MAS REAL ESTATE INC.

ROMAN VALUE CENTRE

INTEGRATED ANNUAL REPORT 2019

HOW TO USE THIS REPORT

NAVIGATION AND INTERCONNECTIVITY

Extensive use is made of iconography and interconnectivity throughout this report to allow users to easily access and cross-reference with other relevant information. The icons used throughout the report are referenced below.

OUR CAPITALS

P	PORTFOLIO	The group's investment property portfolio and other related assets
F	FUNDING	The group's capital structure and the effective capital management of debt, equity and other liquid assets to maximise shareholder returns
R	RELATIONSHIPS	The intrinsic value that is created with all stakeholders of the group through multiple interactions
T	TEAM	The operating platform, incorporating the knowledge and expertise developed through the continued investment in people, systems and processes
S	SUSTAINABILITY	The group's philosophy to make a positive difference in a sustainable way through the operations of the group

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

HUMANIC

INTEGRATED ANNUAL REPORT

ABOUT MAS

About this report ... 2
Chairman's statement ... 5

AT A GLANCE

Company profile ... 6
Vision, mission and values ... 8
Markets and focus ... 10
Our value creation business model ... 12

STRATEGIC CONTEXT

Directors' report ... 14
Strategy and strategic objectives ... 18
Key metrics ... 20
Key risks, opportunities and uncertainties ... 22

CAPITAL VALUE CREATION

Portfolio ... 28
Funding ... 40
Relationships ... 44
Team ... 46
Sustainability ... 48

GOVERNANCE AND REMUNERATION

Board of directors ... 50
Corporate governance ... 57
Report of the Audit and Risk Committee ... 60
Report of the Remuneration and Nomination Committee ... 66
Report of the Governance, Social and Ethics Committee ... 81

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

Contents ... 85
Report of the independent auditor ... 87
Financial statements ... 92
Notes ... 97
Shareholding disclosures ... 193
Company information and advisors ... 194
Shareholder information ... 195
Definitions and abbreviations ... 196

HUMANIC REPORT

ABOUT MAS

ABOUT THIS REPORT

This integrated annual report has been designed with stakeholders in mind and developed to enhance transparency and accountability

MAS' integrated annual report for the year ended 30 June 2019 aims to give a holistic view of its performance, governance, future prospects and how it aims to achieve its objectives in a sustainable manner. By providing a range of financial and non-financial disclosures, this report aims to enable

all stakeholders to assess the performance of the group and its ability to create value from its five capitals in the short, medium and long term.

REPORT SCOPE AND BOUNDARY

The Board is pleased to present this report which covers the year from 1

July 2018 to 30 June 2019. This report provides an overview of both the financial position and the performance of the group's subsidiaries and its associates. This report extends its scope beyond the financial reporting boundary to include wider stakeholders.

REPORTING FRAMEWORKS AND REGULATIONS

The following reporting frameworks have been used in the preparation of this report:

The International Integrated Reporting Framework
King IV
BVI Business Companies Act 2004
JSE Listings Requirements
Rules and Regulations of the Luxembourg Stock Exchange
International Financial Reporting Standards as issued by the International Accounting Standards Board

This report has been prepared with reference to the International Integrated Reporting Framework's guiding principles and content elements, through which the group aims to continually improve its disclosures.

ASSURANCE

The group ensures integrity of the integrated annual report through executive management's and the Board's review of management information, as well as the independent review by the Audit and Risk Committee.

PricewaterhouseCoopers LLC has independently audited the Consolidated Annual Financial Statements that are contained within this integrated annual report. The unmodified audit opinion can be found on pages 87 to 90 of the group's Consolidated Annual Financial Statements and the scope of the report can be found on pages 89 to 90. PricewaterhouseCoopers LLC has also identified key audit matters which are disclosed and addressed in its audit report.

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements which are not considered to be forecasts but reflect the group's best expectations of future events. However, given the uncertainty of these future events, it is possible that actual results may differ materially from expectations. Users are cautioned not to place undue reliance on any forward-looking statements contained within this report. The group disclaims any intention and assumes no obligation to update or revise any forward-looking statements even if new information becomes available as a result of future events or for any other reason other than as required by the Rules and Regulations of the Luxembourg Stock Exchange, the EU Market Abuse Regulations or the JSE Listings Requirements.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

DETERMINING MATERIALITY

The concept of materiality has been used in the preparation of the report to provide information to the group's stakeholders that is of value or material interest. The group considers a matter to be material if it can substantially affect the group's ability to create and sustain value over the short, medium and long term, with reference to its five capitals.

By reviewing a range of evidence including: risk and opportunity assessments; Board documentation; operational reviews; and stakeholder engagements, the group has evaluated and determined which matters, favourable and unfavourable, are most important to the group's value creation. Matters identified are reviewed continually and prioritised based on their ability to affect value creation.

1 IDENTIFY	2 VALIDATE	3 PRIORITISE	4 REVIEW	5 DISCLOSE
Relevant matters are identified by the group as those that may favourably or unfavourably affect the group's ability to create value.	Not all matters raised will be considered to be material. The magnitude of a matter is evaluated and, if considered to be material, will be validated.	Matters are prioritised based on their ability to affect: value creation; time frame; area; size of effect; operational factors; and stakeholder considerations.	Matters related to value creation are reviewed and addressed by the group in terms of their priority over the short, medium and long term.	Judgement is applied in determining information to be disclosed regarding material matters in this report. Internal and external factors are reviewed, with stakeholder considerations at the forefront of the decisions, to ensure this report meets its primary purpose.

The following matters have been used throughout the report in order to focus the content of the report and information requiring disclosure:

CAPITALS	MATERIAL MATTERS
1 PORTFOLIO	- Acquisitions and disposals
- Developments
- Growth opportunities
2 FUNDING	- Capital structuring
- Capital management
3 RELATIONSHIPS	- Stakeholder value creation
- Stakeholder considerations
4 TEAM	- Processes and systems
- Group culture
- Resourcing
5 SUSTAINABILITY	- Achievement of strategic objectives
- Social, environmental and economic factors

RESPONSIBILITY STATEMENT

The Board and executive management acknowledge their responsibility for the integrity of the integrated annual report and confirm that they have applied their collective mind to its preparation and presentation. It is the opinion of the Board that the integrated annual report addresses all material matters, offers a balanced view of performance and has been prepared and presented in accordance with the International Integrated Reporting Framework.

This report was approved by the Board on 30 October 2019.

| Ron Spencer
Chairman | Werner Behrens
Executive director | Jonathan Knight
Executive director | Paul Osbourn
Executive director | Malcolm Levy
Non-executive director |
| --- | --- | --- | --- | --- |
| Melt Hamman
Non-executive director | Glynnis Carthy
Independent
non-executive director | Jaco Jansen
Independent
non-executive director | Pierre Goosen
Independent
non-executive director | Werner Alberts
Independent
non-executive director |

ABOUT MAS

CHAIRMAN'S STATEMENT

STRATEGY AND PERFORMANCE

Three years ago the group embarked on a programme to restructure the balance sheet and to optimise the mix of the assets to focus on those with growth potential. The attractiveness of the Central and Eastern European ("CEE") markets was identified, where strong GDP growth rates are translating into rapidly improving purchasing power, in turn driving tenant turnovers and rents. The group entered these markets in conjunction with joint venture partners, Prime Kapital, who has tremendous experience in the region.

I am pleased to report that this three-year programme has come to a very successful conclusion, exceeding our original expectations:

The property portfolio has more than tripled to nearly €1 billion;
More than 45% of the direct investment property portfolio is now invested in the growing markets of the CEE; and
Distributable earnings has more than quadrupled, to in excess of €57 million.

With the three-year programme now complete, the Board performed an in-depth review of the group's strategy. As part of this process, it noted that specialisation and increased focus are likely to provide the group the best opportunity to deliver continued sustainable growth. With the growth in CEE likely to continue, it was considered appropriate for the group to continue its expansion into CEE, and divest from its Western European portfolio in a phased manner. The focus of the

group will remain on retail assets, with exposure to the residential sector through the development joint venture, PKM Developments.

However, the Board also recognised the importance of the group being able to manage its own assets directly, without reliance on third parties. The objective of the group is therefore to be a real estate group invested in the growing markets of the CEE, with a fully integrated asset and property management system in place to manage the group's properties; and with substantial development exposure through PKM Developments.

TRANSACTION TO ACQUIRE PRIME KAPITAL'S STAKE IN CO-INVESTMENT JOINT VENTURE

Following from this, the Board is recommending the acquisition of Prime Kapital's effective economic interest in the co-investment joint venture, comprising the effective 20% participation in the venture less the interest cost on the participation funding that is provided by MAS. This transaction is subject to a shareholder vote and would, if approved, result in the group owning the platform that manages the assets in the co-investment joint venture.

DIVIDEND

The Board has proposed a dividend of 4.97 euro cents per share in relation to the second half of the year. This brings the total distribution to 8.75 euro cents per share for the year, which meets the group's distribution growth target.

GOVERNANCE

The Board has a comprehensive governance structure in place, through which it sets the strategy of the group and ensures that this is implemented effectively. High standards of corporate governance are applied throughout the group and further resources have been dedicated to this area during the year. The group applies the principles of the King IV Code of Corporate Governance. An implementation report is available on the group's website, www.masrei.com.

APPRECIATION

I would like to express my thanks to all the team members and the group's key partners for all their hard work in delivering impressive results. To

continue to drive the business forward and deliver on targets on a sustained basis is a tremendous achievement.

PROSPECTS

The outlook for the coming year is positive. The group will implement the strategy of continuing East, and will begin the programme of an orderly and disciplined divestment of the Western European portfolio, and redeployment of the proceeds into the growth markets of the CEE.

BOARD

During the year, we have strengthened the Board with key appointments. Werner Alberts, the lead independent director, and Melt Hamman, CEO of Attacq Limited, joined as non-executive directors. Werner Behrens and Paul Osbourn joined the executive team, as CEO and CFO respectively. Further announcements regarding new additions to the Board will be made in due course.

Personally, I have indicated my intention to resign in the coming months once a suitable replacement Chair has been identified. I have offered myself for re-election until a new Chair has been appointed, which will be by 30 June 2020. I am proud to have been part of the group's growth since it's listing some ten years ago and I am delighted to be able to pass on the reins at such an exciting time for the business. I wish my colleagues on the Board, and the employees and partners of the business, every success in the periods ahead. I am confident that they and the revised strategy will drive continued success for shareholders.

I would like to conclude by saying thank you for your confidence as stakeholders.

Ron Spencer
Chairman

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

AT A GLANCE

COMPANY PROFILE

PROPERTY INVESTOR, DEVELOPER AND OPERATOR

MAS is a commercial property investor, developer and operator listed on the main board of the JSE and is listed and admitted to trading on the Euro-MTF market of the Luxembourg Stock Exchange.

€964.7M

BOOK VALUE OF THE INVESTMENT PROPERTY PORTFOLIO

540,726 M²

TOTAL GLA

7.58 YEARS

WALT

97%

OCCUPANCY

BUSINESS STRATEGY

MAS' updated strategy is to focus exclusively on real estate investment, predominantly in retail and residential, in the CEE market and to have a substantial development pipeline in that market through our partners. To this end the group will redeploy capital invested in Western Europe to the CEE in a focused and disciplined manner and strengthen and integrate end to end institutional capability to manage and grow the CEE investments with the focus on income growth.

MANAGEMENT

MAS is internally managed, combining investment, development and asset management skills. Developments are undertaken both directly and by teaming up with strong developers that have an intimate knowledge of the local markets and by agreeing terms that lead to a strong alignment of interests.

FUNDING

MAS is targeting an aggregate portfolio LTV of 30%-40%. This may fluctuate up to a maximum of 50% on a temporary basis as the portfolio grows. Long-term debt funding is preferred and interest rates are managed through the group's hedging strategy. Developments are currently funded through equity and refinanced on completion.

HISTORY

Established in 2008, MAS has assembled, through acquisition and development, a high quality portfolio of retail, office, industrial, logistics and hotel properties in Romania, Germany, the United Kingdom, Bulgaria, Poland and Switzerland. Investments have been made into CEE via two joint ventures with Prime Kapital, a development joint venture ("PKM Developments") and a co-investment joint venture focused on income-generating assets. At 30 June 2019, the portfolio had an outstanding weighted average lease term of almost 8 years, occupied by tenants with strong corporate covenants.

OUTLOOK

Although CEE markets have increased in price, attractive opportunities are still available and are backed by a combination of relatively high initial acquisition yields and substantial growth prospects. Even more appealing is the development market, which is supported by rapidly expanding purchasing power and, in some cases, sub-optimally designed or undersized assets ripe for re-development or displacement.

Accordingly, MAS has embarked upon expansion into the growing economies of CEE. To facilitate the expansion, MAS has partnered with Prime Kapital, a management team with exceptional development, investment and financing experience in these markets over the last decade.

MAS now proposes to further capitalise on this relationship by acquiring Prime Kapital's stake in the co-investment joint venture, and taking receipt of the management platform. This will provide MAS with the ability to manage its own assets directly, a key part of its longer term objectives.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

7
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

KEY FEATURES RELATING TO MAS' PORTFOLIO AND SIZE:

INVESTMENT PROPERTY
BY SEGMENT

INCOME-GENERATING €923.93M
DEVELOPMENTS AND LAND BANK €40.74M

PASSING RENT¹
BY SECTOR

RETAIL €47.36M
INDUSTRIAL/LOGISTICS €4.88M
OFFICE €4.69M
HOTEL €1.86M

PASSING RENT¹
BY LOCATION

GERMANY €20.24M
ROMANIA €16.66M
UK €9.33M
BULGARIA €6.81M
POLAND €4.58M
SWITZERLAND €1.17M

¹ MAS' share of the income-generating portfolio's passing rent.

AT A GLANCE

VISION, MISSION AND VALUES

VISION

To be the pre-eminent real estate investment and development company in CEE focused on delivering sustainable and superior distribution growth to our shareholders

MISSION

To acquire, develop and effectively manage a diversified portfolio of high-quality real estate investments across CEE to deliver sustainable and superior distribution growth

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

VALUES

CREATIVITY

We are creative in the way we solve problems and look to add value for stakeholders

COLLABORATIVE AND RESPECTFUL

We are collaborative in the way we work and are respectful of each other and our stakeholders

GOALS AND RESULTS FOCUSED

We are motivated by results

INTEGRITY

We act responsibly in everything we do

CONVICTION

We believe in everything we do

Baia Mare, Romania
MALREAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

AT A GLANCE

MARKETS AND FOCUS

WHERE WE INVEST

WESTERN EUROPE

VALUE:² €527.24M

PASSING RENT:¹ €30.74M

STRATEGY:

Redeploy capital invested in Western Europe to the CEE in a focused and disciplined manner.

1 MAS' Share.
2 Includes investment property held for sale

CENTRAL AND EASTERN EUROPE

VALUE:² €437.43M

PASSING RENT:¹ €28.05M

STRATEGY:

Strengthen and integrate end to end capability to manage and grow our CEE investments, predominantly in retail and residential, with the focus on income growth.

FACTORS TO CONSIDER IN OUR CHOSEN MARKETS

CENTRAL AND EASTERN EUROPE

FACTORS

GDP and purchasing power grew faster than EUIS. Growth expectations are higher in the CEE markets. Driven by an increase in consumer and household spending off a low base, particularly in the retail space which is under-supplied.
Impact of e-commerce expected to be muted in the short-to medium term due to low density of retail provision and due to infrastructure and logistical challenges.
Although CEE markets have increased in asset value, attractive opportunities are still available that are backed by a combination of relatively high initial acquisition yields, substantial growth prospects and attractive debt terms.

OUR RESPONSE

MAS has embarked upon expansion into the growing economies of CEE. The group has partnered with Prime Kapital, a management team with exceptional development, investment and financing experience in these markets.

The group has entered into an agreement with Prime Kapital to acquire its property management platform, subject to shareholder approval.

The group has a development joint venture with Prime Kapital called PKM Developments. The group owns 40% of the equity in the venture and has funded €170 million via preference shares. It has also committed a further €250 million. The group has exclusivity with Prime Kapital in respect of developments in CEE until the earlier of 2025, or the expenditure of available funding.

WESTERN EUROPE

FACTORS

Established investment and operational platforms, with people on the ground with extensive local knowledge.
High levels of real estate market liquidity in comparison to other regions, giving the group flexibility to crystalise value and recycle capital.
Weak retail environment particularly in the United Kingdom.
Uncertainty over Brexit.

OUR RESPONSE

Recycling of capital out of the Western European portfolio, implementing a measured disposal strategy over the next approximately three years. Following a phased disposal plan in order to:

Maximise value of assets; and
Meet capital requirements of the business.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

KEY SECTORS

MAS' mandate is to invest in a high quality portfolio of retail, residential, office, industrial, logistics and hotel properties and developments. Notwithstanding this, MAS' current strategy is to focus predominately on retail and residential sectors in the CEE market.

OUR PORTFOLIO

RETAIL MARKET OVERVIEW

CENTRAL AND EASTERN EUROPE

TRENDS

Higher purchasing power is positively correlated with retail stock. Outperformance in purchasing power growth and retail sales growth is expected to support existing dominant retail schemes and make room for new schemes.
Growth outperformance in CEE retail markets expected to continue given the large economic gap versus EUIS.
Outperformance in economic growth understates the extent of the opportunities in CEE as old retail space is displaced by modern retail schemes. Less affluent regions in CEE are often lagging in this modernisation process.

OUR RESPONSE

CO-INVESTMENT JOINT VENTURE

The group, through the co-investment joint venture with Prime Kapital, has €437 million of retail property in Romania, Bulgaria and Poland, with €28 million¹ of passing rent.

Plans are underway to refurbish or extend these retail assets to add approximately 57,000 square metres to the aggregate GLA. This will increase the fashion and leisure offering of the centres to enhance the asset performance.

In addition, plans to reconfigure the assets and optimise the tenant mix to further increase the net operating income in the medium term are underway.

PKM DEVELOPMENTS

Leasing, permitting and construction continues apace across developments in Romania in the group's development joint venture, PKM Developments. Signed anchor tenants include Inditex brands, H&M, Carrefour, Cinema City and Altex.

WESTERN EUROPE

TRENDS

Weak retail environment particularly in the United Kingdom.
Uncertainty over Brexit.

OUR RESPONSE

The group has €302 million of retail assets in Western Europe, almost all of which is located in Germany. This generates a passing rent of €19 million, predominantly from tenants with strong covenants. There are no high street or shopping centre assets owned in the United Kingdom.

The group recently acquired a shopping centre in Flensburg, Germany. The centre is currently being asset managed to enhance the space and enable lettings to anchor tenants. In addition, existing leases are being restructured.

In line with the group's updated strategy the group will deploy capital invested in Western Europe to the CEE in a focussed and disciplined manner.

RESIDENTIAL MARKET OVERVIEW

CENTRAL AND EASTERN EUROPE

TRENDS

Large deficits of housing stock combined with the poor quality of current stock and growth in affordability fuel demand for modern housing stock.
Relatively low penetration rates of mortgage loans indicate significant financing headroom as well as substantial demand for home loans that is not adequately covered by current providers of finance.

OUR RESPONSE

Two large-scale residential developments in Bucharest and a large mixed-use development in IASI, Romania are currently underway with our partners Prime Kapital through the development joint venture, PKM Developments.

The expected budget for these developments is expected to be €254 million and will create a total of 3,735 residential units.

PKM Developments will be offering flexible purchase arrangements to residential homebuyers in light of challenges the buyers face in securing deposit and mortgage funding.

WESTERN EUROPE

TRENDS

Undersupply of affordable housing in the UK.
Lack of housing for the ageing population.

OUR RESPONSE

The group has residential development exposure in the United Kingdom at three sites in particular, New Waverley, Langley Park and North Street Quarter. In line with the group's strategy to be fully invested in the CEE markets all three sites are in various stages of disposal to developers and housebuilders.

¹ MAS' Share.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

AT A GLANCE

OUR VALUE CREATION BUSINESS MODEL

INPUTS

OPERATIONAL FRAMEWORK

THE CAPITALS OF VALUE CREATION

Our ability to generate value is dependent on access to our 5 capitals: portfolio; funding; relationships; team; and sustainable.

P

PORTFOLIO CAPITAL

The group's investment property portfolio

€965 million direct property portfolio
€396 million invested in PKM Developments
€147 million REIT portfolio gross exposure

F

FUNDING CAPITAL

Effective capital management

Share capital of €825 million
€456 million of outstanding debt
€98 million committed and undrawn debt facilities
Target LTV 30-40%

R

RELATIONSHIPS CAPITAL

Value created with stakeholders

Close working relationship with development partners in the group's invested markets
Investor confidence established through investor tours and regular communications.
Engagement with local communities

T

TEAM CAPITAL

Knowledge and expertise of our team

Skilled diversified Board
Talented people
Access to Prime Kapital
Continued investment in established systems and processes
Strong corporate governance

S

SUSTAINABLE CAPITAL

To make a positive difference

Investing in the communities in which it operates
Use of natural resources in a responsible and efficient manner

ACQUIRE

The group strategy is to grow income in a sustainable manner. To enable this, the group sources the best opportunities in its invested markets. A robust appraisal process facilitates effective allocation of resources to acquire accretive property.

DEVELOP

Through active engagement with tenants and communities, the group develops properties to meet the needs of prospective tenants and their customers.

MANAGE

The group actively manages the investment portfolio to maximise shareholder returns

OPTIMISE

The group optimises the allocation of capital by mature assets where value has been extracted and redeployed into opportunities for growth

SOUND CORPORATE GOVERNANCE IS A CRITICAL FOUNDATION FOR PROTECTING

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

OUTPUTS

PROVIDING SPACE FOR OUR TENANTS TO OPERATE

OUTCOMES

PORTFOLIO CAPITAL

The group's updated strategy is to be fully invested in CEE. During the year, the group acquired a further €338 million of income-generating property, of which €250 million is in CEE and €88 million in Western Europe – the Western European acquisitions being made before the strategy was updated to focus on CEE. In line with the strategy, the group identified over €200 million net equity in mature assets in Western Europe to be disposed in a disciplined manner to maximise realisable value. The group will redeploy this capital into the CEE, including into PKM Developments, where the commitment has increased by a further €120 million.

FUNDING CAPITAL

The group has continued to take advantage of low cost debt, with €325 million of additional debt drawn during the year. The increase in debt has resulted in the loan to value of the group increasing to 33.9%, from 10.0% in the prior year, within its target range of 30%-40%. The group achieved distributable earnings per share for the year of 9.01 euro cents, which represents growth of 41.9%, compared to 6.35 euro cents in the prior year. A distribution of 8.75 euro cents per share was declared in relation to the earnings for the year.

RELATIONSHIPS CAPITAL

Stakeholder communication is vital for effective stakeholder engagement, which is fundamental to the group's ability to create long-lasting relationships. During the year the group hosted an investor property tour of assets and opportunities in Romania attended by investors, analysts and the media; continuous updates via the website and SENS announcements; and proactive investor interaction with the group's Investor Relations.

TEAM CAPITAL

The group has established a strong team with extensive knowledge and experience across its invested markets. Throughout the year a number of initiatives were completed to enhance, attract, motivate and retain the team: welcomed a new CEO and CFO, two new non-executive directors and increased the headcount by 4 people including the appointment of a Group Legal Counsel.

The group has robust and reliable processes and operating systems in place. During the year these were enhanced by the implementation of an enterprise risk management software solution to strengthen the risk management function.

SUSTAINABLE CAPITAL

The group recognises the importance of using natural resources in a responsible and efficient manner to ensure they are sustainable for the environment. A few of the highlights of how the group has made a difference include: a renewable photovoltaic farm to provide power for one of the sites; the use of efficient LED lights across all new developments in CEE; and analysing tenant power consumption across several centres to reduce the supply capacity. The group recognises the importance of investing in the communities in which it operates and it is at the heart of all its capitals. The group has made a positive impact to Ikhaya le Themba, a community based charity operating in Khayelitsha in Cape Town, by offering a 3-year guaranteed amount in 2017, as well as supporting and making a vast difference to many other charities across the jurisdictions it operates during the year.

TRADE OFFS

P

The group's property portfolio has a long-term investment horizon. Strong investment discipline is required to mitigate the risk of sacrificing long-term growth for shorter-term distribution growth targets.

F

Investment in team and relationships capital can impact the funding capital and distribution to shareholders in the short term but has a positive impact in the long term.

R

The investment in the group's relationships capital allocates time from the other capitals and has a negative impact on the funding capital. In the long term there is a positive impact on the other capitals.

T

Investing in the group's people is imperative to generate sustainable and long-term growth. Investing in the group's systems and processes has a negative impact on funding capital in the short term. However, once implemented there is a positive impact, improving the quality of information and increasing efficiency and staff morale.

S

Investing in sustainable solutions increases our sustainable capital but has an impact on funding capital in the short to medium term. Through efficiencies and renewable sources of energy, there is a positive impact of financial capital in the long term.

STAKEHOLDER VALUE AND ACHIEVING THE GROUP'S STRATEGIC OBJECTIVES

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

STRATEGIC CONTEXT

DIRECTORS' REPORT

OUTPERFORMED DISTRIBUTABLE EARNINGS PER SHARE TARGET OF 8.75 EURO CENTS

41.9%
YEAR-ON-YEAR INCREASE IN DISTRIBUTABLE EARNINGS PER SHARE

59.6%
YEAR-ON-YEAR INCREASE IN NET RENTAL INCOME

45.3%
OF INVESTMENT PROPERTY PORTFOLIO IN CEE¹

2.0%
YEAR-ON-YEAR INCREASE IN EPRA NAV PER SHARE TO 137.6 EURO CENTS

2 YEAR EXTENSION TO EXCLUSIVITY WITH PRIME KAPITAL UNTIL 2025
↓ Prime Kapital

¹ Includes investment property held for sale

In 2016, MAS embarked on a three-year programme to restructure and grow its balance sheet. The emphasis was on developing and owning retail assets in Central and Eastern Europe (CEE), given strong historical consumption growth trends in the region that are expected to continue, whilst retaining the benefits of a geographically diversified asset portfolio. This was funded through raising both debt and additional equity.

This initial programme has now drawn to a successful close. In light of this, the Board of directors has undertaken an in-depth review of the group's strategy. The impressive performance and growth of the CEE portfolio led the Board to consider that the continued expansion into CEE, combined with an orderly and disciplined divestment of the Western European assets, phased to maximise realisable value, is the most appropriate strategy for the group. The increased geographical focus in the higher growth CEE markets, with a predominant focus on retail, provides the group with the best opportunity to continue to meet its long-term objectives of sustainable growth in distributable earnings per share.

DISTRIBUTABLE EARNINGS

The group achieved distributable earnings per share for the year of 9.01 euro cents, which represents growth of 41.9% compared with 6.35 euro cents in the prior year. This significant improvement in distributable earnings per share was driven by the acquisition of a number of investment properties during the year, as well as the interest earned on the additional preference share investment in PKM Developments and distributions received from the group's real estate equity securities.

FINAL DISTRIBUTION

Based on the increase in distributable earnings and in line with the previously stated distribution targets, the Board has proposed a final distribution per share of 4.97 euro cents for the second half of the 2019 financial year. This brings the distribution for the year to 8.75 euro cents per share, in line with guidance.

INCOME-GENERATING PORTFOLIO AND NET ASSET VALUE

Investment property, including investment property held for sale, grew by 52.4%, from €632.8 million at 30 June 2018 to €964.7 million. The portfolio performed strongly, with net rental income growing by 59.6% from €32.3 million to €51.6 million year-on-year and net operating income increasing by 51.8%, from €38.3 million to €58.2 million. This growth was driven by acquisitions, income-enhancing asset management initiatives and strong tenant performance.

The EPRA net asset value per share increased by 2.0% to 137.6 euro cents per share, compared to 134.9 euro cents per share at the 30 June 2018 year-end. This was achieved due to the completion of developments and valuation gains across the direct portfolio which offset negative fair value adjustments on the real estate equity securities portfolio.

ACQUISITION, DISPOSAL AND DEVELOPMENT UPDATE

The timely redeployment of capital realised from the divestment of the Western European assets will be key to the successful implementation of the next phase of the group's strategy. While opportunities remain for reinvestment, current market pricing has led the group to exercise caution when assessing opportunities. The group is unwilling to overpay for assets and will assess new capital deployment opportunities carefully to ensure that its longer-term strategic objectives are not compromised by actions taken in pursuit of short-term goals. MAS remains prudent in its investment process and continues to focus on investing in assets with high organic growth and the potential to add value.

MILITARI SHOPPING CENTRE, BUCHAREST, ROMANIA (ACQUIRED JULY 2018)

The acquisition of the Militari Shopping Centre, through the investment joint venture, was completed in the current reporting period. Trading at the 56,200 square metre GLA centre has been strong since acquisition, with the optimisation of leases at expiry, reconfiguration of units and the addition of non-GLA revenue all

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

providing a platform to grow income. Given ongoing residential densification around the centre, the group is working on plans to extend the centre and substantially increase the GLA to approximately 80,000 square metres.

ATRIUM MALL SHOPPING CENTRE, ARAD, ROMANIA (ACQUIRED DECEMBER 2018)

The Atrium Mall is the only modern retail destination in Arad and the wider catchment area. The mall is well established and centrally located, adjacent to main transport hubs, and with good accessibility and visibility. The city of Arad is situated in Western Romania, close to the Hungarian border. It is the administrative capital of Arad county and forms the principal economic hub of the area. The city has healthy demographics, which are supported by growing purchasing power, and it benefits from a significant catchment area, with 334,000 people within a 45-minute drive.

The mall has a fashion and entertainment focus, with an approximate GLA of 28,600 square metres over three floors. It is anchored by strong tenants including large European retailers Carrefour, Inditex, H&M, C&A, New Yorker, LC Waikiki, Hervis, Deichmann, Media Galaxy, Pepco, CCC and Cinema City with a 10-screen cinema.

Reconfiguration and tenant mix optimisation initiatives are in progress to consolidate the mall's regionally dominant position and enhance the net operating income from this asset.

FLENSBURG GALERIE SHOPPING CENTRE, FLENSBURG, GERMANY (ACQUIRED JANUARY 2019)

The Flensburg Galerie shopping centre has a GLA of 24,540 square metres and is situated on Flensburg's prime shopping street. Flensburg is an important economic hub close to the border with Denmark, from where visitors come to take advantage of attractive pricing differentials. The total catchment area for Flensburg Galerie is more than 500,000 people.

The investment offers the potential for further value to be added, with scope to reduce vacancies, reconfigure parts of the centre and relocate certain tenants to enhance net operating income. Initial asset management initiatives such as the recent opening of Netto and Muller stores have already had a positive impact on footfall at, and the value of, the centre.

ROMANIAN PORTFOLIO, VARIOUS LOCATIONS, ROMANIA (ACQUIRED FEBRUARY 2019)

Through the investment joint venture, MAS acquired nine completed retail developments in Romania from PKM Developments for a price of €109.1 million. The portfolio currently includes two larger value centres, both anchored by Carrefour, in Roman, with 18,800 square metres of GLA, and Baia Mare, with 21,300 square metres of GLA. In addition there are seven smaller, well-located developments adjacent to pre-existing and independent Kaufland mini-hypermarkets in Slobozia, Focsani, Targu Secuiesc, Ramnicu Sarat, Fagaras, Sebes and Gheorgheni. Tenants include large international and national anchors such as Carrefour, New Yorker, C&A, DM, Altex, Takko, CCC, Pepco, Deichmann, Jysk, KFC and McDonald's.

There is potential for second-phase developments at the centres in Slobozia, Roman and Baia Mare which could add approximately 11,000 square metres of GLA. On completion these second-phase developments can be sold by PKM Developments to MAS at a yield of 7.5%.

At acquisition, the portfolio was independently valued at a net initial yield of 7.5%. Part of the consideration for the transaction has been deferred until it is required by PKM Developments for further projects.

PREMIER INN AND HUB BY PREMIER INN HOTELS, EDINBURGH, SCOTLAND (DISPOSED OCTOBER 2018)

As previously reported, in October the group disposed of the Premier Inn and Hub by Premier Inn Hotels, with its associated retail units, at New Waverley, Edinburgh, for €43.3 million (£38.0 million). The sale price represented a net operating income yield of 4.1%. This capital was recycled into higher-yielding opportunities, allowing the group to leverage its ability to manage assets and grow income generated by investments.

UBERIOR HOUSE, EDINBURGH, SCOTLAND (ACQUIRED MAY 2018)

The key aspects of the Uberior House acquisition business plan were completed ahead of schedule. Notably, the leases with Bank of Scotland have been extended to December 2030, significantly increasing the certainty of income from, and value of, the asset. There is further potential for rental income growth at the next rental reviews in December 2020.

PKM DEVELOPMENTS

The development cost for the secured pipeline in CEE is estimated at €792.1 million and consists of the projects discussed below. In May 2019, MAS agreed to increase its commitment to the PKM Developments joint venture by a further €120.0 million to fund this pipeline, with a further two-year extension to the exclusivity and life of the venture. The exclusivity period will now run until March 2025, and the venture until March 2030.

Seven commercial developments are either being progressed through design and permitting or have commenced construction, of which two value centres in Zalau and Balotesti are expected to be completed by the end of December 2019.

SILK DISTRICT, IASI, ROMANIA

Zoning is ongoing on the 10-hectare site in Iasi where a large-scale, mixed-use project is planned that will include up to 100,000 square metres of A-class offices, 2,500 residential units and a hotel. Iasi, with a population of 369,000 people, is the second-largest city in Romania, the most important industrial centre in the north-eastern part of the country and the second-largest university city outside Bucharest, with over 53,000 students. The project is near the city centre and within walking distance of the two largest university campuses. It is highly visible, with 450 metres of frontage on the main boulevard connecting the site to the city centre and is easily accessible both by car and public transport. Three public transport hubs including bus and tram, are located on, or in the immediate vicinity of, the site.

Major office tenants and hotel operators continue to express a strong interest in the planned development. The zoning process is expected to be completed in the fourth quarter of 2019 and construction is planned to start in the second quarter of calendar year 2020. The delivery of the first residential and office buildings is expected to take place in the third quarter of calendar year 2021.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

STRATEGIC CONTEXT

DIRECTORS' REPORT

MALL MOLDOVA, IASI, ROMANIA

Zoning approval and the building permit have been received, and infrastructure and enabling works are now commencing for the planned redevelopment of Era Shopping Park, Iasi, into the 106,300 square metre GLA super-regional Mall Moldova, which will be the largest retail and leisure development in Romania outside Bucharest. Tenant demand remains strong with leasing progressing in line with expectations.

AVALON ESTATE, BUCHAREST, ROMANIA

The permitting process is ongoing for this upmarket, modern housing estate near the developing central business district and commercial centre in the affluent northern part of Bucharest. The pre-construction sales process has commenced and was well received, with 80% of the first units released, already sold. The delivery of the first phase of the planned 767 high-quality houses, townhouses and apartments is expected to take place in the third quarter of 2021.

ARGES MALL, PITESTI, ROMANIA

Permitting and leasing are ongoing for the planned 50,800 square metre GLA, regionally-dominant mall in a central, high density location in Pitești. The project includes the construction of a bridge and connecting roads over the railway tracks between the site and town centre that will be funded and constructed by PKM Developments and then donated to the public authorities on completion.

MARMURA RESIDENCE, BUCHAREST, ROMANIA

Zoning approval has been obtained and the building permit is imminent for the construction of five towers and 468 individual apartments, as well as 1,700 square metres of supporting retail and service functions. The pre-construction sales process has commenced, with 70% of pre-construction units released now sold.

DAMBOVITA MALL, TARGOVISTE, ROMANIA

A building permit was secured, and construction commenced for the 32,900 square metre GLA, regionally-dominant mall in Targoviste. Several major anchor tenants, including Carrefour, Cinema City, Altex, Pepco and CCC have been secured for the development. It will be the first mall in the Dambovita county that will form part of, and be complemented by, a wider urban regeneration project undertaken by the local authorities within two kilometres of the city centre, in a densely populated residential area. The opening of the mall is scheduled for the second quarter of calendar year 2020.

DNI VALUE CENTRE, BALOTESTI, ROMANIA

Zoning approval and building permits have been obtained in relation to the 27,300 square metre GLA, convenience value centre extension of the existing independently owned Hornbach and Lidl units in Balotesti, a rapidly developing affluent residential area, about 25 kilometres north of Bucharest. Lease agreements were concluded with anchor tenants such as Carrefour hypermarket, Jysk, Noriel, Pepco, Animax, DM Drogerie, CCC, Hervis, Sportissimo, Deichmann, New Yorker and Altex. Construction is well progressed and the opening of the first phase of the development is expected in early December 2019, with Carrefour already on site and working on its fit-out.

PLOTESTI VALUE CENTRE, PLOTESTI, ROMANIA

Zoning efforts are ongoing for a retail development in Ploiesti on a plot of land in a densely populated residential area in close proximity to the city's main train, tram and bus stations with high visibility and excellent road access. Even though leasing has not yet commenced, several major anchor tenants have expressed strong interest in the development.

ZALAU VALUE CENTRE, ZALAU, ROMANIA

The building permit has been received and construction is well progressed on the development of a 19,200 square metre GLA retail value centre with a high concentration of anchor tenants in Zalau. The project location is highly visible, in the immediate vicinity of a dense residential area and the city's regional bus terminal, on the main road connecting Zalau with the other major cities in the county and wider Transylvania area. Lease agreements have been entered into with tenants including Carrefour, Noriel, Altex, CCC, Pepco, Jysk, Benvenuti and Takko. The centre is expected to open for trade in November 2019.

SEPSI VALUE CENTRE, S'ANTU GHEORGHE, ROMANIA

Six hectares of land have been secured in Sfantu Gheorghe, the capital of Covasna county, with plans to develop and operate a 16,700 square metre GLA retail value centre with a high concentration of anchor tenants. The project is in the immediate vicinity of the city centre and easily accessible by car and public transport, both from the city as well as from the wider region. The catchment area includes approximately 172,000 people within a 45-minute drive. Anchor tenants have expressed strong interest in the planned development and permitting is ongoing. Assuming permitting is obtained as planned, the centre is expected to open by June 2020.

OTHER DEVELOPMENTS, EXTENSIONS AND LAND BANK

Plans are being developed to refurbish or extend several of the existing CEE retail assets owned in the investment joint venture with Prime Kapital. The extensions and refurbishments are expected to add approximately 57,000 square metres to the aggregate GLA of these retail assets. This will increase the fashion and leisure offering of the centres to consolidate their regionally dominant position and enhance asset performance. Plans include an extension of 3,000 square metres of GLA at Nova Park in Poland, for which the building permit has been received; an extension of 15,000 square metres of GLA at Galleria Burgas, for which land has been secured; a refurbishment of Galleria Stara Zagora Mall, which is in progress and expected to be completed in December 2019; a major extension of Militari Shopping Centre; and extensions to some of the newly acquired assets which form part of the transaction with PKM Developments as discussed above.

NEW WAVERLEY, EDINBURGH, SCOTLAND

The 19,000 square metre office development for the UK government achieved practical completion in May 2019, ahead of schedule and on budget, realising a total profit of €12.5 million (£11.0 million) over the 2018 and 2019 financial years. In addition to the disposal of the Premier Inn and Hub by Premier Inn Hotels, with its

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

associated retail units, discussed above, the southern section of the residential element of the scheme was sold to Queensberry, a housebuilder, on 30 October 2018 for €7.4 million (£6.5 million). The GPU's option over the northern residential section has now lapsed and this is also in the process of being sold to Queensberry.

LANGLEY PARK, CHIPPENHAM, ENGLAND

CAPITAL MANAGEMENT

At year end, the group held €71.2 million in cash and had access to €98.0 million in undrawn secured and unsecured debt facilities in addition to the REIT portfolio.

At 30 June 2019 the group loan to value was 33.9% (30 June 2018: 10.0%), below the 40.0% upper limit at which we are comfortable.

At the financial year end the group had a liability of €91.8 million of interest-bearing deferred consideration and a further €250.0 million preference share funding commitment to PKM Developments. Settling the interest-bearing deferred consideration liability and meeting the preference share funding commitment therefore represent the principal anticipated uses of capital available for redeployment into CEE from the Western European asset divestment programme and the liquidation of the real estate equity securities portfolio.

Efficient capital management is an important area of value creation for shareholders. To achieve this, the Board will consider buying back shares as and when it can create value for shareholders, if the trading price of the shares falls significantly below the intrinsic value per share. Such buybacks will be done with care, since capital is a scarce and valuable resource.

STRATEGY

As part of the updated strategic direction of the business, the Board recognises the importance of being able to manage its income-generating investment properties in CEE directly without reliance on third parties. This strategic intent envisages that MAS will strengthen its institutional capacity to manage and grow its CEE investments. This process is underway.

PROSPECTS

With the group having delivered on its strategy and distribution targets for the financial year ended 30 June 2019, MAS has set itself a three-year target of growing its distribution per share by 30% for the year ending 30 June 2022, from the current distribution level of 8.75 euro cents per share. It should be noted that this targeted growth will not be linear, given that the strategic changes referred to above will include implementing a phased re-deployment of capital from Western Europe into CEE over time. This target is based on the assumption that a stable macro-economic environment will prevail, no major corporate failures will occur and that budgeted rental income, based on contractual escalations and market-related renewals, will be collected. In addition, it is assumed that investments in Western Europe will be able to be divested at least for book value and redeployed contemporaneously in CEE markets at a rate of return on equity at least equivalent to what is currently being achieved in Western Europe. This target has not been reviewed or audited by the group's auditors.

MAS will continue to pursue profitable growth through further acquisition and development opportunities in its markets. Further announcements will be made as appropriate.

By order of the Board of directors

DIRECTORS AND CHANGES:

Ron Spencer
(Non-Executive Chairman)

Werner Behrens
(CEO)

Paul Osbourn
(CFO)

Jonathan Knight
(OIO)

Werner Alberts
(Non-Executive Director)

Glynnis Carthy
(Non-Executive Director)

Pierre Goosen
(Non-Executive Director)

Melt Hamman
(Non-Executive Director)

Jaco Jansen
(Non-Executive Director)

Malcolm Levy
(Non-Executive Director)

Paul Osbourn and Werner Alberts were appointed to the Board with effect from 7 September 2018. Morne Wilken, the former CEO, and Gideon Oosthuizen, former non-executive director, ceased to be directors with effect from 14 December 2018. Melt Hamman was appointed to the Board with effect from 14 December 2018. Malcolm Levy transitioned to the role of non-executive director with effect from 26 June 2019. Werner Behrens was appointed as director and CEO with effect from 1 May 2019.

REPORTING CURRENCY

The group's results are reported in euros.

LISTINGS

MAS is listed on the Main Board of the Johannesburg Stock Exchange and is also listed and admitted to trading on the Euro MTF market of the Luxembourg Stock Exchange.

EXTERNAL AUDITOR

PricewaterhouseCoopers LLC ("PwC") was appointed as the auditor of the group on 27 November 2018.

TRADING STATEMENT

The group uses distribution per share as its most relevant unit of measure for trading statement purposes.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

STRATEGIC CONTEXT

STRATEGY AND STRATEGIC OBJECTIVES

MAS' updated strategy is to focus exclusively on real estate investment, predominantly in the retail and residential sectors, in the Central and Eastern European market, and have a substantial development pipeline in that market through our partners. To this end we will:

STRATEGIC OBJECTIVES	ACHIEVEMENTS
FULLY INVESTED	The group has made significant progress to being fully invested, it has acquired Militari, Atrium mall, Braunschweig, Flensburg Galerie and the Romanian value centre portfolio of nine assets. This has added a further €338 million of income-generating property in the year, of which €250 million is in CEE and €88 million in Western Europe.
The group has optimised the portfolio through the identification, disposal and recycling of mature properties. The group has disposed of €50 million of property in the United Kingdom and is actively marketing five retail properties in Germany.
The group invested a further €70 million into the development joint venture, PKM Developments, and increased its commitment by a further €120 million to fund the secured pipeline. Once drawn the total preference share in PKM Developments will be €420 million.
At year end, the group held €71 million in cash and had access to €98 million in undrawn secured and unsecured debt facilities in addition to the REIT portfolio. The group loan to value level at 30 June 2019 was 33.9% (30 June 2018: 10.0%), which is below the 40% upper limit at which the group is comfortable.
CONTINUED INVESTMENT IN PEOPLE, SYSTEMS AND PROCESSES AS THE ORGANISATION GROWS	During the year the group implemented an enterprise risk management software solution and an updated internal control framework to further enhance the reporting and monitoring of controls.
The group also introduced a dedicated, independent and confidential whistleblowing hotline for the group's staff.
In line with the group's updated strategy, to focus exclusively in the CEE market, the group entered into an agreement with Prime Kapital to acquire its interest in the co-investment joint venture, and take receipt of the management platform, subject to shareholders' approval.
ENHANCED STAKEHOLDER COMMUNICATION	Stakeholder communication is vital for effective stakeholder engagement, which is fundamental to the group's ability to create long-lasting relationships. During the year a number of initiatives were implemented to enhance stakeholder communication:
- Hosted an investor property tour of assets and opportunities in Romania attended by investors, analysts and the media;
- Pro-active investor interaction by group Investor Relations; and
- Held successful Board strategy days.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Redeploy capital invested in Western Europe into Central and Eastern Europe in a focused and disciplined manner; and
Strengthen and integrate end to end capability to manage and grow our Central and Eastern European investments with a focus on income growth.

STRATEGIC OBJECTIVES	APPROACH	LOOKING AHEAD	TARGETS
REDEPLOY CAPITAL INVESTED IN WESTERN EUROPE INTO CENTRAL AND EASTERN EUROPE	- Recycling of capital following a phased disposal plan in order to maximise the value of assets and meet the capital requirements of the business.
- Detailed asset management programme for each investment.	- Phased disposal of the Western European portfolio of assets via an orderly and disciplined process.
- Enhance the value of assets prior to sale by reconfiguration and reorganisation/repositioning of tenants.
- Increase realisable value through the prolonging of leases and the letting of vacant spaces.	- The orderly and disciplined divestment of capital invested in Western Europe and its redeployment into Central and Eastern Europe over the next approximately three years.
STRENGTHEN AND INTEGRATE END TO END CAPABILITY TO MANAGE AND GROW OUR CENTRAL AND EASTERN EUROPEAN INVESTMENTS WITH THE FOCUS ON INCOME GROWTH	- Ensure MAS has the necessary human resources, systems, processes and intellectual property to manage the Central and Eastern European assets without reliance on third parties.
- Continued exposure to the development opportunities in Central and Eastern Europe through investment in PKM Developments Limited.
- Timely redeployment of capital realised from the divestment of the Western European assets.
- Re-finance historical debt in the portfolio.	- The development cost for the secured development pipeline in PKM Developments is estimated at €783 million.
- Agreed to increase the commitment to the PKM Developments joint venture by a further €120 million to fund the pipeline with a further two-year extension to the exclusivity and life of the venture.
- Continue to develop banking relationships to maintain gearing at optimal levels and reduce the cost of debt.	- Fully functioning, focused CEE real estate investment company, with comprehensive integrated CEE management capability.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

STRATEGIC CONTEXT

KEY METRICS

DISTRIBUTION PER SHARE

INVESTMENT PROPERTY

PASSING RENT

EPRA NAV PER SHARE

LOAN TO VALUE

MEDIAN DAILY SHARE VOLUME

i It should be noted that this targeted growth will not be linear, given that the strategic changes referred to above will include implementing a phased re-deployment of capital from Western Europe into CEE over time. This target is based on the assumption that a stable macro-economic environment will prevail, no major corporate failures will occur and that budgeted rental income, based on contractual escalations and market-related renewals, will be collected. In addition, it is assumed that investments in Western Europe will be able to be divested at least for book value and redeployed contemporaneously in CEE markets at a rate of return on equity at least equivalent to what is currently being achieved in Western Europe. This target has not been reviewed or audited by the group's auditors.
ii Includes investment property held for sale.
iii MAS' share of the income-generating portfolio's passing rent.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

KEY METRICS ARE DEFINED AS FOLLOWS:

KEY METRICS	MEASURE	EXPLANATION
Portfolio
Passing rent	Income-generation	The secured annual rent passing at the balance sheet date.
Investment property	Income-generation potential	Income-generating property, development property, land bank and investment property held for sale.
EPRA NAV per share	Capital preservation and growth	IFRS net assets adjusted for the dilutive impact of share options, deferred taxation on property and derivative valuations, and the mark-to-market of effective cash flow hedges and related adjustments, as prescribed by EPRA.
Funding
Distribution per share	Sustainable ability to pay shareholders	The distribution per share to be paid to shareholders as determined by the directors at their discretion. The group's policy is to pay out all distributable earnings per share on a semi-annual basis, as well as capital or other profits at the director's discretion.
Loan to value	Gearing	Loan to value (LTV) is the ratio of the nominal value of debt net of cash and cash equivalents to the aggregate value of property assets, including investment property held for sale, equity accounted investments, preference share investments and listed investments (REIT portfolio). CFDs are included on a gross basis, with the funding leg as debt and gross exposure as the related asset value.
Median daily share volume (annual)	Liquidity of traded share	The median number of shares traded per day during the financial period on the JSE and the Luxembourg Stock Exchange.

Roman Value Centre, Romania

STRATEGIC CONTEXT

KEY RISKS, OPPORTUNITITES AND UNCERTAINTIES

Effective risk management is an integral part of the group's strategic and operational planning process.

RISK APPETITE

The pursuit of the revised strategy brings both risks and opportunities and has led to a shift in risk appetite and tolerance.

Over the next approximately three financial years, MAS will transition from a geographically diversified investment portfolio to focus on the higher growth markets of the CEE region. MAS is well positioned to exploit the opportunities in CEE and will: redeploy capital invested in Western European assets; strengthen and integrate the end to end capability to manage and grow the CEE investments; and continue to fund and participate in a substantial and attractive development pipeline in the CEE region through the development joint venture with PKM Developments.

To mitigate any perceived incremental operational and/or geographical risk as a result of the transition MAS has partnered with Prime Kapital, a management team with exceptional development, investment and financing experience in the CEE market over the last decade.

