapshotBusiness model

BoardEmployeesTenantsShoppersFundersInvestorsSuppliersLocal communitiesEnvironmentRegulatory bodies

OUR

STAK

EHOL

DERS


Page 10

P

F

Pe

GC

S

FUNDING

PORTFOLIO

GLOBAL CONTRIBUTION

STAKEH

OLDER

S

PEOP

LE

PEOPLE

What we doMaximising the group’s human and intellectual capital in a collaborative and results-orientated culture

How we do itStratco established to oversee all aspects of the group’s activitiesExcos restructured with revised mandatesExecution, collaboration and creativity added to group’s valuesPercentage of black senior management employees increased to 19%Training spend increased by 84% Number of black employees increased by 9%Coffee@Hyprop forum established to improve internal communication

Pe

PORTFOLIO

What we doMaintaining the relevance of Hyprop’s properties in line with global trends and customer needs

How we do itProvide a range of retail, entertainment and related services to residents and workers within a mixed-use precinctR132 million invested in mall upgrades and expansions in South AfricaVacancies in SA portfolio reduced to 0,8% and <0,5% in EE portfolioDisposal of non-core asset Lakefield office park12 000m2 Hyper conversion at The Mall, Sofia

P

FUNDING

What we doDisciplined management of debt and equity, recycling of capital

How we do itStrong liquidity position and interest cover ratioR8,5 billion of debt refinancedDistributions paid from cash-backed earningsImproved interaction with Moody’s to address their concernsRoadshows/presentations to equity and bond investors

F

STAKEHOLDERS

What we doSustainable investment returns, improve existing culture, understanding our shoppers in order to provide meaningful experiences

How we do itImproved internal culture of collaborationShopper surveys to strengthen Hyprop’s and our tenants’ operationsInvestor surveys to improve investor communicationsWorkshops with major tenants to address common challengesIncreased transparency of financial reporting

S

GLOBAL CONTRIBUTION

What we doMonitoring our impact on the sustainability of the communities in which we operate

How we do it81% of waste in SA portfolio recycled11 184MWh of electricity saved during the year4 588 tonnes of CO2 emissions avoided through to solar produced electricityR12,3 million saved through energy efficiency projects

GC

Page 11


CHAIRMANCA(SA)Gavin has been involved in the financial services industry for more than 25 years, and was an executive director of Coronation Limited and a technical partner at KPMG South Africa. He currently serves on a number of listed and unlisted boards.Appointed: 2013Committees: AUDIT AND RISK, REMUNERATION AND NOMINATION (chair), INVESTMENT

Gavin Tipper (54)

CA(SA)Thabo began his career as a senior lecturer in accounting and taxation at the University of the North West. He worked as finance manager of the North West Parks Board, centre manager in the Rustenburg office of the auditor-general and finance manager of Royal Bafokeng Administration. He currently serves on the boards of a number of listed companies.Appointed: 2013Committees: AUDIT AND RISK (chair), REMUNERATION AND NOMINATION

MCompt, CA(SA)Zuleka is an internationally certified Leadership and Life Transformation Coach. She previously held the role of Professional Practice Director (Audit Quality Leader) for Deloitte Africa. She was a Deloitte audit partner for more than 12 years, served on various committees at the Independent Regulatory Board for Auditors (IRBA) and is a member of the ATC Examinations Committee at SAICA. Zuleka facilitates at global leadership programmes on leadership and technical matters.Appointed: 2018Committee: AUDIT AND RISK

Independent non-executive directorsThabo Mokgatlha (44) Zuleka Jasper (45)

BCom, BAgric managementMike has over 26 years’ experience in the property industry and headed the group retail division of Redefine Properties Limited until December 2013. He was previously with Edgars Consolidated Stores Limited for 18 years, as its property development executive.Appointed: 2010Committee: SOCIAL AND ETHICS (chair)

CA(SA)Stewart has over 31 years’ experience in investment banking and real estate. Prior to retiring from Standard Bank, he was head of real estate investments: corporate and investment banking, responsible for its equity-related real estate activities. He currently serves on a number of listed and unlisted boards.Appointed: 2000Committees: AUDIT AND RISK, REMUNERATION (chair) AND NOMINATION, INVESTMENT

BSc (QS) Executive mastersNonyameko is a professional quantity surveyor with experience in all aspects of the infrastructure, property investment and development value chain. She is currently executive director of property development and investment venture, Kusile Africa Ventures Proprietary Limited, and Petals Global Proprietary Limited and a non-executive director of Hudaco Industries Limited, SVA International Proprietary Limited and ITISA.Appointed: 2017Committee: SOCIAL AND ETHICS

Mike Lewin (64) Stewart Shaw-Taylor (67) Nonyameko Mandindi (53)

From left: Gavin Tipper, Thabo Mokgatlha, Zuleka Jasper, Mike Lewin, Stewart Shaw-Taylor, Nonyameko Mandindi

DIRECTORATE

Page 12


Non-executive directors

CHIEF INVESTMENT OFFICERCA(SA)Wilhelm has extensive experience in investment analysis, investment management, business strategy and mergers and acquisitions (M&A). He started his career at Deloitte & Touche (financial institutions team) in Johannesburg, before joining BJM Securities as an investment analyst in the banking, insurance and property sectors. He subsequently worked for Royal Bafokeng Holdings as a manager in the strategic investments area, and for the Blend Property Group as an executive director and chief investment officer. Wilhelm joined Hyprop in 2016 and was appointed to the board in July 2018.Appointed: 2018Committee: INVESTMENT

CHIEF EXECUTIVE OFFICERB Eng (Honours)Morné has considerable property experience having spent time at Atterbury Properties and Attacq Limited, with a focus on rolling out the Waterfall Development in Gauteng. He served as the chief executive officer of Attacq Limited from July 2011 to December 2017 and briefly led MAS Real Estate Inc. as chief executive officer before joining Hyprop in December 2018.Appointed: 2018Committees: SOCIAL AND ETHICS, INVESTMENT

CHIEF FINANCIAL OFFICERCA(SA)Brett has extensive experience in corporate finance, due diligence work, financial management and reporting, corporate governance, company and commercial law and taxation and exchange control compliance. He started his career at Fisher Hoffman Stride in Johannesburg, before joining Rebhold Limited in 1998 where he served as group chief financial officer from 1999 until 2007. Brett joined Mentor Africa Limited, a private investment company, in 2007, as the chief financial officer, where he had various financial and corporate finance responsibilities.Appointed: 2018

Morné Wilken (48) Wilhelm Nauta (48) Brett Till (50)

Executive directors

From left: Louis Norval, Kevin Ellerine, Morné Wilken, Wilhelm Nauta, Brett Till

Independent non-executive directors continued

BSc (QS)Louis co-founded Attfund Limited and was executive chairman and chief executive of Attfund Retail Limited when it was acquired by Hyprop. He is executive chairman of Homestead Group Holdings Limited as well as managing director of the Parkdev Group of Companies. Louis is a non-executive director of Capital and Regional Plc (a UK focused specialist retail property REIT listed on the London Stock Exchange with a secondary listing on the JSE), and Hystead Limited. He also serves as non-executive chairman of the Trigen Group.Appointed: 2011Committee: INVESTMENT

National Diploma in Company AdministrationKevin joined the family business, Ellerine Holdings, in 1991 as merchandise manager. In 1993, he became property manager of Ellerine Bros Proprietary Limited and was appointed managing director of the property division in 2000. He is currently the CEO of the Ellerine Group and in addition, serves on a number of listed and unlisted boards.Appointed: 2009Committee: INVESTMENT

Louis Norval (63) Kevin Ellerine (51)

BSc (Mechanical Engineering)Annabel has experience in financial services, with a specific focus on asset securitisation and equity derivatives, technology and artificial intelligence. She is the CEO and founder of Strider, a leading South African fintech company.Appointed: 2019Committees: AUDIT AND RISK, INVESTMENT

Annabel Dallamore (32)*

* Appointed 1 October 2019 (Not represented in photo.)

Page 13


Group snapshotRisk management

The primary objectives of the Hyprop risk management process are to ensure that risk awareness is embedded in strategy discussions at board level, in day-to-day operations and processes, and that uncertainty regarding operational performance is minimised by anticipating surprises and associated costs and losses.

Risk management forms an integral part of normal operations, processes and activities, and a culture of risk awareness endures. The group also monitors and reports on industry risk trends.

Hyprop views risk management as a core competency critical to sustainability. The group employs a structured and disciplined approach to group-wide risk management, with the objective of maintaining a balance between risk and value creation.

Board

Executive management

Audit and risk

committee

Internal audit

External audit

1 • Ultimate responsibility for risk • Determines risk tolerance

2 • Collates and reviews reports from management,

the independent internal audit service provider, PricewaterhouseCoopers, internal audit function and the external auditor

• Coordinates the internal audit efforts with those of the external auditors

3 • Identifies, assesses, measures, monitors and reports risks • Implements controls to safeguard assets and to ensure

the validity, accuracy and completeness of financial information

• Implements the risk management system

4 • Reviews management’s implementation and the

adequacy of controls and reports thereon • Reports on industry risk trends to the audit and risk

committee • Submits an annual internal audit plan and reports

on progress thereon • Reports the results of reviews with opinions and

recommendations for improvements

5 • Reviews the implementation and adequacy of controls

relating to financial information at a statutory reporting level

1

2

3

4

5


Page 14

Key principlesHyprop’s approach to risk management is based on several key principles: • A practical and consistent risk process across the organisation • Promoting and embracing a culture that recognises the

importance of risk management by entrenching it in day-to-day processes, activities and decision-making

• Ensuring that risk identification, assessment and management are part of normal business activities

• Ensuring that the risk management process is aligned with Hyprop’s values and strategic initiatives

• Clearly defining roles and responsibilities for the risk management process

• Establishing and maintaining appropriate risk tolerances and focusing on risks that exceed defined thresholds

• Relevant and effective risk reporting.

Risk toleranceRisk tolerance is at the core of the risk management framework. By definition, risk tolerance specifies how much risk an organisation is willing to accept in the pursuit of its business objectives. At Hyprop, risk will not be tolerated in the instances where, if the risk

event were to occur, it could cause any one, or more, of the following: • The inability to meet any of Hyprop’s core service obligations

within prescribed timeframes • The death, or serious injury, of a customer or an employee while

on duty • The inability to meet any one, or more, of Hyprop’s financial

obligations • The inability to generate sufficient profit to sustain its current

and future operations • Reputational loss to the company such that its ability to operate

effectively is seriously impacted.

These underlying risk tolerance principles are encoded in Hyprop’s formal working documents and processes, for example: • Key Performance Deliverables (KPDs) assigned to executives as

part of Hyprop’s performance management process (refer to our remuneration report on page 69)

• An annual budget with targets for financial performance and guidance on reporting on unfavourable variances

• A board charter which sets out the powers which have been reserved by the board, and a delegation of authority document defining the authorities delegated to management.

• Policy documents, approved by the board, which regulate how and to what extent certain risks are mitigated through specific actions/procedures.

Page 15


Group snapshotRisk management continued

Risk number Key risk Strategic objective Impact Strategic response/mitigation

Changes to risk in the reporting period

1Low GDP growth impacts business growth in South Africa

Focus on sustainable distributable income growth

Slower retail sales growth affects retailers’ financial positions and ability to pay rent

• Hyprop shopping centres are well established, in dominant locations and attract flagship stores• Maintain relevance of malls by optimising tenant mix, entertainment and other offerings• Improve customer interaction through technology

2Slowing consumer spend affects retailers’ trading densities and rent-to-turnover ratios


Leases not renewed; discounted rentals to retain tenants; tenants more cautious on renewals and new lettings; tenants taking less space, increase in vacancies, slower extension plans

• Contractual lease income with financially sound tenants (most are reputable national companies with strong balance sheets and proven business models)

• Model for sustainable rental growth to reduce reversions• Manage total cost of occupancy for tenants

Ç

3Downgraded sovereign credit rating (South Africa)


Increased borrowing costs • Reduce LTV ratio• Interest rate hedging policy adopted by the board• Minimum of 75% of interest rate exposure on borrowings is hedged

4Significant volume of leases expiring in any one year


Increase in vacancies, impact of rent reversions • Stagger quantum and value of leases expiring on an annual basis• Enhance properties to increase their relevance and attractiveness to tenants Ç

5Maintenance and capital improvements

Continuous portfolio improvement and maintaining relevance of Hyprop's malls

Compromised use/functionality of the building and increased maintenance burden/higher operational costs

Malls lose relevance and become outdated

• Project income budgets are based on deals concluded (signed and accepted development offers)• Use reputable consultants, contractors and professionals with experience• Ongoing review of design, and monitoring of construction, by development and centre management and

the project team

6Credit rating downgrade (Hyprop) Optimise funding and restore

investment grade credit ratingInability to raise funding on competitive terms

Increased cost of borrowings

• Restore investment grade credit rating by reducing LTV ratio and maintaining adequate liquidity to refinance short-term debt

• Maintain conservative gearing levels• Maintain high interest cover ratio

7Potential increase in interest rates Managing exposure to interest rate

fluctuationsIncreased borrowing costs result in reduced distributable income

• Interest rate hedging policy adopted by the board• Minimum of 75% of interest rate exposure on borrowings is hedged

8Negative impact of disrupted electricity supply on the economy and at Hyprop shopping centres

Negative impact of disrupted water supply at shopping centres

Increased cost of occupancy from rates, taxes and utilities

Ensure continuous supply of electricity

Reliable supply of water services

More efficient and effective utility cost management

Prolonged electricity and water outages mean sub-optimal trading conditions

Excessive increases in cost of occupancy impacting recoveries, renewals and sustainable income growth

• Introducing smart metering; energy-saving initiatives• Implement alternative water supplies and savings initiatives• Solar photovoltaic plants at Hyprop’s malls

Numerous projects under way to reduce consumption:• Tenants guided by tenant criteria document, with guidelines on reducing electricity consumption• Objections to high increases in municipal rates• Working closely with professional consultants to optimise local authority approval processes and minimise

the negative impact of billing errors• Lobbying through SAPOA to reduce high tariffs• Working with central improvement districts (CIDS) to improve services and reduce costs

Ç

9Digital disruption Embrace technology to enhance the

profitability of our shopping centresInefficient business processes through under-utilisation of technology

Digital disruption impacts performance of retail tenants’ business

Loss of contact with shoppers

• Embrace digital disruption• Develop revenue streams from non-tangible assets Ç

10Multi-currency and refinancing risks associated with the group’s funding structure and gearing

Optimise funding and restore investment grade credit rating

Excessive gearing resulting in credit rating downgrade

Increased LTV due to devaluation of the Rand

Increased cost of borrowing due to currency mismatches

Ability to refinance maturing debt

• Matching currency between borrowings and assets/income to service borrowings• Interest rate hedging policy adopted by the board• Optimum capital allocation• Maintain available bank facilities and strong relationships with lenders

new

External risks (outside the control of management)

External risks (can be mitigated by management)

Internal risks (under the control of management)

Summary of key risks


Page 16

Risk number Key risk Strategic objective Impact Strategic response/mitigation

Changes to risk in the reporting period

1Low GDP growth impacts business growth in South Africa


Slower retail sales growth affects retailers’ financial positions and ability to pay rent

• Hyprop shopping centres are well established, in dominant locations and attract flagship stores• Maintain relevance of malls by optimising tenant mix, entertainment and other offerings• Improve customer interaction through technology

2Slowing consumer spend affects retailers’ trading densities and rent-to-turnover ratios


Leases not renewed; discounted rentals to retain tenants; tenants more cautious on renewals and new lettings; tenants taking less space, increase in vacancies, slower extension plans

• Contractual lease income with financially sound tenants (most are reputable national companies with strong balance sheets and proven business models)

• Model for sustainable rental growth to reduce reversions• Manage total cost of occupancy for tenants

Ç

3Downgraded sovereign credit rating (South Africa)


Increased borrowing costs • Reduce LTV ratio• Interest rate hedging policy adopted by the board• Minimum of 75% of interest rate exposure on borrowings is hedged

4Significant volume of leases expiring in any one year


Increase in vacancies, impact of rent reversions • Stagger quantum and value of leases expiring on an annual basis• Enhance properties to increase their relevance and attractiveness to tenants Ç

5Maintenance and capital improvements

Continuous portfolio improvement and maintaining relevance of Hyprop's malls

Compromised use/functionality of the building and increased maintenance burden/higher operational costs

Malls lose relevance and become outdated

• Project income budgets are based on deals concluded (signed and accepted development offers)• Use reputable consultants, contractors and professionals with experience• Ongoing review of design, and monitoring of construction, by development and centre management and

the project team

6Credit rating downgrade (Hyprop) Optimise funding and restore

investment grade credit ratingInability to raise funding on competitive terms

Increased cost of borrowings

• Restore investment grade credit rating by reducing LTV ratio and maintaining adequate liquidity to refinance short-term debt

• Maintain conservative gearing levels• Maintain high interest cover ratio

7Potential increase in interest rates Managing exposure to interest rate

fluctuationsIncreased borrowing costs result in reduced distributable income

• Interest rate hedging policy adopted by the board• Minimum of 75% of interest rate exposure on borrowings is hedged

8Negative impact of disrupted electricity supply on the economy and at Hyprop shopping centres

Negative impact of disrupted water supply at shopping centres

Increased cost of occupancy from rates, taxes and utilities

Ensure continuous supply of electricity

Reliable supply of water services

More efficient and effective utility cost management

Prolonged electricity and water outages mean sub-optimal trading conditions

Excessive increases in cost of occupancy impacting recoveries, renewals and sustainable income growth

• Introducing smart metering; energy-saving initiatives• Implement alternative water supplies and savings initiatives• Solar photovoltaic plants at Hyprop’s malls

Numerous projects under way to reduce consumption:• Tenants guided by tenant criteria document, with guidelines on reducing electricity consumption• Objections to high increases in municipal rates• Working closely with professional consultants to optimise local authority approval processes and minimise

the negative impact of billing errors• Lobbying through SAPOA to reduce high tariffs• Working with central improvement districts (CIDS) to improve services and reduce costs

Ç

9Digital disruption Embrace technology to enhance the

profitability of our shopping centresInefficient business processes through under-utilisation of technology

Digital disruption impacts performance of retail tenants’ business

Loss of contact with shoppers

• Embrace digital disruption• Develop revenue streams from non-tangible assets Ç

10Multi-currency and refinancing risks associated with the group’s funding structure and gearing

Optimise funding and restore investment grade credit rating

Excessive gearing resulting in credit rating downgrade

Increased LTV due to devaluation of the Rand

Increased cost of borrowing due to currency mismatches

Ability to refinance maturing debt

• Matching currency between borrowings and assets/income to service borrowings• Interest rate hedging policy adopted by the board• Optimum capital allocation• Maintain available bank facilities and strong relationships with lenders

new

External risks (outside the control of management)

External risks (can be mitigated by management)

Internal risks (under the control of management)Ç Increased È Decreased Remained the same

Page 17


Group snapshotOur market in context

South AfricaMarred by a technical recession and slow economic growth, the South African property sector has faced more headwinds in 2019. S&P Global credit ratings agency has kept South Africa’s foreign and local currency credit ratings unchanged at “junk” status with a stable economic outlook. The long-term foreign currency rating is kept at “BB” and the long-term local currency rating at “BB+”. Of the three major international ratings agencies, Moody’s is the only one not to have a “junk” status rating on South Africa’s credit.

Perceived governance issues that plagued JSE listed companies, the impact of the slow economy and the restructuring of Edcon had a material effect on the share prices of property counters and the performance of the SA Listed Property Index performance.

20192009 2010 2011 2012 2013 2014 2015 2016 2017 2018

SAPY versus SA 10-year bond yield (%)

■ SAPI ■ SA 10-year bond yield

800

700

600

500

400

300

200

100

11,00

10,00

9,00

8,00

7,00

6,00

5,00

4,00

3,00

2,00

1,00

Source: Singular, Sharenet.

Labour strikes in certain sectors of the economy, revelations about the extent of state capture and corruption in South Africa, continued conflicting pronouncements on policies and priorities, volatility in the currency and eroding disposable income have weighed heavily on the South African economy and resulted in weak confidence among tenants and subdued tenant demand. Global conditions, including weaker economic growth and the US/China trade war have also contributed to the pessimism.

Financial results reported by several listed retailers bear testimony to the tough trading conditions. The SA Listed Property Index declined with returns down by 3,8% over the past three years, and 5,7% over the last year.

Tenant retention remains a priority for SA REITs as the cost of replacing a tenant remains high and time taken to find replacement tenants is lengthening. Operating costs continue to escalate, driven mainly by municipal charges, and other costs related to the economic environment. Discounting of rentals and incentives offered by landlords are likely to continue. Edcon, which recently faced closure, has restructured its business and implemented a two-year turnaround plan. This will include a reduction in its store footprint, adding to the sector’s vacancy rates.

E-commerce continues to disrupt traditional brick and mortar shopping centres as consumers explore time-saving and convenient shopping methods. Click-and-collect options and entertainment offerings partially offset this risk for retailers and mall owners, but in the long term it is expected that online retail will gain more market share before reaching a plateau.

Page 18


Eastern Europe The Eastern European region continued to grow strongly despite muted global growth and escalating trade tensions in global markets. South African property players continue to explore and expand in this region, confirming its attractiveness as a Rand hedge and a source of investment diversification.

The continued stimulus by the EU has helped in abating unemployment and boosting private consumption, notwithstanding the uncertainty posed by Brexit. Our assets in affluent cities have seen moderate to medium growth in a tough global property market.

Bulgaria Bulgaria has undergone a significant transformation over the past three decades. It has changed from a highly centralised, planned economy to an open, market-based, upper-middle-income economy securely anchored in the EU.

Positive trends in disposable income have helped to sustain private consumption while sound profits, accommodative financing conditions and optimistic expectations about the domestic economy have stimulated investment activity. Real GDP growth is forecast to recover to 3,3% in 2019 and 3,4% in 2020.

On 30 August 2019, Moody’s upgraded the country’s outlook from stable to positive, citing strengthening fiscal metrics and improved growth prospects thanks to ongoing EU integration.

Croatia Croatia’s economy has grown by 3% per annum over the past three years.

As wages and employment continue to grow amid low inflation, household consumption is set to remain the main driver of growth for the foreseeable future. In late July 2019, the government announced a new round of tax cuts aimed at young people as part of an effort to stem emigration. The measures are set to come into effect in 2020, and could provide a boost to disposable incomes.

Investment growth is expected to strengthen further in 2019 before moderating in 2020, supported by an improved uptake of EU funds and low interest rates. Real GDP growth is forecast to increase to 3,1% in 2019 before moderating to 2,7% in 2020.

MacedoniaSince its independence in 1991, Macedonia has made progress in liberalising its economy and improving its business environment. Its low tax rates and free economic zones have helped to attract foreign investment, which is still low relative to the rest of Europe.

Macedonia has expected economic growth of 3,2% in 2019 and 4% in 2020, in which year it expects to become a full-fledged member of NATO (Northern Atlantic Treaty Organisation).

SerbiaStable consumer spending, inflows from strong foreign direct investment and an improved business climate, reinforced by ongoing efforts to pursue international monetary fund-backed reforms, have supported financial growth in Serbia.

That said, overall annual growth is still expected to come in well below 2018’s robust performance, dampened by low industrial production and external headwinds linked to the expected slowdown in the Eurozone, Kosovo import tariffs, rising global trade protectionism and regional tensions.

The National Bank of Serbia expects GDP growth of 3,5% in 2019.

Montenegro As a new free market economy, Montenegro has fiscal sustainability challenges due to large-scale public infrastructure investments and several new social expenditure programmes.

On 1 January 2019, Montenegro launched its economic citizenship programme, designed to attract a maximum of 2 000 investors from 2019 to 2021. Preliminary estimates suggest the programme could bring as much as USD1 billion in infrastructure investments to the country.

Risks to the outlook include the public debt and the EU slowdown, further overruns on construction costs and persistently high unemployment.

In April 2019, Moody’s affirmed Montenegro’s “B1” credit rating and stable outlook, supporting the implementation of economic reforms. The economy is expected to grow by 3,1% in 2019.

Page 19


Group snapshotOur market in context continued

Sub-Saharan Africa (excluding SA)Although some countries in the sub-Saharan Africa region have seen considerable growth, on aggregate there has been low economic growth in 2018. According to the World Bank, the region faces the challenges of strengthening resilience and creating higher, more inclusive and durable growth.

Hyprop will reduce its exposure to the region to focus on other growth areas.

Ghana The Ghanaian GDP grew by 6,2% in 2018 and is projected to grow by 7,3% in 2019, underpinned by a surge in oil prices and a steady increase in private consumption. The projected growth for the next financial year is a result of Ghana rebasing its GDP in September 2018. The government faces a financing challenge with domestic revenues at about 10% of GDP and gross financing needs of more than 20% of GDP.

Other influences include the marginal improvements in the fiscal deficit, reduced interest rates, and inflation declining to single digits. However, the frequent fluctuations in global oil prices continue to pose a risk to growth in Ghana.

NigeriaDebt to GDP is 17,5% with real GDP projected to grow by 2,3% in 2019 and 2,4% in 2020 as implementation of the economic recovery and growth plan gains pace.

Trade in non-oil sectors has improved while the oil sector struggled due to the oil price fluctuations and overall low global growth. The slide in oil prices from late 2018 coupled with an output cut imposed by the Organisation of the Petroleum Exporting Countries poses a downside risk to the economic outlook.

Despite low growth in the oil sector, Nigeria is currently not grappling with the dollar shortage experience in 2017, which was brought on in part by the low price of oil.

Sources: World Bank, African Development Bank, Focus Economics, Bloomberg, Sesfikile, European Commission.

Page 20


Leadershipreview

Hyde Park Corner, Gauteng, South Africa

Page 21


Leadership reviewChairman’s report

Financial performanceHyprop declared a dividend of 359,3 cents per share for the six months ended 30 June 2019, a decrease of 5,5% on the corresponding period in 2018. The total dividend for the year of 744,9 cents per share is a decrease of 1,5% on the prior year.

The decrease in the dividend was a function of a solid performance by the South African portfolio, a strong performance from the centres in Eastern Europe and a disappointing return from the sub-Saharan African portfolio.

Gavin TipperCHAIRMAN

Overview The year under review was difficult for South African property companies with an extended period of mediocre economic growth impacting on tenants’ ability to afford rentals and administered cost increases. Reversions for many sectors were negative with financially stressed consumers contributing to muted retail sales growth.

The strong outperformance of the South African property sector over recent years ended with initial market doubts as to certain companies in the sector followed by a recognition that the ability of property companies to outperform a number of the fundamental challenges they face is limited.

The property index declined by 5,9% from July 2018 to June 2019 in the context of South African GDP growth of 0,5% over the same period. The trade war between the United States and China reduced growth internationally, and having started the financial year with expectations of interest rate increases, we now see some of the major international economies cutting rates to provide further stimulus to slowing growth.

South AfricaThe South African portfolio is the backbone of the company and produced a resilient performance in a difficult market. The Glen and Woodlands benefited from investment in their food offerings and a number of the other malls produced pleasing growth in trading densities in the latter part of the year.

Concerningly, property expenses increased by 14%, largely due to a 16% increase in non-controllable expenses that include rates, taxes and energy costs. While we accept that business has a

Page 22


monitored by management and regularly assessed by the board. Should the properties begin to underperform or should Eastern European asset values enter a period of decline, Hyprop has the capacity to refinance an appropriate portion of the debt in Rand.

We are pleased to report that the Mall of Sofia successfully completed a 12 000m² extension during the year with very positive feedback after opening. A number of projects are planned for some of the other properties which should further entrench their dominance and provide growth in earnings.

We have a strong management team in this portfolio with executives capable of the active asset management needed to grow returns.

Sub-Saharan Africa (excluding South Africa)This portfolio produced a poor return.

Vacancies in the portfolio increased with a number of South African retailers electing not to renew leases. Replacement tenants were obtained at lower rentals, and certain of the economies in which our properties are located had a very difficult year.

The group will exit sub-Saharan Africa, other than South Africa, and in line with this disposed of its interest in Achimota Retail Centre in Ghana during the period, and its interest in Manda Hill shopping centre subsequent to the year-end.

The carrying amounts of the remaining properties were impaired to align with their anticipated sales values, resulting in an overall impairment of R1,46 billion for the year. Our venture into Africa produced reasonable returns where we acquired existing centres, however, where we were involved in developing new properties, we grossly underestimated how long it would take to convert an informal shopping culture to mall-based shopping. In addition, the currency volatility to which we were exposed due to sovereign factors meant that the hedges that existed in Dollar-based rentals were ineffective in many cases.

We are implementing a number of changes to the manner in which the portfolio is managed that should improve returns but do not expect the portfolio to yield any material distributions in the period to its disposal.

SustainabilityWe recognise the importance of a sustainable business and of integrating sustainability into the different facets of our operations. Our commitment to being a good corporate citizen pervades our approach to business and we endeavour to act in a responsible, balanced and commercially sensible manner.

responsibility to contribute to the environment in which it operates, a tendency by government, whether local or national, to allow administered inflation at levels well above those at which business can recover the costs will ultimately lead to less investment and fewer jobs.

It is common cause that South Africa has an oversupply of retail space and while Hyprop’s malls remain destinations of choice, we are conscious of the need to invest in our properties to maintain their appeal, and of the need to understand the changing nature of retail and the evolving demands of our shoppers, and to position our properties accordingly. During the year the company adopted a revised strategy that focuses heavily on what will be required to position our malls for success in the likely South African economic environment over the medium term.

While vacancy levels across the retail portfolio decreased to 0,8% at 30 June 2019, this should be read in the context of rent reversions at negative 9%, offset to an extent by a weighted average escalation rate of 7,1%. As with many other businesses, retailers are under significant pressure and in the absence of revenue growth, will increasingly be forced to reduce costs to survive.

Edcon received much publicity during the year under review. As a result of the support provided by landlords, and an injection of investor funds, it has continued to trade. The rent reduction granted by Hyprop resulted in a marginal reduction in distributable earnings in the current year (which will increase in the next financial year), but provided flexibility to reduce the group’s exposure to Edcon.

Unfortunately, high crime levels continue to be a significant problem for the economy. We endeavour to provide a safe shopping environment and carefully monitor trends in the broader market with the objective of taking whatever measures we can to insulate our shoppers.

Eastern EuropeThe Eastern European portfolio produced a strong performance with distributable income from Hystead, through which the group holds its interests in the underlying properties, increasing by 13% over the previous year. All of the centres grew their trading densities and/or their net operating income.

The portfolio is financed through a combination of in-country asset-backed finance and loan funds, guaranteed primarily by Hyprop. As both the funding and the assets are Euro denominated, there is a risk that if asset values decline, the Euro funding may place pressure on Hyprop’s balance sheet. This risk is carefully

Page 23


Leadership reviewChairman’s report continued

Our regular evaluation of the longevity of our business model and its relevance to the economies in which we operate resulted in the adoption of a revised strategy that will position the group to succeed in a changing economy and retail environment.

We are conscious of our impact on the environment and have been measuring and mitigating this for several years. We have made meaningful progress and our process has become increasingly sophisticated, with demanding goals and accountability for outcomes.

Transformation is a priority for sustainable South African businesses. Hyprop has made substantial progress in this area by implementing initiatives that benefit our people, our business and the environments in which we operate.

Corporate governanceHyprop is committed to the highest standards of corporate governance. Details of our governance structures and the extent to which we apply relevant principles of corporate governance, including King IV, and regulatory requirements, are set out elsewhere in this report.

Board changesBrett Till joined Hyprop as the CFO in October 2018 and Morné Wilken as CEO with effect from 27 December 2018. Both have made a significant contribution.

Pieter Prinsloo resigned with effect from 31 January 2019. The board thanks him for the considerable contribution he made and wishes him well in his future endeavours.

Subsequent to year-end Annabel Dallamore joined the board to add a strong technology perspective to deliberations. Annabel will also join the audit and risk and the investment committees. We welcome Annabel and look forward to a productive relationship with her.

Mike Lewin retires by rotation at the annual general meeting on 2 December 2019 and has not made himself available for re-election. We thank Mike for his considerable contribution to the group over nine years and wish him well in his retirement.

ShareholdingHyprop, based on JSE criteria for public shareholders, has a 100% free float. Foreign shareholders owned 18% of the company at 30 June 2019, a decrease from 23% at 30 June 2018.

OutlookThe company appointed a new executive team during the year under review and this, together with the global changes in retail markets and the material changes taking place in the South African economy, prompted the development of a revised strategy.

The implementation of this strategy will result in lower short-term earnings but should provide the foundation for solid earnings growth in future years.

The South African economy is a concern. Some form of stimulus is necessary for the economy to escape the multi-year low growth trap it is in, however, government has to date squandered its traditional ability to provide that stimulus. Business requires some level of predictability regarding the future environment to justify investment, and the world economy is not growing sufficiently to provide the required stimulus. Until government takes steps to catalyse the confidence that business requires to accelerate investment and job creation, the country will continue getting poorer and the current levels of civil unrest will grow. Given the high levels of poverty in South Africa, this may unfortunately result in further shifts within the political spectrum, less investor friendly policies and further reductions in growth levels.

Hyprop’s South African shopping centres are outstanding properties and there is ongoing investment to maintain their appeal. The retail environment in a number of developed economies has changed substantially with a reduction in the appeal of traditional shopping malls. Although this trend is apparent in South Africa its impact has been far less than internationally; however, we have a number of idiosyncratic factors that

Page 24


necessitate careful work to ensure that our properties remain relevant and desirable. In this regard we are considering the appropriateness and commerciality of investing in and/or creating mixed-use precincts around certain of our centres. While this would mean that Hyprop would no longer be a pure shopping centre fund, there are attractive returns available on the related properties, and those assets should support and enhance the value of the malls.

Further stimulus to the European economy has recently been announced. The Eastern European economies in which we are invested have continued to produce pleasing levels of growth that have been echoed by the results produced by our shopping centres. We have a number of earnings accretive projects planned for the next year which, together with strong asset management, should result in pleasing earnings growth.

Our decision to exit our sub-Saharan African portfolio resulted in a significant level of impairments and we are unlikely to distribute any income from the portfolio in the period to its disposal. After considerable analysis we believe that the resources currently devoted to the sub-Saharan African portfolio would be more effectively applied to the South African and Eastern European exposures.

Technology is playing an ever increasing role in most aspects of our lives and there are opportunities for enhancing the use of technology throughout our business. To date online shopping has gained less traction in South Africa than it has in more developed countries and while there are clear reasons for that, our shoppers’ use of technology is nonetheless increasing and the manner in which they shop is changing. Pursuant to the revision of the group’s strategy, going forward there will be considerable emphasis on the use of technology in the retail, property and infrastructure spaces, and on related opportunities from a defensive and a growth perspective. Resources will be devoted to this with the dual objectives of improving business efficiency and creating further income, where possible.

Hyprop will consider property acquisitions, domestically and internationally, where the risk adjusted returns justify the cost. We will also continue to look at corporate activity where appropriate opportunities exist. Conversely, we regularly evaluate the properties in our South African and Eastern European portfolios and will sell assets should we believe that they are no longer relevant to the portfolio.

ProspectsWe expect a reduction of 10% to 13% in distributable income per share in the 2020 financial year, followed by positive growth in distributable income for the 2021 financial year, and beyond.

This guidance is based on a number of key assumptions set out elsewhere in this report.

AppreciationOn behalf of the board we thank our executives, management and staff for their considerable efforts during the year. We also thank our stakeholders for their support and our fellow board members for their guidance and support.

Gavin TipperChairman

Page 25


Leadership reviewExecutives’ report

Overview

Morné WilkenCHIEF EXECUTIVE OFFICER

Wilhelm NautaCHIEF INVESTMENT OFFICER

Brett TillCHIEF FINANCIAL OFFICER

Revised strategy under new executive team

Growth in distributableincome from South African portfolioof 6,5%, despite the challenging economic climate

Growth in distributableincome from the EasternEuropean portfolio of 13,5%

Very low vacanciesin the South African retail portfolio (0,8%)and in the EasternEuropean portfolio (<0,5%)

Progress inreducingexposure tosub-Saharan Africa(excluding South Africa) – investments in this region impaired by R1,46 billion in the year based on anticipated sales proceeds

Strong liquidity position and R8,5 billionof debt refinanced duringthe year

Decrease in distributionper share of 1,5%

Page 26


Introduction and overview2019 was a year of significant change for Hyprop. Arising from the resignations of the former CEO and CFO, both of whom had been with the group for over a decade, Morné Wilken (CEO) and Brett Till (CFO) were appointed, and together with Wilhelm Nauta (CIO), comprise the new executive team.

In line with the revised strategy, the group will focus on three strategic areas – the South African property portfolio, the Eastern European property portfolio and relevant non-tangible assets arising from the digital disruption which is transforming many traditional market sectors (including the retail and property sectors).

The key priorities for the next 18 months are to exit the sub-Saharan African (excluding South Africa) portfolio, to reposition the South African portfolio and to improve the dominance of the Eastern European portfolio. In addition, we will develop and implement a strategy around digital disruption and technologies in the retail, property and infrastructure spaces.

From a financial perspective we aim to reduce our loan-to-value ratio and restore the group’s investment grade credit rating (subject to South Africa’s sovereign credit rating). Cash flow management will be a key priority and cash-backed income will form the basis of calculating distributions to shareholders.

Market conditions in the South African and sub-Saharan African regions have deteriorated and tenants face significant challenges as a result of the poor economic growth and currency volatility, respectively. Consumer demand remains depressed and shopping preferences are changing, impacting on the ability to maintain rental rates and growth in distributions.

New appointments to the board, and at operational levels, have been made to ensure the group has the necessary skills to deal with the challenges and opportunities presented by the strategic initiatives. Further details on specific actions being taken to meet these challenges are included in the individual portfolio reviews on the following pages.

These changes, the decision to dispose of the group’s sub-Saharan Africa assets and the refinancing of Dollar denominated debt with Rand denominated debt, due to the impairment of the group’s sub-Saharan Africa interests based on the anticipated sales proceeds, have/will negatively impact distributable income for the 2019 and the 2020 financial years. The group believes these are necessary for the group’s long-term sustainability and anticipate positive growth in distributable income in 2021 and beyond.

Distributable income decreased by 0,1% from R1 905 million for the year ended 30 June 2018 to R1 903 million. The distribution per share for the year decreased by 1,5% from 756,5 cents to 744,9 cents as a result of the increase in the weighted average number of shares in issue during the year. The solid performance by the South African portfolio and strong growth from the Eastern European portfolio were offset by a decrease in distributable income from the sub-Saharan African portfolio.

Strategic reviewFollowing the appointment of the new executive team Hyprop’s strategy was interrogated, resulting in a new three-year strategic plan that will see Hyprop adapt to the rapidly evolving retail landscape, disruptive technologies and market conditions.

Underlying the group’s new vision and mission is our “Why” – why do we exist:

“To create environments and opportunities for people to connect and have authentic and meaningful experiences.”

The group’s vision remains largely unchanged:

“To be the leading South African based REIT through managing and developing tangible and non-tangible assets”.

How do we aim to achieve these objectives:

“By owning and managing mixed-use precincts underpinned by dominant retail centres in key economic nodes in South Africa and Europe.”

Arising from the revised vision, why and how, the group will exit its sub-Saharan African portfolio to focus on its South African and European portfolios. Consideration will be given to expanding the European geographies in which the group invests to include all of Eastern Europe and not only South-Eastern Europe as at present.

Mixed-use precincts are increasingly becoming hubs for economic and social activity internationally and in South Africa. We believe that these precincts will provide better opportunities for sustainable growth in the long term. In line with our vision, we will focus on owning retail centres in our South African and Eastern European portfolios which are focal points within mixed-use precincts and provide a range of retail, entertainment and related services to residents and workers within the precinct. It is not our intention to become developers of mixed-use precincts, but rather to play a leading role within the precinct and provide a strong retail underpin.

The group’s activities will be expanded to embrace and develop relevant non-tangible assets arising from the digital disruption which is transforming many traditional market sectors (including the retail and property sectors). Our disruptive technology strategy is multifaceted, and will include: • Increasing the use of technology in our business to improve

efficiencies • Using technology to improve interaction with shoppers,

particularly millennials who represent a growing proportion of consumers, and whose needs and shopping habits are changing the way we and our tenants approach our businesses

• Embracing online retailers and providing facilities for them to either distribute their products via our malls or through co-trading environments within the malls

• Investing in the development of disruptive technologies which will have a direct impact on our business – be it in the property or retail sectors. This will include the funding and development of new technologies in collaboration with technology innovators

Further details of specific elements of this strategy will be communicated in due course.

Strategic priorities, which align with the group’s overall strategic objectives, have been set for each of the group’s focus areas and are explained in more detail in the relevant sections which follow.

Page 27


Leadership reviewExecutives’ report continued

Organisation structureIn order to achieve the group’s strategic objectives various changes have been made to the organisational structure.

A new strategic committee (Stratco), comprising the three executive directors, portfolio executives Nicole Greenstone and Wayne Abbeglen, and national development executive Steven Riley, was established. Stratco’s mandate is to oversee all aspects of the group’s operations and divisions, including setting strategic priorities for each division and allocation of resources across the group. Stratco meets monthly to set and review progress on achieving strategic priorities and overall group financial performance.

The existing executive committees (Excos) for the South African and Eastern European portfolios have been restructured and revised mandates for the committees put in place. A new Exco was recently established under Hyprop’s leadership for the sub-Saharan African portfolio and includes representatives of AttAfrica. Each Exco comprises at least three Stratco members as well as senior executives from the relevant regions covering operations, finance, human resources, IT, marketing and legal. The Excos are responsible for driving the operational and financial performance of the regional businesses, as well as collaboration between the different divisions and between the malls within each division.

Portfolio executives are responsible for the strategic development of their respective portfolio malls, including tenant profiling and selection, leasing strategies, and planning and assessment of major capital projects. There are currently two portfolio executives in the South African portfolio (with a possible third to be appointed in the 2020 financial year) and one in the Eastern European portfolio. A new portfolio executive was recently appointed for the sub-Saharan African (excluding South Africa) portfolio to enable the asset management role to be done in-house. The portfolio executive’s main role is to provide guidance and support to the general managers of each mall, who are in turn responsible for implementing the mall strategy and day-to-day operations and performance of their mall.

Collaboration across the group is a key element to our future success. Existing operating and support structures have been reorganised to ensure higher levels of collaboration between divisions and malls, which should result in improved efficiencies and economies of scale.

The group’s support functions for finance, capital projects and developments, human resources, and legal and compliance are based in Johannesburg and provide support to all group operating divisions, including Eastern Europe and sub-Saharan Africa (excluding South Africa).

Given the importance of debt and capital management, a specific role was created to manage all aspects of the group’s borrowings. The benefits of this revised focus are evident through the group’s refinancing of R8,5 billion of debt during the year, the increase in available borrowing facilities and the reduction in the cost of borrowing.

Page 28


Portfolio reviewsSouth African portfolioThe shopping centre portfolio in South Africa includes super-regional centre Canal Walk, large regional centres Clearwater, The Glen, Woodlands, CapeGate, Somerset and Rosebank Malls, regional centre Hyde Park Corner and value centre, Atterbury Value Mart.

Financial performance30 June 2019

R00030 June 2018

R000

Revenue 3 003 847 2 889 135 Expenses (1 092 420) (956 146)

Net property income 1 911 427 1 932 989 Other operating expenses (44 969) (59 707)Net interest (239 190) (280 812)

Net operating income before fair value adjustments 1 627 268 1 592 470 Adjustments to calculate distributable income 67 743 (796)

Distributable income 1 695 011 1 591 674

Distributable income from the South African portfolio increased by 6,5% over 2018, in line with the guidance provided in September 2018. This was achieved despite a further deterioration in the South African economy and consumer confidence, particularly in the second half of the financial year.

Total revenue (before the lease straight-line adjustment) increased by 6,6% over the 2018 year, largely as a result of a 16% increase in municipal and other cost recoveries. Rental income increased by 6% having been somewhat protected from the economic climate by contractual rental escalations.

Trading density across the retail portfolio increased by 0,6% year on year and the overall rent to turnover ratio increased from 9,1% to 9,4%.

2019

86%


R1 695m

Key prioritiesAssess and reposition malls: • New brands • Entertainment and other offerings • Alternative uses • Reduce Edcon exposure

Increase trading densitiesIncrease non-GLA revenue

R31,2bn

Gross asset value

2019

61%

Page 29


Leadership review

1,2%0,2%

0,4%

0,2% 1,3% 0,4%2,8% 2,1%

2,0%

Can

al W

alk

Cle

arw

ater

Som

erse

t

Woo

dlan

ds

Cap

eGat

e

Rose

bank

R/m

2

The

Gle

n

Att

erbu

ry

Valu

e M

art

Hyd

e Pa

rk

Cor

ner

5 000

4 000

3 000

2 000

1 000

0

Trading density by centre(movements reflect year-on-year changes)

R/m

2

2 71

0

2 79

1

2 64

0

2 75

9 3 27

5

4 43

7

2 77

1

2 55

9

2 88

5

2 84

1

2 90

7

2 91

9

4,3% 1,2% 0,5% 0,4%2,5%

2,4%

0,4% 0,2%0,5% 2,8% 3,9% 6,3%

July

Aug

ust

Sept

embe

r

Oct

ober

Nov

embe

r

Dec

embe

r

Janu

ary

Febr

uary

Mar

ch

Apr

il

May

June

(July 2018 – June 2019)

5 000

4 000

3 000

2 000

1 000

0

Trading density (SA portfolio by month)

R/m

2

The opening of the new food court and play area at Woodlands in May 2019 had a positive effect, with foot count at the mall up 13% and trading density up 2,4% in May and June 2019. Canal Walk, The Glen, Somerset Mall, Rosebank Mall and Atterbury Value Mart also achieved good growth in trading densities in the last quarter of the financial year increasing by an average of 4,3% year on year.

Property expenses increased by 14% compared to the year ended 30 June 2018, due to a 16% increase in non-controllable expenses (mainly rates, taxes and power-related costs). By contrast, controllable costs (excluding bad debts and depreciation), increased by 7,5%. The combined effect was an increase in the portfolio gross cost to income ratio from 33,0% in 2018 to 35,4% in 2019. On a net basis, the cost to income ratio increased from 15,8% in 2018 to 17,1% in 2019.

21,4

1,63,9

6,133,0 6,2

35,4

3,92,0

23,3

16%

31%

7%

8%

(July 2018 – June 2019)

June 2018 June 2019

40

30

20

10

0

Gross cost to income ratio

■ Maintenance and management costs (%)■ Contractor service level agreements (%)■ Bad debts and depreciation (%)■ Municipal costs (%)

%

Other operating expenses decreased due to an increase in asset management fees received from Hystead as a result of the additional properties acquired in April 2018, and savings in staff and related costs.

Tenant arrearsAt 30 June 2019 rental arrears were R31,5 million, compared to R18,9 million at 30 June 2018. Following the adoption of IFRS 9: Financial Instruments and the requirements relating to how doubtful debt provisions should be calculated, doubtful debt provisions increased to R26,8 million. The increase above this amount reflects the financial pressure on the consumer, and ultimately on retailers. At 30 June 2019 the group had no material doubtful debt exposure to, or arrear rentals owing by, any particular tenant or tenant group, including the Edcon Group (Edcon).

Executives’ report continued

Page 30


Lettings and vacancies Over the past four to five years rental escalations have outpaced South Africa’s economic growth and inflation rates and the growth in trading densities at our malls (as indicated in the below graph), leading to pressure on rental rates.

7,4

1,4

8,59,0

11,0

0,5

9,1

7,1

5,2

7,3

9,4

0,61,3 0,7

1,9

8,0

1,6

6,0

0,8

6,0

(July 2018 – June 2019)

June 2018June 2017June 2016June 2015 June 2019

12

10

8

6

4

2

0

Historic trading environment

■ Trading density growth■ Rent ratio (rental as % of turnover)■ Vacancies■ Rental growth

%

Due to the current economic environment, the significant increases in other occupancy costs borne by tenants and low growth in trading densities, rent reversions were negative 9%, with a positive weighted average escalation rate of 7%. Reversions on renewals were negative 7,3%, compared to negative 12,9% on new lettings.

As noted in the prospects below, we anticipate a reduction in distributable income in the 2020 financial year due to the anticipated impact of negative rent reversions. By the end of the 2020 financial year approximately 50% of the South African portfolio leases will have been renewed and, subject to no further deterioration in the South African economy, we expect a reduction in the risk of further aggregate rent reversions thereafter.

New lettings and renewals – South Africa

Leasing activity % of total portfolio

Rentable area (m²)

Rental growth

(%)

Contractual escalation

(%)

Retail 17,2 113 795 (9,1) 7,0New lettings 6,5 42 839 (12,9) 6,5Renewals 10,7 70 954 (7,3) 7,3

Offices 15,2 6 626 (8,7) 6,7

Total 17,0 120 420 (9,1) 7,0

7,4

0,7

1,91,6

0,8

1,3

9,1

7,1

5,2

7,3

9,4


3

2

1

0

Retail vacancy – South Africa

%

Vacancy levels across the retail portfolio decreased to 0,8% (5 103m2) at 30 June 2019, largely due to reductions at The Glen, Atterbury Value Mart and Clearwater Mall. Office vacancies were 4 638m2 (10,7%), mainly due to an increase in vacancy levels at Hyde Park Corner’s office component.

The strategy to reposition the South African portfolio is designed to drive positive growth in trading densities, thereby reducing rent ratios for tenants. Over R360 million of capital expenditure is budgeted for the 2020 financial year towards achieving these objectives (see following pages). We are also evaluating projects aimed at reducing occupancy costs for tenants, such as the introduction of solar plants at our malls, water saving initiatives and other “green” technologies.

At 30 June 2019 Edcon occupied 57 145m2 (2018: 66 781m2) in Hyprop malls, equivalent to 8,1% (2018: 9,2%) of GLA. During the year Hyprop initiated a plan to reduce our exposure to Edcon by 15 910m2. By 30 June 2019, 9 636m2 of this space had been re-let and it is anticipated that the remaining 6 274m2 will be re-let during the 2020 financial year. In re-letting the space vacated by Edcon we plan to introduce new strong anchor tenants to our centres that should positively impact trading densities.

Page 31



ValuationsThe market value of the South African portfolio, as determined by the group’s independent valuers, decreased by R143 million (0,5%) from R28,77 billion (excluding assets held-for-sale) at 30 June 2018 to R28,64 billion at 30 June 2019. The main reasons for the decrease are negative rent reversions and the impact of the two-year Edcon restructure. The valuations are based on an average discount rate of 12,5% (2018: 12,5%) and an average exit cap rate of 6,8% (2018: 6,8%). The resultant average implied yield on the portfolio is 7,2% (2018: 7,1%).

Value attributable to Hyprop Value per m2

Property valuations – South AfricaRentable area

(m2)30 June 2019

R00030 June 2018

R00030 June 2019

R000

Shopping centres 653 509 27 089 719 27 351 847 45 455Value centres 48 649 1 411 000 1 303 000 29 004Total retail 702 158 28 500 719 28 654 847 44 315Total standalone offices1 4 468 136 000 323 000 30 437

Investment property – independent valuations 706 626 28 636 719 28 977 847 44 2271 Reduction from 2018 to 2019 as a result of the disposal of Lakefield Office Park (2018 value: R198 million).

Capital expenditureCapital projects with a value of R132 million were completed during the year. A further R87 million of projects were delayed to the 2020 financial year. New capital expenditure for the 2020 financial year has been budgeted at R363 million, and is focused on repositioning our malls and improving trading densities.

1,4

117,9

319,2

136,0

363,0450,5

87,5■

Infrastructure projects

■Trading density improvements

■Maintenance

capital expenditure

Capital projects 2020

R450m

R20,5m

R121,5m27%

R66,5m15%

R242m54%

4%

■Yield based

projects(July 2018 – June 2019)

June 2018June 2017 June 2020June 2019

500

400

300

200

100

0

Capital expenditure

■ ■Roll over New ■ Capex spent

Rm

Included in yield-driven projects for 2020 is an amount of R54 million relating to new tenant installations as a result of the reduction in space occupied by Edcon, as well as R69 million to be spent on tenant installations for the replacement and/or relocation of tenants as we fine tune our tenant mixes in line with changing customer preferences and to strengthen tenant profiles. Trading density improvement projects are aimed at improving shopper experience and dwell times. These include the development of a technology based customer interaction platform which will allow improved connectivity with “new-age” shoppers, enhancing the food and entertainment offerings at many of our malls, upgrading parking systems (including use of better technology to reduce customer frustration and improve controls), installation and improvements to back-up power supply systems (to ensure continuous trading) and air-conditioning systems. Other projects under consideration are centred on creating co-working and co-trading environments for new entrants to the retail sector to showcase and promote their products and services in a flexible and affordable manner.

DisposalsThe sale of Lakefield Office Park was finalised on 4 January 2019 and the sale proceeds of R200 million were received.

Page 32


Eastern EuropeHyprop’s Eastern European investments, held via a 60% interest in UK-based Hystead Limited (Hystead), include interests in Delta City in Belgrade, Serbia; Delta City in Podgorica, Montenegro; Skopje City Mall in Skopje, Macedonia; The Mall in Sofia, Bulgaria, and a 90% interest (effective 54% interest for Hyprop) in City Center One East and City Center One West, both in Zagreb, Croatia.

In line with the provisions of the Hystead shareholders’ agreement, Hyprop accounts for the investment in Hystead as a financial asset.

