Results - Month Ended 29 February 2016

Results

 


PROVISIONAL SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 12 MONTH PERIOD ENDED
29 FEBRUARY 2016


Directors Report

Nature of Business

Newpark is a property holding and investment company that is currently invested in A-grade commercial properties situated in the heart of Sandton.

Newpark listed on the Alternative Exchange of the JSE on 3 February 2016. Following the successful private placing of 10 000 000 ordinary shares at R6.25 per share, the number of shares in issue after the R62.5 million capital raising increased to 100 000 001.

Newpark’s property portfolio consists of two buildings located in the heart of Sandton, Gauteng, namely the JSE which has 18,162m2 of gross lettable area (“GLA”) and an adjoining building known as 24 Central, which has 15,089m2 GLA. The combined independent valuations of these properties as at 29 February 2016 was R1,065 million.

Change in Auditors

The group changed auditors from Grant Thornton to PricewaterhouseCoopers Inc. effective 3 March 2016.

PricewaterhouseCoopers Inc. will continue in office as auditors in accordance with section 90 of the Companies Act 71 of 2008, subject to approval of the shareholders at the upcoming annual general meeting.

Results

In accordance with the Pre-Listing Statement (“PLS”), the board of directors of Newpark (“the Board”) has not declared a dividend for the 1 month period ended 29 February 2016.

Strategy

Newpark’s investment strategy is to seek well positioned prime commercial properties which provide quality cash flows with the potential of upward rating on lease renewals and/or redevelopment opportunities within the medium to long-term (5 to 20 years).

Acquisitions and Developments

Apart from the acquisition of the entire issued share capital of Newpark Towers Proprietary Limited (“Newpark Towers”), Newpark made no further acquisitions and no developments took place during the period under review.

Vacancies and Arrears

There were no vacancies in the property portfolio as at 29 February 2016. No bad debts were incurred nor is it considered necessary to provide for any potential bad debts.

Funding

During the period Newpark Towers accepted a facility from Rand Merchant Bank of R271 million of which R270 million has been drawn down, and repaid both the Standard Bank loan of R198 million and shareholders loans of R47 million.

 


 

Amount

Margin

Facility drawn down

R’millions

over Jibar

Expiry August 2020

270

1.65%


 

Amount

 

Interest rate applicable     

R’millions

Rate

Interest rate swap

135

8.52%

Interest rate cap

135

10.17%

Both the swap and cap expire in January 2019

 

 


The RMB facility is secured by a first mortgage bond over fixed property with a carrying value of R 982 308 223 and currently attracts a floating rate of three-month JIBAR plus 1.65%. The RMB facility is repayable in August 2020. Newpark secured an interest rate swap and interest rate cap on this facility on 18 January 2016. The interest rate cap has the effect that 50% of the interest on the RMB facility is capped at a rate of 10.17%. In addition, the interest rate swap secured with RMB has the effect that in respect of the remaining 50% of the interest on the RMB facility, the floating portion of the current rate is swapped for a fixed rate of 8.52%, before the RMB margin of 1.65%. The interest rate swap and cap expire on 18 January 2019 and interest is payable quarterly.

Percentage of debt hedged

The all-in weighted average cost of funding is 9.42% and the average hedge-term is 2.9 years. It is the board’s policy to hedge at least 70% of the exposure to interest rate risk.

Summary of financial performance


 

29 February 2016

Shares in issue

100,000,001

Net asset value per share

R7.91

Loan-to-value ratio *

22.3%

Gross property operating expense ratio

34.9%


*The loan-to-value ratio is calculated by dividing interest bearing borrowing net of cash on hand by the total of investment property.

CAPITAL REORGANISATION – NEWPARK TOWERS ACQUISITION

On 3 February 2016 Newpark acquired 100% of the share capital of Newpark Towers. This did not result in a substantive economic change and merely resulted in a change in the structure of the group.

Newpark Towers’ assets and liabilities are ultimately controlled by the same parties both before and after the transaction. IFRS 3 specifically states that a combination of entities or businesses under common control is excluded from the scope of IFRS 3. There is currently no guidance in IFRS on the accounting treatment for combinations among entities under common control. In developing a policy for capital reorganisation transactions, Newpark considered the guidance issued by other standard setting bodies which use a similar conceptual framework to develop accounting standards.

Newpark has elected to use the predecessor accounting method, which is based on equivalent US GAAP and UK GAAP guidance for common control transactions. Predecessor accounting does not require the acquirer to restate assets and liabilities to their fair values. The acquirer, i.e. Newpark incorporated the predecessor carrying values. No goodwill arises in applying the predecessor accounting method.

In accordance with the predecessor method, any difference between the consideration given and the aggregate book value of the assets and liabilities (as of the date of the transaction) is recognised in a separate reserve within equity called the capital reorganisation reserve.

Outlook

The Board is confident that Newpark will deliver on its PLS forecasts of a distribution of 49.47 cents per share for the year ended 28 February 2017. The forecast is based on the assumption that a stable macro-economic environment will prevail and operating cost increases will not be above inflation. This forecast has not been audited or reviewed by the Company’s auditors.

By order of the board.

Simon Fifield                                                                                                        Ron Hill
Managing Director                                                                                              Financial Director

Johannesburg
31 May 2016

SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION


 

 

Audited
29 February
2016

(R’000)

Audited
28 February
 2015
Restated
(R’000)


Assets

 

 


Non-current assets

 

 

Investment properties

982 308

739 591

Straight-line lease asset

44 823

23 726

Deferred tax

55

-

Derivative financial instruments

699

-

Lease incentive

22 496

17 124

 

1 050 381

780 441


Current Assets

 

 

Trade and other receivables

6 157

6 718

Straight-line lease asset

12 727

16 912

Current tax receivable

-

865

Lease incentive

2 647

2 647

Cash and cash equivalent

32 217

1 231


Total Current Assets

53 748

28 373


Total Assets

1 104 129

808 814


Equity and Liabilities

 

 


Equity

 

 

Share capital

620 006

1

Reserves

180 412

-

Retained (loss)/income

(9 759)

452 918


Liabilities

 

 


Non-Current Liabilities

 

 

Bank borrowings

270 000

198 290

Deferred tax

14 640

100 029

 

284 640

298 319


Current liabilities

 

 

Loans from shareholders

-

47 400

Trade and other payables

28 830

10 175

 

