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Annual Report 2006
Park Meadows, Kensington, Gauteng
Contents
Page
Executive Summary 1
Directorate & Administration 2 - 3
Chairman & Chief Executive Officer's Report 4 - 9
Corporate Governance Review 10 - 11
Unitholders' Diary 12
Analysis Of Linked Unitholders 13
Directors' Responsibility For & Approval Of The Annual Financial Statements 14
Independent Auditor’s Report 15
Annual Financial Statements
Directors' Report 16 - 17
Balance Sheets 18
Income Statements 19
Statements Of Changes In Equity 20
Cash Flow Statements 21
Notes To The Annual Financial Statements 22 - 39
Property Portfolio 40 - 41
Notice Of Annual General Meeting 42 - 44
Proxy Form 45 - 46
Directors’ Traditional Income Statement & Balance Sheet 47 - 49
This report together with additional information on the
property portfolio is available at: www.ambitprops.co.za
Annual Report 2006
1
Executive Summary
PROFILE
Ambit Properties Limited (Ambit or The Company) is a property loan stock company which listed on the JSE Securities Exchange South
Africa (JSE) in the Financials – Real Estate sector on 4 February 2004. (Share Code: ABT, ISN: ZAE000051645).
The market capitalisation of the company as at 30 September 2006 was R606 million.
The Group (Ambit and its subsidiary, Whirlprops 37 (Proprietary) Limited) has an investment in a property portfolio of 27 properties and
an investment in Oryx Properties Limited (Oryx), a property loan stock company listed on the Namibian Stock Exchange.
INVESTMENT STRATEGY, OBJECTIVES AND PROSPECTS
To provide investors with sustainable and growing income, and the associated capital appreciation, from an investment portfolio of retail,
office and industrial properties. To maintain the existing high quality of the portfolio and expand it with property acquisitions largely in the
major metropolitan areas which offer good rental growth prospects. Ambit will also continue to seek investment opportunities in selected
neighbouring countries.
HIGHLIGHTS
30 September 2006 30 September 2005
(Restated)
• Distribution (cents per unit) 29,60 27,50
• Income yield on unit price at beginning of year 9,2% 12,6%
• Weighted average headline earnings (cents per unit) 32,24 31,30
• Weighted average earnings (cents per unit) 77,20 77,91
• Number of properties 27 29
• Value of property portfolio (R) 824 550 000 671 000 000
• Oryx investment (R) 110 927 000 82 944 000
• Net asset value including distribution yet to be paid (cents per unit) 326 275
• Linked units in issue 186 482 837 173 814 215
• Market price (cents per unit) 325 323
• (Discount)/premium to net asset value (0,3%) 17,5%
• Borrowings (R) 315 960 000 267 199 000
• Interest bearing borrowings as a percentage of long-term assets 33,8% 35,5%
2
Directorate & Administration
From top left to right
R D Jeffery, R R Emslie, N B S Harris, D L Brown, F Uys, J H Beare, I N Mkhari and W H Raffinetti
Directors of Ambit Properties Limited
(Registration number: 2001/007003/06)
as at 30 September 2006 and at the date of this report are:
D L Brown (59)
(FRICS, MIV (SA)) # *
Non-executive independent Chairman
He has 38 years experience in commercial real estate focused
principally on development, leasing and asset management. He was
previously the managing director of Equity Estates (Proprietary)
Limited, until his retirement earlier this year.
N B S Harris (64)
(FRICS) #
Chief Executive Officer
Executive director
He has over 40 years experience in property. He was a director of
Marriott Property Services (Proprietary) Limited. He is a director of
Oryx Properties Limited (listed on the Namibian Stock Exchange),
is a past president of the South African Property Owners Association
and is chairman of the South African Board of the Royal Institution
of Chartered Surveyors.
J H Beare (52)
(BComm, CA(SA)) # • (C)
Non-executive independent director
He has 18 years experience in the property industry. He is the
managing director of Beare Holdings (Proprietary) Limited which is
extensively involved in property investment, development and
administration. He was a business service partner of Pim Goldby
(now Deloitte & Touche).
R R Emslie (48)
(BComm (Hons), CA (SA))
Non-executive director
He has 19 years banking experience with Absa Bank Limited with
senior appointments in both ACMB and the Business Bank. In August
2004 he was appointed as an executive director of the Absa Group.
He is a director of Paramount Property Fund Limited.
Annual Report 2006
3
R D Jeffery (61)
Alternate director to R R Emslie
(MBA)
Non-executive director
He has 41 years banking experience including 11 years experience
in commercial property finance. He is a general manager within the
Business Banking Services Division of Absa Bank Limited heading up
the Commercial Property Finance Department. He is a director of
Paramount Property Fund Limited.
I N Mkhari (32)
(BA Soc. Science) *
Non-executive independent director
Ipeleng is the Chief Investment Officer of Motseng Investment
Holdings (Proprietary) Limited. In 1998 she founded Phosa Iliso
CCTV; the first black woman-owned and managed CCTV business
in South Africa. She later co-founded Motseng Investment Holdings
and is a shareholder of Motseng Investment Holdings. She is a
director of all Motseng group subsidiaries, Kap International and
Marriott Property Fund Managers Limited.
F Uys (59)
(BA, BComm (Hons), MComm)
(Namibian) •
Non-executive independent director
His experience includes being the managing director of Metje &
Ziegler Limited from 1996 to 2004, of TransNamib Limited from
1989 to 1996 and a senior executive of the Trencor Group from
1970 to 1989. He founded the Road Transport Association in
Namibia in 1976 and acted as chairman until 1980. He has served
on various Government and advisory bodies in Namibia as well as
in South Africa. He was chairman of the Namibian Stock Exchange
from 1999 to 2001. He has been the chairman of FP du Toit Transport
(Proprietary) Limited since 1999, is the chairman of Intercape Ferreira
Mainliner (Proprietary) Limited and is a director of Oryx Properties
Limited.
# Member of the Investment Committee
• Member of the Risk, Audit and Compliance Committee
* Member of the Remuneration Committee
(C) Chairman of relevant sub-committee
Administration
Ambit has changed its registered office and as from 1 December
2006, the registered office is:
Ambit Properties Limited
First Floor, 4 Fricker Road
Illovo, 2196
P O Box 618, Melrose Arch, 2076
Company secretary and manager
Ambit Management Services (Proprietary) Limited
First Floor, 4 Fricker Road
Illovo, 2196
P O Box 618, Melrose Arch, 2076
Trustee
Steinway Trustees (Proprietary) Limited
The Manor House
14 Nuttall Gardens
Morningside
Durban, 4001
P O Box 37957, Overport, 4067
Commercial bank
Absa Bank Limited
Business Banking Services
Palazzo Towers West
Monte Casino Boulevard
Fourways, 2055
P O Box 782991, Sandton, 2146
Merchant bank
Grindrod Bank Limited
Building Three, First Floor, North Wing
Commerce Square, 39 Rivonia Road
Cnr Helling Road, Sandton
PO Box 78011, Sandton, 2146
Auditors
Deloitte & Touche
Deloitte & Touche Place
2 Pencarrow Crescent
La Lucia, Durban, 4001
P O Box 243, Durban, 4000
Transfer secretary
Computershare Investor Services 2004 (Proprietary) Limited
70 Marshall Street
Johannesburg, 2001
P O Box 61051, Marshalltown, 2017
Sponsors
Exchange Sponsors (Proprietary) Limited
Building Three, First Floor, North Wing
Commerce Square, 39 Rivonia Road
Cnr Helling Road, Sandton
PO Box 78011, Sandton, 2146
4
Chairman & Chief Executive Officer’s Report
Ambit has performed well for the year under review providing investors with steady income growth. Ambit’s distributable earnings for the financial year
ended 30 September 2006 amounts to R55,2million or 29,6 cents per unit (cpu) which shows growth of 7,6% over the 2005 distribution (2005: 27,5cpu).
The second half distribution of 15,6cpu shows growth of 11,4% over the first half year distribution of 14,0cpu.
1. ECONOMIC REVIEW
The economy continued the sound 4% growth of the past few years and at last job creation was positive.
Inflation remained within the Reserve Bank target of 3 – 6%, albeit edging towards the upper end of the band. Consumer spending continued to grow,
but this was tempered by the 0,5% interest rate increases in June and August. However, the weakening of the Rand against the major currencies will
have a positive impact on exports.
Business confidence ended the period under review at the same positive levels at which it commenced the year.
2. LISTED PROPERTY
The listed property sector started the period under review as a favoured asset class, with the strong investor demand driving the South African Property
Index (SAPY) index well below the benchmark Government long bond yields (the R153).
By May 2006, the SAPY index reached a peak of 465 from which it rapidly retreated 25% over the next 2 months following the global re-rating of
the emerging markets and the Reserve Bank increase in interest rates.
However, the underlying property fundamentals had not changed and ongoing growth in distributions from the sector soon had investors recognising
the over sold situation and returning to this asset class. By the end of September 2006 the index had recovered to 408, within 12% of its May high.
10
9
8
7
6
5
4
3
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0
Oct
05
Nov
05
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05
Jan
06
Feb
06
Mar
06
Apr
06
May
06
Jun
06
Jul
06
Aug
06
Sep
06
R153 ECPIX
ZAR/USD
The market capitalisation of the sector commenced the period under review at R45 billion and, by the end of September 2006, stood at R57 billion.
Oct
05
Nov
05
Dec
05
Jan
06
Feb
06
Mar
06
Apr
06
May
06
Jun
06
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Aug
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Sep
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0
AMBIT J253 R153
Annual Report 2006
5
The consistent income return from each of the major sectors over the last few years is clearly demonstrated and it is this which forms the foundation
of distribution growth to unitholders.
Ambit, with an income return of 11,5%, outperformed the listed fund index income return of 11% for the 2005 period, but marginally lagged the
growth index of 20,8% with 17,4%. This gave Ambit a total return of 30,8% for the year.
4. REVIEW OF FINANCIAL RESULTS
Ambit has performed steadily for the year under review, with distributions showing 7,6% growth over 2005. The core property portfolio showed a
15% growth in value over 2005.
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) for the first time in the current year,
and IFRS 1 (First time adoption of IFRS) has been applied. The adoption of IFRS has not resulted in any adjustments to the amounts reported previously
in the annual financial statements for the year ended 30 September 2005 or to the opening IFRS balance sheet at 1 October 2004. However, a change
in accounting interpretation of IAS 32 has resulted in the reclassification of share premium to debenture premium and in the amortisation of the resultant
debenture premium. This will increase earnings over the life of the debentures, and the Group has elected to transfer the amount to non-distributable
reserves in order not to affect distributions. This has had the effect of increasing earnings by R1,8 million or 0,99 cents per weighted number of units
in the current year (2005: R1,2 million or 0,72 cents) and increasing the opening balance of non-distributable reserves in 2005 by R0,7 million.
70 000
60 000
50 000
40 000
30 000
20 000
10 000
0
Oct
05
Nov
05
Dec
05
Jan
06
Feb
06
Mar
06
Apr
06
May
06
Jun
06
Jul
06
Aug
06
Sep
06
Rand (Billions)
Source: Inet and Catalyst
Listed Property Market Capitalisation
3. THE PROPERTY MARKET
The strong economic conditions have had a substantial impact on the commercial property market. Demand for retail space has continued, only being
satisfied by further new centres being brought to the market.
According to SAPOA’s statistics, vacancies in A grade offices in the popular decentralised office nodes have halved from about 7% to 3,5%.
Industrial and warehousing demand in all popular areas has virtually filled the available space and there is pressure on remaining vacant land from end
users and developers.
Rentals are rising in both the office and industrial sectors driven by demand and increasing building costs, which have risen substantially over the past
two years.
The Investment Property Data Bank (IPD), which measures direct property returns, and at December 2005 reflected a database of R81 billion (2005:
R74,7 billion), recorded a total return of 30,1% for 2005. The retail and industrial sectors were the top performers as can be seen below.
Total return (%) 2002 2003 2004 2005
Retail 11,0 17,3 26,2 33,0
Office 5,0 8,9 16,6 24,5
Industrial 8,8 17,7 24,4 33,1
All Property 9,6 15,3 23,4 30,1
Income return (%)
Retail 9,0 9,7 9,9 9,5
Office 10,3 10,9 10,7 10,9
Industrial 12,3 13,6 13,6 12,4
All Property 9,8 10,5 10,6 10,3
Source: IPD
6
Chairman & Chief Executive Officer’s Report (continued)
4. REVIEW OF FINANCIAL RESULTS (continued)
In terms of IAS 17: Leases, rental income is recognised on the straight line basis. The directors believe that the straight line basis is inappropriate and
this method of accounting does not add value to users of financial statements. The cash flows inherent in the leases and the straight line adjustment
are separately disclosed in the financial statements in order to assist users to calculate growth trends.
5. AMBIT UNIT PRICE
Ambit's unit price has shown very little growth over the 12 month period (325 cents at 30 September 2006, versus 323 cents at 30 September 2005).
This is due to the fall in the price of listed property stocks in June 2006. Ambit’s historic yield on its price at 30 September 2006 was 8,7%, versus
the SAPY index of 7,4%.
The volatility of 2006 resulting from the seemingly insatiable retail investment demand for listed property in the first half of 2006, and the corrective
interest rate increases thereafter, can be seen from the graph below. Ambit’s high of 435cpu in May, the low of 285cpu only two months later and
the year-end price of 325cpu clearly indicate just how the market over-reacted in June and July.
