CONDENSED CONSOLIDATED FINANCIAL STATEMENTS · The executive team ... is still heavily weighted to Gauteng where 68,3% (2013: 58,7%) of our properties are ... The project to ‘green’

CONDENSED CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2014

Distribution per share

85,47 cents

from 77,25 cents

Share price

965 cents

Investment property income

R271,8 million

from R216,9 million up by

10,6%

up by

25,3%

up by

40,4% Portfolio value

R2,21 billion

Net property income

R184 million

Net asset value

993,89 cents

per share from 861,9 cents

Vacancy

5,3%

(2013: 5,6%)

Bluechiptenants

79,6%

Tenantretention(based onGLA)

82,5%

As the costs of improving buildings’ environmental performance falls in line with the lower costs of technological innovations such as solar panels and efficient heating systems, so occupiers will demand these enhancements and be willing to pay a premium for them.

up by

18,8%

up by

15,4%

Texton Property Fund condensed consolidated financial statements 2014 I 1

INTRODUCTIONThis has been a busy and very positive year for the Fund. A number of fundamental changes have provided us with a solid platform from which to grow our asset base and deliver sustainable, superior earnings for our shareholders. The benefit to shareholders has already been evident during this financial year, with a marked increase in acquisition activity (40,4% growth compared with 9,9% to 30 June 2013). Despite strong growth, the Fund has retained its tight control of the assets and all acquisitions have enhanced the portfolio quality and the sustainability of its income.

The purchase of the management company by a consortium comprising executive management, Angelique de Rauville, Chick Legh, Thys van Heerden and Gerard de Rauville and Investec has invigorated the Fund with the injection of considerable property skills and deal making ability. The underlying portfolio has proven to be an exceptionally stable platform and performed well. Going forward both the existing portfolio and our growth path will benefit from the expertise within the Texton Group. The executive team has grown considerably and we will continue to appoint highly experienced executives with property expertise to ensure we continue the Fund’s focus on tight, hands-on management.

On 7 August 2014 Texton successfully changed its name from Vunani Property Investment Fund Limited following the cession and assignment of the asset management agreement to Texton Property Investments Proprietary Limited with a corresponding change in the ISIN code from ZAE000185872 to ZAE000190542. The share code has changed from VPF to TEX effective 25 August 2014. The Johannesburg and Cape Town offices have been relocated to 54 Bompas Road, Dunkeld West, and 6th Floor, 33 Church Street, Cape Town, respectively.

KEY PERFORMANCE INDICATORSA core discipline for the Fund is the tight management of our assets and monthly tracking of eleven primary indicators that flag

the performance of our underlying assets. The last 12 months has been tough in the market, and nowhere more so than in the office sector. Despite a sluggish economy, we are pleased to report to shareholders that all our KPIs have improved.

While the sector average vacancy is 11,3%, ours has improved to 5,3% on a total GLA of 190 116m2, from 5,6% in June 2013. The Fund started the year with only two material leases expiring, amounting to 7,0% of our lettable area. We extended the Compensation Fund’s lease to three years and SITA has also renewed their lease. The vacancy at Investment Place has continued to be an irritant; we are in negotiations with a number of tenants. We have filled other pockets of vacancies which have offset those at Investment Place, thereby reducing our overall vacancy rate.

The average lease expiry is 3,96 years (2013: 4,75 years) with the average lease escalations at 8,6% (2013: 7,7%). Financial year 2015 will be a relatively quiet year for leasing activity, with 12,2% of leases due to expire. Negotiations are far advanced on 5,0% of the expiries and we are confident we will retain our tenants without rent reversions.

Rent collection has improved to 98,0% excluding those referred to legal intervention. This is a remarkable statistic in what has been a prolonged tough environment. Of note is the fact that we have very little new arrear rentals and our arrears book is largely confined to managing the few long-term defaulters.

The Fund’s geographic profile, based on GLA and rental income, is still heavily weighted to Gauteng where 68,3% (2013: 58,7%) of our properties are located and 21,7% (2013: 28,4%) in the Western Cape. It is our intention to continue to acquire properties in economically strong nodes and over time, our geographical profile should mirror economic activity. ‘Blue chip’ clients (listed, national and government tenants) contribute 79,8% (2013: 79,7%) of our revenue per month. Of our tenant base, on total revenue, national companies comprises 12,9% (2013: 18,3%) and government 38,9% (2013: 45,5%); listed and large entities rent 28,0% (2013: 15,9%). We have a 63%/37% split between single and multi-tenanted

Commentary

I Texton Property Fund condensed consolidated financial statements 20142

buildings based on rental income per month. The vast majority of our tenants are in the commercial sector, at 92,9% (2013: 90,8%) by GLA and 95,0% (2013: 93,5%) by rental income.

GREENING THE PORTFOLIO

An aspect of our tenant retention strategy has involved the Fund in evolving into a specialist in refurbishments and green projects. Experience has proved that renovations result in higher property valuations and a more stable tenant profile as well as increasing distributions. Experience has also taught us that much of the savings punted at feasibility stage do not materialise. Management has taken time to understand this industry and this will ensure that capital expenditure will deliver enhanced returns to shareholders.

The project to ‘green’ the Foretrust building, located in the fast-developing node of the Cape Town foreshore, has been modelled on the successful 14 Loop Street environmental refurbishment we completed in late 2009. The feasibility stage is complete, with costs and savings now well defined. The project will be a joint effort between the Fund, Department of Public Works, Eskom and City of Cape Town. Capital expenditure is estimated to be around R23 million, and will be yield accretionary. We anticipate that we will reduce power and water consumption by over 50,0%.

Our other ‘green’ project is ACS House where we have had positive support from the tenants for the harvesting of spring and rain water. The payback on the capital expenditure will be four years and has resulted in savings of 70,0% in water consumption.

The significant savings achieved indicate that the application of green principles in all refurbishments will sustain the growth of the Fund over the long term. We continue to assess all the buildings in our portfolio and will schedule green refurbishments provided they deliver enhanced returns to our shareholders and tenants.