28 830

57 575


Total Liabilities

313 470

355 894


Total Equity and Liabilities

1 104 129

808 813


 

 

 

 

 

 

SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


 

 

Audited
12 months ended
29 February
 2016

(R’000)

Audited
14 months ended
28 February
 2015
Restated
(R’000)


Revenue

95 185

91 001

Property operating expenses

(33 206)

(29 822)

Other income

100

-

Administrative expenses

(6 000)

(93)


Operating profit

56 079

61 086

Finance income

1 161

300

Fair value adjustments

242 524

(42 854)

Finance costs

(22 191)

(22 950)


Profit / (loss) before taxation

277 573

(4 418)

Taxation

85 537

(2 667)


Profit / (loss) for the period

363 110

(7 085)

Other comprehensive income

-

-


Total comprehensive income / (loss) for the period

363 110

(7 085)


Earnings per share (cents)

 

 


Per share information

 

 

Basic earnings per share*

400.17

(7.87)

Diluted earnings per share*

400.17

(7.87)


* Subsequent to the publication of the trading statement on 25 May 2016, the Board, in consultation with the Company’s auditors, have revised the calculation of the weighted average number of shares in issue to more appropriately reflect the substance of the Newpark Towers acquisition, resulting in the consolidation of Newpark Towers for the full financial period ended 29 February 2016. The trading statement utilised  the weighted average number of shares in issue calculated as the total number of shares in issue as at 29 February 2016, weighted for a period of one month (being the date of listing to 29 February 2016), resulting in 7 397 260 shares being used in the EPS calculation. Whereas, the revised weighted average number of shares contained herein has been calculated as 90 000 001 shares (being the underlying shares attributable to the pre-existing Newpark Towers shareholders) weighted for the full financial year, plus the additional 10 000 000 shares issued on listing, weighted to 29 February 2016, resulting in 90 739 727 shares being used in the EPS calculation (2015: 90 000 001 shares).

RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS

              

12 months ended
29 February
 2016

(R’000)

14 Months ended
28 February
2015
Restated
(R’000)

Earnings

363,110

(7,085)

Less:       Change in fair value of property net of tax    

(331,603)

34,862


Headline Earnings  

31,507

27,777


Less: Current year lease straight lining net of tax

(12,177)

(20,804)

          Derivative financial instrument fair value adjustment net of tax

(503)

-

Add: Lease incentive charge

2,647

2,715


Distributable Income (cents)

21,474

9,689

Headline earnings per ordinary share*

34.72

30.86

Distributable income per share

21.47

10.77

Newpark has no dilutionary instruments in issue.

SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS


 

 

Audited
12 months ended
29 February
2016

(R’000)

Audited
14 months ended
28 February
 2015
Restated
(R’000)


Net cash from operating activities

28 151

(7 180)

Net cash from investing activities

(1 162)

(334)

Cash flows from financing activities

 

 

Proceeds on share issue                                                                                  

62 500

-

Repayment of shareholder loans

 (47 400)

-

Dividends paid

(82 813)

-

Bank borrowings advanced

270 000

5 887

Bank borrowings repaid

(198 290)

-

Net cash from financing activities

3 997

5 887

Total cash and cash equivalent movement for the year

30 986

(1 627)

Cash and cash equivalent at the beginning of the year

1 231

2 858


Total cash and cash equivalent at the end of the year

32 217

1 231


SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


 

 

Share capital

(R’000)

Share issue costs

(R’000)

Total share capital
(R’000)

Capital reorganisation reserve
(R’000)

Retained (loss)/income

(R’000)

Total equity

(R’000)


Balance at 1 March 2015 restated

 

1

 

-

 

1

 

-

 

452 918

 

452 919

Profit for the period

-

-

-

-

363 110

363 110

Other comprehensive income

-

-

-

-

-

-


Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

363 110

 

363 110


Issue of shares

625 000

(4 994)

620 006

-

-

620 006

Capital reorganisation

(1)

-

(1)

180 412

(180 474)

(63)

Dividends

-

-

-

-

(645 313)

(645 313)


Total contributions by and distributions to owners of company recognised directly in equity

 

 

624 999

 

 

(4 994)

 

 

620 005

 

 

180 412

 

 

(825 787)

 

 

(25 370)


Balance at 29 February 2016

625 000

(4 994)

620 005

180 412

(9 759)

790 659


 


SECTORAL SPLIT

GLA

Gross Rentals

Based on:

 

 

Retail

15.03%

15.76%

Office

84.97%

84.24%


LEASE EXPIRY PROFILE (unaudited)

 

 

Based on:

GLA

Gross Rentals

Vacant

 

 

Feb 2016

0.00%

0.07%

Feb 2017

8.44%

3.45%

Feb 2018

13.98%

10.69%

Feb 2019

13.00%

10.02%

Feb 2020

6.99%

6.14%

> Feb 2020

57.59%

69.63%

 

100%

100%


 

SEGMENTAL ANALYSIS

Segmental information
The appointed Chief Operating Decision Maker within the group is the Group Executive Committee (“EXCO”). This is because it is EXCO's responsibility to meet on a frequent basis to review budgets and to assess the operating performance of its operating segments. The information provided to EXCO summarises financial data and information by property. At 29 February 2016, the group is organised into two main operating segments:

  • 24 Central
  • JSE

 

2016

24 Central
(R’000)

JSE
(R’000)

Total
(R’000)

Revenue

58 160

37 025

95 185

Property operating expenses

(21 896)

(11 320)

(33 206)

Fair value adjustments

123 481

119 043

242 524

 

159 745

144 758

302 503


Revenue

66 769

24 232

91 001

Property operating expenses

(29 822)

-

(29 822)

Fair value adjustments

(3 724)

(39 130)

(42 854)

 

33 223

(14 898)

18 325


NOTES
PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION

The provisional summarised audited consolidated financial statements have been prepared in accordance with the requirements of the JSE Listings Requirements and the requirements of the Companies Act of South Africa applicable to summary financial statements. The JSE Listings Requirements require reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34, Interim Financial Reporting. The accounting policies applied in the preparation of the audited consolidated financial statements, from which the provisional summarised audited consolidated financial statements were derived, are in terms of IFRS.

The provisional summarised consolidated financial statements were compiled under the supervision of Ron Hill, the financial director.

