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RES - Resilient Property Income Fund Limited - Condensed audited consolidated

Release Date: 08/02/2012 16:44
Code(s): RES
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RES - Resilient Property Income Fund Limited - Condensed audited consolidated financial statements for the year ended 31 December 2011 Resilient Property Income Fund Limited Incorporated in the Republic of South Africa Reg no 2002/016851/06 Share code RES ISIN ZAE000043642 ("Resilient" or "the group") CONDENSED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 Directors` commentary The distributions for the 2011 financial year increased to 230,71 cents per linked unit (interim: 109,36 cents; final: 121,35 cents), an increase of 8,91% over the distributions for the previous financial year. Resilient undertook a number of transactions which are earnings dilutionary in the short term but that will support earnings growth in the long term. These include the disposal of Resilient`s holding in Fortress Income Fund Limited-A units, acquisition of properties at yields below the cost of funding and the acquisition of additional units in New Europe Property Investments plc ("Nepi") pursuant to that company`s rights issue. The highlights of the year were the successful opening in April 2011 of the 75 000m2 GLA Mall of the North and the November 2011 opening of the 9 190m2 GLA Tzaneen Lifestyle Centre. 1 PROPERTY ACQUISITIONS With effect from June 2011, Resilient acquired the remaining 50% interest in The Grove for R356,4 million based on a forward yield of 8,25%. An additional 3% interest in the Mall of the North was acquired at cost. The interest in Brits Mall was increased from 80% to 93% at a cost of R48,5 million based on a forward yield of 8,5%, effective August 2011. An additional 20% interest in I`langa Mall was acquired at a cost of R135,2 million based on a forward yield of 8% effective from October 2011. Resilient agreed to acquire a 40% interest in a 14,13 ha property in Secunda for the development of the 45 000m2 GLA Secunda Mall from Sasol Pension Fund. On 1 December 2011 Resilient acquired the 65 516m2 GLA Boardwalk Shopping Centre from Capital Property Fund ("Capital") at a forward yield of 8%. The purchase price of R1 028 million was settled through the issue of 16 211 238 units in Resilient at a price of R31,71 per linked unit and the balance of R514 million in cash. 2 COMPLETED DEVELOPMENTS Mall of the North The Mall of the North, in which Resilient has a 60% interest, was completed within budget and opened ahead of schedule on 14 April 2011. This development achieved a forward yield of 10,2%. The 500m2 extension to the Woolworths store to accommodate its full range was completed in November 2011. The mall is trading well and has established itself as the dominant retail centre in Limpopo Province. Northam Plaza The 5 031m2 GLA extension to Northam Plaza was completed within budget at a cost of R42 million and a yield of 13,1%. Tenants include Truworths, John Craig, Mr Price, Standard Bank and Totalsports. The Shoprite store was also extended. Tzaneen Lifestyle Centre Construction of this development commenced in January 2011 and opened on schedule and within budget in November 2011. Resilient has a 70% interest in this development. This first phase has a GLA of 9 190m2 and is anchored by Checkers and a Food Lovers Market. Initial trading reports are encouraging and a second phase is currently being evaluated. 3 NEW DEVELOPMENTS AND EXTENSIONS Burgersfort Mall The development of a 42 000m2 GLA regional mall has been approved with completion scheduled for April 2013. Earthworks have been completed. The mall will be anchored by Shoprite, Game, Edgars and Pick `n Pay and will include the major national retailers. The development is projected to achieve a 9% yield. Developers of a competing shopping centre, being developed in the eastern suburbs of Burgersfort, attempted to delay the development of the mall through an urgent High Court application. The application was dismissed with costs. The full matter is still to be heard, however, Resilient has obtained opinion from senior counsel that the claims are without merit. Highveld Mall A 12 000m2 GLA third extension to Highveld Mall to accommodate Game and HiFi Corporation commenced in September 2011 with completion scheduled for November 