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CAPITAL PROPERTY FUND - AUDITED RESULTS AND INCOME DISTRIBUTION DECLARATION
CAPITAL PROPERTY FUND
JSE Share code: CPL
ISIN: ZAE000001731
("Capital" or "the Fund")
AUDITED RESULTS AND INCOME DISTRIBUTION DECLARATION
The directors of Property Fund Managers Limited, management company of Capital,
announce that the audited consolidated results of the Fund for the financial
year ended 31 December 2003 are as follows:
CONSOLIDATED INCOME STATEMENTS Audited Audited
Year ended Year ended
31 December 31 December
2003 2002
R"000 R"000
Net property income 66 149 51 983
Interest 4 219 3 200
70 368 55 183
Trust expenditure 19 697 13 712
Net income before taxation 50 671 41 471
Taxation - Capital Gains Taxation (18) -
Headline earnings 50 653 41 471
Net write-up/(down) on revaluation of investment
property 36 326 (46 073)
Net deficit on disposal of investment property (1 956) (945)
Deferred Capital Gains Taxation (3 557) (1 728)
Net income/(loss) for the year 81 466 (7 275)
Reconciliation of net income/(loss) for the year
to amount available for distribution:
Net income/(loss) for year 81 466 (7 275)
Transfer (to)/from revaluation reserve (32 769) 47 801
Transfer from trust capital 1 956 945
Transfer from maintenance reserve 3 523 360
Amount available for distribution 54 176 41 831
Units in issue 184 616 320 146 838 565
Weighted average number of units in issue 184 616 320 146 838 565
Headline earnings (cents per unit) 27,44 28,24
Earnings/(loss) (cents per unit) 44,13 (4,95)
Income distribution (cents per unit) 29,34 28,49
Net asset value (cents per unit) 235 225
CONSOLIDATED BALANCE SHEETS
Assets
Non-current assets
Investment property 425 425 313 528
Current assets 46 997 44 285
Total assets 472 422 357 813
Unitholders" interest and liabilities
Unitholders" interest 433 820 330 974
Non-current liabilities - Deferred Capital Gains Taxation 5 285 1 728
Current liabilities 33 317 25 111
Total unitholders" interest and liabilities 472 422 357 813
CONSOLIDATED STATEMENTS OF CHANGES IN
UNITHOLDERS" INTEREST
Capital of Trust 385 524 311 924
Balance at beginning of the year 311 924 312 869
Issue of shares 75 556 -
Net deficit on disposal of property (1 956) (945)
Revaluation reserve 44 308 11 539
Balance at beginning of the year 11 539 59 340
Transfer from/(to) distributable reserve 32 769 (47 801)
Maintenance reserve 3 988 7 511
Balance at beginning of the year 7 511 7 871
As previously reported - -
Change in accounting policy - 7 871
Transfer to distributable reserve (3 523) (360)
Undistributed income - -
Balance at beginning of the year - -
Net income/(loss) for the year 81 466 (7 275)
Net transfers (to)/from Trust capital and
non-distributable reserves (27 290) 49 106
Income distributions (54 176) (41 831)
Total unitholders" interest 433 820 330 974
ABRIDGED CONSOLIDATED
CASH FLOW STATEMENTS
Net cash inflow/(outflow) from operating activities 3 934 (3 620)
Net cash (outflow)/inflow from investing activities (1 971) 9 576
Net increase in cash resources 1 963 5 956
Cash resources at beginning of year 34 977 29 021
Cash resources at end of year 36 940 34 977
INCOME DISTRIBUTIONS
Amount available for distribution (cents per unit) 29,34 28,49
Distribution (cents per unit) 29,34 28,49
Interim 14,75 14,01
Final 14,59 14,48
The final distribution, being number 41, for Capital has been declared in
respect of the income distribution period 1 July 2003 to 31 December 2003.
Accounting Policies
The results have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice and the Accounting Policies, except for
letting fees and tenant installations, as discussed below, are consistent with
those applied in the previous year. The Fund adopted AC133, Financial
Instruments: Recognition and Measurement, during the current financial year.
CHANGE IN ACCOUNTING POLICY AND MAINTENANCE RESERVE
At 31 December 2003, the Board of directors of Property Fund Managers decided
to adopt a more conservative accounting treatment in respect of letting fees
and tenant installations. Whereas previously letting fees and tenant
installation costs were amortised over the period of the lease, the Board has
decided to expense letting fees and tenant installations in the year incurred.
Accordingly, the unamortised letting fees and deferred tenant installation
costs at 31 December 2003 of R1 880 420 and R1 121 880, respectively, have been
written-off in full in the current financial year, totaling R3 002 300. The new
accounting policy has not been applied retrospectively as the Fund was required
by statute to distribute all its prior year earnings.
Tenant installation and letting commissions in respect of new developments and
redevelopments of existing properties for new tenants will be capitalised. In
addition, management of the Fund conducted a comprehensive assessment of the
maintenance reserve required for each fixed property, which resulted in a
transfer from the maintenance reserve to distributable earnings of R3 523 000.
It is the intention that, once the current maintenance reserve has been
exhausted as expenditure in this regard is incurred, such a reserve will no
longer be retained.
Audit Opinion
The auditors, KPMG Inc., have issued their opinion on the Group"s financial
statements for the year ended 31 December 2003. A copy of their unqualified
report is available for inspection at the Fund"s registered office.
FINANCIAL RESULTS
Income available for distribution is 29,34 cents per unit (2002: 28,49 cents)
an increase of 3% over the previous year. Allowing for the interim dividend of
14,75 cents per unit (2002: 14,01 cents) a final dividend of 14,59 cents per
unit (2002: 14,48 cents) will be distributed at the beginning of March 2004.
