Condensed abridged consolidated financial statements 2017
MAS REAL ESTATE INC
Registered in the British Virgin Islands
Company number 1750199
Registered as an external company in South Africa
Registration number 2010/000338/10
JSE share code MSP
SEDOL (XLUX) B96VLJ5
SEDOL (JSE) B96TSD2
ISIN VGG5884M1041
LEI code 213800T1TZPGQ7HS4Q13
CONDENSED ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS 2017
Highlights
30%
INCREASE IN ANNUAL DISTRIBUTION
PER SHARE
SIGNIFICANT VALUE
FROM NEW WAVERLEY
91%
INCREASE IN INCOME-GENERATING
PORTFOLIO
INCREASED COMMITMENT
TO THE PRIME KAPITAL
DEVELOPMENT JOINT
VENTURE
10%
INCREASE IN ADJUSTED
NAV PER SHARE
DIRECTORS'REPORT
ASSURANCE
These condensed abridged consolidated financial statements are extracted from audited information, but is
not itself audited. The directors take full responsibility for the preparation of the condensed abridged consolidated financial
statements and for ensuring that the financial information has been correctly extracted from the underlying audited annual financial
statements. The auditors, KPMG Audit LLC, have issued their unmodified opinion on the annual financial statements for the year ended
30 June 2017 and a copy of the audit opinion, together with the underlying audited annual financial statements
are available for inspection at the company's registered office.
FINAL DISTRIBUTION
As a result of the increase in distributable earnings and strong pipeline of investments and developments, the Board of Directors
has proposed a distribution of 3.19 euro cents per share in respect of the second half of the 2017 financial year.
This distribution represents an increase of 20% over the 2.66 euro cents per share distribution declared in relation to the first half of the
financial year and a 43% increase on the same period in the last financial year. The cumulative annual distribution per share increased from
4.50 to 5.85 euro cents per share for the 2017 financial year, an increase of 30% from 2016.
Shareholders continue to have the option to receive the distribution in cash or as a return of capital by way of an issue of new shares.
Further details regarding the distribution will follow in due course.
The board will consider distributing retained earnings during forthcoming financial periods as the group pursues various highly accretive
property developments, both directly and through the Prime Kapital development joint venture. Once completed, these developments are expected
to have a significant positive impact on per share distributions. Given the strength of the acquisition and development pipeline, discussed
in more detail below, in combination with the active deployment and re-deployment of the balance sheet, the board is of the view that the group
is well placed to deliver on the targeted annual growth in distribution per share of 30% per annum over a 3 year period set out at the end of
2016, along with further growth thereafter.
INCOME-GENERATING PROPERTY
2015 2016 2017
Income-generating property 164.4 242.6 463.4
EVOLUTION OF PASSING RENT
Total
Passing rent 30 June 2016 17 341 797
Bulgaria 5 408 937
Germany 3 949 025
Poland 4 306 988
UK 1 568 659
FCTR -349 278
Passing rent 30 June 2017 32 226 129
DISTRIBUTABLE EARNINGS
The group achieved distributable earnings per share for the year of 4.90 euro cents, a growth of 32% over the
previous year. The improvement in recurring distributable earnings per share was driven by the accretive
acquisitions of investment property, the completion of assets in the development pipeline and the deployment of
capital in the Prime Kapital development joint venture.
In addition, the portfolio benefitted from gains of EUR36.8 million
in the value of investment property, driven in particular by value uplifts from the maturing New Waverley development and the
value of the 25-year lease with the UK government. This has helped the adjusted NAV per share increase by 10% to 126.5 euro
cents per share, despite the continued currency headwinds of a weakening sterling.
ACQUISITION AND DEVELOPMENT UPDATE
INCOME-GENERATING PORTFOLIO
The income-generating property portfolio has grown by 91%, from EUR242.6 million to EUR463.4 million at 30 June 2017.
This has driven the growth in rental income of 84% from the prior year.
Acquisitions in Central and Eastern Europe ("CEE") have been in terms of a long-term co-investment
agreement that MAS has entered into with Prime Kapital. MAS' effective economic interest in the acquisitions is the equivalent of an
80% direct participation in the performance of the malls and a 20% participation at the weighted average cost of external funding achieved
by the acquisition. 30% of passing rent now derives from CEE.
NOVA PARK SHOPPING MALL, POLAND
Acquired November 2016, Prime Kapital Investment Joint Venture Nova Park is a 32,600 square metre GLA dominant regional mall situated
in Gorzów, Poland, with a catchment of 460,000 people within 60 minutes' drive.
Gorzów is located in the wealthier western region of Poland,
150 kilometres from Berlin and 50 kilometres from the German border. The property has an occupancy rate of 91% and anchor tenants include
Bershka, C&A, CCC, Cropp Town, Deichmann, H&M, House, Intersport, Media Expert, Mojito, New Yorker, Piotri Pawel, Pull&Bear, Reserved,
Reserved Kids, Smyk and Stradivarius.
A substantial extension is being planned which will further enhance the footfall to
this shopping centre, which already dominates its local, competitors, and will add further to net operating income over time through turnover
linked leases.
GALLERIA PORTFOLIO, BULGARIA
Acquired May 2017, Prime Kapital Investment Joint Venture
This portfolio consists of 2 assets - the Galleria Burgas mall and the Galleria Stara Zagora mall.
Galleria Burgas is a 37,500 square metre GLA dominant shopping centre in Burgas, the 4th largest Bulgarian city with a population of 200,000.
The mall benefits from a total catchment of approximately 480,000 people within 60 minutes' drive, as well as a significant number of tourists
during the summer holiday season, as the city is in the vicinity of the most popular Black Sea resorts on the Bulgarian coast. The property has
an occupancy rate of 99% and a broad tenant mix including international fashion and entertainment brands such as Bershka, CCC, Cinema City,
Deichmann, H&M, Humanic, Ikea, Intersport, LC Waikiki, Lee Cooper, Lidl, Massimo Dutti, Oysho, Terranova and Zara. Due to strong performance and
tenant demand, a significant centre extension is being considered.
Galleria Stara Zagora is a 21,300 square metre GLA dominant shopping centre in Stara Zagora, the 6th largest Bulgarian city with a population of
140,000. The mall benefits from a total catchment of approximately 400,000 people within 45 minutes' drive. The property has an occupancy rate of
95% and the tenant mix is focused primarily on fashion and entertainment, includes brands such as Bershka, Cinema City, CCC, Deichmann, DM, H&M,
Intersport, Kenvelo, LC Waikiki, New Yorker, Nike, Pull&Bear and Stradivarius. The mall is in need of refurbishment and offers significant value
enhancing opportunities through operational streamlining and commercial layout improvement.
ADAGIO HOTEL AND RETAIL UNITS, EDINBURGH, UK
Completed development December 2016
The 146-room Adagio hotel has frontage directly onto the Royal Mile, Edinburgh. The lease is guaranteed by both Accor
and Pierre & Vacances and the completed development was handed over to the tenant in late 2016. The development also includes 5 well-located retail
units, all of which are let or under offer.
MUNICH PROPERTY, GERMANY
Acquired August 2016
This 13,000 square metre GLA property, currently let to Volkswagen AG, was acquired at an initial acquisition yield of 7% and is a
long-term redevelopment opportunity. MAS is already in pre-lease negotiations with various tenants and in planning discussions with the local
municipality, whilst benefitting from a strong lease covenant in the interim.
EDEKA MIHA PORTFOLIO, GERMANY
Acquired August 2016
The Edeka MIHA 51,000 square metre GLA portfolio, comprises 20 supermarkets and discount food stores in north-east Germany, provides
particularly strong income returns that are underpinned by low-cost debt financing, resulting in attractive income returns on equity invested.
The tenant has recently made substantial investments in many of the portfolio properties, a number of which are well located in, or near
to, Berlin.
ALDI PORTFOLIO, GERMANY
Disposed June 2017
As part of the ongoing review of the portfolio, the group has started to recycle capital out of mature assets at a time when market yields are
strong. In the second half of the financial year, 4 of the 5 Aldi discount food stores were sold at a profit of 14% over their carrying fair value.
DEVELOPMENTS - WESTERN EUROPE
NEW WAVERLEY PHASE II (OFFICE), EDINBURGH, UK
The signing of a 25-year lease (with a break at year 20) with the UK
government for the 19,000 square metre development at New Waverley is a major achievement and represents the largest office letting in Edinburgh
in over 20 years. This development, estimated to complete in June 2019, continues the momentum at the site, which will see high quality office
space blend with restaurants, cafes and shops around a new public square. The site links Waverley Station with the city's iconic Royal Mile,
forming part of the Old Town's UNESCO World Heritage site. During the last two years, New Waverley has delivered 400 hotel rooms, including two
Whitbread hotels - a Premier Inn and a Hub by Premier Inn - and an Adagio Aparthotel overlooking the Royal Mile.
The UK government tenant essentially provides risk-free rental income, making this site particularly appealing to a large number of
institutional investors and pension funds. The pre-let of the largest element of Phase Two of the New Waverley development is expected to
generate higher relative rental growth for the surrounding area as footfall will increase.
PRIME KAPITAL DEVELOPMENT JOINT
VENTURE
The development opportunities acquired by and available to the joint venture have substantially exceeded initial expectations, with the venture
now targeting in excess of EUR1 billion of high quality developments across CEE. In order to fund this pipeline, MAS has increased its commitment
to the Prime Kapital development joint venture from EUR200 million up to a maximum of EUR350 million of preference share capital, on the
same terms as the previous commitment. MAS' equity stake in the Prime Kapital development joint venture remains at 40%.
The market opportunity in CEE remains compelling, with the joint venture offering many benefits to MAS, including the following:
i. Access to high growth, euro denominated jurisdictions, with improving capital markets and investor sentiment and sufficient scale to impact
significantly upon MAS' future growth potential;
ii. Access to good quality assets with higher income and capital returns, and growth in such returns, that are not readily available at this
point in the cycle in western European markets;
iii. Access to an experienced team with a proven track record of delivery in the CEE market, in a manner that ensures MAS' exclusive access to
them for this investment strategy (being development and redevelopment of commercial and residential real estate assets in CEE);
iv. Strong alignment of interest through Prime Kapital's long-term co-investment; and
v. Speed to market, given the experience of Prime Kapital's management team and established pipeline in this region. The expansion of the
joint venture further strengthens the relationship between Prime Kapital and MAS.
In addition, the shortage of modern, high quality residential accommodation in capital cities across CEE provides a further opportunity to
benefit from high growth markets in which the purchasing power of residents is increasing strongly. The Prime Kapital team is well placed to
leverage its experience in CEE to exploit this opportunity. Profits from the sale of completed residential developments will be used to support
and drive distributions and distribution growth in the periods ahead. The secured pipeline in CEE amounts to approximately EUR665 million and
consists of the projects discussed below.
EMONIKA MIXED-USE RETAIL, OFFICE AND
HOTEL DEVELOPMENT
Emonika is a large-scale development project for the construction of commercial and public logistic assets in a public-private partnership with
the Slovenian Railways (SZ) and the Republic of Slovenia (RoS), in the heart of the country's capital Ljubljana. Slovenia benefits from
significantly higher per capita purchasing power than other CEE countries and yet Ljubljana lacks a large modern and centrally located mall.
The project entails the development of a 59,000 square metre GLA mall and 21,000 square metre GLA of A-grade offices and a hotel in addition to
the re-development of the city's central train station and the development of a new central bus station in a highly visible central location,
surrounded by dense residential and office elements. The site is well served by public transport and lies on the main traffic routes that
connect the city centre with the main regional road and rail network. The catchment area is estimated to include a population of
approximately 305,000 and 560,000 within 15 and 30 minute drives respectively.
The project benefits from an approved master plan and is highly complex from a design and regulatory perspective.
The investment of significant capital by the development joint venture is conditional on, amongst others, the conclusion of the design process,
the finalisation of various agreements with SZ and the municipality of Ljubljana as well as RoS government approval. The authorities are
supportive with the result that significant progress has been made.
ERA SHOPPING PARK IASI ACQUISITION OF SENIOR DEBT
The Prime Kapital development joint venture has secured the acquisition of the senior debt extended to the company owning Era Shopping Park Iasi
by a syndicate of banks at a significant discount to the estimated current market value of the project. The debt acquired by the joint venture
is secured with a first rank mortgage over all the project assets. Era Shopping Park Iasi is a 50,000 square metre GLA retail centre that includes
a Carrefour (15,290 square metres of GLA) and a Decathlon (4,090 square metres of GLA) owner-occupied unit. The asset is currently underdeveloped
and overleveraged but due to a large catchment area, very good visibility and accessibility by car and public transport, lack of expansion
potential for the two competing schemes and a 140,000 square metre development land bank it is well positioned for redevelopment into a regional
retail centre.
Iasi, with 321,000 inhabitants, is the second largest city in Romania, the most important industrial centre in the northeast part of the country
and a major university centre. The project is located near to densely populated and rapidly growing residential areas, on the main road that
connects Iasi to most major cities in the wider region.
DN1 VALUE CENTRE
During 2016 the Prime Kapital development joint venture secured a development site of approximately 41,000 square metres in Balotesti, Romania,
with a view to developing a retail value centre. Since then, given the extraordinarily high demand from retailers, an additional neighbouring plot
of approximately 38,000 square metres has been acquired with the intention of developing a larger centre. Balotesti, a rapidly developing affluent
residential area, is approximately 25 kilometres north of Bucharest. Conveniently situated on the DN1, a major motorway connecting the northern
lakeside residential areas with Bucharest, the land plots are adjacent to Bucharest's most successful DIY outlet, Hornbach Balotesti, and the
development site for a new Lidl supermarket. Catchment analysis indicates a population of 85,000 and 137,000 within 15 and 30 minute drives
respectively, with per capita purchasing power well above the Bucharest average. The planned development will be integrated with the Hornbach
outlet and the new planned Lidl on the adjacent sites, extending the combined 18,122 square metres of GLA of these two operators by an additional
28,000 square metres of GLA in the first phase. Lease agreements have been entered into with anchor tenants such as Carrefour (hypermarket),
as well as Jysk, Noriel and Pepco. Permitting is ongoing and the first phase of the development is scheduled to open for trade during the fourth
quarter of 2018.
PLOIESTI RETAIL CENTRE
The Prime Kapital development joint venture secured approximately 95,000 square metres of land in Ploiesti, Romania, with the intention of
developing and operating a 25,600 square metre GLA retail value centre with a high concentration of anchor tenants. Ploiesti, with 210,000
inhabitants and the capital of Prahova County, is placed centrally in the larger urban agglomeration emerging north of Bucharest that is home
to a population of approximately 750,000. The city is an important industrial centre hosting major production facilities for leading international
oil, chemical and automotive players as well as an important distribution hub for the wider area. The scheme will be integrated with the
existing Kaufland mini-hypermarket located next to the project site, as well as with the Lidl supermarket to be developed on an adjacent site.
The planned development is located in a densely populated residential area in close proximity to the city's main train station, tram station and
bus station with high visibility and very good road access. The property benefits from a catchment of 96,000 residents within walking distance
and 565,000 residents within a 30 minute drive. Major anchor tenants have already expressed a strong interest in the project and consideration
is being given to expanding the planned scheme.
BAIA MARE VALUE CENTRE
Approximately 63,000 square metres of land has been acquired in Baia Mare with the intention of developing and operating a 22,500 square metre
GLA retail value centre with a high concentration of anchor tenants.
Baia Mare, with 124,000 inhabitants, is the capital of Maramures County, one of the fastest growing regions in Romania and also a major tourist
destination located close to Romania's north-western border with Hungary and Ukraine. The project location is highly visible, in the immediate
vicinity of a dense residential area on the main road connecting Baia Mare with the other major cities in the wider Transylvania area and is well
served by public transport. The catchment is estimated to include a population of approximately 156,000 and 219,000 within 15 and 30 minute
drives respectively. A lease agreement has been entered into with Carrefour to anchor the centre with a hypermarket. A building permit is
expected to be secured early in 2018 with opening scheduled for the end of 2018.
ROMAN VALUE CENTRE
Approximately 61,000 square metres of land has been secured in Roman, Romania with the intention of developing and operating a 15,000 square
metre GLA retail value centre with a high concentration of anchor tenants, including the first hypermarket in the town. Roman, with 45,000
inhabitants, is the second largest city in Neamt County with a significant automotive, food and construction materials industry.
Nonetheless Roman lacks a relevant retail scheme. The highly visible project site is located within walking distance from the city centre,
in the immediate vicinity of the train station and the city's regional bus station. The catchment is estimated to include a population of
approximately 65,000 and 100,000 within 10 and 20 minute drives respectively. A lease agreement has been entered into with Carrefour to
anchor the centre with a hypermarket. A building permit is expected to be secured early in 2018 with opening scheduled for the end of 2018.
KAUFLAND VALUE CENTRE EXTENSIONS
Seven land plots have been secured in various smaller cities across Romania with the intention of developing approximately 28,000 square metres
of GLA of convenience value extensions to be integrated with the existing Kaufland mini-hypermarkets. Kaufland is a German discount
mini-hypermarket and supermarket chain that operates in excess of 1,000 stores in Germany and several CEE countries. It has become the leading
food retailer in Romania, with more than 100 well located owned and operated stores, generating over EUR2.2 billion in annual sales. The leasing
of the first four of these developments is very advanced and the assets are expected to open for trade before the end of the 2017 calendar year.
RESIDENTIAL DEVELOPMENTS
The secured residential development pipeline consists of two large scale projects in Bucharest. The first is an 81,000 square metre site in
close proximity to the new developing central business district and commercial centre in the affluent, northern part of the city on which
an upmarket modern housing estate consisting of up to 550 high quality houses, townhouses and apartments is being planned. Planning is well
advanced and it is expected that construction of show units will start by December 2017 with a view to be opened to the public by March 2018.
