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DIA/DIB - Dipula Income Fund - Unaudited condensed consolidated interim

Release Date: 16/05/2012 13:00
Code(s): DIA DIB
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DIA/DIB - Dipula Income Fund - Unaudited condensed consolidated interim results for the six months ended 29 February 2012 Dipula Income Fund (Incorporated in the Republic of South Africa (Registration number 2005/013963/06) JSE code for A-linked units: DIA ISIN for A-linked units: ZAE000158317 JSE code for B-linked units: DIB ISIN for B-linked units: ZAE000158325 ("Dipula" or "the company", and together with its subsidiaries, "the Fund") Unaudited condensed consolidated interim results for the six months ended 29 February 2012 Salient features for the period - Actual distributions in line with Prospectus forecast - Property rental income of R137,4 million - Distribution per A-linked unit of 39,685 cents - Distribution per B-linked unit of 27,741 cents - Post reporting period acquisitions of R250 million concluded as at 29 February 2012: - Combined market capitalisation of A- and B-linked units of R1,5 billion - Portfolio asset value of R2,1 billion Condensed consolidated statement of comprehensive income Unaudited Unaudited Audited Six months Six months Year ended ended ended 29 February 28 February 31 August
2012 2011 2011 R`000 R`000 R`000 REVENUE Property portfolio 142 752 48 849 110 171 Rental income 137 417 48 849 106 647 Straight-line rental income 5 335 - 3 524 accrual Total revenue 142 752 48 849 110 171 Property expenses (30 755) (12 911) (27 394) Administration and corporate (4 964) (2 050) (