DIPULA INCOME FUND LIMITED - Financial Effects and withdrawal of cautionary announcement

Financial Effects and withdrawal of cautionary announcement

DIPULA INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2005/013963/06)
JSE share code: DIA    ISIN: ZAE000158317
JSE share code: DIB    ISIN: ZAE000158325
(Approved as a REIT by the JSE)
(“Dipula” or the “company”)


FINANCIAL EFFECTS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


1.   INTRODUCTION

     Linked unitholders are referred to the announcements released on SENS on 21 August 2014 and
     3 October 2014 wherein unitholders were advised that Mergence Africa Property Investment Trust
     (the “purchaser” or “Mergence”) and Dipula, being the sole capital and income beneficiary of
     Mergence, had concluded an agreement with Redefine Properties Limited (“Redefine” or the “seller”)
     for the acquisition of the rental enterprises conducted in respect of and including certain properties and
     buildings of the seller (collectively, the “property portfolio”) (the “acquisition”). The purpose of this
     announcement is to present the financial effects of the acquisition.

2.   FINANCIAL EFFECTS

     Set out below are the forecast revenue, operating profit, net profit after taxation and distributable
     earnings of the property portfolio (“the forecasts”) for the 9 months ending 31 August 2015 and the
     year ending 31 August 2016 (the “forecast periods”). The forecasts have been prepared on the
     assumption that the acquisition will be implemented on 1 December 2014.

     The forecasts, including the assumptions on which they are based and the financial information from
     which they are prepared, are the responsibility of the directors of Dipula. The forecasts have not been
     reviewed or reported on by the independent reporting accountants or external auditors.

     The forecasts presented in the table below have been prepared in accordance with the company’s
     accounting policies and in compliance with IFRS.

                                                                 9 months ending              Year ending
                                                                  31 August 2015           31 August 2016
                                                                           R’000                    R’000
     Contractual rental and tenant recoveries                             38 036                   54 388
     Uncontracted rental                                                   1 161                    2 410
     Straight-line of lease income adjustment                              3 998                    4 172
     Total rental revenue                                                 43 195                   60 970

     Net operating income*                                                36 013                   50 355
     Net profit after taxation*                                           29 207                   41 281
     Distributable earnings                                               25 209                   37 109
     *Includes the effects of straight-lining rental income.

     The forecasts incorporate, inter alia, the following material assumptions:

       1. Contracted revenue is based on existing lease agreements.

       2. Uncontracted revenue comprises 2.7% and 4.0% of the gross rental revenue for the 9 months
          ending 31 August 2015 and the year ending 31 August 2016.
                                                                                                            

       3. All existing lease agreements are valid.

       4. R106.75 million of the purchase consideration (including acquisition costs and expected capital
          expenditure) is assumed to be funded through third party interest-bearing borrowings. These
          interest bearing borrowings are assumed to incur interest at weighted average interest rate
          of 8.5% p.a.

       5. It is assumed that the balance of the purchase consideration and capital expenditure of R318.75
          million will be funded through the issue of approximately 19 137 359 A-linked units at an issue
          price of R9.58 per A-linked unit and the issue of approximately 19 137 359 B-linked units at an
          issue price of R7.07 per B-linked unit to Redefine.

       6. In terms of the asset management agreement with Dipula Asset Management Trust (the
          “manager”), Dipula will pay the manager a monthly fee equivalent to 1/12th of 0.3% of the
          aggregate of the market capitalisation and borrowings of Dipula.

       7. Dipula will pay the appointed property manager for all property management services a monthly
          fee equivalent to 2.5% of the gross monthly income collected (including VAT).


3.   UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION

     The unaudited pro forma financial effects of the acquisition on Dipula’s net asset value and tangible
     net asset value per A-linked unit and per B-linked unit, based on the reviewed consolidated statement
     of financial position as at 31 August 2014, are not significant (less than 3%) and therefore have not
     been disclosed.

     The unaudited pro forma financial effects are the responsibility of the directors of Dipula and have not
     been reviewed or reported on by the company’s auditors.


4.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

     Dipula linked unitholders are advised that following the release of the financial effects of the
     acquisition, caution is no longer required to be exercised by linked unitholders when dealing in their
     linked units.


14 November 2014


Sponsor
Java Capital

Date: 14/11/2014 10:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.