The second secured project is a large-scale residential block development where up to 380 apartments will be constructed on the
15,000 square metre site in the expanding north-west of Bucharest directly adjacent to a public transport node that includes a metro station
and tram stop on major public transport lines. This project is subject to zoning.
FURTHER PIPELINE
In addition to the secured pipeline, the development joint venture is currently conducting due diligence on a further EUR200 million of
development pipeline. Further details will be made available as appropriate.
CASH MANAGEMENT AND DEBT
During the financial year the group raised EUR158 million via the issue of new ordinary shares in two over-subscribed private placings.
As a result of acquisitions and capital expenditure on developments the group ended the financial year with EUR33.0 million in cash
(excluding the group's share of cash held in the Prime Kapital development joint venture).
In addition, the group had EUR147 million of third-party debt finance in place as at 30 June 2017,
having drawn-down a net amount of EUR112 million during the year. This leaves the asset level loan to value at 26% at 30 June 2017.
Shortly after year end, a further EUR53 million of debt was drawn-down against the Nova Park asset and further debt is expected to be drawn on
the currently ungeared Bulgarian Galleria portfolio.
DIRECTORS
Ron Spencer
(Non-executive chairman)
Lukas Nakos
(Chief executive officer)
Malcolm Levy
(Chief financial officer)
Jonathan Knight
(Chief investment officer)
Gideon Oosthuizen
(Non-executive director)
Jaco Jansen
(Non-executive director)
Morné Wilken
(Non-executive director)
Pierre Goosen
(Non-executive director)
Glynnis Carthy
(Non-executive director)
Glynnis Carthy was appointed to the Board of Directors on 30 June 2017. There were no other changes to the board during the financial
year ended 30 June 2017, or to date.
TRADING STATEMENT
The group uses distribution per share as its relevant unit of measure for trading statement purposes.
MANAGEMENT ACCOUNTS
The figures referred to above have been extracted from the management accounts.
REPORTING CURRENCY
The group's results are reported in
euros.
LISTINGS
MAS is listed on the Main Board of the Johannesburg Stock Exchange and the Euro MTF market of the Luxembourg Stock Exchange.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 30 June 2017
Year ended Year ended
Euro Note 30 June 2017 30 June 2016
Rental income 4 27,032,238 14,203,699
Service charge income and other recoveries 4,550,190 2,047,322
31,582,428 16,251,021
Service charge and other property operating expenses (7,598,036) (4,036,748)
Net rental income 23,984,392 12,214,273
Other income — 2,355,381
Corporate expenses (3,498,209) (3,188,770)
Investment expenses (281,061) (2,159,964)
Net operating income 20,205,122 9,220,920
Fair value adjustments 5 25,592,290 6,431,719
Exchange differences 6 (4,684,895) (12,913,210)
Share of profit/(loss) from equity accounted investees, net of tax 9 178,397 (31,908)
Profit before finance costs 41,290,914 2,707,521
Finance income 1,207,196 392,801
Finance costs (2,238,497) (773,765)
Profit before taxation 40,259,613 2,326,557
Current taxation (1,741,449) (684,749)
Deferred taxation (3,942,153) (143,776)
Profit for the year 34,576,011 1,498,032
Attributable to:
Owners of the group 33,587,948 1,498,032
Non-controlling interest 13 988,063 —
Profit for the year 34,576,011 1,498,032
Earnings per share (euro cents) 20 8.43 0.49
Diluted earnings per share (euro cents) 20 8.43 0.49
The notes form part of these condensed abridged consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2017
Year ended Year ended
Euro Note 30 June 2017 30 June 2016
Profit for the year 34,576,011 1,498,032
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign operations - foreign currency translation differences, net of tax 12 (5,371,692) (12,387,307)
Total comprehensive income/(loss) for the year 29,204,319 (10,889,275)
Attributable to:
Owners of the group 28,216,256 (10,889,275)
Non-controlling interest 988,063 —
Total comprehensive income/(loss) for the year 29,204,319 (10,889,275)
The notes form part of these condensed abridged consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
As at As at
Euro Note 30 June 2017 30 June 2016
Non-current assets
Intangible assets 23,967,355 25,262,818
Investment property 7 564,291,928 306,996,079
Investment in equity accounted investees 9 20,205,297 19,991,716
Financial instruments 15 101,134,245 —
Property, plant and equipment 560,019 241,083
Deferred taxation asset 758,055 721,292
Total non-current assets 710,916,899 353,212,988
Current assets
Financial investments 8 — 51,614,068
Derivative financial instruments 15 66,097 —
Trade and other receivables 8,707,035 11,264,083
Cash and cash equivalents 33,017,502 47,997,978
Assets held for sale 6,336,915 3,515,237
Total current assets 48,127,549 114,391,366
Total assets 759,044,448 467,604,354
Equity
Share capital 10 557,556,273 378,530,556
Geared share purchase plan shares 10 (21,056,010) —
Retained earnings 55,888,038 27,503,007
Share-based payment reserve 11 225,973 —
Foreign currency translation reserve 12 (10,560,303) (5,188,611)
Equity attributable to owners of the group 582,053,971 400,844,952
Non-controlling interest 13 988,063 —
Total equity 583,042,034 400,844,952
Non-current liabilities
Interest bearing borrowings 14 141,751,953 43,227,831
Financial instruments 15 1,670,086 5,396,943
Deferred taxation liability 4,998,374 1,242,741
Total non-current liabilities 148,420,413 49,867,515
Current liabilities
Interest bearing borrowings 14 5,461,444 1,350,764
Financial instruments 15 11,211,990 7,146,090
Trade and other payables 10,816,762 8,296,197
Provisions 91,805 98,836
Total current liabilities 27,582,001 16,891,887
Total liabilities 176,002,414 66,759,402
Total shareholders' equity and liabilities 759,044,448 467,604,354
Actual number of shares in issue 10 467,366,299 348,625,219
The notes form part of these condensed abridged consolidated financial statements.
These condensed abridged consolidated financial statements were approved by the board of directors and signed on
1 September 2017 on their behalf by:
Ron Spencer Malcolm Levy
Chairman Chief Financial Officer
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
Geared Foreign Equity
share Share-based currency attributable Non-
Share purchase Retained payment translation to owners of controlling
Euro Note capital plan shares earnings reserve reserve the group interest Total equity
Balance at 30 June 2015 305,671,992 — 40,269,910 — 7,198,696 353,140,598 — 353,140,598
Comprehensive income
for the year
Profit for the year — — 1,498,032 — — 1,498,032 — 1,498,032
Other comprehensive
income — — — — (12,387,307) (12,387,307) — (12,387,307)
Total comprehensive — — 1,498,032 — (12,387,307) (10,889,275) — (10,889,275)
income for the year
Transactions with the
owners of the group
Issue of shares 10 72,858,564 — — — — 72,858,564 — 72,858,564
Distributions 10 — — (14,264,935) — — (14,264,935) — (14,264,935)
Total transactions
with the owners of 72,858,564 — (14,264,935) — — 58,593,629 — 58,593,629
the group
Balance at 30 June 2016 378,530,556 — 27,503,007 — (5,188,611) 400,844,952 — 400,844,952
Comprehensive income
for the year
Profit for the year — — 33,587,948 — — 33,587,948 988,063 34,576,011
Other comprehensive
income — — — — (5,371,692) (5,371,692) — (5,371,692)
Total comprehensive
income — — 33,587,948 — (5,371,692) 28,216,256 988,063 29,204,319
for the year
Equity transactions
Share-based payment
reserve 11 — — — 225,973 — 225,973 — 225,973
Total equity
transcations — — — 225,973 — 225,973 — 225,973
Transactions with the
owners ofthe group
Issue of shares 10 192,292,442 (21,056,010) — — — 171,236,432 — 171,236,432
Distributions 10 (13,266,725) — (5,202,917) — — (18,469,642) — (18,469,642)
Total transactions with 179,025,717 (21,056,010) (5,202,917) — — 152,766,790 — 152,766,790
the owners of the group
Balance at 30 June 2017 557,556,273 (21,056,010) 55,888,038 225,973 (10,560,303) 582,053,971 988,063 583,042,034
The notes form part of these condensed abridged consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
Year ended Year ended
Euro Note 30 June 2017 30 June 2016
Profit for the year 34,576,011 1,498,032
Adjustments for:
Depreciation 27,864 35,535
Provisions — 98,836
Share-based payment expense 16 245,419 —
Fair value adjustments 5 (25,592,290) (6,431,719)
Exchange differences 6 4,684,895 12,913,210
Finance income (1,207,196) (392,801)
Finance costs 2,238,497 773,765
Share of (profit)/loss from equity accounted investees 9 (178,397) 31,908
Taxation expense 5,683,602 828,525
Changes in:
Trade and other receivables 2,557,048 (6,736,280)
Trade and other payables 2,520,565 3,500,837
Cash generated from operating activities 25,556,018 6,119,848
Taxation paid (1,066,198) (310,994)
Net cash from operating activities 24,489,820 5,808,854
Investing activities
Acquisition of investment property 7 (156,414,516) (37,439,245)
Capitalised acquisition costs on investment property 7 (3,993,439) (4,578,229)
Capitalised expenditure on investment property 7 (17,907,155) (38,016,628)
Settlement of investment property acquisition retentions 15 (3,318,865) (255,755)
Proceeds from the sale of investment property 7 7,999,160 1,814,850
Acquisition of subsidiary net of cash acquired 17 (61,326,012) —
Acquisition of PKM preference shares 15 (100,000,000) —
Acquisition of equity accounted investee 9 — (20,000,000)
Capitalised transaction costs of equity accounted investee 9 (35,184) (23,624)
Acquisition of property, plant and equipment (34,425) (263,591)
Capitalised expenditure on intangible assets (222,519) —
Issue of short term loans receivable 19 — (18,920,000)
Proceeds from the sale of financial investments 8 47,045,042 40,376,739
Proceeds from the repayment of short term loans receivable 19 — 19,918,247
Interest paid on cash and equivalents (6,830) (3,522)
Interest received 72,951 392,801
Settlement of financial liability 15 (3,327,225) —
Cash used in investing activities (291,469,017) (56,997,957)
Financing activities
Proceeds from the issue of share capital 10 157,984,909 37,676,095
Proceeds from interest bearing borrowings 14 111,657,786 30,550,000
Transaction costs related to interest bearing borrowings 14 (2,168,837) (412,345)
Repayment of interest bearing borrowings 14 (7,098,329) (922,638)
Interest paid on interest bearing borrowings 14 (2,470,916) (827,855)
Distributions paid 10 (5,202,917) (7,238,795)
Cash generated from financing activities 252,701,696 58,824,462
Net (decrease)/increase in cash and equivalents (14,277,501) 7,635,359
Cash and cash equivalents at the beginning of the year 47,997,978 45,111,775
Effect of movements in exchange rate fluctuations on cash held (702,975) (4,749,156)
Cash and cash equivalents at the end of the year 33,017,502 47,997,978
The notes form part of these condensed abridged consolidated financial statements.
NOTES TO THE CONDENSED ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2017
1. REPORTING ENTITY
The company is domiciled in the British Virgin Islands. These
condensed abridged consolidated financial statements
as at, and for the year ended, 30 June 2017 comprise the
condensed consolidated financial statements of MAS REI
Inc and its subsidiaries (together the "group").
MAS is a real estate investment group with a portfolio
of real estate investments across Europe. The group aims
to deliver sustainable and growing distributions to share
holders over time.
2. BASIS OF PREPARATION
STATEMENT OF COMPLIANCE
These condensed abrideged consolidated financial
Statements are prepared on a going concern basis and
in accordance with International Financial Reporting
Standard ("IFRS") 34: Interim Financial Reporting as issued
by the IASB, the JSE Listings Requirements, the Rules
and Regulations of the Luxembourg Stock Exchange and
applicable legal and regulatory requirements of the BVI
Business Companies Act 2004.
BASIS OF MEASUREMENT
These condensed abridged consolidated financial
statements are prepared on the historical cost basis except
for the following items that are measured on the fair value
basis:
- Financial instruments classified as FVTPL (see note 15);
- Share-based payments (see note 16);
- Investment property (see note 7); and
- Assets held for sale.
The group uses observable market data as far as it is
available to measure the fair values of assets and liabilities.
Fair values are categorised into different levels in a fair
value hierarchy based upon the inputs used in the valuation
technique as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2: Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Inputs for the asset or liability that are not based
on observable market data.
Where the inputs used in the valuation technique fall into
more than one category in the fair value hierarchy, the asset
or liability is categorised into the lowest level input that is
significant in the valuation of that asset or liability.
The group recognises transfers between levels of the fair
value hierarchy at the end of the reporting period during
which the change occurred.
USE OF JUDGEMENT AND ESTIMATION UNCERTAINTY
In the preparation of these condensed abridged
consolidated financial statements the directors have made
judgements, estimates and assumptions that affect the
application of the group's accounting policies and the
reported amounts in the financial statements. The directors
continually evaluate these judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue
and expenses based upon historical experience and on
other factors that they believe to be reasonable under
the circumstances. Actual results may differ from the
judgements, estimates and assumptions. The key areas of
judgement are as follows:
- Investment property: Except where fair value cannot be reliably
determined the valuation of investment property is
determined by external property valuation experts or
where relevant, firm offers from market participants
looking to acquire the assets. The external property
valuation experts use recognised valuation techniques and
apply the principles of IFRS 13: Fair value measurement.
The significant methods and assumptions used by the
valuers in estimating fair value are set out in note 7.
Where fair value is not reliably determinable, the
group uses costs less impairment. The directors have
assessed the value of investment property held at cost
and no impairment has been recognised.
- Financial instruments: In determining the fair value of financial
instruments and financial investments at fair value
through profit or loss, the group is required to make
estimations of unobservable inputs in determining fair
value. The significant methods and assumptions used in
estimating fair value are set out in note 15.
- Investment in equity accounted investee: The group recognises
an investment in associate when there is significant
influence over the investee. Judgements are made to
assess the extent of influence it has over its investments
and whether there is significant influence. Where the
group has significant influence but not control, the
investee is recognised as an investment in associate (see
note 9).
- Loan commitments: The group has loan commitments to an
equity accounted investee (see note 9). Judgements
are made to assess the market related rate of loan
commitments. Loan commitments at a market related
rate are not in the scope of IFRS 9, rather IAS 37 -
Provisions, Contingent Liabilities and Contingent Assets,
until such time as the impairment guidance in IFRS 9
becomes effective. The group applied judgement
in reviewing the loan commitment made to PKM
Development Limited ("PKM") and determined that the
cost of funding the loan commitment is lower than the
rate to be charged, accordingly the loan commitment is
neither onerous nor impaired.
- Impairments: The group annually reviews the recoverable
amount of CGUs to which goodwill has been allocated.
The group uses assumptions in determining the
recoverable amount, which is an estimate and may differ
from actual results in the future.
- Taxation: The group is subject to income tax across the
jurisdictions where it operates. There are assumptions
made in the computation of the provision for taxation
across the operating subsidiaries.
- Deferred taxation: The group recognises deferred taxation
assets to the extent that there are forecast future taxable
profits against which the carry forward tax losses can be
used. Judgements and estimations are made to assess
the future taxable profits of the group.
- Determination of whether the acquisition of an investment property is a business
combination: The group applies judgement to the acquisition
of investment property to determine whether the
acquisition is the acquisition of an asset, a group of
assets or a business combination in the scope of IFRS 3
'Business Combinations'. The group has determined the
acquisitions of Galleria Burgas EAD and Galleria - Stara
Zagora EAD were business combinations because the
group acquired the business operations (see note 17). The
group has determined all other acquisitions of investment
property in the current and prior year were not business
combinations, rather acquisitions of investment property
assets (see note 7).
- Business combinations: The group recognises business combinations
when it obtains control of an entity. The group applies
judgement when determining the fair value of the opening
balances in the acquired entities primary statements.
- Share-based payments: Under the terms of the geared share
purchase plan, participants are granted loans to acquire
shares, with recourse limited to the shares acquired.
These are treated as options under IFRS2: Share-based
Payment. The fair value at grant date is measured by use
of a Black-Scholes Merton model. The expected life used
in the model has been adjusted, based on management's
best estimate, for the effects of non-transferability,
exercise restrictions, dividends and behavioural
considerations, see note 16.
PRESENTATION CURRENCY
These condensed abridged consolidated financial
statements are presented in euro which is the company's
functional currency.
NEW AND AMENDED STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Below is a summary of amendments/improvements to
standards and interpretations that are not yet effective and
were not early adopted:
Amendments/improvements to standards and IASB effective for
interpretations not yet effective annual periods
beginning on or after
Disclosure initiative (Amendments to 1 January 2017
IAS 7)
Amendments regarding the 1 January 2017
recognition of deferred tax assets
for unrealised losses
Recognition of Deferred Tax Assets 1 January 2017
for Unrealised Losses (Amendments
to IAS 12)
Amendments resulting from Annual 1 January 2018
Improvements 2014-2016 cycle
IFRS 15 Revenue from Contracts with 1 January 2018
Customers
IFRS 9 (2014) Financial Instruments* 1 January 2018
Classification and measurement of 1 January 2018
share-based payment transactions
(Amendments to IFRS 2)
IFRS 16 Leases 1 January 2019
* The group early adopted IFRS 9 (2013) in the financial year ending
30 June 2015. All other new standards and amendments will be
adopted in the year that they first become effective for the group.
3. SIGNIFICANT GENERAL ACCOUNTING POLICIES
For specific accounting policies please refer to the
corresponding notes.
FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
The group classifies its financial assets into the following
categories: financial assets at amortised cost and financial
assets at fair value through profit or loss. Financial assets
are recognised when the group becomes party to the
contractual provisions of the asset.