Financial performanceAudited

year ended30 June 2019

€000

Auditedyear ended

30 June 2018€000

Year ended30 June 2019

€000

Year ended30 June 2018

€000

Dividend income 221 190 180 525 13 080 11 820Guarantee fees 40 542 46 671 2 397 3 051Foreign exchange gains 4 284 7 277

Distributable income 266 016 234 473 15 477 14 871

Distributable income from Hystead, comprising dividends from Hystead and guarantee fees from PDI Investment Holdings (PDI), increased by 13% from R234 million to R266 million.

Trading conditions in the region remain favourable with all sites, other than Delta City Belgrade, achieving growth in net operating income. The reduction in net operating income for Delta City Belgrade was mainly due to the substantial increase in electricity prices, and the conversion of the fixed rental with Inditex to turnover based rental. The average trading density for the portfolio increased by 3.7% from 2018.

The Mall Sofia

Delta City Podgorica

City Center

One East

City Center

One West

Skopje City Mall

Delta City

Belgrade

Trading density per month

2,5%

400

300

200

100

1,3%

0,4%

4,1%

7,0%4,7%

EURO

The Mall Sofia


Skopje City Mall

Delta City

Belgrade

Net operating income

7,2%14 000

12 000

10 000

8 000

6 000

4 000

2 000

0

9,6% 1,5%1,2%

2,5%

3,9%

City Center

One East

City Center

One West

€’00

0

Key prioritiesRetain dominance: • Extensions • Asset management initiatives

Leverage SA expertiseFormalise growth strategy

R12,8bn

Gross asset value

2019

25%

R266m


2019

14%

Page 33


Leadership review

In June 2019 The Mall in Sofia, Bulgaria, successfully completed a 12 000m² extension. The extension added 40 new stores, an increase from 182 to 222, making it the second largest shopping centre in Bulgaria at 62 000m². A diverse portfolio of brands has been added to The Mall, including a modernised version of Billa supermarket (one of Central and Eastern Europe’s leading supermarket chains), one of the first Pepco stores in Sofia, a Ciela book store on two levels, Scandinavian home and living retailer Jysk, and a renovated Hippoland kids store. In addition, LPP, a leading international fashion group from Poland, opened the biggest Sinsay store (900m²) in Sofia in August. Initial feedback after the opening has been positive.

Various other investment projects are planned for the new financial year to maintain the portfolio’s dominance. Skopje City Mall is undergoing an 18-month project to right-size various tenants, introduce additional international retailers, improve foot-flow and public and common areas, and refresh the food court and entertainment offerings. The project is budgeted to be earnings accretive and expected to be completed by March 2021 at an estimated cost of EUR6 million.

Investment property30 June 2019

'00030 June 2018

'000

Investment property – independent value (100%) €795 732 €771 800Hyprop attributable share1 €458 539 €456 330Hyprop attributable share1 R7 386 292 R7 302 740Rentable area m2 241 326 230 584Value per m2 €3 297 €3 3471 Based on Hyprop's 60% effective interest in Hystead, other than Hystead's Croatian assets in which Hyprop has a 54% effective interest due to the 10% minority shareholder in Croatia.

At 30 June 2019 Hystead’s investment property portfolio was valued at EUR796 million (2018: EUR772 million) based on a weighted average capitalisation rate of 7,6% (2018: 7,5%). This is equivalent to an implied forward yield of 8,0%. Hyprop’s attributable share of the Hystead portfolio was R7,4 billion (EUR459 million) (2018: R7,3 billion (EUR456 million)).

VacanciesThe Hystead portfolio remains almost fully let with a vacancy level of 0,5% (2018: 0,1%) due mainly to the new extension at Skopje City Mall.

1,10,7

0,10,5

3,6


4

3

2

1

0

Retail vacancy – Eastern European portfolio

%


Page 34


Sub-Saharan Africa (excluding SA)

Pursuant to the strategy review during the year, Hyprop will look to divest of the sub-Saharan African portfolio over the next 12 to 18 months, in order to focus on South Africa and Eastern Europe going forward. We have made good progress in this regard.

At 30 June 2019 the sub-Saharan African portfolio included interests in Accra Mall and West Hills Mall in Accra, Ghana; Kumasi City Mall in Kumasi, Ghana (all held via the group’s 37,5% interest in AttAfrica); Manda Hill Centre in Lusaka, Zambia (held jointly with AttAfrica) and Ikeja City Mall in Lagos, Nigeria.

In June 2019, AttAfrica disposed of its interest in Achimota Retail Centre, in Accra, Ghana. Hyprop’s share of the net disposal proceeds, being USD16 million, was received by Hyprop Mauritius on 26 June 2019.

Subsequent to year-end, Hyprop Mauritius (50%) and AttAfrica (50%) disposed of their interests in Manda Hill Shopping Centre. The group’s interest in Manda Hill is accounted for as an investment in a joint venture and is included under loans receivable on the statement of financial position at 30 June 2019. The carrying value of the investment has been adjusted in line with Hyprop’s share of the total net sale proceeds, being approximately USD50 million.

Progress is being made on the disposal of the group’s remaining sub-Saharan African assets and the interest in Ikeja City Mall is classified as an asset held-for-sale at 30 June 2019.

Net proceeds from the disposals will be applied to reduce the group’s US Dollar denominated debt.

In light of the decision to dispose of the sub-Saharan African portfolio, the carrying amounts of the remaining properties have been impaired to align with their anticipated sales proceeds. The result of these adjustments is an impairment/fair value adjustment of Hyprop’s investments in sub-Saharan Africa of R1,46 billion at 30 June 2019.

Financial performance

Sub-Saharan Africa30 June 2019

R'00030 June 2018

R'000

Revenue 214 000 224 578 Expenses (86 634) (93 746)Net property income 127 366 130 832 Other operating expenses (914) (1 095)Net interest paid (221 965) (1 461)Net operating income before fair value adjustments (95 513) 128 276 Adjustments to calculate distributable income 37 154 (49 909)

Distributable income (58 359) 78 367

The investments in sub-Saharan Africa were affected, inter alia, by weaker local currencies against the US Dollar and certain South African retailers that have curtailed their operations. This resulted in an increase in vacancies and a need to re-tenant at lower yields. As a consequence, cash flow in Hyprop Mauritius, after servicing borrowings, was negative.

Accounting income from the sub-Saharan African portfolio comprises operating profits from Ikeja City Mall and interest received on loans advanced by Hyprop Mauritius to AttAfrica and Manda Hill. Ikeja City Mall and Accra Mall (owned by AttAfrica) continued to trade in line with expectations and contributed positively to distributable income for the year. Interest income from AttAfrica is only recognised on the net unimpaired loan balance and to the extent it is received in cash. This resulted in the increase in net interest paid for the year.

R7,2bn

Gross asset value

2019

14%

(R58m)


2019

Key priorities • Take control of asset management • Implement exit strategy • Preserve value

Page 35


Leadership review

Distributable income from the sub-Saharan African investments reduced from R78 million for the year ended 30 June 2018 to a loss of R58 million after deducting interest paid in Hyprop Mauritius. The negative distributable income in 2019 was exacerbated by the devaluation of the Rand against the Dollar from 2018 to 2019.

Operations and structureManagement have reviewed the business model of AttAfrica and are implementing certain changes with the objective of preserving the value of the assets until the disposal process is completed. These include the internalisation of the asset management function, retaining and hiring key staff (including a new portfolio executive who was recruited post-year-end), which should result in clearer lines of communication between operations and shareholders, re-organising arrangements with in-country partners, restructuring portions of the in-country bank debt to reduce borrowing costs and restructuring the shareholder funding arrangement from 1 January 2020.

Many questions have been asked by investors about the similarities between the group’s investments and funding structures in Africa and Eastern Europe. We have analysed the main risk factors and lessons learnt from the group’s experience in Africa and how these risks are mitigated in our investments in Eastern Europe, as set out below:

Sub-Saharan Africa Eastern Europe

Impact of currency depreciation

✗ Volatile with significant depreciation against USD over time.

✓ Local currency is Euro or pegged to Euro in two countries. Other currencies relatively stable against Euro.

Cost of hard currency debt

✗ Cost of debt very close to yield on property assets.

✓ Average cost of debt 3% compared to property yields of 8%. Healthy interest cover ratio of 2,5 times.

Internal versus external asset management

✗ External asset management. ✓ On-site internal asset management team based in Europe.

Alignment of shareholders’ interests

✗ Multiple shareholders across multiple jurisdictions, each with different

objectives.

✓ PDI is only partner in Hystead. Interests of shareholders are aligned in terms of capital and income growth/

distributions. One local minority shareholder in Croatian assets with no minority protections.

Skin in the game ✗ Financial investment and risk not proportionate to shareholding.

✓ PDI has invested R1,4 billion in Hystead, which is at risk. Compensation is paid to Hyprop in return for Hyprop

guaranteeing more than its pro rata proportion of debt.

Specification levels of malls

✗ Developed malls are oversized and too high-spec for the environment.

✓ Appropriate specifications for market and environment.

Risk of greenfields developments

✗ Mall developments undertaken based on South African

development model.

✓ All malls were acquired with trading histories and known market shares and positioning.

Secure local tenants ✗ Reliance on South African based retailers as anchor tenants.

✓ Strong support and demand for space from local tenants and retailers.

GDP and GDP growth ✗ Volatile GDP growth of commodity based economies.

– Stable positive GDP growth.


Page 36


Group financial results and analysis

20192018

Distribution

■ Group ■ Excluding Africa

757 768725

1,5% 5,9%

745

800

600

400

200

0

Cent

s pe

r sha

re

20192018

NAV per share

102,98 102,50109,90

7,0%6,7%

95,78

120

90

60

30

0

■ IFRS ■ Adjusted – see through■ Group

Rand

Distributable income and dividendDistributable income decreased by 0,1% from R1 905 million for the year ended 30 June 2018 to R1 903 million. The distribution per share decreased by 1,5% from 756,5 cents to 744,9 cents.

The solid performance by the South African portfolio and strong growth from the Eastern European portfolio were offset by a decrease in distributable income from the sub-Saharan African portfolio.

30 June 2019 30 June 2018

South Africa Eastern Europe

Sub-Saharan Africa Group South Africa

Eastern Europe

Sub-Saharan Africa Group

R000 R000 R000 R000 R000 R000 R000 R000

Net income before fair value adjustments 1 627 268 266 016 (95 513) 1 797 771 1 592 470 234 473 128 276 1 955 220 Adjustments to calculate distributable income 67 743 – 37 154 104 897 (797) – (49 909) (50 706)

Straight-line rental income accrual 81 399 – 6 488 87 887 4 696 – (848) 3 847 Non-controlling interest – – 30 959 30 959 – – 2 600 2 600 Taxation paid – – (427) (427) – – (4 381) (4 381) Net interest adjustments – – 134 134 – – (47 279) (47 279) Other fair value adjustments – Edcon (12 705) – – (12 705) – – – –Capital items for distribution purposes (951) – – (951) (5 493) – – (5 493)

Distributable income 1 695 011 266 016 (58 359) 1 902 668 1 591 673 234 473 78 368 1 904 514

% change 6,5 13,5 – (0,1) – – – –

Weighted average number of shares 255 429 238 251 741 343Shares in issue for calculating distribution per share – first half 255 540 828 247 995 018 – second half 255 309 759 255 448 256

Distribution per share (cents) – first half 330,5 53,3 1,7 385,6 313,0 47,1 16,1 376,3– second half 333,1 50,9 (24,6) 359,3 319,2 46,1 15,0 380,3

Total distribution per share (cents) 663,6 104,1 (22,9) 744,9 632,2 93,2 31,1 756,5

% change 5,0 11,8 (1,5)

The weighted average number of shares used to calculate the distribution per share increased by 3,7 million from 251,7 million to 255,4 million, primarily as a result of the 7,5 million new shares issued in April 2018 when additional capital was raised.

Key priorities • Reduce LTV ratio • Restore investment grade

credit rating • Cash backed distributions • Clear and transparent

reporting

Page 37


Leadership review

Cash backed distributionsCash flow management is a key priority and cash backed income forms the basis of calculating distributions to shareholders. The table below provides a reconciliation of cash generated from operations to distributable income for each operating division.

2019South Africa

R000

Eastern Europe

R000

Sub-Saharan Africa

R000Group

R000

Cash generated from operations 1 989 011 44 826 116 095 2 149 932Working capital changes (9 272) 18 490 9 218Depreciation (40 523) (1 686) (42 209)Straight-line rental income accrual (81 399) (6 489) (87 888)Other non-cash items (4 063) 41 (4 022)Fair value adjustment – Edcon 12 705 12 705Net interest paid (239 190) (221 965) (461 155)Dividends received 221 190 221 190

Net income before fair value adjustments 1 627 269 266 016 (95 514) 1 797 771Straight-line rental income accrual 81 399 6 489 87 887Non-controlling interest 30 959 30 959Taxation expense – Mauritius (427) (427)Sub-Saharan Africa 134 134Fair value adjustment – Edcon (12 705) (12 705)Capital items for distribution purposes (952) (952)

Distributable income 1 695 011 266 016 (58 359) 1 902 668

As is evident from the table above, cash generated from operations less net interest paid from the South African portfolio exceeded distributable income for the year.

Approximately 90% of the dividend income from Hystead for the year was received in cash before 30 June 2019, with the balance received in September 2019, before payment of the final dividend for the year ended 30 June 2019 to Hyprop shareholders.

Hyprop has historically paid out 100% of its distributable income as a dividend each year. In light of the current economic climate, participants in the real estate sector have started to debate the sustainability of this practice and its long-term impact on LTV ratios, particularly when growth in property values slows or becomes negative. Market sentiment is shifting in favour of reduced pay-out ratios which will allow REITs to fund capital expenditure partly out of operating profits, and thereby strengthen their balance sheet. The group is considering a reduced dividend pay-out ratio. Any decision in this regard will be communicated to the market in advance of it being implemented.

Interests in investment property

Investment property South Africa R31,2bn (61%)Hyprop share R28,6bn (72,4%)Cap rates 6,3% – 8,3%Forward yield 7,2%

Eastern Europe R12,8bn (25%)Hyprop share R7,4bn (18,7%)Cap rates 7,0% – 9,3%Forward yield 8,0%

Sub-Saharan Africa R7,2bn (14%)Hyprop share R3,5bn (8,9%)Cap rates 7,8% – 8,8%Forward yield 7,9%

R51bn Hyprop’s total

interest R39,5bn

18,7%

72,4%

8,9%


Page 38


The total value of the shopping centres in which Hyprop has interests in South Africa, Eastern Europe and sub-Saharan Africa was R51 billion at 30 June 2019. Hyprop’s attributable share of this value was R39,5 billion and is reflected on the consolidated statement of financial position as follows: • South African investment properties – R28,6 billion; • The group’s attributable share of the Hystead investment properties of R7,4 billion is reflected as a financial asset of R218 million (net

of deferred gains); • Ikeja City Mall in Nigeria (included in assets held-for-sale) – R2,0 billion; and • The group’s interest in the net assets of the remaining sub-Saharan African portfolio is reflected as loans receivable from AttAfrica and

Manda Hill of R1,3 billion (after impairments), under current assets.

All investment properties are valued by independent valuers at least annually.

The impairments of the loans receivable from AttAfrica and Manda Hill were calculated with reference to the underlying independent valuations of the investment properties, anticipated proceeds which will be received on disposal of the investment properties, the impact of current year losses in AttAfrica and Hyprop Mauritius, and expected credit losses until 30 June 2020, by which date it is anticipated that the investments in sub-Saharan Africa will be sold.

Investment in Hystead – financial assetAs a result of the provisions of the suite of agreements which govern the relationship between the shareholders of Hystead, Hyprop accounts for its interest in Hystead as a financial asset. The value of the financial asset is calculated as the present value of the anticipated dividends and guarantee fees estimated to be received by Hyprop from Hystead and PDI respectively.

The value of the financial asset increased from R153 million at 30 June 2018 to R218 million at 30 June 2019 mainly as a result of growth in net operating income for the underlying property companies, the effect of the new supermarket opened in The Mall in Sofia and the reduction in borrowing costs following the refinancing of debt during the year.

In line with the group’s objective of improving the clarity of its financial reporting, we have provided additional financial information for Hystead, including an indicative balance sheet and statement of operating/distributable income for the year ended 30 June 2019, on page 195 of the integrated annual report. This information has not been audited or reported on by the company’s auditor.

EdconAs part of Edcon’s restructuring, Edcon approached its top 31 landlords in November 2018 and offered the landlords an opportunity to subscribe for an equity interest in Edcon, or, as an alternative, requested a 40,9% reduction in rentals for a 24-month period commencing on 1 April 2019 (the Edcon rent reduction). Hyprop agreed to assist Edcon by subscribing for equity in Edcon on a monthly basis for an amount equivalent to the monthly Edcon rent reduction (a total of R12 million from 1 April 2019 to 30 June 2019) (the Edcon subscription).

The equity which Hyprop has received in Edcon has been impaired to zero at 30 June 2019. Distributable income for the year was reduced by R12 million, as a consequence of the reduction in net cash flow received from Edcon.

Net asset valueThe group’s net asset value at 30 June 2019 was R95,78 per share, equating to a premium of 37,1% to the share price of R69,87 at that date.

Borrowings

In February 2019, Moody’s lowered Hyprop’s long-term national scale issuer rating to Aa3.za from Aa1.za and affirmed the short-term national scale rating of Prime-1.za. The main reason cited for the decrease in the rating is that Moody’s estimated that Hyprop’s debt-to-asset ratio, adjusted for the full consolidation of Hystead, had increased to 41% at 30 June 2018, from 33,4% in 2017, as a result of debt-funded acquisitions in Eastern Europe. Moody’s further stated that Hyprop would rely on external debt financing to cover R5 billion of debt coming due in the next 18 months, including the Hystead debt that it guarantees.

■USD100m

■EUR397m

■R750m

2019

9% 17%

74%

Total debt refinanced R8,5bn

2019

29% RMB

3% Omsfin

32% Standard Bank Group

10% Nedbank

3% Investec

23% DCM

Group (including guaranteed debt) by lender

■ZAR DCM

■ZAR bank

■EUR bank facilities

■USD bank facilities

2019

Group (including guaranteed debt) sources of funding

25%

22%

11%

42%

Page 39



Hyprop has taken cognisance of Moody's points which led to two key initiatives: • Refinancing of the portion of debt maturing up to June 2020 – between March and June 2019 R4 billion of external debt (including

EUR214 million of debt in Hystead) was refinanced. In addition, R500 million was raised from the issue of two new corporate bonds in March 2019, the proceeds of which were used to settle R358 million of bonds that matured in July 2019, with the balance being retained to finance capital expenditure in the 2020 financial year;

• Lowering of the fully consolidated LTV ratio to 35% – alternative ways to reduce the LTV ratio continue to be considered and evaluated. In the short term, the disposal of Hyprop’s SSA interests and utilisation of the proceeds to settle USD-denominated debt will result in a reduction in the LTV ratio of approximately 5% (on completion of all disposals).

35,0%

39,3%

44,0%(3,8)

(4,3)

35,0

SSA disposal tranche 1

SSA disposal balance

Recycle capital

30 June 2019 LTV

Target LTV

4543413937353331

292725

Reducing the LTV (%)R740m R2 864m

R1 881m

44,0(0,9)

It is stressed that there is no pressure on Hyprop by any of its banks, financial institutions or bond holders to reduce its LTV ratio. Reducing the LTV ratio is motivated by the key priorities of restoring Hyprop’s investment grade credit rating (subject to South Africa’s sovereign credit rating) by 31 December 2020 and reducing gearing levels in line with more difficult economic conditions. We will continue to engage with Moody’s in that regard.

30 June 2019 (R000) 30 June 2018 (R000)LTV calculation See-through Fully consolidated See-through Fully consolidated

Hyprop total assets 33 432 598 33 432 598 35 012 920 35 012 920 Hystead total assets 13 570 002 13 216 438 Hystead NAV (total assets – in-country debt) x 60% 4 604 241 4 297 489 Total assets 38 036 839 47 062 600 39 310 409 48 229 358Hyprop gross debt 8 385 363 8 385 363 7 884 994 7 884 994 Hystead gross debt 12 289 038 12 194 954 Hystead debt guaranteed by all shareholders (gross) 6 392 771 6 352 742 Hystead debt guaranteed by PDI (EUR40 million) (644 332) (640 128) Security from PDI held by Hyprop (EUR46,8 million) (754 133) (748 950) Total debt 13 379 670 20 674 401 12 848 659 20 079 948 Gross debt/total assets (%) 35,2 44,0 32,7 41,6

The majority of Hyprop’s lender banks use the “see-through” LTV for covenant purposes.

Page 40


We have tested the sensitivity of changes in the valuation of the investment property portfolio on the group’s see-through LTV ratio. A 20% reduction in the valuation of the investment property portfolio would result in an increase in the overall see-through LTV ratio to 44%, with the group still fully compliant with its banking covenants.

At 30 June 2019, the group’s see-through LTV ratio was 35,2% (calculated taking into account Hyprop’s attributable share of the net assets of Hystead, the Hystead debt guaranteed by Hyprop, and the back-to-back security Hyprop holds from PDI in relation to the guarantees). If calculated on a fully consolidated basis (including 100% of Hystead’s assets and borrowings) the LTV is 44,0%.

LTV ratio sensitivity analysis

Change in property values

Actual 35,2% (5%) (10%) (15%) (20%)

Rand (stronger)/weaker

(20%) 33,7% 35,5% 37,6% 40,0%(10%) 35,4% 37,4% 39,6% 42,1%

0% 37,0% 39,1% 41,4% 44,1%10% 38,6% 40,8% 43,2% 46,0%20% 40,2% 42,4% 45,0% 47,8%

7,4

3,874,36

9,1

7,1

5,2

7,3

3,98

4,90

3,683,91

June 2017 June 2018 June 2019

6

5

4

3

2

1

0

Interest cover ratio (ICR)

Bank covenant ICR

■ Consolidated EBITDA/interest paid■ Cash generated from operations/consolidated cash interest paid

The group’s interest cover ratio remains healthy, reflecting the strong cash generative nature of Hyprop’s properties. During the year the group adopted a new interest rate hedging policy, in terms of which a minimum of 75% of interest rate exposure must be hedged. Interest rate hedges are matched with loan maturity dates.

The group complied with all of its banking covenants during the year.

Rand denominated debt

425317

250

400

960

500

348358

650

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 42019 2020 2021 2022 2023 2024 2025

1 200

1 000

800

600

400

200

0

Debt maturity profile South Africa

452

Calendar quarter

ZAR

mill

ion

Key statistics June 2019 June 2018

Property value (Rbn) 28,6bn 28,6bn LTV 15,62% 9,83%Weighted average cost of debt (including hedges) 9,3% 9,4%Weighted average loan tenor (years) 2,84 3,15 Proportion of debt hedged 101,1% 113,6%

The South African bank debt is secured against South African investment property, while the DCM funding is unsecured.

During the year R750 million was raised by issuing new bonds with an average duration of 4,5 years and an average interest rate of 1,62% above three-month JIBAR.

On 26 June 2019, USD100 million of debt in Hyprop Mauritius was re-financed through a Rand denominated four-year term loan of R958 million and a R500 million revolving credit facility, at an interest rate of 1,65% above three-month JIBAR.

Borrowings of R1,0 billion are due for repayment before 30 June 2020. This includes the HILB05 bond of R358 million which was redeemed from available cash resources on 11 July 2019. The remaining R650 million of the short-term debt will be refinanced through new bond issuances, term loans or available bank facilities.

Page 41


Leadership review

US Dollar denominated debt

111

5560

17

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 42019 2020 2021 2022 2023 2024 2025

120

100

80

60

40

20

0

Debt maturity profile sub-Saharan Africa

USD

mill

ion

Calendar quarter

Key statistics June 2019 June 2018

Property value (Rbn) 3,5bn 5,0bnLTV 103,4% 98,9%Weighted average cost of debt (including hedges) 5,4% 5,0%Weighted average loan tenor (years) 1,35 1,98Proportion of debt hedged 44,6% 61,0%

Total USD-denominated bank debt at 30 June 2019 was USD244 million (2018: USD343 million), equivalent to R3,5 billion (2018: R4,7 billion). USD188 million of this debt is secured by guarantees from Hyprop and against South African investment property.Proceeds received from the disposal of the sub-Saharan African assets will be utilised to settle USD-denominated debt, after retaining sufficient cash to cover operating costs and service the remaining USD-denominated debt for the next 12 months.

Euro-denominated debt

183163

50

(only guaranteed loans)

EUR

mill

ion

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 42019 2020 2021 2022 2023 2024 2025

120

100

80

60

40

20

0

Debt maturity profile Eastern Europe

Calendar quarter

Key statistics

June2019

Guaranteed by shareholders

June2019

Non-recourse/

In-country Total

Property value (EURm) 796m 796m 796mLTV 47,11% 43,45% 95,93%Weighted average cost of debt 2,03% 3,57% 2,67%Weighted average loan tenor (years) 3,12 3,59 3,42%Proportion of debt hedged 100% 30% 74%

At 30 June 2019, Hyprop had guaranteed EUR357 million of interest-bearing loans advanced by banks to Hystead and certain of its subsidiaries. This debt is not consolidated in Hyprop’s statement of financial position, however, the financial support results in the recognition of a financial liability in Hyprop’s statement of financial position. Hyprop’s obligations under these guarantees are secured against South African investment property. In exchange for providing guarantees which exceed Hyprop’s 60% shareholding in Hystead, Hyprop receives a credit enhancement fee from PDI, currently equivalent to 11% of the dividends declared by Hystead.

During the period, EUR395 million of bank loans advanced to Hystead were refinanced for three to four years at an average interest rate of 2,0%. This resulted in new financial guarantees with an initial value of R110 million being recognised, and the derecognition of financial guarantees of R186 million in respect of the retired debt. As a result of more information on credit default rates having become publicly available since implementation of IFRS 9: Financial Instruments, the average credit default rates used by the independent valuers to determine the fair values of the financial guarantee liabilities reduced significantly from 2018, with a corresponding decrease in the financial liabilities.

Hyprop regularly reviews the funding of its investments in Eastern Europe. In the context of the current low European interest rate environment, the prudent interest rate hedging strategy adopted by the group and the stable performance of the Eastern European portfolio, the board is comfortable that the current funding structure is appropriate.


Page 42


Exchange ratesThe functional and reporting currencies for the investments in sub-Saharan African and Eastern Europe are the US Dollar and Euro, respectively. The exchange rates used to convert foreign currency amounts to Rand were as follows:

30 June 2019 30 June 2018

Exchange ratesAverage rate

R

Realised average rate

R

Year-endspot rate

RAverage rate

R

Realised average rate

R

Year-endspot rate

R

US Dollar 14,13 14,15 12,47 12,53 13,70Euro 16,04 16,91 16,11 15,32 14,80 16,00

The realised average exchange rate is the weighted average of the actual exchange rates at which foreign currency dividends received were converted to Rand. This rate is higher than the average exchange rate for the year ended 30 June 2019 as a result of exchange rate hedges utilised during the year.

ProspectsIn line with the group’s revised strategic plan, the following key priorities have been set for the next 18 months: • Reposition our South African portfolio – increase trading densities, increase non-GLA revenue, and identify alternative uses to create value • Dispose of the remainder of the sub-Saharan African (excluding South Africa) portfolio, while preserving value in the interim • Improve the dominance of the Eastern European portfolio – extensions to properties, asset management initiatives, leverage SA expertise

and know-how • Finalise and implement the strategy for non-tangible assets • Reduce the LTV ratio and ultimately restore Hyprop’s investment grade credit rating, and • Improve stakeholder communication – internal and external.

Hyprop expects a reduction in distributable income per share for the year ending 30 June 2020 of approximately 10% to 13%. The main reasons for the reduction are: • An approximate 4% to 5% reduction in distributable income from the continuing South Africa and Eastern Europe portfolios, comprising:

– a 2% reduction resulting from the full year effect of the Edcon restructure; – reduction due to the anticipated impact of negative rent reversions as a result of the current economic conditions in South Africa and increased capital expenditure;

– offset by positive growth in dividends received from the Eastern European portfolio; and • Approximately R145 million of additional net interest and other costs as a result of the need to refinance Dollar denominated debt with Rand

denominated debt, as explained above.

The board believes that the new strategy and key priorities will create a more defensive balance sheet and a base for sustainable long-term growth, and expects that following the reduction in distributable income in the 2020 financial year, the group will achieve positive growth in distributable income for the 2021 financial year, and beyond. Hyprop continues to evaluate other potential initiatives to improve financial performance and reduce the LTV.

This guidance is based on the following key assumptions: • Forecast investment property income is based on contractual rental escalations, and market-related renewals • Appropriate allowances for vacancies and rent reversions have been incorporated into the forecast • No major corporate and tenant failures will occur • The impact of the Edcon restructure/share subscription until March 2021 • No further deterioration in the performance of the remaining sub-Saharan African assets • The remaining sub-Saharan Africa assets will be disposed by 30 June 2020 and the proceeds will be used to settle US Dollar denominated debt • Earnings from offshore investments will not be materially impacted by exchange rate volatility or disruptions in the financial markets, and • Exchange rates (which have not been hedged) have been assumed at R15,00 and R17,00 to the US Dollar and Euro, respectively.

These prospects have not been reviewed or reported on by the company’s auditors.

AppreciationWe would like to thank our executives, management and staff for their efforts during the year and the manner in which they have embraced the changes brought about by the new executive team. We also thank our fellow directors for their guidance and support and all our other stakeholders for their support. We look forward to the next stage of Hyprop’s development.

Morné Wilken Brett Till Wilhelm NautaCEO CFO CIO

Page 43


Leadership reviewStakeholder engagement

INVE

STO

RS

EMPLOYEES

SHOPPERSTENANTS

SUPPLIERS

REGULATORSCOMMUNITIES

Investing in South Africa and in Central and

South-Eastern Europe

STAKEHOLDERS

Working with tenantsto reduce the cost of

occupancy and improve trading

densities

Create authenticand meaningful

experiences

Fair labour practices in a stimulating work

environment

Clear, transparent and regular engagement

and reporting

Sustainable partnerships with

suppliers to overcome economic challenges

Compliance with applicable laws and

regulations

Making a meaningful impact beyond the walls of our shopping

centres

Page 44


TENANTSKey topics • Attracting shoppers • Increasing footcount • Improving the quality and sustainability

of shopping centres • Reducing the cost of occupancy

Engagements • Marketing projects and events • Optimise tenant mix • R136 million spent on refurbishments, new equipment and sustainable

technology

SHOPPERSKey topics • Varied tenant mix • Enhancing shopping experience • Safe shopping environment • Meaningful and authentic shopping

experiences

Engagements • Shopper surveys • Monitoring and adapting to global retail trends • Creating spaces where families can spend quality time • Hosting different events to attract shoppers with varied interests • Multiple social touchpoints throughout the portfolio

EMPLOYEESKey topics • Training and development • Fair remuneration practices • Human resource relations • Transformation

Engagements • Introduced Coffee@Hyprop, a group-wide engagement platform • Training programmes to support career goals and transformation targets • Performance-based remuneration structure • Employee surveys • Wellness days

INVESTORSKey topics • Growth in distributable income • LTV and funding structures • Credit rating downgrade • Sub-Saharan Africa • Governance

Engagements • Transparent, accurate, meaningful and timely information • Investor perception poll • One-on-one meetings • Annual and interim results presentations • Pre-close presentations • Site visits

SUPPLIERSKey topics • Sustainable partnerships

Engagements • Fair business practices and tender processes • Efficient contract management • Moving towards improved BEE procurement profile and supporting enterprise

development initiatives

REGULATORSKey topics • Compliance with regulations

Engagements • Submission of all applicable statutory reports • Compliance with all relevant acts and regulations • Participation in professional bodies and industry organisations

COMMUNITIES

Key topics • Hyprop Foundation • Carbon footprint • Alternative energy • Resource conservation

Engagements • Regular foundation events and fundraising activities • Education and community upliftment-focused projects

Page 45


Leadership reviewBusiness structure

100% owned

The Glen (75,16%)

Rosebank Mall

CapeGateAtterbury Value

MartCradock Heights

Woodlands Boulevard

Co-owned

Clearwater Mall

Canal Walk (80%)

Hyde Park Corner

Somerset Mall

Western Cape Gauteng

SOUTH AFRICA

Hyprop Investments Mauritius(Mauritius)

AttAfrica(Mauritius)

Accra Mall(Ghana)

West Hills Mall (Ghana)

Kumasi City Mall(Ghana)

Ikeja City Mall(Nigeria)

75%37,5%

47% 45% 75%

100% owned

SUB-SAHARAN

AFRICA(excluding SA)

100%

90%

100%

90%

100% 100%

Delta City Belgrade(Serbia)

City Center One East

(Croatia) (EU)


(Montenegro)

City Center One West

(Croatia) (EU)

The Mall (Bulgaria) (EU)

Skopje City Mall(Macedonia)

Hystead(United Kingdom)60%

owned

EASTERN EUROPE

Page 46


Sustainability

CapeGate, Western Cape, South Africa

Page 47


Sustainability

Achieving sustainability requires a balanced approach in terms of which the use of resources, the direction of investments, the orientation of technological development and the consequent institutional responses are all applied with the intention of creating value over the long term. Sustainability covers all elements of business – people, environment, community, financial and capital.Hyprop is committed to corporate sustainability and actively considers its social, economic and environmental responsibilities, implements ethical practices and good governance and understands its impact on the natural environment. We endeavour to concentrate our efforts to integrate sustainability considerations into every aspect of the business environment. Initiatives cover improving recycling initiatives, reducing waste and managing assets to be more energy and water efficient and reducing carbon emissions in line with national targets. We are also cognisant of the need to preserve and develop our human capital resources and to manage our financial resources in a prudent and responsible manner.

Reporting on our sustainability initiatives covers the holding company and our South African properties.

People

Human resourcesOur human resources structure is designed to address the operational demands of our business in delivering our strategy. The head office is situated in Rosebank and management teams are deployed at our shopping centres ensuring efficient management, leasing and maintenance of our assets.

The company complies with employment laws and is committed to protecting human rights. Our code of ethics and disciplinary code are communicated to all employees.

We encourage our people to live by our core values and employee code that support a work culture that is transparent, respectful, non-exploitative, fair (especially with regard to compensation and benefits), dynamic, promotes open and constructive dialogue with management, involvement in decision-making, working conditions that are safe and an appropriate work-life balance.

As at 30 June 2019 As at 30 June 2018

263Employees

159Female

104Male

Employee profile (number)

8 3 3 23 190 3 36 5 8 2 0 23 196 7 42 5

WE RECOGNISE AND VALUE OUR PEOPLE AS OUR MOST IMPORTANT ASSET

■ N

on-ex

ecutiv

e dire

ctors

■ Ex

ecutiv

e dire

ctors

■ Con

tract

casual

emplo

yees

■ St

rateg

ic mana

gemen

t

■ Ex

ecutiv

e and

senio

r mana

gemen

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Othe

r emplo

yees

■ Con

tract

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yees

■ Em

ployee

s paid

by di

sabilit

y insur

ance

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e dire

ctors

■ Ex

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ctors

■ Con

tract

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r emplo

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■ Con

tract

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■ Em

ployee

s paid

by di

sabilit

y insur

ance

As at 30 June 2019 As at 30 June 2018

263Employees

159Female

104Male

Employee profile (number)

8 3 3 23 190 3 36 5 8 2 0 23 196 7 42 5

WE RECOGNISE AND VALUE OUR PEOPLE AS OUR MOST IMPORTANT ASSET

■ N

on-ex

ecutiv

e dire

ctors

■ Ex

ecutiv

e dire

ctors

■ Con

tract

casual

emplo

yees

■ St

rateg

ic mana

gemen

t

■ Ex

ecutiv

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r mana

gemen

t■

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r emplo

yees

■ Con

tract

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yees

■ Em

ployee

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by di

sabilit

y insur

ance

■ N

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ctors

■ Ex

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■ Con

tract

casual

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■ St

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y insur

ance

Page 48


Intellectual capitalOur business success is underpinned by the intellectual capital maintained in our human resources. This expertise is centred in the following areas: • Leadership

– A strong leadership team, driving a culture of high performance – Effective partnerships with customers, suppliers, business peers as well as sector and research bodies

• Asset management and transaction capability – In-house asset management team (including directors and executive and general managers) – Expertise in identifying new markets and opportunities – Ability to conclude acquisitions, disposals and capital projects on time and within budget

• Funding – Ability to raise finance on competitive terms

• Legal resources – In-house legal expertise to manage risk and legal processes – Monitoring changes to laws and regulations to ensure the group complies with its legal responsibilities and obligations

• Leasing structures – Leasing, a core function of the business, is supported by regional and on-site skilled management teams

• Information and technology management systems – Innovative systems provide reporting and a comprehensive overview of key portfolio metrics – Real-time integrated property and financial management system – Building management and analytical systems – Constant equipment replacement plan to increase technology efficiencies

• Monitoring business performance, patterns and future trends – Hyprop has a dedicated statistician to compile, evaluate, compare and interpret property and performance statistics

• Ongoing portfolio enhancement – Constant improvement to deliver a positive, meaningful experience to our shoppers in a clean and safe environment – Extensions and refurbishments anticipate and accommodate changing consumer habits and ensure tenant loyalty

Page 49


Sustainability

Company cultureCore values and employee codeOur employee code focuses on creating a work culture that is transparent, respectful, fair, non-exploitative (especially with regard to compensation and benefits), dynamic, promotes open and constructive dialogue with management, involvement in decision-making and provides working conditions that are safe and encourages a work-life balance.

COLLABORATION EXECUTION RESPONSIBILITY

INTEGRITY

CRE

ATIV

ITY

VALUES

Our people are committed to our core values

We encourage teamwork and the

mutual exchange of knowledge, regardless of culture, genders and

background

We challenge the status quo and try new things.

We learn from our actions whether successful or not

We make things happen and support each other

to reach our highest potential, and strive for

excellence We take responsibility for our actions whether

positive or not

We are honest and treat everyone with fairness

and respect to earn their trust

Employee relationsThe national human resources manager is responsible for employee relations. An employee, disciplinary and grievance policy governs these relations and is available on request, in hard copy at each management office, and on the website www.hyprop.co.za.

Hyprop has no unionised employees and there was no impact on the business due to industrial or labour unrest during the year.

There were nine disciplinary cases during the year, primarily for misconduct, which resulted in five terminations of employment.

HarassmentThe company is committed to creating and maintaining a climate where all employees and stakeholders are treated with dignity and respect. Harassment in the workplace is not tolerated under any circumstances and perpetrators are severely disciplined. Grievances raised in respect of harassment will be dealt with timeously, sensitively and confidentially and no person who raises a grievance about harassment will be victimised.

No grievances relating to harassment were reported during the year.

Non-discriminationWe do not tolerate discrimination. Reported instances are immediately and appropriately dealt with under our code of ethics and conduct, and related disciplinary procedures. Policies are reviewed annually and distributed to employees.

No incidents of discrimination were reported during the year.

Page 50


EngagementRegular interaction with our employees is critical in creating an engaged workforce. We engage with our employees through several channels which enable communication from leadership, and forums through which our employees can provide feedback.

Employee forumsStaff meetings are management team specific, driving collaboration across members of the management teams and the departments that operate at shopping centres.

Human resource site meetings are presented by human resource management and include employment equity forum meetings. These meetings provide opportunities for employees to provide feedback and ask questions of leadership. Two human resource meetings per management office were held during the year.

Employee self-service system (ESS)The employee self-service system is used to communicate all payslip, IRP5 and employee payroll information. The system integrates with the payroll and is used for performance reviews, leave applications and approvals.

Company employee newsletterThe newsletter encompasses information and input from all our management teams, highlighting achievements and company values. It is a valuable tool for communicating events to various management teams, communicating staff wellness matters, policy updates and staff information notices, and contains information about changes, challenges and staff appointments.

Employee events Annual year-end functions that include long service and service excellence awards are held.

Thirty long service awards were awarded during the year, including two awards for 30 years’ service with the group. Six Hyprop excellence awards were issued to teams or individuals who worked in an exceptional manner to complete an assigned task or that independently took on an improvement initiative supported by the company.

Employee surveysAnnual surveys ensure we identify and address any issues concerning employee morale, productivity and turnover. Two surveys were conducted during the year focusing on fair labour practices.

Our fair practice survey indicated that 94,4% (target 90%) of employees currently feel that the company’s benefits, processes and policies are implemented fairly and in a non-discriminatory manner. The survey covered our recruitment and disciplinary process, employee policy implementation and HIV and Aids education.

Our employee satisfaction survey indicated that 96,7% of our employees were satisfied with remuneration, company benefits as well as the work environment and facilities.

The outcome of the survey confirmed that our employees value working within a team where there is mutual respect, trust and solid values that promote a diverse and talented workforce. We believe in leading by example and value the input we receive from our employees. Suggestions to improve value were discussed with the executive team and include optimising our tenant mix, improving communication and office facilities.

Page 51


Sustainability

Hyprop ethics lineThe company values its reputation and recognises that over and above any financial damage suffered, fraud may reflect adversely on our reputation.

Our aim therefore is to limit company exposure to fraud by taking firm and vigorous action against any individual or group perpetrating fraud against the company. We encourage our employees to be vigilant and to report any suspicion of fraud, providing them with suitable confidential channels of communication and ensuring sensitive information is treated appropriately. The company always expects employees to act with integrity, comply with financial regulations and to report concerns as soon as any impropriety is suspected.

The Hyprop Ethics Line, our anonymous tip-off line, is working well in conjunction with an external service provider, Whistle Blowers Proprietary Limited, and reports to the audit and risk committee. All employees are made aware of this facility and reporting is on an anonymous basis with feedback provided and action taken to remedy the matters raised.

During the year two calls were reported, investigated, and feedback given. Neither of the calls was of a serious nature.

Performance management meetingsThe performance appraisal process is an opportunity for each manager and employee to reflect on an employee’s performance over a period, review whether previously discussed performance expectations and goals have been met, to discuss professional development opportunities and to identify opportunities to develop additional skills and knowledge to foster performance improvement and career growth. Additionally, the appraisal provides appropriate documentation to support any recommended merit increases and/or other performance-based awards.

Work days and leaveJune 2019 June 2018

Total working days 66 462 68 649Total number of working days lost due to absenteeism (sick, family responsibility and maternity leave) 1 129 1 235Percentage of total days lost due to absenteeism (%) 1,7 1,8Total number of days lost due to industrial action (%) – –Percentage of total days lost due to industrial action – –

Employee development and trainingTrainingOur training and development programme is based on the operational requirements of the business, and takes into account skills shortages in our industry and transformation imperatives.

Training needs are identified during employee reviews, while the group’s skills base is assessed to identify focus areas for training in the year ahead.

Our training strategy aims to: • Enhance the company’s knowledge and skills base • Enable employees to contribute to our business and growth • Encourage further education to enhance competence in current positions and increase eligibility for promotion • Support employment equity initiatives.

During the year, a combination of internal and outsourced training sessions covered the following key areas:

Training spend (R)June 2019

RJune 2018

R

Leadership 792 011 797 310 Strategy 748 246 –Business operations 362 660 193 036 Degree/diploma programmes 143 450 96 144 Green building principles 95 850 116 635 Leasing 14 900 83 769 Learnerships 117 000 –Trade qualifications 253 600 29 100 Health and safety 17 788 45 103 HIV and Aids 56 812 52 549

Total training 2 602 317 1 413 646

A strategy workshop was held following the appointment of the new executive team. The workshop included a detailed analysis of the corporate culture, values, team dynamics, a group SWOT analysis and development of the revised group strategy. Participants in this workshop included members of the investment committee, executive directors and senior executives in the group.

Page 52


During the year we continued to promote and grow our graduate and trade qualification programme which has become a key element in implementing our employment equity plan. Twenty-two (2018: 18) employees are currently enrolled in various degree and trade qualification programmes. Green building and management principles focused on water and energy efficiency training and national lease training was presented in all regions.

Training spend by race profile and gender (R) June 2019 June 2018

Training by raceAfrican 729 020 374 101 Coloured 139 431 116 076 Indian 173 682 66 488 White 1 560 184 856 981 Non-South African – –

2 602 317 1 413 646

Training by genderMale 1 686 986 614 981 Female 915 331 798 665

2 602 317 1 413 646

Succession planningSuccession planning forms part of the group’s risk management process, as well as being integral to the growth and development of our staff. Our primary objective is to identify key positions and ensure we have the necessary staff to cover these roles should the need arise unexpectedly; as well as to groom staff, including those from designated groups, for promotion. This is done by mentoring staff members and providing training focused on the requirements of specific positions, leadership training and development for senior management, technical and people skills training for management and junior management, and structured training for support staff.

This has proved effective with three out of the four internal placements from designated groups.

Transformation and diversityEmployment equityHyprop is committed to promoting equal opportunities for, and fair treatment of, all employees, regardless of gender, race, sexual orientation, religion, language and age. Our employment equity plan focuses on eliminating discrimination and implementing internal measures to redress disadvantages and remove systemic barriers faced by designated groups, in order to ensure their equitable representation in all occupational categories.

Hyprop’s current employment equity plan is for a five-year period (January 2017 to December 2021). The key objective of the plan is to ensure equal opportunities and fair treatment in employment, and that employees ultimately represent the economically active profile of the South African population demographic.

We are committed to: • Creating and maintaining an environment that provides equal opportunities to all employees, with special consideration for historically

disadvantaged groups • Achieving equity in the workplace by:

– Promoting equal opportunities and fair treatment and eliminating any unfair discrimination – Implementing measures to redress disadvantages in employment experienced by designated groups in order to ensure their equitable representation in the workplace

• Ensuring that recruitment and selection (when recruiting) are aligned with our business strategy and based on fairness, objectivity and competency, and seek to redress historical imbalances to achieve representation

• Training and developing employees or prospective employees through an effective training and skills development programme • Prohibiting any medical testing unless required by legislation, or an inherent requirement of the job • We understand that racial representation at all levels is required and we have implemented measures to ensure equal opportunities to grow

in our organisation. These include revised recruitment policies, increased training and development opportunities and equal remuneration policies (as stipulated by section 6 of the Employment Equity Act).

For more information, please view the full employment equity policy and plan on our website www.hyprop.co.za.

Page 53


Sustainability

Total number of employees (including employees with disabilities)Reported in terms of the Employment Equity Act.

June 2019

Male FemaleForeign

nationals Total

Occupational levels A C I W A C I W Male Female A C I W Total

Top management(1) 1 0 0 8 1 0 0 1 0 0 2 0 0 9 11

Senior management 2 0 1 9 1 0 1 12 0 0 3 0 2 21 26

Professionally qualified and experienced specialists and mid-management 6 1 2 14 3 6 2 15 0 0 9 7 4 29 49

Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents 7 3 2 5 17 12 6 19 1 1 24 15 8 26 73

Semi-skilled and discretionary decision making 24 8 1 2 17 9 1 5 1 0 41 17 2 8 68

Unskilled and defined decision-making 4 0 0 0 1 0 0 0 0 0 5 0 0 0 5

Total permanent 44 12 6 38 40 27 10 52 2 1 84 39 16 93 232Temporary employees 1 2 0 5 15 10 0 6 0 0 16 12 0 11 39

Grand total 45 14 6 43 55 37 10 58 2 1 100 51 16 104 271

A – African; C – Coloured; I – Indian; W – White; M – Male; F – Female; B – Black (Black includes African, Coloured and Indian).(1) Top management includes non-executive directors.

Page 54


Health and safetyOur policy is to create a safe and healthy working environment, with procedures to manage occupational incidents and compensation claims, in line with legislation.

Scott Safe, who provides safety consultancy services to Hyprop, carries out a health and safety audit twice a year, in May and November.

We aim to: • Provide a health and safety programme that is effective, of a high standard, and is continuously reviewed and improved • Comply with statutory provisions for health, safety and environmental matters that affect employees, customers, contractors and the public • Ensure that all employees are properly informed of their responsibilities for health, safety and environmental matters and discharge these

effectively • Encourage employees to participate in preventing accidents and preserving health • Provide the resources and training to achieve these objectives.

Each management team is responsible for executing this policy on-site through its operations manager. At group level, the national facilities manager is responsible for biannual audit reports, drawing on submissions from each centre.

Construction projects have health and safety consultants appointed to represent Hyprop and monitor activities on-site. On large and complex projects, the contractor has its own health and safety officer managing contractor teams and subcontractors.

There were no serious casualties or injuries during the year at any of our properties or projects.

Injuries on duty June 2019 June 2018

Workmen’s compensation claims submitted 3 5Serious occupational injury nil nil

Health and safety training and awarenessThe company is focused on informing and training employees on health and safety. Various initiatives were arranged during the year, including:

Initiative HIV/Aids First aidFire-

fightingStress

management CancerHealthylifestyle

Injury onduty

Traumacounselling

Training by external suppliers X X X X X

Health day consultations X X X

Information distributed via newsletters X X X X

Employee awareness days X X

Voluntary testing and counselling X X X X

HIV/AidsHIV/Aids is a concern that could affect the wellbeing of our employees, leading to emotional distress, absenteeism, employee turnover and lower productivity. A formal risk assessment determined that the likely impact of HIV/Aids on the group is negligible. Hyprop does not have targets for addressing the direct impact of HIV/Aids, nor does it have strategies for addressing indirect business risks (e.g. effect on customer base/supply chain) as this risk is considered to be very low.

Our HIV/Aids policy provides guidelines on creating a non-discriminatory workplace, dealing with HIV testing, confidentiality and disclosure, providing equitable employee benefits, dealing with dismissals and managing grievance procedures. It ensures affected employees’ rights to confidentiality. Where employees willingly disclose their status, that is kept confidential. Hyprop offers counselling, acceptance and support.

Every year, HIV/Aids awareness days are conducted by professional nurses at each management office, with an external service provider providing voluntary counselling and testing. Employees are offered the opportunity to test for HIV, cholesterol, sugar and stress levels.

Page 55


Sustainability

EnvironmentAlthough our business has a low environmental impact, we aim to continually reduce our impact on the environment during our daily operations. A key focus is on reducing consumption of natural resources where possible.

Management regularly monitor the execution, reporting and review of our environmental policy, culminating in an annual review by the social and ethics committee.

Hyprop’s environmental strategy aims to practically address the key environmental impacts of its operations, namely water, energy and waste. Our approach is informed by best practice, proven methods, ease of implementation, and the benefit-to-cost ratio of retrofitting green-design principles to existing buildings.

ENVIRONMENTAL SUSTAINABILITY HIGHLIGHTS

81% of total waste by volume recycled

Cost savings of

R12,7 million

due to implementation of LED lighting in common areas

Sixth submission

to CDP on carbon emissions

Sixth successive

participation in GRESB

Second WDP submission

(water disclosure project)

2019 MILESTONE PROJECTS

The undercover parking lights were changed from T8 fluorescent tubes to energy efficient LED tubes. The energy usage was reduced by 50% and light output was increased by 10%.

Domestic and fire water pumps and associated piping were installed to provide back-up domestic and fire water in the event of water cuts from the council due to water rationing.

Domestic and fire water pumps and associated piping were installed to provide back-up domestic and fire water in the event of water cuts from the council due to water rationing. A reverse osmosis plant was installed and commissioned and will commence operating when the water extraction licence is granted.

Domestic and fire water pumps and associated piping were installed to provide back-up domestic and fire water in the event of water cuts from the council due to water rationing. Two boreholes were drilled and a reverse osmosis plant was installed and commissioned and will commence operating when the water extraction licence is granted. The mall now has the ability to go off the water grid.

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International benchmarkingHyprop voluntarily participates in global environmental benchmarking programmes, and works to meet challenging targets. These include: • CDP, which is the global standard for environmental carbon reporting and is the only international system for measuring, disclosing,

managing and sharing vital environmental information necessary for building sustainable economies. Our CDP submission is audited by KPMG’s climate change and sustainability services division (sixth submission). In FY19 we achieved a B+ score (based on the new scoring chart that emphasises actions to mitigate climate change rather than just reporting on the carbon footprint). This is above average compared to our peer group.

• GRESB is an industry-driven index that assesses the sustainability performance of global real estate portfolios (public, private and direct). It is used by institutional investors to improve the sustainability performance of their own portfolios and of the global property sector (sixth submission). Hyprop’s GRESB rating is 56%.

• The MSCI Investment Property Database tracks and publishes related electrical and water consumption analytics (fifth submission).

Hyprop incurred no fines for non-compliance with environmental laws and regulations during the year.

Hyprop environmental scorecard FY19 (baseline June 2013)Target

June 2019Achieved

June 2019Target

June 2020

Energy (kWh) 233 926 214 235 336 930 230 630 192Water consumption (kℓ) 749 048 857 014 850 000Waste recycling (volume) (%) 80 81 82Scope 2 carbon emissions (tCO2e) 24 657 26 706 26 171

EnergyOf Hyprop’s total annual operational spend, a large portion is on electricity (mostly consumed by tenants), making energy efficiency a financial imperative. We continue to implement a range of energy efficient solutions to better manage costs for the group and for our tenants, improve our environmental performance and reach our targets in this regard.