The revised strategy may bring increased execution risk in relation to the disposal of the Western European assets and redeployment of capital in CEE markets. To mitigate this risk the group will implement a measured and phased disposal plan in order to: maximise the value of assets; and meet the capital requirements of the business.

COMBINED ASSURANCE FRAMEWORK

The group has a combined assurance model to manage risk and to ensure the effectiveness of controls, risk management procedures and governance processes. The model's multiple lines of defence emphasise the fundamental concept of holistic risk management, allowing the group to manage its risk exposure and reduce uncertainties, whilst optimising opportunities.

The lines of defence are:

The Executive team considers the operating context and the adequacy of controls on an ongoing basis. It, together with senior management, sets the tone of the group by identifying, evaluating and assigning ownership for the key risks that the business faces and further implementing mitigating controls. It also ensures that the corporate governance framework has clear parameters that specify how the group operates.
Everyone that executes tasks in the ordinary course of business has appropriate and relevant training and experience to perform the task. A culture of open feedback encourages issues to be raised immediately and clear escalation procedures are in place.
Management owns and manages the risks within their respective functions and has collective responsibility for the overarching organisational risks.
Management designs, implements and monitors controls to address the risks identified within each function. It also supervises, reviews and oversees the duties undertaken by staff, without abdicating responsibility or accountability, in order to detect potential errors or attempted frauds.
The Audit and Risk Committee, on behalf of the Board, ensures that the combined assurance model is operating as intended. It provides oversight to ensure that the group's risks are appropriately identified and that the associated internal controls are effective in managing the risk. The committee advises, and reports to the Board, on the key risks and the effectiveness of the combined assurance model.

This model sets out and reinforces an 'everyone is responsible' tone by positioning each of the lines of defence to function effectively. This ensures both a top down and bottom up approach, facilitating early identification of potential risks, proactive mitigation, timely reporting and escalation thereafter.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK MANAGEMENT PROCESS

1. RISK IDENTIFICATION

Risk identification is a two-tiered process:

A top-down approach is tailored to the identification of key strategic risks; and
A predominantly bottom-up approach identifies the key operational risks the group is exposed to.

2. RISK ASSESSMENT

Each risk is assessed to determine the potential impact on the group and the likelihood of occurrence. The level of inherent risk faced by the group is reassessed on an ongoing basis to reflect changes in the economy, the market and any changes to either the strategy or the portfolio. A risk impact matrix is used to drive consistency in categorising the likelihood and impact of each risk, which in turn assists in comparing and prioritising the risks to which the business is exposed. The matrix is reviewed periodically and presented to the Audit and Risk Committee (ARC) at least twice a year.

3. RISK RESPONSE

A risk register is maintained and updated as risks are identified. It is monitored during the ordinary course of business, with a formal review by the executive team and senior management on a quarterly basis. If the output of the risk impact matrix suggests that the residual risk should be categorised as high or extreme, this is communicated to the ARC, and a summary of the risk and any mitigating controls is included.

Controls are designed to mitigate the assessed level of risk, and the adequacy and effectiveness of such controls are monitored and evaluated on a regular basis.

An Internal Control Framework document is in place that outlines:

the primary risks facing the business;
the operating context within which those risks arise;
the extent to which they impact the business;
the mitigating controls that are in place;

the interrelationship between the primary risks, their mitigants and the key controls that the business relies on;
the testing methodology;
details of how adherence to the controls will be evidenced; and
the risk owner in the business who is ultimately responsible.

4. RISK MONITORING

The executive and senior management team reviews the risk register on a regular basis. Management monitors and considers any pertinent issues that affect the industry and/or market sentiment. The executive team frequently discuss all risks included on the risk register. The key risks facing the business are debated and summarised for reporting to the ARC.

5. RISK REPORTING

Management reports to ARC at least twice a year on the key risks facing the business and on the adequacy, and effectiveness, of controls.

If any mitigating controls have not functioned effectively or have been insufficient, or the residual risk has increased to high or extreme, this is brought to the attention of the ARC immediately.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

STRATEGIC CONTEXT

KEY RISKS, OPPORTUNITIES AND UNCERTAINTIES

KEY RISKS AND OPPORTUNITIES

When considering risks and opportunities, the likelihood of each manifesting, and its potential impact on the group, is assessed. The heat map below and the tables on pages 25 to 27 summarise the key risks and opportunities currently facing the group.

HEAT MAP REFERENCE	RISK/OPPORTUNITY
R1	LOWER AND/OR FALLING ASSET VALUATIONS
R2	ECONOMIC AND/OR POLITICAL UNCERTAINTY IN KEY MARKET(S)
R3	REIT EXPOSURE RISK
R4	LIQUIDITY RISK
R5	STRUCTURAL DECLINE IN RETAIL SUB SECTOR
HEAT MAP REFERENCE	RISK/OPPORTUNITY
---	---
R6	TAX LEGISLATION RISK
R7	INCREASED COST OF DEBT
R8	JOINT VENTURE PARTNER RISK
R9	MATERIAL FOREIGN EXCHANGE LOSS
R10	STAKEHOLDER RISK AND EXPECTATION MANAGEMENT

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

25
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2018

LOWER AND/OR FALLING ASSET VALUATIONS

CONTEXT	IMPLICATIONS	RESPONSE
Lower or falling asset values within the group's portfolio.	• LTVs increase due to decreases in valuations, covenants are threatened or breached, EPRA NAV impacted, and adverse effect on the MAS share price likely.	• Increased caution and discipline over potential acquisitions and group LTV levels.
• Increased scrutiny of covenant headroom as part of facility agreement negotiation.
• Regular monitoring of covenant headroom.	• Dispose of assets at the top of cycle and redeploy capital to acquire assets with potential for growth.

ECONOMIC AND/OR POLITICAL UNCERTAINTY IN KEY MARKET(S)

CONTEXT	IMPLICATIONS	RESPONSE
Risk arising from Brexit.
Risk of political unrest/economic downturn specific to, or disproportionately impacting, Germany, UK or CEE markets (especially Romania).	• Asset valuations adversely impacted (see R1 above).
• Sterling devalued.
• Tenants experience challenging trading conditions, are unable to service rents and/or are unwilling to commit to new/long term leases.	• Macro-economic factors, geographic and sub sectors monitored on an ongoing basis to ensure that chosen markets remain in line with current risk appetite.	• Impressive performance and growth of CEE markets coupled with economic confidence in the region.

REIT EXPOSURE RISK

CONTEXT	IMPLICATIONS	RESPONSE	OPPORTUNITY
Risk that the portfolio of REIT investments suffers a real and permanent diminution in value.	• Fair value losses recorded in the short term.
• Crystallisation of the liquidity/funding risk (see R4 below) in the medium term.	• The rationale for holding, and the performance, of the underlying investments in the portfolio, are monitored on an ongoing basis.
• Specialist advisors engaged to assist in the management of the portfolio.	• To invest in listed REITs with potential for appreciation in value.

LIQUIDITY RISK

CONTEXT	IMPLICATIONS	RESPONSE	OPPORTUNITY
Risk that funding is not available to meet the group's obligations as they fall due.	• Ability to meet cash commitments relating to:
- dividend distribution;
- PKM Developments; and
- employees and suppliers.	• Revolving credit facility offers liquidity flexibility.
• Robust liquidity management process in place.
• Optimising capital expenditure and capital commitments to ensure they deliver attractive returns on investment.	• Leverage assets within the portfolio.
• Utilise cash reserves within the group subsidiaries.

STRATEGIC CONTEXT

KEY RISKS, OPPORTUNITITES AND UNCERTAINTIES

STRUCTURAL DECLINE IN RETAIL SUB-SECTOR

CONTEXT	IMPLICATIONS	RESPONSE
Risk that the group has misinterpreted or underestimated the structural challenges facing the retail sub-sector, and exposed the portfolio to retail real estate assets principally in Germany and CEE with adverse economic consequences.	• The focus on retail within the portfolio could expose MAS to reduced income streams through rent renegotiations, increases in the risk of bad debts and lower assets valuations.	• Minimal retail exposure to the markets where there is already a decline in the retail sub-sector e.g. the UK.
• German retail exposure is concentrated on what the group considers to be resilient retail sub-segments that are subject to long term contracts with materially strong single tenants that offer robust covenants.
• Continuous monitoring of retail trends and results in the markets in which MAS operates.
• CEE markets characterised by an under supply of retail, with logistical barriers to e-commerce in the short to medium term, means this market is considered to be more resilient.	• The opportunity to acquire assets that are dominant in the retail sector at distressed valuations.
• Expertise in reconfiguration of retail assets to drive maximum value and optimum tenant mix.
• This, coupled with the CEE market's current barriers to e-commerce, means retail remains an attractive proposition in this market.
• Impressive performance and growth of CEE markets coupled with economic confidence in the region.

TAX LEGISLATION RISK

CONTEXT	IMPLICATIONS	RESPONSE	OPPORTUNITY
Risk that changes to tax regimes may result in a materially increased tax exposure across the group.	• Tax burden suffered by the group may increase.	• Changing tax landscape is continuously monitored by the Head of Tax.	• Changes in tax legislation can create allowances and incentives that reduce the tax burden on the group.

INCREASED COST OF DEBT

CONTEXT	IMPLICATIONS	RESPONSE	OPPORTUNITY
Risk that increased interest rates on debt squeezes operating margins and tightens covenant headroom levels.	• Higher debt costs and/or restricted availability of debt both pose challenges, reducing net operating margins on investment properties making it harder to obtain debt finance to grow the business and meet LTV targets for balance sheet efficiency.
• Falling asset values and relatively minor interest rate increases can have material implications on both the cost and availability of debt and on meeting covenants.	• Short-term risk is largely mitigated through entering into long term and low rate (including fixed) interest rate debt instruments, by matching borrowing to the location of the asset and to the currency exposures.
• Increased caution in gearing to reach long term LTV targets.	• Acquisition prices could decrease due to acquisition yield expansion offsetting increases in the cost of finance.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

JOINT VENTURE PARTNER RISK

CONTEXT

Risk that a material joint venture partner to the group fails or underperforms which leads to a material loss on MAS' investment/ committed capital.

IMPLICATIONS

• Since the group has significant investments into PKM Developments as well as a material additional funding commitment, any failure or underperformance would have a significant impact on the value of our investment.

RESPONSE

• Assets are developed on a ring-fenced basis which negates the risk of a failure on a portfolio basis.

• The strength, reputation and track record of the Prime Kapital team, together with the strong performance of the existing completed developments mitigate the risk of a failure.

• The standard and regular provision of high quality audited financial information from PKM Developments, provides comfort that this is a sound and disciplined business.

OPPORTUNITY

• The group is in a strong position to leverage the impressive performance and growth of CEE markets and the current economic confidence in the region.

MATERIAL FOREIGN EXCHANGE LOSS

CONTEXT

Risk that the currency exposure results in a material adverse foreign exchange movement. Currently this risk relates mostly to sterling exposure relative to the euro.

IMPLICATIONS

• Brexit uncertainty brings additional risk of a further devaluation in sterling.

• If sterling devalues by a further 10-20% against the Euro, the Euro value of the UK portfolio would drop commensurately.

RESPONSE

• Assets and equity are largely Euro denominated.

• Borrowing in Sterling against the UK portfolio reduces the net exposure to Sterling.

• Employee and other operating costs are largely incurred in Sterling, thereby reducing the exposure further.

• Hedging is considered where appropriate.

OPPORTUNITY

• Opportunity to dispose of UK assets and redeploy into CEE.

• The group is able to execute when opportunities arise.

STAKEHOLDER RISK AND EXPECTATION MANAGEMENT

CONTEXT

Risk that the group does not engage with, and consider the needs of, all of its stakeholders.

IMPLICATIONS

• Certain stakeholders could be alienated, and withdraw support for the group.

RESPONSE

• The group has a excellent track record of meeting its distribution target.

• The group focuses on maintaining an excellent relationship with its shareholders.

• Engagement with stakeholders to understand their needs.

OPPORTUNITY

• To increase the group's profile in the geographies in which stakeholders are based and to increase the interaction with current, and potential, stakeholders.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CAPITAL VALUE CREATION

PORTFOLIO

| | 2018
€765M^{ii} | 2019
€1,161M^{ii} |
| --- | --- | --- |
| INCOME-GENERATING
PROPERTY | PROPERTY THAT IS CURRENTLY
PRODUCING INCOME AND
HELD FOR THE PURPOSE OF
EARNING A YIELD | €592M
+56%
€924M |
| DEVELOPMENT
PROPERTY | PROPERTY THAT IS BEING
DEVELOPED IN ORDER TO
CREATE INCOME-GENERATING
PROPERTY AT A BETTER YIELD
AND QUALITY THAN CAN BE
ACHIEVED BY ACQUIRING
STANDING ASSETS | €129M^{i}
+52%
€196M^{i} |
| LAND
BANK | LAND PLOTS HELD FOR
SCHEMES THAT HAVE EITHER
NOT YET RECEIVED
PERMITTING OR COMMENCED
DEVELOPMENT | €44M
-7%
€41M |

i Comprises MAS' investment in equity accounted investee and PKM Developments preference shares.

ii Includes assets held for sale

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

PROGRESS	LOOKING AHEAD
A key strategic objective of the group is to be fully invested; significant progress has been made on this front through the continued investment in the income-generating portfolio.
The group has acquired a further €338 million of income-generating property in the year, of which €250 million is in CEE and €88 million in Western Europe. The properties acquired provide stable underlying income with good prospects for future growth.
The portfolio has been optimised through the identification, disposal and recycling of mature properties. The group has disposed of €42 million of property in the United Kingdom and is actively marketing five retail properties in Germany.
Asset management initiatives have been implemented across the Western Europe and CEE portfolio which have contributed to fair value uplifts of €30 million for the year ended 30 June 2019.	• Redeploy capital invested in Western Europe to the CEE in a focussed and disciplined manner.
• Investments programme in the CEE to continue, with focus on value-adding potential and strong long-term growth prospects.
• Asset management of under rented properties.
• Refurbish and reconfigure retail space to maximise GLA.
In line with the updated strategy to focus in the CEE markets, PKM Developments completed nine convenience value centres, which were acquired by the group through the co-investment joint venture with Prime Kapital in February 2019.
In addition, PKM Developments has a secured development pipeline of €783 million and the group invested a further €70 million into the development joint venture, PKM Developments, and increased the group's commitment by a further €120 million up to €420 million to fund this secured pipeline.
During the year the group completed the office building pre-let to the UK government, sold under a funding agreement to Legal and General, crystalising a profit of approximately €13 million over the 2018 and 2019 financial years.	• Development programme to continue.
• Completion of 46,500 square metres of retail space expected by the end of the 2019 calendar year.
• Further PKM Developments preference share drawdowns scheduled.
The timely redeployment of capital realised from the divestment of the Western European assets will be key to the successful implementation of the next phase of the group's strategy. In line with this the group has:
- disposed of €8 million of land in the United Kingdom;
- received and accepted an offer on remaining land at New Waverley;
- final offers from house builders being considered on the remaining land at Langley Park;
- and the group has finalised the land collaboration agreement and is actively marketing the land at North Street Quarter.	• New Waverley Phase II – residential, northern element – disposal expected by the end of calendar year 2019.
• North Street Quarter – actively marketing.
• Langley Park – final offers received and disposal expected H1 2020.

29
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CAPITAL VALUE CREATION

PORTFOLIO 12

INCOME-GENERATING PROPERTY

The income-generating portfolio assembled through acquisition and development, comprises high quality retail, office, industrial, logistics and hotel properties in Germany, UK, Switzerland, Bulgaria, Poland and Romania.

WESTERN EUROPE

	LOCATION	ASSET TYPE	OWNERSHIP	NO OF ASSETS	GLA (SQM)	OCCUPANCY (%)	WALT (YEARS)	BOOK VALUE (KM)	PASSING RENT (KM)
Income-generating portfolio
Flensborg Galerie	Germany	Retail	100%	1	24,540	80%	6.28	71.19	3.90
Edeka MIHA portfolio	Germany	Retail	100%	20	51,112	100%	11.91	59.22	3.86
Edeka Thales portfolio	Germany	Retail	100%	3	21,845	96%	11.50	29.76	2.00
Braunschweig	Germany	Retail	100%	2	19,066	95%	5.36	25.02	1.53
Bruchsal	Germany	Retail	100%	1	7,119	100%	4.30	23.00	1.46
Gotha	Germany	Retail	100%	1	9,442	100%	7.00	12.40	0.99
Munich	Germany	Industrial	100%	1	13,090	100%	4.50	16.50	0.93
Lehrte	Germany	Retail	100%	1	9,203	100%	7.61	10.60	0.76
Uberior House	UK	Office	100%	1	14,718	100%	11.47	83.75	4.69
Adagio, retail and the Arches	UK	Hotel	100%	1	9,003	98%	16.92	37.54	1.86
Chippenham	UK	Industrial	100%	1	37,350	98%	6.25	25.23	1.93
Braehead	UK	Industrial	100%	1	18,476	100%	5.62	6.97	0.85
Zurich	Switzerland	Logistics	100%	1	5,699	100%	5.25	14.23	1.17
TOTAL				35	240,663	97%	8.99	415.41	25.93

Properties held for sale

Toom portfolio	Germany	Retail	100%	3	25,526	100%	9.83	30.29	2.20
Heppenheim Park	Germany	Retail	100%	1	16,978	100%	8.42	30.50	1.89
Donaueschingen	Germany	Retail	100%	1	8,235	100%	9.62	10.30	0.72
TOTAL				5	50,739	100%	9.25	71.09	4.81

CENTRAL AND EASTERN EUROPE

Income-generating portfolio

	LOCATION	ASSET TYPE	OWNERSHIP	NO OF ASSETS	GLA (SQM)	OCCUPANCY (%)	WALT (YEARS)	BOOK VALUE (KM)	PASSING RENT (KM)
Galleria portfolio	Bulgaria	Retail	80%	2	63,765	91%	4.93	81.09	8.51
Militari	Romania	Retail	80%	1	56,245	100%	9.51	108.73	8.34
Atrium Mali	Romania	Retail	80%	1	28,672	97%	2.74	50.87	4.96
Kaufland portfolio	Romania	Retail	80%	7	27,833	96%	6.35	39.09	2.77
Baia Mare	Romania	Retail	80%	1	21,318	96%	11.31	34.32	2.37
Roman	Romania	Retail	80%	1	18,808	98%	9.44	33.63	2.38
Nova Park	Poland	Retail	80%	1	32,683	93%	3.45	89.70	5.73
TOTAL				14	249,324	96%	6.31	437.43	35.06

MASS SHARE

	GLA (SQM)	OCCUPANCY (%)	WALT (YEARS)	BOOK VALUE (KM)	PASSING RENT (KM)
BOOK VALUE (KM)	PASSING RENT (KM)
64.87	6.81
86.98	6.67
40.69	3.97
31.27	2.22
27.46	1.90
26.90	1.90
71.76	4.58
349.93	28.05

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

TOP 10 TENANTS BY PASSING RENT

WESTERN EUROPE

CENTRAL AND EASTERN EUROPE

1 As a percentage of MAS' share of total passing rent at 30 June 2019

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CAPITAL VALUE CREATION

PORTFOLIO 13

TOP PROPERTIES

GALLERIA PORTFOLIO

€6.81M
PASSING RENT¹

4.93
WALT (YEARS)

€3,765
GLA M¹

€81M
BOOK VALUE

91%
OCCUPANCY

BULGARIA

LOCATION

The Galleria portfolio consists of two malls: Galleria Burgas and Galleria Stara Zagora.

The Galleria Burgas is the regional dominant shopping centre in Burgas, the 4th largest city in Bulgaria with a population in excess of 230,000. It has a broad tenant mix spread over 38,300 square metres of GLA consisting of 115 tenants primarily international fashion and entertainment brands including Bershka, CCC, Cinema City, Deichmann, H&M, Humanic, Ikea, Intersport, LC Waikiki, Lee Cooper, Lidl, Massimo Dutti, Oysho, Terranova and Zara. In response to strong performance and tenant demand, a 15,000 square metres GLA extension and a reconfiguration are being considered.

The Galleria Stara Zagora is the dominant shopping centre in Stara Zagora, the 6th largest Bulgarian city with a population in excess of 140,000. The tenant mix is spread over 25,400 square metres of GLA and focused primarily on fashion and entertainment and consists of 80 tenants which includes brands such as Bershka, Cinema City, CCC, Deichmann, DM, H&M, Intersport, Kenvelo, LC Waikiki, New Yorker, Nike, Pull&Bear and Stradivarius. A major refurbishment and reconfiguration is in progress to improve the design and commercial layout.

¹ MAS' share of passing rent as at 30 June 2019

MILITARI

€6.67M
PASSING RENT¹

9.51
WALT (YEARS)

56,245
GLA M¹

€109M
BOOK VALUE

100%
OCCUPANCY

ROMANIA

LOCATION

The Militari Shopping is a value centre located in Militari district, a densely populated and expanding residential area of Bucharest. The centre has excellent visibility and frontage on one of the busiest road arteries, which also serves as the main western entrance in the city (linking directly into E81/A1 highway). Since its opening in 2009, the centre has benefitted from an aggregate catchment of approximately 360,000 people within a 15-minute drive.

Militari has 57 tenants spread across 56,200 square metres of GLA, in addition to 2,500 parking spaces. Militari is anchored by Auchan (hypermarket), Bricodepot (former Praktiker DIY), Decathlon (sports goods) and various international fashion brands such as H&M, C&A, Reserved, New Yorker, LC Waikiki, Pepco, Deichmann, Hervis, Humanic, Koton, Takko and many others.

The asset provides stable underlying income with good prospects for future growth. This will come from optimisation at lease expiry and an extension of the lettable area to match growing footfall, driving the direct investment return. Significant redevelopment opportunities are expected to be available in the medium and long term.

UBERIOR HOUSE

€4.69M
PASSING RENT¹

11.47
WALT (YEARS)

14,718
GLA M¹

€84M
BOOK VALUE

100%
OCCUPANCY

UK

LOCATION

The property comprises Grade A office buildings prominently positioned in the heart of the Exchange financial district of Edinburgh. The property is let to a single tenant, Bank of Scotland, on several leases, all of which expire in December 2025. Bank of Scotland is a subsidiary of the Lloyds Banking Group PLC, a FTSE 100 listed bank.

Passing rents are below market and a review is due in 2020 with the potential to restructure and extend existing leases. The property has a unique asset management opportunity to grow the NOI of €4.6 million in a market in which the group has extensive experience and with a shortage of A-grade office space.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

NOVA PARK

€4.58M	3.45
PASSING RENT¹	WALT (YEARS)
32,683	€90M
GLA M²	BOOK VALUE
93%	POLAND
OCCUPANCY	LOCATION

A dominant regional mall situated in central Gorzów in western Poland, 135 km from Berlin, it benefits from an aggregate catchment of approximately 460,000 people within a 45-minute drive. The mall has been experiencing growing footfall and tenant turnovers since its opening in 2012.

It has a diversified mix of high quality tenants including international and national brands Bershka, C&A, CCC, Cropp Town, Deichman, Douglas, Empik, Fabryka Formi, H&M, Intersport, KFC, Media Expert, Mohito, New Yorker, Piotr i Pavel, Pull&Bear, Reserved, Rossmann, Sephora, Sinsay, Smyk, Stradivarius and Super-Pharm. An adjacent land plot was acquired and detailed design work is underway to extend the 32,600 square metres GLA regional mall to consolidate its dominant position. The planned extension of 7,000 square metres of GLA includes a cinema as well as additional fashion and leisure offering.

FLENSBURG GALERIE

€3.90M	6.28
PASSING RENT¹	WALT (YEARS)
24,540	€71M
GLA M²	BOOK VALUE
80%	GERMANY
OCCUPANCY	LOCATION

A hybrid mall located in the city of Flensburg in the North of Germany. With more than 70 tenants and its comprehensive range of products, the diverse tenant mix, with focus on fashion, electronics, food, drugstore and convenience, serves in combination with an office building and a library a broad customer range. With more than 4.2m visitors per year, Flensburg Galerie is the only inner shopping mall in the city of Flensburg.

ATRIUM MALL

€3.97M	2.74
PASSING RENT¹	WALT (YEARS)
28,672	€51M
GLA M²	BOOK VALUE
97%	ROMANIA
OCCUPANCY	LOCATION

The Atrium Mall is the sole modern retail destination in Arad and the broader Arad county. The mall is well-established and centrally located, adjacent to main transport hubs with good accessibility and visibility. The city of Arad is situated in Western Romania, close to the Hungarian border. It is the administrative capital of Arad county and forms the principal economic hub of the area. The city has healthy demographics, which is supported by growing purchasing power, and it benefits from a significant catchment area, with 334,000 people within a 45-minute drive.

The mall has a fashion and entertainment focus with more than 110 tenants, with an approximate GLA of 28,600 square metres arranged over three floors. It is anchored by strong tenants including Carrefour, Inditex, H&M, C&A, New Yorker, LC Waikiki, Hervis, Deichmann, Media Galaxy, Pepco, CCC and Cinema City with a 10-screen cinema.

CAPITAL VALUE CREATION

PORTFOLIO 13

DEVELOPMENT PROPERTY – PKM DEVELOPMENTS

RETAIL VALUE CENTRES

MAS invested €20 million in return for a 40% equity interest in PKM Developments and a further €170 million by way of cumulative 7.5% preference shares as at 30 June 2019. MAS has committed to provide up to a further €250 million of preference share funding up to 23 March 2025.

	OWNERSHIP	PROPERTY ASSET BOOK VALUE (€M)	MAS' SHARE BOOK VALUE (€M)
Investment in equity accounted investee	40%	126.98	21.89
Preference shares – PKM Developments	100%	n/a	174.13
TOTAL		126.98	196.02

PKM DEVELOPMENTS TOTAL ASSETS

	TYPE	OWNERSHIP	ESTIMATED COMPLETION	NO OF ASSETS	GLA (SDM)	UNITS	BOOK VALUE (€M)	DEVELOPMENT BUDGET (€M)	ERV (€M)
DEVELOPMENT PROPERTY	Retail / Residential	40%	2019 - 2025	10	614,700	3,735	121.25	783.49	49.44
LAND BANK	Retail	40%	n/a	6	n/a	—	5.73	8.61	n/a
TOTAL				16	614,700	3,735	126.98	792.10	49.44

DNI VALUE CENTRE

Located in Balotesti, Romania, in a rapidly developing affluent residential area, within approximately 25 km north of Bucharest the project has very good road connections: it benefits from direct access to DNI/E60, the busiest national road in Romania.

Pre-construction leasing is progressing well for the convenience value extension of 27,300 square metres GLA to the existing Hornbach and Lidl units. The first phase of development is expected to open by the end of the 2019 calendar year.

PLOIESTI VALUE CENTRE

Ploiesti Retail Centre is located near the city's main train, tram and bus stations. The development will include a high concentration of anchor tenants integrated with the existing adjacent Kaufland hypermarket and planned Lidl supermarket.

Permitting is underway for the retail value centre with 25,600 square metres GLA and a high concentration of anchor tenants. Despite the lease process not yet having commenced, several major anchor tenants have expressed strong interest in the development.

ZALAU VALUE CENTRE

About five hectares of land have been secured in Zalau with plans to develop and operate a retail value centre of 19,200 square metres GLA with a high concentration of anchor tenants. Zalau, with 56,000 inhabitants, is the capital of Salaj county and an important manufacturing centre in the north west of Romania. The project is highly visible. It is in the immediate vicinity of a dense residential area and the city's regional bus terminal, on the main road connecting Zalau with the other major cities in the county and wider Transylvania area. The catchment includes about 166,000 inhabitants within a 45-minute drive. Anchor tenants have expressed strong interest in the planned development and permitting is ongoing. The centre is expected to open for trade by the end of the 2019 calendar year.

SEPSI VALUE CENTRE

Six hectares of land have been secured in Sfantu Gheorghe, with a population of approximately 54,000 it is the capital of Covasna county. The land is located in a densely populated residential area, within 2 km from the city centre. It has good visibility, being located on E578 European road. Anchor tenants have expressed strong interest in the planned development and permitting is ongoing. The centre is expected to open by June 2020

KAUFIGAL ESTATE HOLDING ANNUAL REPORT 2019

CAPITAL VALUE CREATION

PORTFOLIO 18

MALLS

Positioned in a very densely populated residential area, within 2 km from Targoviste city centre and near the city's train station, Targoviste Mall, will be the only shopping centre in Dambovita county. The shopping centre will offer a modern shopping experience with a focus on fashion and entertainment, including a multiplex cinema, restaurants and kids' playground.

The building permit was received for the regionally dominant mall with 32,900 square metres GLA and construction works commenced. The mall is expected to open for trade in the second quarter of 2020 calendar year.

Positioned centrally in a dense residential area, next to the main train station, the city's main boulevard and easily accessible from the A1 Motorway, Arges Mall will consolidate and dominate the county. The centre will be focused on fashion and entertainment and will include a hypermarket.

Permitting for the planned regionally dominant mall with 50,800 square metres GLA and for the accompanying public infrastructure is making good progress. Tenant interest in the planned retail consolidation for the Pitesti and wider Arges region is strong and pre-construction leasing work is progressing well.

MALL MOLDOVA

Permitting is under way for the planned redevelopment of EraShopping Park, Iasi, into the superregional Mall Moldova with 106,300 square metres GLA. Mall Moldova will be the largest retail and leisure development in Romania outside Bucharest. With design work substantially completed, pre-construction leasing work in respect of the extension has commenced and is progressing well, as had been anticipated. Zoning approval and building permit were received in June 2019.

MAS REAL ESTATE INC. THE GRISE OF ANNUAL DEPOSIT 2019

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RESIDENTIAL AND MIXED USE

AVALON ESTATE

Avalon Estate is a unique gated community concept, located between Pipera and Aviatiei neighbourhoods, in the northern part of Bucharest, Romania. The project is being developed on an 8.1 ha land plot with proximity to the business and office nodes of Bucharest, providing a central living solution to its residents. Designed with great attention to detail and emphasis on a large centralised park, with low traffic disturbance and exclusive community services, Avalon Estate has an orientation towards a natural lake frontage and offers many valuable benefits – privacy, security, low traffic volumes – in a private village-type setting.

The project was publicly launched in June 2018 and received very positive feedback. Building permit is expected in October 2019 and the first units of the planned 767 high quality houses, townhouses and apartments will be available for occupation in the third quarter of the 2021 calendar year.

MARMURA APARTMENTS

Marmura Residence enriches northern Bucharest, Romania with a great mix of well-designed urban living solutions, varying in size and function, community spaces, private and public connections, services and coffee bars. Marmura Residence offers, apart from 468 quality urban apartments, several unique extra-features such as: an urban park on its footsteps linking it to the greater neighbourhood, a selection of buzzing cafés and community spaces, a central plaza, rooftop terraces, convenient services and a direct connection to the area and to the greater city.

Zoning approval has been received and building permit is expected by the end of 2019 calendar year. The first units will be available for occupation by the second quarter of the 2021 calendar year.

SILK DISTRICT, IASI

About 10 hectares of land have been secured in lasi with plans to develop a large-scale, mixed-use project that will include up to 100,000 square metres of A-grade offices, over 2,500 residential units and a hotel. lasi, with a population of 369,000 inhabitants, is the second-largest city in Romania, the most important industrial centre in the north east and the second-largest university centre outside Bucharest, with over 53,000 students. The project is close to the city centre and within walking distance of the two largest university campuses in lasi. This site is highly visible, with 450 metres of frontage on a main boulevard connecting the site to the city centre, and easily accessible both by car and public transport since three public transport hubs (bus and tram) are in the immediate vicinity. Due diligence, project planning and zoning approval is currently in progress. Major office tenants and hotel operators have expressed strong interest in the planned development.

CAPITAL VALUE CREATION

PORTFOLIO 18

LAND BANK

Land plots held for schemes that have either not yet received permitting or commenced development.

SUMMARY

	LOCATION	TYPE	OWNERSHIP	NO OF ASSETS	BOOK VALUE (KM)
North Street Quarter	UK	Residential	100%	1	19.22
Langley Park	UK	Residential / Retail	100%	1	14.78
New Waverley Phase II – Residential	UK	Residential	100%	1	6.74
Total				3	40.74

NORTH STREET QUARTER

A large development site in the heart of Lewes, East Sussex and located close to the high street. The strategy is to deliver a vibrant, mixed-use neighbourhood that will regenerate the area around North Street, including the Phoenix Industrial Estate. This is the largest brownfield site in the South Downs National Park. More information available at www.northstreetqtr.co.uk

416 new homes (40% affordable)
13,000 square metres of commercial space, accommodating c475 full time jobs
Retail space
A health centre
6,500 square metres of industrial space on the Malling Brooks site
New riverside walkway and public square, foot and cycle bridge
Car park

The final agreements with the planning and local government authorities subsequent to the granting of planning consent are currently being completed with the intention of undertaking a phased roll-out of the disposal strategy for the scheme.

NEW WAYERLEY PHASE II - RESIDENTIAL

New Waverley - Phase II Residential represents the final residential element of the large New Waverley development and is the last remaining undeveloped component of the site. Part of this element was sold to a residential developer in October 2018 and the remainder is the subject of an option to be acquired by the same developer, subject to receipt of an updated planning consent. The government's option over the northern part of the site has lapsed as it no longer matched its requirements. More information is available at www.newwaverley.com.

New Waverley - Phase II Residential is set to deliver:
- 148 to 244 apartments
- Located on the Royal Mile, one of the most prestigious streets in Scotland
- 17,000 square metres of residential space
- 1,400 square metres of prime retail space
- Car parking
- All within 5 minutes walk from Waverley train station

LANGLEY PARK

Planning permission was obtained in 2016 to develop the site for 420 residential units, a Travelodge hotel with ground floor retail, and a discount food store. The sale of the food store to Aldi was completed in June 2018. A forward sale of the Travelodge was contracted with Torbay Council in 2018, practical completion took place in August 2019 and the sale was finalised in September 2019 at the agreed price of €6.4 million (£5.8 million). The disposal process has progressed with two housebuilders for the sale of the rest of the development site. Legal contracts were exchanged with one party for the sale of part of the site in June 2019 and the remainder of the site is under offer. Both sales are expected to complete prior to the end of the 2019 calendar year. To facilitate the sale of the development land, the existing car park serving the Siemens main facility is being relocated from the Langley Park land to the adjacent Chippenham technology park, which has been retained. Work is ongoing and is expected to be completed in October 2019.

CAPITAL VALUE CREATION

FUNDING

The group uses both debt and equity capital to fund its investment property portfolio. The management of the group's capital structure is fundamental to its ability to create value for stakeholders by managing its cost of capital and growing distributions on a sustainable basis.

DEBT

Managing the debt maturity profile enables the group to maximise the terms available from lenders while maintaining the spread of maturity/refinancing risk in the group. The group manages its liquidity through active monitoring of the group's debt maturity profile and engages with lenders where the group has short-term debt maturities.

INVESTMENT PROPERTY DEBT
MATURITY PROFILE

The group aims to minimise the cost of debt where possible by repaying debt facilities where there is excess cash in the group. The group maintains access to revolving lending facilities both through a geared real estate equities portfolio and group facilities, using short-term debt and minimising the amount of cash held which does not yield a return.

Concentration and currency risks are also a consideration, with care taken to ensure that the group is not unduly exposed to a single debt provider, and that all debt acquired is matched to the local currency of the secured asset.

DEBT BY CURRENCY

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

INTEREST RATE EXPOSURE

The hedging strategy of the group aims to manage the interest rate risk across the debt portfolio and is undertaken on a loan by loan basis, with a preference for fixing rates over the long term and leaving shorter term debt and debt on assets with potential for disposal at floating rates. As at year end 92% of the group's debt was fixed or hedged, up from 82% in the prior year, significantly reducing the group's interest rate risk, but increasing the group's exposure to early termination break clauses and costs in respect of facilities against assets that are now strategically earmarked for disposal in Western Europe.

The group has continued to take advantage of the low cost of debt with €325 million of additional debt drawn

and secured against the group's investment property portfolio at a weighted average cost of 3.16%. In addition to debt secured against investment property, the group has also secured debt against financial investments held in the form of listed real estate equities, this facility carries an interest cost of 1.00%.

The total debt within the group as at year end has increased from €243 million to €456 million and the weighted average cost of debt for year end has increased from 2.69% in the prior year to 2.95% in the current year. With the increase of debt during the period the loan to value of the groups debt has increased to 33.9% from 10.0% in the prior year, which is close to the middle of the group's target loan to value range of between

30 and 40%. This level of debt leaves the group with adequate flexibility, without exposing the group to excessive risk.

There remains undrawn but negotiated debt available as necessary, including an unsecured corporate debt facility of up to €60 million over a three-year term and a facility against a CEE asset of up to €38 million at an interest cost of 2.50% over a five-year term. Debt secured against assets held for sale totalled €34 million at the year end which will require settlement on disposal together with €4 million break fees in respect of the early settlement of the associated fixed rate debt facilities.

PROGRESS

DRAWN DOWN €325M OF DEBT AT 3.16%

MANAGED INTEREST RATE EXPOSURE BY LOCKING IN FIXED RATE DEBT

LTV INCREASED TO 33.9%

NEGOTIATED UNDRAWN FACILITIES OF €98 MILLION

LOOKING AHEAD

Gearing is in the target LTV range of 30-40% and is expected to remain within that target range for the foreseeable future.

As the group divests from WE and redeploys capital into CEE it will look to continue to take advantage of low interest rates in Europe.

CAPITAL VALUE CREATION

FUNDING

EQUITY

Efficient capital management is integral to the creation of value for shareholders. To achieve this, the Board will consider buying back shares as and when it can create value for shareholders, if the trading price of the shares falls significantly below the intrinsic value per share. Such buybacks will be done with care, since capital is a scarce and valuable resource.

During the year 4,000,000 shares in the geared share purchase plan were forfeited and cancelled, and 1,531,127 shares were granted, leaving 5,381,127 shares within the scheme as at year end.

PROGRESS

AUTHORITY TO BUYBACK SHARES

LOOKING AHEAD

The Board will consider buying back shares if the trading price of the shares falls significantly below the intrinsic value per share

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CAPITAL VALUE CREATION

RELATIONSHIPS

Relationship capital is the intrinsic value that is created with stakeholders of the group through multiple interactions. These relationships are critical to delivering what the group does.

Effective stakeholder engagement is fundamental to the group's ability to create long-lasting relationships. The group's approach to stakeholder engagement is to identify and understand both the expectation and the level of contribution of stakeholder.

During the year a number of key initiatives have been implemented to enhance relationship capital:

Hosted a property tour of assets and opportunities in Romania attended by investors, analysts and the media;
Interaction with shareholders;
Launched a group Personal Pension Scheme and an opt in private medical scheme for employees;
Established relationships with new debt lenders broadening the group's capital base;
Continued to reinforce strong relationships with existing tenants, and established relationships with new tenants;
Forged new relationships with brokers and financial institutions across the jurisdictions in which the group invests; and
Extended community investment reach, including supporting MAS' first community project in Germany in partnership with the German Red Cross.

STAKEHOLDER	EXPECTATION
INVESTORS AND ANALYSTS	SUSTAINABLE AND GROWING DISTRIBUTABLE EARNINGS PER SHARE
LENDERS	PROPERTY SECURITY AND MAINTENANCE OF STRONG INCOME AND BALANCE SHEET COVENANTS
TENANTS	QUALITY SPACE FROM WHICH TO OPERATE HIGH LEVEL OF SERVICE AND SUPPORT
SUPPLIERS AND SERVICE PROVIDERS	CONDUCTING BUSINESS IN A MUTUALLY BENEFICIAL AND PROFESSIONAL MANNER, WITH COMMON PURPOSE
EMPLOYEES	ATTRACT, MOTIVATE AND RETAIN THE BEST PEOPLE
REGULATORY BODIES	COMPLIANCE WITH ALL RELEVANT LAWS AND REGULATIONS
LOCAL COMMUNITIES	IMPACTING COMMUNITIES IN A POSITIVE MANNER
DEVELOPMENT PARTNERS	CONDUCTING BUSINESS IN A MUTUALLY BENEFICIAL AND PROFESSIONAL MANNER TO CREATE VALUE FROM REAL ESTATE
MEDIA	FAIRNESS, HONESTY AND TRANSPARENCY ACCESS TO MANAGEMENT
BROKERS	HIGH LEVEL OF LOYALTY AND TRUST
BANKING INSTITUTIONS	EFFICIENT DAY TO DAY BANKING IN THE JURISDICTIONS IN WHICH WE OPERATE

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONTRIBUTION
PROVISION OF EQUITY FUNDING CAPITAL
PROVISION OF DEBT FUNDING CAPITAL
INCOME FROM STRONG COVENANTS
PROVISION OF SERVICES TO MEET THE GROUP'S OBJECTIVES
EMPLOYEES PROVIDE THE TEAM CAPITAL THAT DRIVES THE BUSINESS TOWARDS ITS GOALS
REGULATORY FRAMEWORKS TO ASSIST IN PROVIDING CERTAINTY AND ALLOW EFFECTIVE GOVERNANCE
SOCIAL ACCEPTANCE AND POSITIVE INTERACTIONS IN THE COMMUNITIES IN WHICH WE OPERATE
PROVIDING THE KNOWLEDGE AND EXPERTISE TO CREATE VALUE AND GROW THE PORTFOLIO
PLATFORM TO COMMUNICATE WITH A WIDE AUDIENCE
ACCESS TO A WIDER RANGE OF WILLING BUYERS AND SELLERS OF REAL ESTATE
PROVISION OF SERVICES

COMMUNICATION AND ENGAGEMENT

Investor presentations
Roadshows
Interim and annual reporting
Results conference calls
Results roadshows
SENS
Shareholder meetings
Website
Investor tours
One-on-one meetings
Bespoke updates
Interim and annual reporting
Covenant reporting
Website
One-on-one meetings
Site visits
Property management teams based locally
One-on-one meetings
Regular feedback
Performance evaluation
Additional resources to smooth operational pressure points
Training and development opportunities
Semi-annual performance appraisals
Regular strategic and business updates (CEO's coffee mornings)
Regular team building events
Introduction of group Personal Pension Scheme
Tax and regulatory returns
Input into setting policy
Direct open engagement on required matters
Detailed community engagement with all developments through:
Community presentations
Localised updates
E-forums and press
Development meetings
Site visits
Progress/cost reports
Interviews for print, electronic and on-air media
Publication of results
One-on-one meetings
Dedicated relationship managers
Regular service reviews

PROGRESS

STRENGTHENED RELATIONSHIP AND INCREASED COMMITMENT TO PRIME KAPITAL DEVELOPMENTS JOINT VENTURE
PUBLISHED STAFF AND SUPPLIER CODES OF CONDUCT AND MODERN SLAVERY STATEMENT
ENHANCED EMPLOYEE BENEFITS WITH THE INTRODUCTION OF A CONTRIBUTORY GROUP PERSONAL PENSION SCHEME
INAUGURAL EMPLOYEE CULTURE SURVEY LAUNCHED
IMPLEMENTED NEW RISK MANAGEMENT SYSTEM TO STREAMLINE REPORTING & ESCALATION OF RISKS AND MONITORING OF KEY CONTROLS
WIDENED COMMUNITY INVESTMENT REACH

LOOKING AHEAD

INVEST IN ASSET MANAGEMENT CAPABILITY IN CEE

CAPITAL VALUE CREATION

TEAM

Team capital represents the operating platform, incorporating knowledge and expertise developed through the continued investment in people, systems and processes.

PEOPLE

Through the continued investment in its people, MAS has established a strong team with extensive knowledge and experience across its invested markets. The team includes the people that MAS employs directly and the members of the Prime Kapital team. MAS has resources in London, Frankfurt and Edinburgh in addition to the head office in the Isle of Man. MAS employs talented people that have the skills and experience to contribute to the group's activities and add value. The approach is to attract, motivate and retain the best people.

A number of initiatives to enhance the team and to aid the attraction, motivation and retention of team members have been implemented:

Welcomed Werner Behrens as CEO effective 1 May 2019;
Welcomed Paul Osbourn as Executive Director on 7 September 2018 and as CFO effective from 2 October 2018;
Malcolm Levy transitioned into a non-executive role in July 2019, so that MAS retains his expertise and company knowledge;
Welcomed Werner Alberts and Melt Hamman to the Board as non-executive directors, Werner Alberts was later appointed as lead independent non-executive director; and
Continued to build the depth, capability and capacity of the team with a number of key hires, including the appointment of a Group Legal Counsel.

The partnership with Prime Kapital provides access to a team of highly experienced real estate professionals with an exceptional track record, combining a multi-disciplinary skill-base integrated along the entire property value-creation chain. Its management team includes the founders and former senior executives of the largest CEE-based publicly traded property company. In their previous capacity they developed, re-developed and operated substantial assets.

Over the past year, the Prime Kapital and MAS teams have worked to integrate the joint venture structures to ensure efficient and effective communication and build strong relationships.

SYSTEMS AND PROCESSES

A number of initiatives have been implemented which have enhanced the systems and processes:

Embedded a HR platform to aid staff engagement and provide KPI performance monitoring

Implemented a flexible Risk Management system to streamline reporting, escalation of risks and adherence to key controls

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

PROGRESS

STRENGTHENED THE BOARD BY APPOINTING ADDITIONAL EXECUTIVE AND NON-EXECUTIVE DIRECTORS
LAUNCHED INAUGURAL ORGANISATIONAL CULTURE SURVEY
IMPLEMENTED NEW HR AND RISK MANAGEMENT SYSTEMS

LOOKING AHEAD

KEY INITIATIVES FOR THE YEAR AHEAD ARE:

INVEST IN ADDITIONAL ASSET MANAGEMENT CAPABILITY IN CEE
EMBED REVISED REMUNERATION POLICY

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CAPITAL VALUE CREATION

SUSTAINABILITY

The group's philosophy is to make a positive difference in a sustainable way through the operation of the group. New ways of improving social and natural sustainability are continually being contemplated.

SOCIAL

Investment in the locations in which the group operates to contribute to social well-being

ENVIRONMENTAL

The responsible and efficient use of natural resources in a sustainable manner

ECONOMIC

The responsible approach in optimising the outputs of the group's capitals

SOCIAL IMPACT

The group recognises the importance of investing in the communities in which it operates.

Developments provide a unique opportunity to focus on social impact in a more meaningful way than other investments. At New Waverley, the provision of a community facility to provide meeting space for a number of local groups has been included, as well as affordable housing for eligible households whose needs are not met by the open housing market. North Street Quarter and Langley Park include the provision of affordable housing units, with North Street Quarter also incorporating extra care housing for over 55s with care and support needs. North Street Quarter will also provide local community workspace to encourage new social enterprise and business activity.

The group also focuses on investing in the wider community. In 2017, MAS entered into a 3 year partnership with Ikhaya le Themba ("ILT"), a community based charity operating out of Khayelitsha in Cape Town. ILT provides community development services to vulnerable children, the terminally and chronically ill, as well as the wider community, with a focus on "helping them to help themselves" through skills development.

MAS offered a 3-year guaranteed minimum amount of ZAR 149,250 per

annum, to support various initiatives such as home-based care, soup kitchen, community maintenance and shack coverings, Resilient Kids, Basic Training and Development as well as Workplace Readiness. Over the 3-year period, MAS has provided total funding of ZAR 625,500 (approx. €36,300).

ILT produced video updates in 2017 and 2018 to provide an overview of the difference MAS' support has made. The 2019 video is in production and will be loaded on the website shortly http://www.masrei.com/about-us/sustainability/.

During the year, MAS also provided funding to the German Red Cross to fit out a children's play room in a scheme in Frankfurt that houses c500 Syrian refugees.

MAS also sponsored a number of Isle of Man based initiatives, including the Craig Heartstrong Foundation (a local charity that screens over 8,000 young men and women, between the ages of 14 and 35, each year, for heart related conditions), Mannin Sepsis, Bridge the Gap and Manx Wild Bird Aid. MAS also continued to support the local foodbank throughout the year and was delighted to sponsor members of the team participating in Isle of Man and London based events raising funds for charities close to their hearts.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

ENVIRONMENTAL IMPACT

CENTRAL AND EASTERN EUROPE

The use of most recent and efficient LED lighting across all new developments.
Replacing less efficient lighting as part of refurbishments, for instance new LED lighting has been installed across the parking area at Militari.
Analysed tenant power consumption across several of the centres and have been able to reduce the supply capacity, resulting in lower charges and consumption.
Installing infrastructure for electric car charging points as part of the rolling refurbishment programme for the centres.
Nova Park was the first shopping centre in Poland to receive a BREEAM In-Use Excellent certification.
In Bulgaria, Burgas Mall is certified LEED gold.

UK

Sustainable energy is key to Chippenham and the developments at Langley Park and North Street Quarter. Progressive urban design initiatives implemented include the following:

Green roof technology at Langley Park;
Sustainable urban drainage;
Water efficient/low flow sanitary fittings;
Provision of community facility to accommodate a local charity at New Waverley;
Provision for flood defences to be built at North Street Quarter;
The photovoltaic farm at Chippenham provides power to the site and generates an income; and
Environmentally friendly landfill is used at New Waverley.

Regeneration is also at the heart of our developments, in particular:

New Waverley;
North Street Quarter; and
Langley Park.

GERMANY

The Zurich property makes use of photovoltaic roof panels.

A review of the German portfolio is being undertaken to assess if any green energy initiatives can be progressed, with special attention to the newly purchased shopping centre in Flensburg.

ECONOMIC IMPACT

Extensive community engagement on impact and design of developments;
Open green areas incorporated in all developments;
Generated employment through our developments; and
Consideration of historic setting and artefacts at New Waverley and North Street Quarter.