FINANCIAL ASSETS AT AMORTISED COST
Financial assets are classified as financial assets at
amortised cost only if both the following criteria are met:
the financial asset is held within a business model whose
objective is to hold assets in order to collect contractual
cash flows; and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount
outstanding. Interest is the consideration for the time value
of money and credit risk associated with the principal
amount outstanding.
The group may classify financial assets that meet the
criteria to be classified as financial assets at amortised cost
as financial assets at fair value through profit or loss if doing
so eliminates or significantly reduces a measurement or
recognition inconsistency that would arise if the financial
asset were measured at amortised cost.
Financial assets classified as financial assets at amortised
cost are recognised initially at fair value plus any directly
attributable transaction costs at the settlement date.
Subsequent to initial recognition, these financial assets are
measured at amortised cost using the effective interest
method, less any impairment losses.
IMPAIRMENT
A financial asset not carried at fair value is assessed at each
reporting date to determine whether there is objective
evidence that it is impaired. A financial asset is impaired if
objective evidence indicates that an incurred loss event has
occurred after the initial recognition of the asset, and that
the loss event had a negative effect on the estimated future
cash flows of that asset which can be estimated reliably.
An impairment loss in respect of a financial asset
measured at amortised cost is calculated as the difference
between its carrying amount and the present value of
the estimated future cash flows discounted at the asset's
original effective interest rate. Losses are recognised in
profit or loss and reflected in an allowance account against
trade and other receivables. Interest on the impaired asset
continues to be recognised to the extent that it is probable
that the interest will be collected.
When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment
loss is reversed through profit or loss.
FINANCIAL ASSETS AT FAIR VALUE
A financial asset is classified as fair value if it does not
meet either criteria for classification of a financial asset at
amortised cost. The group initially recognises these financial
assets at trade date and attributable transaction costs are
recognised in profit or loss as incurred. Financial assets at
fair value through profit or loss are subsequently measured
at fair value and changes therein are recognised in profit or
loss in the period in which they occur.
DERECOGNITION OF FINANCIAL ASSETS
The group derecognises a financial asset when the
contractual rights to the cash flows from the asset expire, or
it transfers the rights to receive the contractual cash flows
on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset
are transferred. Any interest in transferred financial assets
that is created or retained by the group is recognised as a
separate asset or liability.
ii. FINANCIAL LIABILITIES
The group classifies its financial liabilities into the following
categories: financial liabilities at amortised cost and financial
liabilities at fair value. Financial liabilities are recognised
when the group becomes party to the contractual
provisions of the liability.
FINANCIAL LIABILITIES AT FAIR VALUE
Financial liabilities are classified as financial liabilities at
fair value if they are: financial liabilities that are held for
trading; derivative financial instruments; financial liabilities
designated as fair value; financial liabilities that arise
when a transfer of a financial liability does not qualify for
derecognition or when the continuing involvement applies;
financial guarantees; and commitments to provide loans at
a below-market interest rate.
The group may elect to designate financial liabilities
as financial liabilities at fair value that would otherwise
meet the criteria to be classified as a financial liability
at amortised cost, if doing so eliminates or significantly
reduces a measurement or recognition inconsistency
that would arise if the financial liability were measured at
amortised cost.
The group initially recognises financial liabilities at fair
value at trade date and attributable transaction costs are
recognised in profit or loss as incurred. Financial liabilities at
fair value through profit or loss are subsequently measured
at fair value and changes therein are recognised in profit or
loss in the period in which they occur.
FINANCIAL LIABILITIES AT AMORTISED COST
All financial liabilities are classified as financial liabilities
at amortised cost unless they meet the criteria for
classification as financial liabilities at fair value.
These financial liabilities are initially recognised at fair
value plus any directly attributable transactions costs at
the settlement date. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost using the
effective interest method.
DERECOGNITION OF FINANCIAL LIABILITIES
The group derecognises a financial liability when the
contractual obligations of the liability expire, i.e. when the
obligation specified in the contract is discharged, cancelled
or expires.
BORROWING COSTS
Interest bearing borrowings are allocated to either specific
or general borrowings. Specific or general borrowing
costs are capitalised if they are directly attributable to the
acquisition, construction or production of qualifying assets
which are assets that necessarily take a substantial period
of time to get ready for their intended use or sale. These
are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss
in the period in which they are incurred.
SERVICE CHARGES AND OTHER PROPERTY OPERATING EXPENSES
Service charge and other property operating expenses are
costs incurred in relation to operating investment property.
These expenses are recognised in profit or loss in the period
in which they are incurred within service charge and other
property operating expenses.
Employee benefits which relate to the operating of
investment properties are also recognised in service charge
and other property operating expenses to the extent that
they relate to income-generating property and capitalised
where they relate to development property. Employee
benefits comprise salary, annual leave and the current
expense in relation to the geared share purchase plan.
These short-term employee benefits are expensed as the
related service is provided. A liability is recognised for the
amount expected to be paid if the group has a present legal
or constructive obligation to pay this amount as a result of
past service provided by the employee and the obligation
can be estimated reliably.
CORPORATE EXPENSES
Corporate expenses are company specific costs which
are incurred in relation to the company's listing and the
group's structuring, these costs are not incurred in relation
to operating investment property. These expenses are
recognised in profit or loss in the period in which they are
incurred.
4. RENTAL INCOME
ACCOUNTING POLICY
Rental income from investment properties leased out under operating leases is recognised in profit or loss on a straight-line
basis over the term of the lease. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as
an expense over the lease term on the same basis as the lease income. The un-expensed direct costs are held as receivables
within trade and other receivables in the statement of financial position.
Tenant lease incentives are recognised as a reduction of rental income on a straight-line basis over the term of the lease.
The term of the lease is the non-cancellable period together with any further term for which the tenant has the option to
continue the lease, where, at the inception of the lease, there is reasonable certainty that the tenant will exercise that option.
DISCLOSURE
Rental income of EUR27,032,238 was generated for the year ended 30 June 2017 (2016: EUR14,203,699). Included in rental income
is contingent rent of EUR1,710,060 (2016:EURnil)
Rental income derived from the following tenants represents more than 10% of the group's rental income and is included
within the income-generating segment of the group:
Year ended
Euro 30 June 2017
Edeka MIHA AG 5,316,024
Euro 30 June 2016
Toom Baumarkt GMBH 2,227,811
Bauhaus GmbH and Co KG 1,644,562
3,872,373
The future aggregate minimum rental receivable under non-cancellable operating leases is as follows:
As at As at
Euro 30 June 2017 30 June 2016
No later than 1 year 34,403,438 18,796,482
Greater than 1 year and less than 5 years 116,200,143 71,729,913
Greater than 5 years 190,513,803 157,873,608
341,117,384 248,400,003
5. FAIR VALUE ADJUSTMENTS
ACCOUNTING POLICY
Fair value adjustments comprise:
FAIR VALUE ADJUSTMENTS ON INVESTMENT PROPERTY
Investment property is measured at fair value at the reporting date and changes therein are recognised within fair value
adjustments in profit or loss in the period in which they occur.
FAIR VALUE ADJUSTMENTS ON ASSETS HELD FOR SALE
Assets held for sale are measured at fair value at the reporting date and changes therein are recognised within fair value
adjustments in profit or loss in the period in which they occur.
FAIR VALUE ADJUSTMENTS ON FINANCIAL INVESTMENTS
Financial investments held at fair value through profit or loss are measured at fair value at the reporting date and changes
therein are recognised within fair value adjustments in profit or loss in the period in which they occur.
FAIR VALUE ADJUSTMENTS ON FINANCIAL INSTRUMENTS
Financial instruments held at fair value through profit or loss are measured at fair value at the reporting date and changes
therein are recognised within fair value adjustments in profit or loss in the period in which they occur.
DISCLOSURE
The group's fair value adjustments comprise the following:
Year ended Year ended
Euro Note 30 June 2017 30 June 2016
Fair value adjustments
Gain/(loss) on fair value of investment property 36,763,196 (3,088,606)
Gain on assets held for sale 786,795 —
(Loss)/gain on fair value of financial investments (4,569,026) 12,938,105
(Loss) on fair value of financial instruments (7,388,675) (3,417,780)
25,592,290 6,431,719
Detailed as follows:
Fair value of investment property
Income-generating 7 19,437,659 (1,764,630)
Development 7 17,325,537 (2,103,869)
Land bank 7 — 779,893
36,763,196 (3,088,606)
Fair value movement in assets held for sale
Langley Park - retail unit (16,730) —
New Waverley - retail unit 803,525 —
786,795 —
Fair value of financial investments
Karoo Fund 8 — 6,130,579
Sirius 8 (4,569,026) 6,807,526
(4,569,026) 12,938,105
Fair value of financial instruments
Zurich interest rate swap 15 520,083 (301,857)
Aldi portfolio interest rate swap 15 249,511 (191,737)
Attacq Limited financial liability 15 — (4,032,584)
New Waverley Development management fee 15 (1,885,457) (1,092,047)
New Waverley Priority participating profit dividend 15 (6,272,812) 2,200,445
(7,388,675) (3,417,780)
6. EXCHANGE DIFFERENCES
ACCOUNTING POLICY
Transactions in foreign currencies are translated into the functional currency of the group at the rate of exchange prevailing
at the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign
currencies are translated into the functional currency at the rates prevailing at that date.
Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the
rate at the date the fair value was determined. Foreign currency differences are recognised in profit or loss. Non-monetary
items that are measured based on the historical cost in a foreign currency are not translated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign
operations are expressed in euros using exchange rates prevailing at the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in
which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified
as equity and transferred to the group's foreign currency translation reserve. Such exchange differences are recognised in
profit or loss in the period in which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities
of the foreign operation and translated at the closing rate.
DISCLOSURE
The group has loans between group entities which are eliminated on consolidation, the foreign exchange differences arising
on these intra-group loans are not eliminated and are recognised in profit or loss because they are not deemed to be a net
investment in a foreign operation.
Where intra-group loans are denominated in the non-euro functional currency of the foreign operation and are from
group entities with a euro functional currency, there is no foreign exchange movement recognised in profit or loss of the
foreign operation, but there is a foreign exchange movement recognised in the profit or loss of the group entity with a
euro functional currency. A foreign exchange movement on the foreign operation is recognised in other comprehensive
income and accumulated in the foreign currency translation reserve when the intra-group loans of the foreign operation are
translated into euros, the presentational currency of the group.
Exchange gains and losses arise from the revaluation of monetary assets and liabilities. It is not the policy of the group to
hedge currencies held between euro, sterling, Swiss franc, Polish Zloty and Bulgarian Lev. As a result, exchange differences
arise predominantly from the intra-group loans to foreign operations. In the current year, this totalled a loss of EUR4,684,895
(2016: EUR12,913,210 (loss)).
7.INVESTMENT PROPERTY
ACCOUNTING POLICY
Investment property comprises freehold land, leasehold land, buildings and installed equipment held for the purpose of
earning rental income and for capital appreciation. Investment property also includes property under construction for future
use as investment property.
Investment properties are treated as long-term investments and are initially recognised at cost (including related
transaction costs unless acquired as part of a business combination) and are subsequently measured at fair value, with any
changes therein recognised in profit or loss. Subsequent additions that produce future economic benefits to the group are
capitalised.
Fair value is based on active market prices, adjusted, if necessary for differences in nature, location, and tenant, amongst
other items. If this information is not available, the group uses alternative valuation methods such as discounted cash flows.
External valuations, where applicable, are performed by independent professional valuers who hold recognised and relevant
professional qualifications and have recent experience of valuing that type and location of investment property.
Development property and land bank are initially recognised at cost and subsequently remeasured to fair value. The fair
value of development property and land bank is not always reliably determinable due to the properties being in the early
stages of construction or where construction has not yet begun. Where fair value cannot be reliably determined, but the group
expects that the fair value will be reliably determinable when construction is further progressed, the group measures such
properties at cost less impairment until such point in time that the fair value becomes reliably determinable. Where fair value
cannot be reliably determined and there are indicators of impairment, the recoverable amount is estimated. In this situation,
the recoverable amount is determined using value in use, because the fair value less costs to sell is not reliably determinable.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is
recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised in
profit or loss.
Any gains or losses arising from changes in fair value are included in the profit or loss. Gains or losses arising from the
disposal of investment property, being the difference between the net disposal proceeds and the carrying amount, are
recognised in profit or loss.
General and specific borrowing costs are capitalised if they are directly attributable to the acquisition, construction
or production of investment property that meets the definition of a qualifying asset. Capitalisation of borrowing costs
commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being
incurred. Capitalisation of borrowing costs continues until the asset is substantially ready for its intended use. If the resulting
carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is
arrived at by reference to the actual rate payable on borrowings used for development purposes or, at the average rate in
respect of that part of the development cost financed out of general funds.
All costs directly associated with the purchase and construction of a property are capitalised.
DISCLOSURE
The group's investment property comprises income-generating property, development property and land bank:
Segment Detail
Income-generating property Property that is currently producing income and held for the purpose of earning a yield.
There may be further asset management opportunities on these properties, which could
further enhance income returns.
Development property Property that is being developed in order to create income producing property held for the
purpose of earning a better yield than by acquiring standing property.
Land bank Land plots held for schemes that have not yet commenced.
The carrying amount of the group's investment property is as follows:
As at 30 June 2017 As at 30 June 2016
Euro Fair value Cost Total Fair value Cost Total
Income-generating property 494,519,173 — 494,519,173 242,625,172 — 242,625,172
Development property 26,413,036 3,668,759 30,081,795 17,927,863 4,502,390 22,430,253
Land bank — 39,690,960 39,690,960 — 41,940,654 41,940,654
520,932,209 43,359,719 564,291,928 260,553,035 46,443,044 306,996,079
As at 30 June 2017
Income-
Euro generating Development Land bank Total
Opening balance 242,625,172 22,430,253 41,940,654 306,996,079
Property acquisitions 156,414,516 — — 156,414,516
Property acquisitions as part of business combinations 61,330,722 — — 61,330,722
(see note 17)
Capitalised acquisition costs 3,993,439 — — 3,993,439
Property disposal (7,737,076) (262,084) — (7,999,160)
Transfers 24,786,917 (23,276,980) (1,509,937) —
Capitalised expenditure 840,436 15,407,910 1,658,809 17,907,155
Capitalised interest on general borrowings (see note 14) — 447,749 121,549 569,298
Transfer to assets held for sale (2,180,000) (115,378) — (2,295,378)
Fair value adjustment (see note 5) 19,437,659 17,325,537 — 36,763,196
Foreign currency translation reserve (4,992,612) (1,875,212) (2,520,115) (9,387,939)
Closing balance 494,519,173 30,081,795 39,690,960 564,291,928
As at 30 June 2016
Income-
Euro generating Development Land bank Total
Opening balance 164,390,518 42,907,443 41,240,845 248,538,806
Property acquisitions 37,439,245 — — 37,439,245
Capitalised retentions (see note 15) 1,370,755 — — 1,370,755
Capitalised acquisition costs 4,578,229 — — 4,578,229
Property disposal (1,814,850) — — (1,814,850)
Transfer 43,937,100 (43,937,100) — —
Capitalised expenditure 749,693 31,356,543 5,910,392 38,016,628
Capitalised financial liability (see note 15) — — 3,327,225 3,327,225
Capitalised interest on general borrowings (see note 14) — 28,452 354 28,806
Fair value adjustment (see note 5) (1,764,630) (2,103,869) 779,893 (3,088,606)
Transfer to assets held for sale — — (3,515,237) (3,515,237)
Foreign currency translation reserve (6,260,888) (5,821,216) (5,802,818) (17,884,922)
Closing balance 242,625,172 22,430,253 41,940,654 306,996,079
The fair value movement of investment property was EUR36,763,196 (2016: EUR3,088,606 loss) for the year, of which EUR912,710
(EURnil) relates to realised fair value movements on the sale of some of the Aldi portfolio.
OPERATING LEASES
Investment properties are subject to operating leases. The group's investment property portfolio generated EUR27,032,238
(2016: EUR14,203,699) in rental income and EUR4,550,190 (2016: EUR2,047,322) in service charge income and other recoveries with
service charge and other property expenses of EUR7,598,036 (2016: EUR4,036,748) being recognised in profit or loss.
INTEREST BEARING BORROWINGS
Bank borrowings of EUR147,213,397 (2016: EUR44,578,595) are secured against investment property (see note 14). The group has
designated bank borrowings drawndown in the period of EUR111,657,786 as general borrowings (2016:EUR30,550,000). During
the year interest costs on general borrowings of EUR569,298 (2016: EUR28,806) (see note 14) have been capitalised and are
included within development property and landbank.
CAPITAL COMMITMENTS
The group has capital commitments of EUR78,840,105 (2016: EUR9,536,867) in respect of capital expenditures contracted for at
the reporting date (see note 22).
RELATED PARTIES
The group has a development management arrangement with the developer New Waverley Advisers, a related party, for
the development and construction of the New Waverley site in Edinburgh. A cumulative development management fee
of EUR4,052,171 (2016: EUR2,367,448) and a cumulative priority participating dividend of EUR6,078,256 (2016: EURnil) have been
recognised in relation to the New Waverley development (see notes 15 and 19).During the year, the group recognised a
fair value adjustment in relation to the development management fee of EUR1,885,457 (2016: EUR1,092,047) and the priority
participating profit dividend of EUR6,272,812 (2016: -EUR2,200,445).
The group has capitalised costs incurred from related parties amounting to EUR13,036,726 (2016: EUR27,117,356) during the
year, (see note 19).
DEFERRED CONSIDERATION
On the acquisition of Heppenheim retail park, Bruchsal and Edeka Thales portfolio, the group retained a portion of the
purchase price per the respective sales and purchase agreement. These retentions will be released to the vendors at such
time as they complete the retention activities. These amounts have been accounted for as deferred consideration.
