Directors' report

FOR THE SIX MONTHS ENDED 30 JUNE 2013

The directors have pleasure in submitting their report, which forms part of the financial statements for the six months ended 30 June 2013.

Nature of business

Hyprop is a professionally managed listed property company specialising in prime quality shopping centres and is 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 financial statements on pages 57 to 99.

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 30 June 2013 are set out in note 14 to the 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 converted to a REIT from 1 July 2013. The REIT structure is an internationally recognised vehicle for listed property, and will provide the sector with tax certainty and uniformity in capital structures. Hyprop will in all likelihood undertake a capital restructure to 'de-link' its combined units and do away with its debentures. Further information will be communicated to unitholders in this regard in due course.

Directors’ interests

The interests of the directors in the combined units of the company at 30 June 2013 were as follows:

⁽¹⁾ Retired 27 June 2013
⁽²⁾ Deceased 28 June 2013
⁽³⁾ Resigned 27 June 2013

Directorate

Independent non-executive chairman Mike Aitken retired and non-executive directors Marc Wainer and Jabu Mabusa resigned from the board on 27 June 2013.

Gavin Tipper replaced Mike Aitken as independent non-executive chairman on the same date.

Les Weil, an independent non-executive director and chairman of the audit committee, passed away on 28 June 2013. Lindie Engelbrecht, also an independent non-executive director and incumbent audit committee member, replaced Les as chairman of the audit committee. On 28 August 2013, Thabo Mokgatlha was appointed to the board of Hyprop as an independent non-executive director. Thabo was also appointed to the audit committee. Thabo's appointment as a director is subject to confirmation at the forthcoming AGM.

Ethan Dube, Lindie Engelbrecht, Mike Lewin and Pieter Prinsloo, in accordance with the company’s memorandum of incorporation, retire at the forthcoming annual general meeting, and being eligible offer themselves for re-election.

An abridged curriculum vitae for each of the directors is set out on pages 28, 29 and 34.

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 inside back cover (IBC).

Beneficial unitholders holding 5% or more

Subsidiaries, joint ventures and associates

Disclosure of the company’s investments in subsidiaries, joint arrangements and associates is included in notes 5, 6, 7 and 8, respectively to the 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 56 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 notes 33 to the 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 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 27 June 2013), and where necessary have been registered by the Companies and Intellectual Property Commission (CIPC):

Johannesburg

28 August 2013