A N N U A L R E P O R T 2 0 0 8

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Financial

Portfolio Status

Board Composition and Viewpoint

Business Philosophy

Outlook and Strategy

Environmental and Social Responsibility

Conclusion

CHAIRMAN’S REPORT55

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Introduction

Activities in the year under review

Financial Overview

Graphical Portfolio Overview

Offshore investments and strategy

Post year end transactions

Conclusion

ASSET MANAGER’S REPORT1111

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CONTENTS

2

Report of the Independent Auditor

Statement of Directors’ Responsibility

Directors’ Report

Balance Sheets

Income Statements

Consolidated Statement of Changes in Equity

Company Statement of Changes in Equity

Cash Flow Statements

Accounting Policies

Notes to the Financial Statements The following schedule has been prepared as additional information and is unaudited

Detailed Income Statements

CONSOLIDATEDFINANCIAL STATEMENTS

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51

82as be

Country of Incorporation

Nature of Business

Directors

Registered Office

Business Address

Postal Address

Bankers

` Auditors

Secretary

Company Registration

South Africa

Property development and investment holding company

BF van Niekerk Chairman

GJ Oosthuizen Executive Director

LLS van der Watt Chief Executive Officer

PH Faure Non-Executive Director

P Tredoux Non-Executive Director

JHP van der Merwe Non-Executive Director

Mertech Building, Glenfield Office Park, Oberon Street, Faerie Glen, 0043, Pretoria, South Africa

Mertech Building, Glenfield Office Park, Oberon Street, Faerie Glen, 0043, Pretoria, South Africa

Postnet Suite 205, Private Bag X20009, Garsfontein, 0042, Pretoria, South Africa

Nedbank Limited Investec Bank Limited Standard Bank Limited FirstRand Bank Limited

TAG Incorporated Chartered Accountants (S.A.) Registered Auditors

T Smith

1997/000543/06

25

3

Francois

- Chairman

It is the Atterbury culture

to never accept progress

as a given.

Photographed at Lady Brooks, Pretoria

CHAIRMAN’S REPORT

5

Concurrent with the end of the third fiscal year, the Company changed its name from Attacq Property Fund Ltd to Atterbury Investment Holdings Ltd (“Atterbury IH”). This to more accurately reflect the evolving group structure and simplify corporate branding without any direct or indirect con-sequence to shareholder interest.

The newly named – but otherwise un-changed – Atterbury IH concluded its third financial year not only with above average market growth but also a positive consolida-tion and enhancement of its asset portfolio and business outlook. The Group's conti-nued success is indicative of a steadily ad-vancing corporate ability, the dynamic and complementary integration of all group ac-tivities and of Atterbury's almost unqualified industry acceptance and business credibi-lity.

It is the Atterbury culture to never accept company progress as a given. But in the cur-rent slower economic cycle it remains of im-mense value that this contingent market ad-versity can be faced with confidence sup-ported by inherent company strengths – even to a point where it can well be ex-pected that Atterbury IH should emerge from the downcycle in better-than-industry shape.

This report is therefore presented to share-holders and other stakeholders with a sense of cautioned optimism.

1. Financial

–

–

The Fund's performance is reflected in a year end share price of R6,75 up 23% from 2007. The share value is supported by the Fund's total asset base of R4,23 billion, a net asset value of R2,82 billion and overall gear-ing of a moderate 25.5%.

Profits attributable to shareholders in-creased by 7.8% from R481,14 million to R518,95 million. Disregarding the fair value adjustment of properties and excluding interest and other income, the net profit from operations increased by more than 100% this mainly due to portfolio expansion and the effective management of income

collection and operating cost control. In line with the Group's growth policy, no dividend is declared.

All major asset classes of the Fund pro-gressed. The Attfund investment grew by 19.5%, the average capitalisation rate of directly owned buildings strengthened to 8.37% despite a marked decline in cap rates of listed property funds and the offshore investment in the German shopping centre proved profitable assisted by the strong Euro.

2. Portfolio StatusFor the year under review market conditions called for a judicious approach in making acquisitions. Transactions concluded were mostly to strengthen our position in selected existing assets. A summary of portfolio movements is given below with specific detail in the Asset Manager’s report:

Waterkloof Corner convenience centre in �Pretoria was sold to Rapfund, increasing the strategic interest in Rapfund from 20% to 25%.

In November 2007, Attfund Ltd had a �rights issue. To follow our rights and re-main a 46% shareholder in Attfund, Atterbury IH issued shares to Sanlam to raise the required R300 million. Sanlam consequently became a 15% share-holder in Atterbury IH. At year end the in-vestment in Attfund represented 55% of our non-current assets and was valued at R2,272 billion.

Significant refurbishment projects of a �combined R136 million commenced at Shell House (renamed Atterbury House) in Cape Town and Brooklyn Square (re-named Design Square) in Pretoria. The full benefit of these upgrades will reflect in the balance sheet of June 2009.

The remainder of Hampton Office Park in �Bryanston was acquired from Sanlam and a further 2,300m² added, increasing owned GLA from 10,600m² to 18,600m².

Towards our strategy to hold 15% of net �asset value offshore, Atterbury IH in-vested R55 million to participate with

Attfund and Sycom in acquiring the Nova Eventis shopping centre in Leipzig, Germany.

3. Board Composition and ViewpointDuring the fiscal year the Board was strengthened by the appointment of Johan van der Merwe, CEO of Sanlam Investment Managers and Pieter Faure, CEO of the Mertech Group. The Board constitutes a par-ticularly well qualified team, the six directors and CFO sharing amongst them five CAs, four M-degrees and an engineer. All six di-rectors furthermore have extensive and va-ried experience at CEO level.

To promote representivity and the benefit of a wider perspective, individual directors were asked their respective views on Atterbury IH's present status and three year outlook:

Executive Directors:

Louis van der Watt, CEO

“Contrary to the defensive strategy taken on by most companies when difficult times pre-vail, the Atterbury approach is to invest in people who would act with a pro-active and innovative disposition to anticipate problems and formulate solutions.

There are regular examples in the manage-ment of our buildings where Asset Managers produce creative transactions succeeding to not only protect but even in-crease net income streams despite tighter market conditions.”