Total electrical consumptionTarget

June 2019AchievedJune 2019 June 2017

Direct non-renewable energy consumption (GJ) from diesel burnt 88 050 79 430 86 560Direct renewable energy consumption (GJ) from solar PV 15 880 13 801 8 444Direct energy consumption (GJ) from electricity consumed but not recovered 98 968 99 859 106 312Indirect energy sold (GJ), i.e. electricity recovered from tenants 748 245 760 191 857 872Electricity consumption (megawatt hours or MWh) 235 336 238 700 267 828Energy consumption (GJ) – calculated 847 213 859 321 964 184

GJ = Gigajoules

To monitor the effectiveness of these initiatives and year on year consumption patterns, we calculate our energy use intensity, as follows:

June 20192019/2018% change June 2018 June 2017

Energy use intensity (GJ/m2) 1,20 (1,63) 1,22 1,27Kilowatt hours per occupied space (kWh/m2)Retail 332 (0,6) 334 345Office 151 (21) 191 275

Planned projectsWe are investigating installing solar PV plants on six of our Gauteng mall rooftops in the new financial year. The return on investment is attractive and will allow us to mitigate some of the steep escalations in electricity costs.

Rosebank Mall – A project has been budgeted to replace the fluorescent lighting in the coves on level 2 with LED lighting. This will be more energy efficient due to the longevity of the LED lamps and will reduce the cost of maintenance.

Carbon emissionsFor an accurate baseline, we determined the group’s scope 1 and 2 carbon footprint using the UK Department for Environment, Food and Rural Affairs (DEFRA) voluntary reporting guidelines and the revised reporting standard of the Greenhouse Gas Protocol, the accepted international tool for government and business leaders to understand, quantify and manage greenhouse gas (GHG) emissions.

Hyprop again participated in the CDP, submitting our audited carbon footprint for the year to June 2019, and achieved a B+ score. This is still considered above average and is above our peers (B- rating on average).

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Sustainability

Hyprop’s carbon emissions

Total carbon emissions (tonnes of carbon dioxide equivalents (tCO2e) – calculated June 2019 June 2018 June 2017

Total carbon emissions broken down as: 268 658 261 323 280 990Scope 1(1) 29 249 15 302 17 912Scope 2(2) 26 706 25 160 27 942Scope 3(3) 212 703 220 861 235 136Average volume of carbon emissions (scope 1 and 2) per hour worked (tCO2e/h) 0,130 0,065 0,076(1) Scope 1: all direct GHG emissions from diesel and fugitive refrigerant gas leaks.(2) Scope 2: indirect GHG emissions from consuming purchased electricity in the common area.(3) Scope 3: indirect GHG emissions from electricity that is resold to the tenants.

Carbon taxBased on current advice, Hyprop will not be liable for any direct carbon tax under the proposed Carbon Tax law. Implementation of the proposed tax has been placed on hold.

WaterWe continue to investigate viable opportunities to reduce water consumption, especially in drought-affected areas such as the Western Cape. These initiatives include installing water-efficient equipment throughout our properties, while improving our measurement and monitoring standards.

We rely on close cooperation from tenants and shoppers to reduce water consumption. We actively engaged with high water usage tenants in the Western Cape region on a weekly basis to ensure compliance with local authority water saving targets. For new developments, renovations and upgrades, water efficiency is one of the criteria in choosing technical equipment such as toilets, taps and dry condenser systems.

Two sites in the Western Cape now have access to borehole water. The quality of the water is being tested and the applications for extraction licences is under way. At The Glen, greywater systems have been installed to reduce consumption of municipal water.

Hyprop monitors bulk water consumption daily at centres to identify unusual patterns that might indicate leaks.

June 20192019/2018% change June 2018 June 2017

Water measuresTotal consumption (kilolitres (kℓ)) 857 014 13,2 756 615 1 028 094Average volume consumed per hour worked (ℓ/h) 1 948 6,6 1 828 2 236Target for consumption, or reduction, against specificdenominator (ℓ/h) 2 300 (1,2) 2 327 2 350Water use intensityRetail: kℓ per occupied space (m2) 1,2 14,1 1,1 1,4Office: kℓ per occupied space (m2) 0,9 50,1 0,6 1,0Total: kℓ per occupied space (m2) 1,2 15,2 1,1 1,4

Water-efficiency initiatives

Initiative Objective Current activities Progress

Smart metering Improve consumption measuring and monitoring; identify leaks from unusual flow patterns

Bulk check meters have been installed at all sites except Canal Walk

Canal Walk is currently evaluating various smart metering systems

Fire system water consumption

Identify leaks and illegal use of water

Save water and avoid abuse of infrastructure

South African and Nigerian buildings monitored

Waterless urinals Reduce water usage Waterless urinals were installed at the food court at Woodlands Boulevard in the current year

Waterless urinals to be installed in the planned toilet upgrades at Canal Walk

Low volume aerators

Reduce water usage at hand wash basins

Aerators fitted at all sites Complete

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WasteRecyclingIn 2018, China announced that it would restrict imports of certain recyclables, including mixed paper – magazines, office paper, junk mail – and most plastics going forward. It is expected that this may have an effect on recycling in South Africa. Hyprop will consider alternative methods of recycling should the need arise.

Our approach to waste management aims to maximise recycling, minimise disposal to landfill sites and comply with legislation. Waste is collected from tenants and separated at a waste yard. All centres have suitable waste-segregation facilities. On-site waste management system information is regularly reiterated to tenants, and Canal Walk and Clearwater Mall have public recycling stations.

Hyprop is also looking into ways to compost large amounts of wet food waste. Two sites, one in the Western Cape and one in Gauteng, have started taking their wet waste to farms where it is used to grow protein. In addition, Canal Walk is piloting an on-site, in vessel composter which treats organic waste avoiding CO2 emissions and improves recycling statistics.

Waste generated by construction is disposed of in line with responsible management plans. For development projects, we adhere to applicable regulations and consider best practice to optimise the environmental quality of our construction sites.

In 2019, Hyprop recycled 80% (by volume) of total waste, down from 83% in 2018. While lower in percentage terms, lower group volumes reflect greater individual recycling efforts from our tenants. The target of 75% has been exceeded. According to our waste service provider, current market conditions dictate that a higher recycling target would involve an increasing cost and would therefore be less economically viable.

Areas of improvement during the year included improved source segregation from tenants, particularly for food waste, to prevent contamination of recyclables. Audits were conducted of tenant back of house waste source segregation at Canal Walk and this programme will be extended to other centres.

Total waste recycled (m³)

Paper Plastic General

waste Scrap metal Glass Tetrapack

Organic waste

Haz liquid Haz dry Total

69 664 28 476 25 970 2 951 2 017 1 268 1 133 125 10 131 614

June 2019 June 2018 June 2017

Total non-hazardous waste disposed (t) 3 705 2 725 3 963Total hazardous waste disposed (t) 43 32 51Total waste sent for recycling (t) 2 692 3 683 2 851Waste sent for recycling (%) 42 57 41RecyclingNumber of loads ordered 4 061 5 133 7 689Quantity of units collected (t) 55 101 68 503 64 769Recycled (volume) (%) 81 83 79Recycled (m3) 19 040 57 537 55 692

Climate changeWe have formally assessed the risks and opportunities presented by climate change as part of our annual submission to CDP and our group risk management process.

Key direct risks include: • Change in temperature extremes – higher temperatures mean air-conditioning equipment will not cope in peak summer • Sea-level rise – danger of flooding at coastal centres, notably Canal Walk and Somerset Mall • Change in rainfall precipitation patterns – extreme rainfall can cause leaks and damage to tenants’ and Hyprop’s property • Drought – successive droughts can lead to additional unbudgeted capital expenditure as was the case in the Cape region.

Environmental sensitivityCanal Walk is in a biodiversity-rich area and is part of the greater Century City precinct, in a national wetland conservation area, Intaka Island. Intaka is an award-winning 16-hectare conservation area, rich in birdlife and indigenous plants. The precinct has an environmental management plan to which Canal Walk adheres: no sewerage, fertilisers, herbicides or chemicals are discharged into canals that run through the precinct; only biodegradable cleaning products are used for parking decks, walkways and walls to minimise water pollution. In addition, Hyprop contributes financially to the environmental management plan.

Hyprop will be participating for the first time in the newly launched South African Bio Diversity Project (BDP).

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Sustainability

Our communitiesHyprop believes in engaging our society and contributing to sustainable projects within the communities that surround our properties. The Hyprop Foundation was established in 2013 to focus the company’s CSI programme on addressing identified needs in those communities affected by our business operations.

The foundation’s long-term vision is to ignite a culture of participation by our people and all stakeholders through sustainable initiatives that create value in the short, medium and long term by focusing on four key areas: • Education • Community upliftment • Health and wellness • Environmental upliftment.

The foundation’s budgets and projects are approved and monitored by the social and ethics committee. In line with the objective of involvement, funding is generated through a system of Hyprop employees and relevant stakeholders (e.g. retail tenants) contributing their time and resources to identified initiatives, with the value of involvement converted to a Rand value. Funding contributed by Hyprop for the year was R1,9 million (2018: R1,9 million).

All potential beneficiary partners are screened by the foundation’s management committee and Hyprop remains involved in each initiative past the point of inception. To identify meaningful projects and beneficiaries, it considers the measurable impact prior to resources being allocated. Employee engagement is encouraged at this stage of the process and employees are entitled to nominate projects and beneficiaries, which will be reviewed by the foundation management committee. The decision to proceed is based on the proposal’s alignment to our core business and the foundation’s stated objectives.

As in prior years, the foundation’s key challenge remains the overwhelming need for assistance and the resulting volume of applications, with the aid requested often exceeding available funding.

Foundation beneficiaries

■ Education■ Community upliftment■ Health and wellness■ Environmental upliftment

54%38%

5% 3%

75%

5%

11%

9%

20182019

Foundation top 10 beneficiaries

MES community servicesEmployee school education scheme

LEAP Science and Maths Schools

Tertiary education bursary in fashion industry

Smile Foundation

Umtholops Primary School

Arbour Day Mvelledzo Primary School

SPCA

Rays of Hope

SAPS Widows and orphans

Financial and capitalDetails of how we have managed our financial capital to achieve sustainable long-term financial returns are provided in the Leadership Review (pages 21 to 43) and audited financial statements (pages 89 to 188).

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Governance

Canal Walk, Western Cape, South Africa

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GovernanceCorporate governance report

Ethical leadershipThe board of directors (the board) is ultimately responsible for the ethical behaviour of the business. In conducting the affairs of the company, the board endorses the principles of fairness, responsibility, transparency and accountability advocated by King IV.

The directors ensure effective ethical leadership and regularly review the company’s governance structures, to ensure these remain relevant and effective in achieving these objectives.

A code of conduct is in place, is reviewed regularly and applies to all employees. The social and ethics committee monitors compliance with the code. There were no reported contraventions of this code during the year.

The boardThe board evaluates and approves group strategy, scrutinises group performance and measures executive management’s performance against key performance deliverables. There is a clear division of responsibilities at board level, to ensure that no one director has unfettered power of decision-making.

In determining the optimal number of directors to serve on the board, the remuneration and nomination committee considers requirements of the group and the knowledge, skills and experience of individuals. At present, the size of the board is considered appropriate, given Hyprop’s scale and geographical diversification. This is reviewed periodically against the size of the company and its needs.

At 30 June 2019, the board comprised 11 directors: six independent non-executives, two non-executives and three executives. The classification of directors is based on an annual assessment of their independence.

The chairman is an independent non-executive director, appointed to the board in June 2013, and is not a former CEO. The chairman’s role is separate from that of the CEO. He provides leadership and guidance to the board and encourages deliberations on all matters requiring directors’ attention.

The non-executive directors have diverse backgrounds in commerce and industry. Their collective experience enables them to provide sound, objective judgement in decision-making. At least one-third of directors retire by rotation every year, in line with the JSE Listings Requirements and Hyprop’s Memorandum of Incorporation (MOI). If eligible and available, these directors offer themselves for re-election. Directors who have been appointed to fill a casual vacancy during the year, retire at the next annual general meeting, when they may make themselves available for re-election.

A directors’ code of conduct is contained in the board charter. Independent non-executive directors serving for more than nine years are subject to an annual review process by the board to evaluate their continued independence.

Having served for more than nine years, Mike Lewin and Stewart Shaw-Taylor’s independence was considered and reviewed by the board and the board is satisfied that there are no factors that impair their independence. Mike and Stewart continue to be classified as independent non-executive directors.

Directors’ and officers’ liability insurance is provided by the company.

Board committeesThe board is satisfied that all board committees fulfilled their responsibilities during the year, in terms of their approved charters. Each committee’s performance is reviewed annually. The need for additional and/or ad hoc committees is evaluated regularly. Hyprop’s remuneration and nomination committees are combined. Discussions on nomination matters are led by the board chairman.

The chairs of the committees provide feedback to the board on a regular basis. In addition, the chairman of the board and the committee chairs attend Hyprop’s annual general meeting to answer questions from shareholders.

The board committees utilise the services of independent external advisers, as and when required.

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Governance structure

The board of directorsResponsibilities: • Custodian of corporate governance for the group • Contributes to, and approves the group’s strategy • Provides ethical leadership and ensures that the group is a responsible corporate citizen and complies with applicable laws • Ensures that its membership is appropriate to carry out its duties and that there is a balance of powers among its members • Promotes transformation, gender and race diversity and succession planning to ensure sustainable leadership structures • Ensures that the group has an effective system for identifying and managing risks and provides guidance and advice on the group’s

financial, audit, governance and other risk management controls

q q q qAudit and risk committeeSee page 94 for full report

Social and ethics committeeSee page 88 for full report

Investment committee Remuneration and nomination committeeSee page 69 for full report

Chair:Thabo Mokgatlha(1)

Chair:Mike Lewin(1)

Chair:Gavin Tipper(1)

Chair:Stewart Shaw-Taylor(1) (remuneration)

Members:Gavin Tipper*†Stewart Shaw-Taylor*†Zuleka Jasper*†

Members:Nonyameko Mandindi*†Morné Wilken

Members:Stewart Shaw-Taylor*†Louis Norval*Kevin Ellerine*Morné WilkenWilhelm Nauta

Members:Gavin Tipper (chair(1), nomination)*†Thabo Mokgatlha*†

By invitation: • CEO • CIO • CFO • Financial managers • External auditor • Internal auditor • Legal executive • Human resources executive

By invitation: • Financial managers • Legal executive • Developments executive • Human resources executive • Chairman

By invitation: • CFO

By invitation: • CEO • Human resources executive

In attendance:Company secretary



Responsibilities: • Oversee integrated reporting,

including consideration of significant judgements and reporting decisions

• Ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities

• Review the expertise, resources and experience of the company’s finance function, and satisfy itself as to the expertise and experience of the chief financial officer

• Oversee internal audit, and in particular, the appointment and/or dismissal of the internal audit service provider

• Monitor compliance with the risk policy

• Recommend the appointment of the external auditor and oversee the external audit process

• Make submissions to the board on any matter concerning the company’s accounting policies, financial controls, records, reporting and risk management

Responsibilities: • Promote ethical leadership

through good corporate citizenship

• Consider process to reduce environmental impact

• Ensure transparent communication to stakeholders

• Human capital including education and skills management

• Transformation through BBBEE and employment equity

Responsibilities: • Review the investment strategy • Assist the board in considering

investment opportunities • Approve acquisitions, disposals

and capital expenditure • Set criteria and targets for

investments • Approve proposals for

development, acquisition and sale of properties

• Periodically review due diligence results

• Review market valuations and annually review performance of the property portfolio

• Report regularly and make recommendations to the board for approval

Responsibilities: • Oversee implementation of the

remuneration policy • Ensure that the remuneration

strategy promotes the delivery of Hyprop’s strategic objectives

• Review remuneration structures and policies

• Consider whether the objectives of the remuneration policy have been achieved

• Ensure that the ratio of fixed and variable pay – in cash, benefits and shares – is aligned with the company’s strategic objectives

• Review the effectiveness of recorded performance measures

• Ensure that all benefits, are justified and correctly valued

• Select an appropriate peer group when comparing remuneration levels

• Consider the performance of the CEO, CFO and CIO, when determining their remuneration

• Address the remuneration of non-executive directors, executive directors and executive management

All details at 30 June 2019.(1) The chairs of these committees are all independent non-executive directors.* Non-executive † Independent

The committee charters are available to view online at www.hyprop.co.zaPage 63


GovernanceCorporate governance report continued

Board and committee meeting attendanceThe board meets at least four times a year, with ad hoc meetings as required. Notice of meetings and documentation is provided to directors timeously, allowing them to adequately prepare for meetings and ensuring that they can make informed decisions.

Attendance at board and committee meetings for the period 1 July 2018 to 30 June 2019 is set out below.

Board

Audit and risk

committee

Remuneration and

nominationcommittee

Social and ethics

committee

Independent non-executive directorsGR Tipper (board chairman and chair nomination committee) 6/6 6/6 3/3 2/2*TV Mokgatlha (chair audit and risk committee) 6/6 5/6 2/2N Mandindi 5/6 – – 2/2L Engelbrecht(1) 2/2 3/4 1/2MJ Lewin (chair social and ethics committee) 5/6 – – 2/2S Shaw-Taylor (chair remuneration committee) 6/6 5/6 3/3Z Jasper 4/6 5/6 – –Non-executive directorsKM Ellerine 6/6 – – –L Norval 5/6 – – –Executive directorsPG Prinsloo (former CEO)(2) 4/4 3/3* 2/2* 1/1AW Nauta 6/6 2/2* – –BC Till(3) 5/5 4/4* 1/1* 1/1MC Wilken (CEO)(4) 3/3 2/2* 1/1* 1/1

Meetings attended/meetings held while in office.(1) Resigned 30 November 2018(2) Resigned 31 January 2019(3) Appointed 1 October 2018(4) Appointed 27 December 2018* By invitation

King IVThe board is committed to the promotion of good corporate governance and to outcomes that are based on an ethical culture, good performance, effective control and legitimacy.

The board recognises the importance of the triple context in which the company operates (economy, society and the environment) and seeks to ensure that operations are conducted in a manner that takes account of the six capitals (financial, intellectual, manufactured, human, social and relationship, and natural).

Corporate governance is approached with a view to meeting the following objectives: • Reinforcing corporate governance as a holistic and interrelated set of arrangements to be understood and implemented in an integrated

manner • Encouraging transparent and meaningful reporting to stakeholders • Presenting corporate governance reports with reference to structure and process, as well as ethical consciousness and conduct.

Please view the full King IV principles application report online at www.hyprop.co.za.

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Director developmentDirectors have access to independent experts and other advisers for assistance in carrying out their duties if required (and after following an approved process). The board ensures that inexperienced directors are developed through mentorship programmes and continuing professional development programmes are implemented as required. Directors are encouraged to further their professional development in their personal capacity, while the board ensures that directors are regularly briefed on changes to risks, laws and the business environment.

A formal induction programme is in place for new directors. This includes a briefing by the chairman, CEO, CFO and Hyprop’s JSE sponsor. New directors are introduced to key senior management at company and shopping centre levels, and site visits to shopping centres are facilitated.

Dealing in securitiesThe board complies with the Financial Markets Act and the JSE Listings Requirements applicable to trading in Hyprop’s shares by directors, the company secretary, their associates and affected employees in closed periods (as defined). In conjunction with the CFO and the JSE sponsor, the board ensures that trading in Hyprop shares by these individuals is disclosed on SENS.

In line with company policy, directors and senior employees with access to Hyprop’s financial results and other price sensitive information are prohibited from dealing in the company’s shares for specified periods before relevant announcements are released on SENS. All directors, employees and affected parties are notified before the company enters a closed period.

Conflicts of interestIn terms of the company’s code of conduct, directors must declare to the chairman and company secretary their shareholdings, other directorships and any potential conflicts of interest.

Company secretaryHyprop’s company secretary during the year ended 30 June 2019 was CIS Company Secretaries Proprietary Limited, an independent practice providing company secretarial services to numerous JSE-listed companies. The board is satisfied that the company secretary and its representative, Gillian Prestwich, are sufficiently qualified and skilled to act in accordance with, and advise directors on, the recommendations of King IV, the Companies Act and other relevant legislation and regulations.

The board reviews the relationship between the company secretary and itself as well as its committees annually. The board has determined that the company secretary is independent of management and does not take on any management or executive duties. The company secretary is not a director of Hyprop, nor a material shareholder in the company or any subsidiary, and has no major contractual relationship with the company or any director. Accordingly, the board is satisfied that the company secretary maintained an arm’s length relationship with all directors during the year under review.

The functions of the company secretary include: • Guiding directors, collectively and individually, on their duties, responsibilities and powers • Providing information on legislation, regulations and relevant matters of ethics and good corporate governance • Recording the minutes of meetings, maintaining attendance registers, resolutions and directors’ declarations of personal and financial

interests, and records of all notices and circulars issued by the company • Preparing the notice of the annual general meeting • Filing annual and other statutory returns with the Companies and Intellectual Property Commission (CIPC) in terms of the Companies Act.

Subsequent to 30 June 2019, Statucor Proprietary Limited was appointed as the company secretary.

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Board appointment processThe board, supported by the remuneration and nomination committee, is responsible for the appointment of executive and non-executive directors. Identification and selection of candidates is conducted in a formal and transparent manner. The remuneration and nomination committee considers the blend of skills and experience required to drive the company’s strategic and operational objectives and transformation goals. The appointment of new directors is confirmed by shareholders at the first annual general meeting following their appointment.

Gender and race diversity at board levelDiversity at board level receives regular consideration and the company’s policies on gender and race diversity are available on our website at www.hyprop.co.za.

The Hyprop board recognises that diversity of skills, experience, background, knowledge, thought, culture, race and gender strengthens the board’s ability to effectively carry out its duties and add value to the group. We acknowledge that further work is required to improve gender equality at board level. At the date of this report the Hyprop board included three female directors, translating to 25% of board members being female.

Succession planningThe remuneration and nomination committee is responsible for ensuring that adequate succession planning is in place for directors and senior management, and that committees are appropriately constituted and chaired. The board is satisfied that the depth of skills among current directors meets succession requirements. Succession planning at executive and management level is actively monitored and succession planning is in place for the role of the CEO.

Performance self-assessmentBoard effectiveness is evaluated annually through an online questionnaire. Results are reviewed by the chairman and any identified issues are discussed with the board and addressed as appropriate. The board and the committees were last evaluated in August 2019.

Access to informationDirectors have unrestricted access to company records, information, documents, property and the company secretary. Non-executive directors have full access to the external and internal auditors, and to management. All directors are entitled, at Hyprop’s expense, to take independent advice on any matters concerning the affairs of the company (in terms of an approved procedure).

Technology and information governanceThe information and IT governance policy is guided by the governance principles of King IV and complies with applicable legislation. The full policy is available on the website at www.hyprop.co.za.

The board, through the audit and risk committee, is responsible for information technology governance and for considering technology risks. Executive management is tasked with managing IT risks, with oversight from the audit and risk committee.

The board is mindful of the importance of safeguarding company information and intellectual capital, and ensures that appropriate technology is maintained to protect information. A governance framework supports effective management of IT resources. The board reviews opportunities for improvements that technology can add and is conscious of risks that may affect classified information and intellectual capital.

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The designated IT executive is responsible for IT and has the appropriate levels of knowledge and experience. She reports to the CFO on IT-related matters and interacts regularly with the audit and risk committee and executive management on IT governance matters.

The objectives of IT governance are: • Responsible use of resources • Appropriate management of IT-related risks • Alignment of IT processes and resources • Exploring new IT methods and technology • Managing IT infrastructure • Responsible incident response to stakeholders.

IT governance ensures that IT goals are met and IT risks are mitigated. Hyprop has established baseline principles for IT governance, being: • Business alignment and enablement • Operations performance • Responsible and adequate procurement • Supplier performance management • Business continuity/disaster recovery • Security • Compliance • Responsible use of IT resources • Responsible incident response • Personal information protection.

The IT skills of the board have been supplemented with the recent appointment of Annabel Dallamore. The appointment of additional IT skills at an operational level is under consideration.

Access to the boardShareholders can provide recommendations to the board at the annual general meeting, at one-on-one meetings and investor presentations, and through investor polls.

Compliance with laws, rules, codes and standardsThe board monitors the company’s compliance with applicable legislation, regulations, codes and standards. The board has discharged its responsibility to ensure an effective compliance framework by: • Establishing appropriate structures, including training programmes, stakeholder communication channels and compliance measurement

systems • Tasking compliance to the legal executive, and human resources executive, supported by the company’s sponsor and the company secretary • Highlighting and addressing areas of non-compliance, through the risk management process, supervised by the audit and risk committee • Periodically reviewing the property sector charter, particularly as regards transformation and related issues.

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Relevant legislation/regulationsAs Hyprop is a listed REIT, it is required to comply with the JSE Listings Requirements and rules specific to REITs in South Africa, along with country-specific legislation and standards. These are set out on the website.

There were no material non-compliance issues identified/reported during the year.

Anticompetitive behaviourDuring the year under review, Hyprop has not been party to anticompetitive behaviour or monopoly practices.

Documents available onlineThe following documents are available to view online at www.hyprop.co.za: • Board charter • Audit and risk committee charter • Investment committee charter • Remuneration and nomination committee charter • Social and ethics committee charter • Employment equity policy and plan • Memorandum of Incorporation • Board gender diversity policy • Board race diversity policy • BEE compliance certificate

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In the context of the accountability and transparency encouraged by King IV, this remuneration report is presented in three sections – background, an overview of the remuneration policy and the remuneration implementation report which articulates the link between strategy, sustainable value creation, performance and remuneration.

BackgroundThis review outlines the key elements of the company’s remuneration policy which is designed to encourage executive directors to improve the company’s performance, and to ensure that executives are fairly and responsibly rewarded for their individual contributions and performance.

The remuneration committee (the committee) comprised three independent non-executive directors, Stewart Shaw-Taylor (chair), Lindie Engelbrecht (resigned effective 30 November 2018) and Gavin Tipper. Thabo Mokgatlha was appointed to the committee on 30 November 2018. The CEO and human resources executive attend meetings by invitation, but are excluded from any deliberations pertaining to their own remuneration.

The composition of the committee ensures that the remuneration of executives is set by independent non-executive directors who have no personal interest in the outcome, and who will give due regard to the interests of all stakeholders of the company.

The committee considers the performance measures and targets for the short-term incentive (STI) plan to ensure that they are appropriate and support the company’s strategy. During the year the committee assessed and reviewed the remuneration policy and in the context of the revised strategy for the group formulated changes to the performance targets for the group’s STIs which will be effective for the financial year ending 30 June 2020. In addition, the company intends to introduce Malus and clawback provisions for both STI and LTI awards, effective from 1 July 2019.

STIs paid in December 2018, were awarded in line with the key performance deliverable (KPD) scores achieved as at June 2018. The KPD score achieved at 30 June 2019 will be applied to determine STIs payable in December 2019.

The year under review continued to be challenging for the company. Distributable income was negatively impacted by the weak economic conditions in South Africa as well as the performance of the sub-Saharan African portfolio, resulting in a decrease in the price of the company’s shares over the financial year. This had an impact on the remuneration of executive directors and senior executives, particularly in regard to annual cash incentives and the expected value of conditional unit plan shares.

Pieter Prinsloo, the chief executive officer, and Laurence Cohen, the chief financial officer, resigned with effect from 31 January 2019, and 31 July 2018, respectively.

Three executive directors were appointed. Morné Wilken was appointed chief executive officer in December 2018, Brett Till as chief financial officer in October 2018 and Wilhelm Nauta, who had been employed as chief investment officer in 2016, joined the board in July 2018.

The committee is satisfied that the current remuneration policy is appropriate and that it complies with the recommended practices of King IV.

A copy of the full remuneration policy is available on the website at www.hyprop.co.za.

Remuneration report

Page 69


GovernanceRemuneration report continued

Remuneration policyPhilosophyAs an internally managed REIT, the objective of the remuneration policy is to promote the delivery of Hyprop’s strategic objectives, encourage individual performance and reward sustainable value creation. Our philosophy emphasises the role of employees in building long-term sustainable value through fair and balanced remuneration.

Hyprop’s success depends on attracting and retaining talented, experienced and motivated individuals who can execute our business strategy to achieve our vision and mission. The company uses both short and long-term incentives in support of its remuneration for executives and management.

Key principles • Ensure remuneration policies and practices are aligned with the company strategy and values • Attract and retain talented, experienced and motivated individuals who can execute the business strategy • Link salary structures and policies to performance objectives that support sustainable value creation over the short, medium and long term • Align long-term incentives (LTI) with the strategic objectives of the company and the creation of long-term shareholder value, and • Apply a fair and reasonable remuneration structure across the company by:

– Ensuring that non-executive directors’ fees are fair, transparent and responsible – Ensuring that the executive directors’ and executive management’s remuneration is fair and responsible in the context of overall company remuneration

– Considering the pay ratios between executives and other staff when determining annual salary increments – Rewarding employees fairly, reasonably and responsibly for their contribution to the operating and financial performance of the company – Identifying, investigating and addressing any remuneration disparities related to, inter alia, race and gender – Ensuring that guaranteed pay is based on equal pay for work of equal value – Ensuring that guaranteed pay for all employees is based on clear role descriptions, which are mapped and aligned with similar jobs. The Patterson job grading system is applied, with the six grades defining the employee’s remuneration scale, and

– Implementing a training plan. Various training courses are provided to create an empowered work environment.

The remuneration and nomination committeeThe responsibilities of the committee are set out in a formal charter, which takes into account the recommendations of King IV, and other relevant best practice.

In executing its mandate relating to remuneration for non-executive directors, executive directors, executive management and other staff, the board (as advised by the committee) will: • Annually review the remuneration structures to ensure that they are performance-based, and linked to realistic performance objectives that

support sustainable long-term growth • Representative of best practice in the industry • Ensure that stakeholders can make an informed assessment of reward practices and governance processes, and • Ensure that the remuneration practices are compliant with all applicable laws and regulatory codes.

Malus and clawback provisionMalus and clawback provisions will apply to STI and LTI awards granted to executives and prescribed officers with effect from 1 July 2019. (Payments relating to the 2019 financial year will be excluded).

VotingShareholders will be requested to cast a non-binding advisory vote on the remuneration policy and implementation report at the company’s annual general meeting on 2 December 2019.

At the annual general meeting held on 30 November 2018, the resolutions on the company’s remuneration policy and the remuneration implementation report received a 72% non-binding vote in support of each policy.

Consultations were subsequently held with the two major dissenting shareholders to understand their concerns regarding the remuneration policy, implementation and disclosure thereof. The committee has considered the feedback and has made appropriate amendments to short-term KPDs, and enhanced the disclosure of executive performance measurement.

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Remuneration structureHyprop’s remuneration structure is set out in the table below:

Element Policy Structure Participation

Base salary Provide a market-related level of base pay with due regard for the responsibilities of the position.

Benchmarked against industry norms and adjusted based on an employee’s experience, qualifications, and the level of responsibility.

Review annually with increases effective from 1 January.

Junior, middle and senior management, executives and executive directors.

Short-term incentive

Short-term incentives, paid in cash, based on performance.

Performance measured against KPDs at property and company level for the year.

Cash bonus paid in December.

Junior, middle and senior management, executives and executive directors.

Long-term incentive scheme

Long-term incentives granted to attract, motivate and retain executive directors, executives, senior managers and employees with specific core, critical and/or strategic skills.

Conditional unit plan. Two components: 70% performance-based, 30% retention-based.

Executive directors, executives, senior managers and employees with specific core, critical and/or strategic skills.

The remuneration policy achieves a reasonable balance between guaranteed pay, short-term incentives and long-term incentives, and is aligned with the group’s objectives.

Base salaryThe fixed (guaranteed) component of remuneration includes a base salary, pension contribution and benefits. Base salaries are normally set at median remuneration levels when compared to the industry and the national salary market.

Salary benchmarkingRemuneration benchmarking is performed annually. Basic salaries are benchmarked against median industry and national salary norms and adjusted based on an employee’s experience, qualifications, responsibilities, and performance.

Independent remuneration consultancies (PwC and 21 Century Proprietary Limited) are used to provide the committee with market data to assist in remuneration decisions, where appropriate. Where surveys indicate that a job grouping is significantly out of line with the comparative benchmark, a remuneration adjustment may be considered.

Remuneration may exceed benchmarked levels where required to attract and retain specialised skills or for employment equity purposes.

Salary increases and reviewsThe committee reviews salaries on an annual basis taking cognisance of the approach set out above. The following factors are considered during this process: • Performance of the company • Projected inflation • Affordability, and • Performance of the individual.

A pro-rated increase is paid to employees who have not been in the employment of the company for the full financial year to which the annual increase relates.

Employee benefitsWe offer a range of employee benefits that exceed legislated minimum standards and include: • Membership of a defined contribution pension fund with death, disability and funeral benefits • Four months partially paid maternity leave (paid at 50% of cost to company) • Ten days partially paid paternity leave (paid at 50% of cost to company) • Annual leave rising to 20 days after five years’ and 25 days after 10 years’ consecutive service with the group, and • Six days’ paid study leave for approved qualifications.

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Short-term incentive (STI)STIs are linked to performance objectives that support business goals. Two components are considered when determining an employee’s STI, namely performance against KPD targets, evaluated biannually, and individual performance reviews, conducted annually. The employee’s level of responsibility and job grade determines the weightings allocated to each area of assessment.

PERFORMANCE MANAGEMENT

Individual performance reviews are completed annually on the company’s employee self-service system after performance discussions with therelevant line manager. These reviews assist the manager and employee

to build on strengths and to identify areas for improvement.All employees are subjected to the same appraisal process andrating criteria. This encourages equality and imposes standard

measures of performance across the company.

Criteria include:

Performance is measured on a five-point scale that o�ers a high degree of structure.

Customer serviceEmployee managementProfessional conduct Business operationsBusiness processes

Implementation of company strategy

KPD targets are set annually at company and portfolio level and performance is measuredagainst the targets. Weighted by responsibility and job grade.

These KPD targets are approved by the committee to ensure thatemployee performance is aligned with the company’s strategy.

Progress on the KPD targets is communicated to management teamsat mid-year with final evaluations at the end of the financial year.

Employees arerewarded based on

the outcome of KPDand individual performancereview scores.

Performancemanagement score

Individual performance review outcome

KPD Outcome

Page 72


STI allocationA significant portion of senior management’s reward is variable, based on achieving group performance targets, as well as individual contributions to the growth and development of their business, division and the company.

Executive directors Senior management Other employees

STIs are aligned with KPD scores and are subject to the committee’s discretion and approval.

KPD weighting – 100%.

STIs are aligned with KPD scores, performance reviews and subject to the committee’s discretion and approval.

KPD weighting – 90%.

Performance review weighting – 10%.

STIs are aligned with KPD scores, performance reviews and are subject to the committee’s discretion and approval.

KPD weighting – dependent on job grade.

Performance review weighting – dependent on job grade.

Allocated at the discretion of the remuneration committee.

Allocated at the discretion of the remuneration committee.

Maximum bonus potential is determined by job grade.

Exceptional performance by senior management may be rewarded at the committee’s discretion.

Exceptional performance is rewarded with higher incentives, after considering recommendations from general managers, regional executives and executive directors.

STIs and salary increases are approved by the committee before payment is made in December.

Long-term incentives (LTI)LTI reward decisions are aligned to the company’s strategic objectives and the creation of long-term shareholder value.

Conditional unit plan (CUP)The CUP was approved by shareholders in 2013 and the scheme applies until 2023. The purpose of the CUP is to align employee performance with stakeholder interests and to retain skilled and talented employees. Annual allocations of performance and retention shares are made in a 70:30 ratio. Vesting of the performance shares is subject to performance conditions stipulated in the rules of the CUP and approved by the committee at the time of allocation.

Conditions for the performance component of the CUP:

Vesting percentage(1)

Threshold 50% of awarded performance shares vest at threshold. No performance shares vest for performance below threshold.

On target 100% of awarded performance shares vest for performance on target.

Stretch 150% of awarded performance shares vest for performance at stretch levels.

(1) Linear vesting will apply for performance between “threshold” and “on target” or between “on target” and “stretch” performance. For example, where performance is exactly halfway between threshold and on target, the portion of performance shares that will vest will reflect a similar ratio, i.e. 75%

Performance condition Detail Weighting Threshold On target Stretch

Growth in distribution per share relative to peer group(1)

Measured as simple growth in distribution per share over the performance period.

40% 95% 102,5% 110%

Share price performance relative to peer group(1)

Measured as growth in share price over the performance period (difference between share price at the end and start of the performance period).

40% 95% 105% 120%

Strategic component Determined by the remuneration and nomination committee.

20% Determined by the remuneration and nomination committee

(1) Peer group comprises the five largest South African REIT companies, by market capitalisation, listed on the JSE

Under the CUP, shares are offered to executives, senior managers and employees with specific core, critical or strategic skills. Allocations are approved by the committee.Performance shares vest three years after initial allocation, provided that the relevant performance conditions have been met.Retention shares vest five years after initial allocation, subject to continuous employment over the vesting period.Participants only receive dividends after the shares have vested.

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Directors’ remuneration

Executive directorsExecutive directors are permanent employees and their employment agreements include a notice period, but no restraints of trade. They are offered competitive remuneration packages (including base salaries, short-term incentives and long-term incentives), which are reviewed by the committee annually.

Minimum employment terms and conditions for executive directors are governed by South African legislation. If an executive director’s services are terminated, the committee oversees any settlement, assisted by labour law advisers where appropriate.

Non-executive directorsNon-executive directors are remunerated competitively. There are no contractual arrangements applicable to loss of office.

The committee benchmarks fees against a peer group of JSE-listed companies every two years with CPI adjustments in the in-between years. Recommendations are made to the board, which proposes fees for approval by shareholders at the AGM.

Remuneration for non-executive directors comprises a base fee only. Non-executive directors do not receive STIs, nor do they participate in any LTI schemes, except if they have previously held executive office and are entitled to unvested benefits from that period.

The chairperson of the board and the chairpersons of the subcommittees are paid higher fees than the members of the board and subcommittees. Different fee levels are paid for the different subcommittees to reflect the complexity, risk and amount of preparation required.

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Implementation of the remuneration policy during the 2019 financial yearKey principles and strategyWe recognise and value our people as our most important asset.

The company is committed to being an employer of choice with a culture, policies and procedures that set high expectations, while providing a stimulating and inclusive environment, sustaining its reputation for being a leading South African based REIT and delivering on key business priorities.

Our salary structure is performance driven with key short-term targets set annually. PwC assisted the company in reviewing the short-term targets in the current year.

Retaining and attracting talentWhile low employee turnover ensures continuity, and aligns group performance with our long-term strategic objectives, we aim for an appropriate balance between internal and external appointments.

Our HR strategy is designed to contribute to the required changes in recruitment, selection and hiring, training and development, succession planning, remuneration and benefits, performance management, employee relations and company culture, that will be needed to ensure the company achieves its strategic goals.

Staff retention statistics 30 June 2019 30 June 2018

Annual employee turnover rate 11% 7%Non-executive directors retained 88% 100%Executive directors retained 0%* 100%Strategic management retained 100% 100%Executives and senior manager retained 96% 83%Other staff retained 90% 93%

Total staff retained 89% 93%

Non-executive directors average tenure (years) 6 6Executive directors average tenure (years) 1 11Strategic management average tenure (years) 11 9Executives and senior manager average tenure (years) 10 9Other staff average tenure (years) 9 9Average tenure of employees (years) 8 9

* Impacted by the resignations and appointments of the CEO and CFO

Employee turnover at senior management level continued to be low and our average tenure of employees remains within our targeted range.

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Base salariesBase salary is defined in terms of a total cost of employment (CTC) package approach; the guaranteed package includes base salary, travel allowance, retirement savings, death, disability and healthcare contributions.

2019 salary increasesThe committee considered the projected inflation rate, performance of the company and the affordability of the increased salary cost to determine the base salary increase for the year. As an added measure, the increase of 6% was compared to the salary increases granted by peer companies. The increases applied were in line with the industry. To address the earnings gap, the committee, as done in the previous three years, approved a minimum 6,5% salary increase for lower earning employees.

Annual base salary increases were effective from 1 January.

Base salary increases applied 30 June 2019 30 June 2018

Executive directors 6% 6,4%Strategic management 6% 6,4%Executive management 6% 6,4%Other staff 6% – 6,5% 6,4% – 7,5%CPI* 5,0% 4,8%Minimum CTC – lowest level of employee (R/pa) 111 715 105 044

* CPI reflects the indicator measured by Statistics South Africa in the preceding October of each year.

Salary benchmarkingThe company’s policy is to pay employees a base salary that is close to the 50th percentile of comparable companies. In addition, the variable compensation elements are set to enable the overall compensation to move towards the upper quartile for outstanding performance.

Benchmark reviews were conducted externally and include market analyses by industry specialists. Bespoke benchmarks include an industry peer group and comparable companies in various industries selected according to where we compete for talent.

The peer group used for the analysis included property management companies and South African REITs.

Adjustments were considered and approved for jobs that were significantly out of line with the survey report.

Base salaries adjusted 30 June 2019 30 June 2018

Executive directors 1 –Strategic management 1 –Executives and senior management 3 5Other employees 34 30

Total 39 35

The company uses the Patterson system to grade positions in the company. All position grades were reviewed during the year. Similar positions are aligned within a salary band taking into consideration an employee’s experience, qualifications, the nature of work and the level of responsibility. This practice accords with the company’s commitment to fair remuneration and equal pay for work of equal value.

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Base salaries paid30 June 2019

R000% increase/

(decrease)30 June 2018

R000% increase/

(decrease)

Executive directors 10 056* 37,4% 7 319 6,1%Strategic management 6 788 6,0% 6 403 –Executives and senior management 28 563** (8,1%) 31 065 (18,3%)Other employees 66 864 4,7% 63 869 6,6%

Total 112 271 3,3% 108 656 3,6%

* Wilhelm Nauta appointed as an executive director in July 2018** Wilhelm Nauta appointed as executive director in July 2018, and included in executive directors for the 2019 financial year (included in executives and senior

management in the 2018 financial year). One regional executive position eliminated after the retirement of Lynda Burger in July 2018

Employee benefitsOur employee surveys confirmed that our employee benefits contribute to the loyalty and commitment of our employees. Details of employee surveys are given on page 51.

Pension fund (defined contribution)In total, 208 employees are members of the company’s pension fund and R12,6 million (2018: R12 million) was contributed to the pension fund during the year. Membership of the fund provides death, disability and funeral insurance.

Benefit

Life insurance Four times annual pensionable salary.Education protector to third year tertiary education.

Disability insurance 75% of monthly pensionable salary.

Funeral insurance R25 000.

Maternity leaveA total of R88 000 was paid to two employees who received four months’ partially paid maternity leave during the year.

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Short-term incentive (STI)STIs are determined based on the employee’s individual performance and business units’ scores against the KPDs.

Key performance deliverablesPerformance against KPDs is measured to ensure we achieve our strategic priorities and deliver value for stakeholders.

The KPDs comprise financial, operational, environmental, social and corporate governance measures. KPDs for the 2019 financial year were approved by the committee in May 2018. Actual performance is measured against targets and communicated to management in December 2018 and June 2019, respectively.

2019 KPD targetsKPD scores against targets relating to the 2019 financial year, which will be applied to STIs allocated and paid in December 2019, are as follows:

Key performance indicator Target Performance achieved Weighting

Score against target

(range 70% – 130%)

Weighted score

Financial targets 58% 70% 40,6%

Distributable income growth

5% to 7% (per division) 1,5% negative growth year on year 33% 70% 23,1%

Budget income and expense management

On budget 8% below budget 25% 70% 17,5%

Operational targets 26% 91% 23,8%

Trading performance

4% trading density increase year on year.

0,61% trading density increase year on year.

3% 85% 2,6%Footcount consistent with previous year.

1,36% decline in footcount year on year.

Leasing

Vacancy movement – 0% increase year on year.

Reduced vacancies year on year by 27% (9 742 sqm – 2019, 13 968 sqm – 2018).

17% 92% 15,6%Rentals achieved – on budget. Rental escalation on new and renewed leases – 7%.

Rentals achieved lower than budget due to rent reversions. Rental escalations achieved 7,2%.

2% of lease documentation in the process of being finalised.

11% of lease documentation in the process of being finalised.

Tenant arrears and deposits

2% arrears outstanding as a % of total rent roll raised.

0,98% arrears outstanding as a % of total rent roll raised.

6% 93% 5,6%1,5% deposits outstanding as a % of deposits raised.

15,2% deposits outstanding as a % of deposits raised.

Environmental, social and corporate governance 16% 123% 19,6%

Operations risk and environmental impact

Building compliance files 90% complete.

Building compliance files 94% complete.

6% 110% 6,6%80% waste recycling rate 81% of waste recycled during the year.

3% kWh saving year on year. 5,57% kWh saving achieved year on year.

Transformation

75% of all new and internal appointments to be black as defined in the EE Act.

88% of all new and internal appointments were black as defined in the EE Act. 5% 130% 6,5%

75% of all procurement from suppliers rated between BEE level 1 – 4.

80% of all procurement from suppliers rated between BEE level 1 – 4. 5% 130% 6,5%

Total 100% 84%

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2020 KPD targetsThe committee reviewed the targets for the executive directors, senior management and management teams during the year. The June 2020 targets are aligned with the company strategy.

KPD targets relating to the 2020 financial year, which will be applied to STIs allocated in December 2020, are as follows:

Key performance indicator Weighting Target

Financial targets 55%

Distributable income growth 20% 668 cents distributable income per share

Total return on investment 20% Total return on investment relative to peer group – 102,5%

Loan to value ratio (based on a fully consolidated loan to value ratio calculation)

15% Reduce loan to value ratio by 4,5%

Operational targets 25%

Trading performance 25%

South Africa – 1,5% trading density growth over previous year. Eastern Europe – 2,5% trading density growth over previous year

South Africa – 1,5% tenant turnover growth over previous year. Eastern Europe – 3% tenant turnover growth over previous year

Footcount consistent with previous year

Environmental targets 20%

Operations risk and environmental impact 13,5% Global Real Estate Sustainability Benchmark (GRESB) score of 65

6,5% Two solar photovoltaic projects implemented within budget during the year

Total 100%

Modifier

Transformation 0% to -10% BBBEE verification rating improved by one level

Innovation 0% to 5% Implement an innovation project that contributes to the strategic objectives

Individual performance reviewsIndividual performance reviews were conducted during October 2018. The rating process was done through the company’s employee self-service system (ESS) after meetings between the employees and line managers. Discussions are structured to cover work goals achieved, training needs and job performance, and to set personal job goals for the next 12 months.

The performance of any employee that requires improvement is addressed during the year through consultation, and if required, training.

Results of individual performance reviews Performance review score % June 2019 June 2018

Performance requires improvement 66% to 93% 4% 7%Performance consistently meets expectations 100% to 110% 53% 51%Performance exceeds expectations 111% to 127% 35% 38%Exceptional performance delivery 128% to 143% 8% 4%

100% 100%

Performance management score and STI allocationsThe committee considered the outcome of the performance reviews conducted in October 2018 and the June 2018 KPD score (110,9%) before STIs were approved. STIs paid for the year aligned with the remuneration policy.

STIs paid – R000 30 June 2019% increase/

(decrease) 30 June 2018

Executive directors 5 894* 12% 5 257 Strategic management 2 614 9% 2 398 Executives and senior management 8 132 (23%) 10 559**Other employees 10 556 13% 9 351

Total 27 196 (1%) 27 565

* 2019 includes the STI for Wilhelm Nauta, appointed as an executive director in July 2018** 2018 includes the STI paid to Wilhelm Nauta

Please see pages 83 and 85 for executive directors’ STI calculations and payments.

Page 79



Long-term incentives (LTI)Refer to financial statement note K2 – Share-based payments.

Award issueAwards in terms of the CUP were approved by the committee and made to 25 participants in July 2018 and to two participants in January 2019.

Shares vestedThe 1 July 2015 CUP award vested in October 2018.

Performance conditions appliedThe performance shares awarded are subject to performance conditions relating to distribution and share price growth measured against the five largest South African REITs. The comparative companies were Growthpoint, Redefine, Fortress, Vukile and Investec Property Fund.

Hyprop’s distribution grew by 39%, over the three-year period from award date and was measured against the 31% weighted average distribution growth of the comparative peer group. The distribution growth performance condition met the stretch target.

Hyprop’s share price decreased by 15%, over the three-year period from award date and was measured against the negative 7% weighted average share price growth of the comparative peer group. The share price growth performance condition was not met.

The committee did not factor in a strategic component and approved the 75% performance condition met in October 2018.

Performance conditions for shares awarded 1 July 2015

Performance condition Threshold Stretch

Growthover three-year period

Weightedpeer group

growth overthree-year

period

Hyprop’sgrowthrelativeto peer

group Weighting

% ofthe award

vested

Weightedtotal

vested

Growth in distribution per unit relative to the peer group

Hyprop’s growth in distribution per unit relative to peer group: 95%

Hyprop’s growth in distribution per unit relative to peer group: 110%

39% 31% 125,9% 50% 150% 75%

Unit price performance to the peer group

Hyprop’s unit price performance relative to peer group: 95%

Hyprop’s unit price performance relative to peer group: 120%

(15%) (7%) (114%) 50% –

% shares awarded to vest 75%

Page 80


Number of shares awarded, vested and forfeited

Performance shares Retention shares

Award dateNumber of

participants

Numberof sharesawarded

Performanceconditions

met

Numberof shares

vested

Numberof sharesforfeited**

Numberof shares

to vest

Numberof shares awarded

Numberof shares

vested

Numberof sharesforfeited

Numberof shares

to vest

01/01/2014 27 107 561 100,0% 100 413 7 148 – 46 098 36 769 9 329 –01/07/2014 26 110 422 89,4% 93 363 17 059 – 47 324 1 428 19 134 26 76201/07/2015 26 78 282 75,0% 47 809 30 473 – 33 549 729 13 464 19 35601/07/2016 26 80 979 1 764 43 253 35 962 33 499 102 12 838 20 55901/01/2017 1* 5 982 5 982 2 564 – 2 56401/07/2017 25 84 840 790 30 230 53 820 35 114 12 043 23 071 01/07/2018 25 96 302 20 800 75 502 41 281 8 915 32 366 01/01/2019 2* 39 281 39 281 16 835 – 16 835

603 649 244 139 148 963 210 597 256 264 39 028 75 723 141 513

* Special allocation** Resignations and performance conditions not met

Value of vested LTI

LTIs vested – R000 30 June 2019% increase/

(decrease) 30 June 2018

Executive directors 1 751 (45%)*** 3 184 Strategic management 1 471 (13%) 1 694 Executives and senior management 4 202 (22%) 5 405 Other employees – –

Total 7 424 (28%) 10 283

*** The vested value of the LTI was impacted due to performance conditions not met and shares forfeited due to resignations.

Page 81



Directors’ remunerationApproved increasesIn determining the salary increases for executive directors, the committee considered inflation, market conditions, industry benchmarks and changes in roles and responsibilities.

Approved increases in executive directors’ base salaries applied in January

2019R

2018R

MC Wilken 4 716 000 –PG Prinsloo – 4 449 000 BC Till 2 884 000 –LR Cohen – 2 800 000 AW Nauta 2 800 000 2 634 000

Total 10 400 000 5,2% 9 883 000

Chief executive officer2019 2018

Total remuneration paid (R)

MC Wilkenappointed

27 December 2018

PG Prinslooresigned

31 January 2019 Total PG Prinsloo

Base salary 2 741 348 3 057 429 5 798 777 4 464 1 2 5STI – 3 708 000 3 708 000 3 498 000LTI vested value – 1 750 9 4 1 1 750 941 2 069 1 3 7

Total 2 741 348 8 516 370 11 257 718 10 03 1 262

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STIPG PrinslooShort-term performance incentives relating to the 2018 financial year, paid in December 2018


Total weighted

score

Financial targets 60% 68,9%

Distributable income per share growth

8% 8,8% 33% 37,8%


On budget Exceeded budget by 0,6% 27% 31,1%

Operational targets 26% 24,6%

Trading performance4% trading density growth 0,5% trading density increase year on year.

3% 2,3%Footcount consistent with previous year 1,6% decline in footcount year on year.

Leasing

Vacancies – 0% increase year on year Reduced vacancies year on year by 25,7% (13 968 sqm – 2018, 17 559 sqm – 2017)

16,5% 16,2%Rentals achieve on budget, 7,5% escalations

Rental escalations achieved 7,7%

2% of lease documentation in the process of being finalised




0,6% arrears outstanding as a % of total rent roll raised.

6,5% 6,1%1,5% deposits outstanding as a % of deposits raised.

8,7% deposits outstanding as a % of deposits raised.

Operational risk and environmental impact 14% 17,4%

Building compliance files

96% complete 100% complete 4% 5,2%

Waste recycling 75% of waste recycled during the year 83% of waste recycled during the year2% 2,5%

Energy saving 3% kWh saving year on year 5,5% kWh saving achieved year on year

Transformation

70% of all new and internal appointments to be black employees as defined in the EE Act.

77,6% of all new and internal appointments were black employees

as defined in the EE Act

5% 5,8%

72% of all procurement from suppliers rated between BEE level 1 – 4


3% 3,9%

Total 100% 110,9%

Total STI allocated (Rand) 3 708 000

STI as a % of base salary 83%

The STI paid to the chief executive officer was determined by the KPD score.

Individual performance reviewAn annual individual performance review was conducted for the chief executive officer by his peers. The review score was considered by the committee but did not carry a weighting in calculating the performance management score used to determine the STI.