2012. Resilient has a 60% interest in Highveld Mall. The extension is expected to yield 9,2% Secunda Mall The development of a regional mall with a GLA of 45 000m2 has been approved. Resilient has a 40% interest in the property and Sasol Pension Fund and local BEE consortiums own 40% and 20% respectively. Each co-owner will fund their respective share of the development. The property is situated adjacent to the Secunda CBD. An additional 10 000m2 of retail rights have been approved resulting in total retail rights of 50 000m2. Earthworks have been completed and construction is anticipated to commence before the end of February 2012. This development is projected to achieve a 9% yield. Sterkspruit Plaza The first phase of this development with a GLA of 9 000m2 will be anchored by Shoprite. Construction commenced in August 2011 with completion scheduled for October 2012. As only 30% of the site is being developed, the forecast yield is 8,5%. As subsequent phases will have no land cost, higher returns will be achieved. Resilient has increased its interest in this property from 68% to 82%. Tenant demand supports a second phase of this development. 4 FUTURE EXTENSIONS Significant extensions to meet tenant demand will be undertaken at The Grove, Mvusuludzo Mall Thohoyandou, Circus Triangle Mthatha, Village Mall Kathu and Northam Plaza during 2012. The extensions will be yield enhancing. 5 RESILIENT AFRICA Resilient has agreed in principle to invest up to R500 million in retail developments in Nigeria in partnership with Standard Bank and Group 5. 6 INVESTMENTS % of Number units/ Carrying of units/ shares value Investment shares in issue (R`000) Capital 208 000 000 12,94% 1 830 400 Fortress Income Fund Limited - B 63 000 000 22,04% 318 150 Nepi 19 100 000 18,58% 620 750 2 769 300
7 VACANCIES Vacancies decreased from 3,1% at December 2010 and 2,8% at June 2011 to 1,9% at December 2011. The most significant reduction in vacancies occurred at Village Mall Kathu and The Grove where vacancies were reduced from 6,0% and 6,6% at December 2010 to the current 0,8% and 1,4% respectively. 8 BORROWINGS Secured facilities of R850 million from Standard Bank and R268 million from RMB were accepted during the year. Resilient`s unsecured DMTN programme has been utilised as follows: Pricing over Amount 3-month Jibar 3-month issuance expiring 14 February 2012 R275 million +0,30% 1-year issuance expiring 17 October 2012 R150 million +0,86% 3-year issuance expiring 3 June 2014 R225 million +1,45% 3-year issuance expiring 18 October 2014 R350 million +1,55% Resilient intends increasing the size of the programme from the current R1 billion to R2 billion. 9 PROSPECTS The board is confident that growth in distributions of approximately 10% will be achieved for the 2012 financial year. The growth is based on the assumptions that a stable macro-economic environment will prevail, no major corporate failures will occur and that tenants will be able to absorb the recovery of rising utility costs. Budgeted rental income was based on contractual escalations and market related renewals. This forecast has not been audited or reviewed by Resilient`s auditors. By order of the board Des de Beer Nick Hanekom Managing director Financial director Johannesburg 8 February 2012 Consolidated statement of financial position Audited Audited
Dec 2011 Dec 2010 R`000 R`000 ASSETS Non-current assets 13 063 400 9 758 917 Investment property 8 759 377 5 764 050 Straight-lining of rental revenue adjustment 122 359 89 598 Investment property under development 346 376 792 810 Investment in associate company - 425 728 Investments 2 769 300 2 216 200 Intangible asset 26 422 26 422 Resilient Unit Purchase Trust loans 420 320 272 303 Loans to employees to acquire Capital units 279 249 9 608 Loans to BEE partners 221 632 97 716 Loans to development partners 118 365 64 482 Current assets 47 068 186 817 Loans to development partners 6 885 95 783 Trade and other receivables 36 357 86 602 Cash and cash equivalents 3 826 4 432
