Directors' report

FOR THE YEAR ENDED 31 DECEMBER 2012

The directors have pleasure in submitting their report, which forms part of the annual financial statements for the year ended 31 December 2012.

Nature of business

Hyprop is a professionally managed listed property company specialising in prime quality shopping centres, listed on the JSE.

Hyprop provides investors with the opportunity to invest in quality retail real estate and distributes all of its distributable earnings on a semi-annual basis. The company grows the portfolio through acquisitions and developments as and when appropriate opportunities arise.

The property portfolio includes 11 prime shopping centres, classified as regional, large regional, super regional and value centres. The centres are located in primary economic hubs in Gauteng and the Western Cape, and are the preferred shopping destinations in their respective nodes, with diverse tenant bases, including a strong national retailer profile and a number of flagship national stores. The company also has investments in Africa through a 37,5% interest in Atterbury Africa.

Review of activities

The results of the group and the company are commented on in the Chairman, CEO and FD’s Reports and are set out in the annual financial statements on pages 67 to 111.

Capital structure

All combined units comprise one ordinary share and one debenture and may only be traded on the JSE. The terms and conditions governing the debentures are contained in the Hyprop Debenture Trust Deed.

Full particulars regarding the authorised and issued share capital at 31 December 2012 are set out in note 14 to the annual financial statements, and full particulars regarding the debentures are set out in note 17.

Following the introduction of Real Estate Investment Trust (“REIT”) legislation in South Africa, Hyprop will convert to a REIT at the appropriate time.

Communication to the market regarding these changes will take place concurrently with the REIT conversion process.

Directors’ interests

The interests of the directors in the combined units of the company at 31 December 2012 were as follows:

* Held via Redefine's interest in Hyprop.

No non-beneficial combined units were held by any of the directors. Other than Marc Wainer’s effective interest which has reduced to 177 540 units, there have been no changes in the directors’ interests between the year-end and the date of this report.

Directors’ remuneration

Directorate

Gavin Tipper and Jabulane Mabuza were appointed to the board as independent non-executive directors effective 8 March 2012 and 21 June 2012, respectively.

Kevin Ellerine, Louis Norval, Louis van der Watt and Laurence Cohen, in accordance with the company’s memorandum of incorporation, retire at the forthcoming annual general meeting, and being eligible they will offer themselves for re-election.

An abridged curriculum vitae for each of the directors is set out on pages 30 and 32.

Company secretary

The company secretary is Probity Business Services Proprietary Limited. The business and postal addresses of the company secretary are set out on the IBC.

Major unitholders

Subsequent to year-end, Redefine reduced its interest in Hyprop to 2 777 710 units or 11,4% (as at 31 March 2013).

Subsidiaries, joint ventures and associates

Disclosure of the company’s investments in subsidiaries, joint ventures and associates is included in notes 5, 6 and 8, respectively to the annual financial statements.

Co-owned shopping centres

The results of The Glen, Canal Walk, and Stoneridge, in which the group owns undivided shares of 75,15%, 80%, and 90% respectively, have been proportionately consolidated in the group and company annual financial statements.

Administration and management

Property management and asset management are fully internalised. No property management or asset management fees were paid during the year.

Audit committee report

The audit committee has fulfilled its responsibilities during the year (refer to the audit committee report on page 66 for details in this regard). The committee has further satisfied itself as to the independence of the external auditors and their suitability for reappointment for the ensuing year.

Auditors

Grant Thornton will continue in office in accordance with part C of section 90 of the South African Companies Act.

Directors’ interest in contracts

No material contracts in which the directors have an interest were entered into during the year, other than the transactions detailed in note 34 to the annual financial statements.

Going concern

The directors consider that the group and company have adequate resources to continue operating for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the group and company annual financial statements. The directors have satisfied themselves that the group and company are in a sound financial position and that they have access to sufficient borrowing facilities to meet their foreseeable cash requirements.

Special resolutions

The following special resolutions were passed by unitholders during the year (at the annual general meeting of unitholders held on 20 June 2012), and where necessary have been registered by the Companies and Intellectual Property Commission (CIPC):

Hyprop Investments (Mauritius) Limited, a wholly-owned subsidiary of Hyprop, passed a special resolution in terms of section 130 of the Mauritius Companies Act, 2001 whereby the rights and obligations in respect of the Atterbury Africa shareholders agreement were transferred from Hyprop to Hyprop Investments (Mauritius) Limited.

Johannesburg
27 February 2013