Gideon Oosthuizen, COO

“Our core strategy of owning strong assets in the best locations and thus attracting re-liable clients, places Atterbury in a position to remain healthy during cyclical downturns. Furthermore, we believe the taking of calcu-lated risks to remain important, even more so during difficult times. When the economic cycle reverses – which we believe it will – our perseverance in blue chip projects will ensure maximum benefit to shareholders.”

6

Non-Executive Directors:

Pierre Tredoux

“There is little doubt that the current eco-nomic climate, especially the high interest rates and decline in consumer spending, will affect the Fund's growth in the short term. However, the quality of Atterbury IH's assets, its sound fiscal and investment stra-tegies and the unique relationship with the Atterbury Property Development Group places us in a strong position to ensure long term growth.”

Pieter Faure

“Atterbury IH's short term stability and expected long term value growth can be attributed to factors such as asset quality, forward-fixing interest rates and a prudent valuation approach which insulate against market volatility. Also the policy of long term capital growth without initial dividend pay-ments, causes free cash flow to help ride out the current high interest rate cycle.”

Johan van der Merwe

“I believe the in-depth understanding of the dynamics of the property market coupled with the entrepreneurial spirit embraced by Atterbury IH will stand it in good stead through any cycle of the property market.The unique culture created within the Com-pany provides an environment of responsi-bility, accountability and mutual trust which I believe is a competitive advantage for the business.”

4. Business PhilosophyAtterbury's participative business philo-sophy is fundamental to the Group's current and future success in the four applicable areas:

4.1 Sharing with our team

Altogether 42 of the Atterbury Property Group’s 53 employees own sharehol-ding worth R244 million at year end. This converts to an average value of R5,8 mil-lion per shareholder employee.

Four of these shareholder colleagues – all with relevant operational involvement and a combined 57 years experience in the property industry – were asked their views on Atterbury IH's portfolio:

“Continued rental growth and strong in-vestment returns are driven by the port-folio's focus on A-grade commercial properties having distinct competitive ad-vantage, locations in powerful business nodes, consistent tenancy demand and intensive net income management. Our asset management team have confi-dence in the quality of the Fund and in our management policy of cultivating mu-tually beneficial relations with our busi-ness partners.” – Heidi Rix, Director: Atterbury Asset Managers (Pty) Ltd, Pretoria

“Considering the current economic cli-mate, Atterbury is well positioned in the market place as the majority of residen-tial projects have reached completion and transfers effected successfully. We are confident that the present strategy of spreading risk by taking on projects in the various development sectors, will greatly enhance and contribute to the continued success of Atterbury.” – Mark Mouton, Managing Director: Atterbury Property Cape (Pty) Ltd, Tygerberg

“Although liquidity may be somewhat constrained in the short term, the Fund is well positioned with diversified, premium grade products. My view is that our portfolio's predominantly commercial composition will keep on outperforming other property asset classes over the next 3 to 5 years and no material increase in vacancies is expected.” – Coenie Bezuidenhout, Director: Atter-bury Property Development (Pty) Ltd, Johannesburg

Creating better places to work, shop and live. This is what Atterbury does and does best. We are not excluded from the current negative economic climate, but we react by just working smarter in structuring our finance and keeping ex-penditure low – without curtailing the tra-ditionally dynamic nature of Company operations.” – Marsia Kuypers, Statutory

Compliance Officer and Human Resour- ces, Atterbury Property Holdings (Pty) Ltd, Pretoria

4.2 Sharing with our business partners

Relationships with existing partners con-tinued and the Company added two busi-ness partners of particular significance:

Sanlam�Sanlam becoming a 15% shareholder represents a first step in a process of Sanlam increasing its shareholding through Atterbury IH acquiring se-lected Sanlam properties for refurbish-ment and/or redevelopment.

Waterfall Development Company�In one of the largest and most signifi-cant South African property transac-tions ever, Atterbury IH acquired com-mercial development rights of poten-tially 1,4 million square meters from the Mia family on 1,000ha of prime land straddling the Buccleuch interchange on the N1 between Midrand and Sandton / Wynberg. The transaction puts Atterbury IH's total black owner-ship in excess of 25% with the Com-pany thus advancing toward compli-ance with the BBBEE property charter.

4.3 Sharing with investors

At year end Atterbury IH had 267 regis-tered shareholders. To further improve communication and benefit from a wider point of view, shareholders were asked which specific Company aspect they would require more information on. The following three shareholders reacted (the overall 1.2% non-critical response taken as a positive shareholder endorse-ment):

Rael Abramowitz, Portfolio Manager, Parkdev, Cape Town“Given the current economic climate, the South African property industry is over-trading with development in certain retail nodes and non sustainability could well result. What is Atterbury IH's strategy in this regard?” - We agree. Our portfolio is standing firm and amplified focus on the established strategy of diversification and acquiring and retaining only quality

CHAIRMAN’S REPORT (CONTINUED)

7

assets with a distinct competitive advan-tage is expected to prevail the status quo. The market will deal with ill-consi-dered developments.

Willie Potgieter, MD, Enhanced Engineering Solutions, Pretoria

“What is the impact of the current inter-est hikes and availability of tenants on Atterbury's property development and asset portfolio?”.

- Company policy is to fix some 70% of bond interest exposure for varying pe-riods up to 10 years. Further to the reply to Rael's question, we also favour na-tional tenants giving longer term stability. But the present tougher trading condi-tions present healthy companies with op-portunities rather than threats.

Bernard van Tonder, Founder Member, Val de Vie Winelands Lifestyle Estate, Paarl

“Is Atterbury IH planning on listing at some stage?”

- No immediate plans but could well be un-der consideration in the medium term – even sooner if Bafana does well in the 2010 World Cup.

4.4Sharing with the South African commu-nity

The Atterbury Group's social and envi-ronmental response dates back to its in-ception and is represented by the Atterbury Foundation – funded by a per-centage of development profits – and by the proceeds of a combined 27.9% of Atterbury IH shareholding held by two in-dependent community beneficial trusts. The financial interests of Atterbury IH shareholders are therefore not diluted by environmental or social allocations.