PROGRESS

THIRD YEAR OF PARTNERSHIP WITH IKHAYA LE THEMBA

BROADER COMMUNITY SUPPORT REACH

SUSTAINABLE ENERGY

LOOKING AHEAD

KEY INITIATIVES FOR THE YEAR AHEAD ARE:

CONTINUE TO ENGAGE WITH THE COMMUNITY ON THE IMPACT AND DESIGN OF OUR DEVELOPMENTS.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

GOVERNANCE AND REMUNERATION

BOARD OF DIRECTORS

Werner Behrens (61)

B. Iuris LLB (Hons)
Executive director
Appointment to the Board:
Werner was appointed to the Board as chief executive officer on 1 May 2019.
Committee memberships: Investment

Experience
Werner joined the group as CEO in 2019. With a background in corporate and commercial law, Werner has extensive experience as an executive in the banking and insurance industry in South Africa. Werner has relocated to be based in the Isle of Man.

Paul Osbourn (43)

BA (Hons), FCA (ICAEW)
Executive director
Appointment to the Board:
Paul was appointed to the Board as executive director on 7 September 2018 and as chief financial officer on 2 October 2018.
Committee memberships: Investment

Experience
Paul joined the executive team in 2018 as CFO with over 20 years' experience in corporate finance and restructuring professional services. Paul is a Fellow of the Institute of Chartered Accountants in England and Wales and relocated to be based in the Isle of Man.

Jonathan Knight (52)

BSc. (Hons), MRICS
Executive director
Appointment to the Board:
Jonathan was appointed to the Board as chief investment officer on 12 August 2014.
Committee memberships: Investment (chair) and Governance Social and Ethics.

Experience
Jonathan joined the group as CIO in 2014. Jonathan has over 30 years' experience in the real estate industry, most recently as a director at ING Bank in London and Amsterdam, working on various European and global real estate projects. Jonathan is based in London.

Ron Spencer (72)

C.Dir
Chairman (independent)
Appointment to the Board:
Ron was appointed to the Board as chairman on 16 July 2009.
Committee memberships: Audit and Risk, Governance Social and Ethics and Remuneration and Nomination.

Experience
Ron is an independent non-executive director and the chairman of MAS. He was managing director of Merrill Lynch Investment Managers Holdings (IOM) Limited and is now the chair of the Isle of Man Gambling Supervision Commission. Ron is based in the Isle of Man.

Glynnis Carthy (53)

CA(SA) B Compt (Hons)
Non-executive director (independent)
Appointment to the Board:
Glynnis was appointed to the Board as an independent non-executive director on 30 June 2017.
Committee memberships: Audit and Risk (chair)

Experience
Glynnis is an independent non-executive director. She is an Independent Financial Reporting Advisor, with over 20 years' experience interpreting and consulting on IFRS. Previously she was a member of the Financial Reporting Investigations Panel of the JSE; and of SAICA's Accounting Practices Committee. Glynnis is based in England.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Experience

Jaco is an independent non-executive director of MAS. Previously Jaco was the head of the investment services division at a global wealth advisory and administration business managing in excess of $500 million for private clients and advising on a multi-asset class basis to institutional clients with $2.3 billion of assets. Jaco is based in the Isle of Man.

Jaco Jansen (46)

B.Com (Hons), CA (SA)

Non-executive director (independent)

Appointment to the Board:
Jaco was appointed to the Board as a non-executive director on 16 July 2009.

Committee memberships:
Audit and Risk

Experience

Malcolm is a non-executive director of MAS. Malcolm was a co-founder of the business and originally served as CFO for over 9 years' following the group's inception. He transitioned to a non-executive director role in June 2019. Prior to joining MAS, he was an equities fund manager and investment analyst in London. Malcolm is based in the Isle of Man.

Malcolm Levy (42)

MCom, MBA (Oxon), CA (SA), CFA

Non-executive director

Appointment to the Board:
Malcolm was appointed to the Board as chief financial officer on 16 February 2009, as interim chief executive officer between 14 December 2018 and 1 May 2019, and as non-executive director on 26 June 2019.

Committee memberships:
Investment

Experience

Melt is a non-executive director of MAS and the CEO of Attacq Ltd. Melt has extensive experience in real estate, banking and business operations and is based in Gauteng, South Africa.

Melt Hamman (48)

B.Com (Hons), CA (SA)

Non-executive director

Appointment to the Board:
Melt was appointed to the Board as non-executive director of MAS on 14 December 2018.

Committee memberships:
Remuneration and Nomination and Investment

Experience

Pierre is an independent non-executive director. He is managing director of Argosy Capital, a European based private equity and venture capital investment business.

Prior to joining Argosy, Pierre worked at two highly regarded international law firms practising as a commercial, private equity and funds lawyer. Pierre is based in the Isle of Man.

Pierre Gooson (41)

B.Com (Law), LLB, MBA

Non-executive director (independent)

Appointment to the Board:
Pierre was appointed to the Board as independent non-executive director of MAS on 12 August 2014.

Committee memberships:
Governance, Social and Ethics (chair), Remuneration and Nomination (chair), Audit and Risk and Investment

Experience

Werner is an independent non-executive director of MAS and the Chief Operating Officer of Capital International Group Limited. Werner is a qualified chartered accountant with over 24 years' experience in the finance industry. Werner is based in the Isle of Man.

Werner Alberts (49)

B.Com Hons (Acc), CA (SA), ACA (ICAEW)

Lead independent non-executive director

Appointment to the Board:
Werner was appointed to the Board as independent non-executive director of MAS on 7 September 2018

Committee memberships:
Investment

GOVERNANCE AND REMUNERATION

BOARD OF DIRECTORS

BOARD COMPOSITION AND EXPERIENCE

The Board comprises seven non-executive directors, the majority of whom are independent (including the chairman) and three executive directors. In compliance with the King IV Code on Corporate Governance, the roles of chairman and CEO are clearly separated and there is a majority of non-executive directors on the Board to ensure a balance of power and authority.

All directors have the skills, experience and/or qualifications required to make adequate judgements on issues of risk, strategy, performance, resources, standards of conduct and evaluation of performance. Their varied backgrounds and experience provide a balanced mix of the knowledge required to manage the business effectively. The skills and knowledge mix of Board members is comprehensive, comprising a variety of professional and experienced qualified individuals, including accountants, surveyors, chartered directors, lawyers and investment professionals. The majority of Board members hold or have held other non-executive positions which add to the skills base in terms of the value they bring from these experiences and they draw on this and their specific professional qualifications to fulfil appropriate committee roles.

Paul Osbourn was appointed on 7 September 2018 as an executive director and as chief financial officer on 2 October 2018 and has over 20 years' experience in corporate finance and in restructuring professional services. Werner Alberts was also appointed on 7 September 2018 as an additional independent non-executive director and has a wealth of experience in the fields of business development, risk and compliance, internal audit and corporate finance. Werner also brings investment expertise to the investment committee. In addition, the Board announced a further appointment of Melt Hamman on 14 December 2018 as non-executive director with extensive experience in real estate, banking and business operations. Werner Behrens was appointed to the role of CEO from 1 May 2019 with a background in corporate and commercial law.

Werner Alberts was appointed as a lead Independent Director in June 2019.

While the Board is satisfied with the mix of knowledge, skills and

7+ YEARS
4-7 YEARS
<3 YEARS

INDEPENDENT NON-EXECUTIVE DIRECTORS
EXECUTIVE DIRECTORS
NON-EXECUTIVE DIRECTORS

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

experience of its members during the financial year, it recognises the increasing challenges all businesses face in many areas and continues to actively pursue candidates to further boost the capability of the Board.

The Board is fully committed to demonstrating the importance of good governance to the success of the business and will continue to encourage robust oversight and constructive challenges from its non-executives.

MAS will continue to engage additional technical experts in relevant fields, as appropriate, to advise and attend Board meetings to supplement its knowledge.

This report has been prepared in accordance with the JSE Listings Requirements, Rules and Regulations of the Luxembourg Stock Exchange, King IV and other applicable regulation. The Board is satisfied it has carried out its responsibilities as set out in its charter.

ROLES AND RESPONSIBILITIES

The Board is responsible for setting the group's values, strategic objectives and investment policies. It acts as a focal point for, and is the custodian of, corporate governance by managing its relationship with management, the group's shareholders and other stakeholders along sound corporate governance principles.

The Board's terms of reference are set out in a written charter which sets out the Board's role and responsibilities as well as the requirements for its composition, meeting procedures and delegation of authority. The Board charter is reviewed and updated regularly. The most recent review and update was approved in September 2019.

The Board's responsibilities include:

Leading the group ethically and effectively;
Acting as the custodian of corporate governance;
Considering the strategy, risk, performance and sustainability of the group;
Ensuring proper management, control and compliance with laws and regulations;
Establishing a framework for internal controls and risk management;
Ensuring that the group is, and is seen to be, a responsible corporate citizen;
Assuming responsibility for the governance of risk, technology and information governance;
Approving the strategy of the group which will result in sustainable outcomes;
Ensuring compliance with appropriate laws, rules and standards and consideration of adherence to non-binding rules, standards and best practice;
Evaluating the performance of the CEO, executive directors and senior officers; and
Ensuring that individual directors adhere to satisfactory standards of conduct including disclosure of conflicts of interest and director's dealings.

All major acquisitions, disposals and financing transactions require approval by a majority of the Board of MAS (BVI) Holdings Limited ("MAS BVI"), the investment decision-making subsidiary within the group, with other matters being delegated by the Board to well-structured committees but without abdicating its own responsibilities. Delegation is determined by defined, formal terms of reference for each Board committee and there is a delegated authority framework in place from the Board and MAS BVI tht provides senior management with the parameters within which it can operate. These terms of reference and the delegated authority framework are approved and regularly reviewed by the Board. There are clear reporting lines to ensure that the Board receives all relevant information about the business.

INDEPENDENCE OF DIRECTORS AND DIVERSITY

The continuing independence of non-executives is vital to ensuring that stakeholders best interests are achieved and the Board conducted a full assessment of each non-executive director in October 2019. King IV states that length of service can impact on a director's independence and the Board, through its Remuneration and Nomination Committee, conducts specific independence assessments on an annual basis in respect of any director who has served for nine years or more. This is a balanced approach, considering the added value that past experience on the Board provide which, together with a fresh perspective brought by more recent appointments, aims to achieve the optimum blend. Jaco Jansen's status was re-classified from non-executive director to independent non-executive director after year end, as the company of which Jaco is the CEO, ceased to be a related party of the group.

MAS is an equal opportunities employer and the Board is committed to workplace diversity and inclusion. It has a gender diversity policy in place which sets out the strategies it adopts to deliver a balanced gender representation across all areas of the business. It recognises that the success of the group relies on having the best people, with a variety of perspectives and a broad range of experience, aligned to a common purpose and set of values in order to achieve the group's strategic objectives. Gender balance, particularly at Board level, is an area for ongoing focus.

The Board will continue to adopt strategies to broaden the field for identification of potential female candidates for future Board appointments, whilst ensuring at all times that candidates are treated equally. Achieving the most suitable blend of aptitudes, experience and qualifications to complement and balance the existing skills of the Board as a whole, regardless of gender is a priority.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

BOARD OF DIRECTORS

ATTENDANCE AT BOARD MEETINGS

DIRECTOR	ATTENDANCE
Ron Spencer	●●●●●●●●●●●●●●
Gideon Oosthuizen 1,2	●●●●●●●
Glynnis Carthy 1	●●●●●●●●●●●●●●
Jaco Jansen 1	●●●●●●●●●●●●●●
Jonathan Knight	●●●●●●●●●●●●●●
Malcolm Levy	●●●●●●●●●●●●●●
Melt Hamman 1,2	●●●●●●●●
Morné Wilken 3	●●●●●●●
Paul Osbourn	●●●●●●●●●●
Pierre Goosen	●●●●●●●●●●●●●●
Werner Alberts 1,2	●●●●●●●●●●●●●
Werner Behrens 3	●●

Apologies with reasons were submitted to the chairman before the meeting.
The director joined/left the Board during the period.

CEO AND BOARD EFFECTIVENESS EVALUATION

Under the terms of the Board charter, the Board is responsible for appointing and evaluating the performance of the CEO as well as all other executive and non-executive directors of the Board. The role of the CEO is key to the success of the group. It is the CEO's responsibility to lead the business ethically, agree the group strategy, culture and values and to ensure that the resources of the group are managed effectively to achieve its targets. During the year, the Board appointed Werner Behrens to the role of CEO, effective from 1 May 2019 and the Board is satisfied with the performance of the CEO during the period since his appointment. The terms of the CEO's contract include a notice period of three months by either party.

The chairman, supported by the Remuneration and Nomination Committee, ensures that the Board's effectiveness is reviewed.

Directors periodically participate in a written peer review to assess individual directors on the attributes that contribute to an effective Board including, but not necessarily restricted to, strategic thinking, leadership, integrity, meeting preparation and overall contribution. The full Board review and individual directors' assessments were undertaken internally during October 2019.

RE-ELECTION AND APPOINTMENT OF NEW DIRECTORS

In accordance with the company's articles of association, one third of the non-executive directors are subject to retirement by rotation and can offer themselves for re-election at the annual shareholders' meeting. The directors subject to retirement by rotation include any director who wishes to retire and not offer himself for re-election or any other of the directors who have been longest in office since their most recent appointment or re-appointment. The directors to retire on each occasion shall be determined by the composition of directors at the end of every financial year. A director's eligibility for re-election is based on the Board's confirmation of their past performance and contribution to the Board. The directors due for retirement at the 2019 annual shareholders' meeting, and offering themselves for re-election, are Jaco Jansen, Pierre Goosen and Ron Spencer.

Ron has indicated his intention to resign in the coming months once a suitable replacement Chair has been identified and he has offered himself for re-election only for the purpose and period until a new Chair has been appointed, but not later than 30 June 2020.

The appointment of new directors is by a resolution of the directors and any such appointment is confirmed at the next annual shareholders' meeting. The Remuneration and Nomination Committee identifies suitable candidates for Board appointments in

order to ensure that such appointments are made in a formal and transparent manner.

EDUCATION, INDUCTION AND TRAINING OF BOARD MEMBERS

The Board, through its Remuneration and Nomination Committee, is responsible for overseeing training and mentorship programmes for existing Board members. Board members are encouraged and supported to pursue further education. Board members have a working knowledge as appropriate to the effect of applicable laws, rules, codes and standards of the group and its business. Updates and

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

briefings on changes to risks, laws, rules and regulations codes and standards are provided as and when necessary.

CONFLICTS OF INTEREST

The group continues to monitor all conflicts of interest with the support of a robust policy that outlines what may constitute a conflict of interest within the group, how any conflicts of interest are reported and recorded, and what steps may be taken to remove, manage or mitigate such conflicts. If a member of the Board has a personal financial, economic or any other interest that might affect the

members' objectivity, transparency or credibility, or knows that a related person of theirs has a personal financial, economic or any other interest in the matter, that person, must disclose the interest and its general nature before the matter is considered at the meeting, and may not vote on the matter being considered by the Board.

Once an actual, potential or perceived conflict of interest has been identified and disclosed at a Board or a committee meeting, it must be reported to the company secretary, who maintains and regularly updates the group conflicts of interest register.

Directors and the company secretary are required to complete an annual declaration of all relevant financial, economic and other interests held by them and their related parties. Further disclosures are required whenever there are significant changes to such interests. The company secretary maintains the disclosure records and updates the conflicts of interest register as required.

The directors and the company secretary are required to declare on an annual basis that they have complied with the conflict of interest policy.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

BOARD OF DIRECTORS

DIRECTORS' DEALINGS IN COMPANY SECURITIES

Dealing in company shares by the directors, the company secretary or any employee is set out in the group's share dealing policy and is regulated by the Rules and Regulations of the Luxembourg Stock Exchange, EU Market Abuse Regulations and the JSE Listings Requirements. All directors and the company secretary must obtain approval, in writing, from the chairman prior to any deal being undertaken. In his absence, any approval must be sought from the Governance, Social and Ethics Committee ("GSEC") chair. The chairman must obtain approval from the GSEC chair in relation to his personal deals. This approval must then be forwarded to the company secretary who maintains a register of all deals undertaken. Disclosure of any deals undertaken by directors, the company secretary, or their associates, or by an employee, or any other individual classified as "Persons Discharging Managerial Responsibility", is made promptly and within strict timescales. Share dealing is not permitted under any circumstances in closed periods.

DIRECTORS' REMUNERATION

The Board has constituted a Remuneration and Nomination Committee to which is delegated the responsibility for all aspects of executive directors' remuneration, evaluation, performance and policy and to review remuneration at all levels in the group. The remuneration of non-executive directors is a matter for the Board, with the Committee providing an advisory role. The Committee ensures that the remuneration policy and its implementation support both the short-term and long-term objectives of the group and is structured to attract, reward and retain talented employees.

Further details and the full report of Remuneration and Nomination Committee is included in the report on pages 66 to 80.

COMPANY SECRETARY

The Board considers and satisfies itself on an annual basis as to the competence, qualifications and experience of the company secretary and the Board reviews the relationship between the company secretary and its members to determine whether the company secretary has maintained an arms-length relationship with the Board.

The Board has direct access to the company secretary who advises on updates of regulatory rules, corporate governance matters and legislation. The company secretary has a direct and open relationship with the chairman and the non-executive members of the Board and communicates frequently without influence, interference, or requiring permission from the executive directors. The company secretary is not a director of the company or of any of its subsidiaries, she does not sit on any Board committees and has no major contractual relationships with the company or any director. The company secretary is a qualified chartered secretary with over thirty years' experience in the corporate governance and finance arena.

The Board maintains that the company secretary's independence from management has not been compromised and it is satisfied that the company secretary has the necessary skills and experience to carry out her duties.

COMMITTEES

The Board has established a number of permanent committees to assist the Board in discharging its duties and responsibilities. The Board delegates authority, whilst retaining accountability, to relevant Board committees (and to the executive directors where appropriate) within clearly defined mandates. The Terms of Reference for each committee set out its role, responsibilities, scope of authority and composition. Details of the current membership of each committee can be found under the governance section within the "About Us" area on our website, www.masrei.com.

The established committees are:

AUDIT AND RISK ("ARC")

The ARC terms of reference are compliant with King IV. This committee ensures that the financial performance of the group is properly reported on and monitored and reviews internal control systems, procedures and processes and is responsible for managing the group's strategic and operational risk. This committee also oversees the external audit process. The ARC meets at least four times a year. The full report of the ARC can be found on pages 60 to 65.

REMUNERATION AND NOMINATION

The Remuneration and Nomination Committee terms of reference are compliant with King IV. This committee reviews and sets remuneration levels across the group, including the provision of any employee share purchase plan and oversees the appointment of directors, evaluating the composition of the Board and succession planning. The committee meets at least once a year. The full report of the Remuneration and Nomination Committee can be found on pages 66 to 80.

GOVERNANCE SOCIAL AND ETHICS ("GSEC")

The GSEC monitors and reviews compliance with all applicable legal, regulatory and listing requirements and ensures that the ethical culture and core values are ingrained across the group. The GSEC meets at least twice a year. The full report of the GSEC Committee can be found on pages 81 to 84.

INVESTMENT

The investment decision-making company within the group is MAS BVI Holdings Limited, and its committee (the "Investment Committee"), receives recommendations from the Portfolio Management team of the investment advisor within the group, comprising the executive directors, none of whom sit on the Board of MAS BVI.

The Investment Committee operates under formal terms of reference and its members are the executive directors, two non-executive directors and two independent non-executive directors. The Committee meets at least twice a year on a formal basis and periodically throughout the year to consider investment pipeline recommendations, acquisition and disposal proposals, project expenditure and all other key matters relating to the investment portfolio.

CONCLUSION

The Board carried out its responsibilities set out in its charter.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CORPORATE GOVERNANCE

COMMITMENT TO GOOD GOVERNANCE

Application of high standards of corporate governance is intrinsic to the sustainability of the business and the ethical tone of MAS is driven from the top via the Chairman, the CEO and the Board. MAS continues to review its governance structures. In the current year there was a focus on enhancing the internal control framework, as well as a review of the group's policies. Further details are set out below.

ETHICAL AND EFFECTIVE LEADERSHIP

The Board members are unified in their approach and understand their responsibility to lead in an ethical manner to safeguard the interests of all stakeholders. It is a critical part of MAS' strategy to operate as a responsible corporate citizen. In conducting the affairs of the group, the Board endorses the principles of fairness, responsibility, transparency and accountability advocated by King IV, in addition to acting with integrity, being one of the five core values of MAS.

The Board charter, codes of conduct for the directors, employees and suppliers are in operation, in addition to the anti-bribery and corruption policy. The whistle blowing policy has been extended this year to include an anonymous hotline for all MAS personnel. There have been no incidents or reports of breaches, bribery, corruption or whistle blowing during the year.

The Board and employee culture survey undertaken during the year reaffirmed the strong alignment of focus between the Board and the wider MAS team, with very pleasing results. A key initiative was the implementation of further enhancements to the internal control framework. A delegated authority framework is in operation, the limits of which are incorporated into all levels of operational procedures ensuring matters are dealt with at the appropriate level. It was remodeled this year to reflect the changing demands of the business.

The Board sets the strategic direction for the group and a two-day strategy session was undertaken in May 2019, which was attended by all Board members. This provided newer Board members the opportunity to build rapport and closer working relationships with their colleagues and the experience was positively welcomed by all. The Board also approved the appointment of a lead independent director, Werner Alberts, as part of the Board's governance function. His role is to provide further support to the Chairman, which includes acting as deputy chair, in his absence or if his independence is impaired.

The Governance, Social and Ethics Committee plays a key role in exercising oversight of ethics and, although responsibility is delegated to this committee, the Board remains accountable for all ethical matters.

CORPORATE GOVERNANCE PRINCIPLES

As a company listed on the Main Board of the Johannesburg Stock Exchange and the Euro-MTF market of the Luxembourg Stock Exchange, MAS remains committed to complying with the listings requirements of the Johannesburg Stock Exchange and the Rules and Regulations of the Luxembourg Stock Exchange, general principles of good corporate governance and, in particular, to the recommendations for best practice as laid down by the King IV Code.

MAS dedicated significant resources to the transition of corporate governance principles from King III to King IV and has implemented the recommendations on an 'apply and explain' basis. The King IV application register, setting out how the company has applied the principles, is available on the group's website, www.masrei.com.

CORPORATE GOVERNANCE FRAMEWORK

The corporate governance framework underpins decision-making, via robust interrogation of the groups' strategy, its execution and ultimately, its performance. The Board knows that effective governance is realised through the creation of an appropriate governance culture, which is of particular importance during sustained periods of growth. As a consequence, the corporate governance framework continues to evolve and is subject to an annual review to adapt to changing environments and reflect the continuous improvement ethos that exists at MAS.

BOARD CHARTER AND CODES OF ETHICS AND CONDUCT

Exemplary standards of behaviour are expected when representing or acting as agent on behalf of the MAS group, and this is applicable for suppliers, joint venture partners and consultants in addition to the Board and all employees. The Board charter and the directors' code of ethics and conduct are the key documents for adherence by the Board. They govern and direct the level of professional competence and integrity required by individual directors in their business dealings on behalf of the group.

Staff are fully aware of the content of the employee code of ethics and conduct and standards of behaviour expected. Regarding suppliers, amendments continue to be made to third party services agreements entered into, to ensure that those suppliers and their agents are fully aware of and adhere to the MAS suppliers code of ethics and conduct.

The Board charter and the various codes of ethics and conduct are reviewed annually and updated as required.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

GOVERNANCE AND REMUNERATION

Travelodge

Travelodge, Chippenham, United Kingdom

TRAVELAGE STATE INC INTEGRALLED ANNUAL JANUARY 2019

CONFLICTS OF INTEREST DISCLOSURES

MAS conducted a detailed review of its conflicts of interest policy and directors' declarations during the year, to enhance the comprehensive programme for disclosure and each director is satisfied, so far as they are aware, that they have fully and frankly disclosed information in a manner which is sufficient for them and the company to comply with the requirements.

DIVERSITY

MAS is conscious of the value that diversity, both in the boardroom and throughout the organisation, brings and has a policy in place governing this. The Board considers that broader aspects of diversity, not purely gender, are vital to achieving a blend of aptitudes, experience and qualifications to complement existing skills for a balanced Board but will continue to consider gender diversity as a key part of the assessment for attracting, developing and retaining the best people.

Being a foreign inwardly-listed company on the JSE, MAS obtained legal advice as to whether it is obliged to report on its compliance with broad-based black economic empowerment (BBBEE) in terms of the BBBEE Act and paragraph 16.20 of the JSE Listings Requirements. Such advice concluded that MAS is not subject to any duty imposed in South Africa. Notwithstanding this, MAS is an equal opportunities employer and is determined that its policies and actions reflect equal treatment across all aspects of the business.

STATEMENT

The Board is satisfied that it has fulfilled its responsibilities in accordance with its Board charter and its code of ethics and conduct. Furthermore, the group has applied, in all material respects, the principles of King IV Code of Corporate Governance during the financial year to 30 June 2019.

CORPORATE GOVERNANCE

Economic interest equivalent to an 80% participation in the performance of the co-investment joint venture

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE AUDIT AND RISK COMMITTEE

GLYNNIS CARTHY

Audit and Risk Committee chair
(Independent non-executive director)

OTHER MEMBERS

Jaco Jansen
(Independent non-executive director)

Pierre Goosen
(Independent non-executive director)

Ron Spencer
(Independent non-executive director)

As the Chair of the Audit and Risk Committee (ARC or Committee), I am pleased to present the Committee's report for the year ended 30 June 2019.

During the year, the Committee considered financial reporting, risk management, the review of internal controls as well as the independence and effectiveness of the external auditor. To achieve this, it focussed on the following areas:

Enhanced the group's risk based internal controls framework.	See internal controls – page 65.
Implemented an internal control function.	See internal controls – page 65.
Refreshed the group's approach to monitoring risk.	See risk management process – page 65.
Recommended the appointment of PricewaterhouseCoopers LLC, which included reviewing the terms of engagement, audit fee proposals, independence, objectivity and inspection reports.	See external auditor – page 64.
Updated key policies on the valuation of investment property valuation and non-audit services.	See key audit matters and external auditor – pages 63 and 64.
Confirmed that the accounting for significant and/or unusual transactions is in accordance with IFRS.	See significant matters – page 63.
Confirmed that the accounting for the key audit matters included in the audit report is in accordance with IFRS.	See key audit matters – page 63.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

ROLES AND RESPONSIBILITIES OF THE COMMITTEE

FINANCIAL PERFORMANCE

Monitor the integrity of the group's financial statements.
Ensure the financial performance of the group is properly monitored and reported on.

FINANCIAL REPORTING

Review the group's annual and interim financial statements.
Provide advice on the Consolidated Annual Financial Statements and integrated report, and confirm that they, when taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the group's performance, business model and strategy.
Review, and challenge if necessary, the accounting policies adopted and any changes thereto.
Review, and challenge if necessary, significant financial reporting judgements and estimates.
Review the going concern statement.
Review the expertise and effectiveness of the group's finance function and chief financial officer.
Review the financial reporting procedures and ensure they are operating efficiently.

RISK MANAGEMENT

Oversee the implementation of an effective policy and plan for risk management that enhances the group's ability to achieve its strategic objectives.
Assess the principal risks facing the group.
Review the dissemination of the risk management plan throughout the group and ensure this is integrated in the day-to-day activities at all levels.
Review the risk monitoring that is undertaken by management and assess its effectiveness.
Ensure comprehensive, timely and relevant disclosures regarding risk.

INTERNAL CONTROL SYSTEMS AND PROCEDURES

Review the systems of internal control, to ensure that adequate processes are in place and that the internal controls are operating effectively.

EXTERNAL AUDIT

Make a recommendation to the Board on the appointment, reappointment or removal of the external auditor.
Oversee the relationship with the external auditor, including approval of remuneration and terms of engagement.
Meet with the external auditor to discuss its remit and any issues arising from the audit.
Oversee the external audit process and review the effectiveness of the external audit process.
Develop, and implement, a policy on the supply of non-audit services by the external auditor to avoid any threat to auditor objectivity and independence.
Review effectiveness of the audit process and assess the quality of the audit.

INTERNAL AUDIT

Assess the need for an internal audit function within the group.

WHISTLEBLOWING

Review the arrangements for employees to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters.

The Committee comprises independent non-executive directors. In the prior year, the Committee consisted of three independent non-executive directors and one non-executive director. The Remuneration and Nomination Committee of the Board has reviewed the independence of each of the non-executive directors after year end and has re-classified Jaco Jansen's status from non-executive director to independent non-executive director, as the company of which Jaco is the CEO, ceased to be a related party of the group. On 14 December 2018 Gideon Oosthuizen resigned as a non-executive director and as a member of the Committee.

The Committee performs an annual self-assessment and is satisfied that it has fulfilled its duties as set out in its terms of reference. It is also satisfied that throughout the year the Committee members acted independently and collectively had the requisite qualifications and experience to fulfil the duties. The Committee also performs an assessment of the expertise and experience of the group's chief financial officer and the finance function. The Committee is satisfied that the chief financial officer and the finance function have the requisite expertise and experience to carry out their duties effectively. The Committee is satisfied that the financial reporting procedures are operating efficiently.

The Committee meets at least four times a year. The external auditor is invited to attend the meetings in which the interim financial statements, the Consolidated Annual Financial Statements and investment property valuations are reviewed by the Committee. The Committee held 13 meetings since the previous IAR was published.

ATTENDANCE
Glynnis Carthy
☹●●●●●●●●●●●●●
Jaco Jansen
☹●●●●●●●●●●●●●
Pierre Goosen
☹●●●●●●●●●●●●●
Ron Spencer
☹●●●●●●●●●●●●●
Gideon Oosthuizen¹
☹●●●●●

¹ Gideon Oosthuizen resigned on 14 December 2018, the Committee had 5 meetings up to this date, all of which he attended.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE AUDIT AND RISK COMMITTEE

MEETINGS

The Committee's areas of focus at each of the meetings were as follows:

| October 2018 | - Recommend the appointment of PricewaterhouseCoopers LLC; and
- Review and recommend the approval of the integrated annual report. |
| --- | --- |
| November 2018 | - Review the quarterly management accounts and budget versus actual for the period ended 30 September 2018;
- Approve the Committee's annual plan of work;
- Review an update on the group's tax position; and
- Consider the expertise, resourcing and effectiveness of the group's finance function. |
| January 2019 | - Review the risk management report which included the group's key risks, how they are managed and the group's risk matrix. |
| February 2019 | - Closed door meeting between the Committee and the external auditor;
- Review the quarterly management accounts and budget versus actual for the period ended 31 December 2018;
- Review and approve the group's investment property valuations as at 31 December 2018;
- Review the group's related parties;
- Approve the external auditor fees;
- Review and recommend for approval, the group's condensed consolidated interim financial statements;
- Approve the group's updated non-audit services policy;
- Review an update on the group's tax position; and
- Consider feedback from the review of the group's internal control's environment. |
| May 2019 | - Review and recommend for approval the group's 2020 budget. |
| June 2019 | - Review the quarterly management accounts and budget versus actual for the period ended 31 March 2019;
- Consider and approve the amendments to the group's valuation policy for investment property;
- Approve the group's independent external investment property valuation experts;
- Review the year end audit plan and materiality;
- Review and recommend for approval, the amendments to the group's internal control framework;
- Consider the report from the Governance Social and Ethics Committee; and
- Review the impact of the JSE proactive monitoring report. |
| July 2019 | - Review and approve the group's investment property valuations as at 30 June 2019;
- Review and approve the significant estimates and judgements;
- Review the risk and control report, key risks facing the business, risk probability impact matrix and risk exposure profile;
- Review the report on the implementation of the updated internal controls framework;
- Review and recommend for approval, the group's updated risk tolerance statement;
- Review and recommend for approval, various policies for which ARC has oversight; and
- Review the annual plan of work pertaining to risk and control related activities. |
| August 2019 | - Closed door meeting between the Committee and the external auditor;
- Review of the group's related parties;
- Review and approve the significant estimates and judgements;
- Review and recommend for approval, the Consolidated Annual Financial Statements for the year ended 30 June 2019;
- Assess the expertise, resources and experience of the finance function and chief financial officer.
- Assess the effectiveness of the external auditor;
- Review the effectiveness of the audit process and assess the quality of the audit; and
- Committee's self-assessment. |

On a quarterly basis, the Committee chair reported any key issues discussed by the Committee to the Board, along with any recommendations.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

SIGNIFICANT JUDGEMENTS AND ESTIMATION UNCERTAINTIES

The Committee assessed whether suitable accounting policies had been selected and that appropriate judgements regarding their application had been made, and whether management had made appropriate estimates. The Committee paid attention to matters it considered to be important because of their impact on the group's results and particularly those which involved more complexity, judgement or estimation by management.

The Committee obtained assurance from the external auditor in making the assessments about the key audit matters and the significant matters below:

KEY AUDIT MATTERS

KEY AUDIT MATTERS	HOW THE COMMITTEE ADDRESSED THE MATTER
Valuation of investment properties	As the valuation of investment property requires significant judgement and estimation, the Committee has oversight of the valuation process and is responsible for approving the independent valuers and the valuation policy. It also reviews a summary of the investment property valuations for the group. The group has obtained an independent valuation report for each asset in the group's investment property portfolio. The Committee:
- Approved the valuation methodology and process that would be applied for the year end reporting. This included the process for selecting a reputable and experienced independent valuer for each investment property as well as the valuation process as detailed in note 17 of the Consolidated Annual Financial Statements.
- Reviewed a summary of the valuation reports after they had been approved by the Portfolio Management Committee and the Investment Committee, and focussed on the significant assumptions used in estimating fair value which are set out in note 17 of the Consolidated Annual Financial Statements.
During the year the Committee reviewed the valuation policy which required the group to obtain external independent valuations annually. Due to changes in stakeholder expectations it was considered appropriate to obtain external independent valuations semi-annually for the financial periods ending after 30 June 2019.

SIGNIFICANT MATTERS

OTHER SIGNIFICANT MATTERS	HOW THE COMMITTEE ADDRESSED THE MATTER
Acquisition of investment properties from PKM Developments	The group acquired a portfolio of nine completed investment properties from the PKM Developments, the group's associate.
There are a number of key judgments in relation to the transaction, namely: the date on which control passed to MAS, the net assets acquired, whether the acquisition constituted a business combination or an asset acquisition and whether the development land that was acquired and agreed to be sold back to the associate was an asset that should be recognised by the group.
The management team presented an analysis on the application of IFRS, along with an opinion from an external IFRS adviser to the ARC. The Committee reviewed the opinion and is satisfied with the conclusions. This transaction has also been reviewed by the group's external auditor.
Impairment assessment – financial assets	The group early adopted IFRS 9 (2013) Financial Instruments for the year ended 30 June 2015, the group has now adopted IFRS 9 (2014) Financial Instruments. The amendments to this standard introduce an expected credit loss model which requires expected credit losses to be recognised on financial assets held at amortised cost.
The most significant financial asset is the PKM Developments preference shares. The Committee has reviewed the impairment analysis prepared by management relating to this investment. The various inputs were debated and a sensitivity test was done to provide the Committee with sufficient comfort to satisfy itself that, as at 30 June 2019, an expected credit loss of nil is appropriate for the PKM Developments preference shares.
Impairment assessment – goodwill	The Committee has reviewed the impairment analysis prepared by management in respect of the goodwill relating to MAS Property Advisors Limited, the group's internal investment advisor. The various inputs were debated and sensitised so that the Committee was able to satisfy itself that goodwill was not impaired as at 30 June 2019.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE AUDIT AND RISK COMMITTEE

EXTERNAL AUDITOR

The Committee is responsible for the appointment of the external auditor and oversight to ensure audit effectiveness and independence. To achieve this the Committee focussed on the following key areas:

Continued monitoring of the allegations against KPMG South Africa;
Review of the scope of the annual audit plan with focus on the appropriateness of the audit plan, key audit matters and materiality;
Assessment of the effectiveness of the external auditor in relation to its independence and audit quality; and
Consideration and approval of the appropriateness of the external auditor remuneration fees.

The Committee continued to monitor the allegations made against KPMG South Africa, to engage with KPMG IOM and independently assessed whether it was appropriate for KPMG IOM to continue as the group's external auditor. As a result of the sustained allegations made against KPMG South Africa, the Committee could not continue to recommend that KPMG IOM be re-appointed at the Annual General Meeting.

Consequently, the Committee re-reviewed the tender documentation from the tender performed in the prior year and invited PricewaterhouseCoopers LLC to submit a revised proposal. The Committee was satisfied that PricewaterhouseCoopers LLC was independent and able to perform a quality audit. Accordingly, the Committee recommended to the Board that it include a resolution in the Annual Shareholder's Meeting to appoint PricewaterhouseCoopers LLC. On 27 November 2018 PricewaterhouseCoopers LLC was appointed as the group's external auditor.

The Committee would like to thank KPMG IOM for the services and remains satisfied with the quality of the audits it performed.

The Committee engaged with PricewaterhouseCoopers LLC about the intended scope and materiality of the audit plan and sought further clarification as necessary. The

Committee also debated the appropriateness of the key audit matters identified.

In assessing the auditor's effectiveness, the Committee has reviewed the inspection reports on PricewaterhouseCoopers LLC which were issued by the audit regulator, considered the audit team's knowledge of the group, understanding of the accounting process and the extent to which the audit plan has progressed in line with expectation. The Committee confirmed that the external auditor has been effective in adequately fulfilling its responsibilities and has the requisite qualifications, expertise and resources to discharge its duties.

PricewaterhouseCoopers LLC has confirmed to the Committee that it remains independent and has maintained the necessary internal safeguards to ensure the objectivity of the audit partner and staff. The group and the external auditor are satisfied that no relationships exist between them other than in the ordinary course of business.

The Committee has reviewed the appropriateness of the fee of the external auditor in the context of the growth of the group during the year, the increased communication between the Committee and external auditor, and the multi-jurisdictional nature of the audit. The Committee benchmarked the fee with the fee proposals from the audit tender and concluded that the fees are commensurate with the work performed and sufficient to perform a quality audit.

The fees approved in respect of PricewaterhouseCoopers LLC and KPMG whilst acting as the group's external auditor were as shown in the table below:

The non-audit services policy was amended by the Committee to require that all non-audit services by the group's external auditor are specifically approved upfront by the Committee. The updated policy clarifies the scope and requires the external auditor to obtain approval from the Committee in respect of the provision of any non-audit services to the group's associates. The group's external auditors have reviewed this policy and have implemented it.

COMBINED ASSURANCE FRAMEWORK

The group has a combined assurance model to manage risk and to ensure the effectiveness of controls, risk management procedures and governance processes. The model's multiple lines of defence emphasise the fundamental concept of holistic risk management and allow the group to manage its risk exposure, whilst optimising opportunities. The lines of defence are detailed in the Risks and Opportunities section on page 22:

RISK MANAGEMENT

The effective management of risk is essential to achieving the group's strategic and operational objectives and goals. Risk management is fundamental to good management practice and is a significant aspect of the corporate governance process applied by group as it is an integral part of the group's decision-making and day to day management and is incorporated in the strategic and operational planning processes across the group.

Managing risk is the ultimate responsibility of the Board of Directors. Without abdicating this responsibility, the Board has delegated this function to the Committee, which

Euro	PwC - year ended 30 June 2019	KPMG - year ended 30 June 2018
Interim review fee	51,040	44,384
Year end audit fee
- Group	260,306	220,396
- Subsidiaries	71,386	—
Non-audit fees	17,455	48,666
Total fees	400,187	313,446
Percentage of non-audit to total fees	4.4%	15.53%

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

oversees risk management. Day to day responsibility for the execution thereof rests with the group's executive management.

The Committee focuses on the key risks that affect the business and these are assessed on a regular basis. A detailed review of the entire register is performed at least quarterly by the senior management team. A summary report is presented to the Committee.

The key risks are described on pages 24 to 27.

INTERNAL CONTROLS

MAS' internal control framework considers the following components:
i. Risk identification;
ii. Risk assessment;
iii. Risk response;
iv. Risk monitoring and
v. Risk reporting.

During the year, the executive team has reassessed the key business objectives, the primary risks facing the business, the operating context within which those risk arise, the extent to which they impact the business and the mitigating controls that are in place. The internal control framework has accordingly been updated. As part of this, the method used to test internal controls, and an explanation of how adherence to the controls will be evidenced, are included within the framework. Each risk and related internal controls have been assigned to an accountable executive or member of senior management who is ultimately responsible for ensuring that the internal controls relating to that risk are effective.

Management believes that the enhancements made to the internal control framework provide an overview of the risks and the controls that are in place to manage or mitigate the risks. The implementation of a dedicated internal control function, together with the enterprise risk management software solution, will further enhance the reporting and monitoring elements.

The updated internal control framework has been reviewed by an independent firm of accountants, and by ARC, both of whom have considered, and are satisfied that:
- The internal control framework is appropriately designed to operate effectively; and
- The key controls that are documented in the framework are appropriately designed.

The Committee is satisfied that there were adequate processes in place and that the internal controls have operated effectively throughout the period.

WHISTLEBLOWING

The Committee is responsible for overseeing the group's whistleblowing policy, under which there is a formal framework for employees, consultants and directors to raise concerns if they believe that there is misconduct or illegal activities within the group, or where concerns over modern slavery and human trafficking exist in the business or within its supply chain.

During the year, the group introduced a dedicated, independent and confidential Whistleblowing hotline for the use of the group's staff only. SeeHearSpeakUp is operated by an independent firm of chartered accountants and is available 24/7 and 365 days a year. Concerns can be raised by email, online, or by telephone to preserve anonymity.

There have been no instances of whistleblowing during the year.

PRIORITIES FOR THE YEAR AHEAD

In the 2020 year, the Committee will focus on the implementation of a dedicated internal control function across the group. The Committee will also focus on further decluttering of the financial statements.

This report has been prepared in accordance with the JSE Listings Requirements, Rules and Regulations of the Luxembourg Stock Exchange, King IV and other applicable regulation.

CONCLUSION

The Committee is satisfied that it has discharged its duties under its terms of reference from the Board.

On behalf of the Audit and Risk Committee

Glynnis Carthy
Chair of the Audit and Risk Committee

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

PIERRE GOOSEN

Remuneration and Nomination Committee chair
(Independent non-executive director)

OTHER MEMBERS

RON SPENCER

(Independent non-executive director)

MELT HAMMAN

(Non-executive director)

As Chair of the Remuneration and Nomination Committee (the "Committee"), I am pleased to present the Committee's report for the year ended 30 June 2019. This report provides an overview of how the Committee is governed, its responsibilities and how the Committee discharged its duties during the year. The remuneration aspects are dealt with on pages 66 to 78, followed by the nomination aspects on pages 79 to 80 of the report.

KEY FOCUS AREAS

In 2018, MAS implemented a number of changes to the remuneration and nomination policies to align with King IV and drive increased transparency and alignment. The focus this year has been on implementing those changes. Other areas of focus during the year include the following:

Recruitment, appointment and induction of the chief executive officer (CEO);
Recruitment, appointment and induction of the chief financial officer (CFO);
Recruitment and appointment of a group legal counsel;
Review of the Board composition and the appointment of two additional non-executive directors;
The appointment of a lead-INED and agreeing his key areas of responsibility;
Approval of the remuneration report and its implementation;
Market and peer assessment of remuneration policy;
Review and approve a number of HR policies;
Enhancing performance driven short-term incentives and the use of performance criteria in determining the long-term incentive awards;
Board effectiveness and director skills assessment;
Cultural assessment of the Board and organisation; and
Independence review of all INEDS, including both the chairman and Jaco Jansen, given their nine-year tenure.

COMPOSITION

The Committee comprises three non-executive directors, two of which are independent. The Committee members collectively have the necessary and relevant qualifications and experience to fulfil their duties. The CEO and CFO are invited to attend certain Committee meetings where it is deemed appropriate, but do not participate in the voting process and are not present when their own remuneration is discussed or considered. The company secretary, Helen Cullen, acts as secretary to the Committee.

The Committee is required to formally meet at least once a year and held six formal meetings during the year. Several ad hoc meetings have also taken place however, these are not reflected in the table below, despite attendance by all members.

Attendance at the formal meetings were as follows:

DIRECTOR	ATTENDANCE
Pierre Goosen	●●●●●●●
Ron Spencer	●●●●●●●
Melt Hamman^{1}	●●
Gideon Oosthuizen^{2}	●●●●

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

REMUNERATION ASPECTS OF THE COMMITTEE

The remuneration section of this report is set out in three parts:

i. Part 1 contains the background statement;
ii. Part 2 sets out the company's forward-looking remuneration philosophy and policy; and
iii. Part 3 details the implementation of the share purchase scheme as endorsed by shareholders at the 2017 annual shareholders' meeting.

Parts 2 and 3 will be put forward to shareholders for separate non-binding advisory votes as required by the JSE Listings Requirements.

PART 1 - BACKGROUND STATEMENT

GOVERNANCE OF THE COMMITTEE

PURPOSE

The purpose of the Committee is to ensure that the remuneration policy and its implementation supports both the short-term and long-term strategic objectives of the group and is structured to attract, reward and retain employees.

ROLES AND RESPONSIBILITIES OF THE COMMITTEE

The Committee is responsible for the following, as set out in its terms of reference:

Determine and agree with the Board the framework and policy for remuneration at all levels in the group that will promote achievement of the strategic objectives, encourage individual performance and assist in the attraction and retention of employees;
Consider how shareholders and other stakeholder interests are taken into account when setting the remuneration policy;
Ensure that any remuneration policy is fair, responsible, transparent and appropriately implemented and executed;
Approve the design of any performance related pay elements of the remuneration policy, determine appropriate key performance indicators (KPIs), and ensure any awards are in line with the approved share purchase scheme;
Review the outcomes of the remuneration policy, including any short and long-term incentives, to determine whether the objectives of the remuneration policy are being achieved and to ensure their continued contribution to the alignment with shareholder value;
Ensure that all benefits, including retirement benefits, are justified and correctly valued;
Evaluate the performance of executive and non-executive directors to determine their remuneration;
Report to shareholders annually on behalf of the Board; and
Review compliance with King IV insofar as reporting to the Board and attendance at the annual shareholders' meeting is concerned.

SHAREHOLDER ENGAGEMENT

In 2017, shareholders voted in support of the introduction of the share purchase scheme, with 93.1% voting in support of the scheme. On 27 November 2018, 73.0% of shareholders that cast their votes endorsed the 2018 remuneration policy and 79.6% endorsed the implementation of the policy during 2018. As fewer than 75% of the votes cast approved the remuneration policy, the Committee engaged with shareholders to ascertain their concerns regarding the remuneration policy and considered how these concerns might be addressed.

MAS invited shareholders to attend a conference call on 17 January 2019 specifically arranged to discuss the remuneration policy. The meeting was publicised, and notice was posted on the group's website. Disappointingly, however, no shareholders attended the call. The only feedback received was previously via email from two shareholders around the time of the annual shareholders meeting. The points they raised are presented below:

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

SHAREHOLDER QUESTIONS RAISED	RESPONSE / ACTION TAKEN
KPI weightings were disclosed at company level but not at individual level and hence appear to be inconsistent with best practice	As detailed further in Part 2, the short-term incentive scheme (STI scheme) now clearly presents the financial, strategic and personal KPIs upon which awards are made (see Part 2). In addition, KPIs have also been set for awards under the long-term incentive scheme (LTI scheme) (with the exception of initial awards to new appointments which will be considered as part of the recruitment process and therefore not linked to KPIs).
Preference that performance hurdles measure operational returns in excess of costs of capital, plus an appropriate return	KPIs will be agreed with employees in advance. Where appropriate, the KPIs will incorporate a cost of capital as a base level return, in order to focus employees on generating returns above the cost of capital. It is noted, however, that the LTI scheme already incorporates a hurdle rate of return, being the group's weighted average cost of debt. This is considered to align the interests of participants with shareholders, by incentivising a lower cost of debt across the group.
LTI performance hurdles should succeed rather than precede awards and be measured over a performance period of at least three years. Where a twelve-month period is used, there is a risk that management may prioritise short term performance over long-term results	Awards unlock/vest over five years and are therefore pro-rated for early termination, as departing employees forego locked/unvested awards. The testing for performance is inherent in the scheme, in that the awards are essentially share options issued at market value. KPIs are considered as part of the award criteria (with the exception of new appointments where awards will be considered as part of the recruitment process and therefore not linked to KPIs).

Significant time has been devoted to increased transparency on the remuneration philosophy and policy, as well as the level of awards made. The Committee also continues to review the policy in light of both peer and general market remuneration. The Committee continues to believe that the remuneration policy is effective in aligning individual, group and shareholder interests by providing a link between strategy, value creation, performance and reward.

PART 2 - REMUNERATION POLICY

REMUNERATION PHILOSOPHY

MAS' remuneration philosophy is aimed at attracting, motivating and retaining the best talent available to facilitate the group meeting its strategic objectives. Remuneration is considered with regard to four specific categories of employees and directors:

i. Executive directors
ii. Senior management
iii. Employees
iv. Non-executive directors

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

REMUNERATION STRUCTURE AND DESIGN

In considering the appropriate remuneration for each specific category of employee and directors, the group considers the following elements of remuneration:

TOTAL GUARANTEED PACKAGE

COMPONENT	TYPE	ELIGIBILITY
Fixed	Basic salary	i. Executive directors (excluding non-salaried variant participants)
ii. Senior management
iii. Employees	The level of salary offered is intended to attract and retain high calibre, talented individuals.
Pay reflects both market demand and the individuals' skills, experience, responsibility and accountability. Base salaries are regularly benchmarked against the market.
In order to align with the year-end of the group, base-salary reviews will form part of the annual staff appraisal process conducted after the annual results are available each year. Salaries are typically adjusted for inflation each year, with increases dependent upon increasing seniority, experience and demonstrated ability.
Fixed	Benefits (including death in service, income protection, holiday purchase scheme and contributory group personal pension scheme*)	i. Executive directors (excluding non-salaried variant participants)
ii. Senior management
iii. Employees	Provide employees with security and personal flexibility to increase motivation. The policy is to provide base level benefits that reflect the market norm.

Optional participation.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

Short term incentive (STI) awards to participants on the salaried variant of the share purchase scheme are determined using a detailed individual KPI scorecard. STI awards paid to participants will be reduced by the net distribution in respect of the financial year on shares issued to participants under the salaried variant of the share purchase scheme.