Total assets 13 110 468 9 945 734 EQUITY AND LIABILITIES Total equity attributable to equity holders 6 573 956 5 216 765 Share capital 2 697 2 471 Share premium 2 490 931 1 904 106 Non-distributable reserves 4 080 328 3 310 188 Retained earnings - - Total liabilities 6 536 512 4 728 969 Non-current liabilities 4 680 213 3 319 527 Linked debentures 1 294 681 1 186 003 Interest-bearing borrowings 2 690 016 1 603 304 BEE instrument 150 350 118 900 Deferred tax 545 166 411 320 Current liabilities 1 856 299 1 409 442 Trade and other payables 220 905 169 413 Linked debenture interest payable 327 312 274 831 Income tax payable 876 1 663 Interest-bearing borrowings 1 307 206 963 535 Total equity and liabilities 13 110 468 9 945 734 Consolidated statement of comprehensive income Audited Audited for the for the year ended Year ended
Dec 2011 Dec 2010 R`000 R`000 Net rental and related revenue 603 423 403 948 Recoveries and contractual rental revenue 843 738 572 097 Straight-lining of rental revenue adjustment 32 761 15 628 Rental revenue 876 499 587 725 Property operating expenses (273 076) (183 777)
Distributable income from investments 181 283 161 502 Fair value gain on investment property and investments 933 326 1 196 075 Fair value gain on investment property 568 696 744 611 Adjustment resulting from straight-lining of rental revenue (32 761) (15 628) Fair value gain on investments 397 391 467 092 Fair value loss on BEE instrument (31 450) (53 116) Management fees received from PFM 63 609 32 267 Administrative expenses (71 353) (29 475) Profit on sale of subsidiaries and joint ventures - 36 868 Income from associate 13 959 56 493 - distributable 13 959 48 204 - non-distributable - 8 289 Profit before net finance costs 1 692 797 1 804 562
Net finance costs (788 702) (661 116) Finance income 99 793 70 233 Interest from loans 70 935 69 489 Fair value adjustment on interest rate derivatives 8 064 - Interest on linked units issued cum distribution 20 794 744 Finance costs (888 495) (731 349) Interest on borrowings (289 089) (211 883) Capitalised interest 43 396 65 779 Fair value adjustment on interest rate derivatives (42 491) (61 847) Interest to linked debenture holders - interim (272 999) (248 566) - final (327 312) (274 832)
Profit before income tax expense 904 095 1 143 446 Income tax expense (133 955) (149 587) Profit for the year attributable to equity holders 770 140 993 859 Total comprehensive income for the year 770 140 993 859 Basic earnings per share (cents) 296,57 402,24 Basic earnings per linked unit (cents) 527,75 614,07 Diluted earnings per share (cents) 284,72 385,37 Diluted earnings per linked unit (cents) 506,65 588,32 Reconciliation of profit for the year to headline earnings and distributable income Audited Audited for the for the year ended year ended Dec 2011 Dec 2010
R`000 R`000 Basic earnings (shares) - profit for the year attributable to equity holders 770 140 993 859 - interest to linked debenture holders 600 311 523 398 Basic earnings (linked units) 1 370 451 1 517 257 Adjusted for: (451 076) (661 326) - fair value gain on investment property (535 935) (728 983) - profit on sale of subsidiaries and joint ventures - (36 868) - fair value adjustments on investment property of associate - (6 437) - income tax effect 84 859 110 962 Headline earnings (linked units) 919 375 855 931 Adjustment resulting from straight-lining of rental revenue (32 761) (15 628) Fair value gain on investments (397 391) (467 092) Fair value loss on BEE instrument 31 450 53 116 Fair value adjustment on interest rate derivatives 34 427 61 847 Interest paid by BEE SPV 21 057 21 352 Income received by BEE SPV (24 942) (22 901) Fair value adjustments on investments of associate - (1 852) Income tax effect 49 096 38 625 Distributable income 600 311 523 398 Less: distribution declared (600 311) (523 398) Income not distributed - - Headline earnings per share (cents) 122,87 134,58 Headline earnings per linked unit (cents) 354,04 346,41 Diluted headline earnings per share (cents) 117,96 128,94 Diluted headline earnings per linked unit (cents) 339,89 331,89
Basic earnings per share, basic earnings per linked unit, headline earnings per share and headline earnings per linked unit are based on the weighted average of 259 679 640 (2010: 247 084 021) shares/linked units in issue during the year. Diluted earnings per share, diluted earnings per linked unit, diluted headline earnings per share and diluted headline earnings per linked unit are based on the weighted average of 270 490 451 (2010: 257 894 832) shares/linked units in issue during the year. Consolidated statement of changes in equity Non- Share Share distributable Retained capital premium reserves earnings Total