The three trusts remain focused on sup-porting effective community upliftment or-ganizations and educational programs. Fiscal 2008 saw a 105% increase in allo-cations to a combined total of R13,7 mil-lion. Detailed information on community projects was given in past annual re-ports. Given the increased awareness and expected future impact of social

and environmental trends, our viewpoint is given later in this report.

5. Outlook and StrategyThe business environment turned less opti-mistic over the last eight months of the fiscal year. Against the backdrop of global eco-nomic turbulence, the South African listed property index fell by a third from a market capitalization of R110 billion to R73 billion.

Although the impact of questionable political action on the business cycle has always been a constant reality, it does appear par-ticularly detrimental at present. During a short eight years the current US administra-tion upped their country's deficit from US$4,000 billion to US$10,000 billion or an average debt of R3,7 million per US family – with none of this ostensibly representing a positive investment which could be ex-pected to better the lives of US citizens or anybody else on the planet. The contrary ap-pears more likely. In context the South African deficit on current account is almost double the US debt expressed as percen-tage of GDP – this being one of many eco-nomic indicators indicative of a more con-stricted trading outlook.

The South African economy, furthermore, appears under disproportionate threat from well debated political action (or inaction). Deserved acknowledgement of outstanding Government achievement in some areas is overshadowed by justified criticism in too many others. South Africans share a mounting impatience with such degenera-tion in Government leadership and perfor-mance as to clearly frustrate the achieve-ment of results which, to most non-politicians, appear (a) very achievable and (b) vitally necessary for South Africa to effectively address national challenges and reach even our minimum potential as a nation.

Unlike Brazil, India and China with their eco-nomies strongly advanced by pragmatic leadership, South African politics appear to have morphed itself into a distressing quag-mire of maladroit agendas and toxic fac-tional enmities hardly conducive to promo-

ting an optimal business environment, let alone the country's best interest.

Given the above more challenging trading outlook, shareholders would require a view on Atterbury IH's position:

5.1 Statistical evidence over the past 70 years point to regular downcycles in the South African property industry and with a notion for property values to perform above market in an upcycle and below market in a downcycle. Atterbury Group's consistent business policy is based on longer term growth. The pre-sent downcycle was to be expected and was planned for in terms of normal busi-ness practice. Hence the downcycle should not have a longer term detrimen-tal effect on the Company – nor should it have on any shareholder given that pro-perty investment is assumed to always be done with a longer term perspective.

5.2 Atterbury IH is an unlisted fund typically less prone to the often volatile nature of the listed sector, as proven by shares presently trading at 5 – 10% below asset value compared to JSE funds having fallen by some 33%

5.3The Atterbury IH investment portfolio is well diversified, of A-grade quality and positioned so as to attract a predomi-nance of leasing only long term to repu-table tenants.

5.4 Atterbury Group is well established and experience gained with previous down-cycles supports our expectation to gain advantage from the currently softer mar-ket.

Despite a trading environment with severe but expected temporary macro constraints, Atterbury IH is advancing its business agen-da with a prudent conviction and resolve that future growth objectives will be realised.

6. Environmental and Social ResponsibilityThe ascending global trend towards height-ened community and environmental aware-ness, together with South Africa's almost

8

overwhelming national sociological realities, accentuates the need for the business sec-tor to work with Government in finding ap-propriate responses to the current societal pressures aimed at both ecological preser-vation and sustainable economic parity.

The immense historical contribution of com-merce to global unity and development has, of late, been tainted by a singular pursuit of wealth and power in certain industrial and commercial areas, this causing potentially le-thal damage to the geographic environment as well as to the human fabric of society. Prolonged future stability requires that con-sideration be given to the eventual cost of an obsessive intolerance of anything not adding to the “bottom line”. Also to the con-tinued disregard of how monopolistic and exploitive practices, continuously eroding communal market economies and skewed values will influence the future trading envi-ronment.

Historical realities do not credibly sup-port any notion that profit alone will ensure the future. Already global growth has been stinted by a number of spectacular cor-porate failures, pointing to the non-sustainability of self-centered greed as a dominant value system. It is fortunate that the con-junctural nature of history has now brought forth a consequen-tial trend toward viewing the cor-poration in the context of its sus-tainable environment. The profit

motive remains central but should be bal-anced by an increased emphasis and posi-tive contribution to the physical environment and a shift to servant leadership focused not only on customers, staff and shareholders but on what drives human issues in the wider market economy and on promoting un-questioned ethics and higher values.

The future business environment may well migrate towards “social capitalism” where business success is based less on profit alone but also on safeguarding sustainability through leadership finding innovative inter-relationships between the corporation, na-ture and human society.

As vital as collective leadership and govern-mental action is in responding to these emerging trends, is the creative compliance of every individual business organization in addressing its closer physical and human challenges to so help preserve acceptable balance within the wider trading environ-ment.

7. ConclusionAtterbury IH concluded a somewhat arduous year with very acceptable results – especially since published financials do not reflect substantive progress also with posi-tioning the Company for future growth. This relates directly to the quality of Atterbury Group's major off balance sheet asset – its human capital. As CEO, Louis van der Watt crafted a team with a nearly unprecedented capacity. Their collective insight, focused work ethic and prodigious powers of reinvention support both present and future forward thrust through a predictable adhe-rence to the highest standards and acknow-ledged ability to consistently uncover successive new layers of prospective busi-ness opportunity.

The Board has unqualified appreciation for the almost undeterminable contribution made by Louis as CEO, Gideon as COO and by every colleague on the Atterbury

team. We once again offer our respect and support.

CHAIRMAN’S REPORT (CONTINUED)

Photographed at Beyers Bytjies Nursery School (supported by the Atterbury Trust), Danville, Pretoria

Carmen - Atterbury Trust Alumni 1999 - 2002,

currently forensic manager at Deloitte.

Francois van NiekerkChairman

Director’s

Gideon (COO)

Johan

Pierre

Pieter

Francois (chairman)

Louis

(CEO)

Gideon - Executive Director& Louis - CEO

The "Waterfall" transaction

can possibly be regarded

as Atterbury's most significant

transaction since its

inception in 1994.

