Last Updated 05/03/2010     

1.                  Note that the tenant is paid up to date even though no rental income has been received for February 2010. Double payment was received in January 2010 which accounts for the correct status of the tenant.

2.                  Bluezone Property Investments (Pty) Ltd (in liquidation) has a claim for Rent Roll and Administration  

            of R 230 629 against the company.

3.                  The current account is held with FNB under acc number 512-3003-8030 and is showing a zero balance. The Nedbank account is held under account number 901-591-8276 and has a credit balance of R 504 467.68 as on the 1^st of March 2010.

4.                  The property’s vacancy factor is 0% as at February 2010.

5.                  The company’s liability for VAT at 30 November 2009 is estimated at R 33 549.

6.                  Included in the expenses is an amount of R 121 502.85 which includes professional fees of forensic auditors and legal fees.

7.                  No provisional judicial management fees have been charged or collected from the company, neither  

            has the Master of the High Court granted any fees to be collect by the judicial managers as on date

            of this report

8.                  Total Immediate Obligations of the company : R 387 587.55

   Forensic Auditors’ Report Findings

The company was incorporated on 27 June 1984 under reference number 1984/006578/07. The

company’s registered office appears to be that of its auditor, Loubser Du Plessis Incorporated, and

is given as De Waterkant Building, 10 Helderberg Street, Stellenbosch. Hennie Lamprecht is given

as the sole director.

The company sole asset of significance is an office block situated in Florida Roodepoort, which is let to

the Gauteng Provincial Government (for the use of the Dept. of Education). The property was valued

by J.T. Seyffert in July 2006 for R 13 300 000 and formed the basis of a syndication arrangement

by Bluezone at a value of R 11 633 000.

It appears that in June 2006, the shares in Madeline Street Properties were purchased by Abrina 2617

(Pty) Ltd. (which changed its name to Madeline Street Holdings) for R 9 000 000 and was done to

avoid the stamp duty (and resultant penalties) on the transfer of the shares.

A further complication arises due to the company accounting for the purchase of the shares as though

it had purchased the property. There are a few consequences that flow from this:

·        the books as prepared, as “unauditable” and have to be re-written from the beginning;

·        the same situation applies in the Holding Company;

·        no audited financial statements are able to be prepared or income tax returns submitted until

      this is done;

·        certain of the expenses which would ordinarily be deductible for income tax purposes

     with the purchase of the property would now be of a capital nature and not deductible for

     normal tax purposes; and

·        the cost of the property for Capital Gains Tax purposes would be the cost of the property

      to the company, namely R 1 684 786, and not the R 9 000 000 paid for the shares.

Provision was made, on syndication, for a “revamp fund” of R 50 000.  This fund never existed.

THE ADMINISTRATION OF THE COMPANY POST SYNDICATION

The lease with the GDE terminates on 30 June 2010. At this stage, it is unsure whether the Department

will renew the lease. Should the department not renew, the company will not be in a position to

meet its immediate obligations, nor pay any income to the holding company.

Despite the fact that the company has not prepared audited financial statements, it appears to have rendered

a “nil” IT 14 for the 2007 and 2008 tax years. The company appears to be in credit with SARS for

R 105 843.

The company is in arrear with its VAT obligations for October 2009 amounting to R 33 549.

FINANCIAL POSITION

The property has been valued by Messrs of Valuers & Appraisers at R 11 000 000.

Regretfully, until such time as the books are re-written, we are unable to confirm if the company is exposed

to a claim from the liquidators of Bluezone Property Investments (Pty.) Ltd. or, whether it has a claim,

in turn, against Bluezone.

This also applies to the South African Revenue Services, in respect of normal taxes which may

become payable once the company’s tax affairs are up to date.

The company has a good lease and tenant in place, provided the GDE renews its lease for a further

period. If not, the company has no reserves to meet future operating costs until a replacement tenant

is found. Also, without a tenant in place, the valuation of the property will, most likely, drop.

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