Audited R`000 R`000 R`000 R`000 R`000 Balance at31 December 2009 2 451 1 863 2 316 319 10 4 182 969 749
Issue of 2 010 000units on8 March 2010 20 40 137 40 157 Total comprehensive income for the year 993 859 993 859 Transfer to non- distributablereserves 993 869 (993 -
869) Balance at 31 December 2010 2 471 1 904 3 310 188 - 5 216 106 765
Issue of units 226 586 825 587 051 - Issue of2 550 000 units on9 March 2011 25 60 062 60 087 - Issue of 3 880 000 units on10 November 2011 39 107 300 107 339 - Issue of 16 211 238 units on1 December 2011 162 419 463 419 625 Total comprehensiveincome 770 140 770 140 for the year Transfer to non- distributable reserves 770 140 (770 - 140) Balance at 31 December 2011 2 697 2 490 4 080 328 - 6 573 931 956 Non-distributable reserves comprise those profits and losses that are not distributable to unitholders and are made up of revaluation adjustments on investment property, investment property held for sale and investments, the share of post-acquisition reserves of associates, straight-lining adjustments and other non-distributable balances. Abridged consolidated statement of cash flows Audited Audited
for the for the year ended year ended Dec 2011 Dec 2010 R`000 R`000
Cash inflow/(outflow) from operating activities 68 208 (54 739) Cash outflow from investing activities (1 680 926) (394 581) Cash inflow from financing activities 1 612 112 443 112 Decrease in cash and cash equivalents (606) (6 208) Cash and cash equivalents at beginning of year 4 432 10 640 Cash and cash equivalents at end of year 3 826 4 432 Cash and cash equivalents consist of: Current accounts 3 826 4 432 Notes 1 PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION The condensed audited consolidated financial statements have been prepared in accordance with the measurement and recognition requirements of IFRS, the AC500 standards as issued by the Accounting Practices Board, the information contained in IAS 34: Interim Financial Reporting, the JSE Listings Requirements, the requirements of the South African Companies Act and the Collective Investment Schemes Control Act (Act 45 of 2002). This report was compiled under the supervision of Nick Hanekom CA(SA), the financial director. The accounting policies adopted are consistent with those applied in the prior periods. The directors are not aware of any matters or circumstances arising subsequent to 31 December 2011 that require any additional disclosure or adjustment to the financial statements. Deloitte & Touche have issued their unmodified opinion on the group financial statements for the year ended 31 December 2011. These condensed financial statements have been derived from the group financial statements and are, in all material respects, consistent with the group financial statements. A copy of their audit report is available for inspection at the company`s registered office. 2 SUMMARY OF FINANCIAL PERFORMANCE Dec 2011 Jun 2011 Dec 2010 Jun 2010 Distribution per linked unit (cents) 121,35 109,36 111,23 100,60 Units in issue 280 536 070 260 444 832 257 894 832 257 894 832 Property operations Net asset value* R29,32 R26,80 R26,11 R22,44 Gearing ratio** 28,8% 27,7% 23,6% 23,8% Units in issue 280 536 070 260 444 832 257 894 832 257 894 832 Consolidated Net asset value* R29,17 R26,67 R25,91 R22,22 Gearing ratio** 30,5% 29,7% 25,8% 26,4% Units in issue 269 725 259 249 634 021 247 084 021 247 084 021 *Net asset value includes total equity attributable to equity holders and linked debentures. **The gearing ratio is calculated by dividing the total interest-bearing borrowings by the total assets. 2.1 To comply with financial reporting requirements the group will account for entities that do not form part of its operations, do not operate under its operating policies and whose businesses, risk profiles and debt levels are not comparable with its own. Disclosure under "Property operations" excludes Eagle`s Eye Investments Proprietary Limited ("BEE SPV"). 