The individual performance review score for PG Prinsloo is summarised below:

WeightingScore out of 5,

where 3 is 100% Outcome

Behaviour 30% 3,6 120%Business processes 10% 3,5 117%Business operations (position-specific responsibilities) 40% 3,9 130%Strategic implementation 20% 4,1 137%

Overall 3,8 127%

Page 83



LTIPerformance shares Retention shares

Award date



met

Numberof shares

vested


Vestingvalue

R

Number of sharesawarded

Numberof shares

vested


Vestingvalue

(R)

MC Wilken01/01/2019 26 033 – – – – 11 157 – – –

Total 26 033 – – – – 11 157 – – –

PG Prinsloo01/01/2014 20 153 100,0% 20 153 – 2 488 089 8 637 8 637 – 708 49301/07/2014 21 845 89,4% 19 529 2 316 2 069 924 9 362 – 9 362 –01/07/2015 15 794 75,0% 11 846 3 948 1 042 448 6 769 – 6 769 –01/07/2016 16 147 – – 16 147 – 6 920 – 6 920 –01/07/2017 17 031 – – 17 031 – 7 299 – 7 299 –01/07/2018 20 800 – – 20 800 – 8 915 – 8 915 –

Total 111 770 51 528 60 242 5 600 461 47 902 8 637 39 265 708 493

Chief financial officer2019 2018

Total remuneration paid (R)

BC Tillappointed

1 October 2018

LR Cohenresigned

31 July 2018 Total LR Cohen

Base salary 2 046 818 304 168 2 350 986 2 855 219 STI – – – 1 759 000 LTI vested value – – – 1 114 803

Total 2 046 818 304 168 2 350 986 5 729 022


Award date



met

Numberof shares

vested


Vestingvalue

R


Numberof shares

vested


BC Till01/01/2019 13 249 – – – – 5 678 – –

Total 13 249 – – – – 5 678 – –

LR Cohen01/01/2014 11 105 100,0% 11 105 – 1 371 023 4 759 – 4 75901/07/2014 11 769 89,4% 10 521 1 248 1 115 172 5 044 – 5 04401/07/2015 8 509 – – 8 509 – 3 647 – 3 64701/07/2016 8 699 – – 8 699 – 3 728 – 3 72801/01/2017 – – – – – – – –01/07/2017 9 176 – – 9 176 – 3 932 – 3 93201/07/2018 – – – – – – – –

Total 49 258 – 21 626 27 632 2 486 195 21 110 – 21 110

Page 84


Chief investment officer

Total remuneration paid (R)June 2019

AW Nauta

Base salary 2 788 431 STI 2 186 000 LTI vested value –

Total 4 974 431

STIAW NautaShort-term performance incentives relating to the 2018 financial year, paid in December 2018


Total weighted

score

Financial targets 60% 68,9%

Distributable income per share growth

8% 8,8% 33% 37,8%


On budget Exceeded budget by 0,6% 27% 31,1%

Operational targets 26% 24,6%

Trading performance 4% trading density growth 0,5% trading density increase year on year3% 2,3%

Footcount consistent with previous year 1,6% decline in footcount year on year

Leasing Vacancies – 0% increase year on year Reduced vacancies year on year by 25,7% (13 968 sqm – 2018, 17 559 sqm – 2017)

16,5% 16,2%Rentals achieved on budget, 7,5% escalations

Rental escalations achieved 7,7%





0,6% arrears outstanding as a % of total rent roll raised

6,5% 6,1%1,5% deposits outstanding as a % of deposits raised.

8,7% deposits outstanding as a % of deposits raised

Operational risk and environmental impact 14% 17,4%

Building compliance files

96% complete 100% complete 4% 5,2%

Waste recycling 75% of waste recycled during the year 83% of waste recycled during the year2% 2,5%

Energy saving 3% kWh saving year on year 5,5% kWh saving achieved year on year

Transformation 70% of all new and internal appointments to be black employees as defined in the EE Act.

77,6% of all new and internal appointments were black employees

as defined in the EE Act

5% 5,8%



3% 3,9%

Total 100% 110,9%

Total STI allocated (Rand) 2 186 000

STI as a % of base salary 83%

The STI paid to the chief investment officer was determined by the KPD score.

Page 85



Individual performance reviewAn annual individual performance review was conducted for the chief investment officer by his peers. The review score was considered by the committee but did not carry a weighting in calculating the performance management score used to determine the STI.

The individual performance review score for AW Nauta is summarised below:

WeightingScore out of 5,

where 3 is 100% Outcome

Behaviour 30% 3,6 118%Business processes 10% 3,2 107%Business operations (position-specific responsibilities) 40% 3,9 130%Strategic implementation 20% 4,0 133%

Overall 3,75 125%


Award date



met

Numberof shares

vested


Numberof shares

to vest

Vestingvalue

R


Numberof shares

vested


Numberof shares

to vest

Vestingvalue

R

AW Nauta01/01/2017 5 982 – – 5 982 2 564 – – 2 564 –01/07/2017 5 737 – – 5 737 2 459 – – 2 459 –01/07/2018 7 008 – – 7 008 3 004 – – 3 004 –

Total 18 727 – – 18 727 – 8 027 – – 8 027 –

Total compensation ratioThe graphs below reflect the earnings potential compared to the actual remuneration paid to the executive directors for the 2019 financial year. The actual LTI and STI amounts for the 2019 financial year will only be quantified once the individual performance evaluations and assessment of KPDs achieved have been completed and approved by the remuneration committee in November 2019.

Page 86


■

4 716 4 716 4 716

2 724*

3 301

3 7734 716

4 952

Minimum

R000

On target Stretchtarget

Actual2019

16 000

14 000

12 000

10 000

8 000

6 000

4 000

2 000

0

CEO

Basic salary ■ ■STI LTI ■

2 884 2 884 2 8842 047*

1 730

2 3072 884

2 596

9 0008 0007 0006 0005 0004 0003 0002 000 1 000

0

CFO

Basic salary ■ ■STI LTI

Minimum

R000


Actual2019

* Less than 12 months

■

2 800 2 800 2 800 2 788

2 186

1 680

2 2402 800

2 520

■ ■

9 0008 0007 0006 0005 0004 0003 0002 000 1 000

0

CIO

Basic salary STI LTI

Minimum

R000


Actual2019

Non-executive directors’ feesNon-executive director fees were externally benchmarked in the previous financial year and the consequent adjustments were approved at the annual general meeting held on 30 November 2018. The previous levels of fees for certain of the non-executive director responsibilities were below the average and median benchmark levels. For the balance of non-executive director responsibilities, the proposed fee adjustments were referenced to CPI.

Non-executive directors’ fees are benchmarked externally every second year with CPI adjustments in alternate years.

Non-executive directors’ fees

Director30 June 2019

R00030 June 2018

R000

Independent non-executive directorsGavin Tipper (chairman) 807 688Lindie Engelbrecht(1) 230 543Zuleka Jasper 479 –Mike Lewin 421 392Nonyameko Mandindi 383 325Thabo Mokgatlha 567 462Stewart Shaw-Taylor 637 551Non-executive directorsKevin Ellerine 397 343Louis Norval 397 343

Total 4 318 3 647(1) Resigned with effect from 30 November 2018

Page 87


GovernanceSocial and ethics committee report

The committee is chaired by Mike Lewin and its membership includes independent non-executive Nonyameko Mandindi and CEO Morné Wilken. Members of the executive are invited to attend meetings. The committee meets twice a year. Attendance at committee meetings is set out on page 64.

Good corporate citizenship is a positive and welcome element of our business activities and corporate ethos. Our corporate ethos reflects our philosophy and ultimately our core values and reason for being. A key component of the Hyprop business strategy is to be a responsible and accountable corporate citizen that contributes to the economic development of the country.

• The committee comprises three members, two independent non-executive directors and one executive director

• The committee is chaired by an independent non-executive director, who has been appointed by the board

• Given the nature and size of Hyprop’s operations, the current composition is appropriate. The committee is satisfied that it fulfilled its responsibilities in line with its charter.

The committee monitors the group’s activities in terms of social, environmental and economic development, including: • Good corporate citizenship – promoting ethical leadership,

integrity, anticorruption, sustainability, value creation, equality, preventing discrimination and contributing to the development of the communities in which its activities are predominantly conducted

• Environmental impact – as a landlord, Hyprop has a low environmental impact, and aims to reduce this further in its operations. The committee reviews the environmental policy biannually and reports to the board on it

• Stakeholder relations – ensuring that all communications to stakeholders are transparent and appropriate

• Human capital – labour and employment, education and skills development

• Transformation – broad-based black economic empowerment and employment equity.

The committee monitors compliance with Hyprop’s code of conduct and ethics and other relevant social, ethical and legal requirements, as well as best practice. It reports to shareholders on matters in its mandate at the annual general meeting.

Committee assuranceHyprop’s social and ethics committee is satisfied that it complied with its legal, regulatory, and other responsibilities during the current financial year.

Mike LewinSocial and ethics committee chairperson

The board of directors is the ultimate custodian of the group’s values and ethics and in its own conduct strives to lead by example. It follows that the board aims to integrate these values and ethics into the company’s growth strategy. The social and ethics committee, a statutory committee of the board, assists the board in this endeavour. The committee is formally appointed to assist the board with social, ethics and related matters, as provided for in the Companies Act.

Page 88


Consolidated and separate financial

statements

Delta City Belgrade, Serbia

Page 89

Integrated annual report and consolidated and separate financial statements for the year ended 30 June 2019

Consolidated and separate financial statements

Notes to the consolidated and separate annual financial statements 111

A Accounting policies 111

A1 Significant accounting policies and elections 111

A2 Key assumptions and estimations 112

A3 Changes in accounting policies and disclosures 114

A4 Standards issued but not yet effective 116

B Performance analyses 117

B1 Dividend per share 117

B2 Earnings per share 117

C Segmental analysis 119

C1 Overview and definitions 119

C2 Segmental analysis – Profit or loss 120

C3 Segmental analysis – Financial position 122

D Profit or loss 123

D1 Revenue and minimum lease payments 123

D2 Property expenses and other operating costs 124

D3 Interest 125

D4 Dividends received 125

D5 Operating commitments 126

D6 Taxation 126

E Property investments and related items 127

E1 Investment property 127

E2 Building appurtenances and tenant installations 131

E3 Investments in subsidiaries 132

E4 Investments in joint arrangements 133

E5 Financial asset 136

E6 Capital commitments 139

E7 Non-current assets held-for-sale 140

F Other assets 141

F1 Loans receivable 141

F2 Trade and other receivables 144

F3 Cash and cash equivalents 145

F4 Other investments 145

G Equity and reserves 146

G1 Share capital and treasury shares 146

G2 Reserves 147

H Funding and related items 148

H1 Borrowings 148

H2 Derivatives 150

H3 Financial guarantees 152

H4 Covenants and capital management 154

I Other liabilities 155

I1 Deferred taxation 155

I2 Trade and other payables 156

J Related parties 156

J1 Related-party transactions and balances 156

K Remuneration 158

K1 Directors’ remuneration 158

K2 Share-based payments 160

K3 Retirement benefits 161

L Financial instruments 162

L1 Classification and measurement of financial instruments 162

L2 Fair value measurement methodologies 166

L3 Reconciliations of level 3 financial instruments 168

L4 Valuation sensitivities 169

M Financial risk management 169

M1 Risk management overview 169

M2 Liquidity risk and sensitivity 170

M3 Interest rate risk and sensitivity 173

M4 Currency risk and sensitivity 174

M5 Credit risk and sensitivity 177

N Cash flow information 180

N1 Cash generated from operations 180

N2 Other cash flow notes 181

Directors’ responsibility statement and approval 92Declaration by the company secretary 93Audit and risk committee’s report 94Directors’ report 98Independent auditor’s report to the shareholders of Hyprop Investments Limited 101Statements of profit or loss and other comprehensive income 106Statements of financial position 107Statements of changes in equity 108Statements of cash flows 110

Page 90

Integrated annual report and consolidated and separate financial statements for the year ended 30 June 2019Hyprop Investments Limited

O Additional information (included in the audited financial statements) 181

O1 Going concern 181

O2 Events after the reporting date 181

O3 JSE property disclosures 182

P Additional information (excluded from the audited financial statements) 189

P1 Earnings reconciliations 189

P2 Net asset values 190

P3 Five-year review 191

P4 SA REIT detailed property disclosures 192

P5 Financial information on Hystead 195

Q Shareholders’ information 196

Q1 Shareholders’ analysis 196

Q2 Shareholders’ diary 197

Q3 Distribution details 197

Q4 Administration 198

Q5 Glossary 199

Basis of preparationThe consolidated and separate annual financial statements represent the financial information of Hyprop Investments Limited and its subsidiaries and have been prepared in compliance with the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa.

Approval of the annual financial statementsThe audited consolidated and separate annual financial statements, set out on pages 106 to 188, were approved by the board of directors on 23 October 2019.


Page 91

The consolidated and separate financial statements are the responsibility of the directors. They are responsible for selecting and adopting sound accounting practices, for maintaining an adequate and effective system of accounting records, for safeguarding assets and for developing and maintaining a system of internal control that, among other objectives, will ensure that the preparation of the consolidated and separate financial statements achieves fair presentation.

These consolidated and separate financial statements have been prepared in accordance with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act of South Africa and the JSE Listings Requirements.

The consolidated and separate financial statements have been prepared on the going concern basis as the directors have reason to believe that the company, and its subsidiaries, have adequate resources to continue operations for the ensuing 12 months.

The external auditor is responsible for independently auditing and reporting on the consolidated and separate financial statements in conformity with the applicable financial reporting framework. Their report is set out on pages 101 – 105.

The consolidated and separate financial statements were prepared under the supervision of Hyprop’s chief financial officer, Brett Till CA(SA).

APPROVAL OF THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTSThe consolidated and separate annual financial statements were approved by the board and are signed on its behalf by:

Morné Wilken Gavin Tipper Chief executive officer Chairman

Johannesburg

23 October 2019

Directors’ responsibility statement and approvalfor the year ended 30 June 2019

Page 92


Declaration by the company secretaryfor the year ended 30 June 2019

We declare that, to the best of our knowledge, the company has lodged with the Companies and Intellectual Property Commission all such returns as are required of a public company in terms of the Companies Act of South Africa, as amended, and that all such returns are true, correct and up to date.

CIS Company Secretaries Proprietary LimitedCompany secretary

Gillian PrestwichJohannesburg

4 September 2019

Page 93


INTRODUCTION AND STATUTORY DUTIESThe audit and risk committee (the committee) has pleasure in submitting its report, as required by section 94(7)(f) of the Companies Act of South Africa, for the year ended 30 June 2019.

The committee is governed by a formal charter that codifies its role and responsibilities. The primary responsibilities of the audit and risk committee are to: • Oversee integrated reporting, including consideration of

significant judgements and reporting decisions made • Ensure that a combined assurance model is applied to provide

a coordinated approach to all assurance activities • Review the expertise, resources and experience of the company’s

finance function, and satisfy itself on the suitability of the expertise and experience of the chief financial officer

• Oversee internal audit, and in particular, the appointment and/or dismissal of the internal audit service provider

• Monitor compliance with the risk policy • Recommend the appointment of the external auditor and

oversee the external audit process, and • Make submissions to the board on any matter concerning the

company’s accounting policies, financial controls, records, reporting and risk management.

FUNCTIONSIn addition to the primary responsibilities above, the committee also covered matters relating to compliance and litigation,

budgeting and forecasting, taxation and accounting policy choices and supported the board in the following areas: • Advising the board on the accounting implications of major

transactions • Approving the annual internal audit plan and reviewing the

scope, work and reports of the internal audit function • Reviewing adherence to Hyprop’s systems of internal controls

and, where necessary, monitoring improvements • Recommending the appointment of the external auditor for

approval by shareholders • Monitoring established guidelines for the use of the external

auditor for non-audit services, to maintain independence • Monitoring compliance with Real Estate Investment Trust (REIT)

requirements, in accordance with the JSE Listings Requirements, and confirming that the risk management policy, which prohibits the company from entering into derivative transactions not in the ordinary course of business, has been complied with in all material respects, and

• Considering and improving financial reporting in line with the results of the JSE proactive monitoring process in respect of the consolidated and separate financial statements.

COMPOSITION AND MEETINGSAll members of the committee are independent non-executive directors, in compliance with the Companies Act of South Africa and as recommended by King IV. The external and internal auditors and executive management are invited to attend every meeting of the committee.

Audit and risk committee’s reportfor the year ended 30 June 2019

Details of committee members’ attendance at meetings held during the year are set out below:

24 August 2018

29 August 2018

8 October 2018

20 November 2018

22 February 2019

28 May 2019

Thabo Mokgatlha (Chair) ✓ ✓ ✕ ✓ ✓ ✓

Stewart Shaw-Taylor ✓ ✓ ✓ ✓ ✕ ✓

Gavin Tipper(1) ✓ ✓ ✓ ✓ ✓ ✓

Zuleka Jasper ✓ ✓ ✓ ✓ ✓ ✕

Lindie Engelbrecht(2) ✓ ✓ ✕ ✓ (2) (2)

(1) Gavin Tipper’s dual role as chairman of the board of directors and member of the audit and risk committee was specifically approved by shareholders at the annual general meeting of the company held on 30 November 2018.

(2) Lindie Engelbrecht resigned as a director of the company and chair of the audit and risk committee effective 30 November 2018.

Page 94


SIGNIFICANT FINANCIAL STATEMENT REPORTING ISSUESA significant part of the financial reporting process includes making estimates and exercising judgement. The committee reviewed and evaluated the main judgements, estimates and assumptions made by management and the conclusions drawn from the available information and evidence.

The committee also ensured that these matters are included and covered in the plans and work of the external auditor.

The key issues involving estimates and judgements during the year are set out below:

Key issue Judgement in financial reporting Audit and risk committee review Conclusion

1 Classification and valuation of investment in Hystead

Judgements were applied by management in interpreting the IFRS implications of the suite of agreements which govern the relationship between the shareholders of Hystead to determine the appropriateness of the classification of the investment in Hystead as a financial asset.

Estimations and judgements were also applied in the determination of future cash flows, appropriate discount and exit cap rates and the application of annual and terminal growth rates when determining the valuation of the investment in Hystead.

Having determined the valuation of the Hystead financial asset, judgement was further applied to the determination of the portion of the valuation which would be deferred as a day-one gain.

The committee reviewed the accounting treatment of Hystead and assessed the appropriateness of the accounting classification, taking advice from the various sources.

The committee received briefings on the consistency of the valuation methodology and deferral of day-one gains, and the expanded disclosure of these two elements in the 2019 financial statements.

Having considered both management’s and the external auditor’s views on the classification and measurement of the investment in Hystead, the committee concluded that the classification as a financial asset remained appropriate and the valuation was reasonable.

2 Recoverability of loans to the sub-Saharan African (excluding South Africa) investments

Judgements and assumptions were applied by management in calculating the recoverable amount of the loans extended to AttAfrica and Manda Hill, particularly with respect to: • Determining the cash-generating units

(CGUs) and the ongoing appropriateness of the CGUs being used for the purpose of impairment testing

• Assumptions on future pricing, net cash inflows and discount rates

• The value of underlying assets held by these entities, including specifically the investment properties of the underlying property companies

• Prospects for the investee companies and expected lifetime credit losses

• The likely time period over which these investments may be realised.

The committee assessed the appropriateness of the CGUs and reviewed the impairment triggers.

In considering the need to impair the loans the committee considered the following: • The group’s stated intention to exit the

investments in sub-Saharan Africa (excluding South Africa)

• The nature of the underlying investments • The remaining period of the loans and the

probability of their extension upon maturity

• The net asset value included deferred tax liabilities on the revaluation of investment properties that Hyprop believes will not be realised on the sale of the shares in the underlying property companies

• Values of the underlying property assets and the net assets/liabilities of the underlying property companies

• The anticipated time to dispose of the sub-Saharan African (excluding South Africa) investments

• Expected profits/losses during the time it may take to dispose of the remaining sub-Saharan African (excluding South Africa) assets

• The anticipated proceeds which may be received on disposal of the sub-Saharan African (excluding South Africa) investments.

The committee endorsed management’s final impairment of the loans extended to AttAfrica and Manda Hill.

Page 95


Key issue Judgement in financial reporting Audit and risk committee review Conclusion

3 Classification and valuation of financial guarantees

Management applied judgement in determining the financial effect of the financial guarantees provided by Hyprop to secure the borrowings incurred in the Eastern European and sub-Saharan African (excluding South Africa) portfolios.

The financial guarantees impact the value of the financial asset recognised in respect of the investment in Hystead, the investments in subsidiaries and joint ventures in respect of sub-Saharan Africa, and the financial liability relating to the guarantees.

Management further obtained external valuations for the financial guarantees.

The committee reviewed the external valuations which supported the accounting entries.

They also reviewed the adequacy of the disclosures relating to financial guarantees as well as the interaction of the financial guarantees on the Hystead financial asset valuation and the investment in Hyprop Mauritius.

The committee endorsed management’s classification and valuation of the financial guarantees.

4 Valuation of investment property

Investment property is the group’s most significant asset and is measured at fair value, with changes in fair value recognised in profit or loss.

The group used independent valuers to value the consolidated investment properties. The valuation involves making significant judgements, especially those around the current market conditions, reversionary capitalisation rates and rental levels.

The committee reviewed the external valuations which supported the accounting entries, including the discount rates and reversionary capitalisation rates.

They also reviewed the adequacy of the disclosures relating to investment properties.

The committee endorsed the independent valuation of the investment properties.

Audit and risk committee’s report continuedfor the year ended 30 June 2019

Where appropriate, the committee sought input and views from the external auditor and other experts in its efforts to continuously improve the quality of financial reporting and the integrated annual report.

GOING CONCERNThe committee reviewed the solvency and liquidity tests undertaken at the time of declaring the distributions for the six-month periods ended on 31 December 2018 and 30 June 2019 and has reported on going concern to the board. This included a review of the company’s budget for the year ended 30 June 2020, available cash balances at 30 June 2019, existing and new bank facilities and the company’s debt maturity profile. The committee confirmed that the company and the group have adequate resources to continue operating for the ensuing 12 months and that it is appropriate to adopt the going concern basis in preparing the company and group financial statements.

EXTERNAL AUDITOR The committee has considered a report from KPMG motivating its independence and is satisfied with the independence of the external auditor. The committee is also satisfied with the terms, nature, scope and proposed fee of the external auditor for the year ended 30 June 2019.

The committee has considered and is satisfied with the suitability of KPMG and the designated audit partner, Tracy Middlemiss, for the appointment as auditors in accordance with paragraphs 3.84(g)(iii) and 22.15(h) of the JSE Listings Requirements.

The committee approved the appointment of KPMG Services Proprietary Limited to provide limited assurance reports for selected sustainability development indicators.

The committee further approved the appointment of KPMG Nigeria to provide tax advisory services to Gruppo Investments Limited, a subsidiary of Hyprop, whose external auditor is Ernst & Young (Nigeria).

RISK MANAGEMENT, COMBINED ASSURANCE FRAMEWORK AND INTERNAL CONTROLSThe committee reviewed the group’s policies on risk assessment and regularly monitors the combined assurance dashboard and risk matrix covering both operational and financial reporting matters and provides feedback and recommendations on actions to mitigate the identified risks.

The committee further took note of macro-economic risks emerging in South Africa and sub-Saharan Africa as well as increasing political risk in South Africa and reviewed management’s responses to these risks.

Page 96


The committee relies on management, the external auditor, internal audit and the group’s independent ethics reporting telephone line to highlight any concerns, complaints or allegations relating to internal financial controls, the content of the financial statements and potential violations of the law or questionable business, accounting or auditing practices. Separate meetings are also held with management, the external auditor and the internal auditor every quarter unless a greater frequency is requested.

CHIEF FINANCIAL OFFICER AND FINANCIAL REPORTINGThe consolidated and separate financial statements have been audited in compliance with section 30 of the Companies Act of South Africa. Brett Till CA(SA), chief financial officer, is responsible for this set of financial statements and has supervised the preparation thereof. The committee is satisfied that the CFO has the necessary expertise and experience to carry out his duties, as required by paragraph 3.84(g)(i) of the JSE Listings Requirements.

The committee is further satisfied that the company has established appropriate financial reporting procedures and that these procedures are operating effectively, as required by paragraph 3.84(g)(ii) of the JSE Listings Requirements.

STAKEHOLDER REPORTING PROCESSConcerns and complaints received from within or outside the group relating to accounting practices and internal financial controls, and the content or auditing of the consolidated and separate financial statements, were considered by the committee and dealt with as appropriate.

RECOMMENDATION OF FINANCIAL STATEMENTSThe consolidated and separate financial statements are reviewed by management, the committee, the board and are audited by the external auditor of the group. The committee is satisfied with the consolidated and separate financial statements and the accounting policies used in their preparation, and has recommended the consolidated and separate financial statements to the board for approval.

Thabo MokgatlhaAudit and risk committee chair

23 October 2019

Page 97


The directors have pleasure in submitting their report, which forms part of the consolidated financial statements for the year ended 30 June 2019.

RESPONSIBILITY STATEMENTThe directors are responsible for the preparation and fair presentation of the consolidated and company financial statements of Hyprop, comprising the statements of financial position, the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, as well as the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and financial pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. In addition, the directors are responsible for the preparation of the directors’ report.

The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.

INTRODUCTION AND OVERVIEWHyprop, is a specialist shopping centre Real Estate Investment Trust (REIT), with interests in a R51 billion portfolio of shopping centres in South Africa, Eastern Europe and sub-Saharan Africa (excluding South Africa).

The portfolio in South Africa includes super regional centre Canal Walk, large regional centres Clearwater, The Glen, Woodlands, CapeGate, Somerset and Rosebank Malls, regional centre Hyde Park Corner and value centre Atterbury Value Mart.

Hyprop’s investments in South-Eastern Europe, held via a 60% interest in UK-based Hystead Limited (Hystead), include interests in Delta City in Belgrade, Serbia; Delta City in Podgorica, Montenegro; Skopje City Mall in Skopje, Macedonia; The Mall in Sofia, Bulgaria, and a 90% interest (effective 54% interest for Hyprop) in City Center One East and City Center One West, both in Zagreb, Croatia.

The sub-Saharan African portfolio (excluding SA) includes interests in Ikeja City Mall in Lagos, Nigeria, Accra Mall and West Hills in Accra, Ghana, Kumasi City Mall in Kumasi, Ghana, and Manda Hill Centre in Lusaka, Zambia.

STRATEGYUnder Hyprop’s new executive team, Hyprop’s strategy was interrogated during the year, resulting in a new three-year strategic plan which will see Hyprop adapt to the rapidly evolving retail landscape, disruptive technologies and market conditions.

The refined mission of the group is “to create environments and opportunities for people to connect and have authentic and meaningful experiences, by managing and developing tangible (mixed-use precincts underpinned by dominant retail centres in key economic nodes) and non-tangible assets”.

Directors’ reportfor the year ended 30 June 2019

In line with the revised strategy, the group will focus on three strategic areas – the South African property portfolio, the Eastern European property portfolio and relevant non-tangible assets arising from the digital disruption which is transforming many traditional market sectors (including the retail and property sectors). Hyprop will divest of the sub-Saharan African (excluding South Africa) portfolio over the next 12 to 18 months.

The key priorities for the next 18 months are to exit the sub-Saharan African (excluding South Africa) portfolio, reposition the South African portfolio and improve the dominance of the Eastern European portfolio. In addition, we will develop and implement our strategy around digital disruption and technologies in the retail, property and infrastructure space.

From a financial perspective we want to reduce our loan-to-value ratio and restore the group’s investment grade credit rating (subject to South Africa’s sovereign credit rating). Cash flow management will be a key priority and will form the basis of calculating distributions to shareholders.

SUBSIDIARIES, JOINT ARRANGEMENTS AND JOINT VENTURESDetails of investments in subsidiaries, joint arrangements and joint ventures are included in notes E3 – Investments in subsidiaries and E4 – Investments in joint arrangements to the financial statements.

PERFORMANCE REVIEWDetails of the group and company’s financial performance for the year ended 30 June 2019 are set out in the attached financial statements.

Net profit for the year attributable to ordinary shareholders decreased from R2 521 million in 2018 to R112 million in 2019. Distributable income for the year decreased by 0,1% from R1 905 million for the year ended 30 June 2018 to R1 903 million. The distribution per share decreased by 1,5% from 756,5 cents to 744,9 cents.

The solid performance by the South African portfolio and strong growth from the Eastern European portfolio were offset by a decrease in distributable income from the sub-Saharan African (excluding South Africa) portfolio. The key elements affecting the performance are: • Growth in distributable income from the South African portfolio

of 6,5% to R1 695 million • Growth in distributable income from the Eastern European

portfolio of 13,5% to R266 million • A decrease in distributable income from the sub-Saharan African

(excluding South Africa) portfolio to a loss of R58 million • An impairment of the group’s investments in sub-Saharan Africa

(excluding South Africa) of R1,46 billion.

DIVIDENDS DECLAREDThe following dividends were declared to shareholders during the year: • On 31 August 2018 a final dividend of 380,2 cents per share

in respect of the year ended 30 June 2018 • On 1 March 2019 an interim dividend of 385,6 cents per share

in respect of the six-month period ended 31 December 2018.

On 4 September 2019 the board of directors declared a final dividend of 359,3 cents per share for the year ended 30 June 2019. The total dividend for the year ended 30 June 2019 was 744,9 cents per share.

Page 98


DIRECTORATE AND DIRECTORS’ INTERESTSDirectorateThe following changes to the board of directors occurred during the year: • On 5 July 2018, Zuleka Jasper was appointed to the board as an

independent non-executive director and Wilhelm Nauta joined the board as an executive director

• Laurence Cohen resigned as financial director with effect from 31 July 2018

• Brett Till was appointed as chief financial officer effective 1 October 2018

• With effect from 30 November 2018, Lindie Engelbrecht resigned from the board. Thabo Mokgatlha replaced Lindie as chair of the audit and risk committee and as a member of the remuneration and nominations committee with effect from 30 November 2018

• Morné Wilken joined the board of directors on 27 December 2018 and became CEO with effect from 31 January 2019

• Pieter Prinsloo resigned as a director and CEO of Hyprop with effect from 30 January 2019.

Directors who served during the financial year are as follows:

Independent non-executive directors

Non-executive directors Executive directors

GR Tipper (Chairman) KM Ellerine AW Nauta (CIO)L Engelbrecht L Norval BC Till (CFO)MJ Lewin MC Wilken (CEO) N Mandindi PG Prinsloo (former CEO)TV Mokgatlha LR Cohen (former financial

director)S Shaw-Taylor

DIRECTORS’ INTERESTS IN SHARES OF THE COMPANYThe interests of the directors in the shares of the company at 30 June 2019 were:

2019 2018Beneficial Non-beneficial Beneficial Non-beneficial

Direct Indirect Indirect Direct Indirect IndirectNON-EXECUTIVEGavin Tipper 9 000 – – 4 000 – –Kevin Ellerine – 378 000 – – 378 000 –Nonyameko Mandindi – 2 940 – – 2 940 –Louis Norval – – – – – 3 447 855Stewart Shaw-Taylor 21 500 – – 21 500 – –EXECUTIVE – – – n/a n/a n/aAW Nauta(1) 26 754 – – n/a n/a n/aBC Till(1) 18 927 1 200 – n/a n/a n/aMC Wilken(1) 43 190 670 – n/a n/a n/a

119 371 382 810 – 25 500 380 940 3 447 855(1) Includes shares awarded under the Hyprop Employee Share Scheme.

There have been no changes to the above interests between 30 June 2019 and the date of this report other than: • Gavin Tipper purchased 4 500 Hyprop ordinary shares

on 17 – 18 October 2019 • MC Wilken was awarded 48 043 shares under the Hyprop

Employee share scheme on 1 July 2019 • AW Nauta was awarded 24 450 shares under the Hyprop

Employee share scheme on 1 July 2019 • BC Till was awarded 25 183 shares under the Hyprop Employee

share scheme on 1 July 2019.

DIRECTORS’ INTEREST IN CONTRACTSNo material contracts in which the directors have an interest were entered into during the year, other than the transactions detailed in note J1 – Related-party transactions and balances to the financial statements.

CAPITAL STRUCTURE AND BORROWINGSShare capitalDetails of the company’s authorised and issued share capital are set out in note G1 – Share capital and treasury shares of the financial statements.

No ordinary shares were issued during the year.

There have been no changes to the authorised or issued share capital between year end and the date of this report.

Borrowings In terms of the company’s memorandum of association and the JSE Listings Requirements, the company’s borrowings are limited to 60% of its gross asset value as reflected on the company’s consolidated statement of financial position.

In February 2019, Moody’s lowered Hyprop’s long-term national scale issuer rating to Aa3.za from Aa1.za and affirmed the short-term national scale rating of Prime-1.za. The main reason cited for the decrease in the rating is that Moody’s estimated that Hyprop’s debt-to-asset ratio, adjusted for the full consolidation of Hystead, had increased to 41% at 30 June 2018, from 33,4% in 2017, as a result of debt funded acquisitions in Eastern Europe. Moody’s further stated that Hyprop will rely on external debt financing to cover R5 billion of debt coming due in the next 18 months, including the Hystead debt that it guarantees.

Hyprop has taken cognisance of Moody’s points which led to two key initiatives – (1) refinancing the portion of debt maturing up to June 2020 and (2) lowering of our LTV to 35% (as considered appropriate and calculated by Moody’s). Good progress has been made with these initiatives, particularly with regards to the refinancing of short-term debt.

Page 99


Directors’ report continuedfor the year ended 30 June 2019

We will endeavour to restore Hyprop’s credit rating to investment grade (subject to South Africa’s sovereign credit rating) by 31 December 2020 and will continue to engage with Moody’s in that regard.

Hyprop’s loan-to-value (LTV) and interest cover ratios are set out in note H4 – Covenants and capital management to the financial statements.

TAX STATUSHyprop is a REIT (Real Estate Investment Trust) in accordance with the South African Income Tax Act (the Act) and in terms of the JSE Listings Requirements.

In terms of section 25BB of the Act, the twice yearly dividend declared to Hyprop shareholders is deductible against Hyprop’s taxable income. As a consequence of this deduction, South African income taxation is usually reduced to zero, and dividends received by South African Hyprop shareholders are free of any dividend withholding tax.

ACQUISITIONS AND DISPOSALSOn 4 January 2019, Lakefield Office Park was sold for a consideration of R200 million.

On 28 June 2019, AttAfrica, in which the group has a 37,5% interest, disposed of its interest in Achimota Retail Centre, in Accra, Ghana.

Subsequent to year end, Hyprop Mauritius (50%) and AttAfrica (50%) disposed of their interests in Manda Hill Shopping Centre, in Lusaka, Zambia.

SPECIAL RESOLUTIONSThe following special resolutions were passed at the company’s annual general meeting held on 30 November 2018:1. The company or any of its subsidiaries were authorised by way

of a general authority to acquire ordinary shares issued by the company, in terms of sections 46 and 48 of the Companies Act, subject to the provisions of the JSE Listings Requirements

2. The board of directors of the company may, subject to compliance with the requirements of the company’s Memorandum of Incorporation, the Companies Act and the JSE Listings Requirements, authorise the company to provide direct or indirect financial assistance, as contemplated in section 45 of the Companies Act, by way of loans, guarantees, the provision of security or otherwise, to any of its present or future subsidiaries and/or any other company or corporation that is or becomes related or inter-related (as defined in the Companies Act) to the company for any purpose or in connection with any matter, such authority to endure for a period of not more than two years.

ADMINISTRATION AND MANAGEMENTProperty and asset management in Hyprop’s South African operations are fully internalised. No property or asset management fees were paid to third parties during the year in South Africa.

AUDIT AND RISK COMMITTEE REPORTThe report of the audit and risk committee is set out on pages 94 to 97 of the annual financial statements.

The committee has fulfilled its responsibilities during the year, including having satisfied itself as to the independence of the

external auditor and their suitability for reappointment for the ensuing year.

AUDITORKPMG Inc. was reappointed as auditor in accordance with part C of section 90 of the Companies Act of South Africa. The external auditor’s report to the shareholders on whether the financial statements are fairly presented in accordance with the applicable financial reporting framework follows on pages 101 to 105.

GOING CONCERNThe financial statements are prepared on the basis of accounting policies applicable to a going concern. This basis takes into account that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities will occur in the ordinary course of business.

At 30 June 2019 the company’s current liabilities exceeded its current assets by R293 million. The increase in current liabilities is due to long-term loans maturing in less than one year. The company proposes to settle these short-term borrowings from existing cash balances and existing and new bank facilities.

In March 2019 the company raised R500 million by the issue of new bonds. R358 million of these proceeds (included in cash balances at 30 June 2019) are earmarked to settle R358 million of bonds which mature in July 2019.

At 30 June 2019 the company had undrawn revolving credit facilities of R500 million. Subsequent to 30 June 2019 term sheets have been signed with commercial banks for an additional R1,1 billion of bank facilities for between three and five-year terms.

Accordingly, the directors consider that the company and the group have adequate resources to continue operating for the ensuing 12 months and that it is appropriate to adopt the going concern basis in preparing the company and group financial statements.

TRADING STATEMENTSHyprop uses dividend per share as the relevant measure of its financial results for trading statement purposes.

APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTSThe financial statements of Hyprop Investments Limited, as identified in the first paragraph, were approved by the board of directors on 23 October 2019 and are signed on its behalf by:

GR Tipper Chairman

MC Wilken Chief executive officer

BC Till Chief financial officer

Johannesburg23 October 2019Page 100


REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTSOpinion We have audited the consolidated and separate financial statements of Hyprop Investments Limited (the group and company), set out on pages 106 to 188, which comprise the statements of financial position as at 30 June 2019, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows and notes to the consolidated and separate annual financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Hyprop Investments Limited as at 30 June 2019, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report. We are independent of the group and company in accordance with the sections 290 and 291 of the

Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018), parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Independent auditor’s report To the shareholders of Hyprop Investments Limited

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Independent auditor’s report continued

VALUATION OF INVESTMENT PROPERTY – GROUP AND COMPANYRefer to the accounting policies and key assumptions and estimations in A1 and A2 and E1 for the investment property note to the consolidated and separate financial statements.

Key audit matter How this matter was addressed in our audit

The group and company’s most significant asset is its investment property portfolio. Investment property is subsequently measured at fair value, with changes in fair value recognised in profit or loss.

The group and company used external independent valuers to value the investment properties. The valuation involves making significant judgements, the key valuation assumptions of which are set out in note E1.7.3.

The valuation also relies on the completeness and accuracy of the underlying lease and financial information provided to the valuers by management.

Due to the magnitude of the investment property portfolio held and the significance of the judgements made in measuring the investment property at fair value, this matter was considered to be a key audit matter in our audit of the consolidated and separate financial statements.

Our response to the key audit matter included performing the following audit procedures: • We evaluated the competence and objectivity of the external valuers.

This assessment included but was not limited to assessing their professional qualifications, experience and independence from the group and company.

• Through discussions with the external valuers, we obtained an understanding of the valuation process adopted; and the significant assumptions used and critical judgement areas applied in the valuation process, including contracted revenue, vacancy levels and the initial and reversionary capitalisation rates.

• The audit team challenged the assumptions used by the external valuers and assessed information provided to the external valuers by management to value the properties. The procedures included:

– Agreeing the forecast cash flows to the contracted revenue through inspection of the relevant underlying lease contracts,

– Selecting a sample of tenants per mall and i. Ensuring a lease contract exists for the tenant and ii. Agreeing the lease contract details to the population of lease

information. • Agreeing growth rates in the budget to the escalation rates in the lease

contracts. • Assessing the reasonability of managements forecasts by comparing the

forecasts to the current year actual results and corroborating any differences identified.

• Our corporate finance specialist evaluated the valuations of a sample of investment properties, and challenged the underlying inputs to the valuations.

• We considered the adequacy and completeness of the disclosures associated with investment property valuation.

VALUATION OF INVESTMENT IN HYSTEAD LIMITED (HYSTEAD GROUP AND COMPANY)Refer to the accounting policies and the key estimations and assumptions in A2 and note E5 to the consolidated and separate financial statements.


The group and company holds a portfolio of investment properties in Eastern Europe, held through Hystead and funded in Euros with credit enhancement provided mainly by Hyprop (referred to as the Hystead structure).

The Hystead structure and the rights and obligations in the contracts underlying that structure are complex.

The valuation of the right to receive dividends and deferral of that right relies on the selection of the appropriate valuation models and judgements made about the key inputs to those models.

Due to the complexity of the Hystead structure and the significance of the judgements made in the related valuations, this matter was considered to be a key audit matter in our audit of the consolidated and separate financial statements.

Our response to the key audit matter included performing the following audit procedures: • We obtained an understanding from management on whether there had

been any changes to the shareholders’ agreement, funding agreements and other documents used to confirm the understanding of the transaction.

• We reviewed management’s assessment of the impact of IFRS 9 on the classification and measurement of this investment

• With the assistance of our corporate finance specialist, we evaluated management’s selection of the valuation model for the right to receive dividends, and the significant assumptions and judgements used in the valuation process. This included an evaluation of the appropriateness of the discount rates used

• For a selection of key inputs to the valuation models, we compared the inputs used by management to available internal and external sources

• We evaluated the dividend forecasts and growth rates applied in terms of the underlying performance of Hystead. This included assessing Hystead’s profit forecasts by challenging the assumptions used in the forecasts against lease escalation rates and industry growth rates

• We evaluated the adequacy of the disclosures made in respect of the unobservable inputs made by management in relation to the valuation of the investment in Hystead.

Page 102


RECOVERABILITY OF ATTAFRICA SHAREHOLDER LOANS – GROUPRefer to the accounting policies and the key assumptions and estimations in A2 and note F1 to the consolidated and separate financial statements.


Hyprop’s wholly owned subsidiary, Hyprop Mauritius Investments Limited (Hyprop MU), has an equity interest of 37,5% in AttAfrica Limited (AttAfrica) which is based in Mauritius. The interest is equity accounted in the consolidated financial statements. Hyprop MU has advanced a loan of USD185 million to AttAfrica which is governed by a shareholder loan agreement. The loan is interest-bearing and repayable on 30 June 2020. The loan is recognised at amortised cost in terms of IFRS 9: Financial Instruments (IFRS 9). Loans receivable are assessed for recoverability on an individual basis.

Significant judgements, estimates and assumptions have been applied by management to: • Determine if the loan or advance is credit impaired • Evaluate the adequacy and recoverability of the

underlying companies and properties held by AttAfrica and the costs likely to be incurred in order to realise these assets

• Evaluate the future performance of the underlying instruments to ensure forward looking credit losses are accounted for appropriately and in terms of IFRS 9.

Due to the significant judgements applied in estimating the recoverability of these loans, this matter was considered to be a key audit matter in our audit of the consolidated financial statements.

Our response to the key audit matter included the following audit procedures: • We obtained an understanding from management on whether there had

been any changes to the shareholder agreement from the prior year in respect of the AttAfrica loan

• We evaluated management’s assessment of the recoverability of the exposure and underlying assets with reference to current economic performance by independently assessing the reasonability of assumptions and judgements made by management. This included:

– Assessing the reasonableness of the fair values of each of the underlying assets and liabilities in AttAfrica which can be recovered through the sale of shares of the investment holding at the loan expiry date by incorporating forward looking information into the assessment of each line item where possible. This included:> An assessment of the appropriateness of the fair values of investment

properties held through assessment of the external valuations obtained. We considered the competence and objectivity of the external valuers and the appropriateness of the valuation methodology used to value the properties taking into account the manner in which they are expected to be recovered

> An assessment of the costs expected to be incurred in order to realise the assets through inspection and corroboration of existing agreements in place and management’s estimates of future costs

• We evaluated the adequacy of the disclosures made about significant judgements made by management in relation to the recoverability of the loans.

VALUATION OF THE FINANCIAL GUARANTEES – GROUP AND COMPANYRefer to the accounting policies and the key estimations and assumptions in A2 and note H3 to the consolidated and separate financial statements.


The group and company currently guarantees external loans in Hystead as well as Hyprop Mauritius Investments Limited (Hyprop MU). Each financial guarantee requires a valuation based on the terms of the loans and credit risk profile of the underlying entity in order to determine the estimated amount expected to be settled.

Determining the fair value of the financial guarantees involves significant management judgement, including accounting estimates that have been identified as having high estimation uncertainty. These judgements included the probability of default (PD) and the loss given default (LGD) of the underlying exposures.

Management further obtained external valuations for the financial guarantees.

Due to the significant judgements applied in estimating the value of these guarantees, this matter was considered to be a key audit matter in our audit of the consolidated and separate financial statements.

Our response to the key audit matter included performing the following audit procedures: • With the assistance of our own valuation specialists, we have assessed the

appropriateness of the external valuation models, inputs and assumptions used in the fair value calculations of the financial guarantees and have independently challenged the inputs into the calculations. This included:

– An assessment of the credit risk profile of Hyprop and the PD and LGD applied by the external valuers against independent market information available from ratings agencies for Hyprop Investments Limited

• We evaluated the competence and objectivity of the external valuers. This assessment included but was not limited to assessing their professional qualifications, experience and independence from the group and company. We considered the adequacy and completeness of the disclosures associated with financial guarantees.

Page 103


EMPHASIS OF MATTER – SUBSEQUENT EVENTWe draw attention to note B2 to the consolidated and separate financial statements, “earnings per share”, which indicates that the previously issued consolidated and separate financial statements for the year ended 30 June 2019, on which we issued an auditor’s report dated 5 September 2019, have been revised and reissued. The basic earnings to headline earnings reconciliation in sub note B2.1 erroneously included an adjustment which added back the non-controlling interest portion of the change in fair value adjustment when it should have been deducted. The consolidated and separate financial statements have been corrected to reflect this change. Our opinion is not modified in respect of this matter.

OTHER INFORMATIONThe directors are responsible for the other information. The other information comprises the information included in the document titled “Hyprop Investments Limited and its subsidiaries’ consolidated and separate annual financial statements for the year ended 30 June 2019”, which includes the declaration by the company secretary, audit and risk committee’s report, the directors’ report, as required by the Companies Act of South Africa, and the Hyprop Investments Limited integrated annual report 2019. The other information does not include the consolidated and separate financial statements and our auditor’s reports thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of the auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTSThe directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to

enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the group and company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and/or the company or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTSOur objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the

consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group and the company’s internal control

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit

Independent auditor’s report continued

Page 104


REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSIn terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that KPMG Inc. has been the auditor of Hyprop Investments Limited for four years.

KPMG Inc. Registered auditor

Per Tracy Middlemiss Chartered Accountant (SA) Registered auditor Director

24 October 2019

KPMG Crescent85 Empire RoadParktownJohannesburg

evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group and the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group and/or the company to cease to continue as a going concern

• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Page 105


Statements of profit or loss and other comprehensive incomefor the year ended 30 June 2019

GROUP COMPANY30 June 2019 30 June 2018 30 June 2019 30 June 2018

Note R000 R000 R000 R000

Revenue D1.1.2 3 217 848 3 113 713 3 003 847 2 889 135 Rental and other lease income 2 330 177 2 244 650 2 157 540 2 071 763 Straight-line rental income accrual (87 887) (3 847) (81 399) (4 696)Recoveries 975 558 872 910 927 706 822 068

Impairment of trade receivables M5.2.3.1 (47 052) (31 089) (23 712) (12 825)Property expenses D2.1 (1 132 002) (1 018 803) (1 068 708) (943 321)

Net property income 2 038 794 2 063 821 1 911 427 1 932 989 Other operating expenses D2.2 (41 600) (55 778) (40 526) (54 586)

Operating income 1 997 194 2 008 043 1 870 901 1 878 403 Net interest D3 (461 155) (282 273) (236 105) (280 846)

Interest income 156 043 312 550 77 152 70 511 Interest expense (617 198) (594 823) (313 257) (351 357)

Net operating income 1 536 039 1 725 770 1 634 796 1 597 557 Guarantee fee income 40 542 46 671 40 542 46 672 Dividends received D4 221 190 182 778 221 190 241 672 Net income before fair value adjustments 1 797 771 1 955 219 1 896 528 1 885 901 Changes in fair value (587 083) 767 052 (310 651) 754 079

Investment property E1.5 (337 238) 650 206 (158 832) 651 558 Financial guarantees – – (16 294) –Other investments F4.2 (12 705) – (12 705) –Loans receivable at FVTPL F1.6 (105 809) – – –Financial asset E5.6 (85 229) 87 761 (85 229) 87 761 Derivative instruments H2 (46 102) 29 085 (37 591) 14 760

Profit on disposal of investment property 2 825 2 697 2 825 2 697 Impairment of loans receivable F1.6 (1 350 727) (166 441) (1 485 389) –Other impairments (29 964) (10 102) – (464 958)Derecognition of financial guarantees H3.3 185 686 11 984 218 779 77 269

Profit before taxation 18 508 2 560 409 322 092 2 254 988 Taxation D6 93 028 (39 486) (1 730) (11 838)Profit for the year 111 536 2 520 923 320 362 2 243 150

Other comprehensive income Items that may be reclassified subsequently to profit or loss (net of taxation) (44 094) 15 471 – –

Exchange differences on translation of foreign operations (46 959) 10 907 – –Exchange differences on translation of foreign operations: non-controlling interest 2 865 4 564 – –

Total comprehensive income for the year 67 442 2 536 394 320 362 2 243 150

Total profit for the year attributable to shareholders of the company 164 922 2 529 466 320 362 2 243 150 Total profit for the year attributable to non-controlling interest (53 386) (8 543) – –

Profit for the year 111 536 2 520 923 320 362 2 243 150

Total comprehensive income for the year attributable to shareholders of the company 117 963 2 540 373 320 362 2 243 150 Total comprehensive income for the year attributable to non-controlling interest (50 521) (3 979) – –

Total comprehensive income for the year 67 442 2 536 394 320 362 2 243 150

Basic earnings per share (cents) B2.3 64,5 1 015,8 125,2 899,1 Diluted earnings per share (cents) B2.3 64,5 1 015,0 125,1 898,5

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GROUP COMPANY

30 June 2019 30 June 2018 30 June 2019 30 June 2018Note R000 R000 R000 R000

ASSETS Non-current assets 28 876 436 33 951 124 29 688 303 29 711 533

Investment property E1.4 28 027 321 30 141 027 28 027 321 28 091 539 Straight-line rental income accrual E1.9 448 917 550 182 448 917 530 316 Building appurtenances and tenant installations E2.2 162 288 163 068 162 288 159 911 Investments in subsidiaries E3.3 – – 758 264 758 264 Financial asset E5.4 218 444 152 556 218 444 152 556 Other investments F4 – – – –Loans receivable F1.4 18 847 2 937 445 72 450 18 723 Derivatives H2.3 619 6 846 619 224

Current assets 2 729 289 1 015 095 1 169 637 927 439 Loans receivable F1.4 1 333 106 40 716 – 84 160 Taxation 2 530 – – –Trade and other receivables F2.4 105 625 258 071 104 534 187 490 Derivatives H2.3 2 691 815 2 691 – Cash and cash equivalents F3.2 1 285 337 715 493 1 062 412 655 789

Non-current assets classified as held-for-sale E7.3 2 047 847 199 257 – 199 257

Total assets 33 653 572 35 165 476 30 857 940 30 838 229

EQUITY AND LIABILITIESEquity and reserves 24 491 805 26 395 237 24 540 621 26 184 148

Equity and reserves attributable to shareholders of the company 24 452 006 26 304 917 24 540 621 26 184 148

Stated capital G1.2 8 407 395 8 418 904 8 462 327 8 462 327 Non-distributable reserves G2.2 15 018 383 16 841 038 15 111 577 16 769 141 Share-based payment reserve K2.3 20 286 27 443 20 286 27 443 Retained income 1 039 777 1 004 408 946 431 925 237 Currency translation reserve (33 835) 13 124 – –

Non-controlling interest E7.3 39 799 90 320 – –LIABILITIES Non-current liabilities 6 578 987 8 203 399 4 854 302 3 447 678

Borrowings H1.3 6 320 801 7 815 651 4 410 909 2 949 278 Financial guarantees H3.4 110 401 185 686 296 424 388 508 Derivatives H2.3 60 224 24 060 59 408 24 060 Deferred taxation I1.3 87 561 178 002 87 561 85 832

Current liabilities 1 484 480 558 683 1 463 017 1 198 246 Borrowings H1.3 1 008 000 69 343 1 008 000 761 125 Trade and other payables I2.2 469 141 486 090 447 691 435 122 Taxation – 1 251 – –Derivatives H2.3 7 339 1 999 7 326 1 999

Liabilities associated with non-current assets held-for-sale E7.4 1 098 300 8 157 – 8 157 Total liabilities 9 161 767 8 770 239 6 317 319 4 654 081

Total equity and liabilities 33 653 572 35 165 476 30 857 940 30 838 229

Statements of financial positionfor the year ended 30 June 2019

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Statements of changes in equityfor the year ended 30 June 2019

Stated capital

Non-distributable

reserve (NDR)

Share-based

payment reserve

(SBPR)

Retainedincome/

(accumulated loss)

Currency translation

reserve

Equity and reserves attributable

to shareholders

of the company

Non-controlling

interest (NCI)

Total equity

GROUP R000 R000 R000 R000 R000 R000 R000 R000

Balance at 30 June 2017 7 648 216 16 252 043 23 901 861 877 2 217 24 788 254 94 299 24 882 553

Total comprehensive income – – – 2 529 466 10 907 2 540 373 (3 979) 2 536 394

Profit for the year – – – 2 529 466 – 2 529 466 (8 543) 2 520 923 Other comprehensive income for the year – – – – 10 907 10 907 4 564 15 471

Transactions with shareholders of the company – contributions and distributions 770 688 588 995 3 542 (2 386 935) – (1 023 710) – (1 023 710)

Vesting of shares 10 174 – (7 632) (2 542) – – – –Issue of shares 778 676 – – – – 778 676 – 778 676 Treasury shares purchased (18 162) – – – – (18 162) – (18 162)Share-based payment expense – – 11 174 – – 11 174 – 11 174 Dividends declared and paid – – – (1 795 398) – (1 795 398) – (1 795 398)Net transfer to non-distributable reserve – 588 995 – (588 995) – – – –

Balance at 30 June 2018 8 418 904 16 841 038 27 443 1 004 408 13 124 26 304 917 90 320 26 395 237 Opening retained income adjustment(1) – – – 1 806 – 1 806 – 1 806 Total comprehensive income – – – 164 922 (46 959) 117 963 (50 521) 67 442

Profit for the year – – – 164 922 – 164 922 (53 386) 111 536 Other comprehensive income for the year – – – – (46 959) (46 959) 2 865 (44 094)

Transactions with shareholders of the company – contributions and distributions (11 509) (1 822 655) (7 157) (131 359) – (1 972 680) – (1 972 680)

Vesting of shares 6 060 – (8 513) 2 453 – – –Forfeit of shares – – (9 009) – – (9 009) – (9 009)Treasury shares purchased (17 569) – – – – (17 569) – (17 569)Share-based payment expense – – 10 365 – – 10 365 – 10 365 Dividends declared and paid – – – (1 956 467) – (1 956 467) – (1 956 467)Net transfer from non-distributable reserve – (1 822 655) – 1 822 655 – – – –

Balance at 30 June 2019 8 407 395 15 018 383 20 286 1 039 777 (33 835) 24 452 006 39 799 24 491 805

Note G1 G2 K2.3

(1) Opening retained income has been adjusted by a reversal of the share-based payment provision due to the non-achievement of the share price element of tranche 3 performance shares which vested during the year.