The directors are not aware of any matters or circumstances arising subsequent to the year-end that require any additional disclosure or adjustment to the financial statements.

This provisional summarised report is extracted from audited information, but is not itself audited. The annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited annual financial statements and the auditor’s report thereon are available for inspection at the company’s registered office.

The directors take full responsibility for the preparation of this provisional summarised report and for ensuring that the financial information has been correctly extracted from the underlying audited annual financial statements.

Significant Financial Statement Notes

Investment properties

The valuation of investment properties was determined principally using discounted cash flow projections, based on estimates of future cash flows, supported by the terms of any existing lease contracts and by external evidence such as current market rentals for similar properties in the same location and condition, and using discount rates that reflects current market assessments, of the uncertainty in the amount and timing of the cash flows. The future rental rates were estimated depending on the actual location, type and quality of the properties and taking into account market data and projections at the valuation date, as well as the expiry of existing lease agreement.

Related parties

Relationships
Subsidiary                                                                                 Newpark Towers Proprietary Limited

Former shareholders of subsidiary                                               B Van Wyk
Ellerine Bros Proprietary Limited
Ellwain Investments Proprietary Limited
FHP Manager Proprietary Limited
Renlia Developments Proprietary Limited


 

GROUP
29 February 2016

GROUP
28 February 2015                

COMPANY
29 February 2016  


 

(R’000)

(R’000)

(R’000)


Related party balances

 

 

 

Loan accounts owing to related parties

 

 

 

Barry Daniel Van Wyk                                                                                    

-

1 100

-

Ellerine Bros Proprietary Limited                                                                 

-

17 237

-

Ellwain Investments Proprietary Limited                                                   

-

17 237

-

Renlia Developments Proprietary Limited                                                

-

11 826

-

 

-

47 400

-


Interest paid to related parties

 

 

 

Barry Daniel Van Wyk                                                                                    

35

-

-

Ellerine Bros Proprietary Limited                                                                 

548

-

-

Ellwain Investments Proprietary Limited                                                   

548

-

-

Renlia Developments Proprietary Limited                                                

376

-

-

Newpark Towers Proprietary Limited                                                    

-

-

41

 

1 057

-

41


Prior period errors

The up-front payment of the lease incentive was expensed in full upon payment in order to extinguish the related liability at the due date being August 2015. No adjustment was processed in order to straight-line the up-front payment of the lease incentive over the remaining term of the lease. The correction of the errors results in adjustments as follows:


 

 

28 February 2015
(R’000)

1 January2014
 (R’000)


Statement of financial position

 

 


Current assets

 

 

Increase in lease

19 771

5 812


Equity

 

 

Increase in opening retained income

(5 812)

 

Increase in retained income

 

(5 812)


Non-current liabilities

 

 

Increase in deferred tax

(3 804)

 


Statement of profit or loss and other comprehensive income

 

 

Increase in revenue

(13 959)

 

Increase in taxation

3 804

 


 

 

 

The straight-line lease asset and the lease incentive receivable were not taken into account in determining the fair value of investment property. The correction of the errors results in adjustments as follows:


 

 

28 February 2015
(R’000)

1 January 2014
 (R’000)


Statement of financial position

 

 

Current assets

 

 

Decrease in investment properties

(61 077)

(18 224)


Equity

 

 

Decrease in opening retained income

14 825

 

Decrease in retained income

 

14 825


Non-current liabilities

 

 

Decrease in deferred tax

11 390

3 398


Statement of profit or loss and other comprehensive income

 

 

Decrease in fair value adjustment

42 854

 

Decrease in taxation

(7 991)

 


 

DIRECTORS
G D Harlow (Chairman) **, S P Fifield (Chief Executive Officer), R R Hill (Financial Director), B D van Wyk *, D T Ellerine*, K M Ellerine*, H C Turner **, D I Sevel **

* Non-executive director
** Independent non-executive director

Registered office
51 West Street, Houghton, Gauteng, 2198

P O Box 3178, Houghton, Gauteng, 2041

Website
www.newpark.co.za

COMPANY SECRETARY
CIS Company Secretaries Proprietary Limited

Transfer secretary
Computershare Investor Services Proprietary Limited

SPONSOR
Java Capital

 


FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF THE NEWPARK GROUP

Set out below are the forecast statements of comprehensive income of the Newpark Group ("forecasts") for the year ending 29 February 2016 and the year ending 28 February 2017 ("forecast periods").

The forecasts include forecast figures for the duration of the forecast periods.

The forecasts, including the assumptions on which they are based and the financial information from which they are prepared, are the responsibility of the directors of Newpark. The forecasts must be read in conjunction with the independent reporting accountants' limited assurance report which is presented in Annexure 11.

The forecasts have been prepared in compliance with IFRS and in accordance with Newpark' accounting policies as set out in Annexure 16 of the pre-listing statement.

FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF THE NEWPARK GROUP

 

  Forecast for the 12 months to Forecast for the year ending
  29 February 2016 28 February 2017
  ZAR ZAR

Revenue  92 892 387  114 366 369
Rental income and recoveries3  77 265 823  101  303 443
Straight-line rental income accrual  15 626 564  13 062 926
Property operating expenses8 (35 626 496)  (26 626 139)

Net property income 57 265 891 87 740 230

Administrative expenses (209 544) (2 766 587)

Profit from operations 57 056 347 84 973 643

Interest income 1 015 227 8 993 209
Finance costs11 (24 635 381)  (34 080 737)

Profit before fair value adjustments 33 436 193 59 886 114
Changes in fair values of investment property (8 168 769) (13 062 926)

Profit before taxation 25 267 424 46 823 188 
Taxation - -

Net profit 25 267 424 46 823 188

Attributable to:    
Equity holders of Newpark 25 267 424 46 823 188
Non-controlling interests - -

 
Reconciliation between earnings and headline earnings
     

   Forecast for the 12 months to  Forecast for the year ending
  29 February 2016 28 February 2017
  ZAR ZAR

Profit for the year attributable to shareholders  25 267 424 46 823 188
Changes in fair values of investment property net of tax 8 168 769 13 062 926

Headline earnings 33 436 193 59 886 114
Straight-line rental income accrual  (15 626 564)  (13 062 926)
Amortisation of lease inducement costs 2 646 576 2 646 576