Photographed at Trevenna Precinct, Pretoria

Double

Trouble!

ASSET MANAGER’S REPORT

IntroductionWhat a difference a year makes! In June 2007, property experts were robustly buoyant about growth and performance forecasts of the South African property market. The IPD index for “global all property returns” reported SA total returns of 27.7% as at December 2007. This performance in excess of 25% for the 3rd year running was notably higher in comparison to other global markets.

South Africa's property market was thus a top performer and it was rated as an interna-tional investment destination which conti-nued to attract strong global investment in-terest on the back of a strengthening eco-nomy. On home ground, South African insti-tutional investors were revisiting property as a preferred investment asset class in their in-vestment allocation policies, and the indivi-dual private investor was seeing more op-portunity and returns by investing in the South African property market – both listed and unlisted.

Then, during the first quarter of 2008, things started looking less optimistic. The property

market started feeling the effect of rising in-terest rates and more stringent credit criteria started taking effect, albeit perhaps on a 6 to 9 month lag behind the Reserve Bank's in-terest rate cycle. Commercial property, it must be said, was influenced to a far lesser degree as compared to residential property. The demand for good quality commercial property was underpinned by owners and in-vestors wishing to grow property funds, and the fact that the office market is driven by the services sector which has traditionally been less sensitive to economic slowdowns and rising interest rates.

Where property funds have felt the pinch, however, is in their gearing. Portfolios with lower gearing, lower cost of funding and high percentages of fixed debt have felt much less of the impact. Growth in annual lease escalation percentages has, on the other hand, been a positive spin off from ri-sing interest rates.

The energy challenge certainly dampened both investors' and developers' robust growth forecasts and sentiments. Some may insist that a lack of proper infrastructure plan-

ning was the main contributor to the crisis. We however believe that South Africa's booming property market was also a signifi-cant contributor, and one could debate whether we would prefer to have had the boom and now have to face the infrastruc-ture challenges, rather than having had no growth and therefore no pressure on our fa-cilities. After performing feasibility assess-ments with regard to alternative power and energy saving solutions on individual pro-perties within our portfolio, our joint efforts with our tenants have contained the initial business losses sustained as a result of load-shedding; however concerns still re-main as to the future impact of further load-shedding or the proposed moratorium on future developments that may be imposed on our industry.

Rising construction costs was another as-pect that had a part to play in our approach. Development costs have risen by in excess of 30% over the last 12 months which, when viewed in combination with increased fi-nancing costs spurred on by sustained in-terest rate increases, indeed posed a chal-lenge for the property development industry.

35

30

25

20

15

10

5

-5

0

Capital GrowthIncome ReturnTotal Return

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

3-yr

5-yr

13-yr

Tota

l Ret

urn

%

IPD Figure: Total returns for SA

11

The South African

Market - All PropertyTotal Returns

However on the back of this challenge, existing property assets benefitted from rental growth and tenant demand as a direct result of the high development costs and a lack of availability of land with available power supply.

A combination of macro and micro eco-nomic factors has seen pressure being brought to bear on capitalisation rates (“cap rates”). A narrowing of the gap between cap rates and interest rates has been expe-rienced; however despite a challenging property market, expectations of continued robust rental growths have continued to sup-port property ratings. One also needs to con-sider that the unlisted property sector is driven mainly by property fundamentals, which, if sound, will provide a level of pro-tection against weakening cap rates. Listed property stocks on the other hand are af-fected by market and stock sentiment in addition to fundamentals. Atterbury Invest-ment Holdings' portfolio is a high quality A-grade portfolio; built on a foundation of stout property fundamentals. This foundation has ensured that, in a time of cap rate pres-sures, the majority of the portfolio's proper-

ties have retained their cap rate levels for the year ending 30 June 2008.

The Group's office and regional retail assets have continued to outperform market ave-rages. Convenience / community retail pro-perties have not performed as well; however, we have no doubt that these as-sets will add value to the fund in the long term despite stringent negative short-term economic conditions.

Against this background, Atterbury Asset Managers implemented the same core prin-ciples that have stood us in good stead over the first three years of the Fund's existence. These principles can be summarised as fol-lows and have ensured continued success:

Sectoral specialisation of internal fund �composition;

Good quality properties;�

Competitive locations;�

Sturdy income growth;�

Good lease covenants;�

Low vacancies : 2.94% (excluding refur-�bishment properties);

Effective arrears management : 1.38% �(excluding refurbishment properties);

Intensive “bottom line” management ap-�proach.

We herewith take pride in outlining our acti-vities for the year, and the financial implica-tions thereof, for the benefit of our share-holders.

Activities in the year under reviewIn August 2007, negotiations were success-fully concluded for the acquisition of Building G of the DTI Campus in Sunnyside, Pretoria. The value of the transaction was only R10 million, but we believe that long-term value lies in entrenching the Group's in-terests in the Sunnyside / Trevenna node. This node is of particular interest to various Government Departments, and has also served as a catalyst to the establishment of the partnership model between Atterbury and the Public Investment Corporation (PIC).

ASSET MANAGER’S REPORT (CONTINUED)

12

-10 -5 50 10 15 20 25 30Source: IPD, NCREIF, KTI

GermanySwitzerland

AustriaItaly

BelgiumFinland

PortugalNetherlands

JapanKorea

SwedenUS

AustraliaSpain

NorwayNew Zealand

DenmarkUK

CanadaFrance

South AfricaIreland

IPD Figure: World returns putting SA returns in context

All property

total returns,

2006 & 2007

% per annum

20072006

Elrika - Shareholder

My interests are spending time with loved o

nes,

gym, experiencing differe

nt cultures, travelling,

animals, modern art and

reading.

My job entails living my passion by do

ing graphic

design for Atterbury Cap

e’s developments that

require marketing materia

l.

The happiest moment of my life? I don’t have a

happiest moment of my li

fe, I have MANY!

Waking up in the morning

is one of them.

My investment in Atterbury Property Holdings gives me

the opportunity to have

a more fulfilling life by

using profit gained from

growing shares when the

need arises.