Page 108

Hyprop Investments LimitedIntegrated annual report and consolidated and separate financial statements for the year ended 30 June 2019

Stated capital

Non-distributable

reserve

Share-based

payment reserve

Retainedincome/

(accumulated loss)

Total equity

COMPANY R000 R000 R000 R000 R000

Balance at 30 June 2017 7 683 651 16 416 585 23 901 839 016 24 963 153

Total comprehensive income – – – 2 243 150 2 243 150

Profit for the year – – – 2 243 150 2 243 150 Other comprehensive income for the year – – – – –

Transactions with shareholders of the company – contributions and distributions 778 676 352 556 3 542 (2 156 929) (1 022 155)

Vesting of shares – – (7 632) (5 410) (13 042)Issue of shares 778 676 – – – 778 676 Share-based payment expense – – 11 174 – 11 174 Dividends declared and paid – – – (1 798 963) (1 798 963)Net transfer to non-distributable reserve – 352 556 – (352 556) –

Balance at 30 June 2018 8 462 327 16 769 141 27 443 925 237 26 184 148

Opening retained income adjustment(1) – – – 1 806 1 806 Total comprehensive income – – – 320 362 320 362

Profit for the year – – – 320 362 320 362 Other comprehensive income for the year – – – – –

Transactions with shareholders of the company – contributions and distributions – (1 657 564) (7 157) (300 974) (1 965 695)

Vesting of shares – – (8 513) 1 090 (7 423)Forfeit of shares – – (9 009) – (9 009)Share-based payment expense – – 10 365 – 10 365 Dividends declared and paid – – – (1 959 628) (1 959 628)Net transfer from non-distributable reserve – (1 657 564) – 1 657 564 –

Balance at 30 June 2019 8 462 327 15 111 577 20 286 946 431 24 540 621

Note G1 G2 K2.3

(1) Opening retained income has been adjusted by a reversal of the share-based payment provision due to the non-achievement of the share price element of

tranche 3 performance shares which vested during the year.

Page 109


Statements of cash flowsfor the year ended 30 June 2019


Note R000 R000 R000 R000

Cash flows (utilised by)/generated from operating activities (186 730) 37 689 (142 102) (117 171)

Cash generated from operations N1 2 149 932 2 133 136 2 034 024 1 983 600 Interest received 174 128 283 289 77 152 70 852 Interest paid (550 115) (580 208) (293 650) (372 661)Taxation paid N2.1 (4 208) (3 130) – –

Cash flows generated from operating activities before distributions 1 769 737 1 833 087 1 817 526 1 681 791 Dividends paid (1 956 467) (1 795 398) (1 959 628) (1 798 963)

Cash flows from/(applied to) investing activities 567 235 104 745 (1 159 509) 114 300

Acquisition of and additions to investment property E1.5 (95 064) (263 640) (94 670) (262 654)Additions to building appurtenances and tenant installations E2.3 (45 051) (52 104) (43 457) (50 428)Proceeds on disposal of assets classified as held-for-sale 201 437 229 759 201 437 229 759 Advances of shareholder loans receivable – long term – (59 061) (1 486 633) –Repayments of loans receivable F1.6 224 517 157 934 – –Advances of loans receivable – (40 715) (17 582) (51 994)Increase in investment in Eastern Europe – (30 979) – (30 979)Dividends received N2.2 281 396 163 551 281 396 280 596

Cash flows from/(applied to) financing activities 275 645 (510 777) 1 708 078 (395 563)

Loans repaid H1.5 (1 414 851) (3 871 791) – (1 964 754)Loans raised H1.5 1 708 078 2 600 502 1 708 078 800 255 Issue of shares – 778 676 – 768 936 Purchase of Hyprop shares by Hyprop Share Scheme (17 582) (18 164) – –

Net increase/(decrease) in cash and cash equivalents 656 150 (368 343) 406 467 (398 435)Cash and cash equivalents at the beginning of the year 715 493 1 125 750 655 789 1 054 224 Effects of changes in exchange rates (FCTR) (44 950) (41 914) – –Cash and cash equivalents transferred (to)/from non-current assets held-for-sale (41 356) – 156 –

Cash and cash equivalents at the end of the year F3.2 1 285 337 715 493 1 062 412 655 789

Page 110


Notes to the consolidated and separate financial statementsfor the year ended 30 June 2019A. ACCOUNTING POLICIESA1 SIGNIFICANT ACCOUNTING POLICIES AND ELECTIONSA1.1 Statement of compliance

These consolidated and separate financial statements have been prepared in accordance with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act of South Africa and the JSE Listings Requirements.

A1.2 Basis of preparationThe consolidated and separate financial statements have been prepared on the historical cost basis, except for the measurement of investment properties, investment property classified as held-for-sale and certain financial instruments which are recorded at fair value, and incorporate the significant accounting policies set out below and in the individual notes to the financial statements.

All accounting policies applied in the preparation of these consolidated and separate financial statements are consistent with those applied in the consolidated and separate financial statements for the year ended 30 June 2018, save as disclosed below.

New accounting standards, IFRS 9: Financial instruments and IFRS 15: Revenue from contracts with customers, have been issued with effective dates applicable to the current year consolidated and separate financial statements. Refer to note A3 – Changes in accounting policies and disclosures for further information.

The financial information presented in the consolidated and separate financial statements comprises that of the parent company, Hyprop Investments Limited, together with its subsidiaries, including consolidated joint operations and joint ventures, presented as a single entity (the group).

All values are presented in South African Rand, the functional currency of Hyprop Investments Limited, and are rounded to the nearest thousand Rand, unless indicated otherwise.

A1.3 Basis of consolidationThe consolidated financial statements incorporate the consolidated financial statements of the company and entities controlled by the group. Control is achieved when the group: • Has power over the investee • Is exposed, or has rights, to variable returns from its involvement with the investee • Has the ability to use its power to affect its returns.

The group reassesses whether or not it controls an investee if facts and circumstances indicate that one or more of the elements listed above have changed during the year.

The consolidated financial statements incorporate the assets, liabilities, income, expenses and cash flows of the group. The results of subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from the date of acquisition or up to the date of disposal, as applicable.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. All intergroup transactions, unrealised profits and balances between group entities are eliminated on consolidation.

A1.4 Non-controlling interests Non-controlling interests are measured at the proportionate share of the non-controlling shareholders’ interest in the identifiable net assets of the relevant entity at the acquisition date and adjusted in the same proportion for the profit or loss at each reporting date.

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Notes to the consolidated and separate financial statements continuedfor the year ended 30 June 2019A. ACCOUNTING POLICIES continued

A1 SIGNIFICANT ACCOUNTING POLICIES AND ELECTIONS continued

A1.5 The following significant accounting policy elections have been made by the group (excluding elections applied as transitional arrangements on adoption of new or amended reporting standards):

Policy electionsItem Option Election and impact NoteInvestment property IAS 40: Investment property allows a choice

between the fair value model and the cost model in recording investment property. The choice is made at a portfolio level.

The group continues to apply the fair value model for all investment properties.

E1

Financial instruments – equity investments

IFRS 9: Financial instruments requires all equity investments within its scope to be measured at FVTPL except where the entity has elected to present changes in fair value in OCI. There is no cost exception for unquoted equities.

The group has elected to recognise fair value changes in equity investments through profit or loss.

L1

Financial instruments IAS 39: Financial instruments: recognition and measurement (and IFRS 9: Financial instruments) allow for the irrevocable designation of financial assets and liabilities on initial recognition as at FVTPL if the designation eliminates or significantly reduces an accounting mismatch.

The group had previously elected to designate certain fixed-rate financial assets at FVTPL prior to the adoption of IFRS 9. In terms of IFRS 9 those assets still qualify for designation as FVTPL.

L1

Investments in subsidiaries, joint operations and associates

In terms of IAS 27: Consolidated and separate financial statements, investments in subsidiaries, associates and joint arrangements can be accounted for in the separate financial statements either at: cost; or at fair value in accordance with IFRS 9; or using the equity method as described in IAS 28: Investments in associates and joint ventures.

The group has elected to recognise these investments at cost less impairments in the separate financial statements.

E3 and E4

A1.6 Remaining accounting policiesAccounting policies for specific items in the financial statements are included in the relevant note to the financial statements.

A2 KEY ASSUMPTIONS AND ESTIMATIONSAssumptions and estimates are an integral part of financial reporting and as such have an impact on the amounts reported for the group’s income, expenses, assets and liabilities. Judgement in these areas is based on historical experience and reasonable expectations relating to future events.

Estimates, assumptions and judgements are applied in the following areas:

Item Nature of judgement or estimation NoteInvestment property valuations

The valuation of investment properties requires judgement in the determination of, inter alia, future cash flows, appropriate discount rates and capitalisation rates.

E1.7

Interests in co-owned assets/joint operations

Judgement is required to identify the relevant activities of the co-owned assets. Interests in co-owned assets are categorised as interests in joint operations as there is a contractually agreed sharing of control of the co-owned assets.

In terms of the co-ownership agreements for Canal Walk and The Glen, material capital expenditure requires mutual consent of the co-owners. In view of the significant increases in development costs, most capital expenditure that is undertaken is material, and accordingly, these centres are not considered to be solely controlled by Hyprop. The interests in these centres are treated as joint operations.

E4

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Item Nature of judgement or estimation Note

Recovery of loans receivable

The underlying investment properties in the group’s sub-Saharan African (excluding South Africa) portfolio have been negatively affected by the economic conditions of recent years and are producing lower investment returns than what was previously anticipated. In addition, during the year the group reviewed its strategy resulting in a revised three-year strategic plan. This led to a decision to exit the group’s sub-Saharan African investments within the next 12 to 18 months.

The shareholder loans to AttAfrica and Manda Hill, which reflect Hyprop’s share of the value of the underlying property investments at group level, have therefore been impaired.

Key estimates and judgements made in determining the impairments were as follows: • The decision to sell the underlying investments • The anticipated market values at which the companies/properties may be sold • The costs likely to be incurred in order to sell the companies/properties • The remaining period of the loans • The expected performance of the underlying investments • The probability of the loans being restructured/refinanced beyond the current

maturity dates

In calculating the recoverability/impairment no probability-weighted outcomes are used as the directors have assumed a 100% loss given default on the calculated shortfall.

F1

Control over an investee Management assessed whether it has control over Hystead based on the suite of agreements which govern the relationship between the shareholders of Hystead.

Due to the strategic nature of the reserve matters, requiring approval by shareholders holding shares representing at least 75% of the total issued share capital of Hystead, Hyprop concluded that the company does not have control over Hystead.

E5

Classification as an equity-accounted investment or financial instrument

In prior years, management considered whether the investment in Hystead should be classified as a joint venture and be equity accounted, or based on the contractual right to receive dividends as a result of the provisions of the Hystead shareholders’ agreement, should be classified as a financial asset.

Based on the provisions of the suite of agreements which govern the relationship between the shareholders of Hystead, Hystead has a financial obligation to pay all of its distributable income as a dividend to its shareholders each year. Accordingly, Hyprop accounts for the investment in Hystead as a financial asset.

Management reassessed the classification and accounting treatment of the investment in Hystead and concluded that the classification as a financial asset remains appropriate.

E5

Valuation of financial asset and deferral of day-one gain

The fair value of the right to receive dividends from Hystead has been valued based on the present value of anticipated future cash flows.

The valuation method includes assumptions derived from unobservable inputs. Management has therefore determined that the day-one gain should be deferred. However, the fair value movement subsequent to that date should be taken through profit or loss.

E5

Financial guarantees The financial guarantees are valued at the higher of the IFRS 9 expected credit loss (ECL) allowance or the amortised initial fair value on day one.

The valuation of the guarantees includes assumptions on credit default rates, credit risks, credit ratings and expected credit losses. The ECL model includes estimates relating to the probability of a default by the borrower and the resultant loss to the guarantor for each underlying borrower.

All guaranteed loans are term loans with only interest being serviced quarterly. The capital is repayable at the end of the loan term. Management has assessed whether the day-one fair value of the guarantees should be amortised and concluded that amortisation is not appropriate.

H3

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Notes to the consolidated and separate financial statements continuedfor the year ended 30 June 2019

Item Nature of judgement or estimation Note

Taxation The group is subject to income tax in numerous jurisdictions. Significant judgement is required in determining the provision for tax as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

A deferred taxation asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred taxation assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related taxation benefit will be realised.

The group recognises liabilities for anticipated tax obligations based on estimates of the taxes that are likely to become due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the group has not rebutted this presumption.

I1

A3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURESThe group has adopted IFRS 15: Revenue from contracts with customers and IFRS 9: Financial instruments with effect from 1 July 2018.

IFRS 15 transition The group has chosen the simplified transition method electing to apply IFRS 15: Revenue from contracts with customers retrospectively only to contracts that are not completed at the date of initial application. As the group provides ancillary services to the tenants of its investment properties, it was necessary to separate the lease considerations between lease and non-lease components on the adoption of IFRS 15 and apply the standard only to the non-lease income. Additionally, the group has applied this separation of non-lease income to the comparative period presented. There are no changes in the transaction price at which those revenues were recorded in prior years.

IFRS 9 transition The group has elected to apply the limited retrospective exemption in IFRS 9 paragraph 7.2.15 relating to transition for classification and measurement and impairment, and accordingly, has not restated comparative periods at 1 July 2018. As a result, • any adjustments to carrying amounts of financial assets or liabilities are recognised at the beginning of

the current reporting period, with any difference recognised in opening retained earnings; • financial assets are not reclassified in the statement of financial position for the comparative period;

and • provisions for impairment have not been restated in the comparative period.

The group has adopted the simplified expected credit loss model for its trade receivables, as required by IFRS 9, paragraph 5.5.15, and the general expected credit loss model for loans receivable carried at amortised cost. The credit risk of certain of the loans deteriorated during the year, resulting in their being classified as stage 3 – credit impaired at 30 June 2019.

A3.1 IFRS 9: Financial instruments (i) Classification and measurement of financial assets and financial liabilities

IFRS 9 eliminates the previous IAS 39: Financial instruments: recognition and measurement categories for financial assets of held-to-maturity, loans and receivables and available for sale. The following table and the accompanying notes set out the categories of financial assets under IAS 39: Financial instruments: recognition and measurement and the new measurement categories under IFRS 9 for each class of the group’s financial assets as at 1 July 2018.

A. ACCOUNTING POLICIES continued

A2 KEY ASSUMPTIONS AND ESTIMATIONS continued

Page 114


GROUP COMPANYOriginal carrying amount

under IAS 39

30 June 2018R000

New carrying amount

under IFRS 9

1 July 2018R000

Original carrying amount

under IAS 39

30 June 2018R000

New carrying amount

under IFRS 9

1 July 2018R000Financial assets

Originalclassification under

IAS 39

New classification

underIFRS 9

Financial asset – Hystead Designated as at FVTPL FVTPL 152 556 152 556 152 556 152 556 Derivatives – non-current FVTPL FVTPL 6 846 6 846 224 224 Derivatives – current FVTPL FVTPL 815 815 – – Loans receivable – non-current Amortised cost FVTPL 543 712 543 712 – –Loans receivable – non-current Amortised cost Amortised cost 2 393 733 2 393 733 18 723 18 723 Loans receivable – current Amortised cost Amortised cost 40 716 40 716 84 160 84 160 Trade and other receivables Amortised cost Amortised cost 258 071 258 071 187 490 187 490 Cash and cash equivalents Amortised cost Amortised cost 715 493 715 493 655 789 655 789 Total financial assets 4 111 942 4 111 942 1 098 942 1 098 942

Certain loans receivable, previously classified at amortised cost, are now classified as FVTPL. The group intends to hold the assets to maturity to collect contractual cash flows, however, these cash flows do not consist solely of payments of principal and interest on the principal amount outstanding. Therefore they do not qualify for classification at amortised cost in terms of IFRS 9.

The group assessed the credit risk of the counterparties for the non-current loans receivables at the adoption date and determined that the carrying amount at 1 July 2018 approximated the fair value.

IFRS 9 largely retains the requirements in IAS 39 for the classification and measurement of financial liabilities. The following table and the accompanying notes set out the categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the group’s financial liabilities as at 1 July 2018.

GROUP COMPANYOriginal carrying amount

under IAS 39

30 June 2018R000

New carrying amount

under IFRS 9

1 July 2018R000

Original carrying amount

under IAS 39

30 June 2018R000

New carrying amount

under IFRS 9

1 July 2018R000Financial liabilities

Originalclassification under

IAS 39

New classification

underIFRS 9

Derivatives – non-current FVTPL FVTPL 24 060 24 060 24 060 24 060 Derivatives – current FVTPL FVTPL 1 999 1 999 1 999 1 999 Borrowings – non-current Amortised cost Amortised cost 7 815 651 7 815 651 2 949 278 2 949 278 Borrowings – current Amortised cost Amortised cost 69 343 69 343 761 125 761 125 Financial guarantees – non-current FVTPL FVTPL 185 686 185 686 388 508 388 508 Trade and other payables Amortised cost Amortised cost 486 090 486 090 435 122 435 122 Total financial liabilities 8 582 829 8 582 829 4 560 092 4 560 092

The adoption of IFRS 9 has not had a significant effect on the group’s accounting policies related to financial liabilities and derivative financial instruments as the group does not apply hedge accounting to its derivative financial instruments.

(ii) Calculation of impairment losses recognised on financial assetsIFRS 9 sets out new requirements for assessing the carrying amounts of financial assets at 1 July 2018 (the date of initial adoption) and impairment requirements, including consideration of expected credit losses (ECLs) and credit impaired financial assets.

The application of IFRS 9 did not have any material effect on the carrying amounts of financial assets at 1 July 2018 (as shown in the table above). Although the loans receivable from AttAfrica and Manda Hill were credit impaired at 30 June 2018, interest payments continued to be made on these loans at the beginning of the current year.

During the year, however, the credit quality of the loans deteriorated as a result of the deterioration of the economic environments in which the group’s sub-Saharan African interests operate, losses incurred by AttAfrica, and decreases in the independent valuations of the investment properties. This resulted in the loans becoming stage 3 – credit impaired and interest income being accrued on the effective interest basis on the net balance (i.e. the outstanding balance less credit impairments). Refer to note F1 – Loans receivable.

Page 115


A. ACCOUNTING POLICIES continued

A3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES continuedA3.2 IFRS 15: Revenue from contracts with customers

Due to the exclusion of lease income from the scope of IFRS 15, the group only applies IFRS 15 to recovery income generated by providing ancillary services to the tenants of its investment properties. IFRS 15 provides a five step model that an entity applies when recognising revenue. The steps are:

Step 1 Identify the contract(s) with a customer. Step 2 Identify the performance obligations in the contract.Step 3 Determine the transaction price.Step 4 Allocate the transaction price to the performance obligations in the contract.Step 5 Recognise revenue when (or as) the entity satisfies a performance obligation.

The group performed an assessment of IFRS 15 and concluded that the adoption of IFRS 15 had no material impact on either the timing or amount of the revenue of the group or company.

The adoption of IFRS 15 does have an effect on the presentation and disclosure of recovery income (income arising from the recovery of, inter alia, utility costs from tenants). Recovery income is separately presented on the statements of profit or loss and other comprehensive income prospectively from the adoption date for the current and prior year.

In addition, the recovery income is allocated between the group’s operating segments in order to depict how the nature, timing, amount and uncertainty of revenue and cash flows are affected by economic factors.

Although lease income is scoped out of IFRS 15, recovery income falls within the scope of IFRS 15. This change in the governing standard for recovery income has not affected the amounts recorded in the statement of profit or loss and other comprehensive income. Lease income continues to be recognised in accordance with IAS 17: Leases.

A4 STANDARDS ISSUED BUT NOT YET EFFECTIVEAt the date of approval of these consolidated and separate financial statements, certain new accounting standards, amendments and interpretations to existing standards have been published but are not yet effective. These have not been early adopted by the group.

Management anticipates that all of the pronouncements will be adopted in the group’s accounting policies for the first period beginning after the effective date of the pronouncements.

Information on new standards, amendments and interpretations that are expected to be relevant to the consolidated and separate financial statements is provided below.

(i) Standards expected to have a material impact, which are not yet effective (impact assessed)IFRS 16: Leases is effective for annual periods beginning on or after 1 January 2019 and will be adopted by the group from 1 July 2019. There is no impact on recognition of leases in situations where the group is the lessor. The group does not have any leases where it is the lessee.

The group as lessorDue to the carry forward of the lessor accounting model from IAS 17, there is no impact for the group on the recognition of leases from the perspective of the lessor.

In addition, the expansion of rental income straight-lining to include inflation-linked leases is expected to result in an incremental change to the straight-line rental accrual balance as detailed below.

GROUP R000

Original carrying amount under IAS 17: Leases (as at 30 June 2019) 448 917 New carrying amount under IFRS 16 (as at 1 July 2019) 480 929Expected impact on straight-line rental accrual balance 32 012

The group anticipates providing enhanced disclosures as required by IFRS 16, mainly related to the components of lease income and risk management with respect to exposures to residual asset risk, in its 2020 financial statements.

(ii) Standards expected to have a material impact, which are not yet effective (Impact not assessed) There are no standards in this category.

(iii) Standards expected to have an immaterial impact, which are not yet effective IFRIC 23: Uncertainty over income tax treatments (effective periods beginning on/after 1 January 2019).

IFRIC 23 clarifies the accounting for uncertainties in income taxes. The interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12: Income taxes.

Long-term interests in associates and joint ventures (amendment to IAS 28: Investments in associates and joint ventures) (effective periods beginning on/after 1 January 2019).

IAS 28 has been amended to clarify that an entity should apply IFRS 9 as well as IAS 28 to long-term interests in associates and joint ventures that in substance form part of the net investment in the associate or joint venture.


Page 116


B. PERFORMANCE ANALYSES B1 DIVIDEND PER SHARE


R000 R000 R000 R000

Total dividend declared and paid(1) 1 956 467 1 795 398 1 959 628 1 798 963 Interim dividend in respect of the six months ended 31 December 2018 (31 December 2017) 985 139 933 205 986 603 934 884 Final dividend in respect of the six months ended 30 June 2018 (30 June 2017) 971 328 862 193 973 025 864 079

Total dividend per share for the year (cents) 765,8 724,1 765,8 724,1 Dividend declared in February 2019/February 2018 385,6 376,3 385,6 376,3 Dividend declared in August 2018/August 2017 380,2 347,8 380,2 347,8

(1) This amount is reflected in the statement of changes in equity

GROUP AND COMPANY30 June 2019 30 June 2018

Cents Cents

Distribution details (amounts distributed from earnings for the year) 744,9 756,5 Six months ended 30 June (declared August 2019/2018) 359,3 380,2 Six months ended 31 December (declared February 2019/2018) 385,6 376,3

B2 EARNINGS PER SHARE Earnings – The calculation of basic and headline earnings per share is based on the total profit attributable to shareholders of the

company, adjusted as shown in the reconciliation below.

Number of shares – The weighted average number of ordinary shares in issue is based on the actual number of ordinary shares in issue adjusted for the treasury shares held by the group and has been used to calculate basic earnings per share and headline earnings per share.

Diluted number of shares – The fully diluted weighted average number of ordinary shares in issue is calculated after taking into account the effect of all potentially dilutive shares which may be issued under the Hyprop share scheme.

GROUP COMPANY


B2.1 Earnings reconciliation – basic to headline earningsProfit for the year attributable to shareholders of the company (basic earnings) 164 922 2 529 466 320 362 2 243 150 Headline earnings adjustments 406 040 (638 616) 237 406 (184 601)

Change in fair value of investment property E1.5 425 125 (646 359) 240 231 (646 862)Non-controlling interests(1) (46 224) 338 – –Profit on disposal of investment property (2 825) (2 697) (2 825) (2 697)Other impairments 29 964 10 102 – 464 958

Headline earnings 570 962 1 890 850 557 768 2 058 549 (1) See note B2.4

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B. PERFORMANCE ANALYSES continued

B2 EARNINGS PER SHARE continued

B2.2 Weighted average number of ordinary sharesGROUP COMPANY

30 June 2019 30 June 2018 30 June 2019 30 June 2018 Number of

shares Number of

sharesNumber of

sharesNumber of

shares

Shares in issue at period end 255 894 516 255 894 516 255 894 516 255 894 516 Issued shares at 1 July 255 894 516 248 441 278 255 894 516 248 441 278 Effect of shares issued – 1 041 411 – 1 041 411 Effect of treasury shares held (399 244) (458 469) – –

Weighted average number of ordinary shares in issue 255 495 272 249 024 220 255 894 516 249 482 689

Effect of dilutive shares 115 043 183 082 115 044 183 082

Fully diluted weighted average number of ordinary shares in issue 255 610 315 249 207 302 256 009 560 249 665 771

GROUP COMPANY

30 June 2019 30 June 2018 30 June 2019 30 June 2018Cents Cents Cents Cents

B2.3 Earnings per share (cents per share)Basic earnings per share (EPS) 64,5 1 015,8 125,2 899,1 (Profit for the year attributable to shareholders of the company (basic earnings) divided by weighted average number of ordinary shares in issue)

Fully diluted earnings per share (DEPS) 64,5 1 015,0 125,1 898,5 (Profit for the year attributable to shareholders of the company (basic earnings) divided by fully diluted weighted average number of ordinary shares in issue)

Headline earnings per share (HEPS) 223,5 759,3 218,0 825,1 (Headline earnings divided by weighted average number of ordinary shares in issue). See note B2.4Fully diluted headline earnings per share (DHEPS) 223,4 758,7 217,9 824,5 (Headline earnings divided by fully diluted weighted average number of ordinary shares in issue). See note B2.4

B2.4 Restatement of previous version of financial statementsThe reconciliation of basic earnings to headline earnings (note B2.1) and the calculations of headline earnings per share and diluted headline earnings per share (note B2.3) have been restated from those contained in the consolidated audited financial statements for the year ended 30 June 2019 which was originally approved by the board of directors and dated 4 September 2019 (“the previous financial statements”).

The reason for the restatement is that the basic earnings to headline earnings reconciliation (note B2.1) in the previous financial statements erroneously included an adjustment adding back the non-controlling interest portion of the change in the fair value of investment property adjustment when it should have been deducted. The consolidated financial statements have been corrected to reflect this change.

The aforementioned restatement does not affect the calculation of distributable income for the year ended 30 June 2019 or the statements of financial position, statements of profit or loss and other comprehensive income, statements of changes in equity or statements of cash flows, all of which remain unchanged from the previous financial statements.


Page 118


C. SEGMENTAL ANALYSISC 1 OVERVIEW AND DEFINITIONS An operating segment is:

• a component of an entity that engages in business activities from which it may earn revenues • the operating results of which are regularly reviewed by the group’s chief operating decision maker to make decisions about resources

to be allocated and to assess its performance, and • for which financial information is available.

The group’s identification of its segments and the measurement of segment results are based on the group’s internal management reporting used for day-to-day decision-making and reviewed by the chief executive officer. The segments have been identified according to their location, other than assets held-for-sale. The primary measures of segment profit is net operating income and distributable income.

Intersegment revenues and transfers are accounted for as if the transactions were concluded with third parties at arm’s length market prices.

The segments are supported by the group head office, which provides support in the areas of finance, human resources, governance and compliance, risk management and information technology. Additional information relating to other performance measures is provided.

Properties (of any previous segment) that have been classified as held-for-sale according to IFRS 5: Non-current assets held-for-sale are reported under their geographic segments. There is one property in this segment (2018: one).

The group comprises the following business segments and sectors:

Business segment Description and basis of segmentation Sector

SOUTH AFRICA The SA portfolio comprises all South African shopping malls and offices irrespective of size. There are nine centres in this segment (2018: nine). Included in this segment are the combined results of the various support services provided to the group from South Africa including: group finance, Stratco, group asset management and development, human resources, legal and compliance, investor relations, group marketing and group facilities management.

SA

EASTERN EUROPE The EE portfolio comprises interests in dominant shopping centres in the Balkan region of Eastern Europe held through the group’s 60% interest in Hystead. There are six properties in this segment (2018: six).

EE

SUB-SAHARAN AFRICA The SSA portfolio comprises interests in shopping centres in southern and western Africa, excluding South Africa, held through Hyprop Mauritius, a wholly owned subsidiary.

SSA

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C. SEGMENTAL ANALYSISC 2 SEGMENTAL ANALYSIS – PROFIT OR LOSS

SOUTH AFRICA EASTERN EUROPESUB-SAHARAN

AFRICA GROUP

30 June 2019 30 June 2019 30 June 2019 30 June 2019GROUP Note R000 R000 R000 R000

Revenue D1 3 003 847 – 214 001 3 217 848 Rental and other lease income 2 157 540 – 172 637 2 330 177 Straight-line rental income accrual (81 399) – (6 488) (87 887)Recoveries 927 706 – 47 852 975 558

Impairment of trade receivables (23 712) – (23 340) (47 052)Property expenses D2 (1 068 708) – (63 294) (1 132 002)

Net property income 1 911 427 127 367 2 038 794 Other operating expenses D2 (44 969) 4 284(1) (915) (41 600)

Operating income 1 866 458 4 284 126 452 1 997 194 Net interest D3 (239 190) – (221 965) (461 155)

Interest income 74 067 – 81 976 156 043 Interest expense (313 257) – (303 941) (617 198)

Guarantee fee income – 40 542 – 40 542 Dividends received D4 – 221 190 – 221 190

Net income/(loss) before fair value adjustments 1 627 268 266 016 (95 513) 1 797 771 Changes in fair value (209 128) (85 229) (292 726) (587 083)Profit on disposal of investment property 2 825 – – 2 825 Impairment of loans receivable F1 – – (1 350 727) (1 350 727)Other impairments – – (29 964) (29 964)Derecognition of financial guarantees – 185 686 – 185 686

Profit/(loss) before taxation 1 420 965 366 473 (1 768 930) 18 508 Taxation (1 730) – 94 758 93 028

Profit/(loss) for the year 1 419 235 366 473 (1 674 172) 111 536

Calculation of distributable incomeNet income/(loss) before fair value adjustments 1 627 268 266 016 (95 513) 1 797 771 Adjusted for: 67 743 – 37 154 104 897

Straight-line rental income accrual 81 399 – 6 488 87 887 Non-controlling interest – – 30 959 30 959 Taxation paid – – (427) (427)Net interest adjustments – – 134 134 Other fair value adjustments – Edcon (12 705) – – (12 705)Capital items for distribution purposes (951) – – (951)

Distributable income 1 695 011 266 016 (58 359) 1 902 668 (1) R4 284 (2018: R7 277) relates to foreign exchange gains realised on dividends from Hystead and guarantee fee income from PDI.


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AFRICA GROUP


Revenue 2 889 135 – 224 578 3 113 713 Rental and other lease income D1 2 071 763 – 172 887 2 244 650 Straight-line rental income accrual (4 696) – 849 (3 847)Recoveries 822 068 – 50 842 872 910

Impairment of trade receivables (12 825) – (18 264) (31 089)Property expenses D2 (943 321) – (75 482) (1 018 803)

Net property income 1 932 989 – 130 832 2 063 821 Other operating expenses D2 (61 960) 7 277(1) (1 095) (55 778)

Operating income D3 1 871 029 7 277 129 737 2 008 043 Net interest (280 812) – (1 461) (282 273)

Interest income 70 545 – 242 005 312 550 Interest expense (351 357) – (243 466) (594 823)

Guarantee fee income 46 671 – 46 671 Dividends received D4 2 253 180 525 – 182 778

Net income before fair value adjustments 1 592 470 234 473 128 276 1 955 219 Changes in fair value 666 318 87 761 12 973 767 052 Profit on disposal of investment property 2 697 – – 2 697 Impairment of loans receivable F1 – – (166 441) (166 441)Derecognition of financial guarantees (29 409) 41 393 – 11 984 Other impairments (10 102) – – (10 102)

Profit/(loss) before taxation 2 221 974 363 627 (25 192) 2 560 409 Taxation (11 838) – (27 648) (39 486)

Profit/(loss) for the year 2 210 136 363 627 (52 840) 2 520 923

Calculation of distributable incomeNet income before fair value adjustments 1 592 470 234 473 128 276 1 955 219 Adjusted for: (796) – (49 909) (50 705)

Straight-line rental income accrual 4 696 – (849) 3 847 Non-controlling interest – – 2 600 2 600 Taxation paid – – (4 381) (4 381)Net interest adjustments – – (47 279) (47 279)Capital items for distribution purposes (5 492) – – (5 492)

Distributable income 1 591 674 234 473 78 367 1 904 514 (1) R4 284 (2018: R7 277) relates to foreign exchange gains realised on dividends from Hystead and guarantee fee income from PDI.

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C. SEGMENTAL ANALYSISC 3 SEGMENTAL ANALYSES – FINANCIAL POSITION


AFRICA GROUP


Assets Non-current assets 28 639 145 237 291 – 28 876 436Current assets 1 151 002 19 262 1 559 025 2 729 289 Non-current assets classified as held-for-sale E7.3 – – 2 047 847 2 047 847

Total assets 29 790 147 256 553 3 606 872 33 653 572

Liabilities Non-current liabilities 3 796 753 110 401 2 671 833 6 578 987Current liabilities 1 461 880 – 22 600 1 484 481Liabilities associated with non-current assets held-for-sale E7.4 – – 1 098 300 1 098 300

Total liabilities 5 258 634 110 401 3 792 733 9 161 768


Assets Non-current assets 28 781 990 171 280 4 997 854 33 951 124Current assets 790 451 94 273 130 371 1 015 095Non-current assets classified as held-for-sale E7.3 199 257 – – 199 257

Total assets 29 771 698 265 553 5 128 225 35 165 476

Liabilities Non-current liabilities 3 059 169 185 686 4 958 544 8 203 399Current liabilities 436 023 – 122 660 558 683Liabilities associated with non-current assets held-for-sale E7.4 8 157 – – 8 157

Total liabilities 3 503 349 185 686 5 081 204 8 770 239


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D. PROFIT OR LOSSD1 REVENUE AND MINIMUM LEASE PAYMENTSD1.1 RevenueD1.1.1 Accounting policy Revenue consists of: a. Rental and other lease income – governed by IAS 17: Leases b. Recoveries – governed by IFRS 15: Revenue from contracts with customers.

Rental and other lease income Rental and other lease income represents the amounts receivable for services provided, net of value added tax, and is measured at

the fair value of the consideration received or receivable.

Rental and other lease income comprise contractual rental income, income from marketing and promotions and parking income. Contractual rental income (including tenant parking income) is recognised on a straight-line basis over the term of the lease. Income from marketing, promotions and parking is recognised when the service is rendered.

Contingent rentals/turnover rentals (variable rentals based on the turnover achieved by a tenant) are included in revenue when the amounts can be reliably measured.

Recoveries Recoveries income represent the transaction price, i.e. the amount of the consideration which the entity expects to receive for services

provided, net of value added tax. The group retains primary responsibility for the provision of the services, and considers itself the principal supplier of such services in this respect.

Recoveries are recognised on an accruals basis in line with the service being provided. Accordingly the group maintains its recording of service charge income on a gross basis.

Performance obligations related to recovery income

a. When the entity typically satisfies its performance obligations

• Services are rendered during the month. Revenue is recognised at a point in time (the end of the month in which the service is rendered).

b. The significant payment terms • Payment from tenants is due on the 1st of each month.

c. Variability of the consideration payable • Recoveries are typically fixed for cleaning, security and marketing contributions based on contracted expenses for a period

• Utility recoveries are charged either at a flat rate per unit or at a variable rate per unit depending on time of use.

d. The nature of the goods or services that the entity has undertaken/agreed to transfer

• Services rendered include the provision of utilities, cleaning, security and marketing services for a calendar month.

D1.1.2 ProfileGROUP COMPANY

30 June 2019 30 June 2018 30 June 2019 30 June 2018R000 R000 R000 R000

Rental and other lease income (recorded in accordance with IAS 17: Leases) 2 330 177 2 244 650 2 157 540 2 071 763

Contractual rental income 2 123 044 2 030 287 1 958 379 1 865 546 Turnover rent 40 610 46 246 40 610 46 246 Parking income 102 389 103 876 99 976 101 846 Marketing and promotions recovery 64 134 64 241 58 575 58 125

Straight-line rental income accrual (87 887) (3 847) (81 399) (4 696)

Lease income 2 242 290 2 240 803 2 076 141 2 067 067Recoveries (non-lease income recorded in accordance with IFRS 15) 975 558 872 910 927 706 822 068

Municipal cost recoveries 720 434 630 536 696 444 606 431 Operating cost recoveries 236 973 226 752 214 862 200 715 Other recoveries 18 151 15 622 16 400 14 922

Revenue 3 217 848 3 113 713 3 003 847 2 889 135

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D. PROFIT OR LOSS continued

D1 REVENUE AND MINIMUM LEASE PAYMENTS continued

D1.2 Minimum lease payments receivable Minimum lease payments comprise contractual rental income and operating costs recoverable from tenants in terms of existing lease

agreements.

GROUP AND COMPANY

30 June 2019 30 June 2018R000 R000

The minimum lease payments receivable from tenants have been classified into the following time periods:– Short term (up to one year) 2 104 186 1 992 472 – Medium term (greater than one year and up to five years) 4 163 614 3 876 110 – Long term (greater than five years) 1 284 452 1 138 838

Total minimum lease payments receivable 7 552 252 7 007 420

Minimum lease payment disclosures exclude held-for-sale properties.

D2 PROPERTY EXPENSES AND OTHER OPERATING COSTSGROUP COMPANY

30 June 2019 30 June 2018 30 June 2019 30 June 2018 Note R000 R000 R000 R000

D2.1 Property expenses comprise: 1 132 002 1 018 803 1 068 708 943 321 Municipal expenses 722 734 624 528 707 874 609 455 Other utilities 35 063 29 959 15 494 11 967 Security 55 081 51 570 52 975 49 720 Cleaning 44 421 42 159 43 025 40 907 Marketing 44 333 42 059 42 577 40 063 Maintenance 38 491 36 564 35 054 33 424 Air-conditioning 17 003 17 010 15 581 15 244 Depreciation 41 809 37 773 40 123 36 021 Legal fees 3 544 1 435 3 049 509 Salaries and staff-related expenses 73 753 66 722 69 022 61 746 Audit fees – external D2.3 1 991 2 790 1 581 1 478 Audit fees – internal 789 567 789 567 Insurance 8 248 7 762 6 747 6 380 Professional fees 3 486 2 702 2 795 2 282 Computer expenses and licences 3 117 3 223 3 112 3 204 Net foreign exchange losses 2 974 16 943 – –Other property costs 35 165 35 037 28 910 30 354

D2.2 Other operating expenses comprise: 41 600 55 778 40 526 54 586 Salaries and staff-related expenses 37 519 55 265 37 519 55 265 Share-based payment expense 10 365 11 174 10 365 11 174 Non-executive directors' remuneration 4 319 3 646 4 319 3 646 Audit fees – external D2.3 2 937 1 168 2 708 916 Audit fees – internal 850 521 850 521 Insurance 306 193 306 193 Professional fees 1 748 598 1 675 522 Computer expenses and licences 1 770 1 464 1 770 1 464 Legal fees 1 178 1 175 1 178 1 175 Corporate social investment 1 925 1 884 – –Depreciation 400 376 400 376 Hystead asset management and accounting fees received (27 715) (17 338) (27 715) (17 338)Net foreign exchange gains (3 113) (10 699) (3 113) (10 699)Investor relations and related costs 2 457 2 091 2 457 2 091 Ratings and regulatory fees 1 835 1 564 1 835 1 564 Other 4 819 2 696 5 972 3 716


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D2.3 Audit feesGROUP COMPANY


Included in expenses are the following amounts:Paid to the external auditors for the attest function (KPMG and Ernst & Young Nigeria) 4 928 2 646 4 289 2 394 Paid to the external auditors for the other approved services (KPMG Services) 271 – 271 –Paid to KPMG Nigeria for the other approved services 204 420 – –

D3 INTEREST D3.1 Accounting policy Interest income – Interest earned on cash invested at financial institutions is recognised on an accrual basis using the effective interest

rate method. Interest earned on loans receivable is recognised on an accrual basis using the effective interest rate method, other than loans which are credit impaired (stage 3 loans) where interest is only accrued on the net balance (i.e. the outstanding balance less credit impairments).

Interest expense – Interest expense is calculated on the effective interest rate method. Borrowing costs, except those capitalised to a qualifying asset, are recognised as an expense in the period in which they are incurred.

Capitalised interest expense – Interest costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is substantially ready for its intended use. Qualifying assets are those that necessarily take a substantial period of time to prepare for their intended use.

The amount of borrowing costs eligible for capitalisation is the actual borrowing costs incurred on funds specifically borrowed in respect of the qualifying asset. Investment income earned on the temporary investment of borrowed funds pending their expenditure on qualifying assets is deducted from the borrowing cost capitalised. Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are complete.

GROUP COMPANY


Interest income 156 043 312 550 77 152 70 511

Positive bank balances 72 969 90 412 72 920 69 941 Loans receivable 83 074 222 138 4 232 570

Interest expense (617 198) (594 823) (313 257) (351 357)

Borrowings (570 118) (580 353) (313 257) (358 022)Capitalised – 6 665 – 6 665 Non-controlling shareholder loan (27 675) (39 671) – –Fair value adjustment on non-controlling shareholder loan (19 404) 18 536 – –

Net interest (461 155) (282 273) (236 105) (280 846)

D4 DIVIDENDS RECEIVEDD4.1 Accounting policy

Dividend income is recognised in the statement of profit or loss and other comprehensive income when the dividend has been declared.Hystead 221 190 180 525 221 190 180 525 Hyprop share scheme – – – 3 491 Word4Word – 2 253 – 2 253 Hyprop Mauritius – – – 55 403

Total 221 190 182 778 221 190 241 672

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D.D5

PROFIT OR LOSS continuedOPERATING COMMITMENTSHyprop has entered into various service contracts for the cleaning, upkeep and general maintenance of its investment property portfolio. Operating expense commitments payable under existing service contracts to service providers in future years have been classified as follows:

GROUP COMPANY


Short term (up to one year) 1 826 2 768 1 826 1 909

Total 1 826 2 768 1 826 1 909

The operating commitments disclosures exclude held-for-sale properties.Contracts which can be terminated on one month’s notice have been included for one month only.

D6 TAXATIOND6.1 Accounting policy Normal and deferred taxes are recognised as income or an expense and included in profit or loss for the year.

The charge for normal taxation includes expected tax payable or receivable on the taxable income or loss for the year and any adjustment for taxation payable or receivable for previous years.

Normal taxation liabilities/(assets) for the current and prior periods are measured at the amount expected to be paid to/(recovered from) the taxation authorities, using the taxation rates and taxation laws that have been enacted or substantively enacted by the reporting date.

Hyprop is a REIT (Real Estate Investment Trust) in terms of the South African Income Tax Act (the Act) and in terms of the JSE Listings Requirements. In terms of section 25BB of the Act, the biannual dividend declared to Hyprop shareholders is deductible against Hyprop’s taxable income. As a consequence of this deduction (which historically has exceeded the company’s taxable income) South African taxable income and income taxation is usually reduced to zero.

D6.2 Taxation expenseGROUP COMPANY


Major components of the taxation expenseNormal taxation 427 4 381 – –

Current year 427 3 583 – –Prior year – 798 – –

Deferred taxation (93 455) 35 105 1 730 11 838

Current year (93 800) 32 178 1 385 11 820 Prior year 345 2 927 345 18

Total taxation expense (93 028) 39 486 1 730 11 838

D6.3 Reconciliation of taxation chargeProfit before tax 18 508 2 560 409 322 092 2 254 988 Notional taxation at 28% 5 182 716 915 90 186 631 397 Adjusted for: (98 210) (677 429) (88 456) (619 559)

REIT dividend (508 258) (485 752) (508 258) (485 752)Income exempt from tax and non-tax deductible expenses D6.4 392 834 (184 731) 390 750 (164 257)Prior year tax adjustments: Normal taxation – 798 – –Prior year tax adjustments: Deferred taxation 345 2 927 345 18 Imputed income from Hyprop Mauritius and Hystead 28 707 30 433 28 707 30 432 Adjustment in respect of foreign tax rates (11 838) (41 103) – –

Total taxation expense (93 028) 39 486 1 730 11 838


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D6.4 Income exempt from tax and non-tax deductible expensesGROUP COMPANY


Income exempt from tax and non-tax deductible expenses comprises the following:Changes in fair value:

Investment property 44 473 (182 436) 44 473 (182 436)Derivative instruments 12 908 (8 144) 10 526 (4 133)Financial asset 23 864 (24 573) 23 864 (24 573)Convertible loan – Gruppo (16 300) 20 760 – –

Derecognition of financial guarantees (51 992) (3 356) (61 258) (21 635)Straight-line rental income accrual 22 792 1 315 22 792 1 315 Profit on disposal of assets (791) (755) (791) (755)Non-taxable dividend received (61 933) (50 547) (61 933) (66 060)Impairment of joint venture – 2 829 – –Impairment of loan to joint venture/intercompany loan 427 642 46 603 415 909 –Impairment in investment in subsidiary – – 4 562 130 188 Reversal of wear and tear allowances on asset sales (8 510) (265) (8 510) (264)Other 681 13 837 1 116 4 096

Total income exempt from tax and non-tax deductible expenses 392 834 (184 732) 390 750 (164 257)

Net unrecognised tax losses – – – –

Assessed tax losses available for utilisation against future taxable income 279 008 279 008 279 008 279 008 Applied to reduce deferred taxation liability (279 008) (279 008) (279 008) (279 008)

E. PROPERTY INVESTMENTS AND RELATED ITEMSE1 INVESTMENT PROPERTYE1.1 Accounting policy Investment properties are properties held to earn rental income and/or for capital appreciation.

Rental income from investment property is recognised as revenue on a straight-line basis over the term of the lease.

Investment property is initially recognised at cost, including transaction costs. Cost includes initial costs, costs incurred subsequently to extend or refurbish investment property and the cost of any development rights.

Investment property is subsequently measured at fair value as determined on at least an annual basis by an independent registered valuer, or fair value less cost to sell, based on market evidence.

Gains or losses arising from changes in fair value, after deducting the straight-line rental income accrual, are included in net profit or loss for the period in which they arise. These gains or losses are transferred to non-distributable reserves in the statement of changes in equity.

In instances when investment property has been sold, but not yet transferred to the purchaser at year-end, the fair value is determined as the sale price.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the property.

Any gain or loss arising on derecognition of the property is included in profit or loss in the period in which the property is derecognised. The gain or loss is calculated as the difference between the net disposal proceeds and the carrying amount of the asset.

Realised gains or losses arising on the disposal of investment properties are recognised in profit or loss for the year and transferred to/from non-distributable reserves in the statement of changes in equity.

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E. PROPERTY INVESTMENTS AND RELATED ITEMS continued

E1 INVESTMENT PROPERTY continued

E1.2 Key assumptions and estimations Investment property valuations

The valuation of investment properties requires judgement in the determination of, inter alia, future cash flows, appropriate discount rates and capitalisation rates. Refer: E1.7.3

E1.3 Profile

GROUP COMPANY


E1.4 Net carrying valueHistorical cost 14 897 979 14 973 825 12 702 164 12 847 920 Accumulated fair value movements 15 067 836 15 361 867 15 325 157 15 438 284 Assets classified as held-for-sale (1 938 494) (194 665) – (194 665)

Total investment property 28 027 321 30 141 027 28 027 321 28 091 539

E1.5 Movement reconciliationInvestment property at valuation at 1 July 30 141 027 29 128 477 28 091 539 27 176 840 Capital expenditure 95 064 263 640 94 670 262 654 Disposals (55) – (55) –Currency translation difference 67 016 98 216 – –Net change in fair value (337 238) 650 206 (158 832) 651 558

Change in fair value (425 125) 646 359 (240 231) 646 862 Straight-line rental income accrual 87 887 3 847 81 399 4 696

Interest capitalised – 6 665 – 6 665 Transfer to non-current assets held-for-sale (1 938 494) (6 177) – (6 178)Total investment property 28 027 321 30 141 027 28 027 321 28 091 539

E1.6 Reconciliation to independent valuationNet carrying value of investment property 28 027 321 30 141 027 28 027 321 28 091 539 Straight-line rental income accrual 448 917 550 182 448 917 530 316 Building appurtenances and tenant installations 162 288 163 068 162 288 159 911 Centre management assets (1 808) (5 076) (1 808) (1 919)Independent valuation(1) 28 636 718 30 849 201 28 636 718 28 779 847 (1) Excludes property held-for-sale.

Refer to section C – Segmental analyses, for a breakdown of investment property, contractual rental income and property expenses by segment.

Interest rate used to calculate interest capitalised (%) N/A 8.3 N/A 8.3


SOUTH AFRICA SUB-SAHARAN AFRICA

Hyde Park Corner Rosebank Mall Woodlands Boulevard

Clearwater Mall Cradock Heights (offices)

Atterbury Value Mart

The Glen (75.16%)

Somerset Mall

CapeGate

Canal Walk (80%)

100% owned

Co-owned

Ikeja City Mall(75%)

Held-for-sale

LAGOS, NIGERIAGAUTENGWESTERN CAPE

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E1.7 Valuation methodology

The group’s policy is to obtain independent valuations of the investment properties and to report investment properties at that value. The South African properties are independently valued, every six months, while properties held by subsidiaries or associates of AttAfrica and Hystead are independently valued on an annual basis.

The valuation methods applied by independent valuers are the same as those used in the prior year.

E1.7.1 Who Valuations of the South African investment properties were performed by valuers who are all registered valuers in terms of section 19

of the Property Valuers Professional Act 47 of 2000. Valuations of the non-South African properties were performed by valuers who are members of the Royal Institution of Chartered Surveyors (RICS), as detailed below:

Company and lead valuer Qualification Properties valued

Viking ValuationTrevor King Managing director

BSc Hons (Building Science, UCT), Dip Surveying (UK, Reading University), Professional Registered Valuer and member of SA Council for the Property Valuers Profession, Chartered Valuation Surveyor and Associate Member of the Royal Institute of Chartered Surveyors (MRICS).

Eight South African properties(retail and office)

Jones Lang LaSalle (JLL)Joshua Askew Head of valuation: Sub-Saharan Africa, National Director

BA (Hons) English and philosophy, MA Property Valuations and Property Law, Fellow of and Registered Valuer of the Royal institute of Chartered Surveyors (FRICS and RICS), Licensed Pfandbrief MLV Valuer, Recognised European Valuer.

The Glen and Clearwater Mall (retail)

Mills Fitchet Thomas BatePartner/member

BSc (Urban Land Economics) University of Westminster London, MSc (Reading University UK), Chartered Valuation Surveyor (RICS).

Ikeja City Mall (Lagos, Nigeria) (retail)

E1.7.2 How Details of the valuation methodologies used in valuing investment property, as well as the significant unobservable inputs used, are set

out in the table below:

Type Valuation methodology Unobservable inputs

Inter-relationship between unobservable inputs and fair value measurement

Investment properties – continuing operations

Discounted cash flow: The valuation models calculate the present value of the future net cash flows expected to be generated by each investment property. The cash flow projections include specific estimates for five years. The expected net cash flows are discounted using a risk adjusted discount rate as well as a risk adjusted cap rate.

• Estimated rentals at the end of the lease

• Vacancy levels• Discount rate, and• Reversionary

capitalisation rate.