Distributable profit 20 456 206 49 469 764
     
Number of shares in issue  100 000 001  100 000 001
Weighted average number of shares in issue  8 333 334  100 000 001
     
Basic and diluted earnings per share (cents) 303.21 46.82
Headline earnings per share (cents) 401.23 59.89
Distributable income per share (cents) 20.46 49.47

An analysis of revenue is set out below:


   Forecast for the 12 months to  Forecast for the year ending
  29 February 2016 28 February 2017
  (%) (%)

Contractual/uncontractual revenue split by rental income:    
% contracted rental revenue 93.7 95.0
% short-term rental revenue - -
% near-contracted rental revenue - 0.5
% uncontracted rental revenue 6.3 4.5

  100.0 100.0

 

Notes and assumptions:

The forecasts incorporate the following material assumptions in respect of revenue and expenses that can be influenced by the directors:

The forecasts incorporate the following material assumptions in respect of revenue and expenses that cannot be influenced by the directors:

The directors have indicated that for the purposes of calculating distributable profit, amortisation charges relating to lease inducement costs should be added back as these costs have historically been incurred and paid.

  1. The forecasts for the year ending 29 February 2016 and year ending 28 February 2017 are based on information derived from the property manager and historic information.
  2. Newpark will not acquire or dispose of any properties during the forecast periods.
  3. Contracted revenue is based on existing lease agreements including stipulated increases, all of which are valid and enforceable. Rental income and recoveries increases significantly from 2016 to 2017 due to the fact that rental income from the JSE is only recognised from 1 September 2015.
  4. Uncontracted rental income (comprising revenue for leases expiring during the forecast periods that are not covered by rental guarantees) comprises 6.3% and 4.5% of rental income for the year ending 29 February 2016 and the year ending 28 February 2017 respectively. Contractual rental income amounts to 66.1% and 72.1% of rental income and recoveries for the year ending 29 February 2016 and the year ending 28 February 2017 respectively.
  5. Turnover rental (rental income based on the actual turnover of the tenant) has not been included in the forecast.
  6. Current vacant or expiring space has been forecast on a property-by-property basis and has been assumed to remain vacant for the duration of the forecast period.
  7. Leases expiring during the forecast periods have been forecast on a lease-by-lease basis, and have been assumed to renew at current market rates unless the lessee has indicated its intention to terminate the lease.
  8. Property operating expenditure has been forecast on a line-by-line basis for each property based on management's review of historic expenditure and discussion with the property manager. Included in property operating expenditure in the forecast period ending 29 February 2016 are repair and maintenance costs of R7.4million which Newpark are contractually obliged to effect by 29 February 2016, and repair and maintenance costs of R2.9m for which Newpark are contractually obliged to refund tenants.
  9. No fair value adjustments to investment properties, other than the adjustment as a result of straight-line rental accrual and restatement of investment properties to the valuation per the property valuers report, have been provided for.
  10. No fair value adjustments to financial assets or financial liabilities have been provided for.
  11. The RMB facility currently attracts a floating rate of 3 month JIBAR plus 1.65%. Newpark secured an interest rate swap and interest rate cap on this facility on 18 January 2016. An adjustment has been processed to account for the fair value of R3.7 million of a financial asset, being the interest rate cap that was secured by Newpark with RMB. The interest rate cap has the effect that 50% of the interest on the RMB facility is capped at a rate of 10.17%. In addition, the interest rate swap secured with RMB has the effect that in respect of the remaining 50% of the interest on the RMB facility, the floating portion of the current rate is swapped for a fixed rate of 8.52%, before the RMB margin of 1.65%. The interest rate swap has no fair value on initial recognition.

The forecast assumes that the current 3 month JIBAR plus 1.65%, being 8.275%, continues throughout the forecast periods.  

  1. There will be no unforeseen economic factors that will affect the lessees' abilities to meet their commitments in terms of existing lease agreements.
  2. Consumption based recoveries are consistent with the independent property valuers' property income statements.
  3. Repairs and maintenance is the only expenditure item which is forecast to increase by greater than 15% from historical costs due to specific repairs required by JSE Building.
  4. Material items of expenditure are in respect of rates, electricity and repairs and maintenance charges.
  5. In terms of the guidance in IFRS 3: Business Combinations we have determined that the acquirer in this transaction is Newpark Towers and Newpark would be the acquiree. However, as Newpark is not a business as defined in IFRS 3, the transaction is not a business combination and outside of the scope of IFRS 3. In terms of the guidance in IAS8.7-12 we have considered the relevant aspect of IFRS 3's methodology for reverse acquisitions and applied these principles by analogy –  specifically the principles on presenting the consolidated financial statements of the legal parent and a continuation of the accounting acquirer's financial statements i.e. Newpark Towers. For this reason no goodwill or intangibles have been identified and recognised as part of this transaction

Annexure 11


INDEPENDENT REPORTING ACCOUNTANTS' LIMITED ASSURANCE REPORT ON THE FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF THE NEWPARK GROUP


"The Directors

Newpark REIT Limited
Ground Floor Houghton Place
51 West Street
Houghton
2041

20 January 2016

Dear Sirs

INDEPENDENT REPORTING ACCOUNTANTS' LIMITED ASSURANCE REPORT ON THE FORECAST STATEMENTS OF COMPREHENSIVE INCOME OF NEWPARK REIT LIMITED ("NEWPARK")

We have examined the forecast statements of comprehensive income as set out in Annexure 10 of the pre-listing statement of Newpark to be issued to prospective Newpark shareholders on or about 26 January 2016 ("the PLS"), the forecast vacancy profile by sector and by gross lettable area, and the forecast lease expiry profile based on existing lease agreements (collectively, the "forecast information").

Directors' responsibility

The directors are responsible for the forecast information, including the assumptions and notes on which it is based, and for the financial information from which it has been prepared. This responsibility, arising from compliance with the Listings Requirements of the JSE Limited, includes:

  • determining whether the assumptions, barring unforeseen circumstances, provide a reasonable basis for the preparation of the forecast information;
  • whether the forecast information has been properly compiled on the basis stated; and
  • whether the forecast information is presented on a basis consistent with the accounting policies of the company.