Oct
05
Nov
05
Dec
05
Jan
06
Feb
06
Mar
06
Apr
06
May
06
Jun
06
Jul
06
Aug
06
Sep
06
500
400
300
200
(Cents per unit)
During the year under review, 51% of Ambit's listed units were traded which represents a total value of R322,9 million.
6. THE PROPERTY PORTFOLIO
At year-end, the portfolio comprised 27 quality properties, with a rentable area of 154 029m
2
.
6.1 Geographic and sectoral profile
6.1.1 Sectoral spread
Ambit listed with a sectorally diversified property portfolio with a bias towards retail properties. It is management’s intention to maintain a spread
across the 3 major sectors of the commercial property market. The major sectors of the market operate on slightly different cycles of demand
and rental growth and thus at times opportunities arise in each sector for investment acquisitions which show good growth potential.
The sectoral spread of Ambit’s portfolio is set out below. All amounts exclude straight line adjustments.
By income By value
By value, retail has increased from 57% in 2005 to 59% in 2006 and income contribution increased by 3% as a result of the acquisition of
Lowveld Lifestyle Centre.
21%
24%
55%
Retail
Office
Industrial
18%
23%
59%
Annual Report 2006
7
6.1.2 Geographic Spread
Ambit’s strategy is to predominantly invest in properties located in the major metropolitan areas and this strategy has been maintained.
The geographic spread is set out below.
By income By value
66%
3%
13%
3%
4%
11% Gauteng
Pietermaritzburg
Durban
Cape Town
Nelspruit
East London
The acquisition of the Lowveld Lifestyle Centre in Nelspruit has marginally reduced the exposure to Gauteng by value by 3% from last year
to 68% this year-end.
6.2 Lease structure, vacancies and expiry profile
During the period under review, leases in respect of 14,6% by rental value (13 783m
2
) of the portfolio fell due for renewal and of these, 74%
by rental value (9 919m
2
) were successfully renewed. The space that was vacated was substantially re-let as can be seen in the continuing high
occupancy levels.
The vacancy is low at 3,80% by rental value (3,5% by area, 5 310m
2
) and is marginally above the levels at the end of last year of 3 981m
2
(2,6%). The bulk of this vacancy (3 766m
2
) is in the office portfolio where the prospects of leasing are encouraging.
6.3 Lease expiry profile
The lease expiry profile determined by rental value is reflected below:
30%
25%
20%
15%
10%
5%
0%
Vacant 2007 2008 2009 2010 2011 2012+
4%
19%
13%
26%
14%
10%
14%
The favourable lease expiry profile continues with no more than 26% of the portfolio's contractual income falling due for renewal in a particular
year. The increase in expiries in 2009 is a result of a number of 3-year leases being concluded during 2006. During 2007, the bulk of the
renewals lie within the office sector.
6.4 Operating costs
The operating costs of the buildings represent 25,3% of the gross rental income. These costs include all property related expenses without
netting off recoveries, include property management fees, but exclude the asset management fees of the portfolio and interest on borrowings.
Last year these costs represented 25,9% and in 2004 were 25,1% showing that the costs are being consistently maintained.
Of the total expenditure (excluding rates, municipal charges, collection commission and insurance) the value of procurement paid to black
owned companies increased from 35% in 2005 to 50% at year-end and is in line with the target Ambit set in 2004.
68%
2%
10%
5%
3%
12%
8
Chairman & Chief Executive Officer’s Report (continued)
6.5 Acquisitions
During the year Ambit took transfer of a building leased to Absa in Roodepoort on a 5-year lease at a price of R22,5 million on a forward yield
of 11,1%.
Lowveld Lifestyle Centre in Nelspruit was acquired at a cost of R43,2 million on a forward yield of 9,1%. This retail/ lifestyle centre is anchored
by Wetherleys and is 79% let to national companies or their franchisees.
In July 2006, Ambit acquired 50% of a property in Old Main Road, Pinetown, jointly with a subsidiary of Highpine Properties (Proprietary)
Limited, a company concentrating on retail property investment in the Pinetown area, at a joint cost of R28,3 million. The co-owners intend
to redevelop the site to create a shopping centre which will benefit from the site’s prime location between Pinecrest Shopping Centre and
the taxi terminus.
The development will be undertaken during 2007 but is presently let and is income producing.
6.6 Disposals
The five properties which Ambit contracted to sell in the 2005 financial year, were transferred in January 2006. These realised a post capital
gains tax profit of R1,0 million.
6.7 Portfolio revaluation
The portfolio was valued by independent valuers, CB Richard Ellis, as at 30 September 2006.
The valuation reflects a portfolio value of R824,6 million. The core portfolio (excluding additions and disposals) showed an increase in value
of 15% over the year.
7. INVESTMENT IN ORYX PROPERTIES LIMITED
Oryx comprises a quality portfolio of well tenanted investment properties, principally located in Windhoek.
Oryx again produced excellent results, with distributions amounting to 78 cents for the year ended 30 June 2006, showing an 11% growth over the
previous year's distributions. Realisable net asset value increased to 859 cents per unit (2005: 721cpu). During the year, Oryx completed its development
of Phase II of Maerua Mall. The expanded Maerua Complex (39 800m
2
of retail space) is fully tenanted and is trading well. At its year-end, Oryx had
a portfolio of 17 properties with an open market value of N$560,6 million and a vacancy of 1%.
During the year Oryx undertook a rights issue, which, although slightly dilutionary to Ambit in 2006, due to the prepayment of distributions, offered
a sound yield for 2007 and beyond. Ambit followed its rights and applied for further units, thereby increasing its stake marginally to 30,6% (2005:
30,5%). At the date of this report Oryx was trading at 820 cents, which is 4,5% below its realisable net asset value. It therefore continues to offer
sound investment value to Ambit.
2-4 Golf Course Drive, Mount Edgecombe, Durban
Annual Report 2006
9
7. INVESTMENT IN ORYX PROPERTIES LIMITED (continued)
Oryx is classified as an associate to Ambit. Ambit's share of the retained earnings of Oryx for the year was R12,5 million. This, combined with the
rights issue and increased unitholding, has taken Ambit's holding in Oryx to R110,9 million and represents 11,9% of Ambit's investment portfolio.
8. FUNDING ARRANGEMENTS
As at year-end Ambit had interest bearing borrowings of R316 million largely with ABSA and Nedbank who are Ambit's long-term financiers. This
reflects a long-term borrowings to long-term asset ratio of 33,8% (2005: 35,5%). During March 2006, Ambit renegotiated the interest rates on its
facilities and reduced the cost of variable borrowings by 50 basis points and fixed borrowings by 80 basis points.
At year-end, R183,7 million (58%) of the debt was on fixed interest contracts (2005: R145 million or 54%). Ambit's average cost of debt at year-end
was 9.7% p.a. (2005: 10,2% p.a.). The fixed and floating debt structure is set out in Note 14 to the financial statements. Management and the board
will continue to actively manage the funding and interest rate risk.
9. BLACK ECONOMIC EMPOWERMENT (BEE)
During the year management engaged in discussions to introduce an identified BEE group. However, these were terminated following differences
between the shareholders of the management Company, Ambit Management Services (Proprietary) Ltd (AMS). The Board and management are
committed to concluding a meaningful transaction with an appropriate BEE group during 2007.
10. MANAGEMENT COMPANY
In August 2006, Absa Bank Limited acquired the rights to the remaining 50% interest in AMS held by Marriott Corporate Property.
The AMS staff who were seconded from Marriott undertook to manage the year-end accounting, audit and the preparation of the financial statements.
AMS has recruited new staff and resources and will relocate its offices to 4 Fricker Road, Illovo from 1 December 2006.
11. PROSPECTS
The fundamentals of the underlying property market continue to firm notwithstanding the recent interest rate increases and the prospects of further
increases in the next 12 months. Office and industrial rentals are increasing which will provide income growth from the existing portfolio when leases
are renewed.
Ambit’s strategy is to increase its property portfolio to in excess of R1,5 billion and its market capitalisation to in excess of R1 billion during the next
year and management expects to be able to make announcements of acquisitions in the near future. There is no change to the strategy of owning
quality properties in good growth nodes.
Nick Harris has been requested and has accepted to remain on as the Chief Executive Officer of the Group until the end of June 2007 to manage
the transition of AMS and to conclude and bed down the initial tranches of the anticipated growth of the asset base.
During the first half of 2007, the Board will be appointing a new Chief Executive Officer to ensure a smooth handover.
We would like to express our appreciation to management and in particular to those seconded to AMS from Marriott for their dedication and hard
work in what, for some of them, has been a difficult period. We would also thank the non-executive directors for their support, experience and advice
during the past year.
D L Brown N B S Harris
Chairman Chief Executive Officer
23 November 2006 23 November 2006
10
Corporate Governance Review
30 September 2006
The board of directors is committed to the implementation of good corporate governance within the group and endorses the principles of openness,
integrity, accountability and transparency. The board has adopted and applied the Code of Corporate Practices and Conduct as set out in the King II Report.
The Board is of the opinion that the Group currently complies with all the significant requirements as set out in the King II report and the Listings Requirements
of the JSE Limited.
In doing so, the directors recognise the need to conduct the enterprise with integrity in accordance with generally acceptable corporate policies. This
includes timely, relevant and meaningful reporting to its unitholders and other stakeholders; and providing a proper and objective perspective of Ambit.
The directors have accordingly established mechanisms and policies appropriate to the Group's business in keeping with its commitment to the best practices
in corporate governance in order to ensure compliance with the King II Report. The directors will review these from time to time.
BOARD OF DIRECTORS AND ITS SUB-COMMITTEES
The board of directors consists of an executive director and five non-executive directors, four of whom are independent non-executives and hence the
majority of the board comprises independent non-executives. These non-executive directors bring to the Group a wide range of skills and experience
that enable them to contribute an independent view and to exercise objective judgement in matters requiring directors' decisions. The chairman is a non-
executive director, whose role is independent from the executive director.
The executive director holds a service contract. All non-executive directors are subject to retirement by rotation and re-election by Ambit unitholders at
least once every three years in accordance with the Articles of Association.
All new appointments to the board are done on a consensus basis between board members, subject to unitholder approval.
The board, which meets at least quarterly, retains full and effective control over the Group and service providers. The board has established a number of
committees to give detailed attention to its responsibilities and which operate within defined, written terms of reference. These are the investment committee,
the remuneration committee and the risk, audit and compliance committee, and the compositions thereof are set out on pages 2 and 3.
79 Hyde Park Lane, Hyde Park, Gauteng
Annual Report 2006
11
The board has approved a Board Charter to regulate how the business is to be conducted by the board in accordance with the principles of good corporate
governance.
During the period under review, directors who did not attend all 5 board meetings were J Zidel (1 absence), F Uys (1 absence) and I N Mkhari (2 absences).
INVESTMENT COMMITTEE
The board has established an investment committee, which is responsible to the board for monitoring and supervising the Group's strategic investment
objectives and implementing the board's instructions as to acquisitions, disposals and the structuring of borrowings.
REMUNERATION COMMITTEE
The board has established a remuneration committee, which reviews the remuneration of the executive director and recommends non-executive directors’
fees.
RISK, AUDIT AND COMPLIANCE COMMITTEE
The board has established a risk, audit and compliance committee whose primary objectives are to provide the board with additional assurance regarding
the efficacy and reliability of the financial information used by the directors and to assist them in the discharge of their duties. The committee provides
comfort to the board that adequate and appropriate financial and operating controls are in place, that significant business, financial and other risks have been
identified and are being suitably managed and that satisfactory standards of governance, reporting and compliance are in operation. The committee is
responsible for setting the principles for recommending the use of the external auditors for non-audit services, and any significant non-audit work must be
approved by this committee. The committee has formal terms of reference for their responsibilities and the Board is of the opinion that these responsibilities
have been satisfied for the year under review.
Due to its size (one direct employee), Ambit does not have an internal audit function. Management and the Risk, Audit and Compliance Committee review
the internal controls, processes and systems of the Group and it’s service providers.
Within this context, the board is responsible for the Group's systems of internal financial and operational control.
DIRECTORS' DEALINGS
The group operates a policy of prohibiting dealings by directors and certain other managers in periods immediately preceding the announcement of its
interim and year-end financial results and at any other time deemed necessary by the board.
RISK MANAGEMENT
The objective of risk management is to identify, assess, manage and monitor the risks to which the business is exposed. This is a board responsibility. Ambit
pursues active management policies designed to minimise the impact of risk.
With the assistance of expert risk consultants, risks have been assessed and appropriate insurance cover provided for all material risks above pre-determined,
self-insured limits. Levels of cover are re-assessed annually.
DIRECTORS' RESPONSIBILITY
The directors are responsible for the preparation of the annual financial statements, as set out on pages 16 to 39, which fairly represent the state of affairs
of the Group at the end of the financial year.
GOING CONCERN
The directors are of the opinion that the Company and the Group have adequate resources to continue in operation for the foreseeable future and the
annual financial statements and Group annual financial statements have accordingly been prepared on a going concern basis.