Photographed at Fountains Mall, Jeffreys Bay

Design Square, Brooklyn, Pretoria

September 2007 saw the conclu-sion of the planned disposals of Waterkloof Corner to Rapfund for R72,6 million and a smaller pro-perty in Lynnwood Road, Pre-toria, to a private investor for R10,5 million. The decision to dis-pose of these properties was in line with the specialisation and asset investment strategy adopted by the Group.

November 2007 was a particu-larly busy time from a project point of view. Firstly, the Atterbury House (formerly known as Shell House) refur-bishment commenced during this period. Atterbury House is an icon of the Cape Town Central Business District and skyline. It is ideally situated in terms of future develop-ment and inner city upgrade plans and has highly com-petitive parking offering within the Central Business District. The asset was acquired for its value optimization potential and the refur-bishment project is well underway. The pro-ject will ensure modernisation of the facilities and “look and feel”, offering high quality accommodation at very competitive rentals. The project has also incorporated “high street” retail into the previously under-utilized lobby areas of the building. Works commenced on a staggered floor by floor basis and will continue over the next 18 to 24 months at a refurbishment cost of ap-proximately R40 million. All mechanical equipment and waterproofing of the roof is also under review. The necessary remedial action will be undertaken as part of the pro-ject. The building is expected to surpass its former glory on completion of the project.

In July 2007, the Brooklyn Square refurbish-ment/modernisation commenced after the project had to be expedited due to a fire which left sections of the building unusable. This asset is situated in the key commercial district of Brooklyn, Pretoria. It was identified

for value extraction and acquired to re-design and refurbish in order to optimise its true value and potential as a destination retail shopping centre. The focus was to re-brand the centre and give it an identity of lifestyle and interior design attraction – a focus successfully achieved in letting acti-vity to date. Phase 1 of the development is complete and has attracted national tenants such as Kaalkop, Col'Cacchio, Derakera, Postnet, The Baron, Look and Listen, The Bread Basket, Perfect 10, Modus Vivendi, Vida E, Maneki and Simply Asia to the centre. Phase 2 is anticipated to be com-pleted by December 2008. To date, the re-furbishment has exceeded expectations in improving the tenant mix, usability and park-ing of the centre. As part of the re-branding and change of focus, the centre's name has been changed to Design Square.

Also in November, an Attfund rights issue, and correspondingly, Sanlam's initial 15% share acquisition, was concluded. The Board

approved pursuing rights as an Attfund shareholder to partake in Attfund's rights

issue and capital raising pro-cess to benefit from further off-shore investment. To raise the capital required and fulfil a stra-tegic business partnership ob-jective, we made the R300 mil-lion share offer to Sanlam who accepted and acquired an initial 15% stake in the Group, a share-holding which will increase in time to come with planned future property acquisition transactions.

During December 2007 the tran- saction whereby Atterbury ob-tained an interest in the Nova Eventis shopping centre in Ger-many was concluded. For pur-poses of record, the investment is indicated under Note 7 of the finan-cial statement: Investment through foreign investment allowance: Investec Securities Limited.

January 2008 saw the conclusion of the acquisition of Landrover Midrand for R29,8

million. Pursuant to intentions expressed last year to explore opportunities within the lei-sure and industrial / motor industry property asset classes, this property was duly acquired in a core business node. Its acqui-sition further enhanced the relationship with the McCarthy group by complementing the existing McCarthy dealership already held along the Nelson Mandela corridor in the Pretoria Central Business District. However, in retrospect, and having reviewed the op-portunities presenting themselves in this property asset class versus offices and re-tail, we have come to believe that the core fo-cus should remain with retail and offices. The motor industry properties have fallen vic-tim to the recent cap rate weakening and as a result the property has marginally reduced in value since acquisition.

Those of us who regularly drive down Atterbury Road in Pretoria would have no-ticed the electronic Investec “equities infor-

14

ASSET MANAGER’S REPORT (CONTINUED)

15

mation board” that was added to the façade of the building. Behind this addition lies addi-tional office space that is expected to offer a future expansion solution to Investec. Both initiatives contributed to further secure the site as one of the most sought after commer-cial sites in the emerging Menlo Park node next to the Atterbury off ramp in Pretoria.

In March 2008 the acquisition of additional buildings, in the Hampton Office Park in Bryanston, was concluded. The assets were acquired in fulfilment of our intention ex-pressed last year to pursue collaboration with the Sanlam Group on its property port-folio in general. Acquiring the remaining five properties in this office park fulfilled two stra-tegic objectives; one being the impetus for further mutually beneficial transactions with Sanlam, the other being greater ownership of property within the Bryanston node – a node qualified by tremendous tenant de-mand and little or no further planned deve-lopments. The last opportunity to increase the Gross Lettable Area (“GLA”) of Hampton was achieved when the construction of a

new 2,600m² building and restaurant facility commenced; completion is anticipated for December 2008. The new building has been designed with the ability to link into the exis-ting Devon House to provide larger future po-tential accommodation. The estimated cost of the development will be R34,6 million (ex-cluding the land cost) adding an estimated R3.3 million to the net income, therefore equating to an 11.8% incremental return on our investment. The acquisition of the San-lam properties and construction of the new building within Hampton Office Park has en-sured that we are better placed to meet mar-ket needs for larger space accommodation within the Bryanston node.

Lastly, towards the end of the reporting period, a refurbishment project and pro-posed parkade development was initiated at Great Westerford in Newlands, Cape Town. Great Westerford remains a flagship pro-perty in the Mother City, tenanted by blue chip financial, services and information tech-nology businesses on an average of 5 year leases. This graceful lady's common area facilities were given a “facelift” to ensure that

the A-Grade appeal of the building and tenant's business image requirements were satisfied. In addition, the parking shortage is being addressed by the planned develop-ment of an on-site parking garage which will increase the parking ratio, a much needed addition to the property. The development is also being complemented by the construc-tion of 10 luxury townhouses. Local Council approved the construction of the on-site parking garage and 10 luxury townhouses on the 13th of March 2008; however, we cur-rently still await provincial approval to pro-gress with the project.