Reporting accountants' responsibility

Our responsibility is to provide a limited assurance report on the forecast information prepared for the purpose of complying with the Listings Requirements of the JSE Limited and for inclusion in the PLS. We conducted our limited assurance engagement in accordance with the International Standard on Assurance Engagements applicable to The Examination of Prospective Financial Information and the SAICA Circular entitled the Reporting Accountants' Responsibilities in Terms of Section 13 of the Listings Requirements of the JSE Limited. This standard requires us to obtain sufficient appropriate evidence as to whether or not:

  • management's best-estimate assumptions on which the forecast information is based are not unreasonable and are consistent with the purpose of the information;
  • the forecast information is prepared on the basis of the assumptions;
  • the forecast information is appropriately presented and all material assumptions are adequately disclosed; and
  • the forecast information, is prepared and presented on a basis consistent with the accounting policies of the company for the period concerned.

In a limited assurance engagement, the evidence-gathering procedures are more limited than for a reasonable assurance engagement and, therefore, less assurance is obtained than in a reasonable assurance engagement. We believe our evidence obtained is sufficient and appropriate to provide a basis for our limited assurance conclusion.

Information and sources of information

In arriving at our conclusion, we have relied upon forecast financial information prepared by management of Newpark and other information from various public, financial and industry sources.

The principal sources of information used in arriving at our conclusion are as follows:

  • Management-prepared forecasts for the financial years ending February 2016 and 2017.
  • Discussions with the management of Newpark regarding the forecasts presented.
  • Discussions with management of Newpark regarding the prevailing market and economic conditions.
  • Discussions with the property valuers and the property managers with regard to the forecast expenses.
  • Lease agreements for a sample of the leases for the properties included in the Newpark portfolio as set out below.
  • Valuation reports in respect of the properties included in the Newpark portfolio prepared by the external property valuers.
  • Indicative debt terms from bankers.

Procedures

In arriving at our conclusion we have performed the following procedures:

Rental income:

  • Selections were made from the forecast contracted rental income streams per the profit forecast. The sample selected resulted in 89.9% and 93.1% of contracted rental income being tested for the years ending 29 February 2016 and 28 February 2017, respectively.
  • For that same sample of properties, other than those properties where property expenses are fully recoverable in terms of the lease agreements, forecast recoveries were compared to historical recoveries and the forecast operating expenditure for reasonableness. The terms of the leases were considered so as to ensure that the basis of the recoveries was correct.
  • Existing lease agreements that will expire during the period under review were discussed individually with the property managers. Unless the existing tenant has indicated that it intends to vacate the premises, it has been assumed that the existing tenant will renew the lease agreement and the resultant near contracted rental income has been included in the forecast. Uncontracted rental income comprised 6.3% for the year ending 29 February 2016 and 4.5% for the year ending 28 February 2017. Near-contracted rental revenue comprised 0% for the year ending 29 February 2016 and 0.5% for the year ending 28 February 2017. Contracted rental income comprised 93.7% and 95.0% for the years ending 29 February 2016 and 28 February 2017 respectively.
  • Space that is currently vacant has been excluded from the forecast except where the property manager has demonstrated that the vacant space is in the process of being let but that the lease agreement in that regard had not been signed on the date of posting the PLS.
  • The vacancy levels of the properties included in the Newpark portfolio assumed in the forecast were compared to the historical vacancy levels of those buildings for reasonableness. Existing vacancies of 0.07% and 3.45% have been assumed for the years ending 29 February 2016 and 28 February 2017, respectively.

Expenses

For a sample of properties, being those properties where property expenses are not necessarily fully recoverable in terms of the lease agreements, forecast property expenses were compared to the historical expenses. Explanations were obtained for any significant differences. The proportion of total property expenses tested was 99% for the year ending 29 February 2016 and 99% for the year ending 28 February 2017.

The detailed forecast expenditure was reviewed to ensure that all material expenditure items, as required by paragraph 13.14(f) of the Listings Requirements of the JSE Limited, were disclosed.

Portfolio expenses

The forecast interest expense, property management fees and other portfolio expenses were assessed for reasonableness and, where applicable, recalculated.

Application of accounting policies

We ascertained that the existing accounting policies of Newpark have been consistently applied in the preparation of the forecast information.

Model review

In order to ensure that the forecast model for the property income and expenses was accurate and reliable, we performed a high level review to determine the consistency and mathematical accuracy of the model.

Vacancy profile and lease expiry profile

We reviewed each property worksheet prepared by management to ascertain that the vacancy profile and the lease expiry profile included in the model was derived from the correct source. We compared the vacancy profile and lease expiry profile included in paragraph 7 of the PLS to the vacancy profile and lease expiry profile in the model and found them to be in agreement.

Accuracy of the information

We have relied upon and assumed the accuracy and completeness of the information provided to us in writing, or obtained through discussions with the management of Newpark. While our work has involved an analysis of historical financial information and consideration of other information provided to us, our assurance engagement does not constitute an audit or review of historical financial information conducted in accordance with International Standards on Auditing or International Standards on Review Engagements.

Accordingly, we do not express an audit or review opinion thereon and assume no responsibility and make no representations in respect of the accuracy or completeness of any information provided to us, in respect of the forecast information and relevant information included in the PLS.

Conclusion

Based on our examination of the evidence obtained, nothing has come to our attention that causes us to believe that:

(i)  the assumptions, barring unforeseen circumstances, do not provide a reasonable basis for the preparation of the forecast information;

(ii)  the forecast information has not been properly compiled on the basis stated;

(iii)  the forecast information has not been properly presented and all material assumptions are not adequately disclosed; and

(iv)  the forecast information is not presented on a basis consistent with the accounting policies of Newpark.

Actual results are likely to be different from the forecast, since anticipated events frequently do not occur as expected and the variation may be material; accordingly no assurance is expressed regarding the achievability of the forecast.

Our report and the conclusion contained herein is provided solely for the benefit of the board of directors of Newpark and prospective shareholders of the issuer for the purpose of their consideration of the transaction. This letter is not addressed to and may not be relied upon by any other third party for any purpose whatsoever.

Consent

We consent to the inclusion of this report, which will form part of the PLS, to be issued on or about 26 January 2016, in the form and context in which it appears.