D L Brown J H Beare
Chairman Chairman – Risk, audit and compliance committee
23 November 2006 23 November 2006
12
Unitholders’ Diary
Financial year-end 30 September
Annual general meeting 21 February 2007
Distribution plan dates in respect of the financial year ending 30 September 2007:
Financial period Declaration date Record date Payment date
1st half to
31 March 2007 18 May 2007 7 June 2007 11 June 2007
2nd half to
30 September 2007 9 November 2007 30 November 2007 3 December 2007
Park Meadows, Kensington, Gauteng
Annual Report 2006
13
Analysis Of Linked Unitholders
30 September 2006
Number of % of Number of % of
unitholders unitholders units held issued units
Size of holding
1 – 10 000 699 46,94 3 640 819 1,95
10 001 – 25 000 432 29,01 7 654 281 4,10
25 001 – 50 000 176 11,82 6 771 823 3,63
50 001 – 100 000 86 5,78 6 464 015 3,47
100 001 – 500 000 64 4,30 14 823 169 7,95
500 001 – 1 000 000 14 0,94 10 401 439 5,58
`Over 1 000 000 18 1,21 136 727 291 73,32
1 489 100,00 186 482 837 100,00
Type of unitholders
Corporates and investment companies 74 4,97 93 252 379 50,01
Individuals and private companies 1 184 79,52 68 817 124 36,90
Nominee holders and trusts 168 11,28 14 685 002 7,87
Pension and provident funds 63 4,23 9 728 332 5,22
1 489 100,00 186 482 837 100,00
Significant unitholders
Unitholders invested in 5% or more of the company
Redefine Income Fund 43 660 824 23,41
Absa 39 150 567 20,99
Marriott 21 381 327 11,47
Oasis Asset Management 10 218 610 5,48
114 411 328 61,35
Unitholder spread
Held by public 1 482 99,53 103 895 568 55,72
Held by non-public
– directors 4 0,27 500 000 0,26
– unitholders with more than 10% unitholding 3 0,20 82 087 269 44,02
1 489 100,00 186 482 837 100,00
Units traded
Number of units traded 92 200 304
Units traded as a percentage of issued capital 51,44%
JSE price history
12 month high (cents) 435
12 month low (cents) 285
14
Directors’ Responsibility For &
Approval Of The Annual Financial Statements
for the year ended 30 September 2006
The directors are responsible for the preparation and integrity of the annual financial statements and the related information included in the annual report.
In order for the board to discharge its responsibilities, management has developed and continues to maintain a system of internal control. The board has
ultimate responsibility for the system of internal controls and reviews its operation, primarily through the risk, audit and compliance committee.
The internal controls include a risk-based system of internal accounting and administrative controls designed to provide reasonable but not absolute assurance
that assets are safeguarded and that transactions are executed and recorded in accordance with generally accepted business practices and the Group's
policies and procedures. These controls are implemented by trained, skilled personnel with appropriate segregation of duties, are monitored by management
and the risk, audit and compliance committee and include a comprehensive budgeting and reporting system operating within an appropriate control
framework.
The external auditors are responsible for reporting on the annual financial statements, and their unmodified opinion is included on page 15. The annual
financial statements are prepared in accordance with International Financial Reporting Standards and incorporate disclosures in line with the accounting
philosophy of the Group. They are based on appropriate accounting policies consistently applied, except where otherwise stated, and are supported by
reasonable and prudent judgements and estimates.
The directors believe that the Group will be a going concern in the year ahead. Accordingly, in preparing the annual financial statements and Group annual
financial statements, the going concern basis has been adopted.
The annual financial statements for the year ended 30 September 2006 as set out on pages 16 to 39 were approved by the board of directors on
23 November 2006 and are signed on its behalf by:
D L Brown J H Beare
Chairman Chairman – Risk, audit and compliance committee
23 November 2006 23 November 2006
Declaration By Secretary
The Secretary certifies that the Company has lodged with the Registrar of Companies all such returns as are required of a public company, in terms of
Section 268G(d) of the Companies Act No 61 of 1973, as amended, and that all such returns are true, correct and up to date.
Ambit Management Services (Proprietary) Limited
Company Secretary
23 November 2006
Annual Report 2006
15
Independent Auditor’s Report
TO THE MEMBERS OF AMBIT PROPERTIES LIMITED
We have audited the annual financial statements and Group annual financial statements of Ambit Properties Limited set out on pages 16 to 39 for the year
ended 30 September 2006. These financial statements are the responsibility of the Company's directors.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements fairly present, in all material respects, the financial position of the Company and of the Group at 30 September
2006, and the results of their operations and cash flows for the year then ended in accordance with International Financial Reporting Standards and in the
manner required by the Companies Act in South Africa.
Deloitte & Touche
Registered Auditors
Per GD Kruger
Partner
23 November 2006
2 Pencarrow Crescent
La Lucia Ridge Office Estate
Durban
National Executive: GG Gelink – Chief Executive, AE Swiegers – Chief Operating Officer, GM Pinnock – Audit, DL Kenney – Tax,
L Geeingh – Consulting, MG Crisp – Financial Advisory, L Bam – Strategy, CR Beukman – Finance, TJ Brown – Clients
& Markets, SJC Sibisi – Public Sector and Corporate Social Responsibility, NT Mtubu – Chairman of the Board, J Rhynes
– Deputy Chairman of the Board
Regional Leader: GC Brazier
16
Directors’ Report
30 September 2006
NATURE OF BUSINESS
Ambit Properties Limited is a property investment company and is listed on the JSE under the “Financials – Real Estate” sector.
The Group derives its income from a portfolio of investment properties in the retail, office and industrial sectors and an investment in Oryx Properties
Limited, a Namibian property investment company listed on the Namibian Stock Exchange.
ISSUED SHARE CAPITAL
As at 30 September 2006 there were 186 482 837 linked units in issue (2005: 173 814 215), each comprising one ordinary share of 1 cent and one
unsecured variable rate debenture of 180 cents. In order to fund the acquisition of the Lowveld Lifestyle Centre in Nelspruit, 12 668 622 units were issued
on 13 April 2006 at a price of 341 cents. An additional 14 cents per unit was received in respect of the interim distribution subsequently paid.
FINANCIAL REVIEW 2006 2005
(restated)
cents cents
Weighted average headline earnings per linked unit 32,24 31,30
Weighted average earnings per linked unit 77,20 77,91
Distribution per linked unit 29,60 27,50
International Financial Reporting Standards (IFRS) were adopted for the first time in the current year, and the adoption thereof has not resulted in any
changes to the reported numbers. However, a change in accounting interpretation has resulted in the share premium being reclassified to debenture
premium and amortised over the life of the debenture. Details are reflected in Notes 6 and 13.
SUBSIDIARY
Details of the Company's subsidiary are reflected in Note 8. The profit after tax of the subsidiary which is attributable to Ambit amounts to R11,2 million
(2005: R10,4 million).
ASSOCIATE
Details of the Company's associate are reflected in Note 9.
DIRECTORATE
Details of the directors are set out on pages 2 and 3 of this report. The composition of the board, together with changes from 1 October 2006 to the
date of this report, are set out below:
Director Date appointed Date resigned
D L Brown (Chairman)
N B S Harris *
C J Ewin 16/08/2006
J H Beare
I N Mkhari
F Uys
R R Emslie
J Zidel 07/02/2006 03/05/2006
R D Jeffrey (alternate)
2006 2005
Director Salaries Directors’ fees Salaries Directors’ fees
R'000 R'000 R'000 R'000
D L Brown (Chairman) – 95 – 95
N B S Harris * 1 061 – 920 –
– salary 861# – 795# –
– bonus 200 – 125 –
C J Ewin – 48 – 65
J H Beare – 90 – 90
R R Emslie – 50 – 12,5
N P Mageza – – – 37,5
I N Mkhari – 50 – 50
F Uys – 65 – 65
J Zidel – 13 – –
1 061 411 920 415
* Executive
The executive director holds a service contract until 30 June 2007.
No other directors have service contracts.
# The executive director's salary is deducted off asset management fees paid to Ambit Management Services (Proprietary) Limited.
Annual Report 2006
17
DIRECTORS' INTERESTS
The joint beneficial interests of directors in the equity of the company as at 30 September 2006 was 0,26% (500 000 units) and can be analysed as follows:
Director Direct beneficial Indirect beneficial Total
Linked units % Linked units % Linked units %
2006
D L Brown (Chairman) 50 000 0,02 – – 50 000 0,02
N B S Harris * 25 000 0,01 25 000 0,01 50 000 0,02
F Uys 200 000 0,11 – – 200 000 0,11
R D Jeffery (alternate) * 200 000 0,11 – – 200 000 0,11
R R Emslie * – – – – – –
500 000 0,26
2005
D L Brown (Chairman) 50 000 0,03 – – 50 000 0,03
N B S Harris * 25 000 0,01 25 000 0,01 50 000 0,03
C J Ewin * 210 000 0,12 – – 210 000 0,12
F Uys 200 000 0,12 – – 200 000 0,12
R D Jeffery (alternate) * 200 000 0,12 – – 200 000 0,12
R R Emslie * – – – – – –
710 000 0,42
* These directors have insignificant indirect interests in Ambit as a result of having insignificant interests in either Absa Bank Limited or RMBT Holdings
Limited as shareholders.
In April 2006, Ambit acquired 50% of 17-19 and 21-35 Old Main Road, Pinetown in conjunction with Pinespring Properties (Proprietary) Limited, a wholly
owned subsidiary of Highpine Properties (Proprietary) Limited, a company in which Mr J H Beare has an interest.
BORROWINGS
The directors are authorised to borrow funds up to an amount not exceeding 60% of the directors' bona fide valuation of the consolidated total assets of
the Company and its subsidiaries. The Group's interest bearing borrowings at 30 September 2006 are disclosed in Note 14 to the annual financial statements.
ACQUISITIONS, IMPROVEMENTS AND DISPOSALS
Refer to paragraphs 6.5 to 6.7 of the Chairman and CEO's report.
POST BALANCE SHEET EVENTS AND GOING CONCERN
Other than the acquisitions and disposals referred to above, the directors are not aware of any material post balance sheet events and are of the opinion
that the Group has adequate resources to continue in operation for the foreseeable future. The financial statements have accordingly been prepared on a
going concern basis.
MANAGEMENT BY THIRD PARTY
Ambit has a service agreement with Ambit Management Services (Proprietary) Limited (AMS), the rights to which are 100% held by Absa Bank Limited,
in respect of the property asset management, property management and the financial accounting and reporting of the company. During August 2006,
Marriott Property Services (Proprietary) Limited disposed of the rights to its 50% share in the management company to Absa Bank Limited.