MEASUREMENT OF FAIR VALUES
VALUATION PROCESS FOR LEVEL 3 INVESTMENT PROPERTY
On an annual basis the fair value of investment property is determined, where applicable, by external independent property
valuation experts. External valuers have appropriate recognised professional qualifications and recent experience in the
location and category of the property being valued.
For all investment properties their current use equates to the highest and best use. The external valuations received are
initially reviewed by the relevant internal asset manager and compared to the expectation of what fair value would be for
individual investment properties. If the asset manager agrees with the valuation, the valuation reports are then checked by
the finance team to confirm their numerical and methodological accuracy.
FAIR VALUE HIERARCHY
The fair value measurement of all the group's investment properties has been categorised as level 3 in the fair value
hierarchy based upon the significant unobservable inputs into the valuation techniques used.
The following table shows the carrying amount and fair value of the group's investments in the fair value hierarchy:
As at 30 June 2017 Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
Income-generating property 494,519,173 — — 494,519,173
Development property 26,413,036 — — 26,413,036
520,932,209 — — 520,932,209
As at 30 June 2016 Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
Income-generating property 242,625,172 — — 242,625,172
Development property 17,927,863 — — 17,927,863
260,553,035 — — 260,553,035
VALUATION TECHNIQUE AND SIGNIFICANT UNOBSERVABLE INPUTS
The following table shows the valuation technique used in measuring the fair value of investment property, as well as the
significant unobservable inputs used. During the year, the group changed its valuation technique on the completed New
Waverley properties from discounted cash flows to capitalisation rate as it believes this results in a more accurate fair value
for these properties.
As at 30 June 2017
Investment Inter-relationship between
property Significant key unobservable inputs and
type Valuation technique unobservable inputs fair value measurement
Income- Discounted cash flows: The valuation model -Risk adjusted discount rates The estimated fair value would
generating considers the present value of net cash -Estimated rental value increase/(decrease) if:
property flows to be generated from the property, -Net rental growth - Expected market rental
taking into account expected rental growth -Reversionary discount rate growth was higher/ (lower)
rates, void periods, occupancy rates, lease - The estimated rental value
incentive costs such as rent-free periods was higher/(lower)
and other costs not paid by tenants. The - The reversionary discount
expected net cash flows are discounted rate was lower/(higher)
using risk-adjusted discount rates. Among - The risk adjusted discount
other factors, the discount rate estimation rate was lower/(higher)
considers the quality of a building and its
location, tenant credit quality and lease
terms.
Capitalisation rate: The valuation model -Capitalisation rate The estimated fair value would
considers the value of the property based -Market rent increase/(decrease) if:
on actual location, size and quality of the -Passing rent - the capitalisation rate was
properties taking into account market data lower/(higher)
and the capitalisation rate of future income - the passing rent was higher/
streams at the valuation date. (lower)
- the market rent was higher/
(lower)
Development Firm offers: - Offers The estimated fair value would
property The valuation model takes into account the increase/(decrease) if:
amount a third party is willing to pay. - The number of the interested
parties was higher/(lower)
- The availability of
comparable properties lower/
(higher)
As at 30 June 2016
Investment Inter-relationship between
property Significant key unobservable inputs and
type Valuation technique unobservable inputs fair value measurement
Income- Discounted cash flows: The valuation model - Risk adjusted discount rates The estimated fair value would
generating considers the present value of net cash - stimated rental value increase/(decrease) if:
property flows to be generated from the property, - Net rental growth - Expected market rental
taking into account expected rental growth - Reversionary discount rate growth was higher/ (lower)
rates, void periods, occupancy rates, lease - The estimated rental value
incentive costs such as rent-free periods was higher/(lower)
and other costs not paid by tenants. The - The reversionary discount
expected net cash flows are discounted rate was lower/(higher)
using risk-adjusted discount rates. Among - The risk adjusted discount
other factors, the discount rate estimation rate was lower/(higher)
considers the quality of a building and its
location, tenant credit quality and lease
terms.
Development Discounted cash flows less cost to complete: - Risk adjusted discount rates The estimated fair value would
property The discounted cash flow is determined - Estimated rental value increase/(decrease) if:
on the same basis as income-generating - Net rental growth - Expected market rental
properties based on the completed - Reversionary discount rate growth was higher/ (lower)
development property. - Costs to complete - The estimated rental value
- Completion date was higher/(lower)
Costs to complete as determined by - The reversionary discount
external quantity surveyors are deducted rate was lower/(higher)
from the discounted cash flow. - The risk adjusted discount
rate was lower/(higher)
- The costs to complete were
lower/(higher)
- Completion date was earlier/
(later)
FAIR VALUE SENSITIVITY ANALYSIS
As at 30 June 2017
INCOME-GENERATING PROPERTY
Significant unobservable inputs
Discount rate Net rental growth Reversionary discount rate Estimated Rental Value
Sensitivity Sensitivity Sensitivity Sensitivity
Technique Valuation Input % Change Valuation Input % Change Valuation Input % Change Valuation Input p.a Change Valuation
4.75%- 0.50% 405,583,114 2.50% 433,652,067 0.50% 394,024,086 10.00% 444,161,124
DCF(1) 417,844,894 1.00%-6.75% 4.42%-9.00% 31,461,564
12.00% -0.50% 444,334,644 -2.50% 414,046,319 -0.50% 418,742,092 -10.00% 401,386,474
Capitalisation rate
Sensitivity
Technique Valuation Input % Change Valuation
Capitalisation 0.50% 66,628,548
76,674,279 4.25%-7.00%
rate -0.50% 83,572,828
494,519,173
DEVELOPMENT PROPERTY
Market offer
Sensitivity
Technique Valuation Input Change Valuation
5.00% 27,733,687
Firm Offers 26,413,036 26,413,036
-5.00% 25,092,384
As at 30 June 2016
INCOME-GENERATING PROPERTY
Significant unobservable inputs
Discount rate Net rental growth Reversionary discount rate Estimated Rental Value
Sensitivity Sensitivity Sensitivity Sensitivity
Technique Valuation Input % Change Valuation Input % Change Valuation Input % Change Valuation Input p.a Change Valuation
0.50% 236,197,023 2.50% 258,029,045 0.50% 219,833,854 10.00% 255,783,647
DCF(1) 242,625,172 4.40%-7.50% 7.00% 0.00%-8.25% 44,803,837
-0.50% 255,037,746 -2.50% 237,489,590 -0.50% 231,776,329 -10.00% 235,430,655
DEVELOPMENT PROPERTY
Significant unobservable inputs
Discount rate Costs to complete
Sensitivity Sensitivity
Technique Valuation Input % Change Valuation Input Change Valuation
0,50% 15,871,033 10,00% 20,226,673
DCF(1) 17,927,863 5.75% 9,536,867
-0,50% 20,347,663 -10,00% 15,629,053
(1) DCF less costs to complete.
8. FINANCIAL INVESTMENTS
ACCOUNTING POLICY
Financial investments have been classified as fair value through profit or loss ("FVTPL"). Accordingly, they are measured at
fair value at the reporting date with changes in fair value being recognised in profit or loss.
Refer to note 3 for the group's general accounting policy for financial instruments.
DISCLOSURE
The carrying amount of the group's financial investments was as follows:
As at As at
Euro 30 June 2017 30 June 2016
Sirius — 51,614,068
During the year the group recognised EURnil in dividends from the investment in Sirius (2016: EUR1,717,829). On 22 August 2016,
the group sold 60,000,000 shares in Sirius for EUR29,282,323. As a result the group's shareholding in Sirius decreased to 4.3%.
On 21 September 2016, the remaining 36,474,895 shares in Sirius were disposed of for EUR17,762,719.
RECONCILIATION OF FINANCIAL INVESTMENTS AT FAIR VALUE
As at 30 June 2017
Euro Note Karoo Fund Sirius Total
Opening balance — 51,614,068 51,614,068
Disposal — (47,045,042) (47,045,042)
Fair value movement 5 — (4,569,026) (4,569,026)
— — —
As at 30 June 2016
Euro Karoo Fund Sirius Total
Opening balance 67,221,894 14,951,843 82,173,737
Cash redemptions (40,376,739) — (40,376,739)
Receipt of shares from in-specie redemption (29,834,661) 29,834,661 —
Fair value movement 5 6,130,579 6,807,526 12,938,105
Foreign currency translation difference in OCI (3,141,073) 20,038 (3,121,035)
— 51,614,068 51,614,068
FAIR VALUE HIERARCHY
The following table shows the carrying amount and fair value of the group's investments in the fair value hierarchy:
As at 30 June 2016 Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
Sirius 51,614,068 51,614,068 — —
51,614,068 51,614,068 — —
VALUATION TECHNIQUES AND UNOBSERVABLE INPUTS
At 30 June 2016, all inputs into the valuation are observable as the Sirius financial investment is listed. The group did not
hold any shares in Sirius at 30 June 2017.
9. INVESTMENT IN EQUITY ACCOUNTED INVESTEES
ACCOUNTING POLICY
Equity accounted investees comprise investments in associates. Associates are entities in which the group has significant
influence over the financial and operating policies. Significant influence is the power to participate in the financial and
operating policy decisions of the investee but does not result in control or joint control of those policies.
Interests in associates are initially recognised at cost including transaction costs. Subsequently, they are accounted for
using the equity method. In terms of this, the group recognises its share of profit or loss and other comprehensive income
of the associate from the date on which significant influence commences until the date on which significant influence
ceases. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to
the extent of the group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but
only to the extent that there is no evidence of impairment.
When the group's share of losses exceeds its interest in an equity accounted investee, the carrying amount of the
investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses
is discontinued except to the extent that the group has an obligation or has made payments on behalf of the investee.
Interests in associates are assessed for impairment if there is an impairment indicator. An impairment loss in respect
of an equity accounted investee is measured by comparing the recoverable amount of the investment with its carrying
amount. An impairment loss is recognised in profit or loss, and is reversed if there has been a favourable change in the
estimates used to determine the recoverable amount.
DISCLOSURE
The carrying amount of the group's investments in equity accounted investees was as follows:
As at As at
Euro 30 June 2017 30 June 2016
PKM Development Limited 20,205,297 19,991,716
RECONCILIATION OF INVESTMENTS IN EQUITY ACCOUNTED INVESTEES
As at As at
Euro 30 June 2017 30 June 2016
Opening balance 19,991,716 —
Acquisition — 20,000,000
Capitalised acquisition costs 35,184 23,624
20,026,900 20,023,624
Share of profit/(loss), net of tax 178,397 (31,908)
Closing balance 20,205,297 19,991,716
The group has an investment in PKM Development Limited ("PKM"), a development property group which develops
investment property predominately in Romania and other central and eastern European countries. PKM Development is an
associate of the group, MAS owns 40% of the ordinary shares and therefore has significant influence over the entity. The
remaining 60% of the ordinary shares of PKM Development are owned by Prime Kapital, who acts as the developer.
MAS has committed to fund PKM Development through investing in 7.5% cumulative preference shares issued by
PKM Development ("PKM Preference Shares"). On 6 April 2017 and 19 May 2017, the group provided EUR30,000,000 and
EUR70,000,000 respectively to acquire 7.5% preference shares in PKM Development (see note 15). At the year end the
group had a commitment to fund an additional EUR100,000,000 through the PKM Preference Shares. At the dates of the
commitments management determined that the cost of funding the loan commitments is lower than the rates to be
charged, accordingly the loan commitments are neither onerous nor impaired.
The following table summarises the financial information of PKM Development as included in its own financial statements:
As at As at
Euro 30 June 2017 30 June 2016
Statement of financial position - PKM Development
Non-current assets 48,139,879 2,697,078
Current assets 105,905,277 47,496,624
Total assets 154,045,156 50,193,702
Non-current liabilities 101,134,247 —
Current liabilities 2,544,687 273,474
Total liabilities 103,678,934 273,474
Net assets 50,366,222 49,920,228
Percentage ownership interest 40% 40%
Group share of net assets 20,146,489 19,968,092
Capitalised costs 58,808 23,624
Carrying amount 20,205,297 19,991,716
For the For the
year ended period ended
Euro 30 June 2017 30 June 2016
Statement of profit or loss - PKM Development
Revenue 2,009 —
Corporate expenses (131,992) (36,756)
Finance income 190,867 100,828
Other income 284,363 —
Finance costs (13,739) (38,392)
Exchange differences 115,719 —
Investment expenses (1,235) (105,450)
Total profit/(loss) 445,992 (79,770)
Percentage ownership interest 40% 40%
Group's share of profit/(loss) 178,397 (31,908)
PKM Development has no other comprehensive income.
10.SHARE CAPITAL AND GEARED PURCHASE PLAN SHARES
ACCOUNTING POLICY
ORDINARY SHARES
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised
as a deduction from equity net of any taxation effects.
The group's policy is to maintain a strong capital base to allow sustainable development. Management monitors the
return on capital as well as the distributions made to shareholders.
GEARED PURCHASE PLAN SHARES
The geared purchase plan shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity net of any taxation effects. When the geared purchase plan shares are
sold or issued subsequently, the amount received is recognised as an increase in equity and the resulting surplus or deficit
on the transaction is recognised within share capital.
DISCLOSURE
The ordinary share capital of the company has no par value. The reconciliation of share capital is as follows:
Number of Share capital
Note shares Euro
Balance at 30 June 2015 291,787,889 305,671,992
Issued during the year
-- Scrip distributions 5,671,745 7,026,140
-- Settlement of Attacq liability 15 21,317,449 28,156,329
-- Issue of share capital 29,848,136 37,676,095
56,837,330 72,858,564
Balance at 30 June 2016 348,625,219 378,530,556
Issued during the year
-- Issue of share capital 108,974,358 157,984,909
-- Geared purchase plan shares 16 12,850,000 21,056,010
-- Distributions reinvested 9,766,722 13,251,523
131,591,080 192,292,442
Distributed during the year
-- Scrip distributions — (13,266,725)
— (13,266,725)
480,216,299 557,556,273
Geared purchase plan shares (unissued) (12,850,000) (21,056,010)
Balance at 30 June 2017 467,366,299 536,500,263
Distributions reinvested represent scrip dividends paid out of share capital.
CAPITAL RAISE
On 29 July 2016 the group issued 25,641,026 shares at an issue price of EUR1.24 (ZAR19.50) as part of an accelerated book
build, raising cash of EUR31,781,847 pursuant to a general authority to issue shares for cash and a vendor consideration
payment. On 30 March 2017 a further 83,333,332 shares were issued by the group at an issue price of EUR1.53 (ZAR21.00) as
part of a further accelerated book build, raising cash of EUR127,145,970 pursuant to a general authority to issue shares for cash
and a vendor consideration payment. During the year the group incurred EUR942,908 (2016: EUR225,212) in expenses in relation
to issuing shares. These were offset against share capital.
In the prior year the group issued 21,317,449 shares at an issue price of EUR1.32 (ZAR 22.46) on 11 March 2016 to Attacq, a
related party of the group, in settlement of the financial liability due to Attacq in relation to the Karoo Fund (see notes 15
and 19). On 7 April 2016 the group issued a further 29,848,136 shares at an issue price of EUR1.27 (ZAR 22.00) as part of an
accelerated book build, raising cash of EUR37,676,095. Of these shares 21,639,899 shares were an issue of shares for cash and
8,208,237 were a vendor consideration placement.
GEARED PURCHASE PLAN SHARES
On 14 March 2017, the group issued 12,850,000 shares as part of an employee purchase plan, (see note 16). Distributions on
the geared purchase plan shares are referred to in note 16.
DISTRIBUTIONS
The holders of the company's shares are entitled to distributions as declared and to one vote per share at general meetings
of the company. Distributions of the company can be paid from retained earnings and share capital in accordance with the
BVI Business Companies Act 2004.
The following distributions were paid by the group:
Year ended 30 June 2017
Distribution
per share
Euro Scrip Cash Total (euro cents)
2 November 2016 7,994,090 352,016 8,346,106 2.23
30 March 2017 5,272,635 4,850,901 10,123,536 2.66
13,266,725 5,202,917 18,469,642 4.89
Year ended 30 June 2016
Distribution
per share
Euro Scrip Cash Total (euro cents)
11 November 2015 3,241,806 3,177,518 6,419,324 2.20
8 April 2016 3,784,334 4,061,277 7,845,611 2.27
7,026,140 7,238,795 14,264,935 4.47
The directors are pleased to propose a final distribution to shareholders for the period from 1 January to 30 June of
3.19 euro cents per share (2016: 2.23 euro cents per share).
11. SHARE-BASED PAYMENT RESERVE
ACCOUNTING POLICY
Refer to note 16 for the accounting policy for share-based payment arrangements.
DISCLOSURE
On 14 March 2017, the group issued 12,850,000 shares as part of a geared purchase plan (see note 16).
RECONCILIATION OF GEARED SHARE PURCHASE PLAN:
As at As at
Euro 30 June 2017 30 June 2016
Opening balance — —
Share-based payment expense 319,248 —
Salaried variant non-forfeitable distribution (93,275) —
Closing balance 225,973 —
12.FOREIGN CURRENCY TRANSLATION RESERVE
ACCOUNTING POLICY
The financial statements of entities that use a functional currency other than euros are translated into euros at the reporting date.
The assets and liabilities, including goodwill and fair value adjustments arising on acquisition, are translated using the exchange
rates at the reporting date. Items in the consolidated statement of comprehensive income and consolidated statement of cash
flows are translated into euro using the actual rates or average rates if they approximate the actual rate of exchange.
The resulting translation adjustments are recorded in other comprehensive income and accumulated in the foreign
currency translation reserve. Cumulative translation adjustments are recognised in profit or loss upon partial or complete
disposal of a foreign operation.
DISCLOSURE
The group recognised a foreign currency translation loss of EUR5,371,692 (2016: EUR12,387,307 (loss)) resulting in a foreign
currency translation deficit at the reporting date of EUR10,560,303 (2016: EUR5,188,611 (deficit)).