ACQUISITIONS

When we listed the Fund in 2011 our main aim was to provide a platform for acquisitive growth so that we

can grow our asset base by investing in well priced income and quality enhancing investment properties specifically in the commercial sector, to optimise returns for our shareholders. During the past financial year, we observed a closing of the gap between seller’s asking prices and our understanding of value. Consequently, we acquired four excellent properties valued at R598,5 million in total (acquired for R544,4 million – refer to note relating to acquisitions/business combinations for details of the acquisitions). We have another R379,6 million of assets in the process of being transferred into the Fund.

BEE TRANSACTIONThe management and board of the Fund continue to be committed to the transformation and empowerment objectives of South Africa and have expended considerable effort in addressing our objective of having a meaningful, sustainable and commercially driven black economic empowerment shareholding at the listed level. Notably, the Fund scores very highly in all aspects of its operations except that of equity ownership. A sub-committee was appointed by the board to consider and propose both a suitable BBBEE structure and participants. The imminent transfer of the PD Naidoo portfolio will result in 6,2% of Texton shares being owned by black empowered individuals/entities and will ensure that the Fund achieves at least a Level 3 rating. Approximately 11,1 million shares will be issued for the settlement of the Scott Street property (refer events after the reporting date).

An additional, circa 20% BBBEE Shareholder deal is at an advanced stage and we anticipate the deal being concluded by the end of the calendar year.

EQUITY RAISEDOn 23 August 2013, Texton successfully concluded its rights offer and issued 48 503 939 new shares (40,2%), raising R455 million. The proceeds were used to settle the acquisition price of the Greenstone Hill Office Park properties and to settle existing variable debt of R180 million. The shares were issued at a 4% discount to the closing clean price of Texton’s shares on the JSE on 4 July 2013.

Commentary continued


Summary of financial performance

Reviewedyear to

30 June2014

Auditedyear to

30 June2013

Net asset value per share (cents)# 993,89 375,17

Net asset value per linked unit (cents) – 861,86

Net tangible asset value less deferred tax per share (cents)^ 991,55 371,37

Net tangible asset value less deferred tax per linked unit (cents) – 858,05

Distribution per share/linked unit (cents) 85,47 77,25

Interim distribution 40,00 38,00

Final distribution – 39,25

Final dividend* 45,47 –

Share price (cents) 965,00 1 005,00

Loan to value (%) 31,6 31,3

# The calculation of net asset value per share was based on shareholders’ interest of R1 592,316 million (2013: R452 524 million),

and shares in issue (excluding treasury shares) of 160 210 102 (2013: 120 618 080).

^ The calculation of tangible net asset value per share was based on shareholders’ interest less deferred tax of R1 588,561 million

(2013: R447 937 million), and shares in issue (excluding treasury shares) of 160 210 102 (2013: 120 618 080).

* Declared subsequent to year end.



GEOGRAPHICAL PROFILE

GLAm2

GLA percentage

%

Revenue per month

R’000

Revenue percentage

%

30 June 2014

Eastern Cape Province 8 102 4,3 825 4,1

Gauteng Province 129 803 68,3 13 799 67,9

KwaZulu-Natal Province 4 333 2,3 334 1,6

North West Province 5 362 2,8 628 3,1

Northern Cape Province 1 181 0,6 98 0,5

Western Cape Province 41 336 21,7 4 651 22,9

190 116 100,0 20 335 100,0

30 June 2013

Eastern Cape Province 7 881 5,4 904 6,5

Gauteng Province 85 417 58,7 7 938 56,9

KwaZulu-Natal Province 4 333 3,0 301 2,2

North West Province 5 362 3,7 580 4,2

Northern Cape Province 1 181 0,8 91 0,6

Western Cape Province 41 420 28,4 4 135 29,6

145 594 100,0 13 949 100,0

Geographical – GLA (%)

2012 2013 2014

0

10

20

30

40

50

60

70

80

Eastern Cape

Gauteng Western Cape

KwaZulu-Natal

Northern Cape

North West Province

Geographical – Revenue (%)

2012 2013 2014

0

10

20

30

40

50

60

70

80

Eastern Cape

Gauteng Western Cape

KwaZulu-Natal

Northern Cape

North West Province


SECTORAL PROFILE

GLAm2

GLA percentage

%

Revenue per month

R’000

Revenue percentage

%

30 June 2014

Commercial 176 548 92,9 19 328 95,0

Retail 8 317 4,3 773 3,8

Industrial 5 251 2,8 234 1,2

190 116 100,0 20 335 100,0

30 June 2013

Commercial 132 247 90,8 13 046 93,5

Retail 8 096 5,6 727 5,2

Industrial 5 251 3,6 178 1,3

145 594 100,0 13 951 100,0

Sectoral – GLA (%)

Commercial Retail Industrial

0

20

40

60

80

100

2012 20142013

Sectoral – Revenue (%)


0

20

40

60

80

100

2012 20142013


TENANT SPREAD

Rentable area

m2

Rentable area

%

Revenue per month

R’000

Revenue percentage

%

30 June 2014

(A) National 23 572 13,1 2 627 12,9

(A) Government 65 790 36,5 7 878 38,9

(B) Listed/Large entities 47 152 26,2 5 690 28,0

(C) Other 43 591 24,2 4 140 20,1

180 105 100,0 20 335 100,0

30 June 2013

(A) National 24 658 17,9 2 559 18,3

(A) Government 54 592 39,8 6 332 45,5

(B) Listed/Large entities 22 324 16,2 2 224 15,9

(C) Other 35 873 26,1 2 834 20,3

137 447 100,0 13 949 100,0

Tenants are classified as follows:

(A) Large national tenants, large listed tenants, government and major franchises;

(B) National tenants, listed tenants, franchises and medium to large professional firms; and

(c) Other.


Tenant spread – Rentable area (%)

2012 2013 2014

0

10

20

30

40

50

60

70

80

National Government Blue chip

Listed/large entities

Other

Tenant spread – Revenue (%)

2012 2013 2014

0

20

40

60

80

100

National Government Blue chip

Listed/large entities

Other


VACANCY PROFILE

30 June 2014 30 June 2013

Rentable area

m2

Rentable area

%

Rentable area

m2

Rentable area

%

Commercial 9 780 97,7 7 797 95,7

Retail 230 2,3 350 4,3

Industrial – – – –

10 010 100,0 8 147 100,0

Vacancy by rentable area (%)


0

20

40

60

80

100

2012 20142013

Vacancy by rentable area as % of total GLA


0

1

2

3

4

5

6

2012 20142013


Total GLA

m2

Vacant30 June

2014%

Total GLA

m2

Vacant30 June

2013%

Commercial 176 548 5,1 132 247 5,4

Retail 8 317 0,2 8 096 0,2

Industrial 5 251 – 5 251 –

Total 190 116 5,3 145 594 5,6

The abovementioned vacancy includes a vacancy that was acquired at Foretrust, which was not paid for. The

weighted average lease escalation is 8,6% (2013: 7,7%) for the portfolio.