COMPANY SECRETARY
The company secretary is Ambit Management Services (Proprietary) Limited, whose business and postal address is as follows:
Postal: Business:
P.O. Box 618 First Floor, 4 Frikker Road
Melrose Arch Illovo
2076 2196
D L Brown N B S Harris
Chairman Chief Executive Officer
23 November 2006 23 November 2006
18
Balance Sheets
30 September 2006
Group Company
Notes 2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
ASSETS
Non-current assets
Investment properties 7 809 329 659 288 673 558 538 896
– At valuation 824 550 671 000 686 350 548 600
– Straight line adjustment (15 221) (11 712) (12 792) (9 704)
Investment in associate company 9 110 927 82 944 83 998 68 480
Rental receivable – straight line adjustment 14 551 11 437 12 122 9 429
Total non-current assets 934 807 753 669 769 678 616 805
Current assets
Trade and other receivables 6 446 9 679 5 048 9 273
– Trade and other receivables 5 776 9 404 4 378 8 998
– Rental receivable – straight line adjustment 670 275 670 275
Cash and cash equivalents 10 56 128 28 929 56 620 28 839
Interest in subsidiary company 8 – – 93 652 92 931
Total current assets 62 574 38 608 155 320 131 043
TOTAL ASSETS 997 381 792 277 924 998 747 848
EQUITY AND LIABILITIES
Capital and reserves
Share capital 11 1 865 1 738 1 865 1 738
Non-distributable reserves 12 190 886 107 386 134 873 75 039
Distributable reserves/ (in deficit) 364 330 (1 966) (1 999)
Total capital and reserves 193 115 109 454 134 772 74 778
Non-current liabilities
Debentures 13 335 669 312 866 335 669 312 866
Debenture premium 6,13 49 586 31 094 49 586 31 094
Interest bearing borrowings 14 315 960 267 199 315 960 267 199
Deferred taxation liability 15 64 499 36 433 51 666 28 175
Total non-current liabilities 765 714 647 592 752 881 639 334
Current liabilities
Trade and other payables 9 087 9 890 7 880 8 395
Current tax liabilities 367 308 367 308
Linked unitholders for distribution 29 098 25 033 29 098 25 033
Total current liabilities 38 552 35 231 37 345 33 736
TOTAL EQUITY AND LIABILITIES 997 381 792 277 924 998 747 848
Annual Report 2006
19
Income Statements
for the year ended 30 September 2006
Group Company
Notes 2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
REVENUE 103 620 99 448 86 844 81 177
– Rental – cash flows inherent in leases 16 99 813 93 530 83 458 76 154
– Rental – straight line adjustment 3 807 5 918 3 386 5 023
Property expenses 17 (25 239) (24 229) (21 432) (20 486)
NET RENTAL INCOME FROM PROPERTIES 78 381 75 219 65 412 60 691
Interest income 18 2 040 2 373 14 571 15 816
Debenture interest and dividend income from associate company 9 9 868 8 338 9 868 8 338
Amortisation of debenture premium 6 1 776 1 191 1 776 1 191
Finance costs (23 902) (25 992) (23 902) (25 992)
Administrative expenses 19 (5 266) (4 484) (5 250) (4 252)
Other expenses 20 (2 026) (1 708) (2 026) (1 750)
OPERATING PROFIT 60 871 54 937 60 449 54 042
Change in fair value of investment properties 93 450 87 495 78 095 73 905
– As per valuations 97 257 93 413 81 481 78 928
– Straight line adjustment (3 807) (5 918) (3 386) (5 023)
Profit on disposal of investment properties 72 711 72 711
Share of associate company's after tax profits 6, 9 12 465 12 972 – –
PROFIT BEFORE TAXATION AND DISTRIBUTION
TO UNITHOLDERS 166 858 156 115 138 616 128 658
Debenture interest – linked unitholders (55 199) (47 799) (55 199) (47 799)
PROFIT BEFORE TAXATION 111 659 108 316 83 417 80 859
Taxation 21 (28 125) (26 509) (23 550) (22 446)
PROFIT ATTRIBUTABLE TO LINKED UNITHOLDERS 83 534 81 807 59 867 58 413
Cents Cents Cents Cents
EARNINGS PER LINKED UNIT (weighted) 22 77,20 77,91 64,03 63,84
EARNINGS AND DILUTED EARNINGS PER SHARE (weighted) 22 46,48 49,18 33,31 35,11
DISTRIBUTION PER LINKED UNIT 22 29,60 27,50 29,60 27,50
20
Non-
Share Share Distributable distributable
capital premium reserves reserves Total
R'000 R'000 R'000 R'000 R'000
GROUP
Balance at 30 September 2004 as previously reported 1 583 26 284 257 24 952 53 076
Prior year adjustment:
Reclassification to debenture premium – (26 284) – – (26 284)
Amortisation of debenture premium – – 700 – 700
Transfer of amortisation to non-distributable reserves – – (700) 700 –
Restated balance at 30 September 2004 1 583 – 257 25 652 27 492
Shares issued during the period 155 – – – 155
Net profit attributable to linked unitholders – – 81 807 – 81 807
As previously reported – – 80 616 – 80 616
Prior year adjustment:
Amortisation of debenture premium – – 1 191 – 1 191
Transfer to non-distributable reserves (restated) – – (81 734) 81 734 –
Balance at 30 September 2005 1 738 – 330 107 386 109 454
Shares issued during the year 127 – – – 127
Net profit attributable to linked unitholders – – 83 534 – 83 534
Transfer to non-distributable reserves – – (83 500) 83 500 –
Balance at 30 September 2006 1 865 – 364 190 886 193 115
COMPANY
Balance at 30 September 2004 as previously reported 1 583 26 284 289 15 130 43 286
Prior year adjustments:
Share of associates retained earnings – – (1 492) – (1 492)
Reclassification to debenture premium – (26 284) – – (26 284)
Amortisation of debenture premium – – 700 – 700
Transfer of amortisation to non-distributable reserves – – (700) 700 –
Restated balance at 30 September 2004 1 583 – (1 203) 15 830 16 210
Shares issued during the period 155 – – – 155
Net profit attributable to linked unitholders – – 58 413 – 58 413
As previously reported – – 70 194 – 70 194
Prior year adjustments:
Share of associates retained earnings – – (12 972) – (12 972)
Amortisation of debenture premium – – 1 191 – 1 191
Transfer to non-distributable reserves (restated) – – (59 209) 59 209 –
Balance at 30 September 2005 1 738 – (1 999) 75 039 74 778
Shares issued during the year 127 – – – 127
Net profit attributable to linked unitholders – – 59 867 – 59 867
Transfer to non-distributable reserves – – (59 834) 59 834 –
Balance at 30 September 2006 1 865 – (1 966) 134 873 134 772
Statements Of Changes In Equity
for the year ended 30 September 2006
Annual Report 2006
21
Cash Flow Statements
for the year ended 30 September 2006
Group Company
Notes 2006 2005 2006 2005
R'000 R'000 R'000 R'000
OPERATING ACTIVITIES
Cash generated by operating activities 23 70 105 63 450 58 853 48 758
Interest received and income from associate 11 908 10 711 24 439 24 154
Finance costs (23 902) (25 992) (23 902) (25 992)
Distributions paid to linked unitholders 24 (51 134) (49 286) (51 134) (49 286)
Cash inflow/ (outflow) from operating activities 6 977 (1 117) 8 256 (2 366)
INVESTING ACTIVITIES
Acquisition of investment properties (80 431) (44 800) (80 431) (44 800)
Improvements to investment properties (1 172) (8 592) (1 148) (7 677)
Proceeds on disposal of investment properties 25 382 32 011 25 382 32 011
(Increase)/ decrease in loan to subsidiary – – (721) 444
Acquisition of holding in associate company (15 518) (4 136) (15 518) (4 136)
Cash outflow from investing activities (71 739) (25 517) (72 436) (24 158)
FINANCING ACTIVITIES
Linked units issued 43 200 35 000 43 200 35 000
Share issue expenses – (268) – (268)
Interest bearing borrowings raised/ (repaid) 48 761 (8 455) 48 761 (8 455)
Cash inflow from financing activities 91 961 26 277 91 961 26 277
Increase/ (decrease) in cash and cash equivalents 27 199 (357) 27 781 (247)
Cash and cash equivalents at beginning of year 28 929 29 286 28 839 29 086
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 10 56 128 28 929 56 620 28 839
Scottsville Mall, Durban Road, Pietermaritzburg
22
Notes To The Annual Financial Statements
30 September 2006
1. GENERAL INFORMATION
Ambit Properties Limited (the Company) is a public company listed on the JSE and is incorporated in South Africa. The address of its registered office
and principal place of business is disclosed in the introduction to the annual report. The principal activities of the Company and its subsidiary (the Group)
are described in the Directors’ Report
2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards
Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective
for accounting periods beginning on or before 1 October 2005. The adoption of IFRS has not resulted in any adjustment to the amounts reported
previously in the annual financial statements for the year ended 30 September 2005.
3. ACCOUNTING POLICIES
The annual financial statements have been prepared in accordance with International Financial Reporting Standards. The accounting policies used in
the preparation of the financial statements are consistent with those applied in the prior year, with the exception of accounting for the premium on
units issued as disclosed under Debentures in Note 3.10 below and the Company’s carrying value of its investment in associate as described in note
3.4 below.
The principal accounting policies are set out below :
3.1 Basis of consolidation
The consolidated financial statements incorporate the results and financial position of the Company and all its subsidiaries, which are defined
as entities over which the Group has the ability to exercise control so as to obtain benefits from their activities. The results of subsidiaries are
included from the effective dates of acquisition and up to the effective dates of disposal. All inter-company transactions and balances between
Group companies are eliminated.
The accounting policies of the subsidiaries are consistent with those of the holding company.
3.2 Business combinations
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured
as the aggregate fair value of the underlying assets acquired, equity instruments issued and liabilities incurred or assumed at the date of exchange,
plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill and is tested for impairment
on an annual basis.
If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income
statement. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, attributable goodwill
is included in the determination of the profit or loss on disposal.
3.3 Investment in subsidiaries
Investments in subsidiaries are recognised at cost less accumulated impairment losses.
3.4 Investment in associates
Associates are those companies, which are not subsidiaries or joint ventures, over which the Group exercises significant influence. Results of
associates are accounted for in the Group using the equity method of accounting, except when the investment is classified as held for sale, in
which case it is accounted for under IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations. Any losses of associates are
brought to account until the investment in, and loans to, such associates are written down to a nominal amount. Thereafter losses are accounted
for only insofar as the Group is committed to providing financial support to such associates. The carrying value of investments in associates
represents the cost of each investment including unamortised goodwill, the share of post acquisition retained earnings or losses and other
movements in reserves. Equity accounted income represents the Group’s proportionate share of the associate’s post-acquisition accumulated
profit after accounting for dividends declared by those entities. Any significant movements between the year-end of associates and the Group
are accounted for. Where a Group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s
interest in the associate. Undistributed equity accounted earnings may be transferred to non-distributable reserves.
In the company the investment in associate is held at cost in accordance with IAS 27. The effects of this change in accounting policy are set
out in Note 6 below.
3.5 Investment properties
Investment properties are properties held to earn rental income and appreciate in capital value based on the increase in rental
income.
Annual Report 2006
23
3. ACCOUNTING POLICIES (continued)
Investment properties are initially recognised at cost and are stated at their fair value at each reporting date. Gains or losses arising
from changes in the fair values are reflected in the income statement in the period in which they arise. Unrealised gains are
transferred to a non-distributable reserve in the statement of changes in equity. Unrealised losses are transferred against a non-
distributable reserve to the extent that the decrease does not exceed the amount held in the non-distributable reserve. On
disposal of investment properties, the difference between the net disposal proceeds and the carrying value is charged or credited
to the income statement and then transferred from / to non-distributable reserves. Buildings are not depreciated.
Properties purchased by the company and settled by issuing linked units are recorded at the fair value of the properties acquired,
unless that fair value cannot be reliably estimated. If the entity cannot reliably estimate the fair value of the property, the entity
shall measure the value of the equity issued, and the corresponding increase in equity, indirectly, by reference to the fair value
of the equity instruments granted in terms of IFRS2: Share Based Payments. This excludes purchases of properties which are
regarded as business combinations as described in 3.2 above.
Buildings under development are carried at cost as property, plant and equipment and are transferred to investment property
upon completion.
3.6 Capitalisation of interest
Where the Group undertakes a major development or refurbishment of a property, interest is capitalised to the cost of the
property concerned during the construction period. Capitalisation of interest is suspended during extended periods in which
active development is interrupted.
3.7 Assets held for sale
Properties held for sale are classified as assets for sale and are measured at the lower of the assets’ previous carrying amount
and the fair value less costs to sell.
3.8 Taxation
Income tax expense comprises the sum of current tax payable, Secondary Tax on Companies and deferred taxation. Tax currently
payable is based on the taxable profit for the year. Taxable profit differs from accounting profit as it excludes income or expenses
that are taxable or deductible in other years and it excludes items never deductible or taxable.
Deferred taxation is provided for using the balance sheet liability method, based on temporary differences. Temporary differences
are differences between the carrying amounts of assets and liabilities for financial reporting purposes and their taxation bases.
Deferred taxation is charged to the income statement except to the extent that it relates to a transaction that is recognised directly
in equity, or a business combination that is an acquisition. A deferred taxation asset is recognised to the extent that it is probable
that future taxable profits will be available against which the associated unused tax losses and deductible temporary differences
can be utilised. Deferred taxation assets are reduced to the extent that it is no longer probable that the related tax benefit will
be realised. Deferred taxation assets and liabilities are only set off when there is a legally enforceable right to set off current tax
assets and liabilities.
Deferred taxation assets and liabilities are not recognised if the temporary difference arises from goodwill, or from the initial
recognition (other than business combinations) of other assets and liabilities in a transaction which effects neither the taxable profit
nor the accounting profit.
Deferred taxation is raised at the company tax rate on all temporary differences, including those arising from the revaluation of
properties. When a property is earmarked for future sale, deferred taxation is computed using the capital gains tax rate.
3.9 Impairment (excluding goodwill)
The carrying amount of the Group's assets is reviewed at each balance sheet date to determine whether there is any indication
of impairment. An impairment loss is recognised in profit or loss whenever the carrying amount of an asset exceeds its recoverable
amount, which is the higher of an asset's net selling price and value in use. Where an impairment loss is subsequently reversed,
the carrying amount of the asset is increased to the extent that the increased carrying amount does not exceed the original carrying
amount. A reversal of impairment loss is recognised immediately in profit or loss.
3.10 Financial instruments
A financial asset or financial liability is recognised on the balance sheet for as long as the group is party to the contractual provisions
of the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held on call with banks and investments in money market instruments,
net of bank overdrafts where legal set-off is permissible.
24
Notes To The Annual Financial Statements (continued)
30 September 2006
3. ACCOUNTING POLICIES (continued)
Trade receivables
Trade and other receivables originated by the Group are held at amortised cost, using the effective interest rate method, after
deducting accumulated impairment losses. Receivables with no fixed maturity are held at cost.
Receivable- straight line basis adjustment
Rental income is recognised on the straight-line basis. Future rentals receivable over the lease period as a result of escalations
are recorded at the differential between the cash received inherent in the lease agreements and the smoothed revenue.
Investments
Financial instruments are initially measured at cost, including directly attributable transaction costs. Subsequent to the initial recognition these
instruments are measured as follows:
• Held-to-maturity investments are held at amortised cost using the effective interest rate method after deducting accumulated impairment
losses.
• Held-for-trading and available-for-sale financial assets are held at fair value.
Gains or losses on Available-for-sale financial assets and Held-for-trading financial assets and liabilities are recognised in net profit for the
year.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered
into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in
the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments
are set out below.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Debentures
Debentures are recognised at original cost less principal repayments. The premium arising on the issue of linked units is split between the
premium relating to the share and the premium relating to the debenture. The debenture premium is amortised over the remaining life of
the debenture (i.e. to 2029) and the resultant income may be transferred to non-distributable reserves.
Interest bearing borrowings
Interest bearing borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest
rate method. Amounts repayable in the next twelve months are classified as current borrowings.
Trade payables
Trade payables are carried at the fair value of the consideration to be paid in the future for goods or services that have been received or supplied
and invoiced or formally agreed with the supplier.
Financial guarantee contracts
Financial guarantee contracts are accounted for as insurance contracts and are initially recorded at cost. Subsequently, they are valued in terms
of IAS 37: Provisions, Contingent Liabilities and Contingent Assets.