The estimated fair value increases if:• The estimated rentals

increase• Vacancy levels decline, • Discount rates (market

yields) decline or• Reversionary

capitalisation rates decline (and vice versa).

Investment properties – held-for-sale

Fair value less costs to sell: Investment property held-for-sale is measured at fair value less costs to sell (FVLCTS) which, in instances where the property is already sold, but not yet transferred, is based on the sale price.

• Estimated rentals at the end of the lease

• Vacancy levels• Discount rate• Reversionary

capitalisation rate, and

• Costs to sell.

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E1 INVESTMENT PROPERTY continued

E1.7.3 Valuation assumptions The key assumptions used by the valuers in determining the fair values of the investment properties are in the following ranges:


% % % %

Unobservable inputs Reversionary capitalisation rates 6,5 to 8,8 6,3 to 8,5 6,5 to 8,8 6,3 to 8,3 Weighted average reversionary capitalisation rates 6,9 6,7 6,8 6,6Discount rate 10,5 to 14,3 12,3 to 14,5 12,3 to 14,3 12,3 to 14,3 Weighted average discount rate 12,4 12,4 12,5 12,5Retail vacancy levels 0,3 to 2 0,5 to 2 0,3 to 2 0,5 to 2Office vacancy levels 0,5 to 0,8 0,5 to 2 0,5 to 0,8 0,5 to 2Average market rental growth rate 5,8 6,0 5,8 6,0

E1.7.4 Valuation sensitivity The valuations of the investment properties are sensitive to changes in the unobservable inputs used in such valuations. Changes to one

of the unobservable inputs, while holding the other inputs constant, would have the following effects on the fair value of investment property in the statement of profit or loss.

GROUP COMPANY

(decreases are indicated by brackets)

June 2019 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018Input % change % change R000 R000 R000 R000

Increase in reversionary capitalisation rates 0,25 0,25 723 337 760 237 723 337 721 666Decrease in reversionary capitalisation rates 0,25 0,25 (778 519) (817 786) (778 519) (776 878) Increase in discount rate 0,25 0,25 274 057 293 838 274 057 274 435Decrease in discount rate 0,25 0,25 (277 580) (297 617) (277 580) (277 962) Increase in average market rental growth rate 0,25 0,25 279 416 281 791 261 581 262 889 Decrease in average market rental growth rate 0,25 0,25 (302 940) (305 515) (283 603) (285 021)

* Prior year sensitivities have been recalculated to take into account time value.

E1.8 Mortgaged properties First mortgage bonds have been registered over South African investment property as well as sub-Saharan African investment property

as security for secured interest-bearing borrowings.

In the case of Standard Bank and Rand Merchant Bank, properties are mortgaged to secure a pool of both consolidated and non-consolidated borrowings.

GROUP COMPANY


Fair value of investment property mortgaged as security 25 299 216 25 507 201 23 360 700 23 437 847 Comprising: Canal Walk, The Glen, Somerset Mall, Woodlands Boulevard, Clearwater Mall, Ikeja City Mall (held-for-sale) and Atterbury Value Mart.

Total secured borrowings H1.4 (10 760 655) (10 986 353) (4 190 131) (6 283 679)

Secured borrowings (consolidated) (4 229 324) (5 302 213) 1 558 308 (599 539)Secured borrowings held-for-sale (consolidated) (782 892) – – –Secured borrowings (non-consolidated)(1) (5 748 439) (5 684 140) (5 748 439) (5 684 140)

(1) Non-consolidated borrowings comprise loans advanced to Hystead Limited and its subsidiaries, which have been guaranteed by Hyprop Investments Limited. Hyprop’s obligations under these guarantees are secured by mortgage bonds over certain of Hyprop’s properties as described above.


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E1.9 Straight-line rental income accrualGROUP COMPANY


Balance at the beginning of the year 550 182 553 119 530 316 535 012 Foreign currency translation difference 650 910 – –Reversal during the year (87 887) (3 847) (81 399) (4 696)Reallocated to assets-held-for-sale (14 028) – – –

Balance at the end of the year 448 917 550 182 448 917 530 316

E2 BUILDING APPURTENANCES AND TENANT INSTALLATIONSE2.1 Accounting policy Building appurtenances and tenant installations are carried at cost less accumulated depreciation and any accumulated impairment

losses. Depreciation is provided on all building appurtenances and tenant installations to write down the cost, to the estimated residual value, in equal monthly instalments over the estimated useful lives of the assets as follows:

Building appurtenances – 3 to 15 yearsTenant installations – period of lease

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if necessary. There were no adjustments in the current and prior years.

Subsequent expenditure is capitalised when it is probable that future economic benefits will flow to the group and the cost thereof can be reliably measured. All other expenditure is recognised as an expense in the period in which it is incurred.

Gains or losses on the disposal of building appurtenances and tenant installations are recognised in profit or loss and are calculated as the difference between the proceeds and the carrying value of the item sold.

E2.2 Net carrying valueGROUP COMPANY


CostBuilding appurtenances 256 158 234 018 256 158 223 444 Tenant installations 77 338 68 475 77 338 68 475

Total cost 333 496 302 493 333 496 291 919

Accumulated depreciationBuilding appurtenances 122 950 100 165 122 950 92 748 Tenant installations 48 258 39 260 48 258 39 260

Total accumulated depreciation 171 208 139 425 171 208 132 008

Net carrying valueBuilding appurtenances 133 208 133 853 133 208 130 696 Tenant installations 29 080 29 215 29 080 29 215

Total net carrying value 162 288 163 068 162 288 159 911

E2.3 Movement for the yearNet carrying value – at the beginning of the year 163 068 148 530 159 911 145 511 Capital expenditure 45 051 52 104 43 457 50 428 Foreign currency translation movement 103 147 – –Disposals (201) – (201) –Assets written off – 67 – –Classified as held-for-sale (3 524) 369 (356) 369 Depreciation (42 209) (38 149) (40 523) (36 397)

Net carrying value at the end of the year 162 288 163 068 162 288 159 911

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E. PROPERTY INVESTMENTS AND RELATED ITEMS continuedE3 INVESTMENTS IN SUBSIDIARIESE3.1 Accounting policy election

Investments in subsidiaries, joint operations

In terms of IAS 27: Investments in subsidiaries, associates and joint arrangements, these investments can be accounted for in the separate financial statements either at: cost; or at fair value in accordance with IFRS 9: Financial instruments; or using the equity method as described in IAS 28: Investments in associates and joint ventures.

The group has elected to recognise these investments at cost less impairments in the separate financial statements.

E3.2 Profile

% held(1)

Name and country of incorporation/operation

30 June 2019 30 June 2018Status Nature of activities % %

Incorporated and operating in South AfricaAfrican Land Investments Limited

Dormant Dormant 100,0 100,0

Hyprop Investments Employee Incentive Scheme Proprietary Limited

Active Hedging the obligations arising from share allocations made to employees.

100,0 100,0

Hyprop Foundation NPC Active Coordination of Hyprop’s corporate social investment initiatives.

100,0 100,0

Incorporated and operating in Mauritius

Hyprop Investments (Mauritius) Limited

Active Indirect investment in and development of income-producing properties in sub-Saharan Africa (excluding SA).

100,0 100,0

Hyprop Ikeja Mall Limited Active Holding company for Gruppo. 100,0 100,0

Incorporated and operating in Nigeria

Gruppo Investments Nigeria Limited

Held-for-sale Owner of Ikeja City Mall.75,0 75,0

(1) Proportion of ownership interest and voting power held by the group.


100%

100%

100%

HYPROP INVESTMENTS LIMITED

Hyprop Investments Employee Incentive Scheme (Proprietary) Limited

Hyprop Foundation NPC

African Land Investments Limited


Hyprop Ikeja Mall Limited (Mauritius)

Gruppo Investments Nigeria Limited (Nigeria)

100%

100%

75%

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E3.3 Carrying valueCOMPANY

30 June 2019 30 June 2018R000 R000

Shares at costAfrican Land 758 264 758 264 Hyprop share scheme * * Hyprop Foundation * * Hyprop Mauritius * *

Total cost 758 264 758 264

* Amounts less than R1 000.

Details of loans to subsidiaries are set out in note F1 – Loans receivable.The fair value of the shares in African Land has been assessed taking into account the loan payable by Hyprop to African Land (see note H1.4).

E3.4 Movement for the yearNet carrying value at the beginning of the year 758 264 1 156 008 Recognition of new guarantees – 102 387 Reallocations to Loans receivable – (35 173)Impairments(2) – (464 958)

Total net carrying value 758 264 758 264 (2) An impairment test was performed at year end and the investment of Hyprop Mauritius was impaired to R0 due to the negative net asset value in Hyprop

Mauritius.

E4 INVESTMENTS IN JOINT ARRANGEMENTS E4.1 Accounting policy Joint arrangements are those entities over which the group has joint control, established by contractual agreements requiring unanimous

consent for decisions about relevant activities that significantly affect the returns of the arrangements. Joint arrangements are classified as either joint operations or joint ventures, depending on the contractual rights and obligations of the investor, and are accounted for as follows:

Joint operation – When the group has rights to the assets and obligations for the liabilities relating to a joint arrangement, it accounts for its proportionate share of the assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation, in accordance with the applicable IFRS.

Joint venture – When the group has rights only to the net assets of the arrangement, it accounts for its interest using the equity method.

The above treatment will apply in all cases, except:

Held-for-sale – When the investment is classified as held-for-sale, it is accounted for in accordance with IFRS 5: Non-current assets held-for-sale.

Financial asset – When the investment is classified as a financial asset, it is accounted for in accordance with IFRS 9: Financial instruments.

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E4 INVESTMENTS IN JOINT ARRANGEMENTS continued

E4.2 Profile

The group’s direct and indirect holdings in joint arrangements and associates are summarised below:

Principal place ofbusiness

Effective economic interest held %

Name Partner/co-investor Status30 June 2019

%30 June 2018

%

Joint operationsCanal Walk Shopping Centre Cape Town, South Africa Ellerine Brothers Active 80,00 80,00

The Glen Shopping Centre Johannesburg, South Africa Ellerine Brothers Active 75,16 75,16

Joint ventures – held through Hyprop Mauritius

AttAfrica Limited(1) Mauritius Attacq Active 37,50 37,50

Manda Hill Mauritius Limited(2) Mauritius Attacq Active 68,75 68,75

(1) Hyprop Mauritius has a 37,5% interest in AttAfrica. The initial investment was made on 20 November 2012. Hyprop Mauritius has 50% of the voting rights on the board of AttAfrica and, accordingly, has joint control of AttAfrica.

(2) Hyprop Mauritius has a 50% interest in Manda Hill Mauritius. AttAfrica holds the other 50% of the shares in Manda Hill Mauritius resulting in a group effective economic interest in Manda Hill Mauritius of 68,75%. The effective date of the investment was 1 July 2014. Hyprop Mauritius has 50% of the voting rights on the board of Manda Hill Mauritius and, accordingly, has joint control of Manda Hill Mauritius.

E4.3 Joint operations Financial results for the joint operations, Canal Walk and The Glen, are proportionately consolidated in the company and group

statements of profit or loss and other comprehensive income and statements of financial position.

E4.3.1 Summary of audited financial information Set out below is a summary of the audited financial information for the joint operations Canal Walk and The Glen.

Canal Walk The Glen

30 June 2019 30 June 2018 30 June 2019 30 June 2018% interest held by Hyprop 80,00% 80,00% 75,16% 75,16%

R000 R000 R000 R000

Revenue 776 657 724 496 252 100 223 280 Expenses (252 853) (227 200) (92 412) (65 973)Interest received – 1 750 – 130

Net property income 523 804 499 046 159 688 157 437

Expenses include:Depreciation (313) (238) (74) (92)



Canal Walk Shopping Centre

The Glen Shopping Centre


AttAfrica Limited (Mauritius)

100%

37,5%

80%

75,16%

Manda Hill Mauritius Limited

50%

50%

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E4.4 Joint ventures E4.4.1 Carrying value

GROUP COMPANY


Shares at costAttAfrica * * * * Manda Hill Mauritius * * * *

Total cost – – – –

* Amounts less than R1 000.

Details of loans to joint ventures are set out in note F1 – Loans receivable.

E4.4.2 Summary of financial information Set out below is a summary of the audited financial information for the joint ventures AttAfrica and Manda Hill Mauritius.

AttAfrica Manda Hill Mauritius

30 June 2019 30 June 2018 30 June 2019 30 June 2018100% 100% 100% 100%R000 R000 R000 R000

Summarised statement of financial positionNon-current assets 2 671 499 4 911 382 1 784 301 1 902 794 Current assets 118 632 132 254 42 183 14 226 Non-current liabilities (4 874 348) (5 083 572) (1 131 302) (1 158 504)Current liabilities (86 022) (721 141) (980 900) (829 596)

Net liabilities (2 170 239) (761 077) (285 718) (71 080)

Summarised statement of financial position includes:Cash and cash equivalents 48 930 54 964 4 409 7 354 Current financial liabilities 79 719 93 426 62 960 12 022 Non-current financial liabilities 4 657 998 4 380 780 1 131 302 1 158 504 Summarised statement of profit or loss and other comprehensive incomeRevenue 274 142 283 396 169 828 150 620

Loss before taxation (1 378 981) (175 788) (202 006) (27 847)Taxation (120 675) 62 751 (9 560) (12 394)

Net loss (1 499 656) (113 037) (211 566) (40 241)Other comprehensive income (currency translation reserve) (25 836) (23 627) (2 377) (1 913)

Total comprehensive loss (1 525 492) (136 664) (213 943) (42 154)

Loss before taxation includes:Interest income 49 714 76 189 Interest expense (534 582) (476 383) (86 048) (90 792)Depreciation (7 821) (2 489) (7 071) (4 358)Comprehensive (loss)/income attributable to: (1 525 492) (136 664) (213 943) (42 154)

Equity holders of the company (1 071 032) (116 106) (213 943) (42 154)Non-controlling interest (454 460) (20 558) – –

Hyprop’s share of losses – – – –

– Share of loss from joint venture (401 637) (43 540) (106 972) (21 077)– Limitation of loss from joint venture 401 637 43 540 106 972 21 077

For further details on loans extended to these entities refer to note F1 – Loans receivable.

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E. PROPERTY INVESTMENTS AND RELATED ITEMS continued E5 FINANCIAL ASSETE5.1 Accounting policy Where the group has a contractual right to receive its share of net distributable earnings of a financial asset, the financial asset is

designated at fair value through profit or loss (FVTPL) and initially measured at fair value. Subsequent to initial recognition, the financial asset is measured at fair value and changes in the fair value are recognised in the consolidated statement of profit or loss and other comprehensive income.

Any gain or loss on initial recognition (i.e. the difference between the fair value and the amount paid) is deferred where the valuation method used to determine the fair value includes assumptions which are derived from unobservable inputs. The deferred profit or loss is subsequently recognised in profit or loss only to the extent of a change in a factor (including time) that market participants would take into account when pricing the asset.

E5.2 Key assumptions and estimations The key assumptions and estimates which have an effect on the group’s investment in Hystead (which is classified as a financial asset)

are set out below:

Control over an investee Management assessed whether it has control over Hystead based on the suite of agreements which govern the relationship between the shareholders of Hystead and concluded that Hyprop has joint control of Hystead.

Classification as an equity-accounted investment or financial instrument

In prior years, management considered whether the investment in Hystead should be classified as a joint venture and be equity accounted, or based on the contractual right to receive dividends as a result of the provisions of the Hystead shareholders’ agreement, should be classified as a financial asset.

Based on the provisions of the suite of agreements which govern the relationship between the shareholders of Hystead, Hystead has a financial obligation to pay all of its distributable income as a dividend to its shareholders each year. Accordingly, Hyprop accounts for the investment in Hystead as a financial asset.

Management reassessed the classification and accounting treatment of the investment in Hystead and concluded that the classification as a financial asset remains appropriate.

Valuation of financial asset and deferral of day-one gain

The fair value of the right to receive dividends from Hystead has been valued based on the present value of anticipated future cash flows.

The valuation method includes assumptions derived from unobservable inputs. Management has therefore determined that the day-one gain should be deferred. However, the fair value movement subsequent to that date should be taken through profit or loss.


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E5.3 Profile


Hystead

Delta City Belgrade (Serbia)

60%

Delta City Podgorica (Montenegro)

Skopje City Mall (Macedonia)

The Mall (Bulgaria)

City Center One East (Croatia)

City Center One West (Croatia)

100% 100% 100% 100%

90% 90%

E5.4 Carrying value and net movement for the year GROUP AND COMPANY

30 June 2019 30 June 2018Note R000 R000

Balance at the beginning of the year 152 556 –Net change in fair value of future cash flows 65 888 152 556

– loans receivable capitalised F1.4 40 716 30 980 – new guarantees issued H3.3 110 401 33 815 – fair value adjustment (85 229) 87 761

Balance at the end of the year 218 444 152 556

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E. PROPERTY INVESTMENTS AND RELATED ITEMS continuedE5 FINANCIAL ASSET continuedE5.5 Gross movement for the year

GROUP AND COMPANY

30 June 2019 30 June 2018R000 R000

E5.5.1 Gross asset (A)Balance at the beginning of the year 3 891 691 2 022 282 Additions (new properties acquired) – 2 626 646 Unrealised foreign exchange gain 25 558 194 480 Change in credit enhancement fees – (402 631)Fair value adjustment through profit or loss 587 742 (549 086)

Subtotal (fair value) at the end of the year 4 504 991 3 891 691 New guarantees issued 110 401 33 815 Fair value adjustment through profit or loss (110 401) (33 815)

Balance at the end of the year 4 504 991 3 891 691

E5.5.2 Deferred gains (B)Balance at the beginning of the year (3 770 115) (2 022 282)Additions (new properties acquired) – (2 626 646)Unrealised foreign exchange loss (24 760) (138 923)Change in credit enhancement fees – 393 864

Fair value adjustment through profit or loss (491 672) 623 872

Balance at the end of the year (4 286 547) (3 770 115)

E5.5.3 Fair value of financial asset (A-B) 218 444 121 576 Capital injection – 30 980

Balance at the end of the year 218 444 152 556

E5.6 Movements through profit or lossMovement on financial asset 613 300 1 869 409 Movement on deferred gains on financial asset (516 432) (1 747 833)Net movements on financial asset before guarantees 96 868 121 576 Less: Capital investments (71 696) –Less: New guarantees issued (110 401) (33 815)

Total fair value adjustment to financial asset (85 229) 87 761

E5.7 Valuation methodology The group performs an internal valuation of the financial asset based on the cash flows of the underlying investment property companies.

The European investment properties are independently valued each December. A directors’ valuation is carried out every June.

The following tables show the valuation techniques used in measuring the financial asset, as well as the significant unobservable inputs used:

Type Valuation techniqueUnobservable inputs

Movement in input

Effect on estimated fair value

Financial asset – Hystead

Discounted cash flow: The valuation is calculated as the present value of the anticipated future net cash flows expected to be generated by the underlying shopping centres after deducting the head office costs within the Hystead group.

The cash flow projections include specific estimates for 10 years (2018: 10 years). The expected net cash flows are discounted using a risk adjusted discount rate as well as a risk adjusted cap rate.

• Annual growth rate

• Terminal growth rate

• Exit cap rate• Discount rate

Increase

Decrease

IncreaseDecrease

Increase

Decrease

DecreaseIncrease


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E5.8 Valuation assumptions The key assumptions used in determining the fair value of the investment in Hystead are in the following ranges:

GROUP AND COMPANY

30 June 2019 30 June 2018Unobservable inputs % %

Financial asset – HysteadAnnual growth rate (1,1) to 2,5 (17,8) to 0,6Weighted average annual growth rate 0,2 (0,3)Terminal growth rate 1,8 to 2,3 0,8 to 2,0Weighted average terminal growth rate 1,9 1,5Discount rate 6,0 to 8,0 7,0 to 8,0Weighted average discount rate 6,9 7,4Exit capitalisation rates 5,0 to 7,3 5,3 to 7,3Weighted average exit capitalisation rate 5,8 5,9

E5.9 Valuation sensitivity The valuation of the investment in Hystead is sensitive to changes to the unobservable inputs. Changes to one of the unobservable

inputs, while holding the other inputs constant, would have the following effects on the fair value of the investment in Hystead in the statement of profit or loss.

GROUP AND COMPANY (decreases are indicated by brackets)

June 2019 June 2018 30 June 2019 30 June 2018Input % change* % change* R000 R000

Annual growth rate Increase 0,5 1,0 96 070 45 449 Decrease 0,5 1,0 (96 070) (45 449)

Terminal growth rate Increase 0,5 1,0 9 150 2 273 Decrease 0,5 1,0 (9 150) (2 273)

Discount rate Increase 0,5 1,0 (67 478) (32 951)Decrease 0,5 1,0 67 478 32 951

Exit capitalisation rates Increase 0,5 1,0 (68 621) (40 904)Decrease 0,5 1,0 68 621 40 904

* The percentage change applied in each year is the possible change applicable to each input.

E6 CAPITAL COMMITMENTS Details of approved capital expenditure for the year ended 30 June 2020 are set out below.

GROUP AND COMPANY

30 June 2019 30 June 2018R000 R000

Approved and committed 84 945 165 912 Approved but not yet committed 365 532 176 236

Total 450 477 342 148

30 June 2020TotalR000

Yield-based projects 241 945 Trading density improvements 121 475 Replacements 66 562 Infrastructure projects 20 495

Total capital commitments* 450 477

* Excludes the cost of solar plants under evaluation.

All the capital commitment disclosures exclude held-for-sale properties.

The capital expenditure will be financed out of available cash resources, banking facilities and debt capital market funding.

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E. PROPERTY INVESTMENTS AND RELATED ITEMS continued E7 NON-CURRENT ASSETS HELD-FOR-SALEE7.1 Accounting policy Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather

than through continuing use, are classified as held-for-sale. This condition is regarded as met only when the sale is highly probable and the non-current asset or disposal group is available for sale in its present condition subject only to terms that are usual and customary for sales of such assets. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset or disposal group.

Investment property classified as held-for-sale is measured in accordance with IAS 40: Investment property at fair value with gains or losses on subsequent measurement being recognised in profit or loss in the line profit/(loss) on disposal – investment property. Disposal groups and non-current assets held-for-sale are presented separately from other assets and liabilities in the statement of financial position.

E7.2 Summary of disposal group During the year the group reviewed its strategy, resulting in a revised three-year strategic plan. This led to a decision to exit the group’s

sub-Saharan African investments within the next 12 to 18 months. As a result the group’s interest in Gruppo (which owns 100% of the Ikeja City Mall in Lagos, Nigeria, and in which Hyprop has a 75% interest) was designated as held-for-sale. Gruppo is reported under the sub-Saharan African operating segment.

The group’s other sub-Saharan African interests comprise its investments and loans receivable from AttAfrica and Manda Hill. It is anticipated that these interests will be realised by repayment of the loans receivable from the proceeds on disposal of the underlying investment properties. The loans receivable have been classified as short term and are included in current assets.

In 2018, the disposal group consisted of Lakefield Office Park, the last remaining non-core property in the portfolio, which was sold effective 4 January 2019 for a profit of R2,8 million. Lakefield had been reported in the South African operating segment.

E7.3 Movement for the year – assetsGROUP AND COMPANY

30 June 2019 30 June 2018R000 R000

Balance at the beginning of the year 199 257 418 796 Disposals – Lakefield(1) (2018: Willowbridge North and Greenstone Park – vacant land) (199 257) (226 607)Additions – Gruppo (2018: Lakefield) 2 047 847 7 068

Balance at the end of the year 2 047 847 199 257

E7.4 Movement for the year – liabilitiesBalance at the beginning of the year (8 157) (5 189)

Disposals – Lakefield(1) (2018: Willowbridge North and Greenstone Park – vacant land) 8 157 1 468 Additions – Gruppo (2018: Lakefield) (1 098 300) (4 436)

Balance at the end of the year (1 098 300) (8 157)

Net classified as held-for-sale 949 547 191 100 (1) The sale of Lakefield Office Park was finalised on 4 January 2019 and the sale proceeds received.


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F. OTHER ASSETSF1 LOANS RECEIVABLEF1.1 Accounting policy Loans receivable are carried at amortised cost using the effective interest method, less any accumulated impairments. Interest earned

on loans receivable is recognised on an accrual basis using the effective interest rate method, other than loans which are credit impaired (stage 3 loans) where interest is only accrued on the net balance (i.e. the outstanding balance less credit impairments).

F1.2 Key assumptions and estimations The key assumptions and estimates which have an effect on the group’s loans receivable are set out below.

Recovery of loans receivable

The underlying investment properties in the group’s sub-Saharan African (excluding South Africa) portfolio have been negatively affected by the economic conditions of recent years and are producing lower investment returns than what was previously anticipated. In addition, during the year the group reviewed its strategy resulting in a revised three-year strategic plan. This led to a decision to exit the group’s sub-Saharan Africa investments within the next 12 to 18 months.

The shareholder loans to AttAfrica and Manda Hill, which reflect Hyprop’s share of the value of the underlying property investments at group level, have therefore been impaired.

Key estimates and judgements made in determining the impairments were as follows: • The decision to sell the underlying investments • The anticipated market values at which the companies/properties may be sold • The costs likely to be incurred in order to sell the companies/properties • The remaining period of the loans • The expected performance of the underlying investments • The probability of the loans being restructured/refinanced beyond the current maturity dates.

In calculating the recoverability/impairment no probability-weighted outcomes are used as the directors have assumed a 100% loss given default on the calculated shortfall.

F1.3 Changes in accounting policies and disclosures IFRS 9: Financial instruments Loans receivable are affected by the group’s application of IFRS 9. This note should be read in conjunction

with note A3.1 – Financial instruments.

GROUP COMPANY


F1.4 Net carrying valueNon-current 18 847 2 937 445 72 450 18 723

USD loans receivable from Investments in sub-Saharan Africa – 2 918 721 – –EUR loans receivable 18 847 18 724 18 847 18 723 ZAR loans receivable from subsidiaries – – 53 603 –

Current 1 333 106 40 716 – 84 160

EUR loans receivable from Hystead – 40 716 – 40 716ZAR loans receivable from subsidiaries – – – 43 444USD loans receivable from Investments in sub-Saharan Africa 1 333 106 – – –

Total 1 351 953 2 978 161 72 450 102 883

Loan balances receivable 3 007 898 3 169 979 1 557 839 102 883 Cumulative impairments (1 513 433) (191 818) (1 485 389) – Cumulative fair value adjustments (142 512) – – –

Total 1 351 953 2 978 161 72 450 102 883

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F. OTHER ASSETS continuedF1 LOANS RECEIVABLE continuedF1.5 Loan details*

GROUP COMPANY

30 June 2019 30 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018Non-current FC000 FC000 R000 R000 R000 R000

USD denominated loans receivable – – – 2 918 721 – –AttAfrica – USD 173 350 – 2 375 009 – –

Loan balance – USD 184 757 – 2 531 287 – –Impairment – (USD 11 407) – (156 278) – –

Hyprop Mauritius – – – – – –

Loan balance USD 1 770 – – – 25 052 –Impairment (USD 1 770) – – – (25 052) –

The loan is unsecured, bears interest at an agreed rate of 4,5% and is repayable on 12 months written notice.

Manda Hill Mauritius – USD 39 685 – 543 712 – –

Loan balance – USD 42 279 – 579 252 – –Impairment – (USD 2 594) – (35 540) – –

EUR denominated loans receivable – – 18 847 18 724 18 847 18 723

Vondelvlag HoldingLoan balance EUR 1 040 EUR 1 020 16 431 16 324 16 431 16 323

The loan is unsecured, bears interest at 3,15% per annum, payable quarterly, and is repayable in April 2021.

Vondelvlag StichtingLoan balance EUR 150 EUR 150 2 416 2 400 2 416 2 400

The loan is unsecured, bears interest at 3,15% per annum, payable quarterly, and is repayable in April 2021.

ZAR denominated loans receivable 53 603 –

Hyprop Mauritius – –Loan balance 1 460 337 –Impairment (1 460 337) –

The loan is unsecured, bears interest at 3-month JIBAR plus 1,65% and is repayable on 12 months written notice.

Hyprop share scheme 53 603 –The loan is unsecured and bears interest at variable rates agreed from time to time. The loan has no fixed repayment terms. The loan is repaid at each vesting date primarily through the transfer of Hyprop shares held by Hyprop share scheme to Hyprop for delivery to employees under the conditional unit plan (CUP). Hyprop has subordinated a portion of the loan in favour of the other creditors of Hyprop share scheme and has agreed not to call for the repayment of the loan for at least 12 months.

Total non-current loans receivable 18 847 2 937 445 72 450 18 723

* The loan terms detailed above apply to both financial years.


Page 142


GROUP COMPANY

30 June 2019 30 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018Current FC000 FC000 R000 R000 R000 R000

USD denominated loans receivable – – 1 333 106 – – –AttAfrica USD 64 315 – 909 967 – – –

Loan balance USD 171 281 – 2 423 400 – – –Impairment (USD 106 966) – (1 513 433) – – –

The loan is unsecured and bears interest at an initial rate of 8% per annum, escalating at 4% per annum. Hyprop Mauritius has a preferential right to receive payment of the interest on the loan to AttAfrica. The loan is repayable in June 2020.

Manda Hill Mauritius USD 29 907 – 423 139 – – –

Loan balance USD 39 979 – 565 651 – – –Fair value adjustment (USD 10 072) – (142 512) – – –

The loan is unsecured, and bears interest at a variable rate which equates to Hyprop Mauritius’ 50% share of distributable income from Manda Hill Mauritius. Subsequent to 30 June 2019 the group sold its interest in Manda Hill. The loan will be settled from the sale proceeds.

ZAR denominated loans receivableHyprop share scheme

The loan is unsecured and bears interest at variable rates agreed from time to time. The loan has no fixed repayment terms. The loan is repaid at each vesting date primarily through the transfer of Hyprop shares held by Hyprop share scheme to Hyprop for delivery to employees under the conditional unit plan (CUP). – – – 43 444

EUR denominated loans receivableHystead – 40 716 – 40 716

The loan was unsecured and interest free. The loan was converted to equity in Hystead in July 2018.

Total current loans receivable 1 333 106 40 716 – 84 160

Total loans receivable 1 351 953 2 978 161 72 450 102 883

GROUP COMPANY


F1.6 Movement for the yearBalance at the beginning of the year 2 978 161 3 013 152 102 883 17 434 Advances during the year – 99 777 17 582 84 160 Advances of shareholder loans receivable – – 1 486 633 –Repayments during the year (224 517) (157 934) – –Amounts capitalised (40 716) – (48 139) –Net interest accrued/(received) – 43 884 (53) (341)Net movement in interest received in advance – (2 786) – – Foreign currency translation 95 561 148 509 (1 067) 1 631 Fair value adjustments (105 809) – – –Impairments of loans (1 350 727) (166 441) (1 485 389) –

Balance at the end of the year 1 351 953 2 978 161 72 450 102 883

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F. OTHER ASSETS continued

F2 TRADE AND OTHER RECEIVABLESF2.1 Accounting policy

Trade and other receivables are carried at amortised cost less any accumulated impairments. Short-term receivables are measured at original invoice amount when the effect of discounting is immaterial.

F2.2 Key estimates and assumptionsTrade receivables have been assessed for impairment based on lifetime expected credit losses using the simplified approach under IFRS 9. An estimate is made of credit losses based on a review of all outstanding amounts at year end.

Evidence of impairment is considered on a tenant-by-tenant basis and a review of trade receivables where there is evidence of default. Based on discussions with tenants and expected payments, an assessment is made of the probability of default, and an allowance for impairment (expected credit loss allowance) is raised on the outstanding balance. The impairment is taken to profit or loss.

F2.3 Changes in accounting policies and disclosures

IFRS 9: Financial instruments Trade and other receivable are affected by the group’s application of IFRS 9. This note should be read in conjunction with note A3.1 – Financial instruments and note M5 – Credit risk and sensitivity.

F2.4 Net carrying valueGROUP COMPANY


Rent and deposits receivable 37 442 112 856 37 442 25 940

Allowance for expected credit losses (26 795) (49 624) (26 795) (8 933)

Municipal recoveries 56 629 60 211 56 629 55 266

Dividend receivable 16 278 76 484 16 278 76 484

Withholding taxes receivable – 13 482 – –

Credit enhancement fee receivable 2 984 17 789 2 984 17 789

Prepayments 6 168 13 535 6 168 6 151

Municipal deposits 3 010 2 996 3 010 2 996

Receivables relating to related parties 922 922 922 922 Other receivables 8 987 9 420 7 896 10 875

Total 105 625 258 071 104 534 187 490

Gross trade and other receivables 132 420 307 695 131 329 196 423 Cumulative impairments (26 795) (49 624) (26 795) (8 933)

Total 105 625 258 071 104 534 187 490


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F3 CASH AND CASH EQUIVALENTSF3.1 Accounting policy

Cash and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents are measured at amortised cost. Interest earned on cash invested at financial institutions is recognised on an accrual basis using the effective interest method.

F3.2 Carrying valueGROUP COMPANY


Cash held in call accounts as security for bank guarantees in favour of municipalities 13 599 12 757 13 599 12 757 Bank balances and cash 1 271 738 702 736 1 048 813 643 032

Total 1 285 337 715 493 1 062 412 655 789

F4 OTHER INVESTMENTSF4.1 Profile

As part of Edcon’s restructuring, Edcon approached its top 31 landlords in November 2018 and offered the landlords an opportunity to subscribe for an equity interest in Edcon, or, as an alternative, requested a 40,9% reduction in rentals for a 24-month period commencing on 1 April 2019 (the Edcon rent reduction).

Hyprop agreed to assist Edcon by subscribing for equity in Edcon on a monthly basis for an amount equivalent to the monthly Edcon rent reduction (a total of R12 million from 1 April 2019 to 30 June 2019) (the Edcon subscription).

At 30 June 2019 the equity which Hyprop had received in Edcon comprised 616 369 class A ordinary shares in K2019216440 (South Africa) Limited (the holding company of the Edcon Group) (the Edcon Group) and R2,083 million of indirectly secured guaranteed tranche C mandatorily convertible instruments (collectively the Edcon equity).

The Edcon restructuring was only implemented in June 2019. As a result, it is too early to assess the progress being made by Edcon’s management team to restore Edcon’s financial performance. The directors consider it prudent to adjust the fair value of the group’s investment in the Edcon Group to zero until there is tangible evidence of such an improvement.

Accordingly, the investment in Edcon has been fully impaired at 30 June 2019. Distributable income for the year has also been reduced by R12 million, as a consequence of the reduction in net cash flow received from Edcon pursuant to the Edcon rent reduction/Edcon subscription.

F4.2 Carrying valueGROUP COMPANY


Cost of Edcon equity 12 705 – 12 705 –Accumulated fair value adjustments (12 705) – (12 705) –

Total – – – –

Page 145


G. EQUITY AND RESERVESG1 SHARE CAPITAL AND TREASURY SHARESG1.1 Accounting policy

Stated capital: Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction from equity.

Treasury shares: Company shares held by the Hyprop share scheme that have not yet vested are classified as treasury shares on consolidation and deducted from equity. These shares are carried at cost and deducted from equity.

Any subsequent gain or loss on the sale or cancellation of the company’s own equity instruments is recognised directly in equity.

Distributions and unrealised losses on own shares are eliminated from group profit or loss for the year.

G1.2 Carrying valueGROUP COMPANY


Stated capitalOrdinary shares 8 462 327 8 462 327 8 462 327 8 462 327

Balance at the beginning of the year 8 462 327 7 683 651 8 462 327 7 683 651 Issued during the year – 778 676 – 778 676

Treasury shares (54 932) (43 423) – –

Balance at the beginning of the year (43 423) (35 435) – –Purchased during the year(1) (17 569) (18 162) – –Vested during the year 6 060 10 174 – –

Balance at the end of the year 8 407 395 8 418 904 8 462 327 8 462 327

G1.3 Number of sharesGROUP COMPANY


Authorised500 000 000 no par value ordinary shares (2018: 500 000 000)Issued and fully paid up sharesOrdinary shares 255 894 516 255 894 516 255 894 516 255 894 516

Balance at the beginning of the year 255 894 516 248 441 278 255 894 516 248 441 278 Issued during the year – 7 453 238 – 7 453 238

Treasury shares (611 519) (446 260) – –

Balance at the beginning of the year (446 260) (387 246) – –Purchased during the year(1) (252 000) (155 000) – –Vested during the year 86 741 95 986 – –

Net number of shares in issue at the end of the year 255 282 997 255 448 256 255 894 516 255 894 516 (1) Purchased (at an average price of R67,72 per share) during the year by Hyprop share scheme and held as treasury shares to hedge Hyprop’s obligation to

deliver Hyprop shares to employees under the CUP.


Page 146


G2 RESERVESG2.1 Accounting policy

Non-distributable reserves The non-distributable reserves relate to items that are not distributable to shareholders, such as fair value adjustments on the revaluation of investment property and derivatives, any impairment adjustments, share-based payment transactions, profit or loss on sale of assets, the straight-line lease income adjustment, deferred taxation and reserves held by the non-controlling shareholders.

Currency translation reserve The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the group’s presentation currency (Rand) at the exchange rates at the reporting date. The income and expenses of foreign operations are translated to Rand at the dates of the transactions (an average rate for the year is used).

Foreign currency translation differences are recognised in other comprehensive income (OCI) and accumulated in the currency translation reserve, except to the extent that the translation difference is allocated to non-controlling interest (NCI).

G2.2 Carrying valueThe following table reflects the composition of non-distributable reserves:

GROUP COMPANY


Revaluation reserves 16 322 939 16 953 415 16 025 588 16 403 072

Investment property 16 051 918 16 432 551 15 646 280 15 888 242 Listed property securities 616 759 616 759 616 759 616 759 Financial asset (161 321) (76 094) (161 321) (76 094)Other investment (12 705) – (12 705) –Loans receivable (105 809) – – –Derivative instruments (65 903) (19 801) (63 425) (25 835)

Derecognition of financial guarantees 197 670 11 984 492 899 274 121 Realised gains/(losses) on disposals 331 551 328 725 469 239 466 414

Investment property 171 209 168 383 171 209 168 384 Listed property securities 276 630 276 630 276 630 276 630 Subsidiaries (131 010) (131 010) – –Associate 17 431 17 431 21 400 21 400 Shares (2 709) (2 709) – –

Non-distributable reserves of associate 125 344 125 344 121 374 121 374 Impairment of goodwill (577 847) (577 847) 25 400 25 400 Gain on bargain purchase (African Land) 191 235 191 235 – –Impairment of loans receivable (1 542 545) (191 818) (1 512 106) (26 716)Impairment of other assets (29 964) – (510 818) (494 524)


Page 147


H. FUNDING AND RELATED ITEMSH1 BORROWINGSH1.1 Accounting policies

Borrowings Interest-bearing loans, are initially measured at fair value, net of transaction costs. Any difference between the proceeds (net of transaction costs) and the settlement or redemption amount of borrowings, is recognised over the term of the borrowings, in accordance with the group’s accounting policy for borrowing costs. Subsequently, they are measured at amortised cost using the effective interest method.

Refer: H1.3

H1.2 Changes in accounting policies and disclosures

IFRS 9: Financial instruments Borrowings are affected by the group’s application of IFRS 9: Financial instruments. The adoption of IFRS 9 has not had a significant effect on the group’s accounting policies related to financial liabilities and derivative financial instruments as the group does not apply hedge accounting to its derivative financial instruments. This note should be read in conjunction with note A3.1 – Financial instruments.

H1.3 Carrying valueGROUP COMPANY


ProfileSecured bank loans 4 229 325 5 302 214 1 558 308 599 539

Unsecured 3 099 476 2 582 780 3 860 601 3 110 864 Unsecured loans – 233 041 761 125 761 125 Unsecured debt capital market funding (DCM) 3 099 476 2 349 739 3 099 476 2 349 739

Total borrowings 7 328 801 7 884 994 5 418 909 3 710 403

Maturity profileNon-current 6 320 801 7 815 651 4 410 909 2 949 278

Bank loans 4 029 325 5 302 214 1 358 308 599 539 DCM funding 2 291 476 2 349 739 2 291 476 2 349 739 Non-controlling shareholder/subsidiary – 163 698 761 125 –

Current 1 008 000 69 343 1 008 000 761 125

Bank loans 200 000 – 200 000 –DCM funding 808 000 – 808 000 –Non-controlling shareholder/subsidiary – 69 343 – 761 125

Total borrowings 7 328 801 7 884 994 5 418 909 3 710 403


Page 148


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Page 149


H. FUNDING AND RELATED ITEMS continued

H1 BORROWINGS continuedH1.5 Movement reconciliation

GROUP COMPANY


Opening balance at 1 July 7 884 994 8 900 638 3 710 403 4 874 902 Foreign exchange movement 161 393 186 303 – –Capital raised during the year 1 708 077 2 600 502 1 708 077 800 255 Raising fees – amortised 429 – 429 –Repayments during the year (1 414 851) (3 871 791) – (1 964 754)Net interest accrued 25 862 – – –Transferred to held-for-sale (1 056 507) – – –Transferred to current liabilities – 69 343 – –Fair value adjustment 19 404 – – –


H2 DERIVATIVES H2.1 Accounting policies

Derivatives Derivatives are initially measured at fair value and are subsequently remeasured at fair value. Any directly attributable transaction costs are recognised in profit or loss as incurred.

Derivative instruments comprise interest rate swaps and exchange rate zero cost collars (put and call options). The interest rate swaps are used to hedge interest rate exposure on long-term debt facilities and corporate bonds. Zero cost collars are used to hedge the exchange rate in anticipation of receipt of dividends from Hystead and Hyprop Mauritius.

Further disclosure on the designation of the interest rate swaps and their risk mitigation role is provided in note M3 – Interest rate risk and sensitivity.

GROUP COMPANY


H2.2 Net carrying valueCurrency collars H2.4 3 310 (1 722) 3 310 (1 722)Interest rate swaps H2.5 (67 563) (16 676) (66 734) (24 113)

Total derivatives (64 253) (18 398) (63 424) (25 835)

H2.3 Maturity profileNon-current assets 619 6 846 619 224 Current assets 2 691 815 2 691 –Non-current liabilities (60 224) (24 060) (59 408) (24 060)Current liabilities (7 339) (1 999) (7 326) (1 999)

Total derivatives (64 253) (18 398) (63 424) (25 835)

H2.4 Currency collarsH2.4.1 Net carrying value

Non-current assets 619 – 619 –Current assets 2 691 – 2 691 –Current liabilities – (1 722) – (1 722)

Total derivatives 3 310 (1 722) 3 310 (1 722)

H2.4.2 Movement reconciliationOpening balance at 1 July (1 722) (80) (1 722) (80)

Additions 3 310 (757) 3 310 (757)Utilised 1 722 – 1 722 –Fair value adjustment – (885) – (885)

Balance at the end of the year 3 310 (1 722) 3 310 (1 722)


Page 150


H2.4.3 Individual instrumentsGROUP COMPANY

Nominal value 30 June 2019 30 June 2018 30 June 2019 30 June 2018Counterparty bank Expiry date EUR000 R000 R000 R000 R000Standard Bank Sep 18 1 000 – (757) – (757)Standard Bank Nov 18 1 500 – (965) – (965)RMB Sep 19 2 400 819 – 819 –RMB Jan 20 2 000 580 – 580 –RMB Jan 20 2 000 660 – 660 –RMB Apr 20 2 000 632 – 632 –RMB Jul 20 2 000 619 – 619 –

Total currency collars 3 310 (1 722) 3 310 (1 722)

H2.5 Interest rate swapsH2.5.1 Net carrying value

GROUP COMPANY


Non-current assets – 6 846 – 224 Current assets – 815 – – Non-current liabilities (60 224) (24 060) (59 408) (24 060)Current liabilities (7 339) (277) (7 326) (277)

Total interest rate swaps (67 563) (16 676) (66 734) (24 113)

H2.5.2 Movement reconciliationOpening balance at 1 July (16 676) (47 073) (24 113) (40 515)Foreign exchange movement 3 684 (330) – –Additions (5 931) 6 607 (5 931) 757 Expiry (554) (8 883) 278 – Fair value adjustment (48 086) 33 003 (36 968) 15 645

Balance at the end of the year (67 563) (16 676) (66 734) (24 113)

Page 151



H2 DERIVATIVES continued

H2.5.3 Individual instrumentsFixedratepayable%

Variableratereceivable

GROUP COMPANY

CounterpartyBank

Nominalamount

Expirydate

30 June 2019 30 June 2018 30 June 2019 30 June 2018

R000 R000 R000 R000

Standard Bank R100m Aug 18 8,02 3-month JIBAR – (277) – (277)Standard Bank R100m Nov 19 8,04 3-month JIBAR (496) (1 256) (496) (1 256)Standard Bank R100m Feb 20 8,50 3-month JIBAR (1 148) (2 142) (1 148) (2 142)Standard Bank R450m Oct 20 7,85 3-month JIBAR (6 903) (5 270) (6 903) (5 270)Standard Bank R958m Jun 23 7,04 3-month JIBAR (4 814) – (4 814) –Standard Bank R300m Oct 23 7,82 3-month JIBAR (10 127) (232) (10 127) (232)Standard Bank R100m May 24 7,85 3-month JIBAR (3 455) 224 (3 455) 224 Standard Bank R350m Mar 24 7,52 3-month JIBAR (7 348) – (7 348) –Standard Bank R150m Mar 24 7,52 3-month JIBAR (3 149) – (3 149) –RMB R200m Sep 19 7,73 3-month JIBAR (337) (1 380) (337) (1 380)Nedbank R250m Jan 20 8,54 3-month JIBAR (2 905) (5 672) (2 905) (5 672)Nedbank R250m Jan 20 8,29 3-month JIBAR (2 440) (4 631) (2 440) (4 631)Nedbank R500m Jan 21 7,43 3-month JIBAR (5 500) (883) (5 500) (883)Nedbank R500m Sep 21 7,61 3-month JIBAR (9 015) (1 536) (9 015) (1 536)Nedbank R500m Oct 21 7,55 3-month JIBAR (9 097) (1 058) (9 097) (1 058)Standard Bank USD17,8m Nov 18 4,26 3-month LIBOR – 831 – –Standard Bank USD27,1m Oct 20 2,11 3-month LIBOR (817) 816 – –RMB USD4,98m May 20 2,10 3-month LIBOR (13) 5 790 – –

Total interest rate swaps (67 563) (16 676) (66 734) (24 113)

H3 FINANCIAL GUARANTEESH3.1 Accounting policies

Financial guarantees are contracts that require the group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the original or modified terms of a debt instrument. Liabilities under financial guarantees are recognised initially at fair value and subsequently as follows: • From 1 July 2018: at the higher of the loss allowance determined in accordance with IFRS 9 (see note M5.2.3.1) and the amount

initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15: Revenue from contracts with customers

• Before 1 July 2018: at the higher of the amount determined in accordance with IAS 37: Provisions, contingent liabilities and contingent assets and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with IAS 18: Revenue.

Management assessed the obligations under the guarantees and concluded that these meet the definition of financial guarantees, and the change in fair value of the guarantees represents a charge to profit or loss.


Page 152


H3.2 Profile

USD guarantees The company has provided guarantees to banks that have provided funding to Hyprop Mauritius (a wholly owned subsidiary) and Hystead. The guarantees are secured by mortgage bonds over certain of the company’s South African investment properties as disclosed in note E1.8 – Mortgaged properties. Details of the secured loans are disclosed in note H1.4. On consolidation the USD guarantees are eliminated as the underlying loans are reflected on the statement of financial position.

EUR guarantees Hyprop and PDI Investment Holdings Limited (PDI) have guaranteed EUR400,8 million of loans advanced by banks to Hystead as follows:

Hyprop EUR360,8 million

PDI EUR40 million

PDI has provided back-to-back guarantees to Hyprop for a further EUR46,8 million (2018: EUR46,8 million) (equivalent to 11,7% of the EUR408,0 million guaranteed debt).

For the EUR73,2 million of debt (2018: EUR73,2 million) (18,3% of the EUR400,8 million guaranteed debts) which Hyprop has guaranteed in excess of its pro rata 60% interest in Hystead, Hyprop receives 60% of the related dividends declared to PDI from Hystead, which equates to 11% (60% x 18,3%) of the dividends paid by Hystead, as a guarantee fee (the credit enhancement fee).

This agreement is in place until May 2021, when the shareholders’ agreement between Hyprop and PDI, as shareholders in Hystead, expires.

During the year, loans of EUR400,8 million (EUR360,8 million of which were guaranteed by Hyprop) were refinanced and Hyprop provided new guarantees for EUR360,8 million of the new loans. This resulted in the derecognition of the guarantees given in respect of the expired loans and recognition of the new guarantees as financial liabilities.

H3.3 Key estimates and assumptions

Valuation of financial guarantees

The guarantees issued by Hyprop are recognised as financial liabilities on the statement of financial position at the higher of the day one fair value or ECL value.

The valuation of the financial guarantees have been calculated by independent advisers as follows: Contractual future cash flows related to each loan were calculated and then multiplied by an appropriate probability of default (PD) and loss given default (LGD). The amounts were then discounted (using risk-free rates) to either the inception date of the exposure or the valuation date (30 June 2019) to obtain the day-one fair value or expected credit loss (ECL) at 30 June 2019.

For the ECL calculations, these can be calculated for either a 12-month period (stage 1) or lifetime (stage 2). Depending on the stage or exposure, the relevant ECL value was chosen and compared to the day-one fair value. The credit rating of the underlying entities were assumed as one notch lower than Hyprop’s credit rating.

In previous years credit default swaps were used to assess the probability of default on the underlying loans. Following implementation of IFRS 9: Financial instruments, more information on historical default rates is available in the market. This has been used to calculate the fair values of the new guarantees issued during the year.

Disclosure of the sensitivity of the valuation of the financial guarantees to changes in the underlying assumptions is included in note L4.2.

GROUP COMPANY


H3.4 Net carrying valueGuarantees in respect of Hyprop Mauritius – – 186 023 202 822 Guarantees in respect of Hystead 110 401 185 686 110 401 185 686

Total financial guarantees 110 401 185 686 296 424 388 508

H3.5 Movement reconciliation*Opening balance at 1 July 185 686 163 855 388 508 329 575 New guarantees issued 110 401 33 815 110 401 136 202 Fair value adjustments – – 16 294 –Derecognition of guarantees cancelled (185 686) (11 984) (218 779) (77 269)


* New guarantees which were issued and expired (due to amendments to loan agreements) in the current year are not included in the above reconciliation.

Page 153



H4 COVENANTS AND CAPITAL MANAGEMENTH4.1 External restrictions

In terms of the agreements between the group and the financial institutions who have granted loans to the group, the group is required to maintain certain key financial ratios (covenants) above or below specified benchmarks. If a covenant is breached on or before the reporting date, the affected loans should be classified as current if the group does not have the right to defer settlement for at least 12 months after the reporting date.

Summary of the group’s key covenants and their status

Covenant Benchmark range Reported as 30 June 2019 Status 30 June 2018 Status

Loan to value ratio A maximum of 50% to 60% Percentage 18,0 to 40 ✓ 17,0 to 40 ✓

Secured loan to value ratio A maximum of 55% to 70% Percentage 12,5 to 49 ✓ 12,7 to 63 ✓

Net asset value A minimum of R7,5 billion Rbn 22,9 ✓ 26,0 ✓

Interest cover ratio (EBITDA/interest expense)

A minimum of 1,75 to 2 times cover

Times 3,6 to 6,3 ✓ 4,4 to 5,6 ✓

Secured portfolio interest cover ratio

A minimum of 1,75 to 2 times cover

Times 3,1 to 5,9 ✓ 3,8 to 6,0 ✓

The group complied with all of its loan covenants during the current and preceding financial years.

H4.2 Internal restrictions Hyprop’s capital management objective is to maintain a strong capital base to provide sustainable returns to shareholders over the long term. The company’s borrowings are limited by its Memorandum of Incorporation and the JSE Listings Requirements to 60% (2018: 60%) of the gross asset value (as defined in the JSE Listings Requirements) as reflected in the company’s consolidated statement of financial position.

Hyprop’s (theoretical) unutilised borrowing capacity can be summarised as follows:

GROUP COMPANY


Total consolidated assets/gross asset value 33 653 572 35 165 476 30 857 940 30 838 229

60% of gross asset value 20 192 143 21 099 286 18 514 764 18 502 938 Total borrowings H1.4 (7 328 801) (7 884 994) (5 418 909) (3 710 403)

Unutilised borrowing capacity 12 863 342 13 214 292 13 095 855 14 792 534


Page 154


I. OTHER LIABILITIESI1 DEFERRED TAXATIONI1.1 Accounting policy

Deferred taxation is recognised for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxation is not recognised for the following temporary differences: • The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting

nor taxable profit • Goodwill that arises on initial recognition in a business combination, and • Differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not

reverse in the foreseeable future.


Deferred taxation assets and liabilities are measured at the taxation rates that are expected to apply to the period when the asset is realised or the liability is settled, based on taxation rates and taxation laws that have been enacted or substantively enacted by the reporting date.

The effect of any changes in taxation rates on deferred taxation is recognised in profit or loss for the period, except to the extent that it relates to items previously charged or credited directly to other comprehensive income or equity.

Deferred taxation assets and liabilities are offset if there is a legally enforceable right to offset current taxation liabilities and assets, and they relate to income taxes levied by the same taxation authority on the same taxable entity.