PORTFOLIO COMMENTARY
As at the year end, the portfolio comprised 57 properties in the major urban
areas of South Africa.
By value 51% are offices, 40% industrial properties and 9% retail.
Geographically 61% are located in Gauteng, 26% in the Cape Province and the
balance in Kwazulu Natal and Mpumalanga.
Sales activity has largely been concentrated on smaller or lower capital value
properties located in secondary commercial or industrial nodes and has resulted
in the disposal of eight properties. The bulk of these properties were either
vacant or with large vacancies and negative cash flows. As a result, the
reinvestment of the sales proceeds will be income enhancing.
Details of the properties sold and accounted for in 2003 are as follows:
Exit
Name Address Price yield
Alfeo 775 Western Service Road R400 000 19,2%
Wynberg, Sandton
Wynberg 26 Corner Thora Crescent R1 200 000 14,1%
5th Street, Sandton
Stand 979 Ferndale 291 Kent Road, Ferndale R1 100 000 Negative
Randburg
Harley Street 19 Harley Street, Ferndale R850 000 10,9%
Randburg
Munro McHarry Corner Harley Street and R900 000 8,8%
Kent Road, Ferndale, Randburg
Erf 107/1 Kya Sand 24 Kya Sand Road, Kya Sands R1 100 000 Negative
Randburg
Busaf Bauer 26 Spanner Road, Clayville R900 000 Negative
Midrand
Maybaker House 25 De Korte Street, R1 500 000 Negative
Braamfontein
Johannesburg
Gross sales price, before deduction of commission R7 950 000
Transfer of a further property was effected in January 2004 and will be
accounted for in the 2004 financial year, as the conditions precedent had not
been met at year-end.
Exit
Name Address Price yield
Alfeskor 32 Chadwick Avenue, Wynberg R800 000 10,1%
Agreements of sale have been concluded on a further three properties in 2003
with transfer expected in 2004. These disposals will be accounted for in the
2004 financial year, as the conditions precedent had not been met at year end.
Exit
Name Address Price yield
290 Halfway House Old Pretoria Road, Midrand R12 500 000 8,6%
Leonard Brushware Spyker Crescent, Stormill R2 750 000 2,3%
Portion Xactinvest Nourse Avenue, Epping, R5 000 000 14,8%
Cape Town
Vacancies have continued to decrease through an increased focus of letting and
retention of tenants. The following table reflects the percentage vacancy at 31
December of the respective year:
2001 15%
2002 11%
2003 6%
PORTFOLIO VALUATION
The entire portfolio was revalued by a panel of valuers appointed in September
2003. These valuations reflected a property portfolio valuation of R425 425 000
at 31 December 2003.
The market valuation including Capital"s cash reserves in the capital account
of R10,2 million equates to 236 cents per unit (2002: 221 cents per unit).
ANNUAL REPORT
Capital"s annual report will be posted to unitholders on or about 1 March 2004.
FUTURE STRATEGY
The acquisition of 2 Long Street and Southway Mall, together with the latter"s
refurbishment programme, and the ongoing sales of older non-performing
properties, is in accordance with the rejuvenation of the portfolio strategy
set in 2003. A potential acquisition of a portfolio is being considered, for
which a cautionary has been issued. Such acquisition will complement the
strategy.
Future acquisitions will focus on good quality properties that are well-
tenanted and are located in growth areas of the major metropolitan areas of
South Africa. Desirable properties in high-growth small towns and in dominant
positions in rural areas will be considered. A balanced sectorial mix is
desirable with further investments required to achieve the optimum mix of:
* retail 45%
* office 40%
* industrial 15%
Acquisitions will also focus on higher value properties.
Sales will continue on a planned basis so as to minimise the effect upon the
Fund"s earnings. The sale portfolio has been split into three tranches:
(a) Sales will initially focus on those properties that consistently provide a
yield that is below the Fund"s average. These are generally poor quality
properties located in secondary areas.
(b) The second tranche are those C grade properties which are let and income
producing.
(c) The third tranche are the better quality buildings that no longer meet the
strategy requirements.
OUTLOOK
The procurement of additional properties and re-orientation of Capital"s
portfolio should result in an improvement in asset quality for unitholders and
a foundation from which earnings will grow. However, the effect of the
acquisitions and the expiry of a number of substantial leases that are above
market levels in the existing portfolio and possibility of vacancies in these
premises until relettings occur, will result in earnings for 2004 being similar
to those of 2003.
INCOME DISTRIBUTION DECLARATION
Notice is hereby given that a cash distribution number 41, of 14,59 cents per
unit (2002: 14,48 cents) ("the distribution") has been declared payable to
unitholders recorded in the books of the Fund at the close of business on the
record date being Friday, 27 February 2004. Unitholders are advised that the
last day to trade "cum" the distribution will be on Friday, 20 February 2004.
The units will trade "ex" distribution as from Monday, 23 February 2004.
Payment will be made on Monday, 1 March 2004. Unit certificates may not be
dematerialised or rematerialised during the period Monday, 23 February 2004 to
Friday, 27 February 2004, both days inclusive.
On behalf of the Board
JHI Real Estate Limited
Johannesburg
Secretaries
5 February 2004
REGISTERED OFFICE:
1st Floor, JHI House
11 Cradock Avenue
Corner Baker Street
Rosebank, 2196
PO Box 2100
Parklands, 2121
TRANSFER SECRETARIES:
COMPUTERSHARE LIMITED
70 Marshall Street
Johannesburg, 2001
PO Box 1053
Johannesburg, 2000
PROPERTY FUND MANAGERS LTD:
Co. Reg. No. 1980/009531/06
Date: 05/02/2004 05:00:12 PM Supplied by www.sharenet.co.za
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