3.11 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that
an outflow of economic benefits will occur, and where a reliable estimate can be made on the settlement amount of the obligation.
3.12 Revenue recognition
Revenue comprises gross rental income, including all recoveries from tenants. Variable operating cost recoveries are recognised on the accrual
basis. Rental income and fixed operating cost recoveries are recognised on the straight line basis in accordance with IAS 17: Leases. The difference
between the rental income recognised on a cash flow/ accrual basis and the straight line basis is transferred to/ from non-distributable reserves.
Interest income is recognised at the effective rates of interest on a time related basis.
Dividend income and debenture interest are recognised when the right to receive them is established.
3.13 Leases
Investment properties leased out under operating leases are reflected as investment properties on the balance sheet. Where there are fixed
incrementals in rental, the income is recognised on a straight line basis in terms of IAS 17: Leases.
Annual Report 2006
25
3. ACCOUNTING POLICIES (continued)
3.14 Deferred expenses
Deferred expenses comprise tenant installation costs and letting commissions which are amortised on a straight line basis over the lease period
to which they relate. These are currently included in accounts receivable due to the immaterial size thereof.
3.15 Distributions
In terms of the Debenture Trust Deed the interest entitlement on each debenture shall be not less than 90% of the net earnings of the company
before providing for debenture interest, depreciation, amortisation and taxes and before taking into account any revaluation surpluses or deficits
and income transferred to any non-distributable reserves, but after provision for funding cost, whether interest or dividend in nature.
3.16 Segment reporting
On a primary basis the group operates in the following segments:
• Retail
• Office
• Industrial
• Corporate
On a secondary basis the group reports on geographical locations as follows:
• Gauteng
• Pietermaritzburg
• Durban
• Other
3.17 Changes in accounting policy
Where there has been a change in accounting policy, all comparative numbers are retrospectively adjusted.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgments are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors.
4.1 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below.
(a) Estimate of fair value of investment properties
The best evidence of fair value is current prices in an active market for similar leases and other contracts. In the absence of such information,
the Group determines the amount within a range of reasonable fair value estimates. In making its judgement, the Group considers
information from a variety of sources including:
i) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other
contracts), adjusted to reflect those differences;
ii) recent prices of similar properties in less active markets, with adjustment to reflect any changes in economic conditions since the date
of the transactions that occurred at those prices; and
iii) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and
other contracts and (where possible) from external evidence such as current market rents for similar properties in the same location
and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the
cash flows.
(b) Principal assumptions for management’s estimation of fair value
If information on current or recent prices is not available, the fair values of investment properties are determined using discounted cash
flow valuation techniques. The Group uses assumptions that are mainly based on market conditions existing at each balance sheet date.
The principal assumptions underlying management’s estimation of fair value are those related to: the receipt of contractual rentals, expected
future market rentals, maintenance requirement and appropriate discount rates. These valuations are regularly compared to actual market
yield data, and actual transactions by the Group and those reported by the market.
The expected future market rentals are determined with reference to current market rentals for similar properties in the same location
and condition.
26
Notes To The Annual Financial Statements (continued)
30 September 2006
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
4.2 Critical judgments in applying the Group’s accounting policies
Allocation of share premium and debenture premium
The Group has determined, in terms of the requirements of accounting standards, that the linked unit premium should be classified as debenture
premium and not share premium. Debenture premium will be amortised over the minimum contractual period of the debentures, namely
the remaining portion of 25 years from February 2004.
Non-distributable reserves
The Group transfers all capital profits and unrealised profits to non-distributable reserves.
In addition, balances arising due to accounting anomalies are transferred to non-distributable reserves at the discretion of the directors and these
currently comprise:
- straight line adjustments to rental income and fair value adjustments to investment properties
- deferred taxation on fair value adjustments to investment properties
- amortisation of debenture premium
5. NEW ACCOUNTING STANDARDS AND IFRIC INTERPRETATIONS
Certain new additional accounting standards and IFRIC interpretations have been published that are mandatory for accounting periods beginning on
or after 1 January 2006. These new standards and interpretations have not been early adopted by the Group. The directors do not expect that the
adoption of the standards and interpretations will have a material impact on future financial statements. The standards and interpretations in issue, but
not yet effective, that are relevant to the Group are:
IFRS 7: Financial Instrument Disclosures
IFRIC 10: Interim Reporting and Impairment
6. PRIOR YEAR ADJUSTMENTS
The accounting policy for the premium arising on the issue of linked units has been changed. This used to be accounted for as share premium but is
now accounted for as debenture premium in terms of IAS 32. The full amount of share premium has therefore been transferred to debenture premium
and is being amortised over the period until 2029. The prior year figures have been restated. The effect of the change in policy on the Group results
is as follows:
Gross Tax Net
R’000 R’000 R’000
Increase in profit for the year 2005 1 191 - 1 191
2006 1 776 - 1 776
The additional profit has been transferred to a non-distributable reserve through the statement of changes in equity.
The above has had the effect of increasing earnings by R1,8 million or 0,99 cents per weighted number of units in the current year (2005: R1,2 million
or 0,72 cents).
Balance sheet effect: 2006 2005
R’000 R’000
Debenture premium as previously reported - -
Reclassification from share premium 32 985 26 284
Premium arising on current year unit issues 20 268 6 701
Amortisation (3 667) (1 891)
Debenture premium closing balance 49 586 31 094
In accordance with IAS 27, the share of associate’s reserves is no longer accounted for in the Company, and is only accounted for in the Group financial
statements. The effect of this change in policy on the Company results is as follows:
Gross Tax Net
R’000 R’000 R’000
Decrease in profit for the year 2005 12 972 - 12 972
2006 12 465 - 12 465
The effect on the Company’s balance sheet is as follows: 2006 2005
R’000 R’000
Investment in associate as previously reported 110 927 82 944
Removal of share of associate’s retained earnings (26 929) (14 464)
Investment in associate as restated 83 998 68 480
Annual Report 2006
27
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
7. INVESTMENT PROPERTIES
Carrying value at beginning of the year 659 288 549 706 538 896 443 819
– At valuation 671 000 555 500 548 600 448 500
– Straight line adjustment (11 712) (5 794) (9 704) (4 681)
Acquisition of Investment properties 80 431 44 800 80 431 44 800
Disposals (25 310) (31 305) (25 310) (31 305)
Improvements to investment properties 1 172 8 592 1 148 7 677
Fair value adjustment
– At valuation 97 257 93 413 81 481 78 928
– Straight line adjustment (3 509) (5 918) (3 088) (5 023)
Carrying value at end of the year 809 329 659 288 673 558 538 896
Reconciliation to valuation:
Add: cumulative straight line adjustments 15 221 11 712 12 792 9 704
Investment properties at valuation 824 550 671 000 686 350 548 600
Property descriptions are detailed on pages 40 and 41 of this report.
The property portfolio is subject to mortgage bonds in favour of Absa Bank
Limited and Nedcor Bank Limited as detailed in Note 14.
The cost of the investment properties is R604 million (2005: R547 million)
and they were valued by CB Richard Ellis (Pty) Ltd, independent valuers.
These fair values were approved by the directors, and the ranges of discount
and capitalisations rates in the respective sectors were as follows:
Sector Discount rates Terminal capitalisation rates
% %
Retail 13,5 to 16,0 9,0 to 12,0
Industrial 14,5 to 16,3 10,0 to 13,0
Office 15,5 to 16,5 11,0 to 13,0
8. INTEREST IN SUBSIDIARY COMPANY
Issued share %
capital Holding
R
Whirlprops 37 (Pty) Ltd (incorporated in South Africa) 100 100
Shares at cost – –
Loans 93 652 92 931
Less: Current portion (93 652) (92 931)
Long term portion – –
Directors' valuation 139 102 112 946
These loans bear interest at variable rates and have no fixed repayment
terms. The properties in the company have been sold to Ambit and will be
transferred to Ambit in the 2007 financial year.
Interest received from Whirlprops 37 amounts to 12 546 13 452
Profit after tax of subsidiary attributable to the holding company 11 202 10 422
28
Notes To The Annual Financial Statements (continued)
30 September 2006
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
8. INTEREST IN SUBSIDIARY COMPANY (continued)
Whirlprops 37 (Proprietary) Limited is a property investment company, the
shares and loan account of which have been pledged as security for obligations
in connection with the borrowing facilities set out in Note 14. The company
has the same year-end as Ambit.
9. INVESTMENT IN ASSOCIATE COMPANY
Oryx Properties Limited is a property loan stock company incorporated in
Nambia and listed on the NSX. The carrying value of the Group's 30,56%
(2005: 30,49%) interest in Oryx comprises:
Shares (at cost) 83 998 68 480 83 998 68 480
Cumulative share of post acquisition reserves 26 929 14 464 – –
Carrying value 110 927 82 944 83 998 68 480
Directors' valuation 110 927 82 944 110 927 82 944
Market value 118 617 68 278 118 617 68 278
Financial information of associate at 30 June:
Investment properties 543 820 283 698 543 820 283 698
– At valuation 560 630 296 350 560 630 296 350
– Straight line adjustment (16 810) (12 652) (16 810) (12 652)
Property and equipment – 86 034 – 86 034
Rent receivable– straight line adjustment 16 119 11 908 16 119 11 908
Current assets 16 089 12 625 16 089 12 625
Current liabilities (34 679) (28 714) (34 679) (28 714)
Deferred taxation (55 714) (31 667) (55 714) (31 667)
Non-current liabilities (123 416) (62 075) (123 416) (62 075)
Net asset value 362 219 271 809 362 219 271 809
Group's share of income since acquisition:
Results for the year to 30 June
Rental revenue before straight line adjustments 45 814 36 388 – –
Profit before finance costs 107 278 101 338 – –
Finance costs (7 147) (6 652) – –
Debenture interest (34 645) (28 454) – –
Profit before taxation 65 486 66 232 – –
Taxation (24 029) (18 202) – –
Net profit for the year 41 457 48 030 – –
Dividends declared – (452) – –
Net profit after dividends declared 41 457 47 578 – –
Group's share 12 465 13 589 – –
Share of Oryx's prior year adjustments – (617) – –
Group's share of profit after tax 12 465 12 972 – –
Annual Report 2006
29
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
9. INVESTMENT IN ASSOCIATE COMPANY (continued)
During the 2006 year, Oryx restated its prior year figures in respect of the
reallocation of share premium to debenture premium and the amortisation
thereof. This did not have an effect on the profit accounted for by the Group.
Income received from associate comprises:
Debenture interest 9 868 8 215 9 868 8 215
Dividends – 123 – 123
Share of retained income 12 465 12 972 – –
22 333 21 310 9 868 8 338
Oryx has a 30 June year-end, but there were no significant items between
that date and 30 September 2006 that required adjustment.
Guarantee
The Company's investment in Oryx is pledged as security for obligations in
connection with the borrowing facilities set out in Note 14.
10. CASH AND CASH EQUIVALENTS
Petty cash 4 2 4 2
Cash on call 53 185 28 065 53 185 28 065
Current accounts 2 939 862 3 431 772
56 128 28 929 56 620 28 839
11. SHARE CAPITAL AND PREMIUM
Share capital
Authorised
2 000 000 000 ordinary shares of 1 cent each 20 000 20 000 20 000 20 000
Issued 186 482 837
(2005: 173 814 215) ordinary shares
of 1 cent each 1 865 1 738 1 865 1 738
In order to fund property acquisitions, 12 668 622 units were issued for cash
on 13 April 2006 at a price of 341 cents. An additional 14,00 cents per unit
was received in respect of the interim distribution subsequently paid.
Each share is linked to a debenture, which together comprise a linked unit
(refer Note 13).
The unissued shares are under the control of the directors, until the next
Annual General Meeting.
30
Notes To The Annual Financial Statements (continued)
30 September 2006
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
12. NON-DISTRIBUTABLE RESERVES
Balance at beginning of the year 107 386 25 652 75 039 15 830
Movement:
Revaluation/ disposal of investment properties net of deferred tax 69 259 68 443 58 058 58 018
Undistributed equity accounted income 12 465 12 100 – –
Amortisation of debenture premium 1 776 1 191 1 776 1 191
Straight line adjustments:
– Rental accrued in advance (net of deferred taxation) 2 490 4 202 2 404 3 566
– Revaluation effect (net of deferred taxation) (2 490) (4 202) (2 404) (3 566)
Balance at end of the year 190 886 107 386 134 873 75 039
Comprising:
Capital reserves
Realised capital surpluses (net of capital gains tax) 5 926 5 016 5 926 5 016
Unrealised 156 728 88 379 125 280 68 132
– Revaluations 220 744 124 477 176 450 95 960
– Deferred taxation (64 016) (36 098) (51 170) (27 828)
Straight line adjustments:
– Rental accrued in advance (net of deferred taxation) 10 806 8 316 9 082 6 890
– Revaluation effect (net of deferred taxation) (10 806) (8 316) (9 082) (6 890)
Amortisation of debenture premium 3 667 1 891 3 667 1 891
Share of associate retained earnings 24 565 12 100 – –
190 886 107 386 134 873 75 039
The reserves arise from the revaluation or realisation of investment properties,
the adjustment to rental required for straight lining in terms of IAS 17, the
amortisation of debenture premium and the share of the associates retained
earnings. The unrealised capital reserve is not distributable.