I1.2 Key assumptions and estimationsDeferred tax The group is subject to income tax in numerous jurisdictions. Significant judgement is required in determining the

provision for tax as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.


The group recognises liabilities for anticipated tax obligations based on estimates of the taxes that are likely to become due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the group has not rebutted this presumption.

I1.3 Carrying valueGROUP COMPANY


Arising on:Wear and tear claims on investment property, building appurtenances and tenant installations 165 683 164 149 165 683 163 954 Taxation loss brought forward (78 122) (78 122) (78 122) (78 122)Fair value of investment property – Gruppo – 76 165 – –Fair value adjustment to convertible loans – Gruppo – 28 017 – –Rent and other receivables – Gruppo – (12 207) – –

Total deferred taxation 87 561 178 002 87 561 85 832

Page 155



I. OTHER LIABILITIES continuedI1 DEFERRED TAXATION continuedI1.4 Movement reconciliation


R000 R000 R000 R000

Balance at the beginning of the year 178 002 139 599 85 832 73 993 Currency translation reserve adjustment 3 014 3 299 – –Movement through profit or loss (93 455) 35 104 1 730 11 839

Building appurtenances and tenant installations 10 440 12 078 9 895 12 085 Reversal of wear and tear allowances on asset sales (8 510) (264) (8 510) (264)Fair value of investment property – Gruppo (13 252) (51) – –Prior year deferred taxation adjustment 345 2 927 345 18 Unutilised losses carried forward (52 142) – – –Fair value adjustment on convertible loans – Gruppo (23 323) 23 706 – –Rent and other receivables – Gruppo (7 013) (3 292) – –


I1.5 Tax rates usedSouth Africa – temporary differences (%) 28 28 28 28Nigeria – temporary differences (%) 30 30 – –Nigeria – investment property (%) 10 10 – –

I2 TRADE AND OTHER PAYABLESI2.1 Accounting policy

Trade and other payables are measured at amortised cost. Short-term payables are measured at the original invoice amount as the effect of discounting is immaterial.

I2.2 Carrying value


R000 R000 R000 R000

Trade payables and accrued expenses 83 421 154 636 84 561 65 278 Tenant deposits 80 218 86 647 80 218 72 511 Gift cards 17 885 15 425 17 885 15 425 Interest payable 67 667 44 980 58 042 37 749 Rent received in advance 64 829 86 944 64 829 85 281 Value added tax (VAT) 18 601 26 201 18 601 21 878 Municipal provisions 95 645 39 561 95 645 106 861 Employee provisions 22 950 28 064 22 950 26 770 Other payables 17 925 3 632 4 960 3 369

Total trade and other payables 469 141 486 090 447 691 435 122

J. RELATED PARTIESJ1 RELATED PARTY TRANSACTIONS AND BALANCESJ1.1 Accounting policy

Related parties are entities that are subsidiaries, joint ventures, co-investors of the group, and individuals that are directors and prescribed officers of the group.

The group, in the ordinary course of business, entered into various sale and purchase transactions on an arm’s length basis at market- related rates with related parties.

Page 156


J1.2 Related-party transactions and balances – entitiesGROUP COMPANY


Entities that are related parties and with whom the group transacted during the period are listed below:African Land – subsidiary

Investment in subsidiary – – 758 264 758 264 Borrowings – – 761 125 761 125

Gruppo – subsidiaryOther receivables – – – 1 330

Hyprop share scheme – subsidiaryDividend declared/received – – – 3 491 Loan receivable – refer to note F1 for further detail – – 53 603 43 444 Interest received – – 3 108 –

Word4Word Marketing – former subsidiaryDividend received – – – 2 253

Hyprop Mauritius – subsidiaryDividend declared/received – – – 55 403 Dividends receivable included in trade and other receivables – – – 259 Loan receivable (net of impairments) – refer to note F1 for further detail – – – –Interest received – – 2 259 –

Financial guarantees given by Hyprop on behalf of Hyprop Mauritius

Debt guaranteed by Hyprop on behalf of Hyprop Mauritius(1) – – 2 671 017 3 945 111 Fair value of financial guarantees given by Hyprop on behalf of Hyprop Mauritius – – 186 023 202 822 Guarantee liability as percentage of debt guaranteed (%) – – 7,0 5,1

AttAfrica – co-investor and joint ventureLoan receivable (net of impairments) – refer to note F1 for further detail 909 967 2 375 009 – –Interest received 80 493 221 568 – –

Manda Hill Mauritius – joint ventureLoan receivable (net of impairments) – refer to note F1 for further detail 423 139 543 712 – –Interest received 3 715 19 689 – –

Hystead – financial assetFinancial asset 218 444 152 556 218 444 152 556 Asset management and accounting fee income 27 715 17 338 27 715 17 338 Dividend declared/received 221 190 180 525 221 190 180 525 Dividends receivable included in trade and other receivables 16 278 76 484 16 278 76 484 Loan receivable – 40 716 – 40 716

Financial guarantees given by Hyprop on behalf of HysteadDebt guaranteed by Hyprop on behalf of Hystead(1) 5 748 439 5 684 140 5 748 439 5 684 140 Fair value of financial guarantees given by Hyprop on behalf of Hystead 110 401 185 686 110 401 185 686 Guarantee liability as percentage of debt guaranteed (%) 1,9 3,3 1,9 3,3

PDI Investment Holdings Limited – co-investor and common directorCredit enhancement fee: income 40 542 46 671 40 542 46 672 Credit enhancement fee: receivable included in trade and other receivables 2 984 17 789 2 984 17 789

(1) Details of investment properties mortgaged to secure guarantees on behalf of Hystead and Hyprop Mauritius are shown in note E1.8 – Mortgaged properties.

Page 157



J. RELATED PARTIES continuedJ1 RELATED PARTY TRANSACTIONS AND BALANCES continuedJ1.3 Directors’ interests in Hyprop shares*

GROUP COMPANY30 June 2019 30 June 2018

Direct beneficial

Indirect beneficial

Non-beneficial Total

Direct beneficial

Indirect beneficial

Non-beneficial Total

Independent non-executive directors 30 500 2 940 – 33 440 25 500 2 940 – 28 440 Non-executive directors – 378 000 – 378 000 – 378 000 3 447 855 3 825 855 Executive directors 6 000 1 870 – 7 870 – 526 501 – 526 501 Total 36 500 382 810 – 419 310 25 500 907 441 3 447 855 4 380 796

* The above table excludes shares outstanding under the Hyprop share scheme for executive directors.

Details of directors’ remuneration are included in note K1 – Directors’ remuneration.

K. REMUNERATIONK1 DIRECTORS’ REMUNERATIONK1.1 Remuneration

FeesBasic

salary

Pension fund

contributions

Perfor-mance bonus

Share incentive scheme(4)

Other benefits Total

30 June 2019 R000 R000 R000 R000 R000 R000 R000

Independent non-executive directorsGavin Tipper (chairman) 807 – – – – – 807 Lindie Engelbrecht(3) 230 – – – – – 230 Zuleka Jasper 479 – – – – – 479 Mike Lewin 421 – – – – – 421 Nonyameko Mandindi 383 – – – – – 383 Thabo Mokgatlha 567 – – – – – 567 Stewart Shaw-Taylor 637 – – – – – 637

Non-executive directorsKevin Ellerine 397 – – – – – 397 Louis Norval 397 – – – – – 397

Executive directorsMorné Wilken (CEO) – 2 087 162 – – 492 2 741 Wilhelm Nauta (CIO) – 2 432 280 2 186 – 77 4 975 Brett Till (CFO) – 1 719 295 – – 33 2 047 Pieter Prinsloo (former CEO)(1) – 2 493 118 3 708 1 751 447 8 517 Laurence Cohen (former CFO)(2) – 202 35 – – 66 303

Total 4 318 8 933 890 5 894 1 751 1 115 22 901 (1) Resigned with effect from 31 January 2019(2) Resigned with effect from 31 July 2018(3) Resigned with effect from 30 November 2018(4) Market value of shares on vesting date

Page 158


FeesBasic

salary

Pension fund

contributionsPerformance

bonus

Share incentive

schemeOther

benefits Total30 June 2018 R000 R000 R000 R000 R000 R000 R000

Independent non-executive directorsGavin Tipper (chairman) 688 – – – – – 688 Lindie Engelbrecht 543 – – – – – 543 Mike Lewin 392 – – – – – 392 Nonyameko Mandindi 325 – – – – – 325 Thabo Mokgatlha 462 – – – – – 462 Stewart Shaw-Taylor 551 – – – – – 551

Non-executive directorsKevin Ellerine 343 – – – – – 343 Louis Norval 343 – – – – – 343

Executive directorsPieter Prinsloo (former CEO) – 4 153 196 3 498 2 069 115 10 031 Laurence Cohen (former CFO) – 2 362 410 1 759 1 115 83 5 729 Total 3 647 6 515 606 5 257 3 184 198 19 407

K1.2 Reconciliation of number of shares outstanding under the CUP for executive directors

GROUP AND COMPANY

30 June 2019

Outstanding at the beginning

of the year R000

IssuedR000

ForfeitedR000

VestedR000

Outstanding at the end of

the yearR000

Market value of shares

outstanding at 30 June 2019

R000

Morné Wilken (CEO) – 37 190 – – 37 190 2 598 Pieter Prinsloo (former CEO) 88 045 29 715 (109 123) (8 637) – –Brett Till (CFO) – 18 927 – – 18 927 1 322 Wilhelm Nauta(1) 16 742 10 012 – – 26 754 1 869 Laurence Cohen (former CFO) 47 541 – (47 541) – – –Total 152 328 95 844 (156 664) (8 637) 82 871 5 789

(1) The unvested shares shown for Mr Nauta include all share allocations granted during his tenure, including prior to becoming an executive director on 5 July 2018

GROUP AND COMPANY

30 June 2018

Outstanding at the beginning

of the yearR000

IssuedR000

ForfeitedR000

VestedR000

Outstanding at the end of

the yearR000

Market value of shares

outstanding at 30 June 2018

R000

Pieter Prinsloo (former CEO) 105 627 24 416 (2 316) (39 682) 88 045 9 011 Laurence Cohen (former CFO) 57 261 13 154 (1 248) (21 626) 47 541 4 865 Total 162 888 37 570 (3 564) (61 308) 135 586 13 876

Page 159



K. REMUNERATION continuedK2 SHARE-BASED PAYMENTSK2.1 Accounting policy

Long-term benefits – share-based paymentsThe company operates equity-settled share-based conditional share plans (CUP) for its employees.

The grant date fair value of equity-settled share-based payment arrangements granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

All share-based remuneration is ultimately recognised as an expense in profit or loss, with a corresponding increase in equity. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of shares expected to vest.

The CUP consists of two components – performance shares and retention shares, both of which are settled by the issue of Hyprop shares. The allocation between performance and retention shares is 70%:30% for all participants. Awards under the CUP are made on an annual basis.

Performance sharesThe performance conditions for the shares allocated as performance shares are as follows: 40% Growth in distribution per share relative to the peer group

40% Share price performance relative to the peer group

20% A strategic component, which is determined by the remuneration committee in line with the prevailing circumstances and projects at the time of the award

Each of the performance conditions is measured over a three-year performance period. Participants must be employed until the end of the vesting period to be eligible for the award.

Retention sharesRetention shares vest after five years, provided the participant is still employed by the group.

K2.2 Reconciliation of number of shares outstanding under the CUP

GROUP AND COMPANY GROUP AND COMPANYPerformance

sharesRetention

sharesPerformance

sharesRetention

shares30 June 2019 30 June 2018 30 June 2019 30 June 2018

Outstanding at the beginning of the year 235 815 181 820 260 811 153 606 New awards granted 135 583 58 116 84 840 35 114 Vested and settled by the issue of Hyprop ordinary shares (49 336) (37 465) (94 390) (1 312)Forfeited (111 515) (60 958) (15 446) (5 588)

Outstanding at the end of the year 210 547 141 513 235 815 181 820

Weighted average remaining vesting period (years) 1,5 2,4 1,1 2,0

K2.3 Balances and movementsGROUP AND COMPANY

30 June 2019 30 June 2018R000 R000

Share-based payment reserveOpening balance at 1 July 27 443 23 901 Release of reserve on vesting of shares (8 513) (7 632)Share-based payment expense 10 365 11 174 Forfeitures (9 009) –

Closing balance at 30 June 20 286 27 443

Page 160


K2.4 Valuation methodologyThe day-one fair value of the awards granted under the CUP is determined based on the 30-day VWAP of Hyprop shares ending on the grant date, as specified in the CUP rules. The fair value of each outstanding tranche of share awards are detailed below:

PERFORMANCE TRANCHE 4 TRANCHE 5 TRANCHE 6 TRANCHE 7 TRANCHE 8

Number of awards granted 80 979 5 982 84 840 96 302 39 281 Share price at grant date (R) 129,89 117,31 116,76 102,34 81,50 Grant date 1 Jul 16 1 Jan 17 1 Jul 17 1 Jul 18 1 Jan 19Vesting period ends 30 Jun 19 31 Dec 19 30 Jun 20 30 Jun 21 31 Dec 21Black Scholes valuation

Fair value of shares at grant date (R) 112,56 100,11 97,66 81,99 61,69 Expected life (years) 3 3 3 3 3Volatility (%) 20,0 20,0 20,0 20,0 20,0Risk-free rate after taxation of 28% (%) 6,3 6,4 6,4 6,4 6,4Dividend yield (%) 4,8 5,3 6,0 7,4 9,3% allocated to executive directors on grant date (%) 30,7 0,0 31,0 28,9 100,0

Tranche 3 of the performance shares vested during the year at a fair value of R88,00 per share.

RETENTION SHARES TRANCHE 2 TRANCHE 3 TRANCHE 4 TRANCHE 5 TRANCHE 6 TRANCHE 7 TRANCHE 8

Number of awards granted 47 324 33 549 33 499 2 564 35 114 41 281 16 835 Share price at grant date (R) 79,51 121,00 129,89 117,31 116,76 102,34 81,50 Grant date (R) 1 Jul 14 1 Jul 15 1 Jul 16 1 Jan 17 1 Jul 17 1 Jul 18 1 Jan 19Vesting period ends 30 Jun 19 30 Jun 20 30 Jun 21 31 Dec 21 30 Jun 22 30 Jun 23 31 Dec 23Black Scholes valuation

Fair value of shares at grant date (R) 59,08 96,68 102,32 90,07 86,70 70,72 51,24 Expected life (years) 5 5 5 5 5 5 5Volatility (%) 20,0 20,0 20,0 20,0 20,0 20,0 20,0Risk-free rate after taxation of 28% (%) 5,9 6,0 6,3 6,4 6,4 6,4 6,4Dividend yield (%) 5,9 4,5 4,8 5,3 6,0 7,4 9,3% allocated to executive directors on grant date (%) 30,4 31,0 31,8 0,0 32,1 28,9 100,0

Tranche 1 of the retention shares vested during the year at a fair value of R105,99 per share.

K3 RETIREMENT BENEFITSK3.1 Accounting policy

Post-employment benefits – defined contribution planA defined contribution plan is a post-employment benefit plan under which the company pays contributions to a separate entity. The company has no legal or constructive obligation to pay further amounts if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

Company contributions to defined contribution plans are recognised as an employee benefit expense when the related services have been rendered.

K3.2 Profile All permanent employees must be members of the Unicover Pension Fund (an umbrella defined contribution fund) (the fund), except those who elect not to be members in terms of section 197 of the Labour Relations Act 66 of 1995 (LRA).

In addition to the post-retirement benefits, the fund provides comprehensive death, disability, funeral and universal education cover for all members.

K3.3 Retirement benefits – expense


R000 R000

Defined contribution fund contributions 12 587 11 508

Page 161



L. FINANCIAL INSTRUMENTSL1 CLASSIFICATION AND MEASUREMENT OF FINANCIAL INSTRUMENTSL1.1 Accounting policy

Financial instruments are monetary contracts that give rise to a financial asset (a right to receive cash) of one entity and a financial liability (an obligation to deliver cash) or equity instrument of another entity.

RecognitionFinancial assets and financial liabilities are recognised in the statement of financial position when the group becomes party to the contractual provisions of the instrument. The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Initial measurement

FVTPL Financial instruments which are categorised and designated at initial recognition as being at FVTPL are initially recognised at fair value. Transaction costs, which are directly attributable to the acquisition or on issue of these financial instruments, are recognised immediately in profit or loss.

Non-FVTPL Financial instruments which are not carried at FVTPL are initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial instruments.

Day-one gains or losses

A day-one gain or loss arises when the transaction price of a financial instrument designated as FVTPL differs from the fair market value on the date of acquisition. If the day-one fair value is calculated based on a valuation methodology which includes assumptions which are derived from unobservable inputs, the day-one gain or loss is deferred. The day-one gain or loss is only recognised in profit or loss to the extent that there is a change in a factor (including time) that market participants would take into account when pricing the financial instrument, the unobservable inputs become observable, or on derecognition of the financial instrument.

Presentation

Offset Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when the group has an enforceable right to set off the asset and liability, and intends to settle the asset and liability on a net basis or to realise the asset and settle the liability simultaneously.

Subsequent measurementThe group has adopted IFRS 9: Financial instruments with effect from 1 July 2018. In applying IFRS 9, the group has reconsidered the classification and subsequent measurement of financial assets and liabilities. The impact is summarised in A3.1.

Derecognition of financial instrumentThe group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the entity is recognised as a separate asset or liability. The group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Fair value hierarchyIn addition to the subsequent measurement classification, financial instruments carried at fair value are further classified into 3 levels based on the lowest level of input significant to the overall valuation.

Level 1 Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. The group has no level 1 financial instruments.

Level 2 Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. The group has classified derivatives as level 2.

Level 3 Level 3 inputs are unobservable inputs. Those are used to measure fair value to the extent that relevant observable inputs are not available, to cater for situations in which there is little, or no, market activity for the asset or liability at the measurement date. The group has classified its investment in Hystead as level 3.

Page 162


L1.2 Accounting classifications, carrying and fair values The following table reflects the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of the fair value.

CARRYING AMOUNT FAIR VALUE AND FAIR VALUE HIERARCHY(The group has no financial instruments

classified as level 1)

GROUP

Fair value through

profit or lossAmortised

cost Total Level 2 Level 3 Total30 June 2019 R000 R000 R000 R000 R000 R000

Financial assets measured at fair valueFinancial asset 218 444 – 218 444 – 218 444 218 444 Derivative instruments – non-current 619 – 619 619 – 619 Derivative instruments – current 2 691 – 2 691 2 691 – 2 691

221 754 – 221 754 3 310 218 444 221 754

Financial assets not measured at fair value Loans receivable – non-current – 18 847 18 847 – – –Loans receivable – current 423 139 909 967 1 333 106 – 423 139 423 139 Trade and other receivables (including held-for-sale)* – 174 970 174 970 – – –Cash and cash equivalents (including held-for-sale) – 1 326 849 1 326 849 – – –

423 139 2 430 633 2 853 772 – 423 139 423 139

Financial liabilities measured at fair valueDerivative instruments – non-current 60 224 – 60 224 60 224 – 60 224 Derivative instruments – current 7 339 – 7 339 7 339 – 7 339 Financial guarantees – non-current 110 401 – 110 401 – 110 401 110 401

177 964 – 177 964 67 563 110 401 177 964

Financial liabilities not measured at fair valueLong-term portion of interest-bearing borrowings (including held-for-sale) – 7 365 864 7 365 864 – – –Short-term portion of interest-bearing borrowings (including held-for-sale) – 1 019 499 1 019 499 – – –Trade and other payables (including held-for-sale) – 373 679 373 679 – – –

– 8 759 042 8 759 042 – – –

* Excluded from this balance are the following: Prepayments, municipal deposits and sundry receivables.

Page 163



L. FINANCIAL INSTRUMENTS continuedL1 CLASSIFICATION AND MEASUREMENT OF FINANCIAL INSTRUMENTS continuedL1.2 Accounting classifications, carrying and fair values continued



GROUP

Fair value through



Financial assets measured at fair valueFinancial asset 121 576 – 121 576 – 121 576 121 576 Derivative instruments – non-current 6 846 – 6 846 6 846 – 6 846 Derivative instruments – current 815 – 815 815 – 815

129 237 – 129 237 7 661 121 576 129 237

Financial assets not measured at fair value Loans receivable – non-current – 2 937 445 2 937 445 – – –Loans receivable – current – 40 716 40 716 – – –Trade and other receivables* – 245 639 245 639 – – –Cash and cash equivalents – 715 648 715 648 – – –

– 3 939 448 3 939 448 – – –

Financial liabilities measured at fair valueDerivative instruments – non-current 24 060 – 24 060 24 060 – 24 060 Derivative instruments – current 1 999 – 1 999 1 999 – 1 999

26 059 – 26 059 26 059 – 26 059

Financial liabilities not measured at fair valueLong-term portion of interest-bearing borrowings – 7 815 651 7 815 651 – – –Short-term portion of interest-bearing borrowings – 69 343 69 343 – – –Financial guarantees – non-current – 185 686 185 686 – – –Trade and other payables – 384 107 384 107 – – –

– 8 454 787 8 454 787 – – –


Page 164




COMPANY

Fair value through



Financial assets measured at fair valueFinancial asset 218 444 – 218 444 – 218 444 218 444 Derivative instruments – non-current 619 – 619 619 – 619 Derivative instruments – current 2 691 – 2 691 2 691 – 2 691

221 754 – 221 754 3 310 218 444 221 754

Financial assets not measured at fair value Loans receivable – non-current – 72 450 72 450 – – –Trade and other receivables* – 94 359 94 359 – – –Cash and cash equivalents – 1 062 412 1 062 412 – – –

– 1 229 221 1 229 221 – – –

Financial liabilities measured at fair valueDerivative instruments – non-current 59 408 – 59 408 59 408 – 59 408 Derivative instruments – current 7 326 – 7 326 7 326 – 7 326 Financial guarantees – non-current 296 424 – 296 424 – 296 424 296 424

363 158 – 363 158 66 734 296 424 363 158

Financial liabilities not measured at fair valueLong-term portion of interest-bearing borrowings – 3 649 784 3 649 784 – – –Short-term portion of interest-bearing borrowings – 1 008 000 1 008 000 – – –Loans payable – non-current – 761 125 761 125 – – –Trade and other payables – 310 494 310 494 – – –

– 5 729 403 5 729 403 – – –


Page 165



L. FINANCIAL INSTRUMENTS continuedL1 CLASSIFICATION AND MEASUREMENT OF FINANCIAL INSTRUMENTS continued

L1.2 Accounting classifications, carrying and fair values continued



COMPANY

Fair value through



Financial assets measured at fair valueFinancial asset 121 576 – 121 576 – 121 576 121 576 Derivative instruments – non-current 224 – 224 224 – 224

121 800 – 121 800 224 121 576 121 800

Financial assets not measured at fair value Loans receivable – non-current – 18 723 18 723 – – –Loans receivable – current – 84 160 84 160 – – –Trade and other receivables – 181 339 181 339 – – –Cash and cash equivalents – 643 032 643 032 – – –

– 927 254 927 254 – – –

Financial liabilities measured at fair valueDerivative instruments – non-current 24 060 – 24 060 24 060 – 24 060 Derivative instruments – current 1 999 – 1 999 1 999 – 1 999

26 059 – 26 059 26 059 – 26 059

Financial liabilities not measured at fair valueLong-term portion of interest-bearing borrowings – 2 949 278 2 949 278 – – –Short-term portion of interest-bearing borrowings – 761 125 761 125 – – –Financial guarantees – non-current – 388 508 388 508 – – –Trade and other payables – 346 916 346 916 – – –

– 4 445 827 4 445 827 – – –


L2 FAIR VALUE MEASUREMENT METHODOLOGIESL2.1 Fair value measurement techniques

The following tables show the valuation techniques used in measuring level 2 and 3 fair values, as well as the significant unobservable inputs used:


Movement in input


Financial asset – Hystead Discounted cash flow: The valuation is calculated as the present value of the anticipated future net cash flows expected to be generated by the underlying shopping centres after deducting the head office costs within the Hystead group.

The cash flow projections include specific estimates for 10 years (2018: 10 years). The expected net cash flows are discounted using a risk-adjusted discount rate as well as a risk-adjusted cap rate.

• Annual growth rate

Increase Increase

• Terminal growth rate

Decrease Decrease

• Exit cap rate Increase Decrease • Discount rate Decrease Increase

Page 166



Movement in input


Derivatives Market comparison: The valuation of the derivative instruments was determined by discounting the future cash flows using the JIBAR or OIS swap curves as applicable. Similar contracts are traded in active markets and the quotes reflect actual transactions in similar instruments.

Not applicable – level 2

Not applicable – level 2

Financial guarantees Discounted cash flow: Contractual future cash flows related to each loan were calculated and then multiplied by an appropriate probability of default (PD) and loss given default (LGD). The amounts were then discounted (using risk-free rates) to either the inception date of the exposure or the valuation date (30 June 2019) to obtain the day-one fair value or expected credit loss (ECL).

For the ECL calculations, these can be calculated for either a 12-month period (stage 1) or lifetime (stage 2). Depending on the stage or exposure, the relevant ECL value was chosen and compared to the day-one fair value.

• Probability of default (PD)

Increase Increase

• Loss given default (LGD)

Decrease Decrease

• Credit rating Decrease Increase

L2.1.1 Transfers between levels 2 and 3 There were no transfers in either direction between levels 1 and 2 during the current or prior periods, nor were there any transfers out of level 2 or 3 during the current or prior periods.


% %

L2.1.2 Valuation assumptions – Unobservable inputs Financial asset

Annual growth rate (1,1) to 2,5 (17,8) to 0,6Weighted average annual growth rate 0 (0,3)Terminal growth rate 1,8 to 2,3 0,8 to 2 Weighted average terminal growth rate 2 1Discount rate 6 to 8 7 to 8Weighted average discount rate 7 7Exit capitalisation rates 5 to 7,3 5,3 to 7,3Weighted average exit capitalisation rate 6 6

Financial guaranteesRisk-free rate EUR IOS and

USD IOSEUR IOS and

USD IOSData used for probability of default Market traded

instrumentsCredit default

swapsLoss given default (%) 20% 20%Credit rating BB+ to BBB BB+ to BBB

Page 167



L. FINANCIAL INSTRUMENTS continuedL3 RECONCILIATIONS OF LEVEL 3 FINANCIAL INSTRUMENTSL3.1 Fair value of financial asset – movement reconciliation


R000 R000

L3.1.1 Gross asset (A)Balance at the beginning of the year 3 891 691 2 022 282 Additions (new properties acquired) – 2 626 646 Unrealised foreign exchange gain 25 558 194 480 Change in credit enhancement fees – (402 631)Fair value adjustment through profit or loss 587 742 (549 086)

Subtotal (fair value) at the end of the year 4 504 991 3 891 691 Additions (financial guarantees) 110 401 33 815 Fair value adjustment through profit or loss (110 401) (33 815)

Balance at the end of the year 4 504 991 3 891 691

L3.1.2 Deferred gains (B)Balance at the beginning of the year (3 770 115) (2 022 282)Additions (new properties acquired) – (2 626 646)Unrealised foreign exchange loss (24 760) (138 923)Change in credit enhancement fees – 393 864 Fair value adjustment through profit or loss (491 672) 623 872

Balance at the end of the year (4 286 547) (3 770 115)

L3.1.3 Fair value of financial asset (A-B) 218 444 121 576

L3.2 Fair value of financial guarantees – movement reconciliation


R000 R000 R000 R000

Opening balance at 1 July 185 686 163 855 388 508 329 575 Recognition of new financial guarantees issued 110 401 33 815 110 401 136 202 Fair value adjustment – – 16 294 –Derecognition of guarantees cancelled (185 686) (11 984) (218 779) (77 269)


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L4 VALUATION SENSITIVITIES – LEVEL 3L4.1 Fair value of financial asset – valuation sensitivities The valuation of the investment in Hystead is sensitive to changes to the unobservable inputs. Changes to one of the unobservable

inputs, while holding the other inputs constant, would have the following effects on the fair value of investment in Hystead in the statement of profit or loss.

GROUP AND COMPANY30 June 2019 30 June 2018 30 June 2019 30 June 2018

Input % change % change R000 R000

Annual growth rate Increase 0,50 1,00 96 070 45 449 Decrease 0,50 1,00 (96 070) (45 449)

Terminal growth rate Increase 0,50 1,00 9 150 2 273 Decrease 0,50 1,00 (9 150) (2 273)

Discount rate Increase 0,50 1,00 (67 478) (32 951)Decrease 0,50 1,00 67 478 32 951

Exit capitalisation rates Increase 0,50 1,00 (68 621) (40 904)Decrease 0,50 1,00 68 621 40 904

* The percentage change applied in each year is the possible change applicable to each input.

L4.2 Fair value of financial guarantees – valuation sensitivities The valuation of the financial guarantees is sensitive to changes to the unobservable inputs. Changes to one of the unobservable inputs,

while holding the other inputs constant, would have the following effects on the fair value of the financial guarantees on the statement of financial position.


Basis of valuation Change in credit risk R000 R000

If all guarantees were day-one fair value: One notch better credit risk than Hyprop (41 390) (182 643)One notch worst credit risk than Hyprop – (114 532)

If all guarantees were 12-month ECL: One notch better credit risk than Hyprop (94 475) (271 994)One notch worst credit risk than Hyprop (86 261) (259 396)

If all guarantees were lifetime ECL: One notch better credit risk than Hyprop (9 467) (17 570)One notch worst credit risk than Hyprop 40 842 39 692

Comparative information has not been provided as all Euro denominated guaranteed loans were refinanced and expired guarantees derecognised. The guarantees for US Dollar denominated loans have been reclassified as stage 2 and 3 during the 2019 year.

M. FINANCIAL RISK MANAGEMENT M1 RISK MANAGEMENT OVERVIEW

The group has exposure to the following risks arising from financial instruments:

• Liquidity risk • Interest rate risk • Currency risk • Credit risk

The board of directors (board) has overall responsibility for the establishment and oversight of the group’s risk management framework. The board, assisted by the audit and risk committee, monitors the effectiveness of the internal control systems.

The audit and risk committee has an independent role, operating as an overseer and making recommendations to the board for its consideration and final approval. The audit and risk committee does not assume the functions of management, which remain the responsibility of the executive directors, officers and other members of senior management. The role of the audit and risk committee includes ensuring that an appropriate risk management policy, aligned with industry practice, is adopted and implemented. For further detail on the role and mandate of the audit and risk committee, please refer to its charter on the group’s website and the report of the audit and risk committee attached to the financial statements.

The audit and risk committee is assisted by management and an outsourced internal audit service provider, both of which reports to the audit and risk committee. The committee reports on the findings of the internal audit function to the board.

Executive management implement controls to safeguard the group’s assets, as well as to ensure validity, accuracy and completeness of financial information. Certain of these controls are reviewed by internal audit.

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M. FINANCIAL RISK MANAGEMENT continued M2 LIQUIDITY RISK AND SENSITIVITYM2.1 Risk and mitigation

Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset and includes liquidity risk, financing/refinancing risk and credit rating risk.

The group’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.

Exposure MitigationLiquidity – the risk that the group will not be able to meet its financial obligations as they fall due.

Liquidity risk is managed by: • actively monitoring cash flow requirements and debt maturity profiles; • maintaining cash balances and adequate loan facilities to ensure future

obligations can be met. Financing risk – the risk that the group is unable to raise the required finance to meet its obligations or to refinance existing borrowings, including that the cost of borrowings becomes unaffordable

Financing and refinancing risk is managed by: • actively monitoring cash flow requirements and debt maturity profiles; • maintaining cash balances and adequate loan facilities to ensure future

obligations can be met; • adopting a pro-active approach to refinancing maturing borrowings well in

advance of the maturity date; • maintaining strong relationships with commercial banks and other lenders; • regular engagement with institutional bond investors; and • managing debt maturity profiles to ensure a relatively constant level of loan

maturities in each year.

Loans are generally raised for between three and five years’ duration.Credit rating risk – The risk that the group’s credit rating is downgraded and negatively impacts the group’s access to finance or increases its cost of borrowings.

In February 2019, Moody’s lowered Hyprop’s long-term national scale issuer rating to Aa3.za from Aa1.za and affirmed the short-term national scale rating of Prime-1.za. The main reason cited for the decrease in the rating is that Moody’s estimated that Hyprop’s debt-to-asset ratio, adjusted for the full consolidation of Hystead, had increased to 41% at 30 June 2018, from 33,4% in 2017, as a result of debt funded acquisitions in Eastern Europe. Moody’s further stated that Hyprop will rely on external debt financing to cover R5 billion of debt coming due in the next 18 months, including the Hystead debt that it guarantees.

Hyprop, like all South African domiciled entities, is constrained (but not necessarily capped) by the South African sovereign rating.

In March 2019 Moody’s passed the review of South Africa’s sovereign credit rating leaving the rating at Baa3, the last rung of investment grade, with a stable outlook while the S&P rating remains at the sub-investment grade BB with a stable outlook.

Hyprop has taken cognisance of Moody’s points which led to two key initiatives that we have advanced: • Refinance the portion of debt maturing up to June 2020 – between March and

June 2019 R4 billion of external debt (including EUR214 million of debt in Hystead) was refinanced. In addition, R500 million was raised by the issue of two new corporate bonds in March 2019, the proceeds of which were used to settle R358 million of bonds that matured in July 2019, with the balance being retained to finance capital expenditure in the 2020 financial year.

• Lowering our LTV to 35% (as considered appropriate and calculated by Moody’s) – alternative ways to reduce the group’s LTV ratio continue to be considered and evaluated. In the short term, the disposal of Hyprop’s sub-Saharan African interests and utilisation of the proceeds to settle USD-denominated debt will result in a reduction in the LTV ratio of approximately 5% (on completion of all disposals).

We will endeavour to restore Hyprop’s credit rating to investment grade by 31 December 2020 and will continue to engage with Moody’s in that regard.

The group meets its financing requirements through a mixture of cash generated from its operations and, short and long-term borrowings. Adequate banking facilities and reserve borrowing capacities are maintained.

The group has complied with all of the covenants in terms of the agreements governing its bank borrowings and debt capital market program at 30 June 2019.

GROUP COMPANYReported as 30 June 2019 30 June 2018 30 June 2019 30 June 2018

Average maturity of borrowings Years 2,6 2,5 2,6 2,8 Weighted average maturity of borrowings Years 2,3 2,3 2,8 2,7

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M2.2 Financial exposureThe following table summarises the maturity profiles and contractual cash flows of financial instruments at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments where applicable. The table below excludes assets held-for-sale.

GROUP Carrying

value Contractual

cash flows(2)Within

one yearOne to

five yearsMore than five years

30 June 2019 R000 R000 R000 R000 R000Non-derivative financial assets Financial asset 218 444 3 220 944 230 232 1 207 965 1 782 747 Loans receivable – non-current (Eastern Europe) 18 847 19 935 594 19 341 –Loans receivable – current (sub-Saharan Africa) 1 333 106 1 333 106 1 333 106 – –Trade and other receivables 105 625 105 625 105 625 – –Cash and cash equivalents 1 285 337 1 285 337 1 285 337 – –Total 2 961 359 5 964 947 2 954 894 1 227 306 1 782 747 Derivative financial assets Currency collars – non-current 619 34 389 – 34 389 –Currency collars – current 2 691 140 401 140 401 – –Total 3 310 174 790 140 401 34 389 –Non-derivative financial liabilities Long-term portion of borrowings 6 320 801 8 474 266 505 836 7 597 298 371 132 Short-term portion of borrowings 1 008 000 1 027 815 1 027 815 – –Financial guarantees – non-current(1) 110 401 4 160 535 – 4 160 535 –Trade and other payables 469 141 469 141 469 141 – –Total 7 908 343 14 131 757 2 002 792 11 757 833 371 132 Derivative financial liabilities(2)

Interest rate swaps – non-current 60 224 47 625 17 603 – –Interest rate swaps – current 7 339 4 750 4 750 – –Total 67 563 52 375 22 353 30 022 –Net exposure – (8 044 395) 1 070 150 (10 526 160) 1 411 615

30 June 2018Non-derivative financial assets Financial asset 152 556 2 120 835 266 527 855 433 998 874 Loans receivable – non-current (sub-Saharan Africa) 2 918 721 3 336 060 206 626 3 129 434 –Loans receivable – non-current (Eastern Europe) 18 724 20 390 590 590 19 211 Loans receivable – current 40 716 40 716 40 716 – –Trade and other receivables 258 071 258 071 258 071 – –Cash and cash equivalents 715 493 715 493 715 493 – –Total 4 104 281 6 491 565 1 488 023 3 985 457 1 018 085 Derivative financial assets Derivative instruments – non-current 6 846 27 543 10 086 16 522 934 Derivative instruments – current 815 2 440 2 440 – –Total 7 661 29 983 12 526 16 522 934 Non-derivative financial liabilities Long-term portion of borrowings 7 815 651 7 256 694 465 524 6 420 349 370 821 Short-term portion of borrowings 69 343 69 343 69 343 – –Financial guarantees – non-current(1) 185 686 6 462 459 3 786 293 2 676 166 –Trade and other payables 486 090 486 090 486 090 – –Total 8 556 770 14 274 586 4 807 250 9 096 515 370 821 Derivative financial liabilities(2)

Derivative instruments – non-current 24 060 12 843 28 435 41 330 930 Derivative instruments – current 1 999 135 135 – –Total 26 059 12 978 28 570 41 330 930 Net exposure (7 766 016) (3 335 271) (5 135 866) 647 268 (1) The outflows disclosed for the financial guarantees in the table represent maximum potential outflow under the guarantees in the event of the borrowers

defaulting on all their obligations under the guaranteed loans.(2) The inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk

management purposes. These derivative financial instruments are not usually closed out before contractual maturity. The disclosure shows net cash flow amounts for derivatives as they are settled on a net basis.

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M. FINANCIAL RISK MANAGEMENT continued M2 LIQUIDITY RISK AND SENSITIVITY continuedM2.2 Financial exposure continued

COMPANYCarrying

value

Con-tractual

cash flows(1)Within

one yearOne to

five yearsMore than five years

30 June 2019 R000 R000 R000 R000 R000

Non-derivative financial assets Financial asset 218 444 3 220 944 230 232 1 207 965 1 782 747 Loans receivable – non-current (sub-Saharan Africa) 758 264 758 264 – 758 264 –Loans receivable – non-current (Eastern Europe) 18 847 19 935 594 19 341 –Loans receivable – non-current (South Africa) 53 603 53 603 – 53 603 –Trade and other receivables 104 534 104 534 104 534 – –Cash and cash equivalents 1 062 412 1 062 412 1 062 412 – –

Total 2 216 104 5 219 692 1 397 772 2 039 173 1 782 747 Derivative financial assets Currency collars – non-current 619 34 389 – 34 389 –Currency collars – current 2 691 140 401 140 401 – –Total 3 310 174 790 140 401 34 389 –Non-derivative financial liabilities Long-term portion of borrowings 4 410 909 4 768 365 317 939 4 079 293 371 132 Short-term portion of borrowings 1 008 000 1 027 815 1 027 815 – –Financial guarantees – non-current(1) 296 424 6 650 356 3 786 293 2 864 063 –Trade and other payables 447 691 447 691 447 691 – –Total 6 163 024 12 894 227 5 579 738 6 943 356 371 132 Derivative financial liabilities(2)

Interest rate swaps – non-current 59 408 47 625 17 603 30 022 –Interest rate swaps – current 7 326 4 750 4 750 – –Total 66 734 52 375 22 353 30 022 –Net exposure – (7 552 120) (4 063 918) (4 899 816) 1 411 615

30 June 2018Non-derivative financial assets Financial asset 152 556 2 120 835 266 527 855 433 998 874 Loans receivable – non-current (sub-Saharan Africa) 758 264 758 264 – 758 264 –Loans receivable – non-current (Eastern Europe) 18 723 20 390 590 590 19 211 Loans receivable – current 84 160 84 160 84 160 – –Trade and other receivables 187 490 187 490 187 490 – –Cash and cash equivalents 655 789 655 789 655 789 – –Total 1 856 982 3 826 928 1 194 556 1 614 287 1 018 085 Non-derivative financial liabilities Long-term portion of borrowings 2 949 278 3 689 627 247 182 3 071 624 370 821 Short-term portion of borrowings 761 125 910 108 910 108 – –Financial guarantees – non-current 388 508 9 353 397 3 960 060 5 393 337 –Trade and other payables 346 916 346 916 346 916 – –Total 4 445 827 14 300 048 5 464 266 8 464 961 370 821 Derivative financial liabilities(2)

Derivative instruments – non-current 24 060 74 515 27 521 45 130 1 864 Derivative instruments – current 1 999 1 999 1 999 – –Total 26 059 76 514 29 520 45 130 1 864

Net exposure – (10 549 634) (4 299 230) (6 895 804) 645 400 (1) The outflows disclosed for the financial guarantees in the table represent maximum potential outflow under the guarantees in the event of the borrowers

defaulting on all their obligations under the guaranteed loans.(2) The inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk

management purposes. These derivative financial instruments are not usually closed out before contractual maturity. The disclosure shows net cash flow amounts for derivatives as they are settled on a net basis.

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M3 INTEREST RATE RISK AND SENSITIVITYM3.1 Risk and mitigation

Interest rate risk is the risk that the value of short-term investments and financial performance will be impacted as a result of fluctuations in interest rates.

Exposure MitigationFluctuations in interest rates impact on the value of short-term investments, financing activities and the cost of borrowings, giving rise to interest rate risk.

Interest rates are monitored and appropriate steps taken to ensure that Hyprop’s exposure to interest rate fluctuations is limited.

The group has significant exposure to interest rate risk through its loans receivable and borrowings.

The group has a formal interest rate hedging policy for borrowings which was approved by the audit and risk committee and the board during the year. In terms of this policy at least 75% of interest rate exposure for borrowings is fixed over the life of interest-bearing borrowings. The board has approved the use of interest rate swaps, forward starting interest rate swaps, fixed rate loans, interest rate collars and interest rate caps to manage interest rate exposure. Details of interest rate hedges at 30 June 2019 are included in note H2 to the financial statements.

M3.2 Financial exposureThe interest rate profile of the group’s interest-bearing borrowings as reported is as follows:


R000 R000 R000 R000

Long-term portion of borrowings 6 320 801 7 815 651 4 410 909 2 949 278 Short-term portion of borrowings 1 008 000 69 343 1 008 000 761 125 Total 7 328 801 7 884 994 5 418 909 3 710 403

Summarised quantitative data on the group’s interest rate exposure is set out in the statistics below:

GROUP30 June 2019 30 June 2018

On-balance sheet debt at fixed rates (%) (excludes EUR funding) 77,0 81,2 South African debt 101,1 113,6 USD debt (Rand equivalent) 44,6 61,0

Average maturity of interest rate hedges (years) 2,25 2,32 South African debt 2,58 2,74 USD debt (Rand equivalent) 1,24 1,15

Average duration of borrowings (years) 2,21 2,43 South African debt 2,84 3,15 USD debt (Rand equivalent) 1,35 1,98

Cost of funding (%) (including hedges) 7,7 6,7 South African debt 9,3 9,4 USD debt 5,4 5,0

Cost of funding (%) (excluding hedges) 7,3 6,5 South African debt 8,7 8,6 USD debt 5,5 5,1

Debt capital market (DCM) % of total debt 22 20Interest cover ratioInterest cover ratio (gross) 4,12 4,36 Interest cover ratio (net) 5,18 8,08 Borrowings covenantsLTV (banks/DCM) 50 – 70/55 50 – 70/55Interest cover (banks) 1,75 – 2,0 1,75 – 2,0

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M. FINANCIAL RISK MANAGEMENT continued M3 INTEREST RATE RISK AND SENSITIVITY continuedM3.3 Sensitivity

Based on the interest rate profile (fixed or variable) of the group’s borrowings and interest rate swaps at 30 June 2019, an interest rate increase/decrease of 150 basis points, while all other variables are held constant, would decrease/increase the group’s profit for the year ended 30 June 2019 by R28,6 million (2018: R18,7 million).

M4 CURRENCY RISK AND SENSITIVITYM4.1 Risk and mitigation

Exposure MitigationThe group is exposed to currency risk in three areas:(i) Transactional versus functional currency exposure

The mismatch between the currencies in which revenue, operating costs and borrowings are denominated and the respective functional currencies of group companies.

Where we are exposedHyprop is exposed to this risk at all levels where it transacts in currencies other than the functional currency, e.g. Euro and USD denominated loans guaranteed by Hyprop (whose functional currency is ZAR), Nigerian Naira denominated expenses and bank accounts in Nigeria (where functional currency is USD) and Euro denominated bank loans across the European portfolio.

The group’s policy is to match the currency in which borrowings are incurred to the currency in which income is earned. This reduces the impact of currency fluctuations on debt service obligations, and thereby reduces the risk of guarantees being called. This is particularly relevant to the group’s funding structures in its sub-Saharan African investments and European investments where borrowings have been guaranteed by Hyprop.

(ii) Functional versus reporting currency The difference that gives rise to a currency translation reserve

in the consolidated financial statements (for example, a subsidiary has a US Dollar functional currency and Hyprop Group reporting currency is ZAR (Rand), or foreign exchange gains or losses on balances denominated in foreign currency).

Where we are exposedHyprop is exposed to this risk through its wholly owned subsidiary Hyprop Mauritius whose functional currency is USD. Although the European properties in the Hystead Group present the same exposure (reporting in Euro, while functioning in Dinar, Kuna, Denar and Lev), the investment in Hystead accounted for as a financial asset and is not consolidated by Hyprop.

Insofar as this risk relates to Hyprop Mauritius, the risk is unmitigated as there are no cash flows which can be hedged. To the extent cash flows do arise, these will be hedged under (iii) below.

Hyprop’s investment in Hystead is accounted for as a financial asset and is not consolidated by Hyprop. Therefore this risk is not applicable to the investment in Hystead.

(iii) Settlement versus functional currency The mismatch between the currency in which transactions

(for example, dividends and interest) are settled (send-side), and the currency in which they are received.)

Where we are exposedHyprop is exposed to this risk through the payments it makes and receives (including dividend income) in Euro and USD.

The group has a formal foreign currency hedging policy which was approved by the audit and risk committee and the board during the year. In terms of this policy between 50% and 75% of known, or reliably predictable, cash flow items can be hedged up to 12 months in advance using foreign exchange collars or forward exchange contracts.

Refer to note H2 of the financial statements for details of the foreign exchange collars in place at 30 June 2019.

The following significant exchange rates were applied during the year:

AVERAGE RATE YEAR END SPOT RATE30 June 2019 30 June 2018 30 June 2019 30 June 2018

Rand/Euro 16,04 15,32 16,11 16,00 Rand/US Dollar 14,13 12,85 14,15 13,70 Naira/US Dollar 362,11 338,02 361,93 360,99

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M4.2 Financial exposureSummarised quantitative data about the group’s exposure to currency risk is as follows:

GROUPCarrying

valueCarrying

valueCarrying

valueCarrying

value30 June 2019 EUR000 USD000 NGN000 R000

Financial asset 13 561 – – 218 444 Loans receivable – non-current (Eastern Europe) 1 170 – – 18 847 Loans receivable – current – 94 221 – 1 333 106 Trade and other receivables 1 011 77 2 062 028 97 971 Cash and cash equivalents (including held-for-sale) – 15 319 1 061 880 258 254

Asset exposure 15 742 109 617 3 123 908 1 926 622 Long-term portion of borrowings – 263 457 – 3 727 579 Short-term portion of borrowings – 813 – 11 499 Financial guarantees – non-current 6 854 – – 110 401 Trade and other payables – 1 513 1 067 648 63 150

Non-derivative liabilities exposure 6 854 265 783 1 067 648 3 912 629

Derivative financial liabilities 205 (59) – 2 480

Net exposure 8 683 (156 107) 2 056 260 (1 988 487)

30 June 2018 Financial asset 9 534 – – 152 556 Loans receivable – non-current (sub-Saharan Africa) – 213 045 – 2 918 717 Loans receivable – non-current (Eastern Europe) 1 170 – – 18 724 Loans receivable – current 2 545 – – 40 716 Trade and other receivables 8 435 – 1 835 309 204 624 Cash and cash equivalents (including held-for-sale) – 370 1 129 033 47 923

Asset exposure 21 684 213 415 2 964 342 3 383 260 Long-term portion of borrowings – 343 261 – 4 702 674 Short-term portion of borrowings – 17 010 – 233 041 Financial guarantees – non-current 11 604 – – 185 686 Trade and other payables – 478 1 170 399 50 968

Non-derivative liabilities exposure 11 604 360 749 1 170 399 5 172 369

Derivative financial liabilities (108) 543 – 5 715

Net exposure 10 188 (147 877) 1 793 943 (1 794 824)

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M. FINANCIAL RISK MANAGEMENT continued M4 CURRENCY RISK AND SENSITIVITY continuedM4.2 Financial exposure continued

COMPANYCarrying

valueCarrying

value30 June 2019 EUR000 R000

Financial asset 13 561 218 444 Loans receivable – non-current (Eastern Europe) 1 170 18 847 Trade and other receivables 1 011 16 278

Asset exposure 15 742 253 569

Financial guarantees – non-current 6 854 110 401 Non-derivative liabilities exposure 6 854 110 401

Derivative financial liabilities 205 3 310

Net exposure 8 683 139 858

COMPANY30 June 2018 Financial asset 9 534 152 556 Loans receivable – non-current (Eastern Europe) 1 170 18 723 Trade and other receivables 4 780 76 484

Asset exposure 15 484 247 763

Financial guarantees – non-current 11 604 185 686 Non-derivative liabilities exposure 11 604 185 686

Derivative financial liabilities (108) (1 722)

Net exposure 3 988 63 799

M4.3 SensitivityThe following sensitivity analysis is provided to show the foreign currency exposure of the individual entities at the end of the reporting period. This analysis is prepared based on the statement of financial position balances at year end, for which there is currency risk, before consideration of currency derivatives.

The effect on equity is calculated as the effect on profit or loss. The effect on translation of results into the group’s presentation currency is excluded from the information provided.

The pre-tax effect of changes to one of the exchange rates is summarised below. The analysis assumes that all other variables, in particular, interest rates, remain constant.

GROUP COMPANY30 June 2019 30 June 2018 30 June 2019 30 June 2018 30 June 2019 30 June 2018

% change % change R000 R000 R000 R000

Impact on profit or lossRand/Euro Strengthening 0,25 1,27 685 78 574 685 78 574 Rand/US Dollar Strengthening 0,25 0,72 – 6 838 N/A N/ANaira/US Dollar Strengthening 0,25 – N/A N/A N/A N/ARand/Euro Weakening 0,25 1,27 (685) (78 574) (685) (78 574)Rand/US Dollar Weakening 0,25 0,72 – (6 838) N/A N/ANaira/US Dollar Weakening 0,25 – N/A N/A N/A N/A

Impact on other comprehensive incomeRand/US Dollar Strengthening 0,25 0,72 (85) (1 537) N/A N/ANaira/US Dollar Strengthening 0,25 – 5 141 N/A N/A N/ARand/US Dollar Weakening 0,25 0,72 85 1 537 N/A N/ANaira/US Dollar Weakening 0,25 – (5 141) N/A N/A N/A

Page 176


M5 CREDIT RISK AND SENSITIVITYM5.1 Risk and mitigation

Credit risk is the risk of financial loss due to counterparties not meeting their contractual obligations when due.

The group is exposed to credit risk due to its trade receivables, cash and cash equivalents, loans receivable and derivative instruments.

Exposure Mitigation

Receivables The group is exposed to credit risk due to trade receivables. The maximum exposure to credit risk in respect of trade receivables at the reporting date is the fair value of each class of receivable.

Deposits and guarantees Save for national tenants, a deposit in the form of cash or a bank guarantee is obtained from tenants in terms of Hyprop’s deposit policy. Furthermore, and only if required, a deed of suretyship will be obtained from a tenant.

Loans receivableThe group is exposed to credit risk due to its loans receivable. The maximum exposure to credit risk in respect of loans receivable at the reporting date is the fair value of each class of loan receivable.

The credit risk in respect of loans receivable is generally mitigated by agreements with the counterparty. These agreements include claims which provide legal protection for Hyprop, common to such agreements. Loans are generally only advanced to group or related parties.

Cash and cash equivalentsThe maximum exposure to credit risk due to cash and cash equivalents is the outstanding balance on deposit with the respective financial institution.

The group and company manage their exposure to credit risk by placing funds with a range of leading South African banks and AA+ rated money market funds. Exposure levels to each financial institution are monitored regularly.

Derivative instrumentsThe maximum exposure to credit risk in respect of derivative instruments at the reporting date is the fair value of the derivative instruments.

The group and company manage their exposure to credit risk by transacting only with leading South African banks.

M5.2 Financial exposure The group considers its maximum credit risk exposure per asset class, without taking into account any collateral and financial

guarantees, to be as follows:


Ref R000 R000 R000 R000

Loans receivable – non-current M5.2.1 18 847 2 937 445 72 450 18 723 Loans receivable – current M5.2.2 1 333 106 40 716 – 84 160 Trade and other receivables (including held-for-sale) M5.2.3 174 970 245 639 94 359 181 339 Cash and cash equivalents (including held-for-sale) M5.2.4 1 326 849 715 648 1 062 412 643 032 Derivative instruments – assets M5.2.5 3 310 7 661 3 310 224

2 857 082 3 947 109 1 232 531 927 478

M5.2.1 Loans receivable – non-currentThe loans receivable from Vondelvlag Stichting and Vondelvlag Finance (which expire in 2021) do not exhibit any signs of credit impairment. Interest payments continued to be made on these loans at each scheduled quarterly date and no expectation of default is indicated.