The tax on foreign currency translation differences in other comprehensive income is EURnil (2016: EURnil).
13.NON-CONTROLLING INTEREST
ACCOUNTING POLICY
The group recognises the non-controlling interests ("NCI") in the net assets of consolidated subsidiaries separately from
the group's interest, within equity. Profits/(losses) of subsidiaries attributable to the NCI are allocated to the NCI even if this
results in a debit balance being recognised for the NCI.
DISCLOSURE
The carrying amount of the group's NCI was as follows:
As at As at
Euro 30 June 2017 30 June 2016
Prime Kapital CEE Property Investment Management Limited 988,063 —
RECONCILIATION OF NCI
As at As at
Euro 30 June 2017 30 June 2016
Opening balance — —
Share of profit for the year 988,063 —
Closing balance 988,063 —
On 20 September 2016 the group aquired 80% of the ordinary share capital of a newly incorporated entity PKM CEE
Investments Limited ("PKM CEE") for the consideration of EUR80. The remaining 20% of the share capital of PKM CEE was
issued to Prime Kapital CEE Property Investment Management Ltd, a non-controlling interest for the consideration of
EUR20. The shares of PKM CEE carry equal voting rights, such that the group has 80% of the voting rights and control over
PKM CEE. At the date of acquisition PKM CEE had no assets or liabilities. PKM CEE was incorporated initially to purchase
investment property in central and eastern Europe.
In November 2016 PKM CEE acquired a retail shopping mall in Poland, Nova Park, for EUR88,640,688. In April 2017, PKM
CEE further acquired two shopping malls in Bulgaria known as the Galleria portfolio. The profit attributable to NCI is
disclosed in the consolidated statement of profit or loss, the equity attributable to NCI of EUR988,063 is disclosed in the
consolidated statement of financial position.
14.INTEREST BEARING BORROWINGS
ACCOUNTING POLICY
The group's interest bearing borrowings are financial instruments and are classified as financial liabilities at amortised cost.
Refer to note 3 for the group's general accounting policy for financial instruments.
DISCLOSURE
The carrying amount of the group's interest-bearing borrowings was as follows:
As at As at
Euro 30 June 2017 30 June 2016
Non-current
UK investment property 30,284,516 —
German investment property 103,478,073 34,833,306
Swiss investment property 7,989,364 8,394,525
141,751,953 43,227,831
Current
UK investment property 1,489,732 —
German investment property 3,614,901 991,886
Swiss investment property 356,811 358,878
5,461,444 1,350,764
147,213,397 44,578,595
Interest bearing borrowings are held at amortised cost, accordingly interest is charged to profit or loss using the effective
interest rate. These liabilities have been classified as amortised cost because the group does not hold them for trading
purposes.
Reconciliation of the group's carrying amount of interest bearing borrowings:
As at As at
Euro Note 30 June 2017 30 June 2016
Opening 44,578,595 15,747,889
Drawn down 111,657,786 30,550,000
Capitalised transaction costs (2,168,837) (412,345)
Capital repayment (7,098,329) (922,638)
Finance costs 2,231,667 770,243
General borrowings capitalised 7 569,298 28,806
Interest paid (2,470,916) (827,855)
Foreign currency translation difference in OCI (85,867) (355,505)
Closing balance 147,213,397 44,578,595
Interest from general borrowings of EUR569,298 (2016: EUR28,806) was capitalised in investment property during the year at a
capitalisation rate of 2.56% (2016: 2.65%) (see note 7).
SUMMARY OF INTEREST BEARING BORROWING TERMS AND COVENANTS
As at 30 June 2017
BORROWING TERMS
Weighted Weighted
average average
remaining term annual capital
of debt repayment Weighted
Jurisdiction (years) Currency (Euro) average margin Base rate
UK investment property
- Variable debt 3.83 GBP 772,904 2.00% 3M UK Libor
German investment property
- Fixed debt 8.24 EUR 327,015 1.83% n/a
- Variable debt 12.26 EUR 95,130 0.95% 3M Euro Libor
Swiss investment property
- Variable debt 8.01 CHF 358 ,878 1.29% 3M Swiss Libor
COVENANTS
Weighted average Weighted average Weighted average
Lender debt service cover ratio interest cover loan to value
UK investment property
- Variable debt n/a 150% 65%
German investment property
- Fixed debt 141% n/a 73%
- Variable debt n/a n/a n/a
Swiss investment property
- Variable debt n/a n/a n/a
As at 30 June 2016
BORROWING TERMS
Weighted Weighted
average average annual
remaining term capital
of debt repayment Weighted
Jurisdiction (years) Currency (Euro) average margin Base rate
German investment property
- Fixed debt 12.24 EUR 280,537 2.45% n/a
- Variable debt 13.26 EUR 391,916 0.95% 3M Euro Libor
Swiss investment property
- Variable debt 9.00 CHF 358,878 1.29% 3M Swiss Libor
COVENANTS
Weighted average Weighted average
Lender debt service cover ratio loan to value
German investment property
- Fixed debt 140% 72.5%
- Variable debt n/a n/a
Swiss investment property
- Variable debt n/a n/a
The group complied with its loan covenants during the current and prior years.
The interest-bearing borrowings of the group have been secured against investment property (see note 7).
15.FINANCIAL INSTRUMENTS
ACCOUNTING POLICY
The group's financial instruments are classified as financial assets and financial liabilities at amortised cost and financial
assets and financial liabilities at fair value. Refer to note 3 for the group's general accounting policy for financial instruments.
DISCLOSURE
The carrying amount of the group's financial instruments are classified as follows:
As at 30 June 2017 As at 30 June 2016
Fair Amortised Fair Amortised
Euro value cost Total value cost Total
Non-current assets
Financial instruments — 101,134,245 101,134,245 — — —
— 101,134,245 101,134,245 — — —
Current assets
Derivative financial 66,097 — 66,097 — — —
instruments
66,097 — 66,097 — — —
Non-current liabilities
Derivative financial 1,170,086 — 1,170,086 3,029,495 — 3,029,495
instruments
Financial liabilities — 500,000 500,000 2,367,448 — 2,367,448
1,170,086 500,000 1,670,086 5,396,943 — 5,396,943
Current liabilities
Derivative financial 1,081,563 — 1,081,563
instruments
Financial liabilities 10,130,427 — 10,130,427 3,327,225 3,818,865 7,146,090
— — 11,211,990 3,327,225 3,818,865 7,146,090
FINANCIAL INSTRUMENTS HELD AT AMORTISED COST
AMORTISED COST ASSETS
The carrying amount of the group's financial asset at amortised cost was as follows:
As at As at
Euro 30 June 2017 30 June 2016
PKM Preference Shares 101,134,245 —
On 6 April 2017 and 19 May 2017, the group provided EUR30,000,000 and EUR70,000,000 respectively to acquire 7.5%
preference shares in PKM Development Limited, see note 9. The group has committed to fund a further EUR100,000,000
(see note 22).
RECONCILIATION OF FINANCIAL ASSETS HELD AT AMORTISED COST:
As at As at
Euro 30 June 2017 30 June 2016
Opening — —
PKM Preference Shares 100,000,000 —
Interest income 1,134,245 —
Closing 101,134,245 —
AMORTISED COST LIABILITIES
The carrying amount of the group's deferred consideration was as follows:
As at As at
Euro 30 June 2017 30 June 2016
Bruchsal — 1,615,000
Heppenheim Park 500,000 883,865
Edeka Thales Portfolio — 1,320,000
500,000 3,818,865
On the acquisition of the Heppenheim Park, Bruchsal and Edeka Thales Portflio the group retained a portion of the
purchase price per the relevant sale and purchase agreements, which will be released to the vendor at such time that they
complete the agreed retention works/activities.
These amounts have been capitalised within investment property (see note 7). Retentions held in escrow at the year end
were EUR500,000 (2016: EUR2,115,000).
RECONCILIATION OF FINANCIAL LIABILITIES HELD AT AMORTISED COST:
As at As at
Euro 30 June 2017 30 June 2016
Opening 3,818,865 2,703,865
Purchase price retained — 1,370,755
Purchase price released (3,318,865) (255,755)
Closing 500,000 3,818,865
FINANCIAL INSTRUMENTS HELD AT FAIR VALUE
FAIR VALUE ASSETS
The carrying amount of the group's financial assets held at fair value was as follows:
As at As at
Euro 30 June 2017 30 June 2016
Assets
Derivative financial instruments
Forward currency contract 66,097 —
66,097 —
RECONCILIATION OF DERIVATIVE FINANCIAL INSTRUMENTS HELD AT FAIR VALUE
ASSETS
Forward
currency
Euro contract Total
Balance at 30 June 2015 — —
Balance at 30 June 2016 — —
Fair value adjustment capitalised as part of Investment property acquisition costs 66,097 66,097
Foreign currency translation difference in OCI — —
Balance at 30 June 2017 66,097 66,097
The group entered into a Polish Zloty forward contract to hedge the exposure on VAT receivable in relation to the Nova
Park acquisition. The hedging instrument is classified as FVTPL, accordingly it is measured at fair value at the reporting date
with changes in fair value being recognised within investment property capitalised acquisition costs.
FAIR VALUE LIABILITIES
The carrying amount of the group's financial liabilities at fair value were as follows:
As at As at
Euro Note 30 June 2017 30 June 2016
Liabilities
Derivative financial instruments
Aldi portfolio interest rate swap 1,081,563 1,331,074
Zurich interest rate swap 1,170,086 1,698,421
2,251,649 3,029,495
Financial liabilities
Development management fee 19 4,052,171 2,367,448
Santon financial liability — 3,327,225
Priority participating profit dividend 19 6,078,256 —
10,130,427 5,694,673
DERIVATIVE FINANCIAL INSTRUMENTS
The group has hedged the interest rate exposure on the interest bearing borrowings (see note 14) from Credit Suisse and
Sparkasse. These hedging instruments are classified as FVTPL; accordingly, they are measured at fair value at the reporting
date with changes in fair value being recognised in profit or loss.
RECONCILIATION OF DERIVATIVE FINANCIAL INSTRUMENTS
Aldi portfolio
interest rate Zurich interest
Euro swap rate swap Total
Balance at 30 June 2015 1,139,337 1,464,198 2,603,535
Fair value adjustment (see note 5) 191,737 301,857 493,594
Foreign currency translation difference in OCI — (67,634) (67,634)
Balance at 30 June 2016 1,331,074 1,698,421 3,029,495
Fair value adjustment (see note 5) (249,511) (520,083) (769,594)
Foreign currency translation difference in OCI — (8,252) (8,252)
Balance at 30 June 2017 1,081,563 1,170,086 2,251,649
The Aldi portfolio interest rate swap was settled on 6 July 2017.
FINANCIAL LIABILITIES
RECONCILIATION OF FINANCIAL LIABILITIES HELD AT FAIR VALUE:
New Waverley New Waverley
Attacq Santon development priority
financial financial management participating
Euro liability liability fee profit dividend Total
Balance at 30 June 2015 26,378,571 — 1,576,779 2,365,168 30,320,518
Recognised on grant of planning permission — 3,327,225 — — 3,327,225
Fair value adjustment (see note 5) 4,032,584 — 1,092,047 (2,200,445) 2,924,186
Settlement (28,156,329) — — — (28,156,329)
Foreign currency translation difference in OCI (2,254,826) — (301,378) (164,723) (2,720,927)
Balance at 30 June 2016 — 3,327,225 2,367,448 — 5,694,673
Fair value adjustment (see note 5) — — 1,885,457 6,272,812 8,158,269
Settlement — (3,327,225) — — (3,327,225)
Foreign currency translation difference in OCI — — (200,734) (194,556) (395,290)
Balance at 30 June 2017 — — 4,052,171 6,078,256 10,130,427
NEW WAVERLEY DEVELOPMENT MANAGEMENT FEE AND NEW WAVERLEYPRIORITY PARTICIPATING PROFIT DIVIDEND
These financial liabilities are classified as FVTPL. This reduces the accounting mismatch by matching the movement in
the fair value of the financial liabilities with the fair value movement on the related investment property, both recognised
directly in profit or loss.
The group has a development management agreement with the developer under which the developer provides services
in procuring the construction of the New Waverley site in Edinburgh. Under the terms of this agreement, a fee is payable to
the developer for its services with that fee being in two parts. Under the terms of a shareholders' agreement between the
shareholders of New Waverley 10, shareholders are entitled to a 7.5% annualised return on invested capital. The first part of
the fee payable to the developer is an amount equal to one third of the annualised return payable to the group. The second
part of the fee payable to the developer is linked to the value of the site following development with the developer entitled
to a fee broadly equal to 25% of the value of the developed site less both costs of development and the annualised return
to shareholders on invested capital. This second part of the fee is only payable once the group has received its return on
capital meaning that, in effect, the developer will receive a fee broadly equal to 25% of any capital gain.
SANTON FINANCIAL LIABILITY
The terms of the revenue sharing agreement with Santon required the group to pay Santon GBP2,750,000 (approximately
EUR3,327,225) (see note 7) on receipt of implementable planning permission. On 10 December 2015 the South Downs National
Park Authority's planning committee approved in principle the plans to develop the North Street Quarter development in
Lewes. Final uncontested written planning permission was granted on 8 July 2016 and the liability was settled.
FAIR VALUE HIERARCHY
The following table shows the carrying and fair value of the group's financial instruments held at fair value in the fair value
hierarchy:
As at 30 June 2017 Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
Financial assets
Forward currency contract 66,097 — 66,097 —
66,097 — 66,097 —
Derivative financial liabilities
Aldi portfolio interest rate swap 1,081,563 — 1,081,563 —
Zurich interest rate swap 1,170,086 — 1,170,086 —
Financial liabilities
New Waverley development management fee 4,052,171 — — 4,052,171
New Waverley priority participating profit dividend 6,078,256 — 6,078,256
12,382,076 — 2,251,649 10,130,427
As at 30 June 2016 Fair value
Carrying
Euro amount Level 1 Level 2 Level 3
Derivative financial liabilities
Aldi portfolio interest rate swap 1,331,074 — 1,331,074 —
Zurich interest rate swap 1,698,421 — 1,698,421 —
Financial liabilities
New Waverley development management fee 2,367,448 — — 2,367,448
Santon financial liability 3,327,225 — — 3,327,225
8,724,168 — 3,029,495 5,694,673
LEVEL 2 FINANCIAL INSTRUMENTS
VALUATION TECHNIQUES AND UNOBSERVABLE INPUTS
The following table shows the valuation technique used to measure financial instruments held at fair value as well as the
unobservable inputs used for level 2 financial instruments.
As at 30 June 2017 and 30 June 2016
Financial Inter-relationship between inputs and fair value
instrument Valuation technique Inputs measurement
Interest rate The fair value is based on discounting -3 month Swiss The estimated fair value would increase/
swaps future cash flows using the interest libor/Euro libor (decrease) if:
rate swap curves plus the historic -Swap rate -3 month Swiss libor/Euro libor was higher/
charged credit margin at the dates -Notional loan (lower)
when the cash flows will take place. value -Swap rate was lower/ (higher)
-Fixed rate of -Notional loan value was lower/ (higher)
interest -Fixed rate of interest was lower/ (higher)
LEVEL 3 FINANCIAL INSTRUMENTS
VALUATION PROCESS OF LEVEL 3 FINANCIAL LIABILITIES
The fair value of the level 3 financial liabilities in respect of New Waverley Advisers Limited and New Waverley Holdings
Limited is calculated semi-annually. The investment property valuation process (see note 7) is part of this valuation process
as a consequence of the financial liability to New Waverley Advisers Limited and New Waverley Holdings Limited being
derived from the fair value of New Waverley investment property. The fair value of the financial liability is calculated and
based on the fair value of the New Waverley investment property. The fair value is then reviewed by the finance manager
and chief financial officer.
The fair value in respect of the Santon financial liability is based on the contractual amount adjusted by the risk adjusted
discount rate.
VALUATION TECHNIQUES AND UNOBSERVABLE INPUTS
The following table shows the valuation technique used to measure financial instruments held at fair value as well as the
significant unobservable inputs used for level 3 financial instruments:
As at 30 June 2017
Financial Inter-relationship between inputs and fair value
instrument Valuation technique Inputs measurement
New Waverley Gross development profit: - Value of The estimated fair value would increase/
development Fair value is based on the value of investment (decrease) if:
management the properties in New Waverley property - Value of investment property was higher/(lower)
fee development. See note 7 for the
valuation technique in respect of
and New Waverley.
New Waverley
priority
participating
profit dividend
30 June 2016
Financial Inter-relationship between inputs and fair value
instrument Valuation technique Inputs measurement
New Waverley Gross development profit: - Value of The estimated fair value would increase/
development Fair value is based on the value of investment (decrease) if:
management the properties in New Waverley property - Value of investment property was higher/(lower)
fee development. See note 7, for the
valuation technique in respect of
and New Waverley.
New Waverley
priority
participating
profit dividend
Santon Discounted cash flows: - Risk adjusted The estimated fair value would increase/
financial The valuation model considers the interest rates (decrease) if:
liability present value of net cash flows - Contracted - Contracted amount was higher/(lower)
based on the contractual amount. amount - Risk adjusted discount rate was lower/(higher)
The expected net cash flows are
discounted using the risk-adjusted
discount rate.
FAIR VALUE SENSITIVITY ANALYSIS
As at 30 June 2017
Gross development value
Sensitivity
Financial liability Technique Valuation Input (Euro) Change % Valuation
Gross +5.00 4,254,779
Development management fee development 4,052,171 40,521,708
profit -5.00 3,849,562
Gross +5.00 6,382,169
Priority participating profit dividend development 6,078,256 40,521,708
profit -5.00 5,774,343
As at 30 June 2016
Gross development value
Sensitivity
Financial liability Technique Valuation Input (Euro) Change % Valuation
Gross +5.00 2,466,304
Development management fee development 2,367,448 9,766,360
profit -5.00 1,879,129
Gross +5.00 97,365
Priority participating profit dividend development — 9,766,360
profit -5.00 —
For the Santon financial liability the risk adjusted discount rate in the prior year was nil on the basis that the financial liability
was due to be settled eight days after the prior year end and therefore the valuation would not be effected by an increase/
decrease in the risk adjusted discount rate.