Lease expiry profile per annum

Vacant 2015 2016 2017 >2017

30 June 2014

Rentable area % 5,3 12,2 31,9 18,5 32,1

Revenue % – 12,4 31,9 18,4 37,3

Vacant 2014 2015 2016 >2016

30 June 2013

Rentable area % 5,6 17,0 29,5 10,5 37,4

Revenue % – 19,5 29,8 11,4 39,3

At 30 June 2014 the property portfolio reported a vacancy level of 5,3% (2013: 5,6%).


Lease expiry profile per annum by rentable area (%)

2012 2013 2014

0

5

10

15

20

25

30

35

40

Vacant 2014 >20172015 20172016

Lease expiry profile per annum by revenue (%)

2012 2013 2014

0

5

10

15

20

25

30

35

40

Vacant 2014 >20172015 20172016


EQUITY RAISED

On 26 August 2013, following the successful rights offer, 48 503 939 new linked units (before the conversion to stated capital) were issued with a face value of 250 cents each at a subscription price of 987,33 cents per share, in the ratio of 40,21283 rights offer units for every 100 units held. The subscription price of 987,33 cents per rights offer unit comprised a clean price of 938,07 cents determined as at 4 July 2013 being the day before the declaration announcement and total pre-paid distributions of 49,26 cents. The clean price of 938,07 cents per rights offer unit represented a 7% discount to the 30-day volume weighted average clean price of shares listed on the JSE at the close of business on Thursday, 4 July 2013 being the last business day prior to the release of the declaration data announcement; and 4% discount to the closing clean price of shares on the JSE on Thursday, 4 July 2013. The proceeds were used to acquire 10 buildings in Greenstone Hill Office Park and settle floating debt to the extent of R180 million.

SUCCESSFUL CONVERSION TO A REAL ESTATE INVESTMENT TRUST (REIT)

On 1 July 2013, Texton converted from a Property Loan Stock company to a Real Estate Investment Trust (REIT), which status was granted by the JSE in accordance with the REIT provisions contained in section 13 of the JSE Listings Requirements, as amended. The company’s ISIN code, with effect from

1 July 2013, was: ZAE000185872 (formerly ISIN: ZAE000157459). Texton’s listing on the JSE has been moved to “Financial Services – Real Estate Investment Trusts”. As part of the REIT conversion, the company converted its share capital structure to an all-equity capital structure, aligned with international REIT capital structures.

Investment property comprises land and buildings held to generate rental income over the long term. Capital profit on the sale of investment property will no longer be subject to capital gains taxation under the new REIT legislation.

At a general meeting held on 16 January 2014, Texton’s shareholders approved the delinking of Texton’s debentures from its ordinary shares, the conversion of the ordinary shares of 250 cents each to shares of no par value. As at 30 June 2014, Texton’s issued share capital comprised 169 122 019 ordinary shares of no par value. As a result of the change in capital structure, the non-distributable reserves were transferred to retained earning.

BASIS OF PRESENTATIONThese condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial

Reconciliation of change in GLA of the Fund

Total GLA at

30 June2013

m2

Netincrease

in GLAm2

TotalGLA

30 June2014

m2

Commercial 132 247 44 301 176 548

Retail 8 096 221 8 317

Industrial 5 251 – 5 251

Total 145 594 44 522 190 116


Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements except for the adoption of new standards which became effective on 1 July 2013.

The adoption of new standards and interpretations has had no material effect on the results for the period nor has it required the restatement of any prior year figures.

The condensed consolidated financial statements information has been presented on the historical cost basis, except for financial instruments and investment properties carried at fair value, and are presented in Rand thousands which is Texton’s functional and presentation currency.

Ms M de Lange (CA (SA)), Texton’s Financial Director, was responsible for the preparation of these condensed consolidated financial statements. The annual financial statements will not be issued at the same time as this announcement.

AUDIT REVIEWThe group’s auditors KPMG Inc. have reviewed these condensed consolidated financial statements for the year ended 30 June 2014. The review was conducted in accordance with ISRE 2410: Review of interim financial information performed by the independent auditor of the entity. A copy of their unmodified review report dated 22 August 2014 is available for inspection at the company’s registered office.

NET PROPERTY INCOMEThe increase in investment property income (25,3%) from the prior year was largely due to the effects of contractual rental escalations and the property acquisitions made.

Investment property income consists of rental income of R215,1 million (2013: R171,2 million) and

recoveries of utilities from tenants of R56,7 million (2013: R45,7 million).

The ratio of net property expenses (property expenses less recoveries) to rental income for the group has improved from 17,1% to 15,3% in the current year as a result of tight cost management. The ratio of gross property expenses to investment property income (rental income including recoveries from tenants) has also improved from 34,6% to 33,0%.

ASSET MANAGEMENT FEESThe asset management function is performed by Texton Property Investments Proprietary Limited after successful cession and assignment of the asset management agreement from Vunani Property Asset Management Proprietary Limited and the day-to-day property management function is performed by JHI Properties Proprietary Limited. The increase is attributable to the increased enterprise value on which the fee is calculated as a result of the property acquisitions.

FAIR VALUE ADJUSTMENTS

The revaluation of properties resulted in a positive upward revaluation of R110,7 million for investment property (including investment properties reclassified as held for sale). This was due to a decrease in the discount rate applied to the valuation as a result of a decrease in the risk free rate, based on the 10-year long bond rate, a revision of market cap rates, as well as increased future contractual rentals.

Swap agreements were fair valued using the yield curve at 30 June 2014, resulting in a decrease in the overall swap liability of R4,3 million (74,2%).

ARREARS

Tight management of receivables resulted in total arrears decreasing significantly to R1,59 million (30 June 2013: R3,9 million). Arrears are being managed carefully.

CAPITAL ITEMS

Capital items represents the costs incurred on unsuccessful acquisitions.