The above outline identifies the major transactional and investment activities that were conducted through the year, but the brevity of description often belies the amount of detailed work that needs to be conducted to ensure eventual success. How does one really judge success? Many crite-ria may exist, but for the purposes of our shareholders, we realise that our actions will eventually translate into financial results, and we herewith wish to summarise certain salient results for your benefit.

Investec Façade with new Electronic Billboard,

Atterbury Road, Pretoria

Photographed at Kumba Iron Ore, Centurion Gate

Jaco - Shareholder

The Net Asset Value of the Group increased by R897,5 million from R1,918 billion to R2,816 billion. The growth in net assets can largely be attributed to the increase in the value of our investment properties from R1,241 billion to R1,550 billion (+25%) and the growth of our investment in other funds, mainly Attfund, from R1,630 billion to R2,415 billion. The latter includes participation in a R300 million Attfund rights issue, where we subscribed to Attfund shares at R90 per share. Attfund's share price grew to R111,04 during the year under review (2007: R92,93) which represents a 19.5% growth. Attfund also declared a dividend of R1,82 per share during the year under review, bringing the to-tal return from the Attfund investment to ap-proximately 21.4%.

The Group's liabilities were R1,434 billion at the start of the year and these were reduced to R1,385 billion by the end of the year. The Deferred Tax Provision portion of the liabili-ties increased from R188 million to R263 mil-lion, which means that the loans portion of

the liabilities decreased by approximately R125 million. Management felt it appropriate to use spare cash to reduce the gearing levels of the Group under the high interest rate circumstances as experienced during the period under review.

The R897,5 million net asset growth, in abso-lute terms, represents an increase of 47%. It must be borne in mind, however, that we raised the R300 million in a rights issue which contributed significantly to increasing the amount of shares in circulation from 349 million to 417 million. The Net Asset Value per share therefore increased from R5,48 to R6,75, representing growth in shareholder value of 23%.

From an income perspective: whilst a por-tion of net income growth can be attributed to structural portfolio changes, the Rental Income (excluding straight line rental adjust-ments but including recoveries) was R148,1 million (2007: R106,1 million) which reflects an increase of 40%. The property expenses

of R46,2 million (2007: R47,1 million) are in line with industry norms of 30% to 33% of rental income. The stringent management of all property expenses paid off with property expenses in 2008 decreasing. Net rental in-come therefore increased by 75% from R68,9 million to R120,9 million. This excep-tional performance provides some insight into our approach of ensuring that the assets under management are, at all times, ma-naged with the utmost of care and diligence, in order to maximize net income and thus op-timize value.

The same principles are applied throughout, irrespective of whether we own shares in a Fund, or own the buildings directly. In cases where our income is reflected as growth in the share price of a Fund, the fair value ad-justment of the assets provides insight into the performance of the underlying assets. In 2008, the fair value adjustment (FVA) on our portfolio as a whole was R572 million. This was slightly down from the FVA achie-ved in 2007 (R581 million), but it should be

The summarised balance sheet as at 30 June 2008 is as follows:2008 2007 Variance

R '000 R '000 %

Investment properties 1,550,265 1,241,511 25%Other assets 200,841 159,853 26%Investment in Attfund and Other investments 2,415,265 1,630,366 48%Assets held for sale - 83,133 -100%Working capital including trade receivables and cash 59,405 257,839 -77%Total assets 4,225,776 3,372,702 25%

Bank loans 1,061,811 1,122,613 -5%Other loans 1,490 23,699 -94%Deferred tax provision 263,050 188,377 40%Liabilities associated with assets held for sale - 38,800 -100%Minority interest 24,373 19,727 24%Working capital including trade payables, tax and bank overdrafts 58,732 60,850 -3%

1,409,456 1,454,066 -3%

Net asset value 2,816,320 1,918,636 47%Number of issued shares 417,171,816 349,749,932 67,421,884 Share price 6.75 5.48 23%

Financial OverviewAgainst the macro environment as described, the activities mentioned resulted in the following economic progress:

17

ASSET MANAGER’S REPORT (CONTINUED)

18

borne in mind that the 2008 figure was achieved over a period where the rising interest rate cycle was already putting pres-sure on property valuations.

The total profit after taxation was R523 mil-lion (2007: R492 million) which reflects profit growth of 6.4%. The profit growth seems modest when compared to the net asset value (NAV) per share growth of 23%. One should however bear in mind the effect of in-terest rate increases and the lower than pre-vious year's fair value adjustments.

On year-end, the total gearing of the Group was 25.5%. The gearing ratio is determined by dividing the total loans (R1,061 billion) by the total assets excluding working capital (R4,166 million). On a see-through basis, i.e. if the underlying gearing in both the Attfund and Rapfund portfolio's is taken into consi-deration, the Group's gearing is lower than 30%. The gearing ratio is well within the co-venants as set by our financiers. Under cur-rent high interest conditions these levels of gearing are considered appropriate and the intention would be to further reduce gearing until the liquidity environment improves.

In terms of risk management, our primary fo-cus has remained on the fixing of debt. At year-end, 58% of the long-term loans were fixed at an average interest rate of 12.32%, which is well below the prevailing prime in-terest rate of 15.5%. Our strategy remains to fix between 60% and 70% of our debt over a 3 to 10 year spread into the future. Imminent post year-end transactions will re-vert our fixing levels to in excess of 60% as per our policy.

In summary, from a financial performance point of view, the net asset value-based share price grew by 23%. We believe this level of performance to be acceptable under the difficult prevailing market conditions. Due to the low liquidity levels in the market, our actual share trades between sharehol-ders have occurred at a discount of between 5% and 10% to net asset value. We reiterate our consistent message to share-holders that the Atterbury IH share should be regarded as a long-term growth invest-ment.

Offshore investment and strategyAtterbury's management team is not cur-rently pursuing an active offshore invest-ment strategy. Our focus is on the local mar-ket, where we have a significant pipeline of projects that were recently complemented by the Waterfall transaction (refer to post year-end events).

However, the Group does have some off-shore exposure via our investment in Attfund Limited, in which we hold a 46% interest. Attfund's management is pursuing offshore diversification with a greater sense of ur-

gency and with the attention to detail and ex-cellence that we have become accustomed to.