2.2 On 27 June 2006 10 810 811 linked units were issued to BEE SPV and Resilient is standing surety for the funding obligations of BEE SPV in acquiring these units. In terms of IFRS the issue did not take place and the essence of the transaction was that the BEE shareholders received a right/option to acquire linked units in Resilient at a future date at a predetermined price. As a consequence the issue of linked units has been eliminated in the preparation of these financial statements. The right/option the BEE shareholders have acquired has a value of R150 350 000 (2010: R118 900 000). The value of this right/option will be considered on an ongoing basis and changes in its fair value are accounted for through profit and loss. The following table indicates the effect of the BEE transaction on the group financial statements (the column "Property operations" indicates Resilient`s results had the BEE transaction been accounted for as an issue for value): Property Consolidated BEE SPV operations Dec 2011 R`000 R`000 R`000 Statement of comprehensive income Fair value loss on BEE instrument (31 450) 31 450 - Finance costs - Interest on borrowings (289 089) 21 057 (268 032) - Interest to linked debenture holders (600 311) (24 942) (625 253) Statement of financial position Current assets - Trade and other receivables 36 357 (1 353) 35 004 Share capital 2 697 108 2 805 Share premium 2 490 931 142 270 2 633 201 Non-distributable reserves 4 080 328 163 595 4 243 923 Non-current liabilities - Linked debentures 1 294 681 51 892 1 346 573 - Interest-bearing borrowings (non-current and current) 3 997 222 (221 739) 3 775 483 BEE instrument 150 350 (150 350) - Current liabilities - Trade and other payables 220 905 (248) 220 657 - Linked debenture interest payable 327 312 13 119 340 431 2.3 The intangible asset relates to the management contract of PFM, the management company of Capital, and is carried at cost. 3 FACILITIES AND INTEREST RATE DERIVATIVES Amount Margin
Facility expiry R`million over Jibar 2012 1 500 1,24% 2013 835 1,66% 2014 575 1,51% 2015 - - 2016 1 221 1,63% 2017 - - 2018 53 1,21% 2019 327 1,64% 4 511 1,49% Amount Swap % of
Interest rate swaps expiry R`million rate borrowings 2012 400 7,82% 10,60% 2013 400 7,22% 10,60% 2014 650 7,42% 17,22% 2015 600 7,71% 15,89% 2016 600 7,42% 15,89% 2017 600 7,80% 15,89% 2018 500 7,54% 13,25% Hedged borrowings 3 750 7,57% 99,34% Variable rate borrowings 25 0,66% Total borrowings* 3 775 8,78%** 100,00% * Total borrowings comprise the level of external interest-bearing borrowings, excluding those of BEE SPV. **Represents the all-in average rate for Resilient on 31 December 2011. 4 LEASE EXPIRY PROFILE (unaudited) Based on
Based on contractual rentable rental Lease expiry area revenue Vacant 1,9% December 2012 19,0% 20,1% December 2013 15,0% 17,8% December 2014 16,8% 20,3% December 2015 10,1% 11,2% December 2016 15,7% 15,9% >December 2016 21,5% 14,7% Total 100,0% 100,0% 5 SEGMENTAL ANALYSIS Dec 2011 Dec 2010 Rental revenue R`000 R`000 Retail 876 499 587 725
Dec 2011 Dec 2010 Profit before net finance costs R`000 R`000 Retail 1 139 358 1 132 931 Corporate 553 439 671 631 Total 1 692 797 1 804 562 6 PAYMENT OF FINAL DISTRIBUTION The board has approved and notice is hereby given of a final interest distribution (distribution no 18) of 121,35 cents per linked unit for the six months ended 31 December 2011. The last date to trade linked units cum distribution will be Friday, 24 February 2012 and trading will commence ex distribution on Monday, 27 February 2012. The record date to participate in the distribution will be Friday, 2 March 2012. Linked unit certificates may not be dematerialised or rematerialised between Monday, 27 February 2012 and Friday, 2 March 2012, both days inclusive. Payment of the distribution will be made to linked unitholders on Monday, 5 March 2012. In respect of dematerialised linked unitholders, the distribution will be transferred to the Central Securities Depository Participant accounts/broker accounts on Monday, 5 March 2012. Certificated linked unitholders` distribution payments will be posted on or about Monday, 5 March 2012. Directors JJ Njeke (chairman) Des de Beer* Thembi Chagonda# Jorge da Costa Andries de Lange* Marthin Greyling Nick Hanekom* Bryan Hopkins Johann Kriek* David Lewis* Phumelele Msweli# Rory Turner Barry van Wyk (*executive) (#non-independent) Company secretary Rajeshree Sookdeyu Business address 4th Floor Rivonia Village Rivonia Boulevard Rivonia 2191 Transfer secretaries Link Market Services South Africa Proprietary Limited 13th Floor Rennie House 19 Ameshoff Street Braamfontein 2001 (PO Box 4844 Johannesburg 2000) Sponsor Java Capital Date: 08/02/2012 16:44:01 Supplied by www.sharenet.co.za 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.

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