SHORT-TERM INCENTIVE

COMPONENT	TYPE	ELIGIBILITY	OBJECTIVE AND POLICY
Variable	Cash bonus	i. Executive directors (excluding non-salaried variant participants)
ii. Senior management
iii. Employees	The objective of the STI award is to motivate and incentivise delivery of performance in the short term.
Short term incentives are paid in cash and based on company and individual performance against pre-agreed targets during the financial year. Appraisals are done in October of each year as part of the holistic remuneration review process. Cash payments of short-term incentives in excess of 50% of an individual's total guaranteed package will be deferred by twelve months and will be paid subject to the individual remaining in full-time employment with the group during and up to the end of the deferred period.
The KPI targets for executive directors are presented in detail later in this report.
The cash bonus award is reduced by the element of distribution in respect of the financial year on shares issued in accordance with the salaried variant of the share purchase scheme. The performance review period and the distribution period are the same, notwithstanding that the distributions are paid shortly after the end of the period.
Non-executive directors and non-salaried variant participants on the share purchase scheme do not participate in short-term incentive awards.
Variable	Share purchase scheme distributions	i. Salaried variant of share purchase scheme participants only	The two variants of the share purchase scheme are described below. Salaried variant participants of the share purchase scheme are entitled to the distributions on the shares that are owned, less the interest due on the loans to acquire such shares. Such net distributions received are offset against the cash bonus award element indicated above.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

LONG-TERM INCENTIVE

COMPONENT	TYPE	ELIGIBILITY	OBJECTIVE AND POLICY
Variable	Share purchase scheme awards - SALARIED VARIANT	i. Executive directors (excluding participants on the non-salaried variant of the share purchase scheme)
ii. Senior management	The LTI scheme is designed to ensure that participants are motivated and focused on delivering sustained long-term performance, thereby aligning their interests with those of shareholders.

A share purchase scheme was approved by shareholders at the annual general meeting on 17 February 2017 and is the only LTI scheme currently available. This is an invitation only scheme, with participants invited to participate at a level determined by their contribution and performance against KPIs. There are two variants to the scheme – a salaried variant and a non-salaried variant. This section details the salaried variant of the share purchase scheme.

Eligible participants are given loans to acquire newly issued shares in the company at the prevailing traded share price, with no discount. The loans attract interest at a rate equal to the group's weighted average cost of debt and are non-recourse loans. The non-recourse nature of the loans means that the share purchase scheme is in substance a share option, or share appreciation right, scheme.

Shares unlock (vest) equally over a five-year period and participants are only entitled to dispose of unlocked shares. Proceeds from any disposal of unlocked shares are firstly used to repay the corresponding loan and accrued but unpaid interest, with any surplus (capital gain) being distributed to the participant.

The total return to participants from the salaried variant of the share purchase scheme is the capital gain on unlocked shares, plus any distributions received, net of interest, on scheme shares. From the 2019 financial year, any distributions received, net of interest paid on the related loans, are deducted from the cash bonus awarded as part of the STI scheme indicated above.

This LTI scheme provides a strong alignment of interest, as it focuses participants on several important and carefully designed factors:
- growing the level of the distribution on a sustainable basis;
- reducing the cost of debt in order to enhance the distribution paid;
- growing the long-term value of the business, which will translate in time to appreciation in the share price; and
- retaining employees through the five-year unlocking (vesting) period.

On inception of the scheme, outsize awards were made on a one-off basis to commence the LTI scheme and ensure adequate alignment of interest. Going forward, awards will only be made to existing participants on the basis of specific KPIs, which are detailed below. The quantum of new awards will be considered in light of existing awards held. Initial awards to new appointments will be considered as part of the recruitment process and therefore not be linked to KPIs. |
| Variable | Share purchase scheme awards - NON-SALARIED VARIANT | i. Executive directors - non-salaried variant participants only | The former CFO was the only remaining participant in the non-salaried variant of the scheme. As such, he did not receive any guaranteed/base remuneration or STIs in relation to his employment as CFO. However, he assisted the group by taking on the role of Interim CEO, a role for which he was compensated by a salary.

All remaining shares awarded under the non-salaried variant of the share purchase scheme, which related only to the former CFO, were cancelled in June 2019 as he transitioned to a non-executive role in the group. There are no longer any participants on the non-salaried variant of the share purchase scheme. |
| Other contractual payments | Sign on bonuses
Relocation expenses | i. Executive directors only | Sign-on bonuses and relocation awards are considered on a case by case basis to ensure the company has the ability to attract senior talent into the group. |
| Non-contractual payments | Exit payments | i. Executive directors only | Non-contractual payments are only considered on an exceptional case by case basis for executive directors. |

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

COMPOSITION OF REMUNERATION

I. EXECUTIVE DIRECTORS

Executive director remuneration is structured to balance both the short and long-term objectives of the company and to enhance the alignment of interests with stakeholders. Remuneration is reviewed annually by the Committee to ensure that the various components of total guaranteed package (TGP), STI and LTI remain appropriate relative to market, the performance of the company and the performance and contribution of the individual.

There are currently no participants on the non-salaried variants of the scheme. The discussion below focuses on the salaried variant of the scheme only as this is currently of relevance.

PACKAGE DESIGN

Executive remuneration is weighted toward variable remuneration. Below we set out the potential executive director and prescribed officer total remuneration including TGP, STI and LTI at different levels of performance. The graphs set out the level of remuneration at threshold performance, at targeted performance and at stretch target or outperformance for salaried directors assuming, for illustrative purposes, a base salary of €100,000 and a 75% on-target STI level (based on grading).

TOTAL GUARANTEED PACKAGE

Annual benchmarking takes place to compare the base packages of the executive team with the market. Benchmarking is undertaken against several peer categories, namely: European listed real estate peers, South African listed real estate peers (taking into consideration cost of living differentials) and alternative executive remuneration in the location in which the executive is employed. Increases are awarded in line with inflation and changes in the market environment, in order to retain the appropriate talent.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

VARIABLE REMUNERATION – SHORT-TERM INCENTIVE

STI FORMULA

From 2019, executives in the salaried version of the share purchase scheme will receive a cash bonus that is based upon their performance scorecard according to the following formula:

ON-TARGET STI LEVEL (BASED ON GRADING) FOR PARTICIPANTS

As a policy, the on-target STI level (based on grading) will range between 50% and 100% of base salary, depending on the role, experience and seniority of the executive.

VESTING PERCENTAGES FOR STI SCORE

Each performance metric will have a threshold, target and stretch level assigned, resulting in a score of between 50% and 150% with linear interpolation being applied between scores. The vesting of the on-target STI will therefore be modified relative to the achievement of the threshold (50%), target (100%) and stretch (150%) performance targets.

STI SCORE – COMPANY AND INDIVIDUAL PERFORMANCE METRICS

The STI scorecard for executive directors comprises a combination of company (general and individual hard metrics) and individual performance soft metrics. The proposed company and individual performance metrics are as follows:

METRIC	SPECIFIC KPI	KPI TARGET	WEIGHTING
Company performance - general	Growth in distribution per share
Growth in EPRA net asset value
Cost-income ratio	Determined annually	50%
Company performance - individual hard metrics	KPIs specific to individual - hard metrics	Refer to page 74	30%
Individual performance - soft metrics	Board and peer review score
based upon:
Leadership
Motivation
Teamwork
Soft outcomes	Board scorecard out of 10
360 degree scorecard out of 10	20%

KEY PERFORMANCE INDICATORS SPECIFIC TO INDIVIDUAL – HARD METRICS

The proposed key performance indicators to be used to assess executive management performance (hard metrics) includes the following:

CEO

Organic growth rate of portfolio

Access to and implementation of pipeline

Access to and implementation of indirect property deals

Management of joint venture relationships

Balance sheet optimisation

Responsibility for overall risk management

Management, implementation and improvement of corporate governance framework

Strategic formulation and implementation

CFO

Reporting and regulatory compliance

Forecast accuracy

Cash flow management

Balance sheet optimisation

Responsibility for property management and accounting system

Risk management framework (representing risk assessment, prioritisation and mitigation)

Strategic formulation and implementation

CIO

Organic growth rate of portfolio

Access to and implementation of pipeline

Access to and implementation of indirect property deals

Responsibility for property management and accounting system

Balance sheet optimisation

Investment and asset management strategy and implementation

Asset level risk management

Strategic formulation and implementation

VARIABLE REMUNERATION – LONG-TERM INCENTIVE

AWARD POLICY AND LIMITS

The LTI rewards long-term decisions that support distributions and capital growth.

As discussed above, the share purchase scheme is in substance a share option, or share appreciation right, scheme. Awards will be made on a case-by-case basis, based upon the performance of the individual. One-off awards may also be made as part of the recruitment process, in order to attract, incentivise and motivate the right participant.

An aggregate limit of 19,029,191 shares, equating to approximately 2.96% of the current issued share capital of the company applies to the share purchase scheme. 5,381,127 shares, equating to approximately 0.84% of the current issued share capital of the company is currently held on behalf of participants in the share purchase scheme (refer to note 23 of the AFS).

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

PERFORMANCE CONDITIONS AND MEASUREMENT

As a policy, a range between 0% and 100% of TGP, expressed in expected value, will be awarded annually.

The expected value, or fair value at grant date, of awards under the share purchase scheme, will be determined as follows:

The face value of the award (amount of loan granted to acquire shares) will be determined as follows:

FACE VALUE MULTIPLIER %

As the loans granted to acquire shares under the scheme are essentially options, the Face value multiplier % is the multiplier that determines the Face value of loan to be given to a participant to transfer to that participant a right equivalent in value to the Expected value of the award (or fair value of the option). The Face value multiplier considers the type of instrument and usual valuation criteria of an option that determine the value of the option as a fraction of the value of the share price at issue date. As a policy, the Face value multiplier % is capped at 400%. This means that the value of the option granted to employees cannot be below 25% of the Face value of the share acquired, even if option valuation methodology indicates otherwise. This multiplier cap is to protect against excessive options being awarded.

LTI SCORE

Performance conditions are measured over a twelve-month period preceding the award date and are used as award criteria to determine the LTI score. Each performance metric will have a threshold, target and stretch level assigned, resulting in a score of between 33.3% and 100% with linear interpolation being applied between scores. The LTI score will be modified relative to the achievement of the threshold (33.3%), target (66.6%) and stretch (100%) performance targets.

The following performance conditions, weightings and targets measured over a twelve-month period preceding the award date will be used as award criteria to determine the LTI score. Linear vesting on a sliding scale will be applied between threshold and stretch performance:

SPECIFIC KPI	KPI TARGET	WEIGHTING
STI scorecard	Determined annually	20%
Growth in per annum distribution per share relative to peer group	Determined annually	30%
Annual share price performance relative to peer group	Determined annually	30%
Strategic outcomes		20%

The peer group will be reviewed and, if considered relevant, be renewed by the Committee annually in advance.
Linear interpolation will be applied between the above performance levels.

EXECUTIVE CONTRACTS

The main terms of the service contracts applicable to executive directors are summarised below:

PROVISION	POLICY
Contract term	Executive contracts represent continuous employment.
Notice period	Three to six months.
Termination of employment and change of control payments and/or automatic vesting of long-term incentives	Change of control provisions are covered by the share scheme and allow for full unlocking (vesting) of awards on a change of control.
Restraint of trade	One-year, standard industry restraint.
Other benefits for salaried participants only	Death in service and income protection. Individuals are also eligible to participate in the Group Personal Pension Plan on completion of any probationary period. Subject to a minimum 5% contribution from the employee, the company will contribute a further 3%. Contributions from the employee are made by way of salary sacrifice.

ii. SENIOR MANAGEMENT

Senior management remuneration is structured in a similar manner to executive remuneration, with the aim to balance both the short and long-term objectives of the company and to enhance the alignment of interests with stakeholders. Remuneration is reviewed annually by the Committee to ensure that the various components of the TGP, STI and LTI remain appropriate relative to market, the performance of the company and the performance and contribution of the individual.

Total guaranteed package consists of base salary and benefits. As with executive directors, fixed awards are benchmarked to industry on an annual basis to ensure that pay levels remain attractive to retain key employees.

Short-term and LTI are calculated in a manner similar to executive directors on the salaried variant of the share purchase scheme. STI awards are capped at levels

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

appropriate to the role and seniority of the member of senior management and the level of award is based upon the appraisal outcome and the level of the performance of the company. Further share purchase scheme awards may be made to senior management, but as a policy these are limited to a loan equal to four times base salary on an annual basis.

iii. EMPLOYEES

Employees receive fixed remuneration and a cash bonus only. The cash bonus is discretionary and is based upon the appraisals of the line manager, in conjunction with the level of both individual and organisation performance. Base salary adjustments are made as employees develop, and there is a strong emphasis on growth, development and providing a flexible working environment that matches the dynamic culture of the organisation.

iv. NON-EXECUTIVE DIRECTORS

Non-executive directors receive a base fee and an additional fee for participation on the relevant sub-committees. They do not participate in the group's variable remuneration scheme, in order to avoid any potential conflict of interest and to maintain their independence. Non-executive directors are reimbursed for their proper and reasonable costs incurred in conducting their activities and are entitled to request expert advice and input as required to fulfil their responsibilities.

Non-executive directors are appointed subject to the provisions set out in a letter of appointment. The letter sets out, amongst other things, the term of appointment, duties and responsibilities, fees and other payments, and provisions related to termination of services.

Non-executive director fees will be benchmarked annually and adjusted for inflation as appropriate. The fees recognise the responsibilities borne by the director throughout the year, in addition to the attendance of meetings and the requirements of the relevant sub-committees. A review was undertaken at the end of the 2018 financial year aligned the fee structure to market levels. Accordingly, the 2020 fee schedule is unchanged from those reported in 2019. Notwithstanding the above, it is emphasised that the Board

is in the process of recruiting a new chairperson for the group, as well as further non-executive directors. Further industry benchmarking will be undertaken during that process to ensure that the appropriate individuals are secured.

NON-EXECUTIVE DIRECTORS' FEES PROPOSED

Euro	2019 Euro	2020 Euro
Base retainer:
Board chair	35,000	35,000
Board - other non-executive members	30,000	30,000
Plus additional fees:
Audit and Risk Committee - chair	10,000	10,000
Audit and Risk Committee - member	7,500	7,500
Remuneration and Nomination Committee - chair	5,000	5,000
Remuneration and Nomination Committee - member	3,000	3,000
Governance, Social and Ethics Committee - chair	5,000	5,000
Governance, Social and Ethics Committee - non-executive members	3,000	3,000
Investment Committee - non-executive members*	4,000	4,000

€4,000 is paid annually for 5 meetings per year with a further €500 paid for each additional meeting

NON-BINDING ADVISORY VOTE

Shareholders will be requested to cast a non-binding advisory vote on the aforementioned Part 2 of this report at the upcoming annual shareholders' meeting.

PART 3: IMPLEMENTATION

The Committee is pleased to report that the group continued to grow strongly and performed well over the financial year. Investment property, including investment property held for sale, grew by 52.4%, from €632.8 million at 30 June 2018 to €964.7 million at year-end. The portfolio performed strongly, with net rental income growing by 59.6% from €32.3 million to €51.6 million year-on-year and net operating income increasing by 51.8%, from €38.3 million to €58.2 million. Distributable earnings per share grew above the target rate of 15%.

EXECUTIVE DIRECTORS

TOTAL GUARANTEED PACKAGE/BASE SALARY ADJUSTMENTS

The CEO and CFO were recruited during the year. Accordingly, they did not receive any basic salary adjustments during the 2019 financial year. The CIO's base salary was increased from £60,000 (approximately €67,000) to £80,000 (approximately €89,000) effective 1 October 2018 following the 2017-

2018 pay review. The amount paid to Coronal Real Estate Partners Limited in respect of his services increased from £115,000 (approximately €130,000) to £145,000 (approximately €162,000), also effective 1 October 2018.

Malcolm Levy, in his capacity as the previous CFO, was on the non-salaried variant of the share purchase scheme. His assistance in stepping into the interim CEO role during the year, whilst a new CEO was recruited, is appreciated. In recognition of this, a salary of £185,000 was paid to Malcolm. In June 2019, he transitioned to a non-executive role and exited the share purchase scheme. Malcolm extracted no benefit from the share purchase scheme during, or at the end of, his period of participation.

2019 SHORT-TERM INCENTIVE OUTCOMES

During the 2019 financial year, no cash bonuses under the STI were made to directors in relation to the 2018 financial year, other than to the extent that dividends exceeded the group's weighted average borrowing cost on the salaried variant of the scheme.

2019 LONG-TERM INCENTIVE UNLOCKING/VESTING

During the year, the awards to participants vested (unlocked), as follows:

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

Schedule of unvested awards and cash flow on settlement

Names	Granted during 2018 (number)	Forfeited during 2018 (number)	Exercised during 2018 (number)	Closed due to unexercised during 2018 (number)	Vested but of receipts during 2018 (1)		Estimated closing fair value on 30 June 2018 (2)		Granted during 2019 (number)	Forfeited during 2019 (number)	Exercised during 2019 (number)	Closed due to unexercised during 2019 (number)	Total of closing fair value on 30 June 2019 (3)
					€	€	€	€
Morne Wilken
Share purchase plan
Sign-on bonus3
01 January 2018	-	-	-	-	-	-	450,960	-	-	-	-	-	-
Malcolm Levy - non-salaried variant
Share purchase plan
2017 SPP - tranche 1 (2018)	-	-	-	600,000	600,000	-	-	-	(600,000)	-	-	-	-
2017 SPP - tranche 2 (2019)	-	-	-	600,000	-	-	-	-	(600,000)	-	-	-	-
2017 SPP - tranche 3 (2020)	-	-	-	600,000	-	-	81,703	-	(600,000)	-	-	-	-
2017 SPP - tranche 4 (2021)	-	-	-	600,000	-	-	81,703	-	(600,000)	-	-	-	-
2017 SPP - tranche 5 (2022)	-	-	-	800,000	-	-	108,937	-	(800,000)	-	-	-	-
2017 SPP - tranche 6 (2023)	-	-	-	800,000	-	-	108,937	-	(800,000)	-	-	-	-
Jonathan Knight - salaried variant
Share purchase plan
2017 SPP - tranche 1 (2018)	-	-	-	300,000	300,000	7,564	-	-	-	-	300,000	300,000	10,251
2017 SPP - tranche 2 (2019)	-	-	-	300,000	-	7,564	-	-	-	-	300,000	300,000	10,251
2017 SPP - tranche 3 (2020)	-	-	-	300,000	-	7,564	40,851	-	-	-	300,000	-	10,251
2017 SPP - tranche 4 (2021)	-	-	-	300,000	-	7,564	40,851	-	-	-	300,000	-	10,251
2017 SPP - tranche 5 (2022)	-	-	-	300,000	-	7,564	40,851	-	-	-	300,000	-	10,251
Helen Cullen - salaried variant
Share purchase plan
2017 SPP - tranche 1 (2018)	-	-	-	100,000	100,000	2,521	-	-	-	-	100,000	100,000	3,417
2017 SPP - tranche 2 (2019)	-	-	-	100,000	-	2,521	-	-	-	-	100,000	100,000	3,417
2017 SPP - tranche 3 (2020)	-	-	-	100,000	-	2,521	13,617	-	-	-	100,000	-	3,417
2017 SPP - tranche 4 (2021)	-	-	-	100,000	-	2,521	13,617	-	-	-	100,000	-	3,417
2017 SPP - tranche 5 (2022)	-	-	-	100,000	-	2,521	13,617	-	-	-	100,000	-	3,417
Werner Behrens - salaried variant
Share purchase plan
2019 SPP - tranche 1 (2020)	-	-	-	-	-	-	168,596	-	-	-	168,596	-	-
2019 SPP - tranche 2 (2021)	-	-	-	-	-	-	168,596	-	-	-	168,596	-	38,427
2019 SPP - tranche 3 (2022)	-	-	-	-	-	-	168,596	-	-	-	168,596	-	38,427
2019 SPP - tranche 4 (2023)	-	-	-	-	-	-	168,596	-	-	-	168,596	-	38,427
2019 SPP - tranche 5 (2024)	-	-	-	-	-	-	168,596	-	-	-	168,596	-	38,427
Paul Osbourn - salaried variant
Share purchase plan
2019 SPP - tranche 1 (2020)	-	-	-	-	-	-	137,629	-	-	-	137,629	-	-
2019 SPP - tranche 2 (2021)	-	-	-	-	-	-	137,629	-	-	-	137,629	-	31,369
2019 SPP - tranche 3 (2022)	-	-	-	-	-	-	137,629	-	-	-	137,629	-	31,369
2019 SPP - tranche 4 (2023)	-	-	-	-	-	-	137,629	-	-	-	137,629	-	31,369
2019 SPP - tranche 5 (2024)	-	-	-	-	-	-	137,629	-	-	-	137,629	-	31,369

Notes
1 Includes net distributions received on SPP shares during the year. Distributions in respect of non-salaried SPP participants repay capital and interest on the participants loan account, therefore no net qualifying distributions are received. Distributions in respect of salaried participants first repay interest on the participants loan account any net proceeds are received by the participant and included in net qualifying distributions.
2 The portion of the award vesting within 12 months after year-end is calculated as: (Number of awards x YE VWAP) - pro-nata balance of loan relating to that tranche. As the options are out-of-money at the end of 2018 and 2019, these values are nil.
3 The portion of the award vesting more than 12 months after year-end is calculated as: Number of awards x indicative fair value per option. The fair value of the options has based upon the same assumptions and approach as the IFRS 2 grant date valuation, save for the current price and term of the option.
4 In order to secure the services of Morne Wilken on a full-time basis, the sum of £500,000 (approximately €557,700) was awarded and paid as recognition that he would forfeit in-the-money incentive scheme benefits by becoming CEO of MAS. This amount was repayable on a pro-nata basis on cessation of employment with the company from 1 January 2018 to 30 June 2020, and accordingly £16,667 (approximately €18,590) was expensed monthly and recognised as a benefit paid to him. Morne refunded the outstanding amount, totaling £300,000 (approximately €334,620), when he ceased to be director. For the purpose of the sign on bonus included in the table, I unit equal €1.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

2019 LONG-TERM INCENTIVES AWARDED

In June 2019, Werner Behrens and Paul Osbourn were invited to join the share purchase scheme, with 842,980 and 688,147 shares awarded respectively. These share awards related to the recruitment of both individuals and were not performance related.

Single figure of remuneration:

Names	ACTUAL^{8}						ESTIMATED^{30}		Total single figure of remuneration
	Base Salary €	Fees €	Other benefits^{1} €	Cash Incentive^{2} €	Qualifying distributions^{3} €	Other^{7} €	LTI reflected^{4,5,6} €	Other^{7} €
Executive directors
Werner Behrens	2019	52,052	—	7,019	—	—	—	—	59,071
	2018	—	—	—	—	—	—	—	—
Paul Osbourn	2019	185,900		3,346	100,748	—	—	—	289,994
	2018	—	—	—	—	—	—	—	—
Jonathan Knight^{8}	2019	250,965			106,638	30,753	—	—	388,356
	2018	198,258	—	—	—	30,257	—	—	228,515
Helen Cullen	2019	96,854		1,440	4,253	10,252	—	—	112,799
	2018	95,778	—	—	—	10,086	—	—	105,864
Malcolm Levy	2019	206,349	—	—	—	—	—	—	206,349
	2018	—	—	—	—	—	—	—	—
Morne Wilken	2019	146,396	—	—	—	—	(223,080)	—	(76,684)
	2018	178,432	10,000	28,323	—	—	113,290	—	781,005

The other benefits provided to Werner Behrens are in relation to relocation fees, those provided to Paul Osbourn and Helen Cullen are in relation to pension contributions
Performance bonus linked to performance.
Net distributions relating to each participant's SPP shares received during the 2018 and 2019 financial years are only included in qualifying distributions for 2018 and 2019 respectively up to and including the year in which the underlying shares are recognised in the single figure table.
The 2nd tranche of the SPP award made on 9 March 2017 which vests on 9 March 2019 has been included in the 2018 single figure of remuneration. The value was based on the 5 day VWAP of €12932 as at 30 June 2018 and the outstanding balance of the loan relating to the 2nd tranche at 30 June 2018.
The 3rd tranche of the SPP award made on 9 March 2017 which vests on 9 March 2020 has been included in the 2019 single figure of remuneration. The value was based on the 5 day VWAP of €12956 as at 30 June 2019 and the outstanding balance of the loan relating to the 3rd tranche at 30 June 2019.
The 1st tranche of the SPP award made on 25 June 2019 which vests on 25 June 2020 has been included in the 2019 single figure of remuneration. The value was based on the 5 day VWAP of €12956 as at 30 June 2019 and the outstanding balance of the loan relating to the 1st tranche at 30 June 2019.
In order to secure the services of Morné Wilken on a full-time basis, the sum of £500,000 (approximately €557,700) was awarded and paid in 2018 as recognition that he would forfeit in-the-money incentive scheme benefits by becoming CEO of MAS. This amount was repayable on a pro-rata basis on cessation of employment with the company from 1 January 2018 to 30 June 2020, and accordingly £16,667 (approximately €18,590) was expensed monthly and recognised as a benefit paid to him. Morné refunded the outstanding amount, totalling £300,000 (approximately €334,620), when he ceased to be director on 14 December 2018.
The figure in relation to Jonathan Knight relates to his services provided to MAS Real Estate Inc. for which he received a salary of €89,232 (2018: €67,974) plus the amount of €161,733 (2018: €130,284) which was paid to Corona Real Estate Partners Limited in relation to services provided to MAS Real Estate Inc. by Corona Real Estate Partners Limited under a services agreement.
This relates to remuneration which will not change in future periods.
Variable remuneration which may differ to the amount disclosed when received by the executive director. The actual award received will be included in the Schedule of unvested awards and cash flow on settlement in future periods.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

Executive director, non-executive director and prescribed officer remuneration as prepared in terms of IFRS for the year ended 30 June 2019 is disclosed in note 38 in the annual financial statements.

SHAREHOLDING DISCLOSURES

As at 30 June 2019

Euro	Direct	Indirect	Associate	Total
Werner Behrens	19,629	842,980	—	862,609
Paul Osbourn	—	688,147	—	688,147
Jonathan Knight	626,525	1,500,000	—	2,126,525
Ron Spencer	12,061	—	—	12,061
Malcolm Levy	11,633	—	1,568,928^{1}	1,580,561
Jaco Jansen	—	—	—	—
Pierre Goosen	—	—	46,679^{1}	46,679
Glynnis Carthy	—	—	—	—
Werner Alberts	—	—	—	—
Melt Hamman	—	3,300^{2}	990^{1}	4,290
Helen Cullen	14,936	500,000	—	514,936
	684,784	3,534,427	1,616,597	5,835,808

As at 30 June 2018

Euro	Direct	Indirect	Associate	Total
Morné Wilken	284,039	—	—	284,039
Malcolm Levy	11,633	4,000,000	1,568,928^{1}	5,580,561
Jonathan Knight	626,525	1,500,000	—	2,126,525
Ron Spencer	12,061	—	—	12,061
Gideon Oosthuizen	—	240,000^{3}	—	240,000
Jaco Jansen	—	—	—	—
Pierre Goosen	—	—	46,679^{1}	46,679
Glynnis Carthy	—	—	—	—
Helen Cullen	14,936	500,000	—	514,936
	949,194	6,240,000	1,615,607	8,804,801

Non-beneficial to director
Family trust
Associate company

There have been no changes in the shareholdings of the directors between year-end and the signature date of this report.

NON-BINDING ADVISORY VOTE

Shareholders will be requested to cast a non-binding advisory vote on the aforementioned Part 3 of this report at the upcoming annual shareholders' meeting.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

NOMINATION ASPECTS OF THE COMMITTEE

ROLES AND RESPONSIBILITIES OF THE COMMITTEE

The Committee is responsible for the following as set out in its terms of reference:

Ensure that the formal and transparent process for the identification and appointment of directors to the Board and the evaluation of its composition remains appropriate;
Review the skills, knowledge and diversity of the Board in light of changing business dynamics;
Perform an annual performance assessment of the Board and individual directors;
Ensure that formal succession plans are developed and implemented for executive and non-executive Board members and senior management;
Oversee the induction of any new directors and confirm that a programme of continuous professional development for existing directors is in place;
Annually assess the independence status of non-executive directors to ensure their classification as independent has not been compromised or prejudiced in any way;
Consider the performance and contribution of directors and instigate action plans where performance or contribution does not meet expectations; and
Find, and recommend to the Board, a replacement for the CEO when that becomes necessary.

PURPOSE

The purpose of the Committee is to assess and ensure that the composition, skills, knowledge and diversity of the Board are appropriate given the challenges and opportunities facing the business.

BOARD COMPOSITION

At year end there were ten directors on the Board, of which seven are non-executive. Five of the non-executive directors are independent.

i. EXECUTIVE DIRECTORS

Werner Behrens was appointed in May 2019. Werner has a strong track record as a senior management executive, providing strategic organisational direction and leadership. His track record demonstrates his versatility and experience in operating successfully across a wide range of sectors. Werner re-located to the Isle of Man. His biography is included on page 50.

Paul Osbourn was appointed in September 2018. Paul comes with over 20 years' experience in corporate finance and restructuring professional services. Paul re-located to the Isle of Man. His biography is included on page 50.

Malcolm Levy, the previous CFO and interim CEO, transitioned to a non-executive role in June 2019. The Committee acknowledges Malcolm's new role as a non-executive director and look forward to continuing to benefit from his wealth of knowledge and experience in the business.

Note: Please refer to the information contained in the Circular released by the company on 28 October 2019 and the impact of the proposed transaction, if approved by shareholders, on the compensation and composition of the executive team.

ii. NON-EXECUTIVE DIRECTORS

Melt Hamman joined the Board in December 2018. Melt is the CEO of Attacq Limited, a major shareholder of MAS. Melt has extensive experience in real estate, banking and business operations. His biography is included on page 51.

Gideon Oosthuizen left the Board in December 2018. The Committee wish to thank and share its appreciation for Gideon's valuable contribution to the Board over the years.

The Committee is satisfied with the performance, skills and competence of the Board. An individual profile self-assessment of each Board member and overall Board culture review has recently been undertaken. This provides valuable insight on Board dynamics and will assist in further enhancing the functioning of the Board and aid the evaluation of future appointees.

The interests of each independent non-executive director are monitored to ensure their independence is not compromised and a review with

reference the requirements of King IV is conducted to ensure they remain independent. The Committee's most recent review of independence resulted in the re-classification of Jaco Jansen's status from non-executive to independent non-executive director, due to Artisan Real Estate Limited, the company of which Jaco is the CEO, ceasing to be a related party of the MAS group during the year. Accordingly, the Committee is satisfied that Ron Spencer, Glynnis Carthy, Werner Alberts, Jaco Jansen and Pierre Goosen remain independent in both character and judgement and comply with the independence requirements of King IV.

CONFLICTS OF INTEREST

Directors adhere to the conflicts of interest policy which is reviewed and approved on an annual basis and requires each director to submit a declaration of financial, economic and other interests that might affect his objectivity, at least annually and whenever a change occurs to such interests.

APPOINTMENT TERMS

All non-executive directors are provided with a letter of appointment setting out the terms of their appointment and their expected commitment to the role. Directors are not appointed for a fixed term, but one third of the non-executive directors are required to retire by rotation each year and may offer themselves for re-election. An independent non-executive director holding office for nine-years or more is subject to an independence assessment by the Committee, following which any re-appointment can be recommended on a rolling one-year basis. Consequently, both Ron Spencer and Jaco Jansen's tenure is reviewed annually.

All directors are expected to attend Board meetings of which there are at least three per annum, in addition to attendance at committee meetings of which they are a member. The Board charter and the appointment letter permits directors to obtain independent advice in connection with their duties and MAS has directors' and officers' liability insurance in place that covers the full term of their appointment.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE

DIRECTORS' RE-ELECTION

One-third of the non-executive directors retire by rotation at the annual shareholders' meeting.

Due to Ron Spencer and Jaco Jansen's tenure on the Board of more than ten-years, both will retire by rotation. The Committee assessed the continuing independence of Jaco and Ron due to their tenure on the Board and is satisfied that they remain independent in both character and judgement and complies with the independence requirements of King IV. In addition, Glynnis Carthy, will retire by rotation this year. All three directors have made themselves available for re-election.

The Committee recommends Jaco Jansen, Ron Spencer and Glynnis Carthy for re-election. Due to Ron and Jaco's existing tenures of ten-years, the Committee recommends their re-election for a further period of one-year, at which point the Board will reassess their continued independence.

The Committee takes note that Ron Spencer indicated his intention to retire from the Board during the 2020 financial year and the process of finding his replacement is underway.

DEVELOPING PEOPLE AT MAS

The Board recognises the importance of developing people and adding to the skills set on an ongoing basis. This is particularly relevant for succession planning in respect of senior positions in the group. Directors are also encouraged and supported to enhance and develop their skills and contribution to the Board, for example, by completing the Institute of Directors programme.

PRIORITIES FOR THE YEAR AHEAD

In the 2020 year, the Committee will review and assess the implementation of the remuneration policy and focus on the induction and integration of new members to the Board.

CONSIDERATIONS OF THE COMMITTEE

This report has been prepared in accordance with the JSE Listings Requirements, Rules and Regulations of the Luxembourg Stock Exchange, King IV and other applicable regulation. The Committee is satisfied that the independence and objectivity of the members has not been compromised in any way and that it has discharged its responsibilities during the period.

Pierre Goosen

Chair of the Remuneration and Nomination Committee

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

REPORT OF THE GOVERNANCE, SOCIAL AND ETHICS COMMITTEE

PIERRE GOOSEN

Governance, Social and Ethics Committee chair
(Independent non-executive director)

OTHER MEMBERS

RON SPENCER

(Independent non-executive director)

JONATHAN KNIGHT

(Executive director)

As Chair of the Governance, Social and Ethics Committee (GSEC or Committee), I am pleased to present the Committee's report for the year ended 30 June 2019.

This was the first full year since the Committee was reformed and expanded. This report provides an overview of how the Committee is governed, its responsibilities and how the Committee has discharged its duties in accordance with its terms of reference.

KEY FOCUS AREAS

MAS' commitment to corporate governance underpins the operations of the business. The Committee focused on several key areas this year, including enhanced shareholder engagement, subsidiary governance reviews and updating the group corporate governance framework and associated policies.

Following the application of the King IV Code on Corporate Governance and transition from King III in 2018, the Committee has this year reinforced the integration of these principles throughout the business, updating the employee handbook, the Modern Slavery Statement and implementing the enhanced whistleblowing policy.

The externally-commissioned culture survey was well received and demonstrated the MAS team's focus on and achieving results.

The community investment working group, autonomously managed by employees, has encouraged involvement throughout the group at all levels and has resulted in improved integration and inter-jurisdictional engagement.

COMPOSITION

The Committee comprises two independent non-executive directors and one executive director. The Committee members' varied backgrounds, which include property, compliance and legal qualifications and experience, add diversity and broaden the ability of the Committee to perform its duties. The Committee is required to meet at least once a year and during the year to 30 June 2019 the Committee held one formal meeting, with full attendance of all members.

In addition, several informal sessions took place to progress, inter alia, the corporate governance framework with associated group policies and to discuss shareholder engagement. The Committee also welcomed the recommendation from members and management to increase the number of formal meetings to two per annum going forward and this has been reflected in the updated terms of reference.

The Committee's key areas of focus for the formal meeting was as follows:

DATE	MEETING
Governance, Social and Ethics
25 April 2019	- Update Committee terms of reference
- Implement duties matrix
- Increase formal meetings to two per annum
- Review of Corporate Governance Framework
- Update group policies delegated to it
- Consideration of King IV review frequency
- UK Modern Slavery Statement enhancement and compliance
- Implementation of employee whistleblowing hotline
- Conflict of interest register, insider list and directors' declarations review
- Review of a summary paper on applicable laws, regulations and legal advisors engaged
- Review report on subsidiary governance themed reviews
- Charitable giving working group report and budget setting
- Committee self-assessment format and application

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

RISK AND GOVERNANCE

REPORT OF THE GOVERNANCE, SOCIAL AND ETHICS COMMITTEE

RESPONSIBILITIES

The Committee's responsibilities include:

Oversight and reporting on organisational ethics, responsible corporate citizenship, sustainable development and stakeholder relationships and the development of the governance framework to address these matters;
assisting the Board in monitoring and ensuring an ethical culture is fostered and maintained within MAS;
reviewing compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen;
making recommendations concerning compliance with regard to any relevant laws or regulations, including the King IV Code, the Johannesburg Stock Exchange Listings Requirements and the Rules and Regulations of the Luxembourg Stock Exchange;
reviewing and recommending changes to the group's corporate governance framework, including the Board's code of ethics and conduct, the employee code of ethics and conduct, the employee handbook and the supplier code of ethics and conduct;
reviewing the register relating to conflicts of interest, director's declaration of interests and insider list registers maintained by the company secretary, ensuring that all registers are periodically reviewed, updated where necessary and confirmed;
reviewing the group's activities in the workplace, in property development, the economy, society and the natural environment;
considering whether health and safety protocols are appropriate to ensure the safety of the group's employees, its suppliers and members of the public;
reviewing relevant policies and procedures designed to set the tone of the organisation including policies for conflicts of interest, whistleblowing, standards of performance and behaviour at work, gender diversity and anti-bribery & corruption;
reviewing charitable donations during the year to ensure these are in line with the policy;
reviewing the implementation of a stakeholder inclusive approach to governance with the aim of enhancing the quality of stakeholder relationships and providing both the group and stakeholders with a platform for constructive communication and engagement.

KING IV COMPLIANCE

MAS adopted and implemented King IV in 2018 and business processes and standards have been aligned to those principles. The Committee appraised and recommended to the Board the adoption of the King IV application register, which is available on the company's website www.masrei.com.

ESTABLISHING AND MAINTAINING AN ETHICAL CULTURE

The core values incorporated in King IV emphasise ethical leadership, culture and good corporate citizenship. Our people are the best advocates for the business and the high standards of behaviour that are expected throughout the organisation are set out in the codes of conduct for the Board, employees and suppliers. The Committee is instrumental in overseeing and recommending any changes to these codes and ensuring that a strong ethical culture is maintained within the group.

During the year, MAS engaged external experts to undertake a Board and employee culture survey. The outcome was extremely pleasing, demonstrating a strong behavioural alignment between management and staff. The results showed a clear leaning towards a results-driven and learning-based focus, facilitated by a caring, helpful and supportive approach. The Board members survey also demonstrated a concentration of results-driven, ethical and strategy focused culture, balanced by a healthy mix of caring and collaborative individual styles.

FOCUS

The organisation sets focused and ambitious goals and people work very hard toward achieving them.

AGILITY

The organisation is able to adapt to changing conditions. People tend to be flexible in how they view the world and solve problems.

DETERMINATION

The organisation is outcome-oriented and driven to succeed. People tend to persevere in the face of difficulty.

TEAMWORK

The organisation encourages collaboration and team effort. People tend to work well together.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

SUSTAINABILITY IN DEVELOPMENT AND RESPONSIBLE MANAGEMENT

Being conscious of the social, economic and environmental impacts of its activities, MAS has implemented key initiatives across the development portfolio including sustainable and green energy in urban design and extensive community engagement. Further details of these initiatives are available in the Sustainability section of this report on pages 48 to 49.

Acting with integrity is one of MAS' core values, so ethical sourcing and practices are fundamental to the business. Health and safety matters form a key part of the Committee's responsibilities and following the site audit undertaken in the previous year, a programme has been rolled out to further enhance the reporting of compliance with health and safety protocols.

MAS is committed to taking steps to reduce the risk of modern slavery and human trafficking in our supply chain and in this regard the Committee made further improvements to the Modern Slavery Statement, which is available on the group's website at www.masrei.com. The statement explains the assessment undertaken, the actions already carried out and those to be progressed within the next twelve months, which include reaching out to partners to ensure that ethical standards are aligned.

RESPONSIBLE CORPORATE CITIZENSHIP

The community investment working group reports to the Committee on progress and initiatives undertaken during the year, and it defers to the Committee for setting the annual budget. The entire MAS team is actively encouraged to propose charitable giving projects to the working group for consideration and the Committee was heartened by the wide variety and geographical reach of the beneficiaries of donations.

In addition to our commitment to Ikhaya le Themba, regular personal involvement and participation by team members in ventures 'close to their hearts' was noted by the Committee.

During the year these projects included the German Red Cross, to fit out a children's playroom for refugees in Frankfurt; Bridge of Gap, which assists teenagers with life threatening conditions; Mannin Sepsis, raising local awareness of the symptoms; food bank deliveries; bird and wildlife assistance; offering financial support to host heart screening for young people; and providing facilities for a festival aimed at those with additional needs, their families and carers.

STAKEHOLDER RELATIONSHIPS

Relationship capital is one of the five key capitals of MAS. The Committee and the Board considers how the business manages its stakeholder relationships, with its shareholders, regulatory bodies, employees, partners, tenants and suppliers. The Committee, on behalf of the Board, recognises the importance and value of these relationships and monitors how the relationships are governed and nurtured.

SHAREHOLDERS

Communication with shareholders is paramount to the success of the business and gauging the mood and sentiment of shareholders is something that MAS regularly engages in. The company failed to gain the support of the shareholders, by a fairly narrow margin, in respect of the two non-binding votes on remuneration at the annual shareholders meeting in November 2018. The Committee and the chair in particular, were heavily involved and consulted on this matter, as a result of which, MAS offered shareholders every opportunity to engage and share their views in January 2019. Feedback is actively and continuously encouraged on roadshows, presentations and investor tours.

Investors' perception of overall governance within the business is important and the Committee supports engagement with investors and third-party analysts.

JOINT VENTURE PARTNERS

Since its inception in 2016, the relationship with Prime Kapital, the joint venture partner in CEE, has been underpinned by a strong alignment of interests to pursue the best possible investment and development opportunities in the region.

EMPLOYEES

People are at the centre of the business, and the MAS team are aligned with senior management in striving to create shareholder value. The results of the culture survey demonstrated that the MAS team, whether front or back office, are motivated and result driven, an approach which stems from the top.

People are encouraged to further develop, improve and learn and are incentivised accordingly. The Committee reviews and recommends the training policy to ensure that the needs of the business continue to be met. The Employee Handbook and associated policies, in addition to the employee code of ethics and conduct set the standards of performance and behaviour expected and an annual review of each of these is undertaken to ensure they remain relevant. During the year, the Committee oversaw the enhancement of the whistleblowing policy and a new confidential whistleblowing hotline was rolled out to staff in May 2019.

TENANTS, SUPPLIERS AND THIRD PARTIES

Good relationships with tenants are fundamental to MAS being able to deliver on its communicated targets. MAS has built up strong direct lines of communication in respect of single-tenanted assets and has engaged the services of reputable asset and property managers for multi-tenanted investments, or where MAS does not have a local presence. This open dialogue approach has enabled MAS to capitalise on value-add opportunities, such as tenant relocations within centres and lease prolongations. Interactions with suppliers and other third parties, is based upon the minimum standard of conduct expected regardless of jurisdiction or local practice and MAS ensures that engagements adhere to the code of conduct and the Modern Slavery Statement, by inclusion of specific clauses in key contracts if necessary. MAS' asset managers are also responsible for managing a significant number of supply chain relationships and they are aware of the risks of modern slavery. The Committee is responsible for ensuring that these codes and the disclosed statement on modern slavery are compliant with legislation and fit for purpose by way of an annual review.

Regulatory relationships are managed by expert sponsors and

RISK AND GOVERNANCE

REPORT OF THE GOVERNANCE, SOCIAL AND ETHICS COMMITTEE

advisors that MAS employs in both South Africa and Luxembourg, to ensure that communication with the regulator is appropriate and fully transparent. The Committee's role is to oversee that the business is aware of, and complies with, its obligations under applicable laws and regulations. It monitors this and undertakes a full review of the corporate governance framework on an annual basis.

SUBSIDIARY GOVERNANCE AND COMPLIANCE

Management reports to the Committee on all group statutory matters. The group has undertaken a review of subsidiaries on a themed basis to assess any opportunities for streamlining administration from a geographical perspective. Given that MAS operates subsidiaries in various jurisdictions, there are efficiencies and cost savings to be made by redomiciling companies to locations in which MAS has a significant physical presence. In addition, MAS has undertaken targeted reviews on, inter alia, registered charges, guarantees and the use of specific or limited powers of attorney. Management reported the results of its ongoing monitoring procedures to the Committee. Reporting to the Board on statutory, tax and financial compliance of group entities continues to be undertaken on a quarterly basis.

Oversight of legal and regulatory compliance continues to be a principal responsibility of the Committee and any amendments that could impact on the group are reported to the Committee at each meeting or more frequently if necessary. The addition of a senior legal resource during the year was welcomed by the Committee to strengthen compliance and corporate governance generally within the group.

PRIORITIES FOR THE YEAR AHEAD

The Committee's key areas of focus for the year ended 30 June 2020 are:

Enhancing the sustainability policy covering property development and ownership.
Continuation of themed reviews in respect of the subsidiary governance programme.
Strengthen stakeholder communication and engagement.
Reassess the Board charter and Committee terms of reference with a view to streamlining and achieving efficiencies.

CONCLUSION

The Committee is satisfied that it has discharged its duties under its terms of reference from the Board.

Pierre Goosen
Chair of the Governance, Social and Ethics Committee

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

ANNUAL FINANCIAL STATEMENTS 2019

Statement of Director's responsibilities ... 86
Report of the Independent Auditor's to the shareholders of MAS Real Estate Inc. ... 87
Consolidated statement of profit or loss ... 92
Consolidated statement of other comprehensive income ... 93
Consolidated statement of financial position ... 94
Consolidated statement of changes in equity ... 95
Consolidated statement of cash flows ... 96
Notes to the consolidated financial statements ... 97
Shareholding disclosures ... 193
Company information and advisors ... 194
Shareholder information ... 195
Definitions and abbreviations ... 196

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the directors' report and the consolidated annual financial statements in accordance with applicable law and regulations.

The directors have elected to prepare the consolidated annual financial statements in accordance with International Financial Reporting Standards ("IFRSs").

In preparing the financial statements, the directors are responsible for:

selecting suitable accounting policies and then applying them consistently;
stating whether IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements;
making judgments and estimates that are reasonable and prudent;
preparing the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business; and
preparing financial statements which give a true and fair view of the state of affairs of the group and of the profit or loss of the group for that period.

The directors are responsible for keeping proper accounting records that are sufficient to show and explain the group's transactions and disclose with reasonable accuracy at any time the financial position of the group. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the group's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF MAS REAL ESTATE INC.

OUR OPINION

In our opinion the consolidated annual financial statements give a true and fair view of the consolidated financial position of MAS Real Estate Inc. (the "Company") and its subsidiaries (together the "Group") as at 30 June 2019 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

WHAT WE HAVE AUDITED

MAS Real Estate Inc.'s consolidated annual financial statements (the "financial statements") comprise:
- the consolidated statement of financial position as at 30 June 2019;
- the consolidated statement of profit or loss for the year then ended;
- the consolidated statement of other comprehensive income for the year then ended;
- the consolidated statement of changes in equity for the year then ended;
- the consolidated statement of cash flows for the year then ended; and
- the notes to the financial statements, which include a summary of significant accounting policies.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

INDEPENDENCE

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code"). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF MAS REAL ESTATE INC. (CONTINUED)

OUR AUDIT APPROACH

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

KEY AUDIT MATTER	HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
VALUATION OF INVESTMENT PROPERTY AND INVESTMENT PROPERTY HELD FOR SALE
Refer to Note 2 'Basis of preparation', Note 17 'Investment Property', Note 18 'Investment property held for sale' and Note 21 'Investment in equity-accounted investees'.
The Group's investment property portfolio is split between Retail properties in Central and Eastern Europe and Retail, Industrial, Leisure, Office and Residential properties in Western Europe. The valuation in the consolidated annual financial statements for investment property and investment property held for sale is €872,062,423 and €92,609,919, respectively. In addition the majority of the assets underlying the Group's investment in equity-accounted investees of €21,888,261 comprises investment property.
The valuation of the Group's and the equity-accounted investee's investment property and investment property held for sale warrants specific audit focus due to the existence of significant judgement, coupled with the fact that only small differences in individual property valuations when aggregated could result in a material misstatement.
The valuations were carried out by third party valuers. The valuers were engaged by the directors, and performed their work in accordance with the Royal Institute of Chartered Surveyors ("RICS") Valuation - Professional Standards or equivalent. The valuers used by the Group have considerable experience of the markets in which the Group operates.
In determining a property's valuation the valuers take into account property-specific information such as current tenancy agreements and rental income, condition and location of the property, and future rental prospects, as well as prevailing market yields and comparable market transactions. For the land bank, the residual appraisal method is used, by estimating the fair value of the completed project using a capitalisation method less estimated costs to complete.	We assessed the valuers' qualifications and expertise and read their terms of engagement with the Group to determine whether there were any matters that might have affected their objectivity or may have imposed scope limitations upon their work. We also considered fees and other contractual arrangements that might exist between the Group and the valuers. We found no evidence to suggest that the objectivity of the valuers was compromised.
We read the valuation reports for a sample of the properties and confirmed that the valuation approach for each property selected was in accordance with RICS standards or equivalent and suitable for use in determining the carrying value for the purpose of the consolidated annual financial statements.
We obtained details of each material property held by the Group and set an expected range for yield and capital value movement, determined by reference to published benchmarks and using our experience and knowledge of the market. We compared investment yields used by the valuers with the range of expected yields and the year on year capital movement to our expected range. We also considered the reasonableness of other assumptions that are not so readily comparable with published benchmarks, such as estimated rental value.
We held meetings with management and the valuers, as appropriate, at which the valuations and the key assumptions therein were discussed, focusing on the largest properties in the portfolio and where the valuation basis has changed in the year.
Where assumptions were outside the expected range or otherwise appeared unusual, and/or valuations showed unexpected movements, we undertook further investigations, and when necessary, held further discussions with management and the valuers and obtained evidence to support explanations received. The valuation commentaries provided by the valuers and other supporting evidence enabled us to consider the property specific factors that may have had an impact on value, including recent comparable transactions where appropriate.
We performed testing on the standing data the Group provided to the valuers for use in the performance of the valuation on a sample basis, to satisfy ourselves of the accuracy of the property information supplied by management. For land bank assets we confirmed that the estimated costs to complete were consistent with the Group's records, for example by inspecting budgets and contracts.
The above procedures were also performed on investment property held by the equity-accounted investees.
Based on the work performed we found that the assumptions were supported by evidence we obtained.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

KEY AUDIT MATTER	HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
LARGE AND/OR COMPLEX TRANSACTIONS
Refer to Note 2 ‘Basis of preparation’ and Note 32 ‘Business Combinations’.
The transaction during the year to acquire investment properties from the Group’s equity-accounted investee, PKM Developments, as well as the associated agreements, warranted particular audit focus. This is due to the magnitude of the transaction and the potential for complex contractual terms introducing judgement into how the elements of the agreements were accounted for.	For the PKM Developments investment property acquisitions and associated agreements we made enquiries with management in order to understand their nature and obtained and reviewed supporting documentation as necessary to verify the transaction, including the effective date, consideration and assets acquired.
We also understood the nature of the transaction and assessed the accounting treatment of the transaction as a business combination in relation to the Group’s accounting policies and relevant International Financial Reporting Standards.
As this represents a related party transaction, we considered whether the transaction price was based on asset fair values and considered the adequacy of the disclosure.
No material exceptions were identified as a result of our testing.