Grant Thornton Johannesburg Partnership

Chartered Accountants (SA)
Registered Auditors
Practice number 903485E

Robyn Fridberg
Partner
Chartered Accountant (SA)
Registered Auditor
@Grant Thornton
Wanderers Office Park
52 Corlett Drive
Illovo
2196"

Annexure 12


CONSOLIDATED PRO FORMA STATEMENT OF FINANCIAL POSITION OF THE NEWPARK GROUP


Set out below is the consolidated pro forma statement of financial position of the Newpark group based on the audited statement of financial position of Newpark as at 7 December 2015, being its incorporation date. The consolidated pro forma statement of financial position has been prepared to reflect the financial position of the Newpark group after adjusting for the acquisition ("the adjustment"), on the assumption that the adjustment took place on 7 December 2015 and on the basis set out in the notes to the consolidated pro forma statement of financial position below.
The consolidated pro forma statement of financial position is the responsibility of the directors of Newpark and has been prepared for illustrative purposes to illustrate the effects of the adjustment on Newpark's statement of financial position at 7 December 2015. Due to the nature of the consolidated pro forma statement of financial position, it may not give a fair reflection of the financial position, changes in equity and results of operations or cash flows of Newpark after adjustments.
The independent reporting accountant's report on the consolidated pro forma statement of financial position is set out in Annexure 13. The independent reporting accountant's report on the value and existence of liabilities to be acquired by the company is set out in Annexure 14.
The consolidated pro forma financial information has been prepared in terms of IFRS, The Guide on Pro Forma Financial Information issued by SAICA and the accounting policies of the company as set out in Annexure 17.

 

Newpark REIT Limited
Pro forma statement of financial position as at 7 December 2015


   

Before

Issue of shares as settlement of subscription consideration Private placement Acquisition of Newpark Towers Consolidation adjustment Other adjustments Pro forma after the adjustments
All amounts in ZAR                

Note  

Note 1

Note 2 Note 3 Note 4 Note 5 Note 6 Note 7

ASSETS                
Non-current assets  

-

625 000 000  - 1 050 542 205 (625 000 000) 11 157 795 1 061 700 000
   
Investment property  

-

- - 1 050 542 205 - 7 457 795 1 058 000 000
Investment in subsidiary  

-

625 000 000 -  -  (625 000 000) - -
Other financial assets  

-

- - - - 3 700 000 3 700 000
                 
Current assets  

1

- - 10 385 691 (1)  14 870 602 25 256 293
   
Tax receivable  

-

- - 865 511 - - 865 511
Trade and other receivables  

-

- - 5 790 231 - - 5 790 231
Cash and cash equivalents  

1

- -   3 729 949 (1)  14 870 602 18 600 551
   
Total assets         1 060 927 896      
   

1

625 000 000 -   (625 000 001) 26 028 397  1 086 956 293
 

EQUITY AND LIABILITIES                
Equity  

1

562 500 000 62 500 000 795 541 046   (625 000 001) (4 958 304) 790 582 742
   
Stated capital  

1

562 500 000 62 500 000  1 000 (625 000 001)   - 1 000
Retained income  

-

- - 795 540 046 - (4 958 304) 790 581 742
   
Non-current liabilities  

-

- - 248 907 806 - 21 092 194 270 000 000
   
Other financial liabilities  

-

- - 200 000 000 - 70 000 000 270 000 000
Shareholder loans  

-

- - 48 907 806 - (48 907 806) -
Deferred tax  

-

- - - - -  -
   
Current liabilities  

-

62 500 000 (62 500 000) 16 479 044 - 9 894 507 26 373 551
   
Trade and other payables  

-

62 500 000   (62 500 000)   15 215 756 - 11 157 795 26 373 551
Other financial liabilities  

 

- - 1 263 288   (1 263 288) -

Total equity and liabilities  

1

625 000 000 - 1 060 927 896  (625 000 001) 26 028 397 1 086 956 293
                 
Number of shares in issue  

1

 90 000 000  10 000 000  -      100 000 001
                 
Net asset value per share (ZAR)  

1.00

          7.91
Net tangible asset value per share (ZAR)  

1.00

          7.91

 

Notes and assumptions:

  1. Extracted without adjustment from the at incorporation statement of financial position of Newpark at 7 December 2015, as set out in Annexure 15. The at incorporation financial statements of Newpark at 7 December 2015 were audited by Grant Thornton who issued an unqualified audit opinion on the financial statements.
  2. Represents the issue of 90 000 000 Newpark shares in part settlement of the purchase consideration of Newpark Towers.
  3. Represents the capital raise in which Newpark will raise capital by way of an offer to invited investors to subscribe for 10 000 000 private placement shares at an issue price of R6.25. Proceeds from the private placement will be used to settle a portion of the remaining purchase consideration price payable to Newpark Towers' shareholders.
  4. Represents the acquisition of Newpark Towers. The statement of financial position has been extracted without adjustment from the audited statement of financial position of Newpark Towers at 31 August 2015, prepared in compliance with IFRS and audited by Grant Thornton, who issued an unqualified audit opinion thereon. The audited statement of financial position together with the Grant Thornton audit opinion are open for inspection at the company's office.
  5. In terms of the subscription agreement between Newpark and the vendors of Newpark Towers the subscription consideration of R625 million is to be settled by R62.5 million in cash, raised by way of private placement, and R562.5 million in Newpark shares.  In terms of the guidance in IFRS 3: Business Combinations we have determined that the acquirer in this transaction is Newpark Towers and Newpark would be the acquiree. However, as Newpark is not a business as defined in IFRS 3, the transaction is not a business combination and outside of the scope of IFRS 3. In terms of the guidance in IAS8.7-12 we have considered the relevant aspect of IFRS 3's methodology for reverse acquisitions and applied these principles by analogy –  specifically the principles on presenting the consolidated financial statements of the legal parent and a continuation of the accounting acquirer's financial statements i.e. Newpark Towers. For this reason no goodwill or intangibles have been identified and recognised as part of this transaction.
  6. Represents the estimated transaction costs of R4 958 304, directly attributable to the private placement, capitalised to stated capital and accounted for in accordance with IAS 32: Financial Instruments: Presentation.  Adjustments have been processed to account for a fair value adjustment to investment property for repair and maintenance expenditure which Newpark is contractually obliged to effect from 1 September 2015. A liability has been raised in respect of these costs. An adjustment has been processed to account for the replacement of the existing financing arrangements in place at 31 August 2015. After 31 August 2015, the Standard Bank loan of R201 million and the shareholders loans of R49 million were replaced with facilities provided by RMB of R270 million, which has resulted in additional cash being on hand. The RMB facility currently attracts a floating rate of 3 month JIBAR plus 1.65%. Newpark secured an interest rate swap and interest rate cap on this facility on 18 January 2016.An adjustment has been processed to account for the fair value of R3.7m of a financial asset, being the interest rate cap that was secured by Newpark with RMB . The interest rate cap has the effect that 50% of the interest on the RMB facility is capped at a rate of 10.17%. In addition, the interest rate swap secured with RMB has the effect that in respect of the remaining 50% of the interest on the RMB facility, the floating portion of the current rate is swapped for a fixed rate of 8.52%, before the RMB margin of 1.65%. The interest rate swap has no fair value on initial recognition.
  7. Represents the statement of financial position of Newpark, after the acquisition of Newpark Towers and private placement. The directors are not aware of any other post balance sheet events which require adjustment to the pro forma statement of financial position.