Over the reporting period, off-shore invest-ments held through asset swap agreements, either via our interest in Attfund, or directly, were as follows:

Europe1,991,732 Deutsche Euroshop shares ac-quired at a cost of R397 million; valued at R594 million as at 30 June 2008. 27,318,073 shares which equate to a 22.5% investment in Stenham European Shopping Centre Fund (SESCF) with a cost of R261 million

ASSET MANAGER’S REPORT (CONTINUED)

Graphical Portfolio Overview

GeographicalSpread By Value

57.13%

42.87%

Gauteng

Western andEastern Cape

60.36%

39.64%

32.12%

66.71%

1.18%21.09%

77.98%

0.93%

GeographicalSpread By Area

Sector SpreadBy Area

Sector SpreadBy Value

Gauteng

Western andEastern Cape

Offices

Retail

Other

Offices

Retail

Other

Lease Expiries >48mLease Expiries 36m>48mLease Expiries 24m>36m

Lease Expiries 12>24mLease Expiries 12mCurrent Vacancies

Lease Expiry Profile

0.00% 10.00% 20.00% 30.00% 40.00% 50.00%

10.17%19.83%

10.80%10.34%

2.92%

45.95%

Lebo - ShareholderMy job entails looking after the technology company, Infotech.My favourite shopping destination is Atterbury Value Mart because of its convenience and the variety of stores.

I love South Africa because of the opportunities it offers.My investment in Atterbury Property Holdings has been extremely good - it has more

than doubled in 18 months.

Photographed at Glenfield Office Park, Pretoria

and valued at R345 million as at 30 June 2008. Attacq also invested directly into the SESCF, acquiring 5,464 shares (4.5% inte-rest) at a cost of R52,5 million and valued at R70,1 million at 30 June 2008.

United States of America

123,000 Simon Group shares acquired at a cost of R55,5 million; valued at R86,5 million as at 30 June 2008. 881,100 Annaly Capital Management Inc. shares acquired at a cost of R96,1 million; valued at R106,9 million as at 30 June 2008.

In total, Attfund's off-shore investment value as at 30 June 2008 is R875,8 mil-lion at an original cost of R597,3 million. At-terbury has a 46% in-terest in Attfund, thus bringing our offshore ex-posure via Attfund to R402,87 million as on 30 June 2008.

Other

Other international invest-ments valued at 30 June 2008 at R57,5 million.

Our 46% interest in the net off-shore assets of Attfund (af-ter taking into account debt on these investments) is va-lued at R373 million. Taking this into account, the Group's total offshore exposure as on 30 June 2008 is valued at R443 million or 10.5% of the net asset value.

The Rand has been exceptionally volatile and generally weak in the period since year-end and, at the time of finalisation of this re-port, the value of our offshore investment should have increased. However, we are not inclined to try and predict the movement in our exchange rate, and we do not claim to be a Rand-hedge investment vehicle. As mentioned, our international exposure is pri-

marily driven by the research and initiatives undertaken by the Board and management team of Attfund, and we monitor their pro-gress with interest while maintaining our own focus on the South African market.

Post year end transactionsA number of transactions are in the process of completion as addressed in the Directors’ Report. Our comments here are focused on

one of these transactions only, as the influ-ence of this particular transaction is deemed of particular importance to shareholders of the Group.

The “Waterfall” transaction

Regarded as possibly Atterbury's most sig-nificant transaction since its inception in 1994, the acquisition of the development rights to the so-called “Waterfall” precinct

20

Waterfall City Site

was signed in August 2008 and all condi-tions precedent have subsequently been met. Situated in the heart of the fastest gro-wing metropolis on the African continent, the Waterfall Development precinct is minutes from Sandton, the financial hub of Africa, be-tween the N1, M1 and N3 Buccleuch inter-change and Allandale, within easy access from Pretoria, Sandton and Johannesburg Central Business Districts, via Gauteng's

main arterial highways.

In this landmark “asset for share” deal, Atterbury acquired the ex-clusive development rights for (initially) 700,000m² of GLA in-tended for commercial, retail, light industrial and mixed use developments. In return for the development rights, the origi-nal owners, the Mia family con-sortium, have become a 22% shareholder in Atterbury In-vestment Holdings Limited.

Interesting background to note: the first title deed of the Waterval farm was signed by President Paul Kruger in 1889. The first owners, the British bro-thers Gibson, bred cattle on the farm and also did commercial plantations. They also managed a

stage-coach business be-tween Pretoria and Johan-

nesburg and established a hotel, then known as “Half-way

house”. Descendants of the Gibson family sold the farm to Witwatersrand Estates Limited, in June 1934. The company was used as wealthy trader, Moosa Ismael Mia's vehicle to buy the 3 000ha farm, Waterfall, in the same year, because the Asiatic Tenure Act prevented him from owning property in his personal capacity. He bought it for a cha-ritable purpose in order to educate under-privileged children. In terms of the laws of Islam, the Waterfall Islamic Institute made portions of the farm available for develop-ment in terms of long-term lease agreements.

ASSET MANAGER’S REPORT (CONTINUED)

The Waterfall Development will ultimately contain 1,455,000m² (GLA) of cutting edge mixed use development encouraging a com-prehensive lifestyle of “live, work, relaxation and lifestyle enjoyment” within the larger Waterfall City community. The development is destined to become the proposed new Central Business District of Midrand as well as a core commercial nexus between Johannesburg and Pretoria. The proposed commercial development rights make prov is ion for a t least 150,000m² of retail shopping and lifestyle experience in the so- called “Downtown City”, a further 400,000m² of mixed use elements, about 400,000m² of office space, most of it in a new central busi-ness district almost as big as the Sandton Central Business District, and finally, close to 400,000m² light industrial and warehouse development pro-viding space equivalent to al-most half the current avail-able industrial lettable area in the greater Midrand. The mixed use development will be supported by attractive residential options for the trendy professional mana-gers who want to take ad-vantage of the complete lifestyle option offered in a leading edge mixed use precinct.