OTHER INFORMATION

The other information comprises all of the information in the Consolidated Annual Financial Statements other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS

The directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for overseeing the Group’s financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF MAS REAL ESTATE INC. (CONTINUED)

Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated annual financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

This report, including the opinion, has been prepared for and only for the Company's shareholders as a body in accordance with our engagement letter dated 17 December 2018 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Nicola Shepstone

for and on behalf of PricewaterhouseCoopers LLC

Chartered Accountants

Douglas, Isle of Man

4 September 2019

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

MASTER

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the year ended 30 June 2019

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Rental income	5	57,619,556	37,452,513
Service charge income and other recoveries	7	12,455,268	5,954,048
Revenue		70,074,824	43,406,561
Service charge and other property operating expenses	8	(18,478,661)	(11,073,518)
Net rental income		51,596,163	32,333,043
Sales of inventory property	6	39,164,705	26,020,940
Cost of sales of inventory property	6,19	(31,013,909)	(21,704,016)
Profit on sales of inventory property		8,150,796	4,316,924
Other income	9	7,259,104	8,585,032
Corporate expenses	12	(5,627,077)	(4,946,973)
Investment expenses	10	(3,210,128)	(1,976,096)
Net operating income		58,168,858	38,311,930
Fair value adjustments	11	(7,631,570)	(15,800,127)
Foreign currency exchange differences	13	(364,553)	(1,020,787)
Share of profit from equity accounted investees, net of tax	21	11,009,325	3,568,925
Gain on bargain purchase	32	12,263,193	—
Goodwill impairment	16	—	(1,274,346)
Profit before finance income/(costs)		73,445,253	23,785,595
Finance income	14	12,057,819	7,975,558
Finance costs	14	(10,251,058)	(5,560,344)
Profit before tax		75,252,014	26,200,809
Current tax	15	(3,948,325)	(5,556,002)
Deferred tax	15	(9,425,315)	(1,311,385)
Tax expense		(13,373,640)	(6,867,387)
Profit for the year		61,878,374	19,333,422
Attributable to:
Owners of the group		55,035,797	16,856,306
Non-controlling interest	26	6,842,577	2,477,116
Profit for the year		61,878,374	19,333,422
Basic earnings per share (euro cents)	37	8.63	2.92
Diluted earnings per share (euro cents)	37	8.63	2.92

The consolidated annual financial statements should be read in conjunction with the accompanying notes.

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 30 June 2019

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Profit for the year		61,878,374	19,333,422
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Foreign operations – foreign currency translation differences	25	(1,338,770)	(1,207,816)
Total comprehensive income for the year		60,539,604	18,125,606
Attributable to:
Owners of the group		53,697,027	15,648,490
Non-controlling interest	26	6,842,577	2,477,116
Total comprehensive income for the year		60,539,604	18,125,606

The consolidated annual financial statements should be read in conjunction with the accompanying notes.

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2019

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Non-current assets
Investment property	17	872,062,423	579,212,345
Intangible assets	16	30,646,739	22,592,493
Investment in equity-accounted investees	21	21,888,261	23,774,222
Financial assets	28	174,903,452	105,394,992
Property, plant and equipment		317,961	485,620
Deferred tax asset	15	4,280,027	607,179
Financial investments	20	—	183,052,263
Total non-current assets		1,104,098,863	915,119,114
Current assets
Financial assets	28	11,593,528	24,507,316
Inventory property	19	5,269,960	1,293,501
Investment property held for sale	18	92,609,919	53,588,444
Financial investments	20	87,814,010	—
Trade and other receivables	30	17,305,972	16,148,333
Cash and cash equivalents	22	71,155,130	147,825,624
Total current assets		285,748,519	243,363,218
Total assets		1,389,847,382	1,158,482,332
Equity
Share capital	23	824,686,464	829,250,399
Geared share purchase plan shares	23	(8,299,075)	(12,863,010)
Retained earnings		53,864,243	48,616,712
Share-based payment reserve	24	975,364	1,031,739
Foreign currency translation reserve	25	(13,106,889)	(11,768,119)
Equity attributable to owners of the group		858,120,107	854,267,721
Non-controlling interest	26	7,439,002	2,527,202
Total equity		865,559,109	856,794,923
Non-current liabilities
Interest-bearing borrowings	27	312,754,576	214,407,455
Financial liabilities	29	2,735,096	1,696,005
Deferred tax liability	15	26,269,767	6,139,373
Total non-current liabilities		341,759,439	222,242,833
Current liabilities
Interest-bearing borrowings	27	143,706,744	28,305,652
Financial liabilities	29	17,309,393	36,121,577
Trade and other payables	31	21,271,411	14,733,264
Provisions		241,286	284,083
Total current liabilities		182,528,834	79,444,576
Total liabilities		524,288,273	301,687,409
Total shareholders’ equity and liabilities		1,389,847,382	1,158,482,332
Actual number of ordinary shares in issue	23	637,493,798	637,493,798
IFRS Net Asset Value per share (euro cents)		134.6	134.0

The consolidated annual financial statements should be read in conjunction with the accompanying notes.

These consolidated annual financial statements were approved by the board and signed on 2 September 2019 on their behalf by:

Ron Spencer
Chairman

Paul Osbourn
Chief Financial Officer

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2019

Euro	Note	Share capital	Geared share purchase plan shares (treasury shares)	Retained earnings	Share-based payment reserve	Foreign currency translation reserve	Equity attributable to owners of the group	Non-controlling interest	Total equity
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
Comprehensive income for the year
Profit for the year		—	—	16,856,306	—	—	16,856,306	2,477,116	19,333,422
Other comprehensive loss		—	—	—	—	(1,207,816)	(1,207,816)	—	(1,207,816)
Total comprehensive profit/(loss) for the year		—	—	16,856,306	—	(1,207,816)	15,648,490	2,477,116	18,125,606
Equity transactions
Share-based payment reserve		—	—	—	805,766	—	805,766	—	805,766
Total equity transactions		—	—	—	805,766	—	805,766	—	805,766
Transactions with the owners of the group and non-controlling interest
Issue of shares	23	295,836,210	—	—	—	—	295,836,210	—	295,836,210
Shares forfeited and cancelled	23	(8,193,000)	8,193,000	—	—	—	—	—	—
Distributions	23,26	(15,949,084)	—	(24,127,632)	—	—	(40,076,716)	(937,977)	(41,014,693)
Total other transactions with the owners of the group and non-controlling interest		271,694,126	8,193,000	(24,127,632)	—	—	255,759,494	(937,977)	254,821,517
Balance at 30 June 2018		829,250,399	(12,863,010)	48,616,712	1,031,739	(11,768,119)	854,267,721	2,527,202	856,794,923
Comprehensive income for the year
Profit for the year		—	—	55,035,797	—	—	55,035,797	6,842,577	61,878,374
Other comprehensive loss		—	—	—	—	(1,338,770)	(1,338,770)	—	(1,338,770)
Total comprehensive profit/(loss) for the year		—	—	55,035,797	—	(1,338,770)	53,697,027	6,842,577	60,539,604
Equity transactions
Share-based payment reserve		—	—	—	(56,375)	—	(56,375)	—	(56,375)
Total equity transactions		—	—	—	(56,375)	—	(56,375)	—	(56,375)
Transactions with the owners of the group and non-controlling interest
Issue of shares	23	1,990,465	(1,990,465)	—	—	—	—	—	—
Shares forfeited and cancelled	23	(6,554,400)	6,554,400	—	—	—	—	—	—
Distributions	23,26	—	—	(49,788,266)	—	—	(49,788,266)	(1,930,777)	(51,719,043)
Total other transactions with the owners of the group and non-controlling interest		(4,563,935)	4,563,935	(49,788,266)	—	—	(49,788,266)	(1,930,777)	(51,719,043)
Balance at 30 June 2019		824,686,464	(8,299,075)	53,864,243	975,364	(13,106,889)	858,120,107	7,439,002	865,559,109

The consolidated annual financial statements should be read in conjunction with the accompanying notes.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2019

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Cash generated from operating activities	22	53,404,995	34,900,798
Adjustments:
Decrease in receivables		1,677,151	1,029,613
Increase/(decrease) in payables		666,063	(904,406)
(Decrease)/increase in provisions		(39,869)	192,278
Interest received on PKM Developments preference shares	14,28	9,181,492	3,602,861
Tax paid on operating activities	15	(1,922,937)	(3,434,495)
Non-forfeitable distribution paid	24	(131,839)	—
Net cash from operating activities		62,835,056	35,386,649
Investing activities
Acquisition of investment property	17	(87,550,000)	(79,650,439)
Capitalised expenditure and acquisition costs on investment property	17	(18,790,862)	(13,167,161)
Settlement of investment property acquisition retentions	29	(473,061)	(225,000)
Proceeds from the sale of investment property	17	—	24,057,746
Capitalised expenditure on investment property held for sale	18	(1,716,601)	(1,149,597)
Proceeds from the sale of investment property held for sale	18	49,256,991	7,353,427
Capitalised expenditure on inventory property	19	(37,990,366)	(17,676,966)
Proceeds from the sales of inventory property	6	46,609,143	17,571,371
Acquisition of subsidiaries net of cash acquired – business combination	32	(117,561,273)	—
Drawdown of PKM Developments preference shares	28	(70,000,000)	—
Acquisition of property, plant and equipment		(199,256)	(25,627)
Disposal of property, plant and equipment		171,270	—
Capitalised expenditure on intangible assets		(98,536)	(78,679)
Acquisition of financial investments	20	(16,729,049)	(199,557,215)
Proceeds from the disposal of direct financial investments	20	20,794,463	—
Proceeds from the disposal of direct financial investments	20	116,089,335	—
- transferred to CFDs
Deposit of CFD collateral on CFD purchases	20	(52,406,643)	—
Receipt of CFD collateral on CFD disposals	20	6,201,159	—
Settlement of fair value adjustments on CFDs	20	(8,557,847)	—
Investment expenses paid	10	(2,574,609)	—
Finance cost paid – interest incurred on bank deposits	14	(249,093)	(332,222)
Finance income received – interest earned on bank deposits	14	259,726	4,223
Settlement of financial liability		(7,541,663)	(1,093,000)
Settlement of financial asset		—	66,097
Tax paid on investing activities	15	(2,543,183)	(1,541,766)
Cash used in investing activities		(185,599,955)	(265,444,808)
Financing activities
Proceeds from the issue of share capital	23	—	279,917,834
Proceeds from interest-bearing borrowings	27	218,590,164	104,067,925
Transaction costs relating to interest-bearing borrowings	27	(2,534,979)	(1,431,560)
Repayment of capital on interest bearing-borrowings	27	(109,537,321)	(7,350,266)
Finance costs paid – interest on interest-bearing borrowings	14,27	(8,226,934)	(4,435,102)
Distributions paid to the owners of the group	23	(49,788,266)	(24,158,340)
Distributions paid to non-controlling interest	26	(1,930,777)	(937,977)
Cash generated from financing activities		46,571,887	345,672,514
Net (decrease)/increase in cash and cash equivalents		(76,193,012)	115,614,355
Cash and cash equivalents at the beginning of the year		147,825,624	33,017,502
Effect of movements in foreign exchange rate on cash held		(477,482)	(806,233)
Cash and cash equivalents at the end of the year	22	71,155,130	147,825,624

The consolidated annual financial statements should be read in conjunction with the accompanying notes.

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

For the year ended 30 June 2019

1. CORPORATE INFORMATION

MAS Real Estate Inc. (the "company" or "MAS") is domiciled in the British Virgin Islands ("BVI") and head quartered in the Isle of Man ("IoM"). These financial statements are as at, and for the year ended, 30 June 2019 and comprise the consolidated annual financial statements of the company 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 shareholders over time.

2. BASIS OF PREPARATION

STATEMENT OF COMPLIANCE

These consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the IASB ("IFRS"), 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 consolidated annual 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 at fair value through profit or loss ("FVTPL"), refer to notes 28 and 29;
Financial investments, refer to note 20;
Share-based payments on grant date, refer to note 33;
Investment property, refer to note 17; and
Investment property held for sale, refer to note 18.

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 year during which the change occurred.

USE OF JUDGEMENT AND ESTIMATION UNCERTAINTY

The board has 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:

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'. During the year the group acquired thirteen investment properties in five separate transactions. Three of the transactions are considered business combinations because inputs, outputs and substantive processes that are capable of providing a return were acquired, refer to note 32. The other two transactions were not considered to be business combinations, although inputs and outputs were acquired, the group did not acquire the substantive processes that would be required to provide a return, refer to note 17.
Whether there has been a significant increase in credit risk when assessing expected credit losses: The group has an investment in PKM Developments Limited ("PKM Developments") through 7.5% preference shares which have a carrying amount of €174,128,273 at 30 June 2019 (2018: €105,045,768) (refer to note 28) and undrawn commitments of €250,000,000 (2018: €250,000,000) (refer to note 41). In accordance IFRS 9 (2014) - Financial Instruments the group is required to assess whether the credit risk of PKM Developments preference shares and undrawn commitments has increased significantly since initial recognition. Judgements are made to assess the credit risk, both quantitative and qualitative factors are considered in the assessment.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

2. BASIS OF PREPARATION (CONTINUED)

When to recognise revenue relating to the sales of inventory property: Once a sale agreement contract is negotiated and a sale of property is agreed, the group assesses whether control is transferred at a point in time or over time. The judgement is based on the terms and conditions of the sale agreement, refer to note 19.

The key areas of estimation uncertainty are:

Fair valuation:
Investment property and Investment property held for sale: External property valuation experts or where relevant, firm offers from market participants are used to determine the fair value of investment property. The external property valuation experts use recognised valuation techniques and apply the principles of IFRS 13: Fair Value Measurement. The methods and significant assumptions used by the valuers in estimating fair value are set out in notes 17 and 18.
Financial instruments: In determining the fair value of financial instruments measured at fair value through profit or loss, the group is required to make estimations of unobservable inputs in determining fair value. The methods and significant assumptions used in estimating fair value are set out in notes 28 and 29.
Loan commitments: The group has committed to advancing funds to PKM Developments in the future by acquiring preference shares, refer to note 41. Judgements are made to assess the market related rate of these loan commitments. The group applies judgement in reviewing the loan commitments made and determined that the PKM Developments preference share commitments are a market related rate.
Continuous-sale transaction: The group entered into an agreement with Legal and General Pensions Limited ("Legal and General") to dispose of the land that is designated for offices at New Waverley in Edinburgh and to develop the office on a forward funding basis. The transaction has been accounted for as a continuous-sale transaction and the following assumptions have been made to estimate the costs of completion to determine the amount of revenue recognised:
Construction costs; and
Stage of completion.

PRESENTATION CURRENCY

These consolidated annual financial statements are presented in euro, the group's presentation currency.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

3. ADOPTION OF NEW AND REVISED STANDARDS

During the year ended 30 June 2019, the group adopted the following standards:

Amendments/improvements to standards and interpretations adopted

IFRS 9 (2014) - 'Financial Instruments'
IFRS 15 - 'Revenue from Contracts with Customers'
IAS 40 - 'Amendment to Clarify Transfers of Property to, or from, Investment Property'

The adoption of these standards does not affect previously reported numbers, however, there are additional disclosures requirements.

IFRS 9 (2014) - 'FINANCIAL INSTRUMENTS'

The group early adopted IFRS 9 (2013) 'Financial Instruments' for the year ended 30 June 2015 and adopted IFRS 9 (2014) 'Financial Instruments' on 1 July 2018, with effect from 1 July 2017. The 2014 amendments relate specifically to impairment and introduce an expected credit loss model which requires expected credit losses to be recognised on financial assets held at amortised cost. The group has determined that no changes are required on transition to IFRS 9 (2014) 'Financial Instruments', the amendment has no material impact on these consolidated annual financial statements, refer to note 4.

IFRS 15 - 'REVENUE FROM CONTRACTS WITH CUSTOMERS'

This standard replaces IAS 18 'Revenue', IAS 11 'Construction Contracts' and related interpretations. It applies to contracts with customers except for lease contracts, finance insurance contracts, financial instruments and non-monetary exchanges between entities in the same business. The standard establishes a five-step model which determines whether, how much and when revenue is recognised.

The majority of the group's income is rental income from leases, which is in the scope of IAS 17 Leases and is therefore not affected by the new standard. The recognition and measurement requirements in IFRS 15 'Revenue from Contracts with Customers' are applicable for determining the timing of derecognition and the measurement of consideration (including applying the requirements for variable consideration) of any gains or losses on disposal of non-financial assets when that disposal is not in the ordinary course of business. The group has determined that no changes are required on transition to IFRS 15 'Revenue from Contracts with Customers', for previous disposals of investment property that was held for rental income.

The group has identified the following revenue streams that are in the scope of IFRS 15 'Revenue from Contracts with Customers':

Sales of inventory property; and
Service charges and other recoveries.

The group adopted IFRS 15 - 'Revenue from Contracts with Customers' on 1 July 2018, with effect from 1 July 2017. The group has applied the full retrospective method and in accordance with the practical expedient for comparative periods has not disclosed the amount of the transaction price allocated to remaining performance obligations or provided an explanation of when the group expects to recognise a transaction price. The new standard requires additional disclosure which has resulted in a reclassification of previously reported numbers, refer to note 30.

IAS 40 - 'AMENDMENT TO CLARIFY TRANSFERS OF PROPERTY TO, OR FROM, INVESTMENT PROPERTY'

The amendments clarify when an entity should transfer property, including property under construction or developments into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management's intentions for the use of a property does not provide evidence of a change in use.

The group adopted IAS 40 'Investment property' on 1 July 2018, with effect from 1 July 2017. There has been no impact on the numbers reported or on the disclosures as a result of the adoption of the amendment to IAS 40 'Investment property'.

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 interpretations not yet effective	IASB effective for annual periods beginning on or after
IFRS 16 - 'Leases'	1 January 2019
IFRS 3 - Amendment to IFRS 3 'Business Combinations'	1 January 2020
IFRIC 23 - 'Uncertainty Over Income Tax Treatments'	1 January 2019
IAS 28 - Amendments to IAS 28 'Investments in Associates and Joint Ventures' on long term interests in an associate or joint venture	1 January 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

3. ADOPTION OF NEW AND REVISED STANDARDS (CONTINUED)

IFRS 16 – 'LEASES'

The standard applies to all lease contracts. The changes require lessees to recognise right of use assets and finance lease liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, which is substantially unchanged from IAS 17 'Leases'.

The group is a lessee under a number of lease contracts for example the group's head office. The group has assessed the impact of these leases and has concluded that there will be right of use assets and finance lease liabilities recognised when IFRS 16 – 'Leases' is adopted. However, the impact will not be material to the group. In addition, the group will also provide additional disclosure on operating leases it enters into as a lessor.

The group will adopt the new standard for the year ending 30 June 2020.

IFRS 3 – AMENDMENT TO IFRS 3 'BUSINESS COMBINATIONS'

The amendment clarifies the definition of a business combination to resolve the difficulties that arise when an entity determines whether it has acquired a business or a group of assets.

The amendment:

clarifies the minimum requirements for the business;
removes the assessment of whether market participants are capable of replacing any missing elements;
adds guidance to help entities assess whether an acquired process is substantive;
narrows the definitions of a business and of outputs; and
introduces an optional fair value concentration test to permit a simplified assessment.

The group will early adopt the amendment for the year ending 30 June 2020. Since the amendments apply prospectively to transactions that occur on or after the date of first application, transactions in prior periods do not need to be revisited. The group has assessed the impact of the amendment and expects fewer acquisitions of investment property to be recognised as business combinations.

IFRIC 23 – 'UNCERTAINTY OVER INCOME TAX TREATMENTS'

The amendment clarifies the accounting for uncertainties in income taxes.

The group has assessed the impact of the new interpretation and has concluded that it will have no material impact. The group will adopt the amendment for the year ending 30 June 2020.

IAS 28 – AMENDMENTS TO IAS 28 'INVESTMENTS IN ASSOCIATES AND JOINT VENTURES'

IAS 28 clarifies that an entity applies IFRS 9 'Financial Instruments' to long term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.

The group will adopt the amendment for the year ending 30 June 2020.

The group has assessed the impact of this amendment and has concluded that it is unlikely that there will be a significant impact. The preference shares in PKM Developments (refer to note 28) fall within the scope of the amendment. There will be no change to the accounting treatment of the preference shares as these are already recognised as a financial asset at amortised cost, under IFRS 9 (2014) 'Financial Instruments'.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

4. SIGNIFICANT GENERAL ACCOUNTING POLICIES

For the specific principal accounting policies applied in the preparation of these consolidated annual financial statements, please refer to the corresponding notes. The following general principal accounting policies have been applied. All policies have been applied consistently to all years presented, unless otherwise stated.

PRINCIPLES OF CONSOLIDATION

Subsidiaries are all entities over which the group has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the group, refer to note 32. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.

FINANCIAL INSTRUMENTS

i. INITIAL RECOGNITION AND MEASUREMENT

Financial instruments are recognised when the group becomes party to the contractual terms of the instrument. They are initially recognised at fair value plus any directly attributable transaction costs, except for attributable transaction costs attributable to financial instruments classified as at fair value through profit or loss, which are recognised in profit or loss as incurred.

ii. DESIGNATION AT FAIR VALUE

The group may elect to designate financial instruments at fair value that would otherwise meet the criteria to be classified as at amortised cost, if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise if the financial instrument were measured at amortised cost. This election has been made for the CFD collateral held as German bonds, refer to note 20.

iii. 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 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.

These financial assets are subsequently measured at amortised cost using the effective interest method, less any impairment losses.

IMPAIRMENT

The group recognises loss allowances for expected credit losses on: financial assets measured at amortised cost; lease receivables and contract assets.

For lease receivables, trade receivables and contract assets the group applies the simplified approach to measuring expected credit losses. Therefore, there is no need to monitor significant increases in credit risk and lifetime expected credit losses are recognised at all times.

For other financial assets such as PKM Developments preference shares and capital contribution receivable, as well as undrawn PKM Developments preference share commitments, 12 month expected credit losses are recognised where the financial asset is determined to have a low credit risk and for those financial instruments for which the credit risk has not increased significantly since initial recognition. When determining whether the credit risk of a financial asset has increased significantly since initial recognition the group considers both quantitative and qualitative information that is reasonably available and such as: financial position, historic and future operating performance, payment delays, covenant breaches and general economic and market conditions.

Lifetime expected credit losses are expected defaults over the expected life of the financial asset. 12 month expected credit losses are expected defaults within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating expected credit losses is the maximum contractual period over which the group is exposed to credit risk.

When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

4. SIGNIFICANT GENERAL ACCOUNTING POLICIES (CONTINUED)

FINANCIAL INSTRUMENTS (CONTINUED)

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets are classified as at fair value through profit or loss if they do not meet either criteria for classification of a financial asset at amortised cost or if they are held for trading; derivative financial instruments; or financial assets designated as fair value. The group initially recognises these financial assets at fair value at the trade date. These financial assets 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 once the asset has been transferred, and the transfer of that asset is subsequently eligible for derecognition.

FINANCIAL INVESTMENTS

Financial investments held both directly and through contract for difference agreements are classified as a financial asset at fair value through profit or loss.

i.v. FINANCIAL LIABILITIES

The group classifies its financial liabilities into the following categories: financial liabilities at amortised cost and financial liabilities at fair value through profit or loss.

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 through profit or loss. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial liabilities are classified as financial liabilities at fair value through profit or loss 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 asset 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 initially recognises these financial liabilities at fair value at the trade date. These financial liabilities 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 LIABILITIES

The group derecognises a financial liability when the contractual obligations of the liability expire, for example 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.

EMPLOYEE COSTS

Employee benefits comprise the total costs of employment to the group, which consist of: salary; annual leave; sick leave; employment taxes; employer pension contribution; and the current expense in relation to the geared share purchase plan. These 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.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

5. RENTAL INCOME

ACCOUNTING POLICY

Rental income from investment property 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.

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.

Turnover rent is included in rental income. Turnover rent is contingent on the turnover of the tenant, as such it is recognised as earned.

DISCLOSURE

Euro	Year ended 30 June 2019	Year ended 30 June 2018
Rental income	54,701,353	35,461,317
Turnover rent	2,918,203	1,991,196
	57,619,556	37,452,513

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:

Euro	Year ended 30 June 2019	Year ended 30 June 2018
Edeka MIHA AG	5,855,519	5,837,967

The future aggregate minimum rental receivable under non-cancellable operating leases, excluding turnover based rent is as follows:

Euro	As at 30 June 2019	As at 30 June 2018
No later than 1 year	61,800,708	39,501,963
Greater than 1 year and less than 5 years	193,913,229	135,874,939
Greater than 5 years	233,892,915	182,238,453
	489,606,852	357,615,355

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

6. PROFIT ON SALES OF INVENTORY PROPERTY

ACCOUNTING POLICY

The group enters into contracts with customers to sell property which is either complete or under development. Where contracts include development management services and consequently include the provision of a number of goods and services, the group determines whether the goods and services are distinct and accounts for them as a single performance obligation if they are not separately identifiable from other promises in the contract.

The group determines whether control is transferred at a point in time or over time based on the following:

Sales of inventory property under development are recognised over time when the group's performance creates an asset that the customer controls as the asset is created. In these situations, the group recognises sales of inventory property to the extent that the performance obligations have been satisfied.
Sales of inventory property under development are recognised on completion when control is transferred at a point in time.

For contracts where sales of inventory property are recognised over-time, the group's performance is measured using the input method, by reference to the costs incurred as a percentage of the total expected costs required to satisfy the performance obligation. The group excludes the effect of costs incurred that do not contribute to the group's performance obligations, such as wastage, and adjusts for costs incurred that are not proportionate to the group's progress in satisfying the performance obligations, such as uninstalled materials.

Where contracts for the sale of inventory property include a variable consideration, the transaction price is estimated and includes the impact of constraints. The group uses either the most likely value method or expected value method depending on which best predicts the transaction price.

The group does not adjust the transaction price for the effects of a financing component in the contract, where the group expects, at contract inception, that the period between the time the customer pays for the good or service and when the group transfers that promised good or service to the customer will be one year or less.

DISCLOSURE

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Sales of inventory property^{1}		39,164,705	26,020,940
Cost of sales of inventory property	19	(31,013,909)	(21,704,016)
	22	8,150,796	4,316,924

1 The group received cash of €46,609,143 (2018: €17,571,371) in relation to sales of inventory property, €7,444,438 (2018: €nil) of which relates to receivables from contract assets and receivables which were outstanding at 30 June 2018.

During the year a total profit of €8,150,796 (2018: €4,316,924) in relation to inventory property was recognised, which derives from the pre-let agreement and disposal of land agreement for the office component of the New Waverley development. Practical completion was achieved on 21 May 2019 (refer to note 19).

The following table reflects expected income for the future sale of a Travelodge hotel at Langley (i.e. income from contracts with customers which is expected to be recognised in the future relates to performance obligations that are unsatisfied at the reporting date).

Euro	Year ended
	30 June 2020	30 June 2021	30 June 2022
Sales of inventory property	6,545,535	—	—

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SERVICE CHARGE INCOME AND OTHER RECOVERIES

ACCOUNTING POLICY

The group has lease agreements in terms of which costs relating to common areas and general services are shared amongst tenants. The costs that can be recharged are specified in the lease agreements and are separately invoiced and are distinct non-lease components. The group allocates the consideration in the lease contracts to the lease component and to the non-lease component (revenue from contracts with customers) based on the relative stand-alone selling prices. The group recognises income in relation to these services over time when the performance obligations are satisfied.

As specified in the lease agreements, the group typically has the primary responsibility for providing services to tenants (such as electricity, water and gas utilities, interior and exterior cleaning, security, maintenance and repairs). The group negotiates all such contracts directly with the suppliers. The group is the principal in these transactions and therefore income and corresponding costs are presented gross, in accordance with IFRS 15 Revenue from Contracts with Customers.

The group negotiates and pays all expenses incurred to suppliers and then re-invoices these costs to tenants.

DISCLOSURE

Euro	Year ended 30 June 2019	Year ended 30 June 2018

Service charge income	12,069,596	5,711,794
Other recoverable expenses	385,672	242,254
	12,455,268	5,954,048

For disclosures on disaggregation of the income from contracts with customers by jurisdiction and the timing of income recognition, refer to note 36.

The group has elected to apply the practical expedient in paragraph 121 of IFRS 15 'Revenue from Contracts with Customers' and does not disclose information about remaining performance obligations for contracts in which the group has a right to consideration from tenants in an amount that corresponds directly with the value to the tenant of the group's performance completed to date.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

8. SERVICE CHARGE AND OTHER PROPERTY OPERATING EXPENSES

ACCOUNTING POLICY

Service charge and other property operating expenses are direct expenses incurred in relation to the property held by the group. These expenses comprise direct expenses in relation to income-generating investment property and are recognised in profit or loss in the period in which they are incurred.

Employee costs which relate to the operating of investment property are included in property operating expenses to the extent that they relate to income-generating property. They are capitalised where they relate to development property.

DISCLOSURE

Euro	Year ended 30 June 2019	Year ended 30 June 2018
Property expenses	10,120,066	4,291,513
Building repairs and maintenance	2,713,281	1,773,243
Property management expense	3,318,742	2,619,665
Marketing fees	975,315	827,768
Insurance expense	751,756	627,121
Legal fees	427,184	587,102
Other expenses	172,317	347,106
	18,478,661	11,073,518

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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9. OTHER INCOME

ACCOUNTING POLICY

Other income includes dividend income from direct financial investments, dividend income earned on contracts for difference ("CFDs") and other income that cannot be directly attributed to investment property. Dividend income earned on direct financial investments is recognised in profit or loss on the date on which the group's right to receive payment is established. Such dividends are disclosed gross of tax, with any tax consequences included as part of tax, as the group is liable to settle the related taxes. Where financial investments are held via CFDs, swaps or similar instruments, dividend income is recognised in profit or loss on the date on which the group's right to receive payment is established, net of tax, as the group's counterparty is liable for the related taxes.

DISCLOSURE

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Dividend income earned on direct financial investments	20	3,812,126	8,423,423
Dividend income earned on CFDs	20	2,877,952	—
Other		569,026	161,609
		7,259,104	8,585,032

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

10. INVESTMENT EXPENSES

ACCOUNTING POLICY

Investment expenses are incurred in the process of acquiring investment property and listed real estate equity securities that are not capitalised. They are recognised in profit or loss in the period in which they are incurred.

DISCLOSURE

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Transaction fees on business combinations	32	1,886,510	—
Transaction fees on disposal of investment property		894,767	—
Transaction fees on listed real estate equity securities		421,143	759,726
Transaction fees on aborted transactions		7,708	1,216,370
		3,210,128	1,976,096

Of the €3,210,128 (2018: €1,976,096) incurred in the year, €2,574,609 (2018: €1,976,096) was paid in cash.

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11. FAIR VALUE ADJUSTMENTS

ACCOUNTING POLICY

The following items are measured at fair value at the reporting date with changes in fair value being recognised within fair value adjustments in profit or loss in the period in which they occur:

DISCLOSURE

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Fair value adjustments
Gain/(loss) on fair value of investment property		24,086,880	(721,387)
Gain on fair value of investment property held for sale		958,055	2,766,206
Loss on fair value of financial investments		(29,846,835)	(16,504,952)
Gain on fair value of financial assets		432,554	350,585
Loss on fair value of financial liabilities		(3,262,224)	(1,690,579)
	22	(7,631,570)	(15,800,127)
Detailed as follows:
Change in fair value of investment property
Income-generating	17	30,317,578	13,439,408
Development	17	(474,743)	(4,559,691)
Land bank	17	(5,755,955)	(9,601,104)
		24,086,880	(721,387)
Change in fair value of investment property held for sale
Investment property held for sale	18	958,055	2,766,206
		958,055	2,766,206
Change in fair value of financial investments
Direct financial investments	20	(21,048,713)	(16,504,952)
CFD collateral	20	(240,275)	—
CFD gross exposure	20	(8,557,847)	—
		(29,846,835)	(16,504,952)
Change in fair value of financial assets
Interest rate swaps	28	432,554	350,585
		432,554	350,585
Change in fair value of financial liabilities
Interest rate swaps	29	(1,473,614)	(123,226)
Development management fee	29	(660,671)	(682,956)
Priority participating profit dividend	29	(1,127,939)	(884,397)
		(3,262,224)	(1,690,579)

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CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

12. CORPORATE EXPENSES

ACCOUNTING POLICY

Corporate expenses are those expenses other than direct property expenses. They are recognised in profit or loss in the period in which they are incurred.

DISCLOSURE

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Employee costs and non-executive Director fees		2,508,695	2,526,935
Office and administration expenses		1,112,354	1,288,761
Legal and professional		722,601	374,986
Audit and accounting fees		559,937	352,282
Investor communications		535,795	176,886
Depreciation	22	101,341	100,026
Listing fees		86,354	127,097
		5,627,077	4,946,973

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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13. FOREIGN CURRENCY EXCHANGE DIFFERENCES

ACCOUNTING POLICY

Transactions in foreign currencies are translated into the presentation 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 presentation currency at the rates prevailing at that date.

Non-monetary assets and liabilities measured at fair value that are denominated in foreign currencies are translated at the rate at the date the fair value was determined. Non-monetary items that are measured based on the historical cost basis in a foreign currency are translated at the rate at the date of the transaction.

Foreign currency exchange differences are recognised in profit or loss.

For the purpose of presenting consolidated annual financial statements, the assets and liabilities of the group's foreign operations are translated to euros using exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognised in other comprehensive income and presented in equity in the foreign currency translation reserve, except to the extent that the translation difference is allocated to non-controlling interest. Such exchange differences are reclassified to profit or loss in the period in which the foreign operation is disposed of.

Goodwill and fair value adjustments that arise on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

DISCLOSURE

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Foreign currency exchange differences	22	364,553	1,020,787

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

14. FINANCE INCOME AND FINANCE COSTS

ACCOUNTING POLICY

Finance income and finance costs include the following:

Interest income from financial assets held at amortised cost; and
Interest expense from financial liabilities held at amortised cost.

Finance income and costs are recognised using the effective interest method.

DISCLOSURE

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Finance income
Interest on PKM Developments preference shares	28	11,194,662	7,514,384
Amortisation of capital contribution receivable	28	603,431	456,951
Interest on bank deposits		259,726	4,223
	22	12,057,819	7,975,558
Finance costs
Interest on interest bearing borrowings	27	(9,398,534)	(4,771,171)
Amortisation of capital contribution payable	29	(603,431)	(456,951)
Interest on bank deposits		(249,093)	(332,222)
	22	(10,251,058)	(5,560,344)

CASH FLOWS

The group received finance income of €9,441,218 (2018: €3,607,084) during the year. The amount relates to €9,181,492 (2018: €3,602,861) of finance income received from operating activities and €259,726 (2018: €4,223) of finance income received from investing activities.

The group paid finance costs of €8,476,027 (2018: €4,767,324) during the reporting year. The amount relates to €249,093 (2018: €332,222) of finance costs paid from investing activities and €8,226,934 (2018: €4,435,102) of finance costs paid from financing activities.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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15. TAX

ACCOUNTING POLICY

Income tax for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or equity.

CURRENT TAX

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the reporting period plus/ minus any adjustments to the tax payable or receivable in respect of previous years. It is measured using enacted or substantively enacted tax rates at the reporting date.

DEFERRED TAX

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the fiscal values used for tax purposes, except for the following temporary differences which are not provided for:

those arising from goodwill not deductible for tax purposes;
those arising from the initial recognition of assets or liabilities that affect neither accounting or taxable profit, and are not part of a business combination; and
those arising on investments in subsidiaries and associates where the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. For deferred tax on investment property there is a rebuttable presumption that the carrying amount is realised through sale.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised and is reduced to the extent that it is no longer probable that the related tax benefit will be realised.

DISCLOSURE

CURRENT TAX

The company is domiciled in the BVI and is not subject to tax in that jurisdiction. Operating subsidiaries of the group, however, are exposed to tax in the jurisdictions in which they operate and, potentially, in the jurisdictions through which the subsidiary investment companies are held.

The group's tax includes the following:

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Current tax		3,948,325	5,556,002
Deferred tax		9,425,315	1,311,385
Tax expense	22	13,373,640	6,867,387

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

15. TAX (CONTINUED)

DISCLOSURE (CONTINUED)

The current tax, for each jurisdiction is as follows:

	Year ended 30 June 2019		Year ended 30 June 2018
	Applicable rate (%)	Tax (Euro)	Applicable rate (%)	Tax (Euro)
Income tax
Isle of Man	0.0	—	0.0	—
UK – income tax	20.0	601,595	20.0	779,132
UK – corporation tax	19.0	1,545,817	19.0	2,394,030
Jersey	0.0	—	0.0	—
Germany	15.8	415,745	15.8	210,255
Poland	19.0	357,080	19.0	66,792
Switzerland	26.8	24,166	26.8	23,683
Netherlands	20.0	32,878	20.0	25,689
Bulgaria	10.0	—	10.0	—
Romania	16.0	16,880	16.0	—
Withholding tax
Poland	5.0	104,116	5.0	(281,974)
UK	20.0	250,797	20.0	144,982
France	30.0	374,985	30.0	2,174,252
Sweden	15.0	—	15.0	55,170
Netherlands	15.0	160,390	15.0	—
Luxembourg	15.0	4,619	15.0	—
Wealth tax
Switzerland	0.2	(5,567)	0.2	19,490
Luxembourg	0.5	64,824	0.5	(55,499)
		3,948,325		5,556,002

The UK corporation tax relates to the following sales at New Waverley, refer to note 19:
- tax on disposal of office land of €nil (2018: €1,581,195); and
- tax on sale of inventory property of €1,545,817 (2018: €812,835).

The group paid €4,466,120 (2018: €4,976,261) in total tax during the year. The amount relates to €1,922,937

(2018: €3,434,495) for tax paid on operating activities and €2,543,183 (2018: €1,541,766) for tax paid on investing activities.

RECONCILIATION OF DEFERRED TAX:

Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Net deferred tax liability brought forward		5,532,194	4,240,319
Current year deferred tax movement		9,425,315	1,311,385
Deferred tax recognised from business combinations	32	7,019,729	—
Foreign currency translation difference in OCI		12,502	(19,510)
Net deferred tax liability carried forward		21,989,740	5,532,194

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

The net deferred tax liability is split as follows:

Euro	As at 30 June 2019	As at 30 June 2018
Revaluation of investment property and investment property cumulative statutory tax allowance	569,462	295,638
Fiscal losses	2,961,578	311,541
Other deductible temporary differences	748,987	—
Deferred tax asset	4,280,027	607,179
Revaluation of investment property and investment property cumulative statutory tax allowance	(26,059,974)	(6,079,801)
Other deductible temporary differences	(209,793)	(59,572)
Deferred tax liabilities	(26,269,767)	(6,139,373)
Net deferred tax liability	(21,989,740)	(5,532,194)

The group recognises deferred taxes on temporary differences on an asset by asset basis in line with the accounting policy. In practice, if the group chose to dispose of certain assets and effected some of the disposals by selling the share in separate entities that hold the assets, this would significantly reduce the effective tax rate on potential capital gains.

RECONCILIATION OF EFFECTIVE TAX RATE

	Year ended 30 June 2019		Year ended 30 June 2018
	%	Euro	%	Euro
Profit before tax		75,252,014		26,200,809
Tax using the company's domestic rate	0.0	—	0.0	—
Effect of tax rates in foreign jurisdictions	(5.2)	(3,866,618)	(22.5)	(5,894,358)
(Under)/over provision in respect of prior years	(0.1)	(81,707)	1.3	338,356
Current tax	(5.3)	(3,948,325)	(21.2)	(5,556,002)
Change in recognised deductible temporary differences
Revaluation of investment property	(11.2)	(8,291,209)	1.9	488,574
Investment property cumulative statutory tax allowance	(2.0)	(1,449,513)	0.0	(2,172,115)
Fiscal losses	(0.2)	(142,109)	0.0	312,584
Other temporary differences	0.6	457,516	(6.9)	59,572
Deferred tax	(12.8)	(9,425,315)	(5.0)	(1,311,385)
Total tax expense	(18.1)	(13,373,640)	(26.2)	(6,867,387)

The Isle of Man domestic tax rate of $0\%$ (2018: $0\%$ ) was considered the most meaningful rate on the basis that the profits are earned across several jurisdictions and none of those jurisdictions dominates the group's portfolio.

The other taxable temporary differences relate to prepayments, accruals and deferred income.

There has been no change in the applicable tax rates. The primary reason for the decrease in the effective tax rate from $26.2\%$ for the year ended 30 June 2018 to $18.1\%$ for the year ended 30 June 2019 is as a result of changes in the geographical mix of profits.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

16. INTANGIBLE ASSETS

ACCOUNTING POLICY

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the fair value of net identifiable assets acquired and liabilities assumed.

Goodwill impairment reviews are undertaken at each reporting date or more frequently if events or changes in circumstances indicate a potential impairment. For impairment testing, assets are grouped together into the smallest groups of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other cash generating units ("CGUs"). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of the CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on estimated future cash flows, discounted to the present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to CGU.

An impairment loss is recognised if the carrying amount of the CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed.

Other intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Other intangible assets are not yet in use and therefore have not been amortised.

DISCLOSURE

Euro			As at 30 June 2019	As at 30 June 2018
Goodwill			30,252,168	22,292,997
Other intangible assets			394,571	299,496
			30,646,739	22,592,493
GOODWILL
Euro	Shopping centre portfolio	MAS Prop	New Waverley	Total
	—
Balance at 30 June 2017	—	22,464,861	1,279,975	23,744,836
Foreign currency translation difference in OCI	—	(171,864)	(5,629)	(177,493)
Impairment	—	—	(1,274,346)	(1,274,346)
Balance at 30 June 2018		22,292,997	—	22,292,997
Acquisition of subsidiaries	8,217,955	—	—	8,217,955
Foreign currency translation difference in OCI	—	(258,784)	—	(258,784)
Balance at 30 June 2019	8,217,955	22,034,213	—	30,252,168

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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MAS PROP

On 15 October 2014 the group internalised the investment adviser by acquiring 100% of the share capital and voting rights of MAS Property Advisors Limited ("MAS Prop"). The internalisation resulted in recognition of goodwill. No impairment loss was recognised as a result of the group's annual impairment test of goodwill in relation to MAS Prop (2018: €nil).

The recoverable amount of the MAS Prop CGU was based on the value in use, using a discounted cash flow methodology. Under the investment advisory agreement, MAS Prop is entitled to a fee based upon the net asset value of the group. As a result of the significant growth in the group's net asset value, the cash flows over the remaining forecast period are substantially in excess of those originally forecast at the time of acquisition. Consequently, the value in use of the MAS Prop CGU is significantly higher than the carrying amount of goodwill.

All cash flows in the value in use calculation were forecast for a period of 5 years (2018: 6 years). Budgeted EBITDA was based on expectations of future outcomes based on past experience, adjusted for anticipated net asset growth of the group and increases in operating expenses.

The following key assumptions were used to estimate value in use:

Inputs	As at 30 June 2019	As at 30 June 2018
Pre-tax discount rate	6.20%	6.49%
Annual increase in revenue	2.00% - 3.00%	2.00% - 3.00%
Annual increase in operating expenses	2.00% - 3.00%	2.00% - 4.00%
Budgeted period	5 years	6 years

The key assumptions were derived from the following:

PRE-TAX DISCOUNT RATE

The weighted average cost of capital of MAS Prop.

ANNUAL INCREASE IN REVENUE AND ANNUAL INCREASE IN OPERATING EXPENSES

The operating budgets of MAS Prop.

BUDGETED PERIOD

The pre-existing investment advisory agreement.

Management has determined that a reasonably possible change to any of the key assumptions would not result in an impairment.

SHOPPING CENTRE PORTFOLIO

On 28 February 2019, the group acquired 9 investment properties from PKM Developments through the acquisition of 100% of the share capital of the respective holding companies. The acquisition resulted in recognition of goodwill, refer to note 32.

The goodwill arising on the acquisition of the shopping centre portfolio has been allocated to the 9 properties as individual cash generating units. The recoverable amounts of the CGUs were based on the value in use, using a discounted cash flow methodology and reduced by the amount of deferred tax liability of €7,582,389 recognised in the business combination, refer to note 32.

The following key assumptions were used to estimate value in use:

Inputs	As at 30 June 2019
Discount rate	9.30% - 9.80%
Annual net rental growth	2.00%
Reversionary discount rate	7.50%
Estimated rental value per annum	€8.15 million

The key assumptions were derived from the independent external valuation report:

Management has determined that a reasonably possible change to any of the key assumptions would not result in an impairment.

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

17. 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 and property which has a currently undetermined use.

Investment property is treated as a long-term investment and is initially recognised at cost (including related transaction costs unless acquired as part of a business combination). It is subsequently measured at fair value, with any changes therein recognised in profit or loss. Subsequent expenditure that produces future economic benefit to the group is capitalised.

Fair value is calculated using the income approach. The income approach is based on the discounting or capitalisation of present and predicted income (cash flows), which may take a number of different forms, to produce a single current capital value. Among the forms taken, discounting of a specific income projection and the capitalisation of a conventional market-based income can both be considered appropriate depending on the type of asset and whether such an approach would be adopted by market participants. Management has based valuations on discounted cashflows, capitalisation rate and residual valuation forms of the income approach.

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 property 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 determined when construction is further progressed, the group measures such property at cost less impairment until the fair value can be reliably determined. 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 a value in use calculation, because the fair value less costs to sell cannot be reliably determined. 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 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.

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.
Euro	As at 30 June 2019
---	---
Income-generating property	852,839,611
Development property	—
Land bank	19,222,812
	872,062,423

All investment property is held at fair value.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

As at 30 June 2019

Euro	Note	Income-generating	Development	Land bank	Total
Opening balance		546,238,139	—	32,974,206	579,212,345
Property acquisitions		87,550,000	—	—	87,550,000
Property acquired in business combinations	32	249,113,571	—	—	249,113,571
Capitalised acquisition costs		7,135,174	—	—	7,135,174
Capitalised expenditure¹		4,753,292	475,121	6,781,037	12,009,450
Capitalised interest on general borrowings	27	—	—	351,556	351,556
Transfer to investment property held for sale	18	(71,090,000)	—	(14,779,050)	(85,869,050)
Fair value adjustment	11	30,317,578	(474,743)	(5,755,955)	24,086,880
Foreign currency translation difference		(1,178,143)	(378)	(348,982)	(1,527,503)
Closing balance		852,839,611	—	19,222,812	872,062,423

¹ The group paid €18,790,862 in relation to capitalised expenditure during the year.

As at 30 June 2018

Euro	Note	Income-generating	Development	Land bank	Total
Opening balance		494,519,173	30,081,795	39,690,960	564,291,928
Property acquisitions		80,123,500	—	—	80,123,500
Property disposals		—	(24,057,746)	—	(24,057,746)
Transfers			(3,434,151)	3,434,151	—
Capitalised expenditure		2,890,738	2,954,116	7,322,307	13,167,161
Capitalised interest on general borrowings	27	—	—	569,031	569,031
Transfer to investment property held for sale	18	(43,082,065)	—	(8,246,692)	(51,328,757)
Transfer to inventory property	19	—	(1,078,030)	—	(1,078,030)
Fair value adjustment	11	13,439,408	(4,559,691)	(9,601,104)	(721,387)
Foreign currency translation difference		(1,652,615)	93,707	(194,447)	(1,753,355)
Closing balance		546,238,139	—	32,974,206	579,212,345

LEASE INCENTIVE ACCRUALS

Income-generating investment property has been adjusted to take into account lease incentive accruals as follows:

Euro	Note	As at 30 June 2019	As at 30 June 2018
Gross valuation		855,028,317	546,517,759
Lease incentive accrual	30	(2,188,706)	(279,620)
Carrying value		852,839,611	546,238,139

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

17. INVESTMENT PROPERTY (CONTINUED)

ACQUISITIONS

During the year, the group acquired the following investment properties:

BUSINESS COMBINATION ACQUISITIONS

MILITARI SHOPPING CENTRE, ROMANIA

On 5 July 2018, the group acquired Militari through the acquisition of 100% of the share capital of a holding company, refer to note 32. The investment property value at the acquisition date was €93,854,946.

ATRIUM MALL, ROMANIA

On 5 December 2018, the group acquired Atrium through the acquisition of 100% of the share capital of a holding company, refer to note 32. The investment property value at the acquisition date was €48,930,000.

SHOPPING CENTRE PORTFOLIO, ROMANIA

On 28 February 2019, the group acquired 9 investment properties from PKM Developments through the acquisition of 100% of the share capital of the respective holding companies, refer to note 32. The investment property value at the acquisition date was €106,328,625.