ACQUISITIONS/BUSINESS COMBINATIONS

During the period the Fund made the following acquisitions:

Transfer date

Acquisition cost

R’000GLA

m2

Acquisitionyield

%

Weightedaverage

annualescalation

Greenstone Hill Office Park

1 Aug 2013 and

30 Oct 2013 149 725 17 666 8,8 7,0

Wellington Road – Parktown 17 Mar 2014 102 500 10 019 10,5 8,0

Bryanston Gate – Bryanston 1 Apr 2014 174 000 16 659 10,8 7,6

426 225 44 344

It is the Fund’s stated intention to grow with yield-enhancing quality assets. As a result, Greenstone Hill Office Park Proprietary Limited, Wellington Road and Bryanston Gate was acquired. Greenstone Hill Office Park consists of 15 buildings, of which the Fund acquired 10, in the sectional title schemes known as Greenstone Hill Office Park, situated at Erf 1841 Greenstone Hill Extension 22 Township, Gauteng and occupied 83% by national and listed tenants with an average lease expiry of 4,2 years.

Wellington Road is occupied by Transnet and the major tenants occupying Bryanston Gate are Primary Asset Management (3 518m²) to 31 August 2016, Nampak Products Limited (2 202m²) to 29 February 2016 and City Lodge Hotels (1 397m²) to 31 December 2016.

Net assets acquired

R’000 Total

Investment property 544 425

Trade and other receivables 365

Income tax receivable 105

Cash and cash equivalents 323

Other financial liabilities (117 383)

Trade and other payables (1 610)

Net assets acquired 426 225

Cost of investment 426 225

Settlement of cost of investment

Less: Cash acquired (323)

Cash paid 425 902

After tax profits since acquisition 13 149

Full year after tax profits 48 819


INVESTMENT PROPERTY RECLASSIFIED AS HELD FOR SALE

On 30 June 2014, the Brickfield property, valued at R24 million, was classified as held for sale. The transfer is expected to take place on 30 September 2014. The Fund entered into a sale agreement for Brickfield in order to realise a risk free profit equivalent to the anticipated profit from the proposed redevelopment.

BORROWINGS

At 30 June 2014 the Fund had a loan to value of 31,6% (2013: 31,3%). The calculation of loan to value was based on other financial liabilities (excluding the fair value of the interest rate swaps) of R695,9 million (2013: R489,9 million) and the value of investment property of R2 202,5 million (2013: R1 567,7 million). The Fund remains capitalised to take advantage of yield-enhancing acquisitions. The fund has an average cost of debt of 8,27% (2013: 7,65%) with 49,2% (2013: 66,6%) of the outstanding debt hedged through the use of interest rate swaps.

On 17 July 2014 the Fund hedged (via a swap) an additional R200 million at 7,12% (base rate) for three years (17 July 2017).

R’000

Reviewed30 June

2014

Audited30 June

2013

Measured at amortised cost

Standard Bank Limited loan 720 792 533 305

Finance costs capitalised to loan 530 –

Amortisation of finance costs (221) –

721 101 533 305

Measured at fair value through profit or loss

Standard Bank Limited

Interest rate swap 1 1 018 3 013

Interest rate swap 2 225 1 398

Interest rate swap 3 222 1 385

722 566 539 101

Less: Amounts to be settled within 12 months and included in current liabilities# (362 500) (319 196)

360 066 219 905

Amounts to be settled within 12 months and included in current liabilities 362 500 319 196

Less: Redraw portion of facility* (25 223) (43 400)

337 277 275 796

# On 1 August 2014, the current portion of the facilities was extended for a further three years.

* Excess cash is paid into the facilities on a monthly basis and when required for the payment of the distribution or dividend, the cash

can be accessed, without penalty, from the facility.



SHARE AND DEBENTURE CAPITAL

At 30 June 2013, the authorised share capital was two billion ordinary shares of R0,0025 each. Each ordinary share was linked to one unsecured variable rate debenture of R2,4975. The ordinary shares and debentures traded as linked units on the JSE. In terms of the debenture trust deed, the interest payable on the debenture was calculated in accordance with the distributable income formula which was distributed 100% annually. During the period 48 503 939 new linked units were issued in terms of a rights offer.

On 16 January 2014 unitholders of the company approved the delinking of the linked units, the termination of the debenture tust deed, the termination of the debentures and the capitalisation of the value of the debentures in the accounts of the Fund to form part of Texton’s stated capital as well as the conversion of the company’s ordinary par value shares into ordinary shares with no par value, which took effect on Monday, 17 February 2014. The company further adopted a new Memorandum of Incorporation (MOI) which entrenches the relevant REIT provisions.

CHANGE IN DIRECTORS AND BOARD SUB-COMMITTEES

Messrs EG Dube, RR Emslie, CE Chimombe-Munyoro and PW Mackenzie resigned from the board of directors on 28 February 2014. As a result of the resignations and the cession and assignment of the asset management agreement, Messrs AN Du Hecquet de Rauville, JA Legh and MJ van Heerden were appointed on 1 March 2014 and NV Balfour and TS Sishuba on 30 June 2014.

The following changes were made to the board committees resulting from the resignations and appointments:

Mr JR Macey resigned as the chairperson, however remained as a member of the investment committee and was appointed as the chairperson to the audit and risk committee. Ms NV Balfour was appointed to the social and ethics committee. Ms AN Du Hecquet de Rauville was appointed as member of the investment and remuneration and nomination committees. Mr JA Legh was appointed to the investment committee. Mr MJ van Heerden was appointed as chairperson to the investment committee. Ms PM Tau-Sekati has resigned from the investment committee, was appointed on a temporary basis to the audit and risk committee and resigned upon the appointment of Mr TS Sishuba as member to the audit and risk committee and appointed as chairperson to the social and ethics committee.

EVENTS AFTER THE REPORTING DATE

On 3 July 2014, the shareholders of the Fund voted in favour of the acquisition of the PD Naidoo properties. The acquisition comprises a building in Scott Street, Waverley and sectional title sections in St George’s Mall, Cape Town and on 24 July 2014, the Selby Property was successfully transferred to the Fund.

The Fund further entered into sale of rental enterprise agreements for the acquisition of the Edcon building in Johannesburg and the Quintiles building in Bloemfontein. Transfer is expected to take place on 31 October 2014 and 30 September 2014 respectively.