16 SHARE-BASED PAYMENT ARRANGEMENTS
ACCOUNTING POLICY
Equity-settled share-based payments to participants are measured at the fair value of the equity instrument at the grant
date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the group's estimate of shares that will eventually vest. A corresponding increase is
recognised in the share-based payment reserve.
Non-forfeitable distributions expected to be paid as part of the share-based payment awards are included within the fair
value at the grant date of the share-based payment.
DISCLOSURE
On 9 March 2017, the group established two geared purchase plans: a Salaried; and a Non-Salaried purchase plan. In terms
of these, the group has granted participants a loan to acquire shares issued by the company. The loans accrue interest at
the weighted average cost of debt of the group. If distributions are declared, the participants are entitled to distributions
on all their shares, irrespective of vesting. A portion of any distribution received must be used to settle the interest that
accrued on the loan. Recourse on the loans is limited to the market value of the shares acquired plus any unpaid interest
accrued, and the shares are pledged as security for repayment of the loan.
Salaried plan participants continue to receive basic salary and other employment benefits from the group in addition to
participating in the employee purchase plan. The participants are entitled to retain the surplus of any distributions received
on their shares less the cost of interest on the loans.
Non-salaried variant participants ceased to receive any remuneration or employment benefits from the group from
9 March 2017. These participants do not receive any distributions on their shares, instead the distributions are applied, firstly,
to reduce the interest cost on the loans and, thereafter, to reduce the loan balance.
The key terms and conditions related to participation in the plans are as follows:
Shares Loan
Vesting
Grant date Number Issue price Vesting period conditions Interest rate Term
Salaried variant 9 March 3,850,000 EUR1.6386 20% annually Service until WACD of 10 years
2017 vesting dates the group,
currently
2.32%
Non-salaried 9 March 9,000,000 EUR1.6386 15% annually Service until WACD of 10 years
variant 2017 for 4 years, vesting dates the group,
and then 20% currently
annually 2.32%
12,850,000
The total number of shares issued in relation to the geared share purchase plan is 12,850,000 (2016:nil) (see note 10 and
note 11).
The loans to acquire shares are, in substance, accounted for as call options in terms of IFRS 2: Share-based Payments. The
options were valued on 9 March 2017 being the grant date. The cost thereof is recognised over the vesting period as an
employment benefit, with a corresponding increase in the share-based payment reserve. During the year EUR319,248 (2016:
EURnil) was recognised in the share-based payment reserve in relation to the options (see note 11).
As the options relate to multiple service periods, the awards have a graded vesting pattern whereby each tranche
relating to a particular service period is recognised as an expense over that service period.
MEASUREMENT OF FAIR VALUE
The fair value of the options of the Salaried and Non-salaried share option plans have been determined by using the Black-
Scholes-Merton model. The participant's service related vesting condition has not been considered in the valuation of the
options. Instead, the expense has been recognised based on the group's estimate of shares that will eventually vest.
The valuation assumptions used to measure the grant date fair value of the options of the equity settled share-based
payments were as follows:
Salaried and
Non-salaried plan
Share price at grant date EUR1.6386
Exercise price EUR2.0967
Implied volatility 21.16%
Risk free rate 0.43%
Expected distribution 0.00%
Time to expiration 10 years
Fair value of option at grant date EUR0.3136
As participants are effectively entitled to distributions, or distribution equivalents, between grant date and exercise date,
the options are valued as if no distributions will be paid on the underlying share. The input for expected distributions is
accordingly zero. In addition, the interest on the loan effectively increases the exercise price of the option from EUR1.6386 to
EUR2.0967.
Implied volatility has been based upon the evaluation of the company's historic volatility and market conditions to
determine the future implied volatility of the company's share price over the term of the options in the geared purchase
plans.
RECONCILIATION OF OUTSTANDING LOAN AND SHARES
The number of shares and the loan value of the employee purchase plans were as follows:
As at 30 June 2017
Non-Salaried purchase plan Salaried purchase plan
Weighted Weighted
Number of share average loan Number of share average loan
shares price per share shares price per share
Opening outstanding — — — — — —
balance
Granted 9,000,000 EUR1.6386 EUR1.6386 3,850,000 EUR1.6386 EUR1.6386
Interest — — EUR0.0150 — — EUR0.0150
Interest repayment — — (EUR0.0024) — — (EUR0.0024)
Capital repayment — — (EUR0.0242) — — —
Share price movement — (EUR0.0636) — — (EUR0.0636) —
Closing outstanding 9,000,000 EUR1.5750 EUR1.6270 3,850,000 EUR1.5750 EUR1.6512
balance
Exercisable — — — — — —
The loan outstanding per share at 30 June 2017 for the Salaried purchase plan and Non-Salaried purchase plan was EUR1.6512
(2016: nil) and EUR1.6270 (2016: nil) respectively. The remaining term of the loan was 9.69 years (2016: nil).
On 15 June 2017 it was announced that Lukas Nakos, CEO, would be leaving the group. The vesting conditions have been
assessed as being unlikely to be met. Accordingly, no expense has been recognised in this regard.
The total expense recognised in employment benefits was EUR245,419 (2016: EURnil).
Refer to note 19 for further disclosures of the share-based payment expense included in key management compensation
and directors' remuneration.
17. ACQUISITION OF SUBSIDIARIES
ACCOUNTING POLICY
CONSOLIDATION PROCEDURES
The results of subsidiaries are included in the condensed abdridged consolidated financial statements from the effective
date of acquisition to the effective date of disposal. When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies in line with those of the group.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of
the group are eliminated in full on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the
group's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests
are allocated to the non-controlling interest even if this results in a debit balance being recognised for the non-controlling
interest.
CHANGES IN CONTROL WITHOUT LOSS OF CONTROL
Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and
after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity.
The carrying amounts of the group's interests and the non-controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiaries. The difference between the fair value of consideration paid or received and the
movement in non-controlling interests for such transactions is recognised in equity attributable to the owners of the parent.
LOSS OF CONTROL
When the group loses control of a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-
controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss.
Any interest retained in the former subsidiary is measured at fair value at the date control was lost. The fair value of
any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial
recognition for subsequent accounting under IAS 39, when applicable, or the cost on initial recognition of an investment in
an associate or a joint venture.
BUSINESS COMBINATIONS
The group accounts for business combinations using the acquisition method of accounting. The cost of the business
combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity
instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to
issue debt which are amortised as part of the effective interest rate and costs to issue equity which are recognised within
equity.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are generally recognised at their fair
value.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over
the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If a gain on bargain
purchase arises, the application of IFRS 3 is reassessed. Thereafter the excess is recognised immediately in profit or loss.
Non-controlling interests that present ownership interests and entitle their holders to a proportionate share of the
entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests'
proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is
made on a transaction-by-transaction basis.
DISCLOSURE
On 5 May 2017, the group acquired 100% of the shares and the voting interests of Galleria Burgas EAD ("Burgas") and
Galleria - Stara Zagora EAD ("Stara Zagora") (together referred to as the "Galleria portfolio", or "the acquisition").
The acquisition was made to gain control over the operations of two investment properties, namely Galleria
Burgas and Galleria Stara Zagora both located in Bulgaria. The entities each held and operated a single investment
property.
The acquisition is part of the group's strategy and continued investment into central and eastern Europe to enhance the
group's distributions.
From the date of acquisition to 30 June 2017 the Galleria portfolio contributed rental income of EUR1,222,457 and profit of
EUR5,022,368. If the Galleria portfolio acquisition had occurred on 1 July 2016, management estimates that the consolidated
rental income would have been EUR7,967,799 and consolidated profit for the year would have been EUR7,038,626. In determining
these amounts, management has assumed that the fair value adjustment of the Galleria portfolio's net assets at acquisition
would have been the same at 1 July 2016 as they were on 5 May 2017.
CONSIDERATION TRANSFERRED
The following table summarises the acquisition date fair value of the consideration transferred for the Galleria portfolio:
Euro Total
Cash 63,961,342
ACQUISITION RELATED COSTS
The group incurred acquisition-related costs of EUR16,845 on legal and due diligence fees. These costs have been included in
profit or loss within investment expenses.
IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED
The following table summarises the fair value of assets and liabilities that were acquired at the date of acquisition:
Euro Total
Investment property (see note 1) 61,330,772
Trade and other receivables 1,508,173
Trade and other payables (1,132,222)
Deferred tax liability (380,711)
Net assets excluding cash 61,326,012
Cash and cash equivalents 2,635,330
Net assets 63,961,342
The gross contracted value of trade and other receivables of the Galleria portfolio at acqusitions was EUR1,710,540. Of this
management does not expect to receive EUR202,367.
No goodwill arose on the acquisitions because the consideration paid was equal to the fair value of assets acquired and
liabilities assumed.
18. OPERATING SEGMENTS
ACCOUNTING POLICY
Segment results that are reported to the executive board include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Unallocated items comprise mainly central costs that relate to group
structuring and operations not related to specific investments. In addition, unallocated items in the consolidated statement
of financial position relate predominantly to cash that has not been allocated to specific investments.
The risks and rewards faced by the group relate primarily to the business segment of the assets and therefore this forms
the basis of the reporting segment.
DISCLOSURE
The group's chief operating decision maker is determined to be the executive management team. During the prior year the
segmentation to monitor group performance was refined. Performance is now considered as follows:
Reportable segment Description
Income-generating property Property that is currently producing income and held for
the purpose of earning a yield. There may be further asset
management angles on these properties, which could further
enhance income returns.
Development property Property that is being developed in order to create income
producing property held for the purpose of earning a better
yield than by acquiring standing property.
Land bank and other strategic assets Land plots held for schemes that have not yet commenced.
Corporate Consists of the cash holdings outside of the other reporting
segments and goodwill on the acquisition of MAS Prop.
The executive management team analyses the performance and position of the group by aggregating the group into
the four reportable segments. These reportable segments have different risk profiles and generate revenue/income from
different sources, accordingly, it allows the executive management team to make better informed strategic decisions for
the group. Management reports are prepared and reviewed on a quarterly basis by the executive management team to
facilitate this process.
As at and for the year ended 30 June 2017
Reportable segments
Land bank
Income- and other
generating Development strategic
Euro property property assets Corporate Total
Statement of profit or loss
External rental income 31,352,298 — 34,632 15,498 31,582,428
Inter-segment revenue — — — — —
Segment profit/(loss) before tax 49,460,087 872,805 (5,003,657) (5,069,622) 40,259,613
Finance income 1,350 1,134,247 16 71,583 1,207,196
Finance cost (2,235,473) — — (3,024) (2,238,497)
Depreciation (23,977) (1,963) (1,924) — (27,864)
Current taxation (1,749,449) — — — (1,741,449)
Deferred taxation (3,942,153) — — — (3,942,153)
Investment in equity accounted investee — 178,397 — — 178,397
Other material non-cash items
-- Fair value adjustments 30,161,319 — (4,569,029) — 25,592,290
-- Exchange differences (819,456) 18 — (3,865,457) (4,684,895)
Statement of financial position
Segment non-current assets 495,615,079 152,701,312 39,690,960 22,909,548 710,916,899
-- Investment in equity accounted investee — 20,205,297 — — 20,205,297
Segment current assets 20,171,923 1,708,107 2,347,199 23,900,320 48,127,549
Segment non-current liabilities 147,306,309 881,180 232,924 — 148,420,413
Segment current liabilities 14,450,775 11,975,661 545,684 609,881 27,582,001
As at and for the year ended 30 June 2016
Reportable segments
Land bank
Income- and other
generating Development strategic
Euro property property assets Corporate Total
Statement of profit or loss
External rental income 15,370,255 11,090 709,469 160,207 16,251,021
Inter-segment revenue — — — — —
Segment profit/(loss) before tax 6,221,242 (1,007,358) 4,375,190 (7,262,517) 2,326,557
Finance income — 57 383,370 9,374 392,801
Finance cost (770,243) — — (3,522) (773,765)
Depreciation — — — (35,535) (35,535)
Current taxation (684,749) — — — (684,749)
Deferred taxation (143,776) — — — (143,776)
Other material non-cash items
-- Fair value adjustments (1,478,331) (995,471) 8,905,521 — 6,431,719
-- Exchange differences (93,783) 196 (5,835,877) (6,983,746) (12,913,210)
Statement of financial position
Segment non-current assets 243,509,575 43,798,848 42,003,549 23,901,016 353,212,988
-- Investment in equity accounted investee — 19,991,716 — — 19,991,716
Segment current assets 19,124,497 1,479,407 52,750,489 41,036,973 114,391,366
Segment non-current liabilities 47,500,067 2,367,448 — — 49,867,515
Segment current liabilities 8,051,526 4,813,814 3,683,792 342,755 16,891,887
18. OPERATING SEGMENTS (CONTINUED)
Where assets/liabilities and income/expense are shared by reportable segments they are allocated to each respective
reportable segment based on a rational driver of use or ownership of the asset/liabilities, income/expense.
GEOGRAPHICAL INFORMATION
The group invests in investment property in Europe. The geographical information below analyses the group's rental income
and service charge income and other recoveries and non-current assets by the company's country of domicile and the
jurisdiction in which the underlying assets are held: Germany, UK, Bulgaria, Poland, Switzerland and also now Romania as a
result of the investment in associate during the year, see note 9.
Rental income and service charge income and other recoveries
Year ended Year ended
Euro 30 June 2017 30 June 2016
BVI — —
Germany 17,041,915 9,332,689
UK 7,073,814 5,674,973
Bulgaria 1,527,194 —
Poland 4,726,650 —
Switzerland 1,212,855 1,243,359
31,582,428 16,251,021
Non-current assets
As at As at
Euro 30 June 2017 30 June 2016
BVI — —
Germany 214,648,055 149,481,292
UK 203,013,452 164,250,144
Poland 156,488,393 —
Romania/Slovenia (Prime Kapital development joint venture and PKM Preference Shares) 121,305,189 19,991,716
Switzerland 15,461,810 19,489,836
710,916,899 353,212,988
19. RELATED PARTIES
PARENT AND ULTIMATE CONTROLLING PARTY
The group has no ultimate controlling party, but is controlled by its ordinary shareholders in aggregate.
KEY MANAGEMENT - TRANSACTIONS
Year ended 30 June 2017
Short-term Long-term
Euro Role Basic salary Benefits incentive incentive Total
Lukas Nakos CEO 125,000 — 181,952 — 306,952
Malcolm Levy CFO 117,656 — 170,580 — 288,236
Jonathan Knight CIO 68,232 — 85,290 — 153,522
Ron Spencer Chairman 30,000 — — — 30,000
Gideon Oosthuizen NED 27,500 — — — 27,500
Jaco Jansen NED 27,500 — — — 27,500
Morné Wilken NED 20,000 — — — 20,000
Pierre Goosen NED 20,000 — — — 20,000
Glynnis Carthy NED — — — — —
Helen Cullen Company Secretary 96,822 — 20,538 — 117,360
532,710 — 458,360 — 991,070
The short-term incentive relates to services provided from 1 January 2016 to 31 December 2016.
GEARED SHARE PURCHASE PLAN
Loan at Number
group of shares IFRS 2 option
Euro Role Variant WACD Date of award acquired expense
Lukas Nakos CEO No salary 8,193,000 9 March 2017 5,000,000 —
Malcolm Levy CFO No salary 6,554,400 9 March 2017 4,000,000 149,237
Jonathan Knight CIO Salaried 2,457,900 9 March 2017 1,500,000 66,238
Helen Cullen Company Secretary Salaried 819,300 9 March 2017 500,000 22,079
18,024,600 11,000,000 237,554
Year ended 30 June 2016
Short-term Long-term
Euro Role Basic salary Benefits incentive incentive Total
Lukas Nakos CEO 209,248 — 166,092 166,092 541,432
Malcolm Levy CFO 196,170 — 155,711 155,711 507,592
Jonathan Knight CIO 78,468 — 77,856 77,856 234,180
Ron Spencer Chairman 30,000 — — — 30,000
Gideon Oosthuizen NED 27,500 — — — 27,500
Jaco Jansen NED 27,500 — — — 27,500
Morné Wilken NED 20,000 — — — 20,000
Pierre Goosen NED 20,000 — — — 20,000
Glynnis Carthy NED — — — — —
Helen Cullen Company Secretary 102,662 — 20,925 — 123,587
711,548 — 420,584 399,659 1,531,791
KEY MANAGEMENT - SHAREHOLDINGS
As at 30 June 2017
Euro Direct Indirect Associate Total
Lukas Nakos 85,143 5,000,000 100,659(3) 5,185,802
Malcolm Levy 11,633 4,000,000 1,568,928(3) 5,580,561
Jonathan Knight 616,342 1,500,000 — 2,116,342
Ron Spencer 11,567 — — 11,567
Gideon Oosthuizen — 240,000(1) — 240,000
Jaco Jansen — — — —
Morné Wilken 61,804 250,280(2) — 312,084
Pierre Goosen — — 44,766(3) 44,766
Glynnis Carthy — — — —
Helen Cullen 14,656 500,000 — 514,656
801,145 11,490,280 1,714,353 14,005,778
1 Accociate company
2 Associate family trust
3 Non-beneficial to director
As at 30 June 2016
Euro Direct Indirect Associate Total
Lukas Nakos 85,143 — 100,659(2) 185,802
Malcolm Levy 11,633 1,568,928(1) — 1,580,561
Jonathan Knight 523,371 74,000 — 597,371
Ron Spencer 11,370 — — 11,370
Gideon Oosthuizen 254,505 — — 254,505
Jaco Jansen — — — —
Morné Wilken 55,784 234,818(1) — 290,602
Pierre Goosen — — 3,113,529(2) 3,113,529
Helen Cullen 14,406 — — 14,406
956,212 1,877,746 3,214,188 6,048,146
1 Associate family trust
2 Non-beneficial to director
There has been no change the in shareholding of the directors or key management from 30 June 2017 to the date of this
integrated annual report.