INVESTMENT PROPERTY ACQUISITIONS

BRAUNSCHWEIG, GERMANY

On 1 August 2018 the group acquired a retail park and a neighbourhood value centre, both located in Braunschweig, Germany for €25,000,000.

FLENSBURG SHOPPING CENTRE, GERMANY

On 14 January 2019 the group acquired a shopping centre located in Flensburg, Germany ("Flensburg") for €62,550,000.

INTEREST-BEARING BORROWINGS

Bank borrowings of €330,258,140 (2018: €220,488,013) are secured against investment property, refer to note 27. The group has designated bank borrowings drawn down in the year of €218,590,164 as general borrowings (2018: €104,067,925). During the year interest costs on general borrowings of €351,556 (2018: €569,031) (refer to note 27) have been capitalised and are included within land bank and inventory property, refer to the tables in this note and note 19 respectively.

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 or, where relevant, firm offers from market participants. External valuers have appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. For details of the respective valuers used refer to page 194.

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 the specific property. If the asset manager agrees with the methodological accuracy of the valuation, the valuation reports are then assessed to confirm the numerical and methodological accuracy. The reports are then reviewed, and approved by, the Portfolio Management Committee and the Investment Committee. Thereafter, a summary is reviewed by the Audit and Risk Committee prior to the approval of the annual financial statements.

FAIR VALUE HIERARCHY

The fair value measurement of the group's investment properties has been categorised as level 3 in the fair value hierarchy due to the significant unobservable inputs applied in the valuation technique used.

As at 30 June 2019Euro	Carrying amount	Fair value
		Level 1	Level 2	Level 3
Income-generating property	852,839,611	—	—	852,839,611
Land bank	19,222,812	—	—	19,222,812
	872,062,423	—	—	872,062,423
As at 30 June 2018Euro	Carrying amount	Fair value
		Level 1	Level 2	Level 3
Income-generating property	546,238,139	—	—	546,238,139
Land bank	32,974,206	—	—	32,974,206
	579,212,345	—	—	579,212,345

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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.

As at 30 June 2019

Investment property type	Valuation technique	Significant unobservable inputs	Inter-relation between key unobservable inputs and fair value measurement
Income-generating property	Discounted cash flows (DCF):
The valuation model considers the present value of net cash flows to be generated from the property, taking into account expected rental growth rates, void periods, occupancy rates, lease incentive costs such as rent-free periods and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location, tenant credit quality and lease terms.	• Risk adjusted discount rates
• Estimated rental value
• Net rental growth
• Reversionary discount rate	The estimated fair value would increase/(decrease) if:
• Expected market rental growth was higher/(lower)
• The estimated rental value was higher/(lower)
• The reversionary discount rate was lower/(higher)
• The risk adjusted discount rate was lower/(higher)
	Capitalisation rate:
The valuation model considers the value of the property based on actual location, size and quality of the property taking into account market data and the capitalisation rate of future income streams at the valuation date.	• Capitalisation rate
• Estimated rental value	The estimated fair value would increase/(decrease) if:
• The capitalisation rate was lower/(higher)
• The estimated market rent was higher/(lower)
	Residual method:
The valuation model considers the gross development value of the property based on an independent view of market values for the completed development less any costs to complete.	• Costs to complete
• Gross development value	The estimated fair value would increase/(decrease) if:
• The budgeted costs to complete was lower/(higher)
• The residential unit price was higher/(lower)
Land bank	Residual method:
The valuation model considers the gross development value of the property based on an independent view of market values for the completed development less any costs to complete.	• Costs to complete
• Gross development value	The estimated fair value would increase/(decrease) if:
• The budgeted costs to complete was lower/(higher)
• The residential unit price was higher/(lower)

CHANGE TO VALUATION METHOD USED

At 30 June 2018 the fair value of Uberior House was its purchase price as a result of the acquisition occurring close to the year end. At 30 June 2019, the group has obtained an independent valuation, and the valuation technique used was the capitalisation rate method. At 30 June 2018 the fair value of Land bank was valued at firm offers less costs to complete. At 30 June 2019 the group has obtained independent valuations, and the valuation technique used was the residual value method.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

INVESTMENT PROPERTY (CONTINUED)
MEASUREMENT OF FAIR VALUES(CONTINUED)
FAIR VALUE SENSITIVITY ANALYSIS
As at 30 June 2019
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
		-	-	-	-	-	-	-	-	-	-	-
DCF	€677,106,454	2.99%-11.75%	0.5%	€650,652,896	1.00%-2.00%	-2.5%	€724,264,415	5.00%-9.50%	0.5%	€655,624,580	€51,595,099	10%
			-0.5%	€712,126,793		-2.5%	€640,612,871		-0.5%	€701,482,632		-10%

Significant unobservable inputs

Technique	Valuation	Capitalisation rate			Estimated Rental Value
		Sensitivity			Sensitivity
		Input	Change	Valuation	Input p.a.	Change	Valuation
Capitalisation rate	€173,446,587	5.00%-6.37%	5%	€166,162,600	€11,447,756	5%	€186,464,690
			-5%	€192,262,840		-5%	€163,368,430

Significant unobservable inputs

Technique	Valuation	Gross Development Value			Costs to Complete
		Sensitivity			Sensitivity
		Input	Change	Valuation	Input p.a.	Change	Valuation
Residual method	€2,286,570	€2,412,658	5%	€2,382,266	€151,025	5%	€2,254,082
			-5%	€2,141,000		-5%	€2,269,184

LAND BANK

	Significant unobservable inputs
		Gross Development Value			Costs to Complete
		Sensitivity			Sensitivity
Technique	Valuation	Input	Change	Valuation	Input p.a.	Value
						Change	Valuation
Residual method	€19,222,812	€20,411,820	5%	€20,319,623	€1,189,007	5%	€19,163,458
			-5%	€18,200,363		-5%	€19,282,263

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

As at 30 June 2018

Investment property type	Valuation technique	Significant unobservable inputs
Income-generating property	Discounted cash flows:
The valuation model considers the present value of net cash flows to be generated from the property, taking into account expected rental growth rates, void periods, occupancy rates, lease incentive costs such as rent-free periods and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location, tenant credit quality and lease terms.	• Risk adjusted discount rates
• Estimated rental value
• Net rental growth
• Reversionary discount rate	The estimated fair value would increase/(decrease) if:
• Expected market rental growth was higher/(lower)
• The estimated rental value was higher/(lower)
• The reversionary discount rate was lower/(higher)
• The risk adjusted discount rate was lower/(higher)
	Purchase price:
The valuation model takes into account the recent acquisition price no earlier than three months before the reporting date, equivalent to the amount a third party would be willing to pay.	• Purchase price	The estimated fair value would increase/(decrease) if:
• The number of the interested parties was higher/(lower) and/or,
• the availability of comparable properties was lower/(higher), thus altering the acquisition price
Land bank	Firm offers less costs to complete:
Fair value is based on the amount a third party is willing to pay less any costs to complete.	• Firm offer
• Cost to complete	The estimated fair value would increase/(decrease) if:
• The number of the interested parties was higher/(lower) and/or
• the availability of comparable properties was lower/(higher), thus altering the offer price
• The budgeted costs to complete was lower/(higher)

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

INVESTMENT PROPERTY (CONTINUED)

MEASUREMENT OF FAIR VALUES (CONTINUED)

FAIR VALUE SENSITIVITY ANALYSIS

As at 30 June 2018

INCOME-GENERATING PROPERTY

	Discount rate			Net rental growth			Reversionary discount rate			Estimated rental value
		Sensitivity			Sensitivity			Sensitivity			Sensitivity
		Input	Change	Valuation	Input	Change	Valuation	Input	Change	Valuation	Input p.a.	Change	Valuation
DCF	€466,114,639	4.50%-11.75%	0.5%	€441,185,461	1%-2%	2.5%	€499,013,575	5.25%-9.50%	0.5%	€449,480,278	€34,178,897	10%	€492,645,582
			-0.5%	€489,817,223		-2.5%	€442,139,843		-0.5%	€519,673,413		-10%	€437,771,688
Technique	Valuation	Purchase price Sensitivity
---	---	---	---
		Input	Change Valuation
Purchase price	€80,123,499	€80,123,499	5% €84,129,674 €76,117,324

LAND BANK

	Firm offer			Costs to complete
		Sensitivity			Sensitivity
		Input	Change	Valuation	Input	Change	Valuation
Firm offers less costs to complete	€32,974,206	€38,094,775	5%	€34,878,944	(€5,120,569)	5%	€32,718,177
			-5%	€31,069,467		-5%	€33,230,234

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

18. INVESTMENT PROPERTY HELD FOR SALE

ACCOUNTING POLICY

Investment property is classified as held for sale if it is highly probable that the carrying amount of the property will be recovered primarily through its sale rather than through continuing use, and the following criteria are met:

Management intends to, and has a plan to, sell
The asset is available for immediate sale and an active programme to locate a buyer is initiated;
The sale is highly probable, within 12 months of classification as held for sale;
The asset is being actively marketed for a reasonable sale price in relation to its fair value; and
Actions required to complete the plan indicate that it is unlikely that the plan will be significantly changed or withdrawn.

The measurement requirements of IFRS 5 - 'Non-current Assets Held for Sale and Discontinued Operations', do not apply to investment property, as such investment property continues to be measured at fair value once transferred to investment property held for sale.

DISCLOSURE

Euro	As at 30 June 2019	As at 30 June 2018
United Kingdom - Land bank	21,519,919	11,060,400
United Kingdom - Income-generating	—	42,528,044
Germany - Income-generating	71,090,000	—
	92,609,919	53,588,444

RECONCILIATION OF THE GROUP'S INVESTMENT PROPERTY HELD FOR SALE:

Euro	Note	As at 30 June 2019	As at 30 June 2018
Opening balance		53,588,444	6,336,915
Transfer from investment property	17	85,869,050	51,328,757
Disposals		(49,256,991)	(7,353,427)
Capitalised expenditure1		1,975,342	1,149,597
Retention release		—	(275,000)
Fair value adjustment	11	958,055	2,766,206
Foreign currency translation difference		(523,981)	(364,604)
Closing balance		92,609,919	53,588,444

1 Of the €1,975,342 (2018: €1,149,597) capitalised expenditure incurred during the year the group paid €1,716,601 (2018: €1,149,597).

The group incurred capitalised expenditure of €1,975,342 (2018: €1,149,597) in order to maximise the capital value of the assets held for sale.

DISPOSALS

On 16 October 2018, the group disposed of the Premier Inn and Hub by Premier Inn and associated retail in Edinburgh, Scotland for £38,000,000 (approximately €41,783,812).

On 1 November 2018, the group disposed of a parcel of land which formed part of the New Waverley site in Edinburgh, Scotland for £6,700,000 (approximately €7,473,179).

INTEREST-BEARING BORROWINGS

Bank borrowings of €34,442,028 (2018: €22,225,094) are secured against investment property held for sale, refer to note 27.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

18. INVESTMENT PROPERTY HELD FOR SALE (CONTINUED)

MEASUREMENT OF FAIR VALUES

FAIR VALUE HIERARCHY

The fair value measurement of all the group's investment property held for sale has been categorised as level 3 in the fair value hierarchy based upon the significant unobservable inputs into the valuation technique used.

VALUATION TECHNIQUE AND SIGNIFICANT UNOBSERVABLE INPUTS

As at 30 June 2019

Investment property type	Valuation technique	Significant unobservable inputs	Inter-relation between key unobservable inputs and fair value measurement
Income-generating	Discounted cash flows:
The valuation model considers the present value of net cash flows to be generated from the property, taking into account expected rental growth rates, void periods, occupancy rates, lease incentive costs such as rent-free periods and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location, tenant credit quality and lease terms.	• Risk adjusted discount rates
• Estimated rental value
• Net rental growth
• Reversionary discount rate	The estimated fair value would increase/(decrease) if:
• Expected market rental growth was higher/(lower)
• The estimated rental value was higher/(lower)
• The reversionary discount rate was lower/(higher)
• The risk adjusted discount rate was lower/(higher)
Land bank	Residual method:
The valuation model considers the gross development value of the property based on an independent view of market values for the completed development less any costs to complete.	• Costs to complete
• Residential unit prices
• Valuation yields
• Funding yield	The estimated fair value would increase/(decrease) if:
• The budgeted costs to complete was lower/(higher) and/or,
• the residential unit price was higher/(lower)

CHANGE TO VALUATION METHOD USED

At 30 June 2018 the fair value of land bank investment property held for sale was determined using the firm offers less costs to sell valuation method. At 30 June 2019, given that the land bank assets had been held for sale for more than twelve months, the group decided to obtain an independent valuation and the valuation technique used was the residual value method.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Fair value sensitivity analysis
As at 30 June 2019

Significant unobservable inputs
Technique	Valuation	Discount rate			Net rental growth			Reversionary discount rate			Estimated rental value
		Input %	Sensitivity		Input %	Sensitivity		Input %	Sensitivity		Input p.a.	Sensitivity
			Change	Valuation		Change	Valuation		Change	Valuation		Change
DCF	€71,090,000	5.25%-6.20%	0.5%	€70,760,000	1.00%-2.00%	2.5%	€82,780,000	5.25%-7.25%	0.5%	€70,730,000	4,759,911	10.0%
			-0.5%	€76,760,000		-2.5%	€66,910,000		-0.5%	€78,430,000		-10.0%
Technique	Valuation	GDV			Cost to complete
---	---	---	---	---	---	---	---
		Input p.a.	Sensitivity		Input p.a.	Sensitivity
			Change	Valuation		Change	Valuation
Residual method	€21,519,919	€23,305,619	5%	€22,68911,9	€1,853,972	5%	€21,426,705
			-5%	€20,350,710		-5%	€21,613,123

Total €92,609,919

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

18. INVESTMENT PROPERTY HELD FOR SALE (CONTINUED)

MEASUREMENT OF FAIR VALUES (CONTINUED)

As at 30 June 2018

Investment property type	Valuation technique	Significant unobservable inputs	Inter-relation between key unobservable inputs and fair value measurement
Land bank	Firm offers less costs to complete: Fair value is based on the amount a third party is willing to pay less any costs to complete.	• Firm offer
• Cost to complete	The estimated fair value would increase/(decrease) if:
• Expected market rental growth was higher/(lower)
• The estimated rental value was higher/(lower)
• The reversionary discount rate was lower/(higher)
• The risk adjusted discount rate was lower/(higher)
Income-generating	Firm offers: The valuation model takes into account the amount a third party is willing to pay.	• Firm offer	The estimated fair value would increase/(decrease) if:
• The budgeted costs to complete was lower/(higher) and/or,
• the residential unit price was higher/(lower)

FAIR VALUE SENSITIVITY ANALYSIS

As at 30 June 2018

Technique	Valuation	Significant unobservable inputs
		Firm offer
		Sensitivity
		Input	Change	Valuation
Firm offers	€42,528,044	€42,528,044	5%	€44,654,446
			-5%	€40,401,642
Significant unobservable inputs
---	---	---	---	---
Technique	Valuation	Firm offers
		Sensitivity
		Input p.a.	Change	Valuation
Firm offers less costs to complete	€11,060,400	€13,688,705	5%	€11,744,836
			-5%	€10,375,965

Total €53,588,444

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

19. INVENTORY PROPERTY

ACCOUNTING POLICY

Inventory property is measured at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs to make the sale. The cost of inventory comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to its present location and condition.

DISCLOSURE

Euro	Note	As at
		30 June 2019	30 June 2018
Opening balance		1,293,501	—
Development expenditure¹		34,937,271	21,918,133
Disposals (recognised in cost of sales of inventory property)	6	(31,013,909)	(21,704,016)
Transfer from investment property	17	—	1,078,030
General borrowings capitalised	27	68,113	1,354
Foreign currency translation reserve		(15,016)	—
Closing balance		5,269,960	1,293,501

¹ Of the €34,937,271 (2018: €21,918,133) development expenditure incurred during the year the group paid €37,990,366 (2018: €17,676,966) of which €3,053,095 (2018: €4,241,167) relates to construction payables at 30 June 2018 paid in the year ended 30 June 2019.

The group's inventory property at 30 June 2019 of €5,269,960 (2018: €1,293,501) relates to the construction of a Travelodge hotel at Langley. The group will recognise a disposal on completion of the hotel, which is the point at which control is transferred.

During the year inventory property of €31,013,909 (2018: €21,704,016) was disposed of and relates to the office component of the New Waverley development in Edinburgh. Control of the office component of the New Waverley development is passed over during the period up to practical completion. Practical completion was achieved on 21 May 2019.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

20. FINANCIAL INVESTMENTS

ACCOUNTING POLICY

Refer to note 4 for the group's general accounting policy for financial instruments. Refer to note 22 for the group's accounting policy on cash.

DISCLOSURE

Financial investments other than cash have been classified as fair value through profit or loss. Accordingly, they are measured at fair value at the reporting date with changes in fair value recognised in profit or loss.

Euro	As at 30 June 2019	As at 30 June 2018
Non-current
Direct financial investments	—	183,052,263
	—	183,052,263
Current
Direct financial investments	41,848,801	—
CFD collateral	45,965,209	—
	87,814,010	—

The group's portfolio of listed real estate equity securities is used to manage liquidity, whilst generating a return on euro deposits awaiting investment, including to fund commitments to PKM Developments. In the prior year the portfolio of listed real estate equity securities were longer term strategic positions, and accordingly, were considered non-current.

During the current year, some of the direct financial investments were converted into Contracts for Difference ("CFDs") held with a large investment banking company. The CFDs require the group to maintain a minimum of 40% collateral on all CFD positions. On conversion the group received cash, referred to as the 'on acquisition funding leg', equal to the difference between the initial collateral amount and the initial notional gross exposure of the CFD. The funding leg, including subsequent variable exposure movements, is recognised as an off balance item.

Variable exposure movements in the market value of the gross CFD positions result in the group receiving or paying funds on a daily basis. Any dividends received on the CFD positions are paid directly to the group, net of tax, refer to note 9. The full notional exposure for all positions, including CFDs, are disclosed below.

	As at 30 June 2019
	Share price (Euro)	Number of shares	Fair value direct investments (Euro)	CFD collateral (Euro)	Funding leg On acquisition (Euro)	Variable exposure movement (Euro)	Gross exposure (Euro)
Direct financial investments
Eurocommercial Properties NV	23.50	193,051	4,536,699	—	—	—	4,536,699
British Land Company PLC	6.01	1,625,000	9,758,519	—	—	—	9,758,519
Land Securities Group PLC	9.29	1,115,000	10,362,144	—	—	—	10,362,144
Empiric Student Property PLC	1.01	2,685,000	2,719,291	—	—	—	2,719,291
Primary Health Properties PLC	1.49	1,450,000	2,157,493	—	—	—	2,157,493
The PRS REIT PLC	1.05	750,000	786,348	—	—	—	786,348
Real Estate Credit Investments Ltd	1.90	1,582,760	3,009,989	—	—	—	3,009,989
Target Healthcare REIT Ltd	1.29	600,000	773,631	—	—	—	773,631
Tritax Big Box REIT PLC	1.72	4,500,000	7,744,687	—	—	—	7,744,687
			41,848,801	—	—	—	41,848,801
Contracts for difference
Cofinimmo CMN	114.20	64,241	—	3,058,042	4,587,064	(308,784)	7,336,322
Intervest offices & warehouses CMN	24.70	131,641	—	1,312,885	1,969,328	(30,680)	3,251,533
Klepierre	29.48	1,626,364	—	20,393,457	30,590,185	(3,038,431)	47,945,211
Mercialys	11.61	772,934	—	4,033,438	6,050,158	(1,109,832)	8,973,764
Unibail-Rodamco	131.75	264,618	—	15,850,903	23,776,355	(4,763,836)	34,863,422
The PRS REIT PLC	1.05	3,000,000	—	1,316,484	1,974,256	(137,568)	3,153,172
			—	45,965,209	68,947,346	(9,389,131)	105,523,424
Total financial investments			41,848,801	45,965,209	68,947,346	(9,389,131)	147,372,225

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Direct financial investments	As at 30 June 2018
	Share price (Euro)	Number of shares	Fair value (Euro)
Eurocommercial Properties NV	36.36	497,333	18,083,028
Unibail - Rodamco Westfield SE	188.55	264,618	49,893,724
British Land Company PLC	7.60	1,625,000	12,350,045
Covivio SA	89.10	150,300	13,391,730
Hufvudstaden AB	12.28	1,083,000	13,295,975
Klepierre SA	32.25	1,626,364	52,450,239
Land Securities Group PLC	10.82	1,115,000	12,063,076
Mercialys SA	14.91	772,934	11,524,446
Total direct financial investments			183,052,263

RECONCILIATION OF FINANCIAL INVESTMENTS AT FAIR VALUE

Euro	Note	Direct financial investments	CFD collateral	CFD gross exposure
As at 30 June 2017		—	—	—
Purchases		199,557,215²	—	—
Fair value adjustment	11	(16,504,952)¹	—	—
As at 30 June 2018		183,052,263	—	—
Purchases		16,729,049²	—	14,259,065¹
Disposals		(20,794,463)²	—	(16,267,129)¹
Transfer to CFD		(116,089,335)²	—	116,089,335¹
CFD collateral in relation to purchases		—	52,406,643²	—
CFD collateral in relation to disposals		—	(6,201,159)²	—
Fair value adjustments	11	(21,048,713)¹	(240,275)¹	(8,557,847)²
As at 30 June 2019		41,848,801	45,965,209	105,523,424

¹ Non cash flow movements
² Cash flow movements

DIRECT FINANCIAL INVESTMENTS

Fair value adjustments in relation to direct financial investments represent the full fair value movement of the direct financial investment portfolio, including fair value movements on purchases and disposals during the year.

CFD COLLATERAL

The majority of the CFD collateral is required to be held in the form of German government bonds with a maturity of 1 year or less, with the remainder of CFD collateral held as cash. German bonds are carried at fair value through profit or loss. They have a maturity of 13 March 2020 and par value of €41,200,000. The total cost of the bonds purchased during the year was €41,430,636. The CFD collateral held as cash is carried at amortised cost.

Euro	Held as German bonds	Held as cash	Total
As at 30 June 2018	—	—	—
Purchase price of 1 year German bonds	41,430,636	—	41,430,636
Transfer of cash to collateral account	—	4,774,848	4,774,848
Fair value adjustment	(240,275)	—	(240,275)
As at 30 June 2019	41,190,361	4,774,848	45,965,209

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

20. FINANCIAL INVESTMENTS (CONTINUED)

ACCOUNTING POLICY (CONTINUED)

CFD GROSS EXPOSURE

The CFD collateral relates to the off-balance sheet gross exposure to the CFD portfolio. All fair value movements are settled in cash on a daily basis, via the collateral deposit.

During the year gross dividend income of €3,812,126 (2018: €8,423,423) was recognised from direct financial assets and €2,877,952 (2018: €Nil) was recognised from the CFD portfolio as other income, refer to note 9.

The financial instrument and fair value disclosures are in note 35

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 2019		Fair value
Euro	Carrying amount	Level 1	Level 2	Level 3
Listed real estate equity securities	41,848,801	41,848,801	—	—
CFD collateral	41,190,361	41,190,361	—	—
	83,039,162	83,039,162	—	—
As at 30 June 2018		Fair value
Euro	Carrying amount	Level 1	Level 2	Level 3
Listed real estate equity securities	183,052,263	183,052,263	—	—
	183,052,263	183,052,263	—	—

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

21. INVESTMENT IN EQUITY-ACCOUNTED INVESTEES

ACCOUNTING POLICY

Equity accounted investees comprise investments in associates. Associates are entities in which the group has significant influence, which 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 entities.

Interests in associates are initially recognised at cost including transaction costs. Subsequently, they are accounted for using the equity method. 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. Distributions received from the associates reduce the carrying amount of the investment.

The group's share of interest charged by the group to the associate and capitalised against qualifying assets that are carried at cost (i.e not subsequently measured at fair value) in the equity accounted investee is eliminated by deducting it from its share of earnings in the equity accounted investee.

Unrealised losses on transactions 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

Euro		As at 30 June 2019	As at 30 June 2018
PKM Developments		21,888,261	23,774,222
RECONCILIATION OF INVESTMENTS IN EQUITY-ACCOUNTED INVESTEES
Euro	Note	As at 30 June 2019	As at 30 June 2018
Opening balance		23,774,222	20,205,297
Share of profit, net of tax	22,38	11,009,325	3,568,925
Distribution	32,38	(12,895,286)	—
Closing balance		21,888,261	23,774,222

The group has an investment in PKM Developments Limited, a development property group which develops investment property predominantly in Romania, as well as other central and eastern European countries. PKM Developments is an associate of the group, of which MAS owns 40% of the ordinary shares and therefore has significant influence. The remaining 60% of the ordinary shares is owned by Prime Kapital Holdings Limited ("Prime Kapital"), who is the developer. PKM Developments Limited is incorporated in the Isle of Man.

The distribution received was offset against the consideration paid for the acquisition of the portfolio of shopping centres in Romania, refer to note 32.

In addition to the investment in the ordinary shares, MAS has invested in 7.5% preference shares issued by PKM Developments, refer to note 28. At year end the amount invested was €170,000,000 (2018: €100,000,000). The preference shares issued by PKM Developments are not considered to be part of the long-term interest that the group has in PKM Developments.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

21. INVESTMENT IN EQUITY-ACCOUNTED INVESTEES (CONTINUED)

DISCLOSURE (CONTINUED)

The following table summarises the financial information of PKM Developments as included in its own audited financial statements which are prepared in accordance with IFRS:

Euro	As at 30 June 2019	As at 30 June 2018
Statement of financial position – PKM Developments
Non-current assets	212,433,897	138,511,061
Current assets	30,657,752	41,864,316
Total assets	243,091,649	180,375,377
Non-current liabilities	178,035,470	109,468,016
Current liabilities	8,444,114	9,311,602
Total liabilities	186,479,584	118,779,618
Net assets	56,612,065	61,595,759
Percentage ownership interest	40%	40%
Unadjusted group share of net assets	22,644,826	24,638,304
Elimination of preference share interest capitalised on qualifying assets carried at cost	(815,373)	(922,890)
Net assets attributable to the group	21,829,453	23,715,414
Capitalised costs	58,808	58,808
Carrying amount	21,888,261	23,774,222
Euro	Year ended 30 June 2019	Year ended 30 June 2018
---	---	---
Statement of profit or loss and other comprehensive income – PKM Developments
Rental income	5,518,492	2,468,271
Service charge income and other recoveries	2,957,429	1,247,193
Service charge and other property operating expenses	(3,120,179)	(1,457,244)
Other income	162,163	2,128
Corporate expenses	(462,408)	(719,216)
Investment expenses	(633,630)	(2,601,061)
Fair value adjustments	29,253,483	16,372,691
Foreign currency exchange differences	(188,159)	(31,399)
Finance income	1,305,205	144,260
Finance costs	(2,863,633)	(36,808)
Tax expense	(4,674,241)	(4,159,274)
Total profit after tax	27,254,522	11,229,541
Percentage ownership interest	40%	40%
Total profit and other comprehensive income attributable to the group	10,901,809	4,491,816
Elimination of preference share interest capitalised on qualifying assets carried at cost	107,516	(922,891)
Group’s share of profit after tax	11,009,325	3,568,925

PKM Developments has no other comprehensive income.

PKM Developments is subject to litigation brought by an unpaid lender which was acquired as part of a business combination. The payable was recognised at fair value at acquisition and has a carrying amount of €700,000 at 30 June 2019. The lender is currently under liquidation and is seeking full repayment of €3,500,000 principal as well as the related accrued interest. As at the date of this report legal proceedings are underway, however, it is considered unlikely that the cash outflow will exceed the €700,000 already provided because this amount has been formally agreed with all the lender's creditors as part of its liquidation process.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

22. CASH AND CASH EQUIVALENTS

ACCOUNTING POLICY

The group's cash and cash equivalents are financial instruments and are classified as financial assets at amortised cost. Refer to note 4 for the group's general accounting policy for financial instruments.

DISCLOSURE

Euro		As at 30 June 2019	As at 30 June 2018
Bank balances		71,155,130	147,825,624
The financial instrument and fair value disclosures are in notes 34 and 35.
Reconciliation of cash generated from operating activities:
Euro	Note	Year ended 30 June 2019	Year ended 30 June 2018
Profit for the year		61,878,374	19,333,422
Adjustments for:
Depreciation	12	101,341	100,026
Investment expenses		3,210,128	—
Share-based payment expense		75,464	805,766
Fair value adjustments	11	7,631,570	15,800,127
Foreign currency exchange differences	13	364,553	1,020,787
Finance income	14	(12,057,819)	(7,975,558)
Finance costs	14	10,251,058	5,560,344
Share of profit from equity accounted investees	21	(11,009,325)	(3,568,925)
Goodwill impairment	16	—	1,274,346
Gain on bargain purchase	32	(12,263,193)	—
Tax expense	15	13,373,640	6,867,387
Profit on sales of inventory property	6	(8,150,796)	(4,316,924)
Cash generated from operating activities		53,404,995	34,900,798

Included within cash from operations is cash received from dividend income from direct financial investments and from CFDs of €3,812,126 (2018: €8,423,423) and €2,877,952 (2018: €nil) respectively, refer to note 9.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

23. SHARE CAPITAL AND GEARED SHARE PURCHASE PLAN SHARES (TREASURY 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.

The group's policy is to maintain a strong capital base to allow sustainable growth in the development of the group.

GEARED SHARE PURCHASE PLAN SHARES (TREASURY SHARES)

Geared share 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 tax effects. When geared share purchase plan shares are sold or issued subsequently, the amount received or paid is recognised within equity and the resulting surplus or deficit on the transaction is recognised within share capital. Where share purchase plan shares are forfeited by participants the shares are cancelled.

DISCLOSURE

The ordinary share capital of the company has no par value. The reconciliation of share capital is as follows:

	Share capital		Geared share purchase plan shares (treasury shares)		Total
	Number of Shares	Euro	Number of shares	Euro	Number of Shares	Euro
Balance at 30 June 2017	480,216,299	557,556,273	(12,850,000)	(21,056,010)	467,366,299	536,500,263
Issued during the year
- Issue of share capital	160,299,409	279,917,834	—	—	160,299,409	279,917,834
- Distributions reinvested	9,828,090	15,918,376	—	—	9,828,090	15,918,376
- Geared share purchase plan shares forfeited and cancelled	(5,000,000)	(8,193,000)	5,000,000	8,193,000	—	—
	645,343,798	845,199,483	(7,850,000)	(12,863,010)	637,493,798	832,336,473
Distributed during the year
- Scrip distributions	—	(15,949,084)	—	—	—	(15,949,084)
Balance at 30 June 2018	645,343,798	829,250,399	(7,850,000)	(12,863,010)	637,493,798	816,387,389
Issued during the year
- Geared share purchase plan shares issued	1,531,127	1,990,465	(1,531,127)	(1,990,465)	—	—
- Geared share purchase plan shares forfeited and cancelled	(4,000,000)	(6,554,400)	4,000,000	6,554,400	—	—
Balance at 30 June 2019	642,874,925	824,686,464	(5,381,127)	(8,299,075)	637,493,798	816,387,389

SHARE CAPITAL

There were no capital raises during the year. In the prior year the group issued 160,299,409 shares generating €279,917,834.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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 or as a return of capital in accordance with the BVI Business Companies Act 2004.

The following distributions were paid by the group:

Year ended 30 June 2019

Euro	Scrip	Cash	Total	Distribution per share (euro cents)
2 October 2018	—	25,691,000	25,691,000	4.03
2 April 2019	—	24,097,266	24,097,266	3.78
	—	49,788,266	49,788,266

Year ended 30 June 2018

Euro	Scrip	Cash	Total	Distribution per share (euro cents)
11 November 2017	10,424,724	6,957,823	17,382,547	3.19
6 April 2018	5,524,360	17,169,809	22,694,169	3.58
	15,949,084	24,127,632	40,076,716

The directors are pleased to propose a final distribution to shareholders of 4.97 euro cents per share (2018: 4.03 euro cents per share).

GEARED SHARE PURCHASE PLAN SHARES (TREASURY SHARES)

Malcolm Levy transitioned to the role of non-executive director with effect from 26 June 2019. This necessitated his exit from the geared share purchase plan, refer to note 33, which occurred on the same date. All 4,000,000 geared shared purchase plan (treasury) shares that related to Malcolm were forfeited and cancelled upon his exit from the scheme.

On 25 June 2019 Werner Behrens, CEO and Paul Osbourn, CFO were invited to join the MAS Share Purchase Scheme and the group subsequently issued 1,531,127 shares at an issue price of €1.30 (ZAR 21.08), refer to note 33

In the prior year, 5,000,000 shares held in the share purchase plan were forfeited and cancelled by the group refer to note 33.

Distributions on the geared share purchase plan shares are referred to in note 24.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

24. SHARE-BASED PAYMENT RESERVE

ACCOUNTING POLICY

Refer to note 33 for the accounting policy for share-based payment arrangements.

DISCLOSURE

RECONCILIATION OF GEARED SHARE PURCHASE PLAN

Euro	Note	As at 30 June 2019	As at 30 June 2018
Opening balance		1,031,739	225,973
Shared-based payment expense	22,33	75,464	902,386
Recognised during the year		539,234	902,386
Recycled during the year – forfeited shares		(463,770)	—
Non-forfeitable distribution paid		(131,839)	(96,620)
Closing balance		975,364	1,031,739

SHARE BASED PAYMENT ARRANGEMENTS

On 26 June 2019, Malcolm Levy's shares in the geared share purchase plan were forfeited and cancelled upon his exit from the scheme, refer to note 23, accordingly €463,770 which relates to unvested shares was recycled to profit or loss within employment expense.

Refer to note 38 for further disclosures of the share-based payment expense included in key management compensation and directors' remuneration.

25. FOREIGN CURRENCY TRANSLATION RESERVE

ACCOUNTING POLICY

Refer to note 13 for the accounting policy for foreign currency translation reserve.

DISCLOSURE

The group recognised a foreign currency translation loss arising from foreign operations of €1,338,770 (2018: €1,207,816 loss) resulting in a foreign currency translation reserve deficit at the reporting date of €13,106,889 (2018: €11,768,119 deficit).

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

26. NON-CONTROLLING INTEREST

ACCOUNTING POLICY

The group recognises the non-controlling interests in the net assets of consolidated subsidiaries separately from the group's interest, within equity. Profits or 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.

DISCLOSURE

Euro	As at 30 June 2019	As at 30 June 2018
Opening balance	2,527,202	988,063
Share of profit	6,842,577	2,477,116
Distribution to NCI	(1,930,777)	(937,977)
Closing balance	7,439,002	2,527,202

The non-controlling interest relates to the participation by Prime Kapital in PKM Investments Limited, the co-investment venture entered into with the group. This co-investment venture is registered in the Isle of Man and focuses on investing in income-generating properties in CEE. Under the terms of the co-investment agreement, Prime Kapital's effective economic interest is equivalent to a 20% direct participation in the co-investment venture, less the interest cost on the participation funding that is provided by MAS. The effective interest rate on this participation funding is equivalent to the weighted average cost of external funding achieved by the co-investment venture of 3.24% (2018: 3.51%). During the year Prime Kapital received a dividend of €1,930,777 (2018: €937,977) in relation to its participation in the co-investment venture.

The following tables summarise the financial information of the co-investment venture:

Reconciliation of profit or loss to NCI

Euro	Year ended 30 June 2019	Year ended 30 June 2018
Statement of profit or loss and other comprehensive income
Rental income	27,948,626	14,039,515
Net service charge and property expense	(1,572,533)	(1,495,154)
Corporate expenses	(891,908)	(690,381)
Finance costs	(13,186,009)	(9,133,938)
Finance income	212,190	1,778
Other income	557,044	145,136
Investment expenses	(1,710,778)	(1,060,257)
Exchange differences	—	(1,785)
Fair value adjustments	28,939,197	9,061,080
Tax expense	(8,256,306)	(2,008,472)
Total profit	32,039,523	8,857,522
Elimination of intercompany transactions	8,940,666	7,274,874
Total adjusted profit	40,980,189	16,132,396
Percentage ownership interest	20%	20%
Total profit and other comprehensive income attributable to NCI	8,196,038	3,226,479
Elimination of interest cost on participation loan	(1,353,461)	(749,363)
NCI's share of profit	6,842,577	2,477,116

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

26. NON-CONTROLLING INTEREST (CONTINUED)

ACCOUNTING POLICY (CONTINUED)

RECONCILIATION OF NET ASSETS TO NCI;

Euro	As at 30 June 2019	As at 30 June 2018
Statement of financial position
Investment property	437,690,000	166,000,000
Non-current assets	8,020,463	255,155
Cash and cash equivalents	13,828,060	10,664,140
Other current assets	13,339,316	3,635,366
Total assets	472,877,839	180,554,661
Non-current liabilities	406,925,458	169,187,857
Current liabilities	28,874,912	6,328,858
Total liabilities	435,800,370	175,516,715
Net assets	37,077,469	5,037,946
Elimination of intercompany transactions to date	27,646,707	18,706,041
Closing adjusted net assets	64,724,176	23,743,987
Percentage ownership interest	20%	20%
Total adjusted net assets attributable to NCI	12,944,835	4,748,797
Elimination of interest cost on participation loan to date	(2,637,079)	(1,283,618)
Distribution paid to date	(2,868,754)	(937,977)
NCI's share of net assets	7,439,002	2,527,202

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

27. 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 4 for the group's general accounting policy for financial instruments.

DISCLOSURE

The carrying amount of the group's interest-bearing borrowings was as follows:

Euro	Note	As at 30 June 2019	As at 30 June 2018
Non-current
Bank borrowings		312,754,576	214,407,455
		312,754,576	214,407,455
Current
Bank borrowings		51,945,592	28,305,652
Amounts owed to PKM Developments	38	91,761,152	—
		143,706,744	28,305,652
		456,461,320	242,713,107

The amount owed to PKM Developments of €91,761,152 (2018: €nil) relates to the interest-bearing deferred consideration on the portfolio of shopping centres in Romania that was acquired from PKM Developments, refer to note 32. The interest-bearing deferred consideration accrues interest at 3.81% and is payable on demand, it is expected that PKM Developments will require payment before the end of the 2019 calendar year. Since the acquisition, interest expense of €1,244,271 (2018: €nil) has been recognised on the interest-bearing deferred consideration, and €2,797,955 has been repaid to PKM Developments, refer note 38. The amounts owed to PKM Developments are guaranteed by the Company and are secured against the PKM Developments preference shares and the shares of the property owning SPVs that were acquired in the transaction.

Included within bank borrowing is €34,442,028 (2018: €22,225,094) of debt which is secured against investment property held for sale with a value of €71,090,000 (2018: €42,528,444), refer to note 18. The remaining bank borrowings of €330,258,140 (2018: €220,488,013) are secured against income generating investment property with a value of €655,451,788 (2018:€278,470,100), refer to note 17.

The carrying amount of the group's bank borrowings relating to specific properties was as follows:

Euro	As at 30 June 2019	As at 30 June 2018
Non-current
German investment property	141,391,749	108,187,711
CEE investment properties	104,281,451	48,358,450
UK investment property	59,920,150	50,650,037
Swiss investment property	7,161,226	7,211,257
	312,754,576	214,407,455
Current
German investment property	38,235,125	2,707,840
CEE investment properties	5,136,922	1,988,212
UK investment property	8,222,350	23,272,484
Swiss investment property	351,195	337,116
	51,945,592	28,305,652
	364,700,168	242,713,107

The financial instrument and fair value disclosures are in notes 34 and 35.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

27. INTEREST-BEARING BORROWINGS (CONTINUED)

ACCOUNTING POLICY (CONTINUED)

RECONCILIATION OF THE GROUP'S CARRYING AMOUNT OF INTEREST-BEARING BORROWINGS:

Euro	Note	As at 30 June 2019	As at 30 June 2018
Opening balance		242,713,107	147,213,397
Changes from financing cash flows
Proceeds from interest-bearing borrowings		218,590,164	104,067,925
Transaction costs related to interest-bearing borrowings		(2,534,979)	(1,431,560)
Repayment of interest-bearing borrowings		(109,537,321)	(7,350,266)
Interest paid		(8,226,934)	(4,435,102)
Non cash flow movements
Borrowings acquired through business combinations	32	12,842,369	—
Interest-bearing deferred consideration	32	93,314,836	—
Finance costs		9,818,203	5,341,556
Finance costs – expense	14	9,398,534	4,771,171
Finance costs – general borrowings capitalised	17,19	419,669	570,385
Foreign currency translation difference		(518,125)	(692,843)
Closing balance		456,461,320	242,713,107

The gross interest-bearing deferred consideration drawn down was €109,140,787 (refer to note 32) which was offset against distributions received from PKM Developments on the preference shares of €2,930,665 (refer to note 28) and distributions received on ordinary shares of €12,895,286 (refer to note 21).

Interest from general borrowings of €419,669 (2018: €570,385) was capitalised during the year at a capitalisation rate of 2.64% (2018: 2.60%).

FIXED AND VARIABLE DEBT

The group is subject to both fixed and variable interest rates on its interest-bearing borrowings:

Euro	As at 30 June 2019	As at 30 June 2018
Fixed/hedged debt	418,842,626	199,289,452
Floating rate debt	37,618,694	43,423,655
	456,461,320	242,713,107

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

SUMMARY OF BORROWING TERMS AND COVENANTS

As at 30 June 2019

BORROWING TERMS

Jurisdiction	Currency	Weighted average remaining term of debt	Weighted average interest rate	Significant terms and conditions
CEE
- Owed to PKM Developments	EUR	On demand	3.81%	- Owed to PKM Developments in respect of portfolio acquired, refer to note 32
UK
- Floating/hedged debt	GBP	3.20 years	1.64 % + 3M UK Libor¹
German
- Fixed debt	EUR	5.46 years	1.97 %	- All loans were utilised to purchase properties or to invest in shares of property owning entities
Swiss
- Hedged debt	CHF	6.00 years	1.29 % + 3M Swiss Libor¹	- Some loans have covenants as reported below
CEE
- Fixed debt	EUR	12.50 years	3.50 %	- All loans are secured against specific properties
CEE
- Floating/hedged debt	EUR	17.52 years	2.50 % + 1M Euro Libor¹
CEE
- Hedged debt	EUR	3.00 years	2.50 % + 12M Euro Libor¹

¹ The group has entered into interest rate swaps to hedge some of the group's exposure to the applicable Libor, refer to note 28 and 29 for further information. The group has not applied hedge accounting.

COVENANTS

Jurisdiction	Weighted average debt service cover ratio	Weighted average interest cover	Weighted average loan to value
UK investment property
- UK floating/hedged debt	n/a	240%	66%
German investment property
- German fixed debt	98%	n/a	52%
Swiss investment property
- Swiss hedged debt	n/a	n/a	n/a
CEE investment property
- CEE fixed debt	120%	n/a	65%
- CEE floating/hedged debt	120%	n/a	63%

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

27. INTEREST-BEARING BORROWINGS (CONTINUED)

ACCOUNTING POLICY (CONTINUED)

As at 30 June 2018

BORROWING TERMS

Jurisdiction	Currency	Weighted average remaining term of debt	Weighted average interest rate	Significant terms and conditions
UK
- Floating/hedged debt	GBP	3.44 years	1.70% + 3M UK Libor²	- All loans were utilised to purchase properties or to invest in shares of property owning entities
German
- Fixed debt	EUR	7.09 years	1.87%	- Some loans have covenants as reported below
Swiss
- Hedged debt	CHF	7.00 years	1.29% + 3M Swiss Libor²	- All loans are secured against specific properties
CEE
- Hedged debt	EUR	6.58 years	2.50% + 12M Euro Libor²

² The group has entered into interest rate swaps to hedge some of the group's exposure to the applicable Libor, refer to note 28 and 29 for further information.

COVENANTS

Jurisdiction	Weighted average debt service cover ratio	Weighted average interest cover	Weighted average loan to value
UK investment property
- UK floating/hedged debt	n/a	222%	68%
German investment property
- German fixed debt	140%	n/a	73%
Swiss investment property
- Swiss hedged debt	n/a	n/a	n/a
CEE investment property
- CEE hedged debt	120%	n/a	65%

The group has complied with its loan covenants during the current and prior reporting periods.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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28. FINANCIAL ASSETS

ACCOUNTING POLICY

The group's financial assets are classified as financial assets at amortised cost and financial assets at fair value through profit or loss. Refer to note 4 for the group's general accounting policy for financial instruments.

DISCLOSURE

Euro	Note	As at 30 June 2019	As at 30 June 2018
Non-current assets
PKM Developments preference shares		174,128,273	105,045,768
Interest rate swaps		775,179	349,224
		174,903,452	105,394,992
Current assets
Capital contribution receivable	29	11,593,528	24,507,316
		11,593,528	24,507,316
		186,496,980	129,902,308

PKM DEVELOPMENTS PREFERENCE SHARES

The group has invested €170,000,000 (2018: €100,000,000) to acquire 170,000,000 (2018: 100,000,000) 7.5% preference shares in PKM Developments. The preference shares are held at amortised cost. Accordingly, the group has performed an impairment assessment and considers that there has not been a significant increase in credit risk in relation to PKM Developments, and that the expected credit loss is €nil (2018: €nil).

Distributions received on the preference shares of €2,930,665 have been offset against the consideration for the acquisition of the Shopping Centre Portfolio in Romania, refer to note 32.

CAPITAL CONTRIBUTION

A financial asset and corresponding financial liability have been recognised in respect of the capital contribution due from Legal & General, and due to the UK Government, under the terms of the Pre-Let Agreement. Both the financial asset and financial liability are held at amortised cost, refer to note 34. The expected credit loss allowance is €nil (2018: €nil).

INTEREST RATE SWAP

The group has entered into additional interest rate swaps during the current year. Interest rate swaps are held at fair value, with any changes in fair value recognised in profit or loss in the period in which it occurs.

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

28. FINANCIAL ASSETS (CONTINUED)

DISCLOSURE (CONTINUED)

RECONCILIATION OF THE GROUP'S FINANCIAL ASSETS HELD AT AMORTISED COST:

Euro	PKM Developments preference shares	Capital contribution	Total
Balance at 30 June 2017	101,134,245	—	101,134,245
Capital contribution	—	24,052,119	24,052,119
Finance income	7,514,384	—	7,514,384
Distribution received	(3,602,861)	—	(3,602,861)
Finance income – amortisation of capital contribution	—	456,951	456,951
Foreign currency translation reserve	—	(1,754)	(1,754)
Balance at 30 June 2018	105,045,768	24,507,316	129,553,084
Drawdown of preference shares	70,000,000	—	70,000,000
Finance income	11,194,662		11,194,662
Distribution received	(12,112,157)	—	(12,112,157)
Cash	(9,181,492)	—	(9,181,492)
Non-cash	(2,930,665)	—	(2,930,665)
Finance income – amortisation of capital contribution	—	603,431	603,431
Amounts invoiced and received¹	—	(13,228,958)	(13,228,958)
Foreign currency translation reserve	—	(288,261)	(288,261)
Balance at 30 June 2019	174,128,273	11,593,528	185,721,801

¹ Amounts invoiced and received of €13,228,958 (2018: €nil) in relation to the capital contribution have been offset against amounts invoiced and paid of €13,228,958 (2018: €nil) in relation to the capital contribution payable, refer to note 29.

RECONCILIATION OF THE GROUP'S FINANCIAL ASSETS HELD AT FVTPL:

Euro	Note	Interest rate swaps
Balance at 30 June 2017		—
Fair value adjustment	11	350,585
Foreign currency exchange difference in OCI		(1,361)
Balance at 30 June 2018		349,224
Fair value adjustment	11	432,554
Foreign currency exchange difference in OCI		(6,599)
Balance at 30 June 2019		775,179

Interest rate swaps are level 2 in the fair value hierarchy.

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 2019 and 30 June 2018

Financial instrument	Valuation technique	Inputs
Interest rate swaps	The fair value is based on discounting future cash flows using the interest rate swap curves plus the current credit margin at the valuation date.	• 3-month GBP Libor
• Swap rate
• Notional loan value
• Fixed rate of interest	The estimated fair value would increase/ (decrease) if:
• 3-month GBP libor was higher/ (lower)
• Swap rate was lower/ (higher)

The financial instrument and fair value disclosures are in notes 34 and 35.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

29. FINANCIAL LIABILITIES

ACCOUNTING POLICY

The group's financial liabilities are classified as financial liabilities at amortised cost and financial liabilities at fair value through profit or loss. Refer to note 4 for the group's general accounting policy for financial instruments.

DISCLOSURE

Euro	Note	As at 30 June 2019	As at 30 June 2018
Non-current liabilities
Interest rate swaps		2,735,096	1,222,944
Deferred consideration		—	473,061
		2,735,096	1,696,005
Current liabilities
Capital contribution payable	28	11,593,528	24,507,316
Priority participating profit dividend		3,429,519	6,912,756
Development management fee		2,286,346	4,701,505
		17,309,393	36,121,577
		20,044,489	37,817,582

FINANCIAL LIABILITIES AT AMORTISED COST

RECONCILIATION OF THE GROUP'S FINANCIAL LIABILITIES HELD AT AMORTISED COST:

Euro	Note	Deferred consideration	Capital contribution
Balance at 30 June 2017		500,000	—
Purchase price released		(500,000)	—
Purchase price retained		473,061
Capital contribution	28	—	24,052,119
Finance cost – amortisation of capital contribution	14	—	456,951
Foreign currency exchange difference in OCI		—	(1,754)
Balance at 30 June 2018		473,061	24,507,316
Purchase price released		(473,061)	—
Finance cost – amortisation of capital contribution	14	—	603,431
Amounts invoiced and paid¹		—	(13,228,958)
Foreign currency exchange difference in OCI		—	(288,261)
Balance at 30 June 2019		—	11,593,528

¹ Amounts invoiced and paid of €13,228,958 (2018:€nil) in relation to the capital contribution have been offset against amounts invoiced and received of €13,228,958 (2018: €nil) in relation to the capital contribution receivable, refer to note 28.