The details of the acquisitions are as follows:


Description of propertyPortion 22 of Erf 13 Waverley

Purchase priceR107 804 895

Payment methodTransfer of the 8 911 917 Treasury Shares at R9,65 (R86 million) and the allotment and issue of shares to the value of R21 804 895 for the balance of the purchase price

RegionGauteng

SectorCommercial

VacancyNil

TenantMott MacDonald PDNA3,5 year triple net lease

Gross lettable area (GLA)4 329m2

Annualised property yield9,5%

Scott Street, Waverley


Description of propertyErven 28, 29, 30, 31, 32 and 33 New Centre. Measuring 932m², 932m², 915m², 915m², 915m² and 915m² respectively, situated at 12 Laub Street, New Centre, Johannesburg


Payment methodShares

RegionGauteng

SectorCommercial

VacancyNil

TenantEdcon8,8 year triple net lease

Gross lettable area (GLA)28 580m²


Edcon, Johannesburg

Description of propertyPortion 121 Erf 13021, Bloemfontein extension 77


Payment methodCash

RegionBloemfontein

SectorCommercial

VacancyNil

TenantQuintiles Clindepharm5 year triple net lease

Gross lettable area (GLA)3 404m²


Quintiles, Bloemfontein


Description of propertyErf 544 Selby Extension 22, Erf 545 Selby Extension 22, Portion 1 of Erf 19 Crown City Extension 6 and Erf 20 Crown City Extension 6


Payment methodCash

RegionGauteng

SectorIndustrial and commercial

VacancyNil

TenantToolquip and Allied7 year triple net lease



Selby Property

Description of propertySections 13, 50. Exclusive use areas 322, 323, 324, 325, 326, 327, 567, 568, 569, 576, 577 and 578 and an undivided share in the common property apportioned to the above sections and six single undercover parking bays and three tandem undercover parking bays in sectional title scheme numbered SS2134/2006 and SS267/2008 known as 5 St George’s Mall, Cape Town


Payment methodCash

RegionWestern Cape

SectorCommercial

VacancyNil

TenantMott MacDonald PDNA3,5 year triple net lease



St George’s Mall, Cape Town


PROSPECTS

The Fund has performed well since inception in 2006. The portfolio size, quality and income has grown consistently. The Fund listed three years ago and its distributions to shareholders has always been in the upper quartile. Despite the difficult economic climate, the portfolio has again performed well over the past year and the board anticipates the Fund remaining in the upper quartile for the next financial year. We will continue to focus on our strategy of growing the Fund with yield enhancing assets without compromising on quality. Importantly, the new management structure has enabled the executive team to grow materially. The effect of this can be seen in the solid performance of the portfolio and the significant increase in acquisitions. In addition, the management team now has greatly increased property skills, and deal making ability. The pipeline is stronger than it has been since inception.

It is common knowledge that the office sector is struggling so some diversification of risk is prudent. We are seeing selected opportunities in the industrial and retail sectors that will enhance our offering to shareholders. The board is also applying itself to opportunities outside of South Africa. As with any acquisition, a clear, well defined and thought out strategy is mandatory. The board will not move offshore unless it is fully confident that we have the necessary skills and deep market knowledge. Fortunately, management has significant experience in markets outside of South Africa and this knowledge will deliver improved dividends and risk diversification.

2014 has been a cornerstone year for the Fund in terms of creating a solid platform and skill base with which to grow. Management is confident that this next reporting period will be an exciting phase for the Fund and our shareholders will enjoy above market earnings growth coupled with solid capital appreciation.

This prospects statement has not been reviewed or reported on by the Fund’s independent external auditors.

CASH DISTRIBUTION

The board has approved and notice is hereby given of a final distribution (distribution number 6) of 45,47 cents per share for the year ended 30 June 2014.

The source of the distribution comprises net income from property rentals and interest earned on cash on deposit. Please refer to the consolidated statement of comprehensive income for further details.

In accordance with Texton’s status as a REIT, shareholders are advised that the distribution meets the requirements of a “qualifying distribution” for the purposes of section 25BB of the Income Tax Act, No 58 of 1962 (Income Tax Act). Accordingly, qualifying distributions received by local tax residents must be included in the gross income of such shareholders (as a non-exempt dividend in terms of section 10(1)(k)(aa) of the Income Tax Act), with the effect that the qualifying distribution is taxable as income in the hands of the shareholder. These qualifying distributions are, however, exempt from dividend withholding tax in the hands of South African tax resident shareholders, subject to provision of the required declarations to the shareholders’ Central Securities Depository Participant (CSDP) or broker, as the case may be, in respect of uncertificated shares, or the company, in respect of certificated shares.

Qualifying distributions received by non-resident shareholders will not be taxable as income and instead will be treated as ordinary dividends but which are exempt in terms of the usual dividend exemptions per section 10(1)(k) of the Income Tax Act. It should be noted that until 30 June 2014 qualifying distributions received by non-residents were not subject to dividend withholding tax. From 1 January 2014, any qualifying distribution received by a non-resident from a REIT will be subject to dividend withholding tax at 15,0%, unless the rate is reduced in terms of any applicable agreement for the avoidance of double taxation between South Africa and the country of residence of the shareholder. Assuming dividend withholding tax will be withheld at a rate of 15,0%, the net amount due to non-resident shareholders will be 38,64950 cents per share.



Local tax resident shareholders as well as non-resident shareholders are encouraged to consult their professional advisors should they be in any doubt as to the appropriate action to take.

Texton’s shares in issue at the date of these results are 169 122 019 and tax reference number is 9353785158.

Summary of the salient dates relating to the cash distribution are as follows:

Declaration date Monday,25 August 2014

Last date to trade in order to participate in the cash distribution

Friday,12 September 2014

Shares to trade ex-distribution

Monday,15 September 2014

Record date Friday,19 September 2014

Payment date Monday,22 September 2014

Shares may not be dematerialised or rematerialised between Monday, 15 September 2014 and Friday, 19 September 2014, both dates inclusive.