OTHER RELATED PARTY TRANSACTIONS:
Income/(expenses) Capitalised Balances
for the year ended for the year ended assets/(liabilities) as at
Euro Note 30 June 2017 30 June 2016 30 June 2017 30 June 2016 30 June 2017 30 June 2016
NW Advisers
- Oncharged development costs 7 (293) — 12,860,460 27,117,356 (214,680) (1,069,607)
- Development management fee1 7, 15 (1,684,723) (1,092,047) — — (4,052,171) (2,367,448)
(1,685,016) (1,092,047) 12,860,460 27,117,356 (4,266,851) (3,437,055)
NW Holdings
- Development profit
participation fee(1) 7, 15 (6,078,256) 2,200,445 — — (6,078,256) —
(6,078,256) 2,200,445 — — (6,078,256) —
Corona
- Legal and professional expenses (889,482) (850,180) 176,266 — (83,857) (41,984)
(889,482) (850,180) 176,266 — (83,857) (41,984)
Attacq
- Karoo Fund financial liability 15 — (4,032,584) — — — —
- Interest income from loan receivable — 383,263 — — — —
— (3,649,321) — — —
Artisan
- Oncharged administrative expenses (13,583) 51,962 — — — 41,255
(13,583) 51,962 — — — 41,255
PKM Development
- Investment in equity accounted
investees 9 178,397 (31,908) — — 20,205,297 19,991,716
- PKM Preference Shares 15 1,134,245 — — — 101,134,245 —
1,312,642 (31,908) 121,339,542 19,991,716
(7,353,695) (3,371,049) 13,036,726 27,117,356 110,910,578 16,553,932
(1) Differences between the income/(expense) and the corresponding receivable/(payable) related to foreign exchange movements recognised in OCI.
KEY MANAGEMENT
Key management consists of the executive and non-executive directors as well as the company secretary.
ARTISAN
Artisan is a real estate management company. Lukas Nakos and Malcolm Levy, the chief executive officer and chief financial
officer of the group respectively, were able to exert significant influence over Artisan as directors of Salt Properties Limited, a
minority shareholder. An associate of Malcolm Levy was also a shareholder of Salt Properties Limited during the year.
At the year end, the board of Artisan comprises four directors, two of whom are common to MAS, being Jaco Jansen
and Pierre Goosen. Malcolm Levy resigned as a director of Artisan during the year.
On 30 June 2017 salt Properties Limited was no longer a shareholder of Artisan.
NW ADVISERS
NW Advisers is a real estate developer and is a 100% owned subsidiary of NW Holdings which is a 60% owned subsidiary
of Artisan, as such is controlled by Artisan which is a related party of the group.
During the year NW Advisers on-charged expenses in relation to the development of New Waverley which amounted to
EUR12,860,460 (2016: EUR27,117,356). These have been capitalised as part of the New Waverley development within investment
property (see note 7). These on-charges were charged to the group in accordance with the development management
agreement and are on an arm's length basis.
In addition, the group has provided for a development management fee of EUR4,052,171 (2016: EUR2,367,448) as a result of
the revaluation of the three pre-let hotels at the New Waverley development (see note 15). This fee is in accordance with
the development management agreement and is on an arm's length basis.
NW HOLDINGS
NW Holdings is a real estate developer and is a 60% owned subsidiary of Artisan. As such it is controlled by Artisan which
is a related party of the group.
At the reporting date the group provided for the New Waverley priority participating profit dividend of EUR6,078,256
(2016:EURnil) as a result of the revaluation of the New Waverley development (see note 15). The fee is in accordance with the
development management agreement and is on an arm's length basis.
CORONA
Corona is a real estate management company with seven staff, and is owned by Jonathan Knight as the sole shareholder.
Jonathan Knight is also chief investment officer of the group.
During the year, the group used the professional services of Corona and incurred expenses of EUR889,482
(2016: EUR850,180), which were charged to the group on an arm's length basis. Professional services fees are expensed in profit or
loss within investment expenses and service charge and other property operating expenses. Jonathan Knight has a contract
of employment with Corona Real Estate Partners Limited, a service provider to MAS Property Advisors Limited. Corona
Real Estate Partners paid Jonathan Knight a basic salary of EUR68,232 during the year (2016: EUR78,468)
ATTACQ
Attacq is a significant shareholder in the company and has significant influence over the group.
On 30 November 2015, the group entered into a short-term loan agreement with Attacq. The group provided for
EUR18,920,000 over a maximum term of 3 months and a minimum term of 1 month with early repayment permitted
thereafter without penalty, subject to interest of 8% per annum. The group took two forms of security, firstly the amount
payable to Attacq under the Karoo Fund transaction of EUR29,112,780 and Attacq's shares in the company owning Nova
Aventis (Stenham European Shopping Centre Fund (Guernsey) to the value of EUR22,931,521). The loan was repaid in full
on 29 February 2016. Interest of EURnil (2016: EUR383,263) was received on the loan.
The short-term loan receivable was classified as a financial asset at amortised cost. Accordingly on initial recognition it
was recognised at fair value and subsequently measured at amortised cost using the effective interest method.
The group purchased the Karoo Fund from Attacq in 2013 for an all share consideration of EUR34,199,731 (see note 8).
Under the purchase agreement of the Karoo Fund, Attacq was entitled to a contingent adjustment (the "Adjustment") in
the consideration paid to it by the group. This contingent adjustment was dependent upon the value at which the Karoo
Fund redeemed. On 31 January 2016 the group's remaining shares in the Karoo Fund were redeemed. The group received
an in-specie redemption of 64,540,371 shares in Sirius and EUR2,577,304 cash in exchange for EUR32,411,907 being the group's
share of the Karoo Fund's net asset value at 31 January 2016. The final redemption triggered the settlement of the Attacq
financial liability (see note 15) from whom the group acquired the investment, through the issuance of MAS shares. Under
the purchase agreement the MAS adjustment shares were issued at a price per share equal to the 30-day volume weighted
average price of MAS shares at each point the Karoo Fund was realised. Accordingly, 21,317,449 shares were issued to
Attacq in settlement of the Attacq financial liability.
PKM DEVELOPMENT
In 2016, the group invested EUR20,000,000 in PKM Development. PKM Development is an associate of the group and MAS
owns 40% of the ordinary shares (see note 9). The group's share of the associate profit for the year of EUR178,397
(2016: EUR31,908 loss) was recognised in profit or loss.
On 6 April 2017 and 19 May 2017, the group provided EUR30,000,000 and EUR70,000,000 respectfully to acquire 7.5%
preference shares in PKM Development, see note 15. The group has committed to fund a further EUR100,000,000 (see note 22).
The group received interest income of EUR1,134,245 (2016: EURnil) on the preference shares during the year.
20. EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE
BASIC AND DILUTED EARNINGS PER SHARE
ACCOUNTING POLICY
The group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of
ordinary shares outstanding during the period, adjusted for own shares held.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.
DISCLOSURE
The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders and
the weighted-average number of ordinary shares outstanding.
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
Year ended Year ended
Euro 30 June 2017 30 June 2016
Profit for the year attributable to the owners of the group 33,587,948 1,498,032
WEIGHTED-AVERAGE NUMBER OF ORDINARY SHARES
Year ended Year ended
Euro 30 June 2017 30 June 2016
Opening issued ordinary shares 348,625,219 291,787,889
Effect of shares issued for capital raise 44,608,360 5,871,764
Effect of shares issued related to the settlement of the Attacq liability — 6,465,128
Effect of shares issued for scrip distributions 5,023,402 2,281,979
Weighted-average number of ordinary shares 398,256,981 306,406,760
The shares issued as part of the geared share purchase plan are not included in the calculation of the weighted-average
number of ordinary shares as they are deemed to be unissued in accordance with IFRS2: Share-based Payment.
BASIC EARNINGS PER SHARE
Year ended Year ended
Euro 30 June 2017 30 June 2016
Profit attributable to ordinary shareholders 33,587,948 1,498,032
Weighted-average number of ordinary shares 398,256,981 306,406,760
Basic earnings per shares (euro cents) 8.43 0.49
There are no dilutionary instruments in issue and therefore basic earnings and diluted earnings are the same. The group has
issued share-based payments instruments during the year (see note 11), however these are not dilutive for the financial year.
HEADLINE EARNINGS AND HEADLINE EARNINGS PER SHARE
ACCOUNTING POLICY
Headline earnings are derived from basic earnings adjusted for re-measurements that relate to the capital platform of the
group per Circular 2/2015 issued by the South African Institute of Chartered Accountants.
DISCLOSURE
Headline earnings and headline earnings per share was as follows:
Year ended 30 June 2017 Year ended 30 June 2016
Euro Note Gross Net Gross Net
Profit for the year 33,587,948 33,587,948 1,498,032 1,498,032
Adjusted for:
Revaluation of investment property 5 (36,763,196) (32,995,314) 3,088,606 3,274,432
Revaluation of assets held for sale (786,795) — — —
Headline earnings (3,962,043) 592,634 4,586,638 4,772,464
Weighted-average number of ordinary shares 398,256,981 398,256,981 306,406,760 306,406,760
Headline earnings per share (euro cents) (0.99) 0.15 1.50 1.56
There are no dilutionary instruments in issue and therefore headline earnings and diluted headline earnings are the same.
The JSE Listings Requirements require the calculation of headline earnings and diluted headline earnings per share and
the disclosure of a detailed reconciliation of headline earnings to the earnings numbers used in the calculation of basic
earnings per share, as required by IAS 33 - Earnings per Share. Disclosure of headline earnings is not an IFRS requirement.
The directors do not use headline earnings or headline earnings per share in their analysis of the group's performance, and
do not consider it to be a useful or relevant metric for the group. The directors make no reference to headline earnings or
headline earnings per share in their commentaries, instead, the directors use distributable earnings as a measure.
21. SIGNIFICANT SHAREHOLDINGS
The significant shareholdings of the group are:
Year ended Year ended
30 June 2017 30 June 2016
Attacq 30.57% 41.38%
Argosy Capital Limited 12.19% 14.06%
STANLIB Asset Management 7.40% n/a
Sanlam Life Insurance Limited n/a 5.02%
50.16% 60.46%
22. CAPITAL COMMITMENTS
INVESTMENT PROPERTY
The group entered into contracts for the construction and development of New Waverley office (see note 7). These
contracts will give rise to committed expenses of GBP69,328,267 (approx. EUR78,840,105) (2016: GBP7,882,360
(approx. EUR9,536,867)), which will be capitalised as part of the New Waverley development.
INVESTMENT IN EQUITY ACCOUNTED INVESTEE
On the 23 March 2016, the group entered into a contract with PKM Development to develop investment property in central
and eastern Europe. The terms of the contract commit the group to invest an initial EUR100,000,000 in cumulative 7.5%
preference shares in PKM Development over 4 years, with an election to invest a further EUR100,000,000 by 23 March 2017,
(see note 15).
The group has committed to fund PKM Development through 7.5% cumulative preference shares issued by PKM
Development. In the prior year, the group committed to funding EUR100,000,000 which was extended by a further
EUR100,000,000 on 29 February 2017. The outstanding commitment at the reporting date was EUR100,000,000
(2016: EUR100,000,000).
Post year end the group increased its commitment up to EUR350,000,000 of preference share funding (see note 23).
23. SUBSEQUENT EVENTS
DRAWDOWN ON INTEREST BEARING BORROWINGS
In August 2017 the group entered into a loan agreement for a facility of EUR53,000,000. The facility is for a term of 5 years at
a fixed interest rate of 2.68% per annum. This facility has been secured against income-generating property and has been
classified as general borrowings.
INVESTMENT IN EQUITY ACCOUNTED INVESTEE
In July 2017, the group increased its commitment up to EUR350,000,000 of preference shared funding into PKM
Development.
INVESTOR INFORMATION
SHAREHOLDING DISCLOSURES
MAS Real Estate Inc. (the "company")
% of number %
Number of of Number of of number of
Public and non-public shareholders shareholders shares shares
Public 7,161 99.78% 260,416,275 54.22%
Non-Public
- Significant shareholders 1 0.03% 205,368,307 42.77%
- Directors and their associates 13 0.18% 13,917,061 2.90%
- Company secretary 1 0.01% 514,656 0.11%
Total shareholders 7,176 100% 480,216,299 100%
MAJOR SHAREHOLDINGS
No of shares Percentage of
as at shares as at
Name 30 June 2017 30 June 2017
Attacq Limited 146,818,251 30.57%
Argosy Capital Limited 58,550,056 12.19%
STANLIB Asset Management 35,577,283 7.4%
Total 240,945,590 50.16%
No of shares Percentage of
as at shares as at
Name 30 June 2016 30 June 2016
Attacq Limited 144,275,653 41.38%
Argosy Capital Limited 49,028,947 14.06%
Sanlam Life Insurance Limited 17,507,629 5.02%
Total 210,812,229 60.46%
COMPANY INFORMATION AND ADVISORS
REGISTERED OFFICE IN THE BVI REGISTRAR/ TRANSFER SECRETARIES PROPERTY VALUERS
MAS Real Estate Inc.
Midocean Chambers BRITISH VIRGIN ISLANDS BULGARIA
Road Town, Tortola Computershare Investor Services CBRE
British Virgin Islands (BVI) Limited 1 Kuzman Shapkarev Str.
Registration number 003287V Sofia 1000 Bulgaria
CORRESPONDENCE ADDRESS Woodbourne Hall
MAS Real Estate Inc. P O Box 3162 GERMANY
2nd Floor Road Town, Tortola Cushman & Wakefield LLP
Clarendon House British Virgin Islands Rathenauplatz 1
Victoria Street D-60313 Frankfurt am Main
Douglas Germany
Isle of Man SOUTH AFRICA
IM1 2LN Computershare Investor Services
Proprietary Limited
Registration number JLL
COMPANY SECRETARY 2004/003647/07 Wilhelm-Leuschner-Strasse 78
Helen Cullen ACIS Rosebank Towers D-60329 Frankfurt am Main
(Associate of the Institute of 15 Biermann Avenue Germany
Chartered Secretaries & Rosebank 2196
Administrators) South Africa POLAND
CBRE
INDEPENDENT AUDITOR DEPOSITORY Rondo ONZ 1
KPMG Audit LLC Computershare Investor Services PLC PL-00-124 Warsaw
Heritage Court The Pavilions Poland
41 Athol Street Bridgewater Road
Douglas Bristol, SWITZERLAND
Isle of Man BS13,8AE Wüest & Partner AG
IM99,1HN Bleicherweg 5
CH-8001
JSE SPONSOR Zürich
Java Capital Trustees and Sponsors Switzerland
Proprietary Limited
2nd Floor UK
6a Sandown Valley Crescent CBRE
Sandown 7 Castle Street
Sandton Edinburgh,
2196 EH2,3AH
Johannesburg
South Africa GVA Grimley Limited
Quayside House
LUXEMBOURG LEGAL ADVISER 127 Fountainbridge
M Partners Edinburgh
56, rue Charles Martel EH3,9QG
L-2134 Luxembourg
Grand Duchy of Luxembourg
LUXEMBOURG ADMINISTRATOR
Hoche Partner Trust Services SA
121, Avenue de la Faiencerie
L-1511 Luxembourg
Grand Duchy of Luxembourg
BVI ADMINISTRATOR
Midocean Management and Trust
Services (BVI) Limited Midocean
Chambers, P. O. Box 805, Road Town,
Tortola, British Virgin Islands VG1110
INVESTOR INFORMATION
SHAREHOLDER INFORMATION
Registered in the British Virgin Islands Company number 1750199
Registered as an external company in South Africa Registration number 2010/000338/10
JSE share code MSP
SEDOL (XLUX) B96VLJ5
SEDOL (JSE) B96TSD2
ISIN VGG5884M1041
LEI code 213800T1TZPGQ7HS4Q13
Number of shares in issue as at 30 June 2017 480,216,299
MANAGEMENT ACCOUNTS
PRO FORMA MANAGEMENT ACCOUNTS
INDEPENDENT REPORTING ACCOUNTANT'S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION INCLUDED IN
THE CONDENSED ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS
The Directors
MAS Real Estate Inc
2nd Floor
Clarendon House
Victoria Street
Douglas
Isle of Man
IMI 2LN
1 September 2017
REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION
We have completed our assurance engagement to report on the compilation of the, pro forma distribution income
statement of MAS Real Estate Inc ("MAS" or "the Company") for the year ended 30 June 2017 and the pro forma
summarised statement of financial position of MAS as at 30 June 2017, (collectively "Pro forma Financial Information").
The Pro forma Financial Information is set out in the Condensed Abridged Consolidated Financial Statements to be issued
by the Company on 7 September 2017.
The Pro forma Financial Information has been compiled by the directors of MAS to illustrate the impact of the pro forma
adjustments on the distribution income statement and the summarised statement of financial position as at 30 June 2017
as described in the basis of preparation paragraph and detailed in the Condensed Abridged Consolidated Financial
Statements.
As part of this process, the Company's Pro forma Financial Information has been extracted by the directors from the
Company's published financial statements for the year ended 30 June 2017, on which an audit report will be published.
DIRECTORS' RESPONSIBILITY FOR THE PRO FORMA FINANCIAL INFORMATION
The directors of MAS are responsible for compiling the Pro forma Financial Information on the basis of the applicable
criteria as detailed in paragraphs 8.15 to 8.34 of the Listings Requirements of the JSE Limited and the SAICA Guide on
Pro forma Financial Information, revised and issued in September 2014 ("Applicable Criteria").