CAPITAL CONTRIBUTION

A financial liability and corresponding financial asset have been recognised in respect of the capital contribution due from Legal & General, and due to the UK Government, under the terms of the Pre-let Agreement, see note 28. Both the financial asset and financial liability are held at amortised cost, refer to note 34.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

29. FINANCIAL LIABILITIES (CONTINUED)

FINANCIAL LIABILITIES AT FVTPL

RECONCILIATION OF THE GROUP'S FINANCIAL LIABILITIES HELD AT FVTPL:

Euro	Note	Interest rate swaps	Development management fee	Priority participating profit dividend
Balance at 30 June 2017		2,251,649	4,052,171	6,078,256
Fair value adjustment	11	123,226	682,956	884,397
Foreign currency translation difference in OCI		(58,931)	(33,622)	(49,897)
Settlement		(1,093,000)	—	—
Balance at 30 June 2018		1,222,944	4,701,505	6,912,756
Settlement	38	—	(3,017,367)	(4,524,296)
Fair value adjustment	11	1,473,614	660,671	1,127,939
Foreign currency translation difference in OCI		38,538	(58,463)	(86,880)
Balance at 30 June 2019		2,735,096	2,286,346	3,429,519

FAIR VALUE HIERARCHY

The following table shows the carrying and fair value of the group's financial liabilities held at fair value in the fair value hierarchy:

As at 30 June 2019	Carrying amount	Fair value
		Level 1	Level 2	Level 3
Non-current liabilities
Interest rate swaps	2,735,096	—	2,735,096	—
	2,735,096	—	2,735,096	—
Current liabilities
Development management fee	2,286,346	—	—	2,286,346
Priority participating profit dividend	3,429,519	—	—	3,429,519
	5,715,865	—	—	5,715,865
As at 30 June 2018		Fair value
Euro	Carrying amount	Level 1	Level 2	Level 3
Non-current liabilities
Interest rate swaps	1,222,944	—	1,222,944	—
	1,222,944	—	1,222,944	—
Current liabilities
Development management fee	4,701,505	—	—	4,701,505
Priority participating profit dividend	6,912,756	—	—	6,912,756
	11,614,261	—	—	11,614,261

INTEREST RATE SWAPS

The group has hedged some of the interest rate exposure on the interest-bearing borrowings using interest rate swaps, refer to note 27. These interest rate swaps are classified as fair value through profit or loss. Accordingly, they are measured at fair value at the reporting date with changes in fair value being recognised in profit or loss. Hedge accounting under IFRS 9 has not been applied.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

149
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

DEVELOPMENT MANAGEMENT FEE AND PRIORITY PARTICIPATING PROFIT DIVIDEND

The group has a development management agreement with New Waverley Advisers Limited and New Waverley Holdings Limited ("the developer") under which a fee and a priority participating profit dividend is payable to the developer in relation to the development of the New Waverley site in Edinburgh, Scotland. Under the terms of the agreement, MAS is entitled to a 7.5% annualised preferred return on invested capital. The developer then earns one third of this annualised return and thereafter is entitled to a fee or profit dividend that together approximate 25% of any further development profit. With the services required under the Development Management Agreement now complete, the group paid €3,071,367 and €4,524,296 of the Development Management Fee and the Priority Participating Profit Dividend respectively for the completed New Waverley Sites. €2,286,346 and €3,429,519 of the Development Management fee and Priority Participating Profit Dividend respectively remain outstanding relating to components of the development where there is still an element of valuation uncertainty.

These financial liabilities were designated and classified on initial recognition as FVTPL. Accordingly, they are measured at fair value at the reporting date with changes in fair value being recognised in profit or loss. There has been no change to the fair value of the financial liabilities as a result of the group's own credit risk.

LEVEL 2 FINANCIAL LIABILITIES

VALUATION TECHNIQUES AND UNOBSERVABLE INPUTS

The following table shows the valuation technique used to measure financial liabilities held at fair value as well as the unobservable inputs used for level 2 financial liabilities.

As at 30 June 2019 and as at 30 June 2018

Financial liability	Valuation technique	Inputs
Interest rate swaps	The fair value is based on discounting future cash flows using the interest rate swap curves plus the current credit margin at the valuation date.	• 3-month EUR/GBP/CHF Libor
• Swap rate
• Notional loan value
• Fixed rate of interest	The estimated fair value would increase/(decrease) if:
• 3-month Euro Libor/Swiss Libor was higher/(lower)
• Swap rate was lower/(higher)

LEVEL 3 FINANCIAL LIABILITIES

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 (refer to note 17) is part of this valuation process as the financial liability is derived from the fair value of New Waverley investment property.

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 2019 and as at 30 June 2018

Financial instrument	Valuation technique	Inputs	Inter-relationship between inputs and fair value measurement
Development management fee and priority participating profit dividend	Development profit: Fair value is based on the value of the properties in the New Waverley development.	• Value of investment property	The estimated fair value would increase/(decrease) if:
• Value of investment property was higher/(lower)

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

29. FINANCIAL LIABILITIES (CONTINUED)

LEVEL 3 FINANCIAL LIABILITIES (CONTINUED)

FAIR VALUE SENSITIVITY ANALYSIS

As at 30 June 2019

Financial liability	Technique	Valuation	Gross development value
			Sensitivity
			Input (Euro)	Change	Valuation
Development management fee	Development profit	2,286,346	22,863,255	+5%	2,400,663
				-5%	2,173,029
Priority participating profit dividend	Development profit	3,429,519	22,863,255	+5%	3,600,995
				-5%	3,258,043

As at 30 June 2018

Financial liability	Technique	Valuation	Gross development value
			Sensitivity
			Input (Euro)	Change	Valuation
Development management fee	Development profit	4,701,505	46,457,049	+5%	4,936,580
				-5%	4,466,430
Priority participating profit dividend	Development profit	6,912,756	46,457,049	+5%	7,258,394
				-5%	6,567,118

The financial instrument and fair value disclosures are in notes 34 and 35.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

30. TRADE AND OTHER RECEIVABLES

ACCOUNTING POLICY

The group's trade and other receivables include financial instruments and non-financial instruments. The financial instruments are classified as financial assets at amortised cost. Refer to note 4 for the group's general accounting policy for financial instruments. The non-financial instruments include prepayments, lease incentive accrual and VAT.

DISCLOSURE

Euro	Note	As at 30 June 2019	As at 30 June 2018
Trade receivables from lessees		7,198,454	3,308,938
Prepayments		2,215,405	1,009,668
VAT receivable		2,193,220	1,141,499
Lease incentive accrual	17	2,188,706	279,620
Receivables		1,491,408	4,132,645
Other		936,740	799,070
Property retentions held in escrow		796,684	20,316
Dividends receivable		285,355	322,240
Contract assets¹		—	5,134,337
		17,305,972	16,148,333

¹ In the prior year receivables from contracts with customers were not shown separately. This has been reclassified to Contract assets as a result of the group adopting IFRS 15, refer to note 3 for further detail regarding the adoption of IFRS 15.

Contract assets in the prior year relate to the group's right to consideration for work completed. Contract assets are transferred to receivables when the rights become unconditional. €4,338,266 of the prior year balance related to profit receivable under the Forward Funding Agreement, which was paid on completion of the development, refer to note 19.

Receivables of €1,491,408 (2018: €4,132,645) relate to development costs receivable in relation to the development of the Pre-Let office at New Waverley. This receivable is only conditional on the passage of time and is therefore a receivable from a contract with the group's customers.

Significant changes to contract assets during the period are as follows:

Euro	As at 30 June 2019	As at 30 June 2018
Opening balance	5,134,337	—
Increase in measure of progress	8,813,835	5,134,337
Received during the year	(13,948,172)	—
Closing balance	—	5,134,337

The financial instrument and fair value disclosures are in notes 34 and 35.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

31. TRADE AND OTHER PAYABLES

ACCOUNTING POLICY

The group's trade and other payables include financial instruments and non-financial instruments. The financial instruments are classified as financial liabilities at amortised cost. Refer to note 4 for the group's general accounting policy for financial instruments. The non-financial instruments include deferred income, current tax payable and VAT payable.

DISCLOSURE

The group's trade and other payables comprise:

Euro	As at 30 June 2019	As at 30 June 2018
Trade payables	9,169,004	4,524,420
Deferred income	4,844,924	1,904,870
VAT payable	3,709,255	1,765,052
Construction payables	2,060,132	4,551,993
Current tax payable	1,065,875	1,599,942
Other	422,221	386,987
	21,271,411	14,733,264

Construction payables relate to amounts owed to developers from the construction of the group's development properties.

The financial instrument and fair value disclosures are in notes 34 and 35.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

32. BUSINESS COMBINATIONS

ACCOUNTING POLICY

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in investment expenses.

When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 (2014) Financial Instruments, is measured at fair value with the changes in fair value recognised in profit or loss. Other contingent consideration that is not within the scope of IFRS 9 (2014) Financial Instruments is measured at fair value at each reporting date with changes in fair value recognised in profit or loss.

DISCLOSURE

ACQUISITION OF MILITARI SHOPPING CENTRE ("MILITARI")

On 5 July 2018, the group acquired 100% of the shares and the voting interests of Militari in Romania.

The group acquired the shares to gain control over the operations of the investment property portfolio. The entities held and operated 9 investment properties. The acquisition is part of the group's strategy and continued investment into central and eastern Europe to enhance the group's distributions. The acquisition has been treated as business combinations as the group acquired substantially all of the business operations.

From the date of acquisition to 30 June 2019 Militari contributed revenue of €11,158,678 and profit of €5,794,890.

ACQUISITION OF ATRIUM MALL ("ARAD").

On 5 December 2018, the group acquired 100% of the shares and the voting interests of the Atrium Mall in Arad.

The group acquired the shares to gain control over the operations of the investment property, namely Atrium Mall located in Romania. The entity held and operated a single investment property, Atrium Mall shopping centre. The acquisition is part of the group's strategy and continued investment into central and eastern Europe to enhance the group's distributions over the immediate, medium and long term. The acquisition has been treated as a business combination as the group acquired substantially all of the business operations.

From the date of acquisition to 30 June 2019 Arad contributed revenue of €4,241,162 and profit of €14,465,513.

ACQUISITION OF A PORTFOLIO OF SHOPPING CENTRES IN ROMANIA ("SHOPPING CENTRE PORTFOLIO")

On 28 February 2019, the group acquired 9 investment properties from PKM Developments through the acquisition of the 100% of the share capital of the respective holding companies.

The group acquired the shares to gain control over the operations of the investment property portfolio. The entities held and operated 9 investment properties. The acquisition is part of the group's strategy and continued investment into central and eastern Europe to enhance the group's distributions over the immediate, medium and long term. The acquisition has been treated as business combinations as the group acquired substantially all of the business operations.

In terms of the agreements, the purchase price of €112,969,279 related to the acquisition of 9 completed investment properties (€106,328,625) plus a portion of development land that formed part of the registered land plot (€3,828,492), cash and cash equivalents (€1,653,226) and the remaining net liabilities (€7,061,019). The development land was to be subsequently transferred back to PKM Developments at the same price, adjusted for accrued interest. As expected, the development land was legally transferred back to PKM Developments on 28 June 2019 and will be developed by PKM Developments. In terms of IFRS, the development land was not considered to be controlled by the group and has therefore not been recognised as an asset of the group. Instead it has been recognised as a financing transaction. The corresponding purchase price of €3,828,492 has also not been included in the interest-bearing deferred consideration of €91,761,152 as at 30 June 2019, refer to note 27.

In addition, MAS has granted PKM Developments an option ("the put option"), under the terms of which PKM Developments can put these completed extensions to MAS at an acquisition yield of 7.5% if developed over the next five years, and thereafter at an acquisition yield equating to the latest valuation yield of the relevant property. The extensions have zoning approval. The put option is outside the scope of IFRS 9 (2014) Financial Instruments as it relates to the 'own use' exemption (i.e. the purpose of entering into the contract is to meet the group's expected purchase, sale or usage requirements and cannot be net settled). Accordingly, it is not accounted for as a derivative financial instrument. Instead IAS 37 - Provisions, Contingent Liabilities and Contingent Assets is considered in assessing whether an onerous contract exists.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

32. BUSINESS COMBINATIONS (CONTINUED)

DISCLOSURE (CONTINUED)

ACQUISITION OF A PORTFOLIO OF SHOPPING CENTRES IN ROMANIA ("SHOPPING CENTRE PORTFOLIO") (CONTINUED)

The value of the acquisition was calculated on the basis the investment property acquired was fully let with an estimated net operating income of €8,148,431 ("Estimated NOI"). If the actual NOI for the period 1 January 2019 to 31 December 2019 is greater than the Estimated NOI a balancing payment will be due to PKM Developments for the difference. This contingent consideration was measured at a fair value of €nil at acquisition and a fair value of €nil at 30 June 2019.

PKM Developments is a related party of the group, accordingly, the transaction has been disclosed as a related party transaction, refer to note 38.

From the date of acquisition to 30 June 2019 the shopping centre portfolio in Romania contributed revenue of €3,645,520 and profit of €551,958.

If the acquisitions of: Militari; Arad; and the shopping centre portfolio in Romania had occurred on 1 July 2018, management estimates that the group's revenue for the year ended 30 June 2019 would have been €76,408,007 and profit for the year would have been €88,466,025 including fair value adjustments.

CONSIDERATION TRANSFERRED

The following table summarises the acquisition date fair value of the consideration transferred:

Euro	Consideration
Militari	94,472,318
Arad	28,145,360
Shopping centre portfolio	109,140,787
	231,758,465

The interest-bearing deferred consideration of €109,140,787 in respect of the shopping centre portfolio was offset against distributions received from PKM Developments on the preference shares of €2,930,665 (refer to note 28), and distributions received on the ordinary shares of €12,895,286 (refer to note 21). Consequently, the net consideration was €93,314,836, refer to note 27.

ACQUISITION RELATED COSTS

The group incurred acquisition-related costs of €1,886,510 (2018: €nil) on legal and due diligence fees. These costs have been included in profit or loss within investment expenses, refer to note 10.

GOODWILL

Goodwill arose on the acquisition of the shopping centre portfolio due to the recognition of deferred tax liabilities at the carrying amount as determined by IAS 12 Income Taxes, rather than fair value. IFRS does not permit the deferred tax liabilities to be discounted, which creates a mismatch between the recognition of the consideration at fair value and the deferred tax liabilities at the carrying amount. This difference has been recognised as goodwill. The goodwill arising on the acquisition of the shopping centre portfolio has been allocated to the 9 properties as individual cash generating units.

GAIN ON BARGAIN PURCHASE

A gain on bargain purchase of €12,263,193 arose on the acquisition of Arad because the consideration paid was less than the fair value of net assets acquired, and liabilities assumed. The transaction price was based on the offer made at the start of the negotiations, 12 months prior to closing the deal. Within this year the footfall, tenants' turnover and the net operating income increased significantly, which implicitly led to an increase in the valuation of the property.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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	Note	Militari	Arad	Shopping centre portfolio			Total
				Assets and liabilities not acquired or recognised	Investment property and working capital	Total
Investment property	17	93,854,946	48,930,000	—	106,328,625	106,328,625	249,113,571
Development land		—	—	3,828,492	—	3,828,492	3,828,492
Trade and other receivables		1,543,313	1,325,825	—	7,508,423	7,508,423	10,377,561
Trade and other payables		(846,799)	(1,047,884)	—	(6,987,053)	(6,987,053)	(8,881,736)
Interest-bearing borrowings	27	—	(12,842,369)	—	—	—	(12,842,369)
Deferred tax (liability)/asset	15	(203,919)	766,579	—	(7,582,389)	(7,582,389)	(7,019,729)
Net assets excluding cash		94,347,541	37,132,151	3,828,492	99,267,606	103,096,098	234,575,790
Cash and cash equivalents		124,777	3,276,402	—	1,655,226	1,655,226	5,056,405
Net assets		94,472,318	40,408,553	3,828,492	100,922,832	104,751,324	239,632,195
Goodwill	16	—	—	—	8,217,955	8,217,955	8,217,955
Gain on bargain purchase		—	(12,263,193)	—	—	—	(12,263,193)
Total net assets		94,472,318	28,145,360	3,828,492	109,140,787	112,969,279	235,586,957
Interest bearing deferred consideration		—	—	3,828,492	109,140,787	112,969,279	112,969,279
Cash consideration transferred		94,472,318	28,145,360	—	—	—	122,617,678
Consideration		94,472,318	28,145,360	3,828,492	109,140,787	112,969,279	235,586,957
Cash and cash equivalents acquired		(124,777)	(3,276,402)	—	(1,655,226)	(1,655,226)	(5,056,405)
Cash consideration transferred, net of cash acquired		94,347,541	24,868,958	—	(1,655,226)	(1,655,226)	117,561,273

The gross contracted value of trade and other receivables of the business combinations acquired was €10,377,651 which management expected to receive in full.
The fair value of the investment property purchased as part of the business combination was based upon valuations performed by independent property valuers.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

33. SHARE-BASED PAYMENT ARRANGEMENTS

ACCOUNTING POLICY

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instrument at the grant date.

The fair value determined at the grant date 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 paid as part of the share-based payment awards are included within the fair value at the grant date of the share-based payment.

Options are forfeited if the employee leaves the group before the options vest.

DISCLOSURE

The group has two geared share purchase plans, a Salaried and a Non-Salaried purchase plan. In terms of these, the group 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 accrued on the loan. Recourse on the loans is limited to the 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 normal employment benefits from the group. The participants are entitled to retain the surplus of any distributions received on their shares less the cost of interest on the loans. On 25 June 2019, 842,980 and 688,147 shares were issued to Werner Behrens, CEO and Paul Osbourn, CFO respectively.

In the non-salaried variant, participants do not receive any distributions on the shares, instead the distributions are applied, firstly, to reduce the interest cost on the loans and, thereafter, to reduce the loan balance.

On 26 June 2019 Malcolm Levy transitioned to a non-executive director, and fully exited the share scheme. All 4,000,000 shares issued to him under the scheme were forfeited and cancelled by the group (see note 23).

The key terms and conditions related to participation in the plans are as follows:

	Shares						Initial term of loan
	Grant date	As at 30 June 2019 Number	As at 30 June 2018 Number	Issue price	Vesting period	Vesting conditions	Interest rate	Initial term
Salaried variant	9 March 2017	3,850,000	3,850,000	€1.64	20% annually	Service until vesting dates	WACD of the group 2.64%	10 years
	25 June 2019	1,531,127	-	€1.30			WACD of the group 2.95%
Non-salaried variant	9 March 2017	-	4,000,000	€1.64	15% annually for 4 years, and then 20% annually	Service until vesting dates	WACD of the group 2.60%	10 years

The loans to acquire shares are, in substance, call options in terms of IFRS 2: 'Share-based Payments'. The options were valued at 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 €75,464 (2018: €902,386) was recognised in the share-based payment reserve in relation to the options, refer to note 24.

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 in profit or loss over that service period.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

MEASUREMENT OF FAIR VALUE

The fair values of the options of the Salaried and Non-salaried share option plans have been determined by using the Black-Scholes-Merton model. The participants' service related vesting conditions have 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	For shares granted on 9 March 2017	For shares granted on 25 June 2019
Share price at grant date	€1.64	€1.30
Exercise price	€2.10	€1.65
Expected volatility	21.16%	21.56%
Risk free rate	0.43%	0.29%
Expected distribution	0.00%	0.00%
Time to expiration	10 years	10 years
Fair value of option	€0.31	€0.23

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.

Expected 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 incentive plans were as follows:

As at 30 June 2019

	Non-Salaried purchase plan			Salaried purchase plan
	Number of shares	Weighted average share price	Weighted average loan per share	Number of shares	Weighted average share price	Weighted average loan per share
Opening outstanding balance	4,000,000	€1.3083	€1.5985	3,850,000	€1.3083	€1.6490
Granted	—	—	—	1,531,127	—	(€0.0993)
Forfeited	(4,000,000)	—	—	—	—
Interest	—	—	€0.0412	—	—	€0.0440
Interest repayment	—	—	(€0.0505)	—	—	(€0.0440)
Capital repayment	—	—	(€1.5892)	—	—	—
Share price movement	—	(€0.0119)	—	—	(€0.0119)	—
Closing outstanding balance	—	€1.2964	—	5,381,127	€1.2964	€1.5497
Exercisable	—	—	—	1,540,000	€1.2964	€1.5497

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

33. SHARE-BASED PAYMENT ARRANGEMENTS (CONTINUED)

DISCLOSURE (CONTINUED)

As at 30 June 2018

	Non-Salaried purchase plan			Salaried purchase plan
	Number of shares	Weighted average share price	Weighted average loan per share	Number of shares	Weighted average share price	Weighted average loan per share
Opening outstanding balance	9,000,000	€1.5750	€1.6270	3,850,000	€1.5750	€1.6512
Forfeited	(5,000,000)	—	—	—	—	—
Interest	—	—	€0.0392	—	—	€0.0426
Interest repayment	—	—	(€0.0417)	—	—	(€0.0448)
Capital repayment	—	—	(€0.0260)	—	—	—
Share price movement	—	(€0.2667)		—	(€0.2667)	—
Closing outstanding balance	4,000,000	€1.3083	€1.5985	3,850,000	€1.3083	€1.6490
Exercisable	666,667	€1.3083	€1.5985	770,000	€1.3083	€1.6490

The remaining term of the loans were as follows:

	As at 30 June 2019	As at 30 June 2018
Shares granted on 9 March 2017	7.69 years	8.69 years
Shares granted on 25 June 2019	9.99 years	—

The call options on all vested and unvested shares in the share scheme are out of the money at 30 June 2019 and 30 June 2018.

Refer to note 38 for further disclosures of the share-based payment expense included in key management compensation and directors' remuneration.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

As at 30 June 2019

ACCOUNTING CLASSIFICATION AND FAIR VALUES

Euro	Note	FVTPL				Amortised cost	Non-financial instruments	Total
		Level 1	Level 2	Level 3	Total FVTPL
Financial assets
Interest rate swaps	28	—	775,179	—	775,179	—	—	775,179
PKM Developments preference shares	28	—	—	—	—	174,128,273	—	174,128,273
Direct financial investments	20	41,848,801	—	—	41,848,801	—	—	41,848,801
CFD collateral	20	41,190,361	—	—	41,190,361	4,774,848	—	45,965,209
Capital contribution receivable	28	—	—	—	—	11,593,528	—	11,593,528
Trade and other receivables held at amortised cost	30	—	—	—	—	10,708,641		10,708,641
VAT receivable, prepayments, contract assets and lease incentive accruals	30	—	—	—	—	—	6,597,331	6,597,331
Cash and cash equivalents	22	—	—	—	—	71,155,130	—	71,155,130
		83,039,162	775,179	—	83,814,341	272,360,420	6,597,331	362,772,092
Financial liabilities
Interest rate swaps	29	—	2,735,096	—	2,735,096	—	—	2,735,096
Interest-bearing borrowings	27	—	—	—	—	456,461,320	—	456,461,320
Capital contribution payable	29	—	—	—	—	11,593,528	—	11,593,528
Priority participation dividend	29	—	—	3,429,519	3,429,519	—	—	3,429,519
Development management fee	29	—	—	2,286,346	2,286,346	—	—	2,286,346
Trade and other payables held at amortised cost	31	—	—	—	—	11,651,357	—	11,651,357
Deferred income, VAT payable and tax payable	31	—	—	—	—	—	9,620,054	9,620,054
		—	2,735,096	5,715,865	8,450,961	479,706,205	9,620,054	497,777,220

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

As at 30 June 2018

Euro	Note	FVTPL				Amortised cost	Non-financial instruments	Total
		Level 1	Level 2	Level 3	Total FVTPL
Financial assets
Interest rate swaps	28	—	349,224	—	349,224	—	—	349,224
PKM Developments preference shares	28	—	—	—	—	105,045,768	—	105,045,768
Direct financial investments	20	183,052,263	—	—	183,052,263	—	—	183,052,263
Capital contribution receivable	28	—	—	—	—	24,507,316	—	24,507,316
Trade and other receivables held at amortised cost	30	—	—	—	—	8,583,209	—	8,583,209
VAT receivable, prepayments, contract assets and lease incentive accruals	30	—	—	—	—	—	7,565,124	7,565,124
Cash and cash equivalents	22	—	—	—	—	147,825,624	—	147,825,624
		183,052,263	349,224	—	183,401,487	285,961,917	7,565,124	476,928,528
Financial liabilities
Interest rate swaps	29	—	1,222,944	—	1,222,944	—	—	1,222,944
Deferred consideration	29	—	—	—	—	473,061	—	473,061
Interest-bearing borrowings	27	—	—	—	—	242,713,107	—	242,713,107
Capital contribution payable	29	—	—	—	—	24,507,316	—	24,507,316
Priority participation dividend	29	—	—	6,912,756	6,912,756	—	—	6,912,756
Development management fee	29	—	—	4,701,505	4,701,505	—	—	4,701,505
Trade and other payables held at amortised cost	31	—	—	—	—	9,463,400	—	9,463,400
Deferred income, VAT payable and tax payable	31	—	—	—	—	—	5,269,864	5,269,864
		—	1,222,944	11,614,261	12,837,205	277,156,884	5,269,864	295,263,953

The group has not disclosed the fair values for financial instruments such as cash and cash equivalents, trade and other receivables, contract assets, trade and other payables and interest-bearing borrowings because their carrying amounts are a reasonable approximation of fair values. The disclosures for level 2 and level 3 can be found in the relevant note to each line item.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

35. FINANCIAL RISK MANAGEMENT

OVERVIEW

The group is exposed to the following risks from its use of financial instruments:

Liquidity risk
Market price risk
Interest rate risk: fair value interest rate risk and cash flow interest rate risk
Foreign exchange risk
Credit risk

LIQUIDITY RISK – The risk that the group will encounter difficulty meeting its obligations associated with its financial liabilities that arises when the maturity of assets and liabilities do not match. An unmatched position potentially enhances profitability but can also increase the risk of losses.

The group has an internal treasury function focused on ensuring the efficient but prudent use of cash and availability of working capital, including future cashflows and liabilities. The liquidity risks inherent in the business are: tenant default, should a tenant default, this may result in the inability of the group to cover the interest and capital payments; and PKM Developments preference share drawdowns, the group has to have sufficient liquidity to meet drawdown requests from PKM Developments. The group mitigates the liquidity risk by maintaining adequate: cash; assets readily convertible into cash such as listed real estate equity securities; and access to undrawn debt facilities.

The group intends to invest up to a further €250,000,000 in PKM Developments, refer to note 41. Other than the commitments to PKM Developments, the group has no significant concentration of liquidity risk on the basis that the group holds all cash and cash equivalents on demand.

The following reflects the contractual maturities of payments, and includes interest payments:

As at 30 June 2019

Euro	Note	1-6 months	6-12 months	1-3 years	>3 years	Total
Capital commitments	41	121,251,386	120,000,000	10,000,000	—	251,251,386
- Inventory property¹		1,251,386	—	—	—	1,251,386
- PKM Developments preference shares		120,000,000	120,000,000	10,000,000	—	250,000,000
Interest-bearing borrowings		148,756,661	8,756,216	158,497,367	171,311,749	487,321,993
Trade and other payables		11,651,357	—	—	—	11,651,357
Financial instruments		17,309,393	—	—	2,735,096	20,044,489
- Current financial liabilities	29	17,309,393	—		—	17,309,393
- Non-current derivative financial instruments	29	—	—	—	2,735,096	2,735,096
		298,968,797	128,756,216	168,497,367	174,046,845	770,269,225

¹ Non financial instruments

The PKM Developments preference shares are with a single counterparty PKM Developments. The preference shares do not have contractual drawdowns, consequently, the concentration risk is principally managed by maintaining sufficient liquidity to match PKM Developments budgeted drawdowns of the preference shares. The maturity disclosure represents PKM Developments' maximum drawdown, it does not reflect the budgeted or expected drawdowns.

As at 30 June 2018

Euro	Note	1-6 months	6-12 months	1-3 years	>3 years	Total
Capital commitments	41	242,754,299	30,103,744	160,807,972	—	433,666,015
- Investment property¹		118,800,000	—	—	—	118,800,000
- Inventory property¹		23,954,299	30,103,744	10,807,972	—	64,866,015
- PKM Developments preference shares		100,000,000	—	150,000,000	—	250,000,000
Interest-bearing borrowings		6,732,069	6,225,490	30,293,331	229,009,978	272,260,868
Trade and other payables		14,733,264	—	—	—	14,733,264
Financial instruments		—	36,121,577	473,061	1,222,944	37,817,582
- Current financial liabilities		—	36,121,577	—	—	36,121,577
- Non-current financial liabilities		—	—	473,061	—	473,061
- Non-current derivate financial instruments		—	—	—	1,222,944	1,222,944
		264,219,632	72,450,811	191,574,364	230,232,922	758,477,729

¹ Non financial instruments

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

35. FINANCIAL RISK MANAGEMENT (CONTINUED)

OVERVIEW (CONTINUED)

MARKET PRICE RISK - The risk that the market price of an investment or financial instrument will fluctuate due to changes in foreign exchange rates, market interest rates, market factors specific to the security or its issuer or factors generally affecting all such investments.

The risk to the group arises due to an imbalance between demand and supply for the relevant investments and financial instruments in the portfolio, which could potentially result in a disorderly market. Market price risk is mitigated through a combination of extensive initial market research prior to acquiring the asset, ongoing monitoring of the share price of the listed real estate equity securities and maintaining a sufficiently diversified asset portfolio.

The assets and liabilities affected by market price risk are as follows:

Euro	As at
	30 June 2019	30 June 2018
Assets
Direct financial investments	41,848,801	183,052,263
CFD collateral held as German bonds	41,190,361	—
CFD positions	—	—
Interest rate swaps	775,179	349,224
	83,814,341	183,401,487
Liabilities
Interest rate swaps	2,735,096	1,222,944
Priority participation dividend	3,429,519	6,912,756
Development management fee	2,286,346	4,701,505
	8,450,961	12,837,205

the breakdown of market risk exposure to direct financial investments and CFD positions is as follows:

Euro	Notional exposure		Gross exposure
	As at 30 June 2019	As at 30 June 2018	As at 30 June 2019	As at 30 June 2018
Direct financial investments
Empiric Student Property PLC	2,719,291	—	2,719,291	—
Primary Health Properties PLC	2,157,493	—	2,157,493	—
The PRS REIT PLC	786,348	—	786,348	—
Real Estate Credit Investments Ltd	3,009,989	—	3,009,989	—
Target Healthcare REIT Ltd	773,631	—	773,631	—
Tritax Big Box REIT PLC	7,744,687	—	7,744,687	—
Eurocommercial Properties NV	4,536,699	18,083,028	4,536,699	18,083,028
British Land Company PLC	9,758,519	12,350,045	9,758,519	12,350,045
Land Securities Group PLC	10,362,144	12,063,076	10,362,144	12,063,076
Unibail-Rodamco Westfield SE	—	49,893,724	—	49,893,724
Covivio SA	—	13,391,730	—	13,391,730
Hufvudstaden AB	—	13,295,975	—	13,295,975
Klepierre SA	—	52,450,239	—	52,450,239
Mercialys SA	—	11,524,446	—	11,524,446
	41,848,801	183,052,263	41,848,801	183,052,263
	Notional exposure		Gross exposure
Euro	As at 30 June 2019	As at 30 June 2018	As at 30 June 2019	As at 30 June 2018
Contracts for difference
Cofinimmo CMN	—	—	7,336,322	—
Intervest offices & warehouses CMN	—	—	3,251,533	—
Klepierre	—	—	47,945,211	—
Mercialys	—	—	8,973,764	—
Unibail-Rodamco	—	—	34,863,422	—
The PRS REIT PLC	—	—	3,153,172	—
	—	—	105,523,424	—

At 30 June 2019, if market prices at that date had been 5% (2018: 5%) higher/lower with all other variables held constant, post-tax profit for the year would have been €9,044,340 (2018: €8,528,214) higher/lower. The change post-tax profit for the year has a linear relationship with the percentage change in market price. This sensitivity analysis is based on the gross exposure of financial investments and assumes that all other variables remain constant.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

INTEREST RATE RISK- A significant part of the funding of the group's portfolio derives from debt. Debt is managed on an active basis, with interest rate swaps used sometimes to hedge against adverse movements in interest rates. Details of the hedging arrangements of the group are disclosed in note 27.

The carrying amount of assets and liabilities affected by interest risk are as follows:

Euro	As at 30 June 2019					As at 30 June 2018
	Fixed rate	Variable	No exposure	Non-financial instruments	Total	Fixed rate	Variable	No exposure	Non-financial instruments	Total
Assets
Financial assets	41,190,361	4,774,848	—	—	45,965,209
Financial assets	174,128,273	11,593,528	—	—	185,721,801	105,045,768	24,507,316	—	—	129,553,084
Trade and other receivables	—	—	12,897,347	4,408,625	17,305,972	—	—	13,997,166	2,151,167	16,148,333
Cash and cash equivalents	—	71,155,130	—	—	71,155,130	—	147,825,624	—	—	147,825,624
	215,318,634	87,523,506	12,897,347	4,408,625	320,148,112	105,045,768	172,332,940	13,997,166	2,151,167	293,527,041
Liabilities
Interest bearing borrowings	283,591,618	172,869,702	—	—	456,461,320	133,111,243	109,601,864	—	—	242,713,107
Financial instruments	135,251,008	(123,657,480)	5,715,865	—	17,309,393	66,178,209	(41,197,832)	11,614,261	—	36,594,638
– Effect of derivative financial instruments	135,251,008	(135,251,008)	—	—	—	66,178,209	(66,178,209)	—	—	—
– Financial liabilities	—	11,593,528	5,715,865	—	17,309,393	—	24,980,377	11,614,261	—	36,594,638
Trade and other payables	—	—	11,651,357	9,620,054	21,271,411	—	—	14,733,265	—	14,733,265
	418,842,626	49,212,222	17,367,222	9,620,054	495,042,124	199,289,452	68,404,032	26,347,526	—	294,041,010

FAIR VALUE SENSITIVITY FOR FIXED-RATE INSTRUMENTS
The group does not account for any fixed rate interest bearing borrowings at fair value through profit or loss and the group does not designate derivative financial instruments as hedging instruments. Therefore, a change in interest rates on fixed rate interest-bearing borrowings would not affect profit or loss. A change in the fair value of the hedging instruments would not have a material impact on the profit or loss.

CASH FLOW SENSITIVITY FOR VARIABLE RATE INSTRUMENTS
At 30 June 2019, if interest rates at that date had been 25 basis points higher/ lower (2018: 25 basis points) with all other variables held constant, post-tax profit for the year would have been €347,838 (2018: €330,003) lower/higher, arising mainly as a result of the higher/ lower interest expense on variable borrowings. This sensitivity analysis assumes that all other variables remain constant.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

35. FINANCIAL RISK MANAGEMENT (CONTINUED)

OVERVIEW (CONTINUED)

FOREIGN EXCHANGE RISK - The group is exposed to currency risk because it holds both assets and liabilities denominated in currencies other than euro, the presentation currency. It is therefore exposed to currency risk, as the value of assets and liabilities denominated in other currencies will fluctuate due to changes in exchange rates. The foreign exchange risk is mitigated as management monitors exchange rates against assets and liabilities on a regular basis, in addition effort is made to match assets and liabilities in foreign currency against each other to reduce any foreign exchange risk.

As at 30 June 2019 the group had the following functional currency exposures:

CURRENCY RISK EXPOSURE
	GBP	CHF	ZAR	USD	PLN	SEK	BGN	RON
Closing exchange rate	0.8965	1.1105	16.1218	1.1380	4.2496	10.5633	1.9558	4.7343
FINANCIAL INSTRUMENTS - ASSETS
Financial investments
Foreign currency	33,450,300	—	—	—	—	—	—	—
Euro equivalent	37,312,103	—	—	—	—	—	—	—
Financial assets
Foreign currency	11,088,546	—	—	—	—	—	—	—
Euro equivalent	12,368,707	—	—	—	—	—	—	—
Trade and other receivables
Foreign currency	5,839,852	370,927	—	—	3,361,893	—	3,938,083	23,068,520
Euro equivalent	6,514,057	334,018	—	—	791,108	—	2,013,541	4,872,636
Cash and cash equivalents
Foreign currency	31,669,522	1,293,100	187,464	7,048	3,533,822	—	3,733,364	33,391,134
Euro equivalent	35,325,736	1,164,430	11,628	6,193	831,566	—	1,908,868	7,053,025
FINANCIAL INSTRUMENTS - LIABILITIES
Financial liabilities
Foreign currency	15,517,871	1,080,083	—	—	—	—	—	—
Euro equivalent	17,309,393	972,609	—	—	—	—	—	—
Interest bearing borrowings
Foreign currency	61,089,752	8,342,544	—	—	—	—	—	—
Euro equivalent	68,142,501	7,512,421	—	—	—	—	—	—
Trade and other payables
Foreign currency	6,674,409	364,608	—	—	3,127,682	—	3,163,531	15,419,231
Euro equivalent	7,444,963	328,328	—	—	735,995	—	1,617,512	3,256,919
Total net financial (liability)/asset exposure
Foreign currency	(1,233,812)	(8,123,208)	187,464	7,048	3,768,033	—	4,507,916	41,040,423
Euro equivalent	(1,376,254)	(7,314,910)	11,628	6,193	886,679	—	2,304,897	8,668,742

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

As at 30 June 2018 the group had the following currency exposures:

CURRENCY RISK EXPOSURES

	GBP	CHF	ZAR	USD	PLN	SEK	BGN
Closing exchange rate	0.8861	1.1569	16.0514	1.1658	4.3725	10.4560	1.9560
FINANCIAL INSTRUMENTS - ASSETS
Financial investments
Foreign currency	21,633,249	—	—	—	—	139,022,719	—
Euro equivalent	24,413,121	—	—	—	—	13,295,975	—
Financial instruments
Foreign currency	22,026,176	—	—	—	—	—	—
Euro equivalent	24,856,540	—	—	—	—	—	—
Trade and other receivables
Foreign currency	10,736,098	53,258	—	—	3,909,118	—	3,508,951
Euro equivalent	12,115,687	46,036	—	—	894,015	—	1,794,098
Cash and cash equivalents
Foreign currency	15,417,936	844,729	154,061	14,623	1,546,070	—	5,479,690
Euro equivalent	17,399,141	730,184	9,598	12,544	353,586	—	2,801,721
FINANCIAL INSTRUMENTS - LIABILITIES
Financial instruments
Foreign currency	32,427,681	1,054,990	—	—	1,359,909	—	—
Euro equivalent	36,594,639	911,933	—	—	311,011	—	—
Interest bearing borrowings
Foreign currency	65,513,444	8,732,500	—	—	—	—	—
Euro equivalent	73,931,921	7,548,373	—	—	—	—	—
Trade and other payables
Foreign currency	8,764,932	53,924	—	—	1,338,840	—	3,790,847
Euro equivalent	9,891,226	46,612	—	—	306,193	—	1,938,229
Total net financial (liability)/asset exposure
Foreign currency	(36,892,598)	(8,943,427)	154,061	14,623	2,756,439	139,022,719	5,197,794
Euro equivalent	(41,633,297)	(7,730,698)	9,598	12,544	630,397	13,295,975	2,657,590

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

35. FINANCIAL RISK MANAGEMENT (CONTINUED)

CURRENCY RISK EXPOSURES (CONTINUED)

As at 30 June 2019 and 30 June 2018, if the euro had strengthened/weakened against other currencies used by the group with all other variables held constant, post-tax profit for the year would have been:

Euro	Movement	30 June 2019		Movement	30 June 2018
		Profit or loss			Profit or loss
		Strengthening	Weakening		Strengthening	Weakening
GBP	10%	(125,114)	125,114	5%	2,081,665	(2,081,665)
CHF	5%	(348,329)	348,329	5%	386,535	(386,535)
ZAR	10%	1,057	(1,057)	10%	(960)	960
USD	5%	295	(295)	5%	(627)	627
PLN	5%	42,223	(42,223)	5%	(31,520)	31,520
SEK	5%	—	—	5%	(664,799)	664,799
BGN¹	0%	—	—	0%	—	—
RON	5%	232,030	(232,030)	5%	—	—
		(197,838)	197,838		1,770,294	(1,770,294)

¹ The Bulgarian Lev is fixed to the euro exchange rate therefore there was no currency risk exposure.

This sensitivity analysis assumes that all other variables, particularly interest rates, remain constant.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CREDIT RISK - The group is exposed to credit risk primarily as a result of its banking relationships, trade receivables and contract assets owed by tenants, capital contribution receivable, CFD collateral and its investment in the PKM Developments preference shares.

The carrying amount of financial assets represents the maximum credit risk exposure, as follows:

Euro	As at 30 June 2019				As at 30 June 2018
	Credit risk exposure	No exposure	Non-financial instruments	Total	Credit risk exposure	No exposure	Non-financial instruments	Total
Non-current financial assets
Financial assets	174,903,452	-	-	174,903,452	105,394,992	-	-	105,394,992
Financial investments	-	-	-	-	-	183,052,263	-	183,052,263
	174,903,452	-	-	174,903,452	105,394,992	183,052,263	-	288,447,255
Current financial assets
Financial assets	-	11,593,528	-	11,593,528	-	24,507,316	-	24,507,316
Trade and other receivables	12,897,347	-	4,408,625	17,305,972	13,997,166	-	2,151,167	16,148,333
Financial investments	45,965,209	41,848,801	-	87,814,010
Cash and cash equivalents	71,155,130	-	-	71,155,130	147,825,624	-	-	147,825,624
	130,017,686	53,442,329	4,408,625	187,868,640	161,822,790	24,507,316	2,151,167	188,481,273
	304,921,138	53,442,329	4,408,625	362,772,092	267,217,782	207,559,579	2,151,167	476,928,528

The group's PKM Developments preference shares €174,128,273 (2018: €105,045,768) included within financial assets are with a single counterparty PKM Developments. This concentration of credit risk is principally managed by assessing credit quality through quarterly reviews of PKM Developments management accounts, annually reviewing the audited annual financial statements and property valuation reports. The PKM Developments preference shares have no expected credit losses.

The group's financial investments with credit risk exposure €45,965,209 relate to the CFD collateral which is held with a single investment banking company. This concentration of credit risk is managed by assessing the counterparty's credit rating is rated B+ or better by Moody's rating agency.

There are no other concentration credit risks related to trade and other receivables as the group does not place reliance on a single counterparty. In order to manage the credit risk after initial recognition of the group's: financial instruments; trade and other receivables; and cash and cash equivalents, management:

deposits cash and cash equivalents with banks and financial institution counterparties which are rated B+ or better by Moody's rating agency; and
delegates the oversight of credit risk of trade and other receivables and financial instruments to MAS Prop as investment advisors to the group.

In calculating the expected credit loss rates, the group considers the historic loss rates and adjusts for forward looking macroeconomic data. There are no material impairment losses. Any significant changes to credit risk are escalated to the Audit and Risk Committee. There have been no changes to the group's estimation of credit risk from the prior financial year.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

36. OPERATING SEGMENTS

ACCOUNTING POLICY

Segment results that are reported to the executive management team 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 the group structure 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

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 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 and other strategic assets	Residential developments and land plots held for schemes that have not yet commenced, and listed real estate equity securities.
Corporate	Consists of the cash holdings outside of the other reporting segments and goodwill.

Management 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 2019

Euro	Reportable segments				Total
	Income-generating property	Development property	Land bank and other strategic assets	Corporate
Statement of profit or loss
External revenue	69,634,262	—	398,198	42,364	70,074,824
Segment profit/(loss) before tax	79,309,116	29,722,534	(28,229,876)	(5,549,760)	75,252,014
Finance income	226,245	11,799,324	—	32,250	12,057,819
Interest earned on preference shares	—	11,194,662	—	—	11,194,662
Finance costs	(9,323,741)	(603,377)	(323,940)	—	(10,251,058)
Current tax	(1,606,902)	(1,545,817)	(786,172)	(9,434)	(3,948,325)
Deferred tax	(9,425,315)	—	—	—	(9,425,315)
Share of profit from equity-accounted investee	—	11,009,325	—	—	11,009,325
Other material non-cash items
Fair value adjustments gain/(loss)	26,960,098	(558,095)	(34,033,573)	—	(7,631,570)
Gain on bargain purchase	12,263,193	—	—	—	12,263,193
Foreign currency exchange differences	680,113	(133)	—	(1,044,533)	(364,553)
Depreciation	(51,001)	—	—	(50,340)	(101,341)
Statement of financial position
Segment non-current assets	866,176,406	196,016,469	19,251,750	22,654,238	1,104,098,863
Investment in equity-accounted investee	—	21,888,261	—	—	21,888,261
Segment current assets	113,818,372	27,743,728	124,878,431	19,307,988	285,748,519
Investment property held for sale	71,090,000	—	21,519,919	—	92,609,919
Segment non-current liabilities	(341,759,439)	—	—	—	(341,759,439)
Segment current liabilities	(159,181,200)	(20,945,560)	(1,764,392)	(637,682)	(182,528,834)

168

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

As at and for the year ended 30 June 2018

Euro	Reportable segments				Total
	Income-generating property	Development property	Land bank and other strategic assets	Corporate
Statement of profit or loss
External revenue	43,010,408	—	396,153	—	43,406,561
Segment profit/(loss) before tax	37,329,217	9,938,530	(18,696,118)	(2,370,820)	26,200,809
Finance income	3,744	7,971,335	479	—	7,975,558
Interest earned on preference shares	—	7,514,384	—	—	7,514,384
Finance costs	(4,944,538)	(456,951)	—	(158,855)	(5,560,344)
Current tax	(788,830)	(2,394,030)	(2,369,785)	(3,357)	(5,556,002)
Deferred tax	(3,730,148)	2,418,763	—	—	(1,311,385)
Share of profit from equity-accounted investee	—	3,568,925	—	—	3,568,925
Other material non-cash items
Fair value adjustments gain/(loss)	12,357,437	(5,388,602)	(22,921,758)	152,796	(15,800,127)
Exchange differences	(837)	—	—	(1,019,950)	(1,020,787)
Goodwill impairment	—	—	—	(1,274,346)	(1,274,346)
Depreciation	(85,088)	—	—	(14,938)	(100,026)
Statement of financial position
Segment non-current assets	548,602,766	128,784,871	216,150,430	21,581,047	915,119,114
Investment in equity-accounted investee	—	23,774,222	—	—	23,774,222
Segment current assets	72,949,162	37,001,253	15,532,543	117,880,260	243,363,218
Investment property held for sale	42,528,044	—	11,060,400	—	53,588,444
Segment non-current liabilities	(222,239,291)	—	—	(3,542)	(222,242,833)
Segment current liabilities	(47,772,895)	(29,887,847)	(1,419,996)	(363,838)	(79,444,576)

Where assets/liabilities and income/expenses 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.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

36. OPERATING SEGMENTS (CONTINUED)

DISCLOSURE (CONTINUED)

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: Western Europe (UK, Germany and Switzerland) and Central and Eastern Europe (Poland, Bulgaria and Romania) as a result of the investment in associate, refer to note 21.

Revenue

Euro	Year ended 30 June 2019	Year ended 30 June 2018
BVI	42,364	—
Western Europe	31,945,702	24,865,399
Central and Eastern Europe (CEE)	38,086,758	18,541,162
	70,074,824	43,406,561
Non-current assets
Euro	As at 30 June 2019	As at 30 June 2018
BVI	22,654,238	204,633,310
Western Europe	436,124,009	414,204,311
CEE	645,320,616	296,281,493
	1,104,098,863	915,119,114
Income from contracts with customers
Euro	Year ended 30 June 2019	Year ended 30 June 2018
Sales of inventory property	39,164,705	26,020,940
Service charges and other recoveries	12,455,268	5,954,048
	51,619,973	31,974,988

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

DISAGGREGATION

The following table disaggregates the income from contracts with customers by jurisdiction and explains the timing of income recognition. The table also includes a reconciliation to the group's reportable segments.

| Euro | Year ended 30 June 2019
Reportable segments | | | | |
| --- | --- | --- | --- | --- | --- |
| | Income-generating property | Development property | Land bank and other strategic assets | Corporate | Total |
| Jurisdiction | | | | | |
| BVI | — | — | — | 42,364 | 42,364 |
| Western Europe | 2,227,667 | 39,164,705 | 47,105 | — | 41,439,477 |
| CEE | 10,138,132 | — | — | — | 10,138,132 |
| | 12,365,799 | 39,164,705 | 47,105 | 42,364 | 51,619,973 |
| Timing of income recognition | | | | | |
| Over a period of time | 12,365,799 | 39,164,705 | 47,105 | 42,364 | 51,619,973 |
| | 12,365,799 | 39,164,705 | 47,105 | 42,364 | 51,619,973 |
| Euro | Year ended 30 June 2018
Reportable segments | | | | |
| --- | --- | --- | --- | --- | --- |
| | Income-generating property | Development property | Land bank and other strategic assets | Corporate | Total |
| Jurisdiction | | | | | |
| BVI | — | — | — | 46,946 | 46,946 |
| Western Europe | 1,369,015 | 26,020,940 | 46,364 | — | 27,436,319 |
| CEE | 4,491,723 | — | — | — | 4,491,723 |
| | 5,860,738 | 26,020,940 | 46,364 | 46,946 | 31,974,988 |
| Timing of income recognition | | | | | |
| Over a period of time | 5,860,738 | 26,020,940 | 46,364 | 46,946 | 31,974,988 |
| | 5,860,738 | 26,020,940 | 46,364 | 46,946 | 31,974,988 |

171
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

36. OPERATING SEGMENTS (CONTINUED)

DISCLOSURE (CONTINUED)

DIRECT AND INDIRECT INVESTMENT RESULTS

In order to provide information of relevance to investors and a meaningful basis of comparison for users of the financial information, a statement of direct and indirect investment results for the year ended 30 June 2019 has been prepared and presented below. It allocates the IFRS result between direct and indirect investment result respectively.

The directors consider that the distribution statement is useful in interpreting the performance of the group.