13. DEBENTURES
186 482 837 (2005: 173 814 215) unsecured variable
rate debentures of 180 cents each 335 669 312 866 335 669 312 866
In terms of the Debenture Trust Deed, the interest entitlement of every
debenture linked to each ordinary share shall not be less than 90% of net
earnings of the Company before providing for debenture interest, depreciation,
amortisation and taxes and before taking into account any revaluation surpluses
or deficits and income which is to be transferred to any non-distributable
reserves but after provision for funding costs, whether interest or dividend
in nature. The interest is payable bi-annually. The debentures are redeemable
at the option of the holder after 25 years from the first allotment date (i.e.
2029).
Annual Report 2006
31
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
13. DEBENTURES (continued)
Debenture premium
Premium arising on listing 28 361 28 361 28 361 28 361
Subsequent issues 28 955 8 687 28 955 8 687
Accumulated issue expenses (4 063) (4 063) (4 063) (4 063)
Amortisation of debenture premium
- prior years (1 891) (700) (1 891) (700)
- current year (1 776) (1 191) (1 776) (1 191)
49 586 31 094 49 586 31 094
14. INTEREST BEARING BORROWINGS
14.1 ABSA BANK LIMITED
Loan bearing interest at 11,93% per annum until 09/03/2007, and
prime less 1,5% thereafter – 27 265 – 27 265
Loan bearing interest at 11,13% per annum until 09/03/2007, and
prime less 2,0% thereafter 27 246 – 27 246 –
Loan bearing interest at 11,02% per annum until 26/08/2008, and
prime less 1,5% thereafter – 25 226 – 25 226
Loan bearing interest at 10,22% per annum until 26/08/2008, and
prime less 2,0% thereafter 25 210 – 25 210 –
Loan bearing interest at 10,65% per annum until 28/10/2007, and
prime less 1,5% thereafter – 25 218 – 25 218
Loan bearing interest at 9,85% per annum until 28/10/2007, and
prime less 2,0% thereafter 25 202 – 25 202 –
Loan bearing interest at prime less 1,5% per annum – 58 701 – 58 701
Loan bearing interest at prime less 2,0% per annum 80 132 – 80 132 –
157 790 136 410 157 790 136 410
14.2 NEDCOR BANK LIMITED
Loan bearing interest at 14,64% per annum until 25/01/2006, and
prime less 1,5% thereafter – 1 340 – 1 340
Loan bearing interest at 13,18% per annum until 05/02/2006, and
prime less 1,5% thereafter – 18 788 – 18 788
Loan bearing interest at 14,63% per annum until 05/02/2006, and
prime less 1,5% thereafter – 5 771 – 5 771
Loan bearing interest at 14,58% per annum until 05/02/2006, and
prime less 1,5% thereafter – 4 696 – 4 696
Loan bearing interest at 11,73% per annum until 28/02/2009, and
prime less 1,5% thereafter – 1 362 – 1 362
Loan bearing interest at 10,87% per annum until 28/02/2009, and
prime less 2,0% thereafter 1 362 – 1 362 –
Loan bearing interest at 10,76% per annum until 06/09/2010, and
prime less 2,0% thereafter 30 221 – 30 221 –
Loan bearing interest at 8,92% per annum until 09/03/2009, and
prime less 2,0% thereafter 75 366 – 75 366 –
Loan bearing interest at 8,97% per annum until 16/12/2005, and
prime less 1,5% thereafter – 35 102 – 35 102
Loan bearing interest at prime less 1,5% per annum – 63 290 – 63 290
Loan bearing interest at prime less 2,0% per annum 50 841 – 50 841 –
157 790 130 349 157 790 130 349
32
Notes To The Annual Financial Statements (continued)
30 September 2006
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
14. INTEREST BEARING BORROWINGS (continued)
The loans detailed above in 14.1 and 14.2 are secured by first
mortgage bonds over the property portfolio, which has a fair value of
R824,6 million, and by a pledge of the Group’s investment in Oryx
which has a value of R110,9 million.
The Absa and Nedbank loans are repayable on 31/01/2014.
14.3 BP SOUTHERN AFRICA (PROPRIETARY) LIMITED 380 440 380 440
This loan does not bear interest and is repayable
in monthly installments of R5 000 until January 2012.
It is secured over Section 92 Nedbank Plaza,
Pietermaritzburg which has a fair value of R2,25 million.
315 960 267 199 315 960 267 199
The Company’s Articles of Association limit the
Group’s borrowing capacity (excluding debentures)
to 60% of its consolidated total assets.
Borrowing capacity 598 429 475 366
Borrowing facility with Absa Bank Limited and Nedcor Bank Limited 390 000 294 129
Less: borrowings (315 960) (267 199)
Unutilised borrowing facility 74 040 26 930
Subsequent to the year-end, the borrowing facility was increased to
R700 million.
An overdraft facility of R5 million exists with Absa Bank Limited, of
which R0,8 million (2005:R0,9 million) has been utilised for municipal
guarantees. With the exception of the guarantees issued, the overdraft
bears interest at prime less 2% (2005:1,5%), with no security and is
repayable on demand.
15. DEFERRED TAXATION LIABILITY
Movements in deferred taxation:
Balance at beginning of the year 36 433 10 239 28 175 6 044
Charged to the income statement
Deferred taxation on revaluation of investment properties 27 922 25 761 23 347 21 560
Straight line adjustment- revaluation (1 104) (1 716) (982) (1 457)
Straight line adjustment– rental 1 104 1 716 982 1 457
Temporary differences charged to the income statement 144 433 144 571
Balance at end of the year 64 499 36 433 51 666 28 175
Annual Report 2006
33
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
15. DEFERRED TAXATION LIABILITY (continued)
Temporary differences comprise of:
Building allowances 202 135 202 135
Tenant installation and letting commission costs 583 388 451 361
Provision for doubtful debts (102) (112) (102) (112)
Tax losses (143) (38) – –
Deposits received (61) (38) (61) (38)
Deferred taxation on revaluation of investment properties 64 020 36 098 51 176 27 829
64 499 36 433 51 666 28 175
Deferred taxation has been raised at the corporate tax rate
of 29%, even though the taxation payable would be at the
capital gains tax rate of 14,5% should the properties be
realised.
16. RENTAL REVENUE
Rental revenue before straight line adjustments 82 806 76 889 69 345 63 459
Recoveries 17 007 16 641 14 113 12 695
99 813 93 530 83 458 76 154
17. PROPERTY EXPENSES
Property expenses include the following major categories:
Body corporate levies 2 115 1 992 2 115 1 992
Cleaning 1 264 1 239 1 240 1 221
Collection commission 2 630 2 639 2 179 2 148
Electricity 5 182 4 361 4 520 3 750
Rates and taxes 5 734 5 716 4 428 4 399
Security 1 727 1 465 1 555 1 465
Water 980 1 004 891 812
18. INTEREST INCOME
Bank 186 281 170 272
Interest on net rentals 80 63 81 63
Prepaid debenture interest on units issued 1 774 2 029 1 774 2 029
Subsidiary company – – 12 546 13 452
2 040 2 373 14 571 15 816
34
Notes To The Annual Financial Statements (continued)
30 September 2006
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
19. ADMINISTRATIVE EXPENSES
Announcements and annual reports 313 355 313 355
Asset management fees 3 903 2 750 3 903 2 518
JSE Securities Exchange fee 131 130 131 130
Professional fees 83 58 78 58
Travel 153 160 153 160
Valuations 210 270 198 270
Other 473 761 474 761
5 266 4 484 5 250 4 252
20. OTHER EXPENSES
Net provision for doubtful debts expense 208 154 208 196
Auditors’ remuneration – audit fee 270 219 270 219
Directors' emoluments:
Executive – salary, benefits and other emoluments 1 061 920 1 061 920
Non-executive – fees 411 415 411 415
Donations 50 – 50 –
Other 26 – 26 –
2 026 1 708 2 026 1 750
21. TAXATION EXPENSE
South African Normal Taxation
Current
Capital Gains Taxation 59 308 59 308
Deferred taxation
Current 28 066 26 281 23 491 22 079
Change in tax rate – (341) – (202)
Prior year – 261 – 261
28 125 26 509 23 550 22 446
Reconciliation of effective tax rate: % % % %
Statutory rate 29,0 29,0 29,0 29,0
Share of associate company's profits (3,2) (3,5) – –
Non-taxable income (0,5) (0,3) (0,6) (0,5)
Capital Gains Taxation (0,1) (0,7) (0,2) (0,9)
Disallowable expenditure – 0,1 – 0,1
Change in tax rate – (0,3) – (0,2)
Prior year adjustments – 0,2 – 0,3
25,2 24,5 28,2 27,8
Annual Report 2006
35
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 Cents per Cents per
unit/share* unit/share*
22. HEADLINE EARNINGS AND EARNINGS PER LINKED
UNIT/ SHARE (WEIGHTED)
GROUP
Net profit (earnings) – shares 83 534 81 807 46,48 49,18
Debenture interest 55 199 47 799 30,72 28,73
Net profit (earnings) – linked units 138 733 129 606 77,20 77,91
Amortisation of debenture premium (1 776) (1 191) (0,99) (0,72)
Capital surpluses (net of deferred taxation) (79 015) (76 339) (43,97) (45,89)
Headline earnings – linked units 57 942 52 076 32,24 31,30
Debenture interest (55 199) (47 799) (30,72) (28,73)
Headline earnings – shares 2 743 4 277 1,52 2,57
Reconciliation to undistributed income:
Debenture interest 55 199 47 799 30,72 28,73
Rental straight lining net of deferred taxation (2 703) (4 202) (1,50) (2,53)
Distributable earnings 55 239 47 874 30,74 28,77
Debenture interest (55 199) (47 799) (30,72) (28,73)
Undistributed income 40 75 0,02 0,04
COMPANY
Net profit (earnings) – shares 59 867 58 413 33,31 35,11
Debenture interest 55 199 47 799 30,72 28,73
Net profit (earnings) – linked units 115 066 106 212 64,03 63,84
Amortisation of debenture premium (1 776) (1 191) (0,99) (0,72)
Capital surpluses (net of deferred taxation) (55 648) (53 718) (30,97) (32,29)
Headline earnings – linked units 57 642 51 303 32,07 30,83
Debenture interest (55 199) (47 799) (30,72) (28,73)
Headline earnings – shares 2 443 3 504 1,35 2,10
* Based on a weighted average number of 179 707 418 (2005: 166 351 253)
units in issue for the year.
Distribution per linked unit in issue
Based on 186 482 837 (2005: 173 814 215) units in issue
at 30 September 2006. 29,60 27,50
36
Notes To The Annual Financial Statements (continued)
30 September 2006
Group Company
2006 2005 2006 2005
(restated) (restated)
R'000 R'000 R'000 R'000
23. CASH GENERATED BY OPERATING ACTIVITIES
Profit before taxation 111 659 108 316 83 417 80 859
Adjusted for:
Straight-line adjustment (3 807) (5 918) (3 386) (5 023)
Amortisation of debenture premium (1 776) (1 191) (1 776) (1 191)
Share of income from associate (12 465) (12 972) – –
Fair value adjustment for investment properties (93 450) (87 495) (78 095) (73 905)
Profit on disposal of investment properties (72) (711) (72) (711)
Interest received (11 908) (10 711) (24 439) (24 154)
Debenture interest 55 199 47 799 55 199 47 799
Finance costs 23 902 25 992 23 902 25 992
Cash generated from operations before working capital changes 67 282 63 109 54 750 49 666
Decrease/ (increase) in trade and other receivables 3 628 (4 019) 4 620 (4 065)
(Decrease)/ increase in trade and other payables (805) 4 360 (517) 3 157
70 105 63 450 58 853 48 758
24. DISTRIBUTIONS PAID TO LINKED UNITHOLDERS
Debenture interest paid is reconciled as follows:
Amounts unpaid at beginning of the year (25 033) (26 520) (25 033) (26 520)
Amounts charged to the income statement (55 199) (47 799) (55 199) (47 799)
Amounts unpaid at end of the year 29 098 25 033 29 098 25 033
(51 134) (49 286) (51 134) (49 286)
25. COMMITMENTS
Investment property contracted for – 22 500 – 22 500
26. LEASES
The future minimum lease commitments receivable
under non-cancellable operating leases are as follows:
Not later than 1 year 92 118 73 435 76 706 62 284
Later than 1 year and not later than 5 years 217 510 154 204 183 668 124 358
Later than 5 years 18 927 24 630 18 927 24 630
Ambit enters into lease contracts with tenants in exchange for their use
of the property.