On behalf of the board

PD Naidoo RF KaneChairman Chief executive officer

22 August 2014

R’000Reviewed

2014Audited

2013

ASSETS

Non-current assets 2 219 986 1 586 016

Investment property 2 202 525 1 567 667

Property, plant and equipment 7 925 6 734

Other non-current assets 5 781 7 028

Deferred tax 3 755 4 587

Current assets 113 501 34 882

Trade and other receivables 23 824 11 261

Investment property reclassified as held for sale 24 000 –

Income tax receivable 1 228 66

Cash and cash equivalents 64 449 23 555

Total assets 2 333 487 1 620 898

EQUITY AND LIABILITIES

Equity 1 592 316 452 524

Ordinary share capital – 301

Stated capital 945 436 –

Retained earnings/(accumulated loss) 646 880 (46 061)

Non-distributable reserves – 498 284

Debentures – 587 029

Shareholders’ interest 1 592 316 1 039 553

Other liabilities

Other non-current liabilities

Other financial liabilities 360 066 219 905

Current liabilities 381 105 361 440

Current portion of other financial liabilities 337 277 275 796

Trade and other payables 43 828 85 644

Total liabilities 741 171 581 345

Total equity and liabilities 2 333 487 1 620 898

Shares/linked units in issue (’000) 160 210 120 618

Net asset value per share (cents) 993,89 375,17

Net asset value per linked unit (cents) – 861,86

Net tangible asset value less deferred tax per share (cents) 991,55 371,37

Net tangible asset value less deferred tax per linked unit (cents) – 858,05

Consolidated statement of financial positionas at 30 June


Consolidated statement of comprehensive incomefor the year ended 30 June


R’000Reviewed

2014Audited

2013

Investment property income 271 759 216 883

Straight-line rental adjustment 1 839 12 957

Revenue 273 598 229 840

Property expenses (89 571) (74 948)

Net property income 184 027 154 892

Other income 5 444 1 967

Other operating expenses (4 689) (3 169)

Asset management fees (9 588) (8 120)

Operating profit 175 194 145 570

Finance income 8 299 1 616

Finance costs (41 421) (40 821)

Fair value adjustments 114 827 45 405

Capital items (9) –

Profit before debenture interest and income tax 256 890 151 770

Debenture interest (64 022) (93 174)

Profit before amortisation of debenture premium 192 868 58 596

Amortisation of debenture premium 2 159 1 889

Profit before income tax 195 027 60 485

Income tax (370) 84 849

Profit for the period 194 657 145 334

Total comprehensive income for the year 194 657 145 334

Basic and diluted earnings per share (cents) 123,60 120,49

Comparable basic and diluted earnings per share/linked unit (cents)

162,88 196,17


Interim distribution 40,00 38,00

Final distribution – 39,25

Final dividend* 45,47 –

* Declared subsequent to year end.

R’000

Ordinary share

capitalStatedcapital

Non-distributable

reserve

(Accu-mulated

loss)/Retained earnings Total

Balance at 30 June 2012 301 – 363 389 (56 500) 307 190

Transactions with owners of the company recognised directly in equity

Transfer to non-distributable reserve – – 134 895 (134 895) –

Total comprehensive income for the year

Profit for the year – – – 145 334 145 334

Balance at 30 June 2013 301 – 498 284 (46 061) 452 524

Transactions with owners of the company recognised directly in equity

Issue of shares 121 – – – 121

Treasury shares acquired – (86 060) – – (86 060)

Transfer from non-distributable reserve – – (498 284) 498 284 –

Conversion of debentures to shares (422) 1 031 496 – – 1 031 074

Total comprehensive income for the year

Profit for the year – – – 194 657 194 657

Balance at 30 June 2014 – 945 436 – 646 880 1 592 316

Consolidated statement of changes in equityfor the year ended 30 June


R’000Reviewed

2014Audited

2013

Cash flows from operating activities

Cash generated/(utilised) by operations 122 652 147 770

Finance income received 8 299 1 616

Finance costs paid (41 200) (40 821)

Debenture interest paid (111 520) (86 810)

Income tax paid (336) (262)

Net cash (outflow)/inflow from operating activities (22 105) 21 493

Net cash outflow from investing activities (504 412) (93 361)

Net cash inflow from financing activities 567 411 75 381

Net increase in cash and cash equivalents 40 894 3 513

Cash and cash equivalents at the beginning of the year 23 555 20 042

Cash and cash equivalents at the end of the year 64 449 23 555

Consolidated statement of cash flowsfor the year ended 30 June


The group has six reportable segments based on the geographic split of the country. Each segment is further split into its various sectors. This has changed from the prior year to enable a more comprehensive analysis of the strategic business components.

GAUTENG

R’000 Commercial Retail Industrial Total

Extracts from the statement of comprehensive income 30 June 2014

Investment property income (excluding straight-line rental adjustment) 178 389 4 285 – 182 674

Property expenses (62 118) (2 374) – (64 492)

Segment results 116 271 1 911 – 118 182

Extracts from the statement of financial position as at 30 June 2014

Investment property

Opening balance 954 374 19 517 – 973 891

Additions through business combinations 544 425 – – 544 425

Other additions 1 624 30 – 1 654

Straight-line rental adjustment 1 982 152 – 2 134

Cumulative fair value adjustments 76 710 556 – 77 266

Investment property reclassified as held for sale – – – –

Closing balance 1 578 724 20 643 – 1 599 367

Segmental analysis


WESTERN CAPE



Investment property income (excluding straight-line rental adjustment) 59 751 1 022 3 118 63 891

Property expenses (18 159) (630) (915) (19 704)

Segment results 41 592 392 2 203 44 187


Investment property

Opening balance 373 746 5 429 23 400 402 575

Additions through business combinations – – – –

Other additions 24 – 6 30

Straight-line rental adjustment 3 378 (4) 62 3 436

Cumulative fair value adjustments 22 595 299 532 22 828

Investment property reclassified as held for sale

– – (24 000) (24 000)

Closing balance 399 741 5 126 – 404 869

NORTH WEST



Investment property income (excluding straight-line rental adjustment) 8 034 – – 8 034

Property expenses (1 534) – – (1 534)

Segment results 6 500 – – 6 500


Investment property

Opening balance 59 719 – – 59 719

Other additions – – – –

Straight-line rental adjustment 88 – – 88

Cumulative fair value adjustments 2 602 – – 2 602

Closing balance 62 409 – – 62 409


EASTERN CAPE




Property expenses (1 918) (985) – (2 903)