The transaction was con-cluded on the basis of the ex-isting rights of 700,000m² of GLA. The purchase price is R800 million and shares were issued as consideration at R6,58 per share. Based on the number of shares in issue before the transaction, the current shareholders will experience a dilu-tion of approximately 22%.

The transaction is expected to add signifi-cant value to the Group over the medium to long term. Firstly, although the transaction

was concluded on the basis of exchanging one asset for another, the reality is that the transaction was based on 700,000m² whereas the full suite of rights that may be applied for is 1,455,000m² of GLA. The im-plication is that, once these additional rights are approved, the value of such zoned land will be added to the balance sheet of Atterbury Investment Holdings. There is ob-viously a risk that such a rezoning could not

succeed, whether par-tially or wholly.

Secondly, the transaction is structured to al-low for 80% of the development profit to be made by Atterbury Investment Holdings. We will therefore not only own 80% of the as-sets upon completion, but also participate in 80% of any differential between the develop-ment cost and the value upon completion. The balance (20%) is owned by Atterbury Property Holdings (Pty) Ltd.

Thirdly, one has in this case the ability to in-fluence the quality and coherency of a whole business node from the onset. This unique

ability will assist in ensuring that ope-rational efficiencies can be optimized throughout the pro-cess and thus pro-vide for a cost-effective roll-out over a sustained period of time. All of these fac-tors will, if executed with professionalism and care, result in a sig-nificant accrual of value to the shareholders over the next 10 years . Atterbury Investment Holdings, in close colla-boration with Atterbury Property as developer, will

apply its collective intellec-tual property to ensure that

this project delivers on its promise.

The noticeable potential of this project brings with it questions that

are both pleasing and awkward at the same time. We shall attempt to pre-empt some questions here and provide answers at the best of our ability.

What will this transaction do to the Atterbury Investment Holdings share price? We be-lieve it will play a significant part in creating long term sustainable upward momentum in the share price, at least for the next 10 years.

21

However, our belief is that significant sup-port exists with the applicable authorities with regard to the development of this node. We therefore have little doubt that the major-ity of the additional land will eventually be rezoned and would contribute to the growth of the Group, solely on the basis of the in-creased value of the rezoned land.

Lucille, Heidi, Talana & IanPhotographed at Trevenna Precinct, Pretoria

Deal Police

AssetWatcher

HardcoreAccountant

Queen ofcashflowAsse

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Manageme

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Gideon Oosthuizen Louis van der WattChief Operating Officer Chief Executive Officer

22

By how much will the share price rise? We do not know, because there are too many factors, both known and unknown, which will influence the price. We have never been in the habit of projecting our share price and we do not wish to start at this time. Yes, long-term value has been locked in, but short-term uncertainty is at an all-time high.

But will the price rise significantly, espe-cially in the short term? We believe that the transaction was closed at a fair value and no immediate up-or-downward movement can be predicted. However, once the transaction has been concluded, the intention is to re-value the land (with effect 31 December 2008) and such revaluation may result in a positive adjustment, bearing in mind that the transaction values were negotiated more than 6 months prior to the planned revalua-tion date.

Well, how should I go about trading with my shares, then? We have always maintained a consistent approach, and that is to build a company that will provide long-term value to any investor, irrespective of when he/she de-cides to invest. The implication is that the price, as announced from time to time, should always (in our opinion) be consi-dered as a buyer's price. The Waterfall transaction will place an even higher accent on this approach, especially during the next 2 to 3 years, during which revaluation of the extra 755,000m² may take place.

In conclusionThe year under review started by presenting certain challenges as the rising interest rate cycle slowed down our economy, made funding more expensive, and correspon-dingly, made property investments slightly less attractive. Since year-end, international economic woes have increased and, at the time of writing this report, the only prediction anyone is willing to make is that uncertainty and volatility will be with us for the foresee-able future.

In the context of this rather fluid situation, the Asset Managers of Atterbury Investment Holdings Limited will continue, as always, with our focus on the fundamentals that have contributed to our successes of the past. Our total growth in shareholders' equity of 23% is pleasing, albeit that liquidity is low and shareholders that are sellers at this time may have experienced lower returns. Our ac-tions will be directed towards improving the critical mass and quality of our portfolio even further; and by possibly selling off mature and smaller assets that may be deemed to have a lesser role to play in our long-term strategy.

Looking forward towards 2009, we may ex-perience that the Group's assets do not achieve the same exceptional levels of fair value adjustment as we have had over the past two years. We will, however, have a much stronger balance sheet by the time the

Waterfall transaction is fully digested, in its immediate form (and not taking into account the future revaluation prospects as indicated above). We may therefore feel as though we are wading through syrup for a while, but we are using the inevitable short-term pressure to properly prepare ourselves for the acce-leration that will be required during the next phase of the cycle. We retain the immutable long-term belief that the property sector in South Africa is still available at a discount when compared to international property prices (even after the correction of October 2008) and that strong growth prospects exist for as long as our economy is allowed to flourish under free market conditions.

The Executive Directors are, as always, deeply indebted to the individuals that con-tribute their time and energy with unwave-ring commitment to the cause of optimizing the performance of the assets in the port-folio. Featured in the photograph on the pre-vious page are the other members of the executive committee of Atterbury Asset Managers. Not pictured, but ever-present in their support, is the rest of the Atterbury team, for whom we have the highest regard. Special mention must also be made of the asset managers of Attfund (Parkdev), the as-set managers of Rapfund (Retail Africa Asset Managers) and our property manage-ment partners Eris Property Group. We here-with wish to express our appreciation and ac-knowledgement of your talents.

ASSET MANAGER’S REPORT (CONTINUED)

Victor - Shareholder

Photographed at Woodlands Boulevard, Pretoria

Stephan - ShareholderMy job/career is running an

international online marketing

consulting, outsourcing and technology

company called Acceleration.

My favourite holiday destination is Hermanus. It

restores us after the congestion and

greyness of London.Raising young children in London is very tough. I am

not sure South Africans ever really

adjust to the indoor lifestyle.

I think my investment in Atterbury Property Holdings was

one of the best deals I've ever done. I

am very bullish about Atterbury's long-

term growth and value despite the

current global financial crisis.

Photographed at The Bread Basket at Design Square, Pretoria