Annual Report 2006
37
Retail Office Industrial Corporate Total
R'000 R'000 R'000 R'000 R'000
27. SEGMENT INFORMATION
– all items are stated before straight line adjustments
BUSINESS SECTORS
2006
GROUP
Income statement
Rental 55 556 25 818 18 439 – 99 813
Net property income 41 257 18 011 15 306 – 74 574
Fair value adjustments to investment properties 58 270 18 861 20 126 – 97 257
Profit on disposal of investment properties (29) 77 24 – 72
Balance sheet
Assets
Investment properties 487 950 190 200 146 400 – 824 550
Trade and other receivables 2 912 1 331 1 094 439 5 776
Liabilities
Deferred taxation liability 40 472 10 780 12 751 496 64 499
Trade and other payables 5 500 1 677 1 250 660 9 087
2005
GROUP
Income statement
Rental 49 383 28 766 15 381 – 93 530
Net property income 36 083 20 343 12 875 – 69 301
Fair value adjustments to investment properties 65 700 9 209 18 504 – 93 413
Profit on disposal of investment properties – 703 8 – 711
Balance sheet
Assets
Investment properties 381 900 155 800 133 300 – 671 000
Trade and other receivables 3 292 1 184 426 4 502 9 404
Liabilities
Deferred taxation liability 23 987 5 257 6 843 346 36 433
Trade and other payables 6 430 2 178 1 029 253 9 890
38
Notes To The Annual Financial Statements (continued)
30 September 2006
Gauteng Durban Pietermartizburg Other Total
R'000 R'000 R'000 R'000 R'000
27. SEGMENT INFORMATION (continued)
– all items are stated before straight line adjustments
GEOGRAPHICAL
2006
GROUP
Income statement
Rental 65 227 12 028 14 065 8 493 99 813
Net property income 49 392 8 196 9 979 7 007 74 574
Fair value adjustments
to investment properties 80 114 10 303 2 154 4 686 97 257
Balance sheet
Investment properties 558 300 97 550 80 900 87 800 824 550
2005
GROUP
Income statement
Rental 59 044 12 061 14 613 7 812 93 530
Balance sheet
Investment properties 475 900 72 800 77 800 44 500 671 000
28. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Group's financial instruments consist primarily of cash deposits with banks, investments, trade and other receivables, payables and interest bearing
borrowings. All these financial instruments are carried at cost or amortised cost.
In the normal course of its operations, the Group is inter alia exposed to credit, interest rate and liquidity risk. In order to manage these risks, the
Group may enter into transactions which make use of derivatives. The Group does not speculate in or engage in the trading of derivative instruments.
Credit risk
The Group's financial assets that are potentially subject to credit risk include cash deposits with banks and trade and other receivables. The credit risk
attached to the Group's cash deposits is minimised by its cash deposits only being placed with reputable financial institutions. Credit risk with respect
to trade and other receivables is limited due to the large and diverse tenant base. In addition tenant creditworthiness is thoroughly assessed before
leases are signed.
Interest rate risk
The Group is exposed to interest rate price risk on its fixed rate loan liabilities and accounts receivable and payable, which can impact on the fair value
of the instruments. The Group is exposed to interest rate cash flow risk in respect of its variable rate loans and short-term cash investments, which
can impact on the cash flows of these instruments. The exposure to interest rate risk is managed through monitoring cashflows and investing surplus
cash at negotiated rates which enables the Group to maximise returns while minimising risks.
Liquidity risk
The Group proactively manages its liquidity risk by regularly assessing cash requirements and monitoring cashflows, whilst ensuring surplus cash is
invested in a manner to achieve maximum returns.
Annual Report 2006
39
GROUP
2006 2005
R'000 R'000
29. RELATED PARTY TRANSACTIONS
PARTY CONCERNED TRANSACTION TYPE
Amounts expensed to the income statement:
Marriott Property Services (Proprietary) Limited – Leasing commissions 707 386
– Collection commissions 2 573 2 176
Ambit Management Services (Proprietary) Limited – Asset management fees* 3 903 2 750
Absa Bank Limited – Interest paid on loans 12 574 12 861
Amounts credited to the income statement:
Absa Bank Limited – Bank interest received 54 344
– Interest received
(prepaid distribution on issue of units) 953 2 029
Oryx Properties Limited – Interest received 9 868 8 215
– Dividends received –123
– Share of after tax profits 12 465 12 972
– Fees for directorship 33 20
Property acquisitions and listing expenses:
Motseng Marriott Property Services (Proprietary) Limited – Valuation fees –52
Exchange Sponsors (Proprietary) Limited – Sponsors fees 68 61
Amounts owing to related parties:
Absa Bank Limited – Long-term loans 157 790 136 410
Amounts owing from related parties:
Absa Bank Limited – Cash 34 197 21 860
The Group is managed by Ambit Management Services (Proprietary) Limited (AMS). This company, which is considered to be a related party, is owned
by Absa Bank Limited (Absa). Marriott Property Services (Proprietary) Limited (Marriott) sold the rights to its 50% share in AMS to Absa in August
2006. Absa and Marriott, together with their related group companies, are consequently also regarded as related parties for the purpose of the
disclosures above. All transactions are concluded on an arms length basis with market related terms and conditions.
Key personnel are the executive and non-executive directors, whose remuneration is disclosed in Note 20.
In April 2006, Ambit acquired 50% of Akals Properties (Proprietary) Limited in conjunction with Pinespring Properties (Proprietary) Limited, a wholly
owned subsidiary of Highpine Properties (Proprietary) Limited, a company in which Mr J H Beare has an interest.
* AMS sub-contracts certain of these services to Absa and Marriott and remunerates them out of the fees received from Ambit Properties Limited.
40
Property Portfolio
30 September 2006
Address Location Site Rentable % Vacancy Major leases Date of Year-end % of
area m2area m2by rentable acquisition valuation fund
area by value
RETAIL
Park Meadows Gauteng 75 873 24 402 0 Pick 'n Pay 29/01/2004 327 500 000 39,7
Kensington Ackermans
Furniture City
Hi Fi Corporation
Dischem
Baby City
Mr Price Weekend
Mr Price Home
Sportsmans Warehouse
Home Etc
and others
Scottsville Mall Pietermaritzburg 19 326 14 501 4,6 Shoprite Checkers 26/01/2004 72 500 000 8,8
Durban Road Ster Kinekor
El Sombrero Spur
Miladys
Absa Bank
Nedbank
and others
Lowveld Lifestyle Nelspruit 24 566 11 420 0 Wetherleys 11/04/2006 43 700 000 5,3
Centre Beds 4 Africa
Jumbo Cash & Carry
cnr Oxford & East London 2 007 1 932 0 Mr Price 11/02/2004 15 400 000 1,9
Terminus Street Total Sports
Discom
and others
Old Main Road Durban 8 112 9 190 0 Midas 12/07/2006 14 150 000 1,7
Pinetown (50%) Engen
Wesbank
Royal Palm Avenue Durban 4 461 927 0 Engen 27/01/2004 10 200 000 1,2
Umgeni Steers
and others
Truworths Corner Cape Town 512 512 0 First National Bank 08/03/2004 4 500 000 0,5
Mitchells’ Plain
Total Retail 1,2 487 950 000 59,1
OFFICES
43 Bekker Road Gauteng 14 503 8 312 14,4 Wyeth South Africa 03/02/2004 52 500 000 6,4
Vorna Valley Syngenta South Africa
Midrand
79 Hyde Park Lane Gauteng 10 106 4 379 14,5 Marriott 03/02/2004 26 500 000 3,2
Hyde Park Universal Database
Marketing
Horizon Park Gauteng 4 158 2 427 0 Absa Bank Limited 11/01/2006 26 000 000 3,1
Roodepoort
Annual Report 2006
41
Address Location Site Rentable % Vacancy Major leases Date of Year-end % of
area m2area m2by rentable acquisition valuation fund
area by value
OFFICES (continued)
cnr Reserve Road & Biccard Gauteng 991 5 984 1,2 Firstrand Bank 28/01/2004 18 600 000 2,3
Street The Gauteng Provincial
Braamfontein Government
2-4 Golf Course Drive Durban 3 014 3 042 25,4 Accord Education Trust 27/01/2004 18 200 000 2,2
Mount Edgecombe Toplink
36 Newport Avenue Durban 3 716 2 766 5,9 Engen 26/01/2004 17 300 000 2,1
Glenashley Coimbra
Splashes
7 Derby Place Durban 4 826 2 158 18,9 Department of Health 29/01/2004 10 700 000 1,3
Westville
3 Sookhai Place Durban 3 596 1 848 1,1 Thebe Risk Services 29/01/2004 10 000 000 1,2
Westville Volker Wattrus & De Witt
1 Derby Place Durban 2 017 960 30,7 Ensign Shipping & Logistics 26/01/2004 4 900 000 0,6
Westville Imperial Fleet Services
2 George McFarlane Lane Pietermaritzburg 596 572 36,6 Wesbank 26/01/2004 3 200 000 0,4
10 Derby Place Durban 516 554 0 The KZN Provincial 26/01/2004 2 300 000 0,3
Westville Administration
Total Offices 11,4 190 200 000 23,1
INDUSTRIAL
8 Jansen Road Gauteng 48 946 22 774 0 Picpack Grindrod 03/02/2004 59 200 000 7,2
Jet Park
12 Piet Rautenbach Street, Gauteng 135 001 22 310 3,7 Dept of Public Works 15/07/2005 37 500 000 4,5
Rosslyn and others
12 Nourse Avenue Cape Town 17 277 10 581 0 Rare Woods 04/01/2005 16 200 000 2,0
Epping First Garment
233 Hendrik Verwoerd Drive, Gauteng 4 062 2 958 0 McCarthy Retail 27/02/2004 10 500 000 1,3
Randburg
9 Montague Drive Montague Cape Town 5 028 2 669 2,0 Progress Lighting and Fire 19/03/2004 8 000 000 1,0
2 Cardiff Road Pietermaritzburg 10 480 3 114 0 Central African Seed 26/01/2004 5 200 000 0,6
Services
110 Intersite Avenue Durban 2 101 1 376 0 MacPhersons Office 28/01/2004 4 500 000 0,6
Springfield Plan
94 Moore Road Durban 1 095 1 197 0 Transworld Tyres Africa 29/01/2004 3 400 000 0,4
32 Intersite Avenue Durban 1 157 600 0 Tactic Merchant 28/01/2004 1 900 000 0,2
Springfield Services
Total Industrial 1,3 146 400 000 17,8
Total Portfolio 3,5 * 824 550 000 100,0
* Old Main Road Pinetown excluded as held for development.
42
Notice Of Annual General Meeting
AMBIT PROPERTIES LIMITED Reg. No. 2001/007003/06
JSE Code: ABT ISIN Code: ZAE000051645
PLEASE TAKE NOTICE that the Annual General Meeting of the Company will be held at the Quatermain Premier Boutique Hotel, 137 West Road South,
Morningside, Johannesburg, on Wednesday 21
st
day of February 2007 at 10am.
AGENDA
1. Notice convening the Meeting.
2. Apologies.
3. Confirmation of the minutes of the Annual General Meeting held on the 7th day of February 2006.
4. Report of the Chairman.
5. To receive the audited Annual Financial Statements of the Company including the reports of the auditors and directors for the year ended
30 September 2006.
6. To approve the remuneration of the non-executive directors for the financial year ended 30 September 2006 and to approve a 10% increase in the
remuneration of the non-executive directors for the year ahead as follows:
•Non-executive director R55 000 p.a.
•Chairman of the Board, an additional R38 500 p.a.
•Chairman of the Risk, Audit and Compliance Committee (RA&CC), an additional R33 000 p.a.
•Member of the Risk, Audit and Compliance Committee (RA&CC), an additional R16 500 p.a.
•Member of the Investment Committee, an additional R11 000 p.a.
7. To consider and, if deemed fit, to pass, with or without modification, the following resolutions:
7.1 Ordinary Resolution number 1:
“Resolved that the unissued linked units of the Company be placed under the control of the directors, and that they are hereby authorised, subject
to section 221 and 222 of the Companies Act of 1973, as amended, and to the Listings Requirements of the JSE Limited, to allot and/or issue
linked units to such person or persons on such terms and conditions as they may determine, subject to the following limitations:
a) The authority will expire at the next Annual General Meeting of the Company.
b) The authority may be varied or revoked by any general meeting of the Company prior to such annual general meeting.
c) The authority shall not authorize the allotment or issue of any such shares or debentures to any director of the Company or his nominee, or
to any body corporate which is or the directors of which are accustomed to act in accordance with the directions or instructions of such
director or nominee, or at a general meeting of which such director or his nominee is entitled to exercise or control the exercise of one-fifth
or more of the voting power, or to any subsidiary of such body corporate unless-
i) the particular allotment or issue has prior to the allotment or issue been specifically approved by the Company in general meeting; or
ii) such shares or debentures are allotted or issued under a contract underwriting such shares or debentures; or
iii) such shares or debentures are allotted or issued in proportion to existing holdings, on the same terms and conditions as have been
offered to all the members or debenture-holders of the company or to all the holders of the shares or such debentures of the class or
classes being allotted or issued; or
iv) such shares or debentures are allotted or issued on the same terms and conditions as have been offered to members of the public.”
7.2 Ordinary Resolution number 2:
“Resolved to authorise the directors to re-appoint Deloitte & Touche as the auditors of the company and to determine the remuneration of the
auditors for the past period.”
Annual Report 2006
43
7.3 Ordinary Resolution number 3:
“To re-elect retiring and confirm the appointment of any new directors in accordance with the Articles of Association. Such elections will be moved
in a single motion, if a resolution that it be so moved is first agreed, without any vote being cast against it. Otherwise motions for re-election will
be moved individually.”
“In terms of the Company's Articles of Association, one third of the directors are required to retire annually on a rotation basis, but are eligible
for re-election. Accordingly, Mr F Uys and Mr R R Emslie retire by rotation but being eligible, offer themselves for re-election.”
“To ratify the resignation of Mr J Zidel (full director) who resigned from the board of directors on 3 May 2006.”
“To ratify the resignation of Mr C J Ewin (full director) who resigned from the board of directors on 16 August 2006.”
7.4. Ordinary Resolution number 4:
“To confirm the appointment of new directors nominated in accordance with the Articles of Association.”