INDEPENDENT REPORTING ACCOUNTANT'S INDEPENDENCE AND QUALITY CONTROL
We have complied with the independence and other ethical requirements of the Code of Professional Conduct for
Registered Auditors issued by the Independent Regulatory Board for Auditors (IRBA Code), which is founded on
fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional
behaviour. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for
Professional Accountants (Part A and B).
The firm applies International Standard on Quality Control 1 Quality Control for Firms that Perform Audits and
Reviews of Financial Statements, and Other Assurance and Related Services Engagements and, accordingly, maintains a
comprehensive system of quality control including documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
REPORTING ACCOUNTANT'S RESPONSIBILITY
Our responsibility is to express an opinion about whether the Pro forma Financial Information has been compiled, in all
material respects, by the directors on the basis of the Applicable Criteria, based on our procedures performed.
We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420,
Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued by
the International Auditing and Assurance Standards Board. This standard requires that the reporting accountants comply
with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the directors
have compiled, in all material respects, the Pro forma Financial Information on the basis of the Applicable Criteria.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any
Published Financial Information used in compiling the Pro forma Financial Information, nor have we, in the course of this
engagement, performed an audit or review of the Published Financial Information used in compiling the Pro forma Financial
Information.
The purpose of Pro forma Financial Information included in the Condensed Abridged Consolidated Financial Statements
is solely to illustrate the impact of the adjustments on the unadjusted Published Financial Information as described in the
basis of preparation paragraph.
A reasonable assurance engagement to report on whether the Pro forma Financial Information has been properly
compiled, in all material respects, on the basis of the Applicable Criteria involves performing procedures to assess whether
the Applicable Criteria used by the directors in the compilation of the Pro forma Financial Information provide a reasonable
basis for presenting the significant effects directly attributable to the adjustments and to obtain sufficient appropriate
evidence about whether:
- The related pro forma adjustments give appropriate effect to the Applicable Criteria; and
- The Pro forma Financial Information reflects the proper application of those pro forma adjustments to the unadjusted
Published Financial Information.
The procedures selected depend on the reporting accountant's judgment, having regard to the reporting accountant's
understanding of the nature of the Company, the Adjustments in respect of which the Pro forma Financial Information has
been compiled and other relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the Pro forma Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
OPINION
In our opinion, the Pro forma Financial Information has been compiled, in all material respects, on the basis of the
Applicable Criteria.
Yours faithfully
KPMG Inc.
Per GS Kolbe
Chartered Accountants (SA)
Registered Auditor
Director
PURPOSE AND BASIS OF PREPARATION
In order to provide information of relevance to investors and a meaningful basis of comparison for users of the financial
information, pro forma management accounts comprising of a pro forma distribution income statement and a pro forma
statement of financial position for the year ended 30 June 2017 have been prepared and presented below, in conjunction
with the condensed abridged consolidated financial statements.
The directors consider that the pro forma management accounts are useful in interpreting the performance of the
group. In terms of section 8.15 of the JSE Listings Requirements, the pro forma management accounts constitute pro forma
financial information and the company is therefore required to comply with the requirements of sections 8.16 to 8.34 of the
JSE Listings Requirements on pro forma financial information. In accordance with section 8.19, the pro forma information is
to be presented in columnar format showing separately the unadjusted financial information, pro forma adjustments and
the pro forma financial information.
The pro forma management accounts diverge from IFRS in respect of the following:
- Investment in associates has been accounted for using the proportionate consolidation method in the management
accounts, as opposed to the equity accounting method embodied in the condensed abridged consolidated financial
statements in accordance with IAS 28;
- Investment in subsidiaries, with a non-controlling interest has been accounted for using the proportionate consolidation
method in the management accounts, as opposed to consolidating 100% of all assets and liabilities as embodied in the condensed abridged
consolidated financial statements in accordance with IAS 27 and IFRS 3; and
- The geared share purchase plan options in accordance with IFRS 2 has been derecognised in the pro forma
management accounts. The transaction has been accounted for in terms of its legal form, being the loan and shares
issued in terms of the plan.
DIRECTORS' RESPONSIBILITY
The preparation of the pro forma management accounts is the sole responsibility of the directors and has been prepared
in accordance with the basis stated above, for illustrative purposes only, to demonstrate the impact on the pro forma
distribution income statement and the pro forma summarised statement of financial position. Due to Its nature, the pro
forma management accounts may not fairly present the results of the group and the financial position.
MANAGEMENT ACCOUNTS
PRO FORMA DISTRIBUTION INCOME STATEMENT
Year ended Year ended
Euro 30 June 2017 30 June 2016
Rental income 26,086,282 14,203,699
Net service charges and property operating expenses (2,982,320) (1,989,426)
- Service charges income and other recoveries 4,246,181 2,047,322
- Service charges and other property operating expenses (7,228,501) (4,036,748)
Net rental income 23,103,962 12,214,273
Other income 113,744 1,717,829
Corporate expenses (3,265,895) (3,203,472)
Net operating income 19,951,811 10,728,630
Net finance costs (439,869) (355,990)
- Finance income 1,803,433 433,132
- Finance costs (2,812,600) (817,928)
- Interest capitalised on development property 569,298 28,806
Current taxation (1,612,764) (684,749)
Direct investment result 17,899,178 9,687,891
Fair value adjustments 24,623,199 6,431,719
Investment expenses (281,555) (2,202,144)
Other income (245,419) 637,552
Exchange differences (4,638,606) (12,913,210)
Deferred taxation (3,768,849) (143,776)
Indirect investment result 15,688,770 (8,189,859)
IFRS net profit (direct plus indirect result) 33,587,948 1,498,032
Other specific adjustments
Direct investment result
Elimination of IFRS 2 option expense 245,419 —
Interest income on geared share purchase plan 192,988 —
Sirius earnings on a look-through basis(1) 1,137,215 924,985
Capitalisation of borrowing costs to development 240,658 773,765
1,816,280 1,698,750
Indirect investment result
Fair value adjustments 17,199 —
Loan impairment on geared share purchase (760,852) —
(743,653) —
Management accounts profit 34,660,575 3,196,782
(1) The sirius adjustment recognises the group's share of Sirius Real Estate Limited's earnings which exceeds the dividend income the
group has already recognised
DISTRIBUTABLE EARNINGS
Year ended Year ended
Euro 30 June 2017 30 June 2016
Direct investment result 17,899,178 9,687,891
Other specific adjustments - direct 1,816,280 1,698,750
Distributable earnings before effect of shares issued during the year 19,715,458 11,386,641
Adjustment relating to shares issued during the year 3,832,529 1,568,916
Distributable earnings(1) 23,547,987 12,955,557
Distributable earnings per share 4.90 3.72
BASIS OF DISTRIBUTION
Year ended Year ended
Euro 30 June 2017 30 June 2016
Distributable earnings 23,547,987 12,955,557
Interim distributable earnings (8,631,292) (2,339,625)
14,916,695 10,615,932
Adjustment from reserves 402,204 (2,841,590)
Final distribution 15,318,899 7,774,342
Final distribution per share (euro cents) 3.19 2.23
Interim distribution per share (euro cents) 2.66 2.27
Annual distribution per share (euro cents) 5.85 4.50
Closing number of shares 480,216,299 348,625,219
Weighted average number of shares in issue(2) 402,059,173 306,406,760
(1) Adjusted for the impact of shares issued during the year
(2) Weighted average number of shares includes geared purchase plan shares
MANAGEMENT ACCOUNTS
PRO FORMA SUMMARISED STATEMENT OF FINANCIAL POSITION
As at As at
Euro 30 June 2017 30 June 2016
Intangibles 23,961,030 25,262,818
Investment property 558,646,823 311,613,772
- Income-generating property 463,397,773 242,625,172
- Development property 44,653,472 24,907,797
- Land bank 50,613,578 44,080,803
Financial instruments 21,014,243 51,614,068
Interest bearing receivables - PKM Preference Shares 60,680,546 —
Interest bearing receivables - PKM Investment joint venture 30,595,055 —
Deferred taxation asset 758,055 721,292
Trade and other receivables 7,908,529 11,313,808
Other assets 550,827 241,083
Cash and cash equivalents 74,164,762 66,946,902
Total assets 778,279,870 467,713,743
Shareholders' equity 602,241,619 400,844,952
Interest bearing borrowings - external 147,243,076 44,578,595
Financial instruments 12,881,004 12,543,033
Deferred taxation liability 4,895,895 1,242,741
Trade and other payables 10,926,472 8,405,586
Other liabilities 91,805 98,836
Total liabilities 176,038,252 66,868,791
Total shareholders' equity and liabilities 778,279,870 467,713,743
Actual number of ordinary shares in issue 480,216,299 348,625,219
NAV per share (euro cents) 125.6 115.0
Adjusted NAV per share (euro cents)(1) 126.5 115.1
(1) Adjusted NAV per share excludes deferred taxation.
PRO FORMA DISTRIBUTION INCOME STATEMENT
RECONCILIATION OF IFRS TO MANAGEMENT ACCOUNTS
MANAGEMENT
IFRS ADJUSTMENTS ACCOUNTS
year ended Development Investment Geared share year ended
Euro 30 June 2017 Reclassification(1) joint venture(2) joint venture(3) purchase plan(4) 30 June 2017
Rental income 27,032,238 — 400 (946,356) — 26,086,282
Service charges and
other recoveries 4,550,190 — 404 (304,413) — 4,246,181
31,582,428 — 804 (1,250,769) — 30,332,463
Service charges and other
property operating expenses (7,598,036) — — 368,715 820 (7,228,501)
Net rental income 23,984,392 — 804 (882,054) 820 23,103,962
Other income — — 113,744 — — 113,744
Corporate expenses (3,498,209) — (52,797) 40,512 244,599 (3,265,895)
Investment expenses (281,061) 281,061 — — — —
Net operating income 20,205,122 281,061 61,751 (841,542) 245,419 19,951,811
Fair value adjustments 25,592,290 (25,592,290) — — — —
Exchange differences (4,684,895) 4,684,895 — — — —
Share of profit/(loss)
from equity accounted
investee, net of taxation 178,397 — (178,397) — — —
Profit before finance
income/costs 41,290,914 (20,626,334) (116,646) (841,542) 245,419 19,951,811
Finance income 1,207,196 — 76,347 519,890 — 1,803,433
Finance costs (2,238,497) (569,298) (5,496) 691 — (2,812,600)
Interest capitalised on
development property — 569,298 — — — 569,298
Profit before taxation 40,259,613 (20,626,334) (45,795) (320,961) 245,419 19,511,942
Current taxation (1,741,449) — — 128,685 — (1,612,764)
Deferred taxation (3,942,153) 3,942,153 — — — —
DIRECT INVESTMENT RESULT 34,576,011 (16,684,181) (45,795) (192,276) 245,419 17,899,178
Fair value adjustments — 25,592,290 — (969,091) 24,623,199
Investment expenses — (281,061) (494) — — (281,555)
Other income/expenses — — — — (245,419) (245,419)
Exchange differences — (4,684,895) 46,289 — — (4,638,606)
Deferred taxation — (3,942,153) — 173,304 — (3,768,849)
INDIRECT INVESTMENT RESULT — 16,684,181 45,795 (795,787) (245,419) 15,688,770
IFRS net profit (direct plus
indirect results) 34,576,011 — — (988,063) — 33,587,948
Attributable to:
Non-controlling interest 988,063 — — (988,063) — —
Owners of the group 33,587,948 — — — — 33,587,948
Other specific adjustments
Direct investment result
- Elimination of IFRS 2
option expense — — — — 245,419 245,419
- Interest income on geared
share purchase plan — — — — — 192,988
- Sirius earnings on a
look-through basis — — — — — 1,137,215
- Capitalisation of borrowing
costs to development — — — — — 240,658
Indirect investment result
- Fair value adjustments — — — — 17,199 17,199
- Loan impairment on geared
share purchase — — — — — (760,852)
MANAGEMENT ACCOUNTS PROFIT — — — — — 34,660,575
(1) Reclassifications relate to the adjustments made to the IFRS income statement by allocating amounts into direct investment result and indirect
investment result, and to re-allocate certain statement of financial position items between current and non-current captions.
(2) The Development JV adjustments proportionately consolidates the income, expenditures, assets and liabilities relating to the Prime Kapital
Development joint venture, which has been equity accounted for in the condensed abridged consolidated financial statements prepared in
accordance with IFRS.
(3) The Investment JV adjustments proportionately consolidates the income, expenditures, assets and liabilities relating to the Prime Kapital
investment joint venture, which has been consolidated in the condensed abridged consolidated financial statements prepared in accordance
with IFRS.
(4) The geared share purchase plan adjustments reverse the IFRS accounting in the following manner.
(i) the option accounting has been replaced with the legal form, being the recognition of the loan and shares issued in terms of the plan.
(ii) the interest earned on the loan is recognised in Other specific adjustments - Direct. The loan has also been impaired to the value of the
shares held as security as required.
(iii)the shares issued are treated as issued rather than being reflected as treasury shares in terms of IFRS.
(5) Adjusted NAV per share excludes deferred taxation
RECONCILIATION OF IFRS TO MANAGEMENT ACCOUNTS
MANAGEMENT
IFRS ADJUSTMENTS ACCOUNTS
As at Development Investment Geared share As at
Euro 30 June 2017 Reclassification(1) joint venture(2) joint venture(3) purchase plan(4) 30 June 2017
Non-current assets
Intangible assets 23,967,355 — — — (6,325) 23,961,030
Investment property 564,291,928 6,336,915 19,255,950 (31,223,400) (14,570) 558,646,823
- Income-generating
property 494,519,173 2,180,000 — (33,319,400) — 463,397,773
- Development property 30,081,795 852,900 11,633,225 2,096,000 (10,448) 44,653,472
- Land bank 39,690,960 3,304,015 7,622,725 — (4,122) 50,613,578
Investment in equity
accounted investee 20,205,297 — (20,204,865) — (432) —
Financial instruments 101,134,245 — (101,134,245) — — —
Interest bearing receivables
- PKM Preference Shares — — 60,680,546 — — 60,680,546
Interest bearing receivables
- PKM Investment joint — — — 30,595,055 — 30,595,055
venture
Property, plant and equipment 560,019 — 58,378 (67,570) — 550,827
Deferred taxation asset 758,055 — — — — 758,055
Total non-current assets 710,916,899 6,336,915 (41,344,236) (695,915) (21,327) 675,192,336
Current assets
Financial instruments 66,097 — 460,000 — 20,488,146 21,014,243
Trade and other receivables 8,707,035 — 324,875 (780,614) (342,767) 7,908,529
Cash and cash equivalents 33,017,502 — 41,577,235 (429,975) — 74,164,762
Assets held for sale 6,336,915 (6,336,915) — — — —
Total current assets 48,127,549 (6,336,915) 42,362,110 (1,210,589) 20,145,379 103,087,534
Total assets 759,044,448 — 1,017,874 (1,906,504) 20,124,052 778,279,870
Equity
Share capital 557,556,273 — — — 4,667 557,560,940
Geared share purchase plan (21,056,010) — — — 21,056,010 —
Retained earnings 55,888,038 — — — (647,056) 55,240,982
Share-based payment reserve 225,973 — — — (225,973) —
Foreign currency
translation reserve (10,560,303) — — — — (10,560,303)
Equity attributable to
owners of the group 582,053,971 — — — 20,187,648 602,241,619
Non-controlling interest 988,063 — — (988,063) — —
Total Equity 583,042,034 — — (988,063) 20,187,648 602,241,619
Non-current liabilities
Interest bearing borrowings 141,751,953 5,461,444 — — 29,679 147,243,076
Financial instruments 1,670,086 11,211,990 — (1,072) — 12,881,004
Deferred taxation
liability 4,998,374 — — (102,479) — 4,895,895
Total non-current
liabilities 148,420,413 16,673,434 — (103,551) 29,679 165,019,975
Current liabilities
Interest bearing borrowings 5,461,444 (5,461,444) — — — —
Financial instruments 11,211,990 (11,211,990) — — — —
Trade and other payables 10,816,762 — 1,017,874 (814,890) (93,275) 10,926,471
Provisions 91,805 — — — — 91,805
Total current liabilities 27,582,001 (16,673,434) 1,017,874 (814,890) (93,275) 11,018,276
Total liabilities 176,002,414 — 1,017,874 (918,441) (63,596) 176,038,251
Total shareholder equity
and liabilities 759,044,448 — 1,017,874 (1,906,504) 20,124,052 778,279,870
Number of shares in issue 467,366,299 12,850,000 480,216,299
NAV per share 124.5 125.6
Adjusted NAV per share(5) 125.4 126.5
(1) Reclassifications relate to the adjustments made to the IFRS income statement by allocating amounts into direct investment result and
indirect investment result, and to re-allocate certain statement of financial position items between current and non-current captions.
(2) The Development JV adjustments proportionately consolidates the income, expenditures, assets and liabilities relating to the Prime Kapital
Development joint venture, which has been equity accounted for in the condensed abridged consolidated financial statements prepared
in accordance with IFRS.
(3) The Investment JV adjustments proportionately consolidates the income, expenditures, assets and liabilities relating to the Prime
Kapital investment joint venture, which has been consolidated in the condensed abridged consolidated financial statements prepared
in accordance with IFRS.
(4) The geared share purchase plan adjustments reverse the IFRS accounting in the following manner.
(i) the option accounting has been replaced with the legal form, being the recognition of the loan and shares issued in terms of the plan.
(ii) the interest earned on the loan is recognised in Other specific adjustments - Direct. The loan has also been impaired to the value of
the shares held as security as required.
(iii) the shares issued are treated as issued rather than being reflected as treasury shares in terms of IFRS.
(5) Adjusted NAV per share excludes deferred taxation.
7 September 2017
Date: 07/09/2017 08:00:00
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