Segment results 5 752 3 475 – 9 227


Investment property

Opening balance 55 000 37 499 – 92 499

Other additions – 6 – 6

Straight-line rental adjustment (133) 485 – 352


Closing balance 54 955 41 311 – 96 266

KWAZULU-NATAL



Investment property income (excluding straight-line rental adjustment) 3 553 305 – 3 858

Property expenses (661) (76) – (737)

Segment results 2 892 229 – 3 121


Investment property

Opening balance 26 973 2 264 – 29 237

Other additions 49 – – 49

Straight-line rental adjustment (93) (14) – (107)

Cumulative fair value adjustments 366 81 – 447

Closing balance 27 295 2 331 – 29 626

Segmental analysis continued


NORTHERN CAPE




Property expenses (201) – – (201)

Segment results 971 – – 971


Investment property




Cumulative fair value adjustments 244 – – 244


TOTAL PORTFOLIO




Property expenses (84 591) (4 065) (915) (89 571)

Segment results 173 978 6 007 2 203 182 188


Investment property

Opening balance 1 479 556 64 709 23 402 1 567 667


Other additions 1 809 36 6 1 851

Straight-line rental adjustment 1 158 619 62 1 839

Cumulative fair value adjustments 106 552 3 659 532 110 743

Investment property reclassified as held for sale – – (24 000) (24 000)

Closing balance 2 133 500 69 023 – 2 202 525


R’000Total2014

Reconciliation from segment results to profit for the period

Segment results 182 188

Straight-line rental adjustment 1 839

Other income 5 444

Other operating expenses (4 689)

Asset management fees (9 588)

Finance income 8 299

Finance costs (41 421)

Fair value adjustments 114 827

Capital items (9)

Debenture interest (64 022)

Amortisation of debenture premium 2 159

Income tax (370)

Profit for the period 194 657

GAUTENG





Segment results 82 316 1 501 – 83 817


Investment property

Opening balance 846 669 17 769 – 864 438


Other additions 4 767 – – 4 767


Cumulative fair value adjustments 35 302 1 543 – 36 845

Closing balance 954 374 19 517 – 973 891



WESTERN CAPE



Investment property income (excluding straight-line rental adjustment) 53 063 892 3 077 57 032

Property expenses (15 772) (521) (1 326) (17 619)

Segment results 37 291 371 1 751 39 291


Investment property

Opening balance 370 855 5 454 – 376 855

Additions through business combinations – – 20 004 20 004



Cumulative fair value adjustments (7 499) (228) 3 321 (4 406)

Closing balance 373 746 5 429 23 400 402 575

NORTH WEST




Property expenses (1 496) – – (1 496)

Segment results 6 171 – – 6 171


Investment property




Cumulative fair value adjustments 2 097 – – 2 097



I Texton Property Fund condensed consolidated financial statements 201428 I Texton Property Fund condensed consolidated financial statements 201428

EASTERN CAPE



Investment property income (excluding straight-line rental adjustment)

8 182 3 756 – 11 938


Segment results 6 475 2 663 – 9 138


Investment property

Opening balance 54 600 35 000 – 89 600

Other additions – 244 – 244

Straight-line rental adjustment (7) 719 – 712


Closing balance 55 000 37 499 – 92 499

KWAZULU-NATAL



Investment property income (excluding straight-line rental adjustment) 3 267 289 – 3 556

Property expenses (965) (79) – (1 044)

Segment results 2 302 210 – 2 512


Investment property

Opening balance 27 289 2 263 – 29 552


Straight-line rental adjustment 30 1 – 31

Cumulative fair value adjustments (346) – – (346)

Closing balance 26 973 2 264 – 29 237


Texton Property Fund condensed consolidated financial statements 2014 I 29 Texton Property Fund condensed consolidated financial statements 2014 I 29

NORTHERN CAPE



Investment property income (excluding straight-line rental adjustment)

1 093 – – 1 093

Property expenses (209) – – (209)

Segment results 884 – – 884


Investment property




Cumulative fair value adjustments 187 – – 187


TOTAL PORTFOLIO




Property expenses (69 203) (4 419) (1 326) (74 948)

Segment results 135 439 4 745 1 751 141 935


Investment property

Opening balance 1 365 908 60 486 – 1 426 394

Additions through business combinations 64 579 – 20 004 84 583


Straight-line rental adjustment 11 928 1 029 – 12 957

Cumulative fair value adjustments 30 148 2 851 3 321 36 320

Closing balance 1 479 556 64 709 23 402 1 567 667


R’000Total2013

Reconciliation from segment results to profit for the period

Segment results 141 935

Straight-line rental adjustment 12 957

Other income 1 967

Other operating expenses (3 169)

Asset management fees (8 120)

Finance income 1 616

Finance costs (40 821)

Fair value adjustments 45 405

Debenture interest (93 174)

Amortisation of debenture premium 1 889

Income tax 84 849

Profit for the period 145 334



Basic, diluted, headline, comparable basic and comparable headline earnings and distribution per sharefor the year ended 30 June

Cents

Reviewed30 June

2014

Audited30 June

2013

Basic earnings per share 123,60 120,49

Comparable basic earnings per share/linked unit* 162,88 196,17

Headline earnings per share 53,28 21,76

Comparable headline earnings per share/linked unit* 92,56 97,44

Distribution per share 85,47 77,25

* Comparable basic earnings per share/linked unit and comparable headline earnings per share/linked unit have been included to

enable shareholders to compare the current year figures to those previously reported which related to linked units.

BASIC EARNINGS PER SHARE

The calculation of basic earnings per share was based on the comparable earnings attributable to shareholders of R194,657 million (2013: R145,334 million), and a weighted average number of shares outstanding of 157 494 340 (2013: 120 618 080).

COMPARABLE BASIC EARNINGS PER SHARE/LINKED UNIT

The calculation of comparable basic earnings per share/linked unit was based on the comparable earnings attributable to shareholders/linked unitholders of R256,520 million (2013: R236,619 million), and a weighted average number of shares outstanding of 157 494 340 (2013: 120 618 080).

HEADLINE EARNINGS PER SHARE

The calculation of headline earnings per share was based on headline earnings attributable to shareholders of R83,914 million (2013: R26,247 million), and a weighted average number of shares outstanding of 157 494 340 (2013: 120 618 080).