M5.2.2 Loans receivable – currentAlthough the loans receivable from AttAfrica and Manda Hill were credit impaired at 30 June 2018, interest payments continued to be made on these loans at the beginning of the current year.

During the year, however, the credit quality of the loans deteriorated as a result of the deterioration of the economic environments in which the group’s sub-Saharan African interests operate, losses incurred by AttAfrica, the cessation of payment of the majority of the interest on the loans, decreases in the independent valuations of the underlying investment properties and Hyprop’s decision to dispose of its sub-Saharan African interests. This resulted in the credit quality of the loans declining to stage 3 credit impaired.

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M. FINANCIAL RISK MANAGEMENT continued M5 CREDIT RISK AND SENSITIVITY continuedM5.2 Financial exposure continued


R000 R000 R000 R000

M5.2.3 Trade receivablesMaximum exposure 148 175 196 015 67 564 172 406

Gross trade and other receivables 174 970 245 639 94 359 181 339Cumulative impairments (26 795) (49 624) (26 795) (8 933)

Mitigating balances 374 581 315 943 345 792 283 710Bank guarantees on behalf of tenants in favour of the group 235 212 229 296 214 004 211 199Tenant deposits held by the group 139 369 86 647 131 788 72 511

M5.2.3.1 Impairment of trade receivables The allowance for doubtful debts has been determined on a tenant-by-tenant basis, taking into account the circumstances of each

tenant, including factors such as defaults on payment terms, known insolvency and the legal status of the accounts.

The group has applied the simplified approach to determine the expected credit loss for trade receivables resulting in a calculation of lifetime expected credit losses.

Management believes that there are no significant trade receivables that are doubtful that have not been provided for as doubtful debts or written off.


R000 R000 R000 R000

Movement reconciliationBalance at the beginning of the year 49 624 33 944 8 933 5 558 Allowance for doubtful debts raised during the year 47 052 31 089 23 712 12 825 Receivables written off during the year (5 850) (17 509) (5 850) (9 450)Currency translation adjustment 1 369 2 100 – –Transferred to held-for-sale (65 400) – – –Balance at the end of the year 26 795 49 624 26 795 8 933 Ageing of impaired receivablesCurrent 10 753 2 772 10 753 2 771 30 days 4 031 1 791 4 031 1 791 60 days 2 745 1 218 2 745 1 218 90+ days 9 266 43 843 9 266 3 153 Total 26 795 49 624 26 795 8 933 Ageing of receivables past due but not impaired30 days 2 422 11 911 2 422 3 232 60 days 855 7 409 855 1 084 90+ days 2 197 27 872 2 197 3 585 Total 5 474 47 192 5 474 7 901

Page 178


M5.2.4 Cash and cash equivalentsCash and cash equivalents comprise cash deposits with leading South African banks and units held in AA+ rated money market funds.

The Moody’s credit ratings for the counterparty financial institutions as well the exposure concentration of cash and cash equivalents with each financial institution are as follows:

GROUP COMPANYCredit rating Credit rating 30 June 2019 30 June 2018 30 June 2019 30 June 2018

2019 2018 % % % %

Absa Bank Limited Baa3 Baa3 60,6 48,9 73,3 53,3 Nedbank Baa3 Baa3 18,8 37,3 22,7 40,7 Standard Bank Group Baa3 Baa3 20,6 13,8 4,0 6,0

Total exposure 100,0 100,0 100,0 100,0

Impairment losses on cash and cash equivalents are measured on a 12-month expected credit loss basis. No expected credit losses are anticipated in respect of cash and cash equivalents, given the credit ratings of the counterparties.

M5.2.5 Derivative instrumentsDerivative instruments comprise interest rate swaps and foreign currency collars.

The Moody’s credit ratings for the counterparty financial institutions as well the exposure of derivative instruments with each financial institution are as follows:

GROUP COMPANYCredit rating Credit rating 30 June 2019 30 June 2018 30 June 2019 30 June 2018

2019 2018 % % % %

Rand Merchant Bank Baa3 Baa3 5,8 6,7 4,7 6,1 Nedbank Baa3 Baa3 41,0 56,4 45,3 68,1 Standard Bank Group Baa3 Baa3 53,2 36,9 50,0 25,8

Total exposure 100,0 100,0 100,0 100,0

Exposure is based on the nominal values of the underlying derivative instruments.

Page 179



N. CASH FLOW INFORMATIONN1 CASH GENERATED FROM OPERATIONS


R000 R000 R000 R000

Total profit for the period/year attributable to shareholders of the company 164 922 2 529 466 320 362 2 243 150 Non-controlling interests share of profit after tax (53 386) (8 543) – –Deferred and normal tax (93 028) 39 486 1 730 11 838 Profit before taxation 18 508 2 560 409 322 092 2 254 988 Adjustments to profit before tax to cash generated from operations 2 187 695 (475 938) 1 726 325 (280 405)

Interest earned (156 043) (312 550) (77 152) (70 511)Interest incurred 617 198 594 823 313 257 351 357 Change in fair value – investment property 337 238 (650 206) 158 832 (651 558)Change in fair value – straight-line rental income accrual 87 887 3 847 81 399 4 696 Derecognition of financial guarantee (185 686) (11 984) (218 779) (77 269)Change in fair value – investment in joint venture – sub-Saharan Africa 105 809 10 102 – –Change in fair value – financial asset 85 229 (87 761) 85 229 (87 761)Change in fair value – derivatives 46 102 (29 085) 37 591 (14 760)

Profit/(loss) on disposal – investment property (2 825) (2 697) (2 825) (2 697)Impairment of shareholder/intercompany loan 1 350 727 166 441 1 485 389 – Impairment of subsidiary – – 16 294 464 958 Provision for costs to sell 29 964 – – –Dividends received (221 190) (182 778) (221 190) (241 672)

Unrealised foreign exchange loss/gain 1 121 (8 860) 1 121 (340)Movement in bad debts provision 47 052 (15 680) 23 712 –Depreciation – BA 42 209 38 149 40 523 36 397 Share-based payment expense 2 496 10 877 2 496 10 877 Other non-cash items 407 1 424 428 (2 122)

Operating profit before working capital changes (Cash generated from operations) 2 206 203 2 084 471 2 048 417 1 974 583 Decrease in working capital (56 271) 48 665 (14 393) 9 017 Decrease/(increase) in receivables (49 433) (616) 806 (33 503)(Decrease)/increase in payables (6 838) 49 281 (15 199) 42 520

Cash generated from operations 2 149 932 2 133 136 2 034 024 1 983 600

Page 180


N2 OTHER CASH FLOW NOTES


R000 R000 R000 R000

N2.1 Taxation paidTaxation payable at the beginning of the year (1 251) – – –Charge for the year in statement of profit or loss and other comprehensive income (427) (4 381) – –Taxation (receivable)/payable at the end of the year (2 530) 1 251 – –

Taxation paid in cash (4 208) (3 130) – –

N2.2 Dividends receivedDividend receivable at the beginning of the year 76 484 57 257 76 484 115 408 Dividend income 221 190 182 778 221 190 241 672 Dividends receivable at the end of year (16 278) (76 484) (16 278) (76 484)

Dividends received in cash 281 396 163 551 281 396 280 596

O. ADDITIONAL INFORMATION (INCLUDED IN THE AUDITED FINANCIAL STATEMENTS)O1 GOING CONCERN

The financial statements are prepared on the basis of accounting policies applicable to a going concern. This basis takes into account that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities will occur in the ordinary course of business.

At 30 June 2019 the company’s current liabilities exceeded its current assets by R240 million. The increase in current liabilities is due to loans maturing in less than one year. The company proposes to settle these short-term borrowings from existing cash balances and existing and new bank facilities.

In March 2019 the company raised R500 million by the issue of new bonds. R350 million of these proceeds (included in cash balances at 30 June 2019) are earmarked to settle R358 million of bonds which mature in July 2019.

At 30 June 2019 the company had undrawn revolving credit facilities of R500 million. Subsequent to 30 June 2019 term sheets have been signed with commercial banks for an additional R1,1 billion of bank facilities for between three and five-year terms.

Accordingly, the directors consider that the company and the group have adequate resources to continue operating for the ensuing 12 months and that it is appropriate to adopt the going concern basis in preparing the company and group financial statements.

O2 EVENTS AFTER THE REPORTING DATEO2.1 Disposal of Manda Hill Shopping Centre – Zambia

Subsequent to the year end, Hyprop and AttAfrica disposed of their interests in Manda Hill Shopping Centre in Zambia (the disposal).

The sale price is in line with Hyprop’s valuation of the Manda Hill Shopping Centre at 30 June 2019. Hyprop’s share of the disposal proceeds will be used to settle a portion of its US Dollar denominated debt.

O2.2 Declaration of dividendOn 4 September 2019 the board of directors declared a final dividend of 359,33956 cents per share in respect of the six months ended 30 June 2019.

Page 181


O. ADDITIONAL INFORMATION (INCLUDED IN THE AUDITED FINANCIAL STATEMENTS) continuedO3 JSE PROPERTY DISCLOSURES

Listed companies that carry out property-related transactions are subject to additional requirements, principally relating to valuations. Property entities are subject to additional requirements (principally relating to valuations and disclosure of their property portfolio) and different requirements with respect to financial information.

GROUP Location

Revenue attributable

to HypropR000

Revenue contribution

%Total

GLA m²

GLA contribution

%Revenue

per m²Retail

GLA m²Retail

vacancy m²

Retail vacancy

%Office

GLA m²Office

vacancy m²

Office vacancy

%

Retail – rental

escalation per year (1)

%

Office –rental

escalation per year

%

Average annualised

rental property

yield %

Average annualised

NOI property

yield %

30 June 2019(excluding properties held-for-sale)GEOGRAPHICAL PROFILE 2 986 920 100,0 706 414 100,0 352 662 946 5 103 0,8 43 468 4 638 10,7 7,7 7,6 7,5 7,5 South Africa 2 986 920 100,0 706 626 100,0 352 662 946 5 103 0,8 43 468 4 638 10,7 7,7 7,6 7,6 7,5

Gauteng 1 679 384 56,2 415 054 58,7 337 381 926 4 619 1,2 32 959 3 853 11,7 7,4 7,4 7,4 7,6 Western Cape 1 307 536 43,8 291 572 41,3 374 281 020 484 0,2 10 509 785 7,5 8,1 8,2 7,7 7,2

Sub-Saharan Africa – – – – – – – – – – – – – – –

SECTORAL PROFILESRetail 2 972 499 99,5 702 158 99,4 353 662 946 5 103 0,8 39 000 4 235 10,9 7,8 7,5 7,5 7,3 Shopping centres 2 813 368 94,2 653 732 92,5 359 614 304 4 700 0,8 39 000 4 235 10,9 7,9 7,5 7,5 7,2

Super regional 765 607 25,6 158 737 22,5 402 148 188 484 0,3 10 509 785 7,5 8,6 8,2 7,2 6,9 Canal Walk WC 765 607 25,6 158 737 22,5 402 148 188 484 0,3 10 509 785 7,5 8,6 8,2 7,2 6,9

Large regional 1 808 702 60,6 456 035 64,5 331 437 642 3 995 0,9 18 249 463 2,5 7,5 8,1 7,7 7,3 Clearwater Mall GP 452 233 15,1 87 059 12,3 433 87 028 241 0,3 – – – 8,0 – 7,0 7,2 The Glen GP 207 395 6,9 80 431 11,4 215 80 323 3 196 4,0 – – – 7,2 – 8,6 7,9 Woodlands GP 275 610 9,2 71 626 10,1 321 71 629 61 0,1 – – – 7,4 – 7,1 7,0 CapeGate WC 222 269 7,4 63 832 9,0 290 63 831 – 0,0 – – – 8,0 – 8,5 7,4 Somerset Mall WC 319 660 10,7 69 003 9,8 386 69 001 – 0,0 – – – 7,8 – 7,5 7,2 Rosebank Mall GP 331 535 11,1 84 085 11,9 329 65 831 497 0,8 18 249 463 2,5 6,5 8,1 7,3 6,8

Regional 239 060 8,0 38 737 5,5 515 28 474 222 0,8 10 242 2 987 29,2 7,7 6,3 7,0 7,0 Hyde Park Corner GP 239 060 8,0 38 737 5,5 515 28 474 222 0,8 10 242 2 987 29,2 7,7 6,3 7,0 7,0

Value centres (Atterbury Value Mart) GP 159 130 5,3 48 649 6,9 273 48 642 403 0,8 – – – 7,7 – 7,0 8,5

Offices (standalone offices only) GP 14 421 0,5 4 468 0,6 – – – – 4 468 403 9,0 – 7,8 7,9 8,8

TOTAL 2 986 920 100,0 706 626 100,0 352 662 946 5 103 0,8 43 468 4 638 10,7 7,7 7,6 7,5 7,5 (1) Rental escalations relate to new leases and amendments made during the financial year.

Additional information (included in the audited financial statements)for the year ended 30 June 2019

Page 182


O. ADDITIONAL INFORMATION (INCLUDED IN THE AUDITED FINANCIAL STATEMENTS) continuedO3 JSE PROPERTY DISCLOSURES

Listed companies that carry out property-related transactions are subject to additional requirements, principally relating to valuations. Property entities are subject to additional requirements (principally relating to valuations and disclosure of their property portfolio) and different requirements with respect to financial information.

GROUP Location


to HypropR000


%Total

GLA m²

GLA contribution

%Revenue

per m²Retail

GLA m²Retail

vacancy m²

Retail vacancy

%Office

GLA m²Office

vacancy m²

Office vacancy

%

Retail – rental

escalation per year (1)

%

Office –rental

escalation per year

%

Average annualised

rental property

yield %

Average annualised

NOI property

yield %



Sub-Saharan Africa – – – – – – – – – – – – – – –



Large regional 1 808 702 60,6 456 035 64,5 331 437 642 3 995 0,9 18 249 463 2,5 7,5 8,1 7,7 7,3 Clearwater Mall GP 452 233 15,1 87 059 12,3 433 87 028 241 0,3 – – – 8,0 – 7,0 7,2 The Glen GP 207 395 6,9 80 431 11,4 215 80 323 3 196 4,0 – – – 7,2 – 8,6 7,9 Woodlands GP 275 610 9,2 71 626 10,1 321 71 629 61 0,1 – – – 7,4 – 7,1 7,0 CapeGate WC 222 269 7,4 63 832 9,0 290 63 831 – 0,0 – – – 8,0 – 8,5 7,4 Somerset Mall WC 319 660 10,7 69 003 9,8 386 69 001 – 0,0 – – – 7,8 – 7,5 7,2 Rosebank Mall GP 331 535 11,1 84 085 11,9 329 65 831 497 0,8 18 249 463 2,5 6,5 8,1 7,3 6,8

Regional 239 060 8,0 38 737 5,5 515 28 474 222 0,8 10 242 2 987 29,2 7,7 6,3 7,0 7,0 Hyde Park Corner GP 239 060 8,0 38 737 5,5 515 28 474 222 0,8 10 242 2 987 29,2 7,7 6,3 7,0 7,0

Value centres (Atterbury Value Mart) GP 159 130 5,3 48 649 6,9 273 48 642 403 0,8 – – – 7,7 – 7,0 8,5

Offices (standalone offices only) GP 14 421 0,5 4 468 0,6 – – – – 4 468 403 9,0 – 7,8 7,9 8,8

TOTAL 2 986 920 100,0 706 626 100,0 352 662 946 5 103 0,8 43 468 4 638 10,7 7,7 7,6 7,5 7,5 (1) Rental escalations relate to new leases and amendments made during the financial year.

Page 183


O. ADDITIONAL INFORMATION (INCLUDED IN THE AUDITED FINANCIAL STATEMENTS) continuedO3 JSE PROPERTY DISCLOSURES continued

GROUP Location


to HypropR000


%Total

GLA m²

GLA contribution

%

Averagerevenue

per m²Retail

GLA m²Retail

vacancy m²

Retail vacancy

%Office

GLA m²Office

vacancy m²

Office vacancy

%

Retail – rental

escalation per year(1)

%

Office –rental

escalation per year

%

Average annualised

rental property

yield %

Average annualised

NOI property

yield %



Sub-Saharan Africa 224 578 7,2 22 223 3,0 842 22 223 679 3,1 – – – 3,8 – 7,4 8,4



Large regional 1 730 878 55,7 456 099 61,2 316 437 850 8 084 1,8 18 249 296 1,6 6,6 8,0 7,5 7,2 Clearwater Mall GP 416 925 13,4 87 083 11,7 399 87 083 1 988 2,3 – – – 7,2 – 6,6 6,9 The Glen GP 223 410 7,2 80 428 10,8 231 80 428 4 378 5,4 – – – 6,0 – 7,3 7,6 Woodlands GP 282 122 9,1 71 643 9,6 328 71 643 618 0,9 – – – 5,8 – 7,4 7,1 CapeGate WC 208 807 6,7 63 756 8,6 273 63 756 308 0,5 – – – 7,3 – 8,6 7,4 Somerset Mall WC 301 900 9,7 69 054 9,3 364 69 054 75 0,1 – – – 6,3 – 7,4 7,2 Rosebank Mall GP 297 714 9,6 84 135 11,3 295 65 886 717 1,1 18 249 296 1,6 7,2 8,0 7,7 6,9

Regional 452 032 14,5 60 986 8,2 618 50 766 1 216 2,4 10 221 1 797 17,6 5,5 6,2 7,3 7,6 Hyde Park Corner GP 227 454 7,3 38 763 5,2 489 28 543 537 1,9 10 221 1 797 17,6 7,3 6,2 7,2 6,8 Ikeja City Mall Nigeria 224 578 7,2 22 223 3,0 842 22 223 679 3,1 – – – 3,8 – 7,4 8,4

Value centres (Atterbury Value Mart) GP 151 214 4,9 48 848 6,6 258 48 848 1 751 3,6 – – – 6,8 – 9,0 8,5

Offices (standalone offices only) GP 47 166 1,5 20 354 2,7 – – – – 20 354 1 027 5,0 – 7,6 8,3 8,4

TOTAL 3 107 536 100,0 744 683 100,0 348 685 727 11 392 1,7 58 956 3 255 5,5 6,6 7,4 7,6 7,5(1) Rental escalations relate to new leases and amendments made during the financial year.

Additional information (included in the audited financial statements) continuedfor the year ended 30 June 2019

Page 184



GROUP Location


to HypropR000


%Total

GLA m²

GLA contribution

%

Averagerevenue

per m²Retail

GLA m²Retail

vacancy m²

Retail vacancy

%Office

GLA m²Office

vacancy m²

Office vacancy

%

Retail – rental

escalation per year(1)

%

Office –rental

escalation per year

%

Average annualised

rental property

yield %

Average annualised

NOI property

yield %



Sub-Saharan Africa 224 578 7,2 22 223 3,0 842 22 223 679 3,1 – – – 3,8 – 7,4 8,4



Large regional 1 730 878 55,7 456 099 61,2 316 437 850 8 084 1,8 18 249 296 1,6 6,6 8,0 7,5 7,2 Clearwater Mall GP 416 925 13,4 87 083 11,7 399 87 083 1 988 2,3 – – – 7,2 – 6,6 6,9 The Glen GP 223 410 7,2 80 428 10,8 231 80 428 4 378 5,4 – – – 6,0 – 7,3 7,6 Woodlands GP 282 122 9,1 71 643 9,6 328 71 643 618 0,9 – – – 5,8 – 7,4 7,1 CapeGate WC 208 807 6,7 63 756 8,6 273 63 756 308 0,5 – – – 7,3 – 8,6 7,4 Somerset Mall WC 301 900 9,7 69 054 9,3 364 69 054 75 0,1 – – – 6,3 – 7,4 7,2 Rosebank Mall GP 297 714 9,6 84 135 11,3 295 65 886 717 1,1 18 249 296 1,6 7,2 8,0 7,7 6,9

Regional 452 032 14,5 60 986 8,2 618 50 766 1 216 2,4 10 221 1 797 17,6 5,5 6,2 7,3 7,6 Hyde Park Corner GP 227 454 7,3 38 763 5,2 489 28 543 537 1,9 10 221 1 797 17,6 7,3 6,2 7,2 6,8 Ikeja City Mall Nigeria 224 578 7,2 22 223 3,0 842 22 223 679 3,1 – – – 3,8 – 7,4 8,4

Value centres (Atterbury Value Mart) GP 151 214 4,9 48 848 6,6 258 48 848 1 751 3,6 – – – 6,8 – 9,0 8,5

Offices (standalone offices only) GP 47 166 1,5 20 354 2,7 – – – – 20 354 1 027 5,0 – 7,6 8,3 8,4

TOTAL 3 107 536 100,0 744 683 100,0 348 685 727 11 392 1,7 58 956 3 255 5,5 6,6 7,4 7,6 7,5(1) Rental escalations relate to new leases and amendments made during the financial year.

Page 185



Tenants in our portfolio are categorised by grade, although this is largely subjective given the strong retail nature of our portfolio.


to HypropR000


%Rentable area

(GLA) m²

Rentable area contribution

%Revenue

per m²

Tenant profile – 30 June 2019 South Africa 2 762 769 100,0 726 706 100,0 316,81 A grade(i) 1 505 224 54,5 473 391 65,1 264,97 B grade(ii) 777 658 28,1 155 408 21,4 417,00 C grade(iii) 479 887 17,4 97 907 13,5 408,46

Tenant profile – 30 June 2018 South Africa 2 503 784 100,0 733 606 100,0 284,42 A grade(i) 1 382 279 55,2 505 254 68,9 227,98 B grade(ii) 674 057 26,9 142 735 19,5 393,54 C grade(iii) 447 448 17,9 85 617 11,7 435,51

Tenant profile – 30 June 2018 Sub Saharan Africa (Ikeja City Mall) 176 296 100,0 21 029 100,0 698,60 A grade(i) 38 070 21,6 7 275 34,6 436,06 B grade(ii) 98 735 56,0 11 280 53,6 729,42 C grade(iii) 39 491 22,4 2 474 11,8 1 330,11 (i) A grade: Large national tenants, large listed tenants and major franchises (including all national retailers and tenants in large listed groups).(ii) B grade: Smaller national and listed tenants, medium-sized franchises, medium to large retailers.(iii) C grade: Smaller line stores.


Page 186


30 June 2019

GROUPFY20

%FY21

%FY22

%FY23

%FY24+

%

Lease expiry profile – by revenue (%) 28 20 17 13 22 Retail 28 20 16 13 23

Shopping centres 30 19 16 13 22 Super regional 19 25 14 18 24

Canal Walk 19 25 14 18 24 Large regional 31 19 17 11 22

Clearwater Mall 36 25 17 6 16 The Glen 29 16 20 18 17 Woodlands 21 35 16 8 20 CapeGate 47 10 16 13 15 Somerset Mall 21 20 18 12 29 Rosebank Mall 32 7 14 9 37

Regional 35 18 14 18 16 Hyde Park Corner 35 18 14 18 16

Value centres (Atterbury Value Mart) 17 23 16 11 33

Offices (standalone offices only) 24 21 22 22 12

30 June 2018

GROUPFY19

%FY20

%FY21

%FY22

%FY23+

%

Lease expiry profile – by revenue (%) 20 26 20 10 24 Retail 19 27 20 9 25

Shopping centres 18 28 19 9 25 Super regional 15 19 26 8 32

Canal Walk 15 19 26 8 32 Large regional 17 30 18 10 24

Clearwater Mall 8 38 25 13 16 The Glen 15 23 14 12 37 Woodlands 15 24 34 13 15 CapeGate 19 48 10 8 15 Somerset Mall 21 19 19 8 33 Rosebank Mall 26 29 7 7 31

Regional 23 28 20 8 22 Hyde Park Corner 24 25 18 9 23 Ikeja City Mall 21 30 21 7 21

Value centres (Atterbury Value Mart) 24 17 23 10 26

Offices (standalone offices only) 29 13 22 16 19

Page 187



30 June 2019

GROUPVacancy

%FY20

%FY21

%FY22

%FY23

%FY24+

%

Lease expiry profile – by rentable area % 2 25 15 14 12 32 Retail 1 26 15 13 12 34

Shopping centres 1 27 15 12 12 33 Super regional – 15 22 10 22 32

Canal Walk – 15 22 10 22 32 Large regional 1 28 14 14 10 34

Clearwater Mall – 36 19 11 5 28 The Glen 4 24 9 17 19 26 Woodlands – 13 32 16 9 30 CapeGate – 50 6 20 8 16 Somerset Mall – 14 13 11 14 48 Rosebank Mall 1 28 4 7 7 53

Regional 1 37 13 8 12 30 Hyde Park Corner 1 37 13 8 12 30

Value centres (Atterbury Value Mart) 1 14 20 16 9 41

Offices (standalone offices only) 11 24 16 23 14 12

30 June 2018

GROUPVacancy

%FY19

%FY20

%FY21

%FY22

%FY23+

%

Lease expiry profile – by rentable area % 2 16 17 24 9 32 Retail 2 15 16 25 8 34

Shopping centres 2 14 16 26 8 34 Super regional – 12 22 16 6 44

Canal Walk – 12 22 16 6 44 Large regional 2 13 14 26 9 36

Clearwater Mall 2 4 20 38 8 27 The Glen 5 13 8 19 11 44 Woodlands 1 10 32 15 15 27 CapeGate – 19 6 48 10 17 Somerset Mall – 11 14 14 6 54 Rosebank Mall 1 20 5 23 3 48

Regional 2 20 17 33 6 22 Hyde Park Corner 2 24 13 31 5 25 Ikeja City Mall 2 16 21 35 6 19

Value centres (Atterbury Value Mart) 4 23 20 13 9 33

Offices (standalone offices only) 6 26 20 13 19 17


Page 188


P. ADDITIONAL INFORMATION (EXCLUDED FROM THE AUDITED FINANCIAL STATEMENTS) P1 EARNINGS RECONCILIATIONSP1.1 Reconciliation of net income before fair value adjustments to distributable earnings

GROUP30 June 2019 30 June 2018

R000 R000

Net income before fair value adjustments 1 797 771 1 955 219 Adjustments to calculate distributable income 104 897 (50 705)

Straight-line rental income accrual 87 887 3 847 Non-controlling interest 30 959 2 600 Taxation paid – Hyprop Mauritius (427) (4 381)Net interest adjustments 134 (47 279)Other fair value adjustments – Edcon (12 705) –Capital items for distribution purposes (951) (5 492)

Distributable earnings 1 902 668 1 904 514 * Net effect of converting IFRS earnings to distributable earnings.

P1.2 Reconciliation of cash generated from operations to distributable earningsCash generated from operations 2 149 932 2 133 136 Adjusted for: (247 265) (228 622)

(Decrease)/increase in receivables 49 433 47 725 Decrease/(increase) in payables 6 838 (49 281)Bad debt provision and related balances (47 052) (31 089)Depreciation (42 209) (38 149)Share-based payment expense (net of forfeit credits) (2 496) (10 877)Interest received 156 043 312 550 Interest paid (617 198) (594 823)Dividend received 221 190 182 778 Other non-cash items (406) (1 424)Non-controlling interest 30 959 2 600 Taxation expense – Mauritius (427) (4 381)Sub-Saharan Africa 134 (47 279)Other impairments – Edcon – –Capital items for distribution purposes (951) (5 492)Capital items – other (1 120) 8 520

Distributable earnings 1 902 668 1 904 514

Additional information (excluded from the audited financial statements)for the year ended 30 June 2019

Page 189


P. ADDITIONAL INFORMATION (EXCLUDED FROM THE AUDITED FINANCIAL STATEMENTS) continued

P2 NET ASSET VALUESNAV Net Asset Value (NAV) per share is calculated by dividing equity and reserves attributable to Hyprop shareholders (as reflected

on the statement of financial position) by the number of ordinary shares in issue at the end of the year less treasury shares. TNAV Tangible Net Asset Value (TNAV) per share is calculated by dividing tangible net asset value (as calculated below) by the

number of ordinary shares in issue at the end of the year less treasury shares.

The effect of outstanding/unvested shares awarded to employees under the share scheme is not material.

P2.1 CalculationThe following table reflects the net asset and share data used in the NAV and TNAV per share calculations:


Equity and reserves attributable to Hyprop shareholders (R000) 24 452 006 26 304 917 24 540 621 26 184 148 Adjusted for:Deferred taxation 87 561 178 002 87 561 85 832 Tangible Net Asset Value (R000) 24 539 567 26 330 364 24 628 182 26 269 980 Number of ordinary shares in issue 255 894 516 255 894 516 255 894 516 255 894 516 Treasury shares (611 519) (446 260) – –Net number of ordinary shares in issue 255 282 997 255 448 256 255 894 516 255 894 516 NAV per share (Rand) 95,78 102,98 95,90 102,32 TNAV per share (Rand) 96,13 103,08 96,24 102,66

Additional information (excluded from the audited financial statements) continuedfor the year ended 30 June 2019

Page 190


P3 FIVE-YEAR REVIEW

COMPANY30 June 2019 30 June 2018 30 June 2017 30 June 2016 30 June 2015

R000 R000 R000 R000 R000

Revenue 3 217 848 3 113 713 3 167 649 3 078 221 2 703 034 Rental income and other income 2 330 177 2 244 650 3 128 062 2 976 420 2 642 949 Straight-line rental income accrual (87 887) (3 847) 39 587 101 801 60 085 Recoveries 975 558 872 910 – – –

Property expenses (1 179 054) (1 049 892) (1 073 877) (993 861) (887 918)Net property income 2 038 794 2 063 821 2 093 772 2 084 360 1 815 116 Other operating expenses (41 600) (55 778) (78 232) (76 593) (64 611)Operating income 1 997 194 2 008 043 2 015 540 2 007 767 1 750 505 Net interest (461 155) (282 273) (336 502) (366 176) (351 647)

Interest income 156 043 312 550 294 177 323 759 157 344 Interest expense (617 198) (594 823) (630 679) (689 935) (508 991)

Other income 40 542 46 671 36 931 – –Dividends received 221 190 182 778 146 350 – –Net operating income 1 797 771 1 955 220 1 862 319 1 641 591 1 398 858 Investment propertyChange in fair value (401 395) 779 036 973 270 1 227 151 2 426 584

Investment property (337 237) 650 206 1 142 199 1 280 333 2 407 028 Other investments (12 705) – – – –Derecognition of financial guarantee 185 686 11 984 – – –Loan receivable (105 809) – – – –Investment in joint venture – South-Eastern Europe (85 228) 87 761 (163 855) – –Derivative instruments (46 102) 29 085 (5 074) (53 182) 19 556

Profit/(loss) on disposal 2 825 2 697 (526) – (5 768)Investment property 2 825 2 697 2 031 – 24 243 Subsidiary – – (2 557) – (30 011)

Impairment of loans receivable (1 350 727) (166 441) (25 377) – –Other impairments (29 964) (10 102) 10 102 (10 102) –Impairment of goodwill/Investment in subsidiary – – (18 134) – (4 280)Net income before equity-accounted investments 18 511 2 560 410 2 801 654 2 858 640 3 815 394 Share of loss from joint ventures – – (50 380) (41 007) (17 447)Share of income from associate – – – 457 652 Profit before taxation 18 511 2 560 410 2 751 274 2 818 090 3 798 599 Taxation 93 028 (39 486) (4 340) (50 930) (19 023)

Normal taxation (427) (4 381) (2 714) (7 371) (12 386)Deferred taxation 93 455 (35 105) (1 626) (43 559) (6 637)

Profit for the year 111 538 2 520 924 2 746 934 2 767 160 3 779 576 Total profit for the year attributable to shareholders of the company 164 922 2 529 467 2 767 652 2 750 847 3 779 576 Investment property at fair value(1) 28 636 718 30 849 201 29 825 333 28 822 197 25 000 630 Distribution per share (cents) 745 757 695 620 543

(1) Excludes investment property held-for-sale.

Page 191



P. ADDITIONAL INFORMATION (EXCLUDED FROM THE AUDITED FINANCIAL STATEMENTS) continuedP4 SA REIT DETAILED PROPERTY DISCLOSURES

While section 13 of the JSE Listings Requirements prescribes certain disclosures applicable to property counters. SA REIT recommends that its members disclose the following additional information to provide users with more granular detail of the underlying properties as envisaged by the original REIT legislation, namely, to give investors the opportunity to fully understand the underlying properties that they invest in through the purchase and sale of a REIT’s shares.

GROUPAcquisition

date

Completion/major

development date

Land area

Occupied GLA

Vacant GLA

Total GLA

SA REIT average

annualised property

yield %

Average lease

length

Rental escalation

% GROUPAcquisition

date

Completion/major

development date

Land area

Occupied GLA

Vacant GLA

Total GLA

SA REIT average

annualised property

yield %

Average lease

length

Rental escalation

%

30 June 2019 30 June 2018R000 R000GEOGRAPHICAL PROFILE GEOGRAPHICAL PROFILESouth Africa 1 422 335 696 885 9 741 706 626 7,5 4,2 7,7 South Africa 1 422 335 696 673 9 741 706 414 7,4 4,3 8,0

Gauteng 723 175 406 583 8 472 415 054 7,6 4,3 7,4 Gauteng 723 175 406 413 8 472 414 885 7,5 4,4 8,0 Western Cape 699 160 290 303 1 269 291 572 7,2 3,8 8,1 Western Cape 699 160 290 260 1 269 291 529 7,1 4,0 8,1

Sub-Saharan Africa 51 360 21 658 565 22 223 8,5 3,4 3,7 Sub -Saharan Africa 51 360 – – – 8,4 3,4 3,8

SECTORAL PROFILES SECTORAL PROFILESRetail 1 473 695 714 479 9 903 724 381 7,4 4,1 7,3 Retail 1 473 695 692 608 9 338 701 946 7,4 4,1 7,6 Shopping centres 1 355 139 666 232 9 500 675 732 7,3 4,0 7,2 Shopping centres 1 355 139 644 368 8 935 653 304 7,2 4,1 7,5

Super regional 233 849 157 468 1 269 158 737 6,9 4,0 8,6 Super regional 233 849 157 428 1 269 158 697 6,8 4,1 8,1 Canal Walk 17 Oct 03 2018 233 849 157 468 1 269 158 737 6,9 4,0 8,6 Canal Walk 17 Oct 03 2018 233 849 157 428 1 269 158 697 6,8 4,1 8,1

Large regional 1 027 479 451 578 4 458 456 035 7,3 4,1 7,5 Large regional 1 027 479 451 434 4 458 455 891 7,2 4,2 7,9 Clearwater Mall 1 Sep 11 194 545 86 817 241 87 059 7,2 4,6 8,0 Clearwater Mall 1 Sep 11 194 545 86 786 241 87 028 6,9 4,6 8,2 The Glen 27 Dec 01 2018 98 689 77 235 3 196 80 431 7,9 4,7 7,2 The Glen 27 Dec 01 2018 98 689 77 127 3 196 80 323 7,6 4,6 9,0 Woodlands 1 Sep 11 215 684 71 566 61 71 626 7,0 4,5 7,4 Woodlands 1 Sep 11 215 684 71 569 61 71 629 7,1 4,6 7,4 CapeGate 1 Sep 11 242 438 63 832 – 63 832 7,4 4,1 8,0 CapeGate 1 Sep 11 242 438 63 831 – 63 831 7,4 3,9 7,7 Somerset Mall 1 Oct 13 222 873 69 003 – 69 003 7,2 3,4 7,8 Somerset Mall 1 Oct 13 222 873 69 001 – 69 001 7,2 3,9 8,3 Rosebank Mall 25 Apr 03 2018 53 250 83 125 960 84 085 6,8 3,7 6,8 Rosebank Mall 25 Apr 03 2018 53 250 83 120 960 84 080 6,9 3,9 7,3

Regional 93 811 57 186 3 773 60 960 7,7 3,7 5,5 Regional 93 811 35 507 3 209 38 716 7,6 3,7 5,9 Hyde Park Corner 8 Sep 98 42 451 35 528 3 209 38 737 7,0 4,0 7,3 Hyde Park Corner 8 Sep 98 42 451 35 507 3 209 38 716 6,8 3,9 8,0 Ikeja City Mall 17 Nov 15 51 360 21 658 565 22 223 8,5 3,4 3,7 Ikeja City Mall 17 Nov 15 51 360 – – – 8,4 3,4 3,8

Value centres (Atterbury Value Mart) 1 Sep 11 118 556 48 247 403 48 649 8,5 4,5 7,7


Offices (standalone offices only/Cradock) 1 Jun 09 – 4 065 403 4 468 8,8 4,2 7,8


Total 1 473 695 718 544 10 306 728 849 7,6 4,1 7,3 Total 1 473 695 696 673 9 741 706 414 7,5 4,2 7,6

(1) All properties listed above are externally valued as at 30 June 2019.(2) The group has 10 retail properties and one standalone office (2018: 10 retail, two office).(3) All properties are 100% owned except Canal Walk (80%), The Glen (75.16%) and Ikeja City Mall (75%).

Page 192


P. ADDITIONAL INFORMATION (EXCLUDED FROM THE AUDITED FINANCIAL STATEMENTS) continuedP4 SA REIT DETAILED PROPERTY DISCLOSURES

While section 13 of the JSE Listings Requirements prescribes certain disclosures applicable to property counters. SA REIT recommends that its members disclose the following additional information to provide users with more granular detail of the underlying properties as envisaged by the original REIT legislation, namely, to give investors the opportunity to fully understand the underlying properties that they invest in through the purchase and sale of a REIT’s shares.

GROUPAcquisition

date

Completion/major

development date

Land area

Occupied GLA

Vacant GLA

Total GLA

SA REIT average

annualised property

yield %

Average lease

length

Rental escalation

% GROUPAcquisition

date

Completion/major

development date

Land area

Occupied GLA

Vacant GLA

Total GLA

SA REIT average

annualised property

yield %

Average lease

length

Rental escalation

%

30 June 2019 30 June 2018R000 R000GEOGRAPHICAL PROFILE GEOGRAPHICAL PROFILESouth Africa 1 422 335 696 885 9 741 706 626 7,5 4,2 7,7 South Africa 1 422 335 696 673 9 741 706 414 7,4 4,3 8,0

Gauteng 723 175 406 583 8 472 415 054 7,6 4,3 7,4 Gauteng 723 175 406 413 8 472 414 885 7,5 4,4 8,0 Western Cape 699 160 290 303 1 269 291 572 7,2 3,8 8,1 Western Cape 699 160 290 260 1 269 291 529 7,1 4,0 8,1

Sub-Saharan Africa 51 360 21 658 565 22 223 8,5 3,4 3,7 Sub -Saharan Africa 51 360 – – – 8,4 3,4 3,8

SECTORAL PROFILES SECTORAL PROFILESRetail 1 473 695 714 479 9 903 724 381 7,4 4,1 7,3 Retail 1 473 695 692 608 9 338 701 946 7,4 4,1 7,6 Shopping centres 1 355 139 666 232 9 500 675 732 7,3 4,0 7,2 Shopping centres 1 355 139 644 368 8 935 653 304 7,2 4,1 7,5

Super regional 233 849 157 468 1 269 158 737 6,9 4,0 8,6 Super regional 233 849 157 428 1 269 158 697 6,8 4,1 8,1 Canal Walk 17 Oct 03 2018 233 849 157 468 1 269 158 737 6,9 4,0 8,6 Canal Walk 17 Oct 03 2018 233 849 157 428 1 269 158 697 6,8 4,1 8,1

Large regional 1 027 479 451 578 4 458 456 035 7,3 4,1 7,5 Large regional 1 027 479 451 434 4 458 455 891 7,2 4,2 7,9 Clearwater Mall 1 Sep 11 194 545 86 817 241 87 059 7,2 4,6 8,0 Clearwater Mall 1 Sep 11 194 545 86 786 241 87 028 6,9 4,6 8,2 The Glen 27 Dec 01 2018 98 689 77 235 3 196 80 431 7,9 4,7 7,2 The Glen 27 Dec 01 2018 98 689 77 127 3 196 80 323 7,6 4,6 9,0 Woodlands 1 Sep 11 215 684 71 566 61 71 626 7,0 4,5 7,4 Woodlands 1 Sep 11 215 684 71 569 61 71 629 7,1 4,6 7,4 CapeGate 1 Sep 11 242 438 63 832 – 63 832 7,4 4,1 8,0 CapeGate 1 Sep 11 242 438 63 831 – 63 831 7,4 3,9 7,7 Somerset Mall 1 Oct 13 222 873 69 003 – 69 003 7,2 3,4 7,8 Somerset Mall 1 Oct 13 222 873 69 001 – 69 001 7,2 3,9 8,3 Rosebank Mall 25 Apr 03 2018 53 250 83 125 960 84 085 6,8 3,7 6,8 Rosebank Mall 25 Apr 03 2018 53 250 83 120 960 84 080 6,9 3,9 7,3

Regional 93 811 57 186 3 773 60 960 7,7 3,7 5,5 Regional 93 811 35 507 3 209 38 716 7,6 3,7 5,9 Hyde Park Corner 8 Sep 98 42 451 35 528 3 209 38 737 7,0 4,0 7,3 Hyde Park Corner 8 Sep 98 42 451 35 507 3 209 38 716 6,8 3,9 8,0 Ikeja City Mall 17 Nov 15 51 360 21 658 565 22 223 8,5 3,4 3,7 Ikeja City Mall 17 Nov 15 51 360 – – – 8,4 3,4 3,8





Total 1 473 695 718 544 10 306 728 849 7,6 4,1 7,3 Total 1 473 695 696 673 9 741 706 414 7,5 4,2 7,6

(1) All properties listed above are externally valued as at 30 June 2019.(2) The group has 10 retail properties and one standalone office (2018: 10 retail, two office).(3) All properties are 100% owned except Canal Walk (80%), The Glen (75.16%) and Ikeja City Mall (75%).

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P. ADDITIONAL INFORMATION (EXCLUDED FROM THE AUDITED FINANCIAL STATEMENTS) continued

P4 SA REIT DETAILED PROPERTY DISCLOSURES continuedP4.1 Top 10 tenants by GLA

SOUTH AFRICA GLA M² % OF SEGMENT GLARank Tenant Prior year ranking 30 June 2019 30 June 2018 30 June 2019 30 June 2018

1 Edcon Group 1 63 013 68 136 9,5 10,3 2 Woolworths 2 53 199 53 199 8,0 8,0 3 Mass Mart Group 3 49 718 50 841 7,5 7,7 4 Pick n Pay LTD 4 49 454 48 970 7,5 7,4 5 Foschini Group 5 35 722 34 208 5,4 5,2 6 Mr Price Group 6 28 946 29 247 4,4 4,4 7 Pepkor Holdings 7 22 427 22 059 3,4 3,3 8 Nu Metro 10 17 753 16 915 2,7 2,5 9 Truworths LTD 8 17 721 17 567 2,7 2,6

10 Shoprite Holdings 9 17 046 17 046 2,6 2,6

P4.2 Top 10 tenants by revenue

SOUTH AFRICA REVENUE R000 % OF SEGMENT REVENUERank Tenant Prior year ranking 30 June 2019 30 June 2018 30 June 2019 30 June 2018

1 Edcon Group 1 163 785 169 854 24,7 25,6 2 Foschini Group 2 157 916 145 348 23,8 21,9 3 Mr Price Group 3 92 974 87 674 14,0 13,2 4 Mass Mart Group 4 87 192 85 256 13,2 12,8 5 Pepkor Holdings 6 73 215 65 971 11,0 9,9 6 Truworths LTD 5 72 611 68 247 11,0 10,3 7 Woolworths 7 66 220 64 865 10,0 9,8 8 Pick n Pay LTD 8 59 393 55 689 9,0 8,4 9 Nu Metro 9 23 835 21 932 3,6 3,3

10 Shoprite Holdings 10 19 687 18 717 3,0 2,8

P4.3 Top 10 tenants by GLA

SUB-SAHARAN AFRICA (IKEJA CITY MALL) GLA M² % OF SEGMENT GLARank Tenant Prior year ranking 30 June 2019 30 June 2018 30 June 2019 30 June 2018

1 Shoprite 1 5 002 5 002 22,5 22,5 2 Silverbird Cinemas 2 1 611 1 611 7,3 7,3 3 Smartmark 740 – 3,3 –4 Mr Price 4 685 685 3,1 3,1 5 Rhapsodys 5 558 558 2,5 2,5 6 Redtag 6 517 518 2,3 2,3 7 Miniso 7 509 509 2,3 2,3 8 Cash & Carry 8 505 505 2,3 2,3 9 Gourmet Foods 224 – 1,0 –

10 Food Concept 214 – 1,0 –


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P4.4 Top 10 tenants by revenue

SUB-SAHARAN AFRICA (IKEJA CITY MALL) REVENUE R000 % OF SEGMENT REVENUERank Tenant Prior year ranking 30 June 2019 30 June 2018 30 June 2019 30 June 2018

1 Shoprite 1 22 805 20 105 13,9 11,47 2 Smartmark 11 091 – 6,8 –3 Mr Price 3 4 845 5 234 3,0 2,98 4 Silverbird Cinemas 5 4 027 4 350 2,5 2,48 5 Rhapsodys 4 3 673 5 229 2,2 2,98 6 Cash & Carry 6 3 358 4 085 2,0 2,33 7 Miniso 8 3 263 3 804 2,0 2,17 8 Food Concept 2 947 – 1,8 –9 Gourmet Foods 2 767 – 1,7 –

10 Redtag 2 750 – 1,7 –

P5 FINANCIAL INFORMATION ON HYSTEADFinancial position(Extracted from management accounts and included for information purposes only.)

STATEMENT OF FINANCIAL POSITION30 June 2019 30 June 2018

R000 R000

Non-current assets 13 013 799 12 703 739 Investment property 12 951 540 12 676 758 Other non-current assets 62 259 26 981 Current assets 556 203 512 699 Receivables and other current assets 89 659 106 232 Cash and cash equivalents 466 545 406 466

Total assets 13 570 002 13 216 438

Non-current liabilities 13 015 235 8 926 768 Borrowings – in country 5 881 478 2 873 344 Borrowings – equity 6 392 771 5 550 277 Other non-current liabilities 740 985 503 146 Current liabilities 271 795 4 082 283 Borrowings – in country 14 787 2 943 557 Borrowings – equity – 800 070 Other current liabilities 257 008 338 656

Total liabilities 13 287 031 13 009 051

Net assets 282 971 207 387

Converted to Rand at year-end spot rate R16.11/EUR for 2019 (2018: R16.00).

(Extracted from management accounts and included for information purposes only.)OPERATING/DISTRIBUTABLE INCOME

2019 2018Year ended 30 June R000 R000Total revenue 1 434 847 826 177Operating profit 916 062 513 901Finance costs (373 067) (169 252)Profit/(loss) from derivatives (62 348) –Net income before taxation 480 646 344 649Taxation (76 906) (41 048)Net income after taxation 405 740 303 601Dividends declared 349 676 301 804Dividend included in Hyprop’s income 221 190 180 525

Converted to Rand at year-end spot rate R16.04/EUR for 2019 (2018: R15.32).

Page 195


Q. SHAREHOLDERS’ INFORMATIONQ1 SHAREHOLDERS’ ANALYSIS

Number of shareholdings

% of number of shareholdings

Number of shares

% of issued capital

Q1.1 Shareholder spread1 – 1 000 7 766 61,2 3 368 972 1,3 1 001 – 10 000 3 959 31,2 11 411 847 4,5 10 001 – 100 000 712 5,6 22 110 555 8,6 100 001 – 1 000 000 215 1,7 62 367 171 24,4 Over 1 000 000 46 0,4 156 635 971 61,2

Total 12 698 100,0 255 894 516 100,0

Q1.2 Distribution of shareholdersAssurance companies 60 0,5 6 465 225 2,5 BEE entities 1 – 714 –Close corporations 117 0,9 334 358 0,1 Collective investment schemes 362 2,9 90 964 205 35,5 Custodians 104 0,8 41 658 506 16,3 Foundations and charitable funds 180 1,4 2 966 515 1,2 Hedge funds 2 – 56 500 –Insurance companies 13 0,1 190 341 0,1 Investment partnerships 48 0,4 135 158 0,1 Managed funds 45 0,4 1 121 815 0,4 Medical aid funds 20 0,2 941 408 0,4 Organs of state 6 – 37 581 294 14,7 Private companies 373 2,9 3 607 782 1,4 Public companies 8 0,1 3 989 556 1,6 Public entities 3 0,0 150 078 0,1 Retail shareholders 9 104 71,7 12 853 197 5,0 Retirement benefit funds 253 2,0 27 591 731 10,8 Scrip lending 17 0,1 10 922 389 4,3 Share schemes 1 – 359 519 0,1 Stockbrokers and nominees 23 0,2 5 087 099 2,0 Trusts 1 957 15,4 8 917 125 3,5 Unclaimed scrip 1 – 1 –

Total 12 698 100,0 255 894 516 100,0 Q1.3 Shareholder type

Non-public shareholders 10 0,08 30 751 215 12,02 Directors 8 0,06 419 310 0,16 Government Employees Pension Fund > 10% 1 0,01 29 972 386 11,71 Share scheme 1 0,01 359 519 0,14

Public shareholders 12 688 99,92 225 143 301 87,98 Total

Q1.4 Beneficial shareholders with a holding greater than 5% of the issued sharesGovernment Employees Pension Fund 33 129 683 12,9 MMI 14 983 188 5,9 State Street (Custodian) 14 763 822 5,8 Sanlam Group 12 900 805 5,0

Total 75 777 498 29,6

Shareholders’ informationfor the year ended 30 June 2019

Page 196


Q2 SHAREHOLDERS’ DIARYFinancial year end 30 June 2019Publication of financial results 5 September 2019Annual general meeting 2 December 2019Annual report available to shareholders October 2019Publication of interim results 28 February 2020

These dates are provisional and are subject to change.

Q3. DISTRIBUTION DETAILS2019

cents pershare

2018cents per

share

Six months ended:30 June 359,3 380,231 December 385,6 376,3

Total 744,9 756,5

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Q4. ADMINISTRATION

REGISTERED OFFICE AND BUSINESS ADDRESS2nd Floor, Cradock Heights21 Cradock AvenueRosebank 2196

REGISTRATION NUMBER1987/005284/06

CONTACT DETAILS +27 11 447 0090

@ www.hyprop.co.za twitter.com/Hyprop

CORPORATE ADVISER AND SPONSORJava Capital2nd Floor6A Sandown Valley CrescentSandton2196

COMPANY SECRETARYStatucor Proprietary LimitedWanderers Office Park52 Corlett DriveIllovo, Johannesburg, 2196

TRANSFER SECRETARYComputershare Investor Services Proprietary LimitedRosebank Towers15 Biermann AvenueRosebank 2196

POSTAL ADDRESSPO Box 52509Saxonwold2132

INVESTOR RELATIONSMichèle [email protected]: +27 82 497 9827

+27 10 003 0661

INDEPENDENT AUDITOR

KPMG INCKPMG Crescent85 Empire RoadParktown2193

Postal addressStatucor Proprietary LimitedPrivate Bag X60500Houghton2041

Postal addressComputershare Investor Services Proprietary LimitedPO Box 61051Marshalltown2107

Shareholders’ information continuedfor the year ended 30 June 2019

Page 198


Glossary

Q5. GLOSSARY

African Land African Land Investments Limited

ARC Audit and risk committee

AttAfrica AttAfrica Limited

CFC Controlled foreign company as defined in the South African Income Tax Act 58 of 1962

CUP The group long-term employee incentive scheme/the conditional share plan

ECL Expected credit loss/(es)

EE The Eastern Europe portfolio held through the group’s 60% interest in Hystead

FVLCTS Fair value less cost to sell

FVTPL Fair value though profit or loss

Gruppo Gruppo Investments Nigeria Limited

Hyprop Foundation Hyprop Foundation NPC

Hyprop Ikeja Hyprop Ikeja Mall Limited

Hyprop Mauritius Hyprop Investments (Mauritius) Limited

Hyprop Share scheme Hyprop Investments Employee Incentive Scheme Proprietary Limited

Hystead Hystead Limited ( a UK registered company)

Hystead Group Hystead Limited and its subsidiaries

IFRS International Financial Reporting Standards

Ikeja or Ikeja City Mall Ikeja City Mall, a property owned by Gruppo Investments Nigeria Limited

JIBAR The Johannesburg Interbank Average Rate

LIBOR The basic rate of interest used in lending between banks on the London interbank market and also used as a reference for setting the interest rate on other loans

Manda Hill Mauritius Manda Hill Mauritius Limited

OCI Other comprehensive income

PDI PDI Investment Holdings Limited, a co-investor in Hystead

SA The South African portfolio, comprising all South African shopping malls and offices irrespective of size

SAICA South African Institute of Chartered Accountants

SCE Statements of changes in equity

SCF Statements of cash flows

SFP Statements of financial position

SOCI Statements of profit or loss and other comprehensive income

SSA The sub-Saharan Africa portfolio, comprising interests in shopping centres in southern and western Africa, excluding South Africa, held through Hyprop Mauritius, a wholly owned subsidiary

WALE Weighted average lease expiry period in years

Page 199


Hyprop Investments Limited

Hyprop Investments Limited2nd FloorCradock Heights21 Cradock AvenueRosebank, 2196

www.hyprop.co.za

Hyprop Investments Lim

ited Integrated annual report and consolidated and separate financial statements 2019