7.5 Ordinary Resolution number 5:
“Resolved that, subject to no less than 75% of linked unitholders, present in person or by proxy and entitled to vote at the Annual General
Meeting at which this ordinary resolution is to be considered, voting in favour thereof, the directors of the Company be and are hereby authorised,
by way of general authority, valid until the next Annual General Meeting of the Company, or for 15 months from the date of this Annual General
Meeting, whichever is first, to issue all or any of the authorised but unissued linked units in the capital of the Company for cash as they in their
discretion deem fit, subject to the following limitations:
•The securities must be of a class already in issue;
•The securities must be issued to public unitholders and not to related parties;
•The general issue of linked units for cash in the aggregate in any one financial year may not exceed 15% of the Company's issued linked unit
capital of that class;
•The maximum discount at which the securities may be issued is 10% of the weighted average traded price of those securities over the 30
business days prior to the date that the price of the issue is determined or agreed by the directors of the Company; and
•That a press announcement giving full details, including the impact on net asset value and earnings per linked unit, will be published at the
time of any issue representing, on a cumulative basis within one year, 5% or more of the number of linked units of that class in issue prior
to the issues.”
8. To transact any other business which under the Articles of Association, may be transacted at an Annual General Meeting.
9. General
AMBIT MANAGEMENT SERVICES (PROPRIETARY) LIMITED
COMPANY SECRETARY
44
Notice Of Annual General Meeting (continued)
AMBIT PROPERTIES LIMITED Reg. No. 2001/007003/06
JSE Code: ABT ISIN Code: ZAE000051645
NOTE:
1. A linked unitholder (certificated or own name dematerialised unitholder) entitled to attend and vote is entitled to appoint a proxy to attend, speak,
vote, and on a poll, vote in his stead, and such proxy need not also be a linked unitholder of the Company.
2. The Proxy Form must be deposited at the Company Secretary's Office or with the Transfer Secretaries not less than 48 (FORTY-EIGHT) hours before
the time of holding the meeting. Linked unitholders (other than own name dematerialised unitholders) who have dematerialised their units should
instruct their broker or CSDP as to how they want to vote on the resolutions at the meeting. Alternatively should they wish to attend the meeting,
they must arrange with the CSDP or broker concerned to provide them with the necessary authorisation to attend the Annual General Meeting and
vote thereat. This must be done in terms of the agreement entered into between the linked unitholder and the CSDP or broker concerned.
3. Should you wish to nominate a director in terms of the company's Articles of Association, a directors nomination form, to be completed by the
nominator and person(s) nominated as director, can be collected from Mrs M Peters at the Company Secretary's Office. The directors' nomination
form together with the nominated director's curriculum vitae is to be lodged at the Company Secretary's Office by no later than 16:00 on 14 February
2006.
Dated at FOURWAYS on this 23
rd
day of November 2006.
Company Secretary's Office
First Floor, 4 Fricker Road P O Box 618 Tel. 011 268 5062
Illovo Melrose Arch Fax. 011 252 7293
2196 2076
Registered Office
First Floor, 4 Fricker Road P O Box 618 Tel. 011 268 5062
Illovo Melrose Arch Fax. 011 252 7293
2196 2076
Transfer Secretaries
Computershare Investor Services 2004 P O Box 61051 Tel. 011 370 5000
(Proprietary) Limited Marshalltown Fax. 011 688 5217
70 Marshall Street 2107
Johannesburg, 2001
8 Jansen Road, Jet Park, Gauteng
Annual Report 2006
45
Proxy Form
AMBIT PROPERTIES LIMITED (AMBIT)
JSE Code: ABT ISIN Code: ZAE000051645
To be used by certificated or dematerialised linked unitholders with own name registration.
I/We
(Name/s in block letters)
of address
being the holder/s of linked units in AMBIT, as at 10am on Monday, the 19
th
February 2007,
hereby appoint of
or failing him of
or failing him THE CHAIRMAN OF THE MEETING
as my/our Proxy to act on my/our behalf at the Annual General Meeting of AMBIT to be held at the Quatermain, 137 West Road South, Morningside on
Wednesday, the 21
st
February 2007 at 10am and at any adjournment thereof and to vote for or against the resolutions or to abstain from voting in respect
of the units registered in my/our name/s, in accordance with the following instructions:
FOR AGAINST ABSTAIN
1 Resolution to receive and adopt the audited annual financial statements of the Company
and the reports of the auditors and the directors for the year ended 30 September 2006.
2.1 Resolution to approve the remuneration of the non-executive directors for the financial
year ended 30 September 2006; and
2.2 to approve the remuneration of the non-executive directors for the year ahead, as per
item 6 of the Notice of the Meeting.
3 Ordinary Resolution number 1:
Resolution to place the unissued linked units under the control of the directors.
4 Ordinary Resolution number 2:
Resolution to authorise the directors to re-appoint the auditors for the ensuing year and
approve their remuneration for the past year.
5 Ordinary Resolution number 3:
5.1 To re-elect Mr F Uys as director;
5.2 To re-elect Mr R R Emslie as director;
5.3 To ratify the resignation of Mr J Zidel (full director);
5.4 To ratify the resignation of Mr C J Ewin (full director); and
6 Ordinary Resolution number 4:
To consider the nominations (if any) and, if deemed fit, appoint any new directors
nominated in terms of the Company’s Articles of Association
7 Ordinary Resolution number 5:
Resolution to authorise the directors by way of general authority to issue the
unissued linked units in the Company for cash.
46
INSTRUCTIONS ON SIGNING AND LODGING OF THE PROXY FORM
1. The Proxy Form must be deposited at the Company Secretary’s Office or with the Transfer Secretaries not less than 48 (FORTY-EIGHT) hours
before the time of holding the meeting.
2. A deletion of any printed matter and the completion of any blank space(s) need not be signed or initialed. Any alteration must be signed in full.
3. The Chairman of the meeting shall be entitled to decline to accept the authority of the signatory:
(a) under a power of attorney; or,
(b) on behalf of a company or any other entity, unless the power of attorney or authority is deposited at the registered office of the company not
less than 48 (FORTY-EIGHT) hours before the time scheduled for the meeting.
4. The authority of a person signing a Proxy in a representative capacity must be attached to the Proxy Form unless the authority has already been
recorded by the Secretaries.
5. The signatory may insert the name of any person(s) whom the signatory wishes to appoint as his Proxy in the blank space(s) provided for that
purpose.
6. When there are joint holders of units and if more than one such joint holder be present or represented, then the person whose name stands first
in the register in respect of such units or his Proxy, as the case may be, shall alone be entitled to vote in respect thereof.
7. The completion and lodging of this Proxy Form will not preclude a signatory from attending the meeting and speaking and voting in person thereat,
to the exclusion of any Proxy appointed in terms hereof should such signatory wish to do so.
8. The Chairman of the meeting may reject or accept any Proxy Form which is completed and/or submitted other than in accordance with these
instructions, provided that he is satisfied as to the manner in which a member wishes to vote.
9. If the unitholding is not indicated on the Proxy Form, the Proxy will be deemed to be authorised to vote the total unitholding.
10. If unitholders have dematerialised their units with a CSDP or broker, other than own name dematerialised unitholders, they must arrange with
the CSDP or broker concerned to provide them with the necessary authorisation to attend the Annual General Meeting and vote thereat or the
unitholder concerned must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement
entered into between the unitholder and the CSDP or broker concerned.
Each linked unitholder is entitled to appoint one or more proxies (who need not be a linked unitholder of AMBIT) to attend, speak, and on a poll, vote in
place of the linked unitholder at the Annual General Meeting.
Signed at on this day of 200 .
Signature(s) Capacity
Company Secretary’s Office
First Floor, 4 Fricker Road P O Box 618 Tel. 011 268 5062
Illovo Melrose Arch Fax. 011 252 7293
2196 2076
Transfer Secretaries
Computershare Investor Services 2004 (Proprietary) Limited P O Box 61051 Tel. 011 370 5000
70 Marshall Street Marshalltown Fax. 011 688 5217
Johannesburg, 2001 2107
Proxy Form
Annual Report 2006
47
Directors’ Traditional Income Statement
& Balance Sheet
for the year ended 30 September 2006
Due to the number of accounting adjustments that have resulted from changes to accounting standards over the last three years, the directors of Ambit
Properties Limited (“Ambit”) have taken the decision to present a traditional income statement and balance sheet. This is for the benefit of users who wish
to analyse the Ambit financials in a more user-friendly format.
The following balance sheet and income statement are therefore unaudited and are provided as additional information, in a format better suited to user
analysis. They are identical to the audited financials with the following exceptions:
1) Removal of the effects of straight lining of rentals
IFRS requires rentals to be recognised on a straight-line basis over the period of the lease. This means that all escalations are taken into account
upfront and smoothed over the period of the lease. In the audited financials this results in an increase to rentals in the first half of the lease and
a decrease in the second half. The increase is recognised in the income statement as rental and in the balance sheet as a non-current receivable.
There is a corresponding decrease in the revaluation of the investment properties. In the IFRS financials, the effects of straight lining of rentals
are then moved to non-distributable reserves.
All straight lining adjustments have been removed in the traditional balance sheet and income statement as presented herein.
2) Reduction of the provision for deferred taxation on revaluations
IFRS requires deferred taxation to be raised on revaluations at the company tax rate of 29%. However, the buildings are valued using after
tax rental streams, and the only tax payable would be the capital gains taxation on disposal of the buildings. The deferred taxation on revaluations
has therefore been reduced to the capital gains tax rate of 14,5% in the financials below.
3) Removal of the effects of reclassifying and amortising debenture premium
IFRS requires that amounts that were classified as share premium are now allocated to debenture premium and reflected as a long-term liability.
This amount is required to be amortised over the minimum contractual period of the debentures, being the remaining period of 25 years from
February 2004. As the amount is not a liability, and is legally classified as share premium, the traditional financials have classified these amounts
back to share premium and have removed the amortization thereof.
A reconciliation back to the audited IFRS financials is presented below both the income statement and balance sheet.
43 Bekker Road, Vorna Valley, Midrand, Gauteng
48
Directors’ Traditional Group Balance Sheet
as at 30 September 2006
Group
Notes* 2006 2005
R'000 R'000
ASSETS
Non-current assets
Investment properties 7 824 550 671 000
Investment in associate company 9 110 927 82 944
935 477 753 944
Current assets
Trade and other receivables 5 776 9 404
Cash and cash equivalents 10 56 128 28 929
61 904 38 333
TOTAL ASSETS 997 381 792 277
EQUITY AND LIABILITIES
Capital and reserves
Share capital 11 1 865 1 738
Share premium 53 255 32 986
Non-distributable reserves 219 224 123 543
Per IFRS 12 190 886 107 386
Additional deferred taxation on revaluations 32 005 18 048
Accumulated amortisation on debenture premium (3 667) (1 891)
Distributable reserves 364 330
274 708 158 597
Non-current liabilities
Debentures 13 335 669 312 866
Long-term borrowings 14 315 960 267 199
Deferred taxation 32 492 18 384
684 121 598 449
Current liabilities
Trade and other payables 9 087 9 890
Taxation payable 367 308
Linked unitholders for distribution 29 098 25 033
38 552 35 231
TOTAL EQUITY AND LIABILITIES 997 381 792 277
Reconciliation of equity:
Equity per traditional balance sheet above 274 708 158 597
Less:
Additional deferred tax on revaluations (32 005) (18 048)
Reclassification of share premium to debenture premium (53 255) (32 986)
Add back:
Amortisation of debenture premium 3 667 1 891
EQUITY PER AUDITED IFRS BALANCE SHEET 193 115 109 454
Net asset value per linked unit (before payment of distribution) 343 285
Annual Report 2006
49
Directors’ Traditional Group Income Statement
for the year ended 30 September 2006
Group
Notes* 2006 2005
R'000 R'000
REVENUE
Rental 16 99 813 93 530
Property expenses 17 (25 239) (24 229)
NET RENTAL INCOME 74 574 69 301
Investment income 18 2 040 2 373
Debenture interest income from associate company 9 9 868 8 338
Other expenses 19,20 (7 292) (6 192)
OPERATING PROFIT BEFORE FINANCE COSTS 79 190 73 820
Less: Finance costs (23 902) (25 992)
NET PROFIT BEFORE TAXATION 55 288 47 828
Taxation (49) 46
DISTRIBUTABLE EARNINGS 55 239 47 874
Debenture interest (55 199) (47 799)
UNDISTRIBUTED INCOME 40 75
Share of associate company’s after tax profits 6,9 12 465 12 972
Capital profits 83 211 80 450
Profit on sale of investment properties 72 711
Capital gains taxation on disposals (160) (793)
Changes in fair value of investment properties 97 257 93 413
Deferred tax on revaluations at 14.5% (13 958) (12 881)
NET PROFIT FOR THE YEAR 95 716 93 497
Distribution per linked unit 29,60 27,50
Reconciliation to IFRS income statement:
Net profit per traditional income statement above 95 716 93 497
Add back:
Rental straight lining 3 807 5 918
Amortisation of debenture premium 1 776 1 191
Less:
Revaluation straight lining adjustment (3 807) (5 918)
Additional deferred taxation on revaluations (13 958) (12 881)
NET PROFIT PER AUDITED IFRS INCOME STATEMENT 83 534 81 807
Notes*: Users are referred to the notes as included in the audited financials.
Design: Design Insight, Printing: Fishwicks
www.ambitprops.co.za
Tel: +27 11 268 5062 Fax: +27 11 252 7293