COMPARABLE HEADLINE EARNINGS PER SHARE/LINKED UNIT

The calculation of comparable headline earnings per share/linked unit was based on comparable headline earnings attributable to shareholders/linked unitholders of R145,777 million (2013: R117,532 million), and a weighted average number of shares outstanding of 157 494 340 (2013: 120 618 080).

DILUTED BASIC EARNINGS AND DILUTED HEADLINE EARNINGS PER SHARE

There were no dilutive instruments in issue at year end.

DISTRIBUTION PER SHARE

The calculation of distribution per share was based on the distributable earnings attributable to shareholders of R144,541 million (2013: R93,174 million), and an issued number of shares outstanding of 160 212 102 (2013: 120 618 080). At year end the shares reflecting as treasury shares are not cancelled as they were repurchased by the controlled trust, Vunani Property Investment Trust. The distribution per share/linked unit is calculated with reference to the actual shares in issue at year end being 169 122 019.

WEIGHTED AVERAGE NUMBER OF SHARES

’000

Reviewed 30 June

2014

Audited30 June

2013

Issued at the beginning of the year 120 618 120 618

Issued during the year 48 504 –

Treasury shares (8 912) –

Shares in issue at the end of the year 160 210 120 618

Weighted average number of shares in issue for the year 157 494 120 618

* On 15 January 2014, Vunani Property Investment Trust (a controlled trust) purchase 8 911 917 shares in the Fund at R9,65 per

share as part of a repurchase plan.

Basic, diluted, headline, comparable basic and comparable headline earnings and distribution per share continued

for the year ended 30 June


EARNINGS

R’000

Reviewed30 June

2014

Audited30 June

2013

Earnings attributable to shareholders: 194 657 145 334

Adjust for:

Debenture interest 64 022 93 174

Amortisation of debenture interest (2 159) (1 889)

Comparable earnings attributable to shareholders/linked unitholders 256 520 236 619

HEADLINE EARNINGS

R’000

Reviewed30 June

2014

Audited30 June

2013

Profit attributable to shareholders 194 657 145 334

Adjust for:

Profit on sale of subsidiaries – (1 927)

Gross revaluation of investment property (110 743) (36 320)

Deferred taxation on revaluation of investment property – (80 840)

Headline earnings attributable to shareholders 83 914 26 247

Adjust for:

Debenture interest 64 022 93 174

Amortisation of debenture interest (2 159) (1 889)

Comparable headline earnings attributable to shareholders/linked unitholders 145 777 117 532


DISTRIBUTABLE EARNINGS

R’000

Reviewed30 June

2014

Audited30 June

2013

Revenue 271 759 216 883

Property expenses (89 571) (74 948)

Other income 5 444 1 967

Other operating expenses (4 689) (3 169)

Asset management fees (9 588) (8 120)

Net finance cost (32 901) (39 205)

Finance income 8 299 1 616

Finance cost (41 421) (40 821)

Finance cost amortisation 221 –

Deconsolidation of treasury shares 3 626 –

Taxation 461 (234)

Distributable earnings 144 541 93 174

Reconciliation of comparable earnings to distributable earnings

Comparable earnings attributable to shareholders/linked unitholders 256 520 236 619

Straight-line rental adjustment (1 839) (12 957)

Finance cost amortisation 221 –

Fair value adjustments (114 827) (45 405)

Deconsolidation of treasury shares 3 626 –

Capital items 9 –

Deferred tax 831 (85 083)

144 541 93 174

Basic, diluted, headline, comparable basic and comparable headline earnings and distribution per share continued

for the year ended 30 June


BASIC, DILUTED, HEADLINE EARNINGS AND DISTRIBUTION PER SHARE

’000

Reviewed30 June

2014

Audited30 June

2013

Distributable earnings (R’000) 144 541 93 174

Shares in issue (‘000) 169 122 120 618


Distributable earnings (R’000) 144 541 93 174

Less: Distributions to shareholders (payment 1) (R’000) (67 648) (45 835)

Available for distribution (payment 2) (R’000) 76 893 47 339

Units in issue (‘000) 169 122 120 618

Distribution per share (cents)

Dividend per share subsequent to year end 45,47 –

Distribution per linked unit – 39,25


PD Naidoo (Chairman)RF Kane (Chief Executive Officer)M de Lange (Financial Director)NV Balfour AN Du Hecquet de RauvilleJA LeghJR MaceyTS SishubaPM Tau-SekatiMJ van HeerdenKN Vundla

The composition of the board of directors and board committees is as follows:

Board compositionDate ofappointment

Audit and riskcommittee

Investmentcommittee

Remunerationandnominations committee

Social and ethicscommittee

Independent non-executive directors

PD Naidoo (Chairperson) 11 Aug 2011 Member Member

NV Balfour 30 Jun 2014 Member

JR Macey 11 Aug 2011 Chairperson Member

PM Tau-Sekati 11 Mar 2013 Chairperson Chairperson

TS Sishuba 30 Jun 2014 Member

KN Vundla 11 Mar 2013 Member

Non-executive directors

AN Du Hecquet de Rauville 1 Mar 2014 Member Member

JA Legh 1 Mar 2014 Member

MJ van Heerden 1 Mar 2014 Chairperson

Executive directors

RF Kane 7 Aug 2008 Invitee Member Invitee Invitee

M de Lange 11 Aug 2011 Invitee Invitee Invitee Member

Board of directors

Corporate information

Texton Property Fund Limited (formerly Vunani Property Investment Fund Limited)(Incorporated in the Republic of South Africa)(Registration number: 2005/019302/06)A Real Estate Investment Trust, listed on the JSE LimitedJSE share code: TEXISIN: ZAE000190542 (formerly ISIN: ZAE000185872)

Company secretaryCIS Company Secretaries Proprietary Limited (N Toerien)

SponsorInvestec Bank Limited

Transfer secretaryComputershare Investor Services Proprietary Limited70 Marshall StreetJohannesburg, 2001

Physical/Registered and postal address54 Bompas RoadDunkeld West, 2196PO Box 41394Craighall Park, 2024

www.texton.co.za

Documents

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS · The executive team ... is still heavily weighted to Gauteng where 68,3% (2013: 58,7%) of our properties are ... The project to ‘green’