Year ended 30 June 2019
Statement of Direct and Indirect Investment Result

Euro	Direct investment result	Indirect investment result	Total IFRS
Rental income	57,619,556	—	57,619,556
Service charge income and other recoveries	12,455,268	—	12,455,268
Revenue	70,074,824	—	70,074,824
Service charge and other property operating expenses	(18,478,661)	—	(18,478,661)
Net rental income	51,596,163	—	51,596,163
Sales of inventory property	—	39,164,705	39,164,705
Cost of sales of inventory property	—	(31,013,909)	(31,013,909)
Profit on sale of inventory property	—	8,150,796	8,150,796
Other income	7,259,104	—	7,259,104
Corporate expenses	(5,627,077)	—	(5,627,077)
Investment expenses	—	(3,210,128)	(3,210,128)
Net operating income	53,228,190	4,940,668	58,168,858
Fair value adjustments	—	(7,631,570)	(7,631,570)
Foreign currency exchange differences	—	(364,553)	(364,553)
Share of profit from equity accounted investee, net of tax³	—	11,009,325	11,009,325
Gain on bargain purchase	—	12,263,193	12,263,193
Profit before net financing costs	53,228,190	20,217,063	73,445,253
Finance income	12,057,819	—	12,057,819
Finance costs	(10,251,058)	—	(10,251,058)
Profit before tax	55,034,951	20,217,063	75,252,014
Current tax	(2,402,508)	(1,545,817)	(3,948,325)
Deferred tax	—	(9,425,315)	(9,425,315)
Profit for the year	52,632,443	9,245,931	61,878,374
Attributable to:
Owners of the group	49,696,674	5,339,123	55,035,797
Non-controlling interest	2,935,769	3,906,808	6,842,577

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Distributable earnings and basis of distribution

Euro	Year ended 30 June 2019
Direct investment result distributable to owners of the group	49,696,674
Company specific adjustments
Net attributable profit on sales of inventory property¹	4,953,734
Accrued dividends on REIT portfolio²	2,760,225
Distributable earnings before effect of shares issues during the year	57,410,633
Weighted average number of shares in issue	637,493,798
Distributable earnings per share (euro cents per share)	9.01
Distributable earnings before effect of shares issued during the year	57,410,633
Adjustment relating to shares issued during the year	—
Distributable earnings (after adjustment for shares issued during the year)	57,410,633
Closing number of shares in issue	637,493,798

DISTRIBUTION

Euro cents	Six-month period ended 31 December 2018	Six-month period ended 30 June 2019	Year ended 30 June 2019
Distributable earnings per share	3.78	5.23	9.01
Adjustment (to)/from reserves per share	—	(0.26)	(0.26)
Distribution per share	3.78	4.97	8.75

¹ The profit on sales of inventory property during the year was €8,150,796. The tax recognised on these sales was €1,545,817, refer to note 15, giving a net amount of profit of €6,604,979. The group has recognised 75% (€4,953,734) of this balance as a company specific adjustment as approximately 25% of profit is payable to the developer, refer to note 29.

² The accrued dividend adjustment provides consistency and comparability of dividend receipts between financial years, particularly with respect to the lag between declaration date and distribution. In the prior year, both Unibail and Klepierre declared and paid dividends relating to their previous reporting period. In the current year, these comparable dividends were declared during the year, but a portion of the payment was delayed to July. The accrued dividend adjustment corrects for this timing anomaly. The accrued dividend adjustment is in line with the Best Practice Recommendations of the South African REIT Association.

³ In the current year the earnings in associate are all included in the indirect investment result and are not included in the distributable earnings. Going forward the earnings in associate will be split into direct and indirect investment result and the direct investment result from earnings in associate will be included in distributable earnings. The direct and indirect investment result for the year was €1,486,696 and €9,522,629 respectively.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

36. OPERATING SEGMENTS (CONTINUED)

DISCLOSURE (CONTINUED)

Reconciliation of cash from operations to direct investment result

Euro	Year ended 30 June 2019
Cash from operations	62,835,056
Finance cost	(10,251,058)
Finance cost	(10,251,058)
Finance income	2,876,327
Finance income	12,057,819
Finance income received – interest on preference shares	(9,181,492)
Tax	(479,571)
Tax expense	(2,402,508)
Tax paid on operating activities	1,922,937
Non-cash items	(176,805)
Depreciation	(101,341)
Share based payment expenses	(75,464)
Working capital movement	(2,303,345)
Decrease in receivables	(1,677,151)
Increase in payables	(666,063)
Decrease in provisions	39,869
Other	131,839
Non-forfeitable distribution	131,839
TOTAL DIRECT INVESTMENT RESULT	52,632,443
Attributable to:
Owners of the group	49,696,674
Non-controlling interest	2,935,769

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Year ended 30 June 2018
Statement of Direct and Indirect Investment Result

Euro	Direct investment result	Indirect investment result	Total IFRS
Rental income	37,452,513	—	37,452,513
Service charge income and other recoveries	5,954,048	—	5,954,048
Revenue	43,406,561	—	43,406,561
Service charge and other property operating expenses	(11,073,518)	—	(11,073,518)
Net rental income	32,333,043	—	32,333,043
Sales of inventory property	—	26,020,940	26,020,940
Cost of sales of inventory property	—	(21,704,016)	(21,704,016)
Profit on sale of inventory property	—	4,316,924	4,316,924
Other income	8,585,032	—	8,585,032
Corporate expenses	(4,946,973)	—	(4,946,973)
Investment expenses	—	(1,976,096)	(1,976,096)
Net operating income	35,971,102	2,340,828	38,311,930
Fair value adjustments	—	(15,800,127)	(15,800,127)
Foreign currency exchange differences	—	(1,020,787)	(1,020,787)
Share of profit from equity-accounted investee, net of tax	—	3,568,925	3,568,925
Goodwill impairment	—	(1,274,346)	(1,274,346)
Profit/(loss) before net financing costs	35,971,102	(12,185,507)	23,785,595
Finance income	7,975,558	—	7,975,558
Finance costs	(5,560,344)	—	(5,560,344)
Profit/(loss) before tax	38,386,316	(12,185,507)	26,200,809
Current tax	(2,979,626)	(2,576,376)	(5,556,002)
Deferred tax	—	(1,311,385)	(1,311,385)
Profit/(loss) for the year	35,406,690	(16,073,268)	19,333,422
Attributable to:
Owners of the group	34,078,183	(17,221,877)	16,856,306
Non-controlling interest	1,328,507	1,148,609	2,477,116

175
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

36. OPERATING SEGMENTS (CONTINUED)

DISTRIBUTABLE EARNINGS AND BASIS OF DISTRIBUTION

Euro	Year ended 30 June 2018
Direct investment result distributable to shareholders	34,078,183
Company specific adjustments
Net attributable profit on sales of inventory property¹	2,628,067
Distributable earnings before effect of shares issued during the year	36,706,250
Weighted average number of shares in issue	577,814,866
Distributable earnings per share (euro cents per share)	6.35
Distributable earnings before effect of shares issued during the year	36,706,250
Adjustment relating to shares issued during the year	3,772,061
Distributable earnings (after adjustment for shares issued during the year)	40,478,311
Closing number of shares in issue	637,493,798

DISTRIBUTION

Euro cents	Six-month period ended 31 December 2017	Six-month period ended 30 June 2018	Year ended 30 June 2018
Distributable earnings per share	2.70	3.65	6.35
Adjustment from reserves per share	0.88	0.38	1.26
Distribution per share	3.58	4.03	7.61

¹ The profit on sales of inventory property during the year ended 30 June 2018 was €4,316,924. The tax recognised on these sales was €812,835, refer to note 15, giving a net amount of profit of €3,504,089. The group has recognised 75% (€2,628,067) of this balance as a company specific adjustment as approximately 25% of profit is payable to the developer, refer to note 29.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Reconciliation of cash from operations to direct investment result

Euro	Year ended 30 June 2018
Cash from operations	35,386,649
Finance cost	(5,560,344)
Finance cost	(5,560,344)
Finance income	4,372,697
Finance income	7,975,558
Finance income received – interest on preference shares	(3,602,861)
Tax	454,869
Tax expense	(2,979,626)
Tax paid on operating activities	3,434,495
Non-cash items	(905,792)
Depreciation	(100,026)
Share based payment expenses	(805,766)
Working capital movement	(317,485)
Decrease in receivables	(1,029,613)
Decrease in payables	904,406
Increase in provisions	(192,278)
Other	1,976,096
Investment expenses	1,976,096
TOTAL DIRECT INVESTMENT RESULT	35,406,690
Attributable to:
Owners of the group	34,078,183
Non-controlling interest	1,328,507

177
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

36. OPERATING SEGMENTS (CONTINUED)

EPRA NAV

The European Public Real Estate Association (EPRA) is an organisation that promotes, develops and represents the European public real estate sector. EPRA sets out best practice reporting guidelines on a number of financial and operational performance indicators relevant to the real estate sector. As the business of the group matures, the board intends to adopt the EPRA performance measures on a comprehensive basis. However, as the business goes through the current stage of rapid change and growth, some of the metrics are currently considered not to be relevant. Initially, EPRA NAV and EPRA NAV per share have been computed, which provides an industry standard methodology for the computation of the net asset value per share of the group.

RECONCILIATION OF IFRS NAV TO EPRA NAV

Euro	Note	As at 30 June 2019	As at 30 June 2018
Equity attributable to owners of the group		858,120,107	854,267,721
Adjustments for:
Change in fair value of interest rate swaps – financial liability	11	1,473,614	873,720
Change in fair value of interest rate swaps – financial asset	11	(432,554)	—
Deferred tax asset	15	(4,280,027)	(607,179)
Deferred tax liability	15	26,269,767	6,139,373
Non-controlling interest share of the above adjustments		(3,796,923)	(616,418)
EPRA NAV		877,353,984	860,057,217
Fully diluted number of shares		637,493,798	637,556,656
Closing number of shares		637,493,798	637,493,798
Effect of share options	37	—	62,858
EPRA NAV per share (euro cents)		137.63	134.90

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

179
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

37. 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 year, 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 treasury 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 OWNERS OF THE GROUP

Euro		Year ended 30 June 2019	Year ended 30 June 2018
Profit for the year attributable to owners of the group		55,035,797	16,856,306
WEIGHTED-AVERAGE NUMBER OF ORDINARY SHARES
	Note	Year ended 30 June 2019	Year ended 30 June 2018
Opening issued ordinary shares	23	637,493,798	467,366,299
Effect of shares issued for capital raise		—	105,128,974
Effect of shares issued for scrip distributions		—	5,319,593
Weighted-average number of ordinary shares		637,493,798	577,814,866

The shares issued as part of the geared share purchase plans are not included in the calculation of the weighted-average number of ordinary shares as they are deemed to be unissued (treasury shares) in accordance with IFRS2 'Share-based Payment'.

BASIC EARNINGS PER SHARE

	Year ended 30 June 2019	Year ended 30 June 2018
Profit attributable to owners of the group (euro)	55,035,797	16,856,306
Weighted-average number of ordinary shares	637,493,798	577,814,866
Basic earnings per shares (euro cents)	8.63	2.92

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

37. EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE (CONTINUED)

DILUTED EARNINGS PER SHARE

The calculation of diluted earnings per share has been based on the following weighted-average number of ordinary shares outstanding after adjusting for the effects of all dilutive potential ordinary shares.

	Year ended 30 June 2019	Year ended 30 June 2018
Weighted-average number of ordinary shares (basic)	637,493,798	577,814,866
Effect of share options	—	62,858
Weighted-average number of ordinary shares (diluted)	637,493,798	577,877,724

DILUTED EARNINGS PER SHARE

	Year ended 30 June 2019	Year ended 30 June 2018
Profit attributable to ordinary shareholders (euro)	55,035,797	16,856,306
Weighted-average number of ordinary shares	637,493,798	577,877,724
Diluted earnings per share (euro cents)	8.63	2.92

At 30 June 2019, options on 5,381,127 shares (2018: 7,850,000 shares) were excluded from the diluted weighted-average number of ordinary shares because their effect would have been anti-dilutive.

The average market value of the company's shares for the purpose of calculating the dilutive effect of the share options was based on quoted market prices for the period during which the options were outstanding.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

HEADLINE EARNINGS AND HEADLINE EARNINGS PER SHARE

ACCOUNTING POLICY

Headline earnings is derived from basic earnings adjusted for re-measurements that relate to the capital platform of the group per Circular 4/2018 issued by the South African Institute of Chartered Accountants.

DISCLOSURE

Headline earnings and headline earnings per share was as follows:

Euro	Note	Year ended 30 June 2019		Year ended 30 June 2018
		Gross	Net	Gross	Net
Profit attributable to owners of the group		55,035,797	55,035,797	16,856,306	16,856,306
Adjusted for:
Fair value gain on investment property	17	(24,086,880)	(15,795,671)	721,387	232,813
Fair value gain on investment property in associate		(11,808,911)	(9,393,173)	(6,179,920)	(3,878,272)
Fair value gain on investment property held for sale	18	(958,055)	(958,055)	(2,766,206)	(2,766,206)
Gain on bargain purchase	32	(12,263,193)	(12,263,193)	—	—
Goodwill impairment	16	—	—	1,274,346	1,274,346
Loss on disposal of property, plant and equipment	22	90,672	90,672	—	—
Recycle of foreign currency exchange through profit and loss		(679,034)	(679,034)	—	—
Headline earnings		5,330,396	16,037,343	9,905,913	11,718,987
Basic headline earnings per share
Weighted-average number of ordinary shares (basic)		637,493,798	637,493,798	577,814,866	577,814,866
Headline earnings per share (euro cents)		0.84	2.52	1.71	2.03
Diluted headline earnings per share
Weighted-average number of ordinary shares (diluted)		637,493,798	637,493,798	577,877,724	577,877,724
Diluted headline earnings per share (euro cents)		0.84	2.52	1.71	2.03

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 more relevant measure, refer to note 36.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

38. 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 2019

Euro	Role	During the year	Basic salary/fees	Benefits³	Short-term incentive	Long-term incentive	Sub total	IFRS 2 option expense	Total
Werner Behrens	CEO	appointed	52,052	7,019	—	—	59,071	1,214	60,285
Paul Osbourn	CFO	appointed	185,900	3,346	—	—	189,246	991	190,237
Jonathan Knight¹	CIO		89,232	—	—	—	89,232	51,255	140,487
Ron Spencer	Chairman		48,500	—	—	—	48,500	—	48,500
Malcolm Levy	NED	appointed	—	—	—	—	—	—	—
Malcolm Levy	Former CFO /Interim CEO	resigned	206,349	—	—	—	206,349	(463,770)	(257,421)
Jaco Jansen	NED		37,500	—	—	—	37,500	—	37,500
Pierre Goosen	NED		51,500	—	—	—	51,500	—	51,500
Glynnis Carthy	NED		40,000	—	—	—	40,000	—	40,000
Werner Alberts	NED	appointed	27,805	—	—	—	27,805	—	27,805
Melt Hamman	NED	appointed	20,173	—	—	—	20,173		20,173
Helen Cullen	Company Secretary		96,854	1,440	4,253	—	102,547	17,086	119,633
Morné Wilken²	Former CEO	resigned	146,396	111,540	—	—	257,936	—	257,936
Gideon Oosthuizen	Former NED	resigned	18,530	—	—	—	18,530	—	18,530
			1,020,791	123,345	4,253	—	1,148,389	(393,224)	755,165

¹ Jonathan Knight has a contract of employment with Corona Real Estate Partners Limited, a service provider to MAS Property Advisors Limited. The total remuneration paid to Corona in relation to services provided to MAS by Jonathan Knight was €161,733 (2018: €130,284). Jonathan Knight received a salary of €66,924 (2018: €67,974) from Corona.

² When recruited, a sum of £500,000 (approximately €557,700) was awarded and paid to Morné Wilken as recognition that he would forfeit an in-the money incentive scheme by becoming CEO of MAS. This amount was repayable on a pro-rata basis should he cease to be employed by the company from 1 January 2018 to 30 June 2020, and accordingly £16,667 (approximately €18,590) was expensed monthly and recognised as a benefit paid to him. Morné refunded the outstanding amount, totalling £300,000 (approximately €334,620), when he ceased to be director.

³ The benefits provided to Werner Behrens are in relation to relocation fees, those provided to Paul Osbourn and Helen Cullen are in relation to pension contributions.

Year ended 30 June 2018

Euro	Role	During the year	Basic salary/fees	Benefits	Short-term incentive	Long-term incentive	Sub total	IFRS 2 option expense	Total
Morné Wilken			188,432	141,613	—	—	330,045		330,045
	CEO	appointed	178,432	141,613	—	—	320,045	—	320,045
	Former NED	resigned	10,000	—	—	—	10,000	—	10,000
Malcolm Levy	CFO		—	—	—	—	—	425,758	425,758
Jonathan Knight	CIO		67,974	—	—	—	67,974	164,354	232,328
Ron Spencer	Chairman		30,000	—	—	—	30,000	—	30,000
Gideon Oosthuizen	NED		27,500	—	—	—	27,500	—	27,500
Jaco Jansen	NED		25,000	—	—	—	25,000	—	25,000
Pierre Goosen	NED		22,500	—	—	—	22,500	—	22,500
Glynnis Carthy	NED		27,500	—	—	—	27,500	—	27,500
Helen Cullen	Company Secretary		95,778	—	—	—	95,778	66,441	162,219
Lukas Nakos⁴	Former CEO	resigned	—	157,794	—	—	157,794	—	157,794
			484,684	299,407	—	—	784,091	656,553	1,440,644

⁴ During January 2018 the Board of Directors approved a payment of £140,000 (€157,794) to Lukas Nakos.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

KEY MANAGEMENT – SHAREHOLDINGS

As at 30 June 2019

Euro	Direct	Indirect	Associate	Total
Werner Behrens	19,629	842,980	—	862,609
Paul Osbourn	—	688,147	—	688,147
Jonathan Knight	626,525	1,500,000	—	2,126,525
Ron Spencer	12,061	—	—	12,061
Malcolm Levy	11,633	—	1,568,928¹	1,580,561
Jaco Jansen	—	—	—	—
Pierre Goosen	—	—	46,679¹	46,679
Glynnis Carthy	—	—	—	—
Werner Alberts	—	—	—	—
Melt Hamman	—	3,300²	990¹	4,290
Helen Cullen	14,936	500,000	—	514,936
	684,784	3,534,427	1,616,597	5,835,808

¹ Non-beneficial to director
² Family trust

4,000,000 shares have been forfeited during the year by Malcolm Levy in respect of the geared share purchase plan. 1,531,127 new shares have been issued during the year to 30 June 2019, 842,980 to Werner Behrens and 688,147 to Paul Osbourn. The number of shares in the scheme at the year end is 5,381,127, refer to note 33.

As at 30 June 2018

Euro	Direct	Indirect	Associate	Total
Morné Wilken	284,039	—	—	284,039
Malcolm Levy	11,633	4,000,000	1,568,928²	5,580,561
Jonathan Knight	626,525	1,500,000	—	2,126,525
Ron Spencer	12,061	—	—	12,061
Gideon Oosthuizen	—	240,000¹	—	240,000
Jaco Jansen	—	—	—	—
Pierre Goosen	—	—	46,679²	46,679
Glynnis Carthy	—	—	—	—
Helen Cullen	14,936	500,000	—	514,936
	949,194	6,240,000	1,615,607	8,804,801

¹ Associate company
² Non-beneficial to director

There has been no change in the shareholding of the directors or key management from 30 June 2019 to the date of approval of these consolidated financial statements.

183
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

RELATED PARTIES (CONTINUED)
OTHER RELATED PARTY TRANSACTIONS:

Euro	Note	Income/(expenses) for the year ended		Net (receipts)/payments for the year ended		Capitalised for the year ended		Balances assets/(liabilities) as at
		30 June 2019	30 June 2018	30 June 2019	30 June 2018	30 June 2019	30 June 2018	30 June 2019	30 June 2018
New Waverley Advisers Limited
- On-charged development costs		—	—	—	—	2,653,770	2,287,409	—	—
- Development management fee1	29	(660,671)	(682,957)	3,071,367	—	—	—	(2,286,346)	(4,701,505)
		(660,671)	(682,957)	3,071,367	—	2,653,770	2,287,409	(2,286,346)	(4,701,505)
New Waverley Holdings Limited
- Priority participating profit dividend1	29	(1,127,939)	(884,397)	4,524,296	—	—	—	(3,429,519)	(6,912,757)
		(1,127,939)	(884,397)	4,524,296	—	—	—	(3,429,519)	(6,912,757)
Corona Real Estate Partners Limited
- Legal and professional expenses2		(879,538)	(804,187)	1,007,541	1,042,996	—	132,549	(136,637)	(124,474)
		(879,538)	(804,187)	1,007,541	1,042,996	—	132,549	(136,637)	(124,474)
Artisan Real Estate Limited
- On-charged administrative expenses2		42,115	46,946	(41,599)	(78,300)	—	—	12,007	—
		42,115	46,946	(41,599)	(78,300)	—	—	12,007	—
PKM Developments
- Equity accounted investee	21	11,009,325	3,568,925	—	—	(12,895,286)	—	21,888,261	23,774,222
- PKM Developments preference shares	28	11,194,662	7,514,384	60,818,508	(3,602,862)	(2,930,665)	—	174,128,273	105,045,768
- Other income		292,861	—	(292,861)	—	—	—	—	—
- Interest-bearing deferred consideration	27	(1,244,271)	—	2,797,955	—	(93,314,836)	—	(91,761,152)	—
- Net assets acquired in business combination (including goodwill)	32	—	—	—	—	109,140,787	—	—	—
		21,252,577	11,083,309	63,323,602	(3,602,862)	—	—	104,255,382	128,819,990
Momats
- Directors fee and legal and professional expenses		(17,637)	(12,621)	23,445	25,693	—	—	8,793	2,180
		(17,637)	(12,621)	23,445	25,693	—	—	8,793	2,180
		18,608,907	8,746,093	71,908,652	(2,612,473)	2,653,770	2,419,958	98,423,680	117,083,434

1 Differences between the income/(expense) and the corresponding receivable/(payable) relate to foreign exchange differences recognised in OCI.
2 Differences between the income/(expense) and the corresponding receivable/(payable) relate to VAT receivables and payables.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

KEY MANAGEMENT

Key management consists of the executive and non-executive directors as well as the company secretary.

RELATED PARTY RELATIONSHIPS

ARTISAN REAL ESTATE LIMITED, NEW Waverley HOLDINGS LIMITED AND NEW Waverley Advisers LIMITED

Artisan Real Estate Limited ("Artisan") is a real estate management company which controls both New Waverley Holdings ("NW Holdings") and New Waverley Advisers ("NW Advisers"). Up to 1 October 2018 Artisan's board comprised of four directors, two of which were key management personnel of the group, therefore, Artisan, NW Holdings and NW Advisers were considered to be related parties. On 1 October 2018, a key management personnel of the group resigned as a director of Artisan, at this date, Artisan, NW Holdings and NW Advisers ceased to be a related party of the group. For transparency and comparability with the prior year, the group has disclosed the transactions with Artisan, NW Holdings and NW Advisers for the year although these entities were only related parties up to 1 October 2018.

CORONA REAL ESTATE PARTNERS LIMITED

Corona Real Estate Partners Limited ("Corona") is a real estate management company with five staff members and is owned 100% by Jonathan Knight who is the chief investment officer of the group.

PKM DEVELOPMENTS

PKM Developments is an associate of the group and MAS owns 40% of the ordinary shares, refer to note 21.

MOMATS

Momats provides BVI corporate services and is a director of MAS (BVI) Holdings Limited and MAS CEE Investments Limited, 100% owned subsidiaries of the company.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

38. RELATED PARTIES (CONTINUED)

GROUP SUBSIDIARIES

The group's subsidiaries at 30 June 2019 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business.

Entity name	Ownership interest held by the group	Ownership interest held by NCI	Effective ownership interest held by the group	Effective ownership interest held by NCI
MAS REI	100%	—	100%	—
MAS (BVI) Holdings Limited	100%	—	100%	—
MAS Mezzi Limited	100%	—	100%	—
MAS Property Advisors Limited	100%	—	100%	—
MAS (IOM) Holdings Limited	100%	—	100%	—
MAS CEE Developments Limited	100%	—	100%	—
MAS CEE Investments Limited	100%	—	100%	—
Braehead Properties Limited	100%	—	100%	—
Chippenham Properties Limited	100%	—	100%	—
Langley Properties Limited	100%	—	100%	—
North Street Quarter Limited	100%	—	100%	—
New Waverley 10 Limited	100%	—	100%	—
New Waverley 12 Limited	100%	—	100%	—
New Waverley 14 Limited	100%	—	100%	—
New Waverley 20 Limited	100%	—	100%	—
MAS (European) Holdings Limited	100%	—	100%	—
Braunschweig Limited	100%	—	100%	—
Flensburg Limited	100%	—	100%	—
New Uberior House Limited	100%	—	100%	—
Brandenburg Retail Capital SARL	100%	—	100%	—
European Property Holdings SARL	100%	—	100%	—
Impromptu Capital SARL	100%	—	100%	—
Incantada Capital SARL	100%	—	100%	—
Innova Capital SARL	100%	—	100%	—
Interlude Capital SARL	100%	—	100%	—
Intermezzo Capital SARL	100%	—	100%	—
Istempo Capital SARL	100%	—	100%	—
Instrumento Capital SARL	100%	—	100%	—
Intonata Capital SARL	100%	—	100%	—
Inventive Capital SARL	100%	—	100%	—
Leipzig Retail Capital SARL	100%	—	100%	—
Magdeburg Retail Capital SARL	100%	—	100%	—
Petrusse Capital SARL	100%	—	100%	—
PKM CEE Investments Ltd	100%	—	80%	20%
PKM Investments Finance Ltd	100%	—	80%	20%
PKM Investment Sarl	100%	—	80%	20%
PKM Ariel SRL	100%	—	80%	20%
PKM Neptune SRL	100%	—	80%	20%
Land Development Project SRL	100%	—	80%	20%
PKM Gemini SRL	100%	—	80%	20%
Mastweight SRL	100%	—	80%	20%
PK Black SRL	100%	—	80%	20%
PK Red SRL	100%	—	80%	20%
PK Indigo SRL	100%	—	80%	20%
Galleria Burgas ead	100%	—	80%	20%
Galleria Stara Zagora ead	100%	—	80%	20%
PKM Investments (Netherlands) BV	100%	—	80%	20%
Nova Park sp zoo	100%	—	80%	20%
Prime Kapital CEE Property Investment Management Ltd	—	100%	80%	20%
PK Mezz BV	—	100%	80%	20%

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

187
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

39. SIGNIFICANT SHAREHOLDERS

The significant shareholders of the group are:

	Number of shares as at 30 June 2019	Percentage of shares as at 30 June 2019
Attacq Limited	146,818,251	22.84%
Argosy	54,772,439	8.52%
Government Employees Pension Fund	52,962,397	8.24%
	254,553,087	39.60%
	Number of shares as at 30 June 2018	Percentage of shares as at 30 June 2018
Attacq Limited	146,818,251	22.75%
Argosy	55,841,264	8.65%
Public Investment Corporation	49,504,171	7.67%
	252,163,686	39.07%

40. CONTINGENT LIABILITIES

The group is subject to possible litigation regarding a disputed lease agreement in one of its subsidiaries. The maximum potential claim is €3,000,000 (2018:€nil).

PKM Developments is subject to litigation brought by an unpaid lender which was acquired as part of a business combination, refer to note 21.

41. CAPITAL COMMITMENTS

INVENTORY PROPERTY

The group entered into contracts for the construction and development of the New Waverley office, refer to note 19. These contracts will give rise to committed expenses of £287,713 (approximately €320,914) (2018: £53,092,275 (approximately €59,914,632) over the next 12 months, which will be capitalised as part of the New Waverley development.

The group entered into contracts for the construction and development of Travelodge at Langley. These contracts will give rise to committed expenses of £834,205 (approximately €930,472) (2018: £4,387,579 (approximately €4,951,383) over the next 12 months, which will be capitalised as part of the Langley development.

INVESTMENT IN EQUITY ACCOUNTED INVESTEE

The group has committed to fund PKM Developments through 7.5% cumulative preference shares issued by PKM Developments. During the current year, the group committed to funding up to a total of €420,000,000 (2018: €350,000,000). The outstanding commitment at the reporting date was €250,000,000 (2018: €250,000,000) which is expected to be funded by 23 March 2025. The loan commitments have been reviewed and are not considered to be onerous at the reporting date.

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

42. EVENTS AFTER THE REPORTING DATE

FINANCIAL INVESTMENTS

After the reporting date the group made a number of purchases and sales of the listed real estate equity securities portfolio as detailed below. As at 30 August 2019 the group's listed real estate securities had a fair value of €67,656,273.

Euro	Direct financial investments	CFD Margin	CFD gross exposure
As at 30 June 2019	41,848,801	45,965,209	105,523,424
Purchases	—	—	10,164,484
Disposal	(8,363,752)	—	(16,007,840)
CFD Margin in relation to CFD purchases	—	4,065,793	—
CFD Margin in relation to CFD disposals	—	(7,838,762)	—
Fair value adjustment	(7,988,119)	(32,897)	(5,378,026)
As at 30 August 2019	25,496,930	42,159,343	94,302,042

After the reporting date to 30 August 2019 the group received a total of €408,424 dividends from direct financial investments and €2,760,225 from CFD positions.

INTEREST-BEARING DEFERRED CONSIDERATION

As at 30 August 2019 the total amount outstanding under interest-bearing deferred considerations was €66,298,309. Since the reporting period the group has incurred €537,157 of interest and repaid a total of €26,000,000 against accrued interest and principal balances.

MEMORANDUM OF UNDERSTANDING WITH PRIME KAPITAL

On 4 June 2019 the group announced that it had entered into a non-binding memorandum of understanding with Prime Kapital to acquire a call option to purchase Prime Kapital's effective 20% interest in the investment joint venture. After the reporting period on 28 August 2019, the group announced that negotiations with Prime Kapital have been terminated without a conclusion of a binding call option agreement.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

43. OTHER JSE DISCLOSURES

UNAUDITED PROPERTY PROFILE

Property	Property address	Type	Rentable area (sqm)	Current vacancy area (sqm)	Passing rent per sqm (Euro)	WALT
Bulgaria
Galleria portfolio - Burgas	Yanko Komitov Street 6, Burgas, Bulgaria	Retail	38,372	2,772	158.0	5.4
Galleria portfolio - Stara Zagora	Han Asparuh Street 30, Stara Zagora, Bulgaria	Retail	25,393	2,615	96.6	3.6
Germany
Braunschweig	Varrentrappstraße 2, 14, Braunschweig, Germany	Retail	19,066	913	80.3	5.4
Bruchsal	Kaiserstraße 66, Bruchsal, Germany	Retail	7,119	—	204.7	4.3
Donaueschingen	Bregstraße, Donaueschingen, Germany	Retail	8,235	—	87.4	9.6
Edeka portfolio - Miha	Heidelberger Straße 90, Berlin, Germany	Retail	1,674	—	173.8	12.1
Edeka portfolio - Miha	Flankenschnze 32, Berlin, Germany	Retail	1,432	—	170.4	12.1
Edeka portfolio - Miha	Waldring 190, 110, Haldensleben, Germany	Retail	1,470	—	88.4	12.1
Edeka portfolio - Miha	Bahnhofstraße 12, Holzminden, Germany	Retail	1,924	—	129.4	12.1
Edeka portfolio - Miha	Alte Poststraße 1, Müllrose, Germany	Retail	1,676	—	155.7	12.1
Edeka portfolio - Miha	Erlenweg 3, Nebra, Germany	Retail	1,423	—	98.4	12.1
Edeka portfolio - Miha	Händelstraße 1-2, Zepernick-Panketal, Germany	Retail	1,656	—	140.7	12.1
Edeka portfolio - Miha	Rudolf-Breitscheid-Straße 193, Potsdam, Germany	Retail	2,012	—	127.8	8.8
Edeka portfolio - Miha	Platz des Friedens 10, Sandersdorf, Germany	Retail	1,633	—	130.4	12.1
Edeka portfolio - Miha	Goethepromenade 13, Gröningen, Germany	Retail	1,170	—	78.6	12.2
Edeka portfolio - Miha	Adolf-Meyer-Straße 15, Neinburg, Germany	Retail	989	—	100.1	12.2
Edeka portfolio - Miha	Marktstraße 6, Oldsleben, Germany	Retail	965	—	113.0	12.2
Edeka portfolio - Miha	Hallesche Straße 51 A, Raguhn, Germany	Retail	859	—	101.3	12.2
Edeka portfolio - Miha	Bahnhofstraße 21, Sangerhausen, Germany	Retail	888	—	102.5	12.2
Edeka portfolio - Miha	Haupstraße 29, Thale-Neinstedt, Germany	Retail	709	—	112.8	12.2
Edeka portfolio - Miha	Am Wiesenhof 147-148, Wilelmshaven, Germany	Retail	1,140	—	74.6	12.2
Edeka portfolio - Miha	August-Bebel-Damm 25, Magdeburg, Germany	Retail	8,428	—	38.0	12.2
Edeka portfolio - Miha	Otto-von-Guericke-Straße 1A, Magdeburg, Germany	Retail	6,455	—	46.5	12.2
Edeka portfolio - Miha	Westringstraße 179, 181, 193, Dölzig-Schkeuditz, Germany	Retail	9,167	—	40.9	12.2
Edeka portfolio - Miha	Vor dem Weiherbusch 9, Soltau-Tetendorf, Germany	Retail	5,442	—	36.8	12.2
Edeka portfolio - Thales	Alte Schmelze 23, 65201 Wiesbaden, Germany	Retail	11,502	—	105.2	11.5
Edeka portfolio - Thales	In der Teichmatt 6, 79689 Maulburg, Germany	Retail	4,435	—	78.9	11.5
Edeka portfolio - Thales	Rudolf-Diesel-Straße 6, 72250 Freudenstadt, Germany	Retail	5,908	925	74.5	11.5
Flensburg Galerie	Angelburger Straße 15-17, 24937 Flensburg, Germany	Retail	24,540	4,915	158.9	6.3
Gotha	Schubertstraße 20, Gotha, Germany	Retail	9,442	—	105.0	7.0
Heppenheim retail park	Tiergartenstraße 7, Heppenheim, Germany	Retail	16,978	—	111.1	8.4
Lehrte	Germaniastraße 18, Lehrte, Germany	Retail	9,203	—	82.5	7.6
Munich	Wasserburger, Landstraße 133, Munich, Germany	Industrial	13,090	—	71.4	4.5
Toom Portfolio - Frankenthal	Eisenbahnstraße 77, Frankenthal, Germany	Retail	7,425	—	74.1	9.8
Toom Portfolio - Gummersbach	Vollmerhauser Straße 36, Gummersbach, Germany	Retail	10,937	—	100.6	9.8
Toom Portfolio - Nordhausen	Hallesche Straße 141, Nordhausen, Germany	Retail	7,164	—	76.8	9.8

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

43. OTHER JSE DISCLOSURES (CONTINUED)

UNAUDITED PROPERTY PROFILE (CONTINUED)

Poland
Nova Park	Przemysłowa 2, 66-400 Gorzów Wielkopolski, Poland	Retail	32,683	2,399	175.3	3.4
Romania
Militari Shopping Centre	303 Maniu Boulevard, Bucharest 061129, Romania	Retail	56,245	22	148.2	9.5
Atrium Mall	10-12, Aurel Vlaicu Street, Arad, 310365, Romania	Retail	28,672	849	173.1	2.7
Roman Value Centre	Strada Mihai Viteazul 3, Roman 617135, Romania	Retail	18,808	326	126.8	9.4
Baia Mare Value Centre	Bulevardul Bucuresti nr 53, Baia Mare 430013, Romania	Retail	21,318	753	111.2	11.3
Kaufland - Fagaras	Strada Tudor Vladimirescu 85-87, Fagaras 505200, Romania	Retail	3,176	—	90.9	5.4
Kaufland - Focsani	Bulevardul Brailei 102, Focșani 620170, Romania	Retail	6,099	—	126.4	6.0
Kaufland - Gheorgheni	Fratiei 44, Gheorgheni 535500, Romania	Retail	1,396	—	118.4	3.9
Kaufland - Ramnicu Sarat	C. Brancoveanu 46, Ramnicu Sarat,125300, Romania	Retail	3,998	—	97.5	5.1
Kaufland - Sebes	Strada Augustin Bena 88, Sebes 515800, Romania	Retail	3,176	—	101.2	4.9
Kaufland - Targu Secuiesc	Strada Cernatului 20, Targu Secuiesc 525400, Romania	Retail	3,248	359	87.0	4.8
Kaufland - Slobozia	Șoseaua București-Constana 16, Slobozia 920051, Romania	Retail	6,741	828	81.4	10.3
Switzerland
Zurich	Mulbachstraße 41, Zurich, Switzerland	Logistics	5,699	—	206.0	5.3
United Kingdom
Adagio Aparthotel	New Waverley, Edinburgh (NW), United Kingdom	Hotel/Retail	8,481	102	198.3	16.4
Braehead	Old Govan Road, Glasgow (BL), United Kingdom	Industrial	18,476	—	46.0	5.6
Chippenham	Langley Park, Chippenham (CL), United Kingdom	Industrial	37,350	631	51.7	6.2
Langley park	Langley Park, Chippenham (LPL), United Kingdom	Residential/Hotel	9,184	9,184	—	—
The Arches	New Waverley, Edinburgh (NW), United Kingdom	Retail	522	61	337.4	0.5
New Uberior House	9 Earl Grey Street, Edinburgh, United Kingdom	Office	14,718	—	318.7	11.5
North Street Quarter	Phoenix Works, Lewes, United Kingdom	Residential	16,381	9,746	14.4	1.1
New Waverley PA4 North	New Waverley, Edinburgh (NW), United Kingdom	Land	—	—	—	—
New Waverley PA7	New Waverley, Edinburgh (NW), United Kingdom	Land	—	—	—	—

UNAUDITED GEOGRAPHICAL PROFILE

Jurisdiction	Rentable area (sqm)	Rental income (Euro)	Current vacancy area (sqm)	Passing rent per sqm (Euro)
Bulgaria	63,765	8,338,695	5,387	133.5
Germany	206,156	18,023,897	6,753	98.2
Poland	32,683	6,060,023	2,399	175.3
Romania	152,876	13,549,908	3,137	136.2
Switzerland	5,699	1,162,577	—	206.0
United Kingdom	105,112	10,484,456	19,724	91.0
	566,291	57,619,556	37,400	116.6

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

UNAUDITED SECTOR PROFILE

Sector	Rentable area (sqm)	Rental income (Euro)	Current vacancy area (sqm)	Passing rent per sqm (Euro)
Hotel	7,424	2,369,905	—	196.5
Industrial	68,873	2,697,273	631	54.0
Logistics	5,699	2,068,658	—	206.0
Office	14,869	4,635,208	—	315.4
Residential	26,355	391,403	18,930	11.7
Retail	443,071	45,457,109	17,839	123.4
	566,291	57,619,556	37,400	116.6¹

¹ Total is weighted average passing rent per square metre

UNAUDITED TENANT PROFILE

Category	Number
A	264
B	258
C	381
	903

"A": large national tenants, large listed tenants, government and major franchisees;
"B": national tenants, listed tenants, franchisees, medium to large professional firms; and
"C": other

UNAUDITED PORTFOLIO YIELD

Yield	%
Average annualised property yield	7.58%

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS (CONTINUED)

For the year ended 30 June 2019

43. OTHER JSE DISCLOSURES (CONTINUED)

LEASE EXPIRY PASSING RENT %

LEASE EXPIRY GLA %

Rental escalations are predominantly index linked or as a percentage of inflation and are not reliably determinable. Accordingly, the group has not provided a weighted average rental escalation profile.

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

SHAREHOLDING DISCLOSURES

MAS Real Estate Inc. (the "company")

Public and non-public	No of shareholders	Percentage of total	No of shares	Percentage of total
Public	9,829	99.82%	488,370,866	75.97%
Non-public
Significant shareholders	1	0.01%	146,818,251	22.84%
Directors and their associates	13	0.13%	5,835,808	0.90%
Other share scheme participants	4	0.04%	1,850,000	0.29%
Total shareholders	9,847	100%	642,874,925	100%

SIGNIFICANT SHAREHOLDERS

Name	Number of shares as at 30 June 2019	Percentage of shares as at 30 June 2019
Attacq Limited	146,818,251	22.84%
Argosy	54,772,439	8.52%
Government Employees Pension Fund	52,962,397	8.24%
	254,553,087	39.60%
Name	Number of shares as at 30 June 2018	Percentage of shares as at 30 June 2018
Attacq Limited	146,818,251	22.75%
Argosy	55,841,264	8.65%
Public Investment Corporation	49,504,171	7.67%
	252,163,686	39.07%

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MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

COMPANY INFORMATION AND ADVISORS

REGISTERED OFFICE IN THE BVI

MAS Real Estate Inc.
Craigmuir Chambers
Road Town, Tortola VG1110
British Virgin Islands

CORRESPONDENCE ADDRESS

MAS Real Estate Inc.
2nd Floor
Clarendon House
Victoria Street
Douglas
Isle of Man
IM1 1LN

COMPANY SECRETARY

Helen Cullen ACIS
(Associate of the Institute of Chartered Secretaries & Administrators)

INDEPENDENT AUDITOR

PricewaterhouseCoopers LLC
Chartered Accountants
Sixty Circular Road
Douglas
Isle of Man
IM1 1SA

JSE SPONSOR

Java Capital
2nd Floor
6a Sandown Valley Crescent
Sandown, Sandton, 2196
Johannesburg
South Africa

LUXEMBOURG STOCK EXCHANGE LISTING AGENT

Harney Westwood & Riegels SARL,
56 Rue Charles Martel,
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

Harneys Corporate and Trust Services Limited
Craigmuir Chambers
Road Town, Tortola VG1110
British Virgin Islands

REGISTRAR/ TRANSFER SECRETARIES

BRITISH VIRGIN ISLANDS

Computershare Investor Services (BVI) Limited
Registration number 003287V
Woodbourne Hall
PO Box 3162
Road Town, Tortola
British Virgin Islands

SOUTH AFRICA

Computershare Investor Services
Proprietary Limited
Registration number 2004/003647/07
Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
PO Box 61051 Marshalltown 2107

DEPOSITORY

Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol, BS13 8AE

PROPERTY VALUERS

BULGARIA

Forton AD (Cushman & Wakefield)
Polygraphia Office Center
47A Tsarigradsko Shose Blvd
1124 Sofia
Bulgaria

GERMANY

Cushman & Wakefield (UK) LLP - German Branch
Rathenauplatz 1
D-60313 Frankfurt am Main
Germany
Jones Lang LaSalle SE
Wilhelm-Leuschner-Strasse 78
D-60329 Frankfurt am Main
Germany

POLAND

Cushman & Wakefield Polska Sp. z o.o.
Metropolitan
Plac Pilsudskiego 1
Warsaw, 00-078
Poland

ROMANIA

Cushmann & Wakefield Echinox
Banu Antonache Street
No 40-44, 3rd Floor Sector 1,
Bucharest

SWITZERLAND

Wüest & Partner AG
Bleicherweg 5
CH-8001
Zürich
Switzerland

UNITED KINGDOM

Cushman & Wakefield
43/45 Portman Square
London, W1A 3BG
Montagu Evans LLP
4th Floor Exchange Tower
19 Canning Street
Edinburgh EH3 8EG

CBRE

7 Castle Street, Edinburgh, EH2 3AH
Avison Young (GVA Grimley Limited)
4th Floor Exchange Tower,
19 Canning Street, Edinburgh,
EH3 8EG

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

SHAREHOLDER INFORMATION

Registered in the British Virgin Islands	Company number 1750199
JSE share code	MSP
SEDOL (EMTF)	B96VLJ5
SEDOL (JSE)	B96TSD2
ISIN	VGG5884M1041
LEI code	213800T1TZPGQ7HS4Q13
Number of shares in issue as at 30 June 2019	637,493,798

MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

DEFINITIONS AND ABBREVIATIONS

Artisan: Artisan Real Estate Investors
BVI: British Virgin Islands
CEE: Central and Eastern Europe
CGU: Cash-generating unit
Company: MAS Real Estate Inc.

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.

Direct investment result: The underlying earnings of the group that derive from investment into property and related assets and entities. This includes: net rental income, dividends received, finance income on preference shares, and the related taxation and non-controlling interest adjustments. This excludes: profit on sales of inventory property, exchange differences, changes in fair value, goodwill impairment, investment/transaction expenses not capitalised, related taxation and non-controlling interest adjustments, and deferred taxation. Other adjustments may be made in order to reflect the underlying earnings of the group.

Distributable earnings: Distributable earnings is the Direct investment result, adjusted for company specific adjustments made to reflect the underlying earnings of the group. This final number is adjusted for the dilutory impact of shares issued during the year.

Distributable earnings per share: Distributable earnings before the impact of shares issued during the year divided by the basic weighted average number of shares in issue.

Distribution per share: The distribution per share to be paid to shareholders as determined by the directors at their discretion. The group's policy is to pay out all distributable earnings per share on a semi-annual basis, as well as capital or other profits as the directors may, at their discretion.

EPRA: European Public Real Estate Association

EPRA Net Asset Value: IFRS net assets adjusted for the dilutive impact of share options, deferred taxation on property and derivative valuations and the mark-to-market of effective cash flow hedges and related adjustments

EPRA NAV per share: EPRA Net Asset Value divided by the IFRS diluted number of shares in issue at the end of the year

ERV: Estimated rental value

FVTPL: Fair value through profit or loss

GLA: Gross leasable area

Group: MAS Real Estate Inc. and its subsidiaries

IASB: International Accounting Standards Board

IFRS: International Financial Reporting Standards as issued by the IASB

IFRS NAV per share: IFRS Net Asset Value divided by the IFRS basic number of shares in issue at the end of the year. For clarity this excludes the geared share purchase plan shares

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.

MAS REAL ESTATE INC CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 2019

197
MAS REAL ESTATE INC INTEGRATED ANNUAL REPORT 2019

Indirect investment result
The earnings of the group that do not relate to underlying operational activities. This includes the earnings excluded from the Direct investment result, including profit on sales of inventory property, exchange differences, changes in fair value, goodwill impairment, investment/transaction expenses not capitalised, related taxation and non-controlling interest adjustments, and deferred taxation.

Investment property
Income-generating property, Development property and Land-Bank

IOM
Isle of Man

JSE
Johannesburg Stock Exchange

Land bank
Land plots held for schemes that have not yet commenced and residential developments

Land bank and inventory
Land plots held for schemes that have not yet commenced, residential developments and Inventory property

Lease incentives
Incentives offered to lessees to enter into a lease, typically in the form of a rent-free period or cash contribution towards fit-out costs

Loan to value (LTV)
Loan to value (LTV) is the ratio of the nominal value of debt net of cash and equivalents to the aggregate value of property assets, including investment property held for sale, equity accounted investments, preference share investments and listed investments (REIT portfolio). CFDs are included on a gross basis, with the funding leg as debt and gross exposure as the related asset value.

LuxSE
Luxembourg Stock Exchange

Manco
Prime Kapital CEE Property Investment Management Ltd

Median daily share volume
The median number of shares traded per day during the financial year on the JSE

NAV
Net asset value

NCI
Non-controlling interest

OCI
Other Comprehensive Income

PKM Developments
PKM Development Limited

REIT
Investment in listed real estate equity securities

Scrip distribution
Distributions elected to be received in the form of shares in the company, typically paid as a return of capital

WE
Western Europe

WALT
Weighted average lease term across the portfolio weighted by passing rent

WACD
Weighted average cost of debt

MAS REAL ESTATE INC

AI assistant

MAS PLC — Annual Report 2019

48756_rns_2019-10-31_bccbe6ef-cc4b-4b58-a956-f6dc1ca46aee.pdf

ROMAN VALUE CENTRE

HOW TO USE THIS REPORT

NAVIGATION AND INTERCONNECTIVITY

OUR CAPITALS

CONTENTS

INTEGRATED ANNUAL REPORT

ABOUT MAS

AT A GLANCE

STRATEGIC CONTEXT

CAPITAL VALUE CREATION

GOVERNANCE AND REMUNERATION

CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

ABOUT THIS REPORT

REPORT SCOPE AND BOUNDARY

REPORTING FRAMEWORKS AND REGULATIONS

ASSURANCE

FORWARD-LOOKING STATEMENTS

DETERMINING MATERIALITY

RESPONSIBILITY STATEMENT

STRATEGY AND PERFORMANCE

TRANSACTION TO ACQUIRE PRIME KAPITAL'S STAKE IN CO-INVESTMENT JOINT VENTURE

DIVIDEND

GOVERNANCE

APPRECIATION

PROSPECTS

BOARD

COMPANY PROFILE

PROPERTY INVESTOR, DEVELOPER AND OPERATOR

€964.7M

540,726 M²

7.58 YEARS

97%

BUSINESS STRATEGY

MANAGEMENT

FUNDING

HISTORY

OUTLOOK

VISION, MISSION AND VALUES

VISION

MISSION

VALUES

CREATIVITY

COLLABORATIVE AND RESPECTFUL

GOALS AND RESULTS FOCUSED

INTEGRITY

CONVICTION

MARKETS AND FOCUS

WHERE WE INVEST

WESTERN EUROPE

STRATEGY:

CENTRAL AND EASTERN EUROPE

STRATEGY:

FACTORS TO CONSIDER IN OUR CHOSEN MARKETS

CENTRAL AND EASTERN EUROPE

FACTORS

OUR RESPONSE

WESTERN EUROPE

FACTORS

OUR RESPONSE

KEY SECTORS

OUR PORTFOLIO

RETAIL MARKET OVERVIEW

CENTRAL AND EASTERN EUROPE

TRENDS

OUR RESPONSE

CO-INVESTMENT JOINT VENTURE

PKM DEVELOPMENTS

WESTERN EUROPE

TRENDS

OUR RESPONSE

RESIDENTIAL MARKET OVERVIEW

CENTRAL AND EASTERN EUROPE

TRENDS

OUR RESPONSE

WESTERN EUROPE

TRENDS

OUR RESPONSE

MAS PLC Annual Report 2019