Annexure 13


INDEPENDENT REPORTING ACCOUNTANTS' LIMITED ASSURANCE REPORT ON THE CONSOLIDATED PRO FORMA STATEMENT OF FINANCIAL POSITION OF NEWPARK


"The Directors

Newpark REIT Limited
Ground Floor Houghton Place
51 West Street
Houghton
2041

20 January 2016

Dear Sirs

INDEPENDENT REPORTING ACCOUNTANTS' ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION OF NEWPARK REIT LIMITED ("NEWPARK")

We have completed our assurance engagement to report on the compilation of pro forma financial information of Newpark by the directors. The pro forma financial information as set out in Annexure 12 of the pre-listing statement ("the PLS"), consists of the pro forma statement of financial position of Newpark and related notes. The pro forma financial information has been compiled on the basis of the applicable criteria specified in the JSE Limited ("JSE") Listings Requirements.

The pro forma financial information has been compiled by the directors to illustrate the impact of the corporate action or event, described in Annexure 12, on the group's financial position as at 7 December 2015, being the incorporation date of Newpark, as if the corporate action or event had taken place at 7 December 2015. As part of this process, information about the group's financial position has been extracted by the directors from the company's financial statements at the incorporation date of Newpark, being 7 December 2015, on which an auditor's report was issued on 20 January 2016.

Directors' Responsibility for the Pro Forma Financial Information

The directors are responsible for compiling the pro forma financial information on the basis of the applicable criteria specified in the JSE Listings Requirements and described in Annexure 12.

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 specified in the JSE Listings Requirements 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. This standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether the pro forma financial information has been compiled, in all material respects, on the basis specified in the JSE Listings Requirements.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical 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 financial information used in compiling the pro forma financial information.

As the purpose of pro forma financial information included in a PLS is solely to illustrate the impact of a significant corporate action or event on unadjusted financial information of the entity as if the corporate action or event had occurred or had been undertaken at an earlier date selected for purposes of the illustration, we do not provide any assurance that the actual outcome of the event or transaction would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used in the compilation of the pro forma financial information provides a reasonable basis for presenting the significant effects directly attributable to the corporate action or event, and to obtain sufficient appropriate evidence about whether:

  • the related pro forma adjustments give appropriate effect to those criteria; and
  • the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

Our procedures selected depend on our judgment, having regard to our understanding of the nature of the company, the corporate action or event in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

Our 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 specified by the JSE Listings Requirements and described in Annexure 12.

Consent

This report on the unaudited pro forma financial information is included solely for the information of the Newpark shareholders. We consent to the inclusion of our report on the pro forma statement of financial position and the references thereto, in the form and context in which they appear.

Grant Thornton Johannesburg Partnership 

Chartered Accountants (SA)
Registered Auditors
Practice number 903485E

Robyn Fridberg
Partner
Chartered Accountant (SA)
Registered Auditor
@Grant Thornton
Wanderers Office Park
52 Corlett Drive
Illovo
2196"

Annexure 14


INDEPENDENT REPORTING ACCOUNTANTS' REVIEW CONCLUSION ON THE VALUE AND EXISTENCE OF THE ASSETS AND LIABILITIES ACQUIRED BY NEWPARK


"The Directors

Newpark REIT Limited
Ground Floor Houghton Place
51 West Street
Houghton
2041

20 January 2016

Dear Sirs

REVIEW CONCLUSION ON THE VALUATION AND EXISTENCE OF THE ASSETS AND LIABILITIES ACQUIRED BY NEWPARK REIT LIMITED ("NEWPARK")

Introduction

We have reviewed the assets and liabilities acquired by Newpark reflected in the acquisition adjustment column 4 of the pro forma statement of financial position included in Annexure 12 of the pre-listing statement to be issued on or about 26 January 2016 ("the PLS") relating to the assets and liabilities to be acquired by Newpark on listing on the Alternative Exchange of the JSE Limited ("JSE"). The directors are responsible for the compilation, contents and preparation of the adjustment columns of the pro forma statement of financial position. Our responsibility is to express a review conclusion on the value and existence of the assets and liabilities acquired reflected in the adjustment columns in accordance with the accounting policies adopted by Newpark and the recognition and measurement criteria of International Financial Reporting Standards ("IFRS").

Directors' responsibility for the pro forma statement of financial position

The directors are responsible for the compilation, contents and preparation of the adjustment columns of the pro forma statement of financial position.

Independent reviewer's responsibility

Our responsibility is to express a conclusion regarding the value and existence of the assets and liabilities to be acquired by Newpark in accordance with the requirements of section 13.16(e) of the JSE Listings Requirements based on our review. We conducted our review in accordance with the International Standard on Review Engagements ("ISRE") 2400: Engagements to Review Financial Statements, which is applicable to an engagement of this nature. ISRE 2400  requires us to conclude whether anything has come to our attention that causes us to believe that the financial information in respect of which we are required to issue a review conclusion, being the assets and liabilities acquired by Newpark reflected in the adjustment columns of the pro forma statement of financial position included in Annexure 12 of the PLS, are not fairly valued, do not exist or are not fairly presented in all material respects in accordance with the accounting policies adopted by Newpark and the recognition and measurement criteria of IFRS. This Standard also requires us to comply with relevant ethical requirements.

A review of financial information in accordance with ISRE 2400 consists primarily of making inquiries of management and others within the entity involved in financial and accounting matters, applying analytical procedures, and evaluating the sufficiency and appropriateness of evidence obtained. A review also requires performance of additional procedures when the practitioner becomes aware of matters that cause the practitioner to believe the financial information in respect of which we are required to issue a review conclusion may be materially misstated. We believe that the evidence we obtained in our review is sufficient and appropriate to provide a basis for our conclusion.

The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on this financial information.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the assets and liabilities to be acquired by Newpark reflected in the acquisition adjustment column 4 of the pro forma statement of financial position included in Annexure 12 to the PLS are not fairly valued, do not exist or are not fairly presented, in all material respects, in accordance with the accounting policies adopted by Newpark, and the recognition and measurement criteria of IFRS and the requirements of the Companies Act of South Africa.

Grant Thornton Johannesburg Partnership
Chartered Accountants (SA)
Registered Auditors
Practice number 903485E

Robyn Fridberg
Partner
Chartered Accountant (SA)
Registered Auditor
@Grant Thornton
Wanderers Office Park
52 Corlett Drive
Illovo
2196"

Annexure 15


HISTORICAL FINANCIAL INFORMATION OF NEWPARK


Set out below are extracts from the audited financial statements of Newpark at the date incorporation of the company. These extracts are the responsibility of the Newpark directors. The independent reporting accountants' audit report is contained in Annexure 16.

Nature of business

Newpark is a property holding and investment company. The company was incorporated as a public company on 7 December 2015.

Dividends

No dividends were declared during the current period.

Share capital

The company issued 1 no par value share during the period.

General review and commentary

The company has not traded since 7 December 2015, being its date of incorporation.

Board of directors

Gary David Harlow (Chairman, independent non-executive director)

Simon Peter Fifield (Chief executive officer)

Ronnie Ralph Hill (Chief financial officer)
Barry Daniel Van Wyk (Non-executive director)
Dionne Traci Ellerine (Non-executive director)
Kevin Murray Ellerine (Non-executive director)
Howard CharlesTurner (Independent non-executive director)
David Ivor Sevel (Independent non-executive director)

NEWPARK REIT LIMITED 

STATEMENT OF FINANCIAL POSITION AS AT 7 DECEMBER 2015


 

Note

R

ASSETS
Current Assets
Cash and cash equivalents
    1

Total assets   1

EQUITY AND LIABILITIES
Capital reserves
Stated capital
  3   1

Total equity and liabilities   1

Net asset value per share
Tangible net asset value per share
  1
1

Notes to the financial statements

  1. GENERAL INFORMATION

Newpark was incorporated on 7 December 2015 under the laws of the Republic of South Africa and is a company domiciled in South Africa. The preparation of the financial statements was done under the supervision of the Chief Financial Director, Ronnie Ralph Hill.

  1. SIGNIFICANT ACCOUNTING POLICIES
    1. Basis of preparation

The financial statements are prepared on the historical-cost basis.
The financial statements are prepared on the going concern basis and are presented in Rands unless otherwise indicated. The preparation of financial statements, in conformity with International Financial Reporting Standards ("IFRS"), requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or the period of the revision of future periods, if the revision affects both current and future periods.
The accounting policies set out below have been applied in preparing the financial statements for the period from incorporation to 31 December 2015. There is no comparative information shown as the company is newly incorporated and thus had no issued share capital, assets or liabilities.

  1. Statement of compliance

The annual financial statements have been prepared in accordance with IFRS and its interpretations adopted by the Independent Accounting Standards Board and the requirements of the Companies Act of South Africa.

Share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares, are shown as a deduction in equity from the proceeds.

  1. STATED CAPITAL

   R

Authorised:
2 000 000 000 no par value shares
 

Issued:
1 no par value share

1

  1

The unissued shares are under the control of the directors until the next annual general meeting.

SUBSEQUENT EVENTS

Save for the subscription, the share sale, the private placement and the listing, the directors are not aware of any other events subsequent to 7 December 2015, not arising in the normal course of business, which are likely to have a material effect on the financial information contained in these financial statements.

STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT OF CASH FLOWS

As these financial statements relate to the incorporation date of Newpark, being 7 December 2015, the statement of comprehensive income and statement of cash flows are not presented.

Annexure 16


INDEPENDENT REPORTING ACCOUNTANTS' REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF NEWPARK


"The Directors

Newpark REIT Limited
Ground Floor Houghton Place
51 West Street
Houghton
2041

20 January 2016

Dear Sirs

INDEPENDENT REPORTING ACCOUNTANT'S REPORT ON THE HISTORICAL FINANCIAL INFORMATION INCLUDED IN THE PRE-LISTING STATEMENT

Introduction

We have audited the at incorporation date financial information of Newpark REIT Limited ("Newpark") at 7 December 2015 as set out in Annexure 15 of the pre-listing statement to be issued on or about 26 January 2016 ("the PLS") in compliance with the JSE Limited ("JSE") Listings Requirements.

The at incorporation date financial information comprises the Statement of Financial Position as at 7 December 2015, and the notes thereto, comprising a summary of significant accounting policies and other explanatory information.

Directors' Responsibility for the Historical Financial Information

The company's directors are responsible for the preparation, contents and presentation of the PLS and the fair presentation of the historical financial information in accordance with International Financial Reporting Standards. The responsibility includes: designing implementing and maintaining internal control relevant to the preparation and fair representation of financial statements that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Reporting Accountants' Responsibility

Our responsibility is to express an opinion or conclusion on the historical financial information of Newpark, included in the PLS, based on our audit of the financial information at incorporation of Newpark at 7 December 2015.

We conducted our audit of the historical financial information at the incorporation date of 7 December 2015 in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and report the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial information. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial information, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial information.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the at incorporation date financial information of Newpark at 7 December 2015 presents fairly, in all material respects, for the purposes of the PLS, the financial position of Newpark at that date in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa and the JSE Listings Requirements.

Consent

We consent to the inclusion of this report, which will form part of the PLS to the shareholders of Newpark in the form and context in which it appears.

Grant Thornton Johannesburg Partnership
Chartered Accountants (SA)
Registered Auditors
Practice number 903485E

R M Huiskamp
Partner
Chartered Accountant (SA)
Registered Auditor
@Grant Thornton
Wanderers Office Park
52 Corlett Drive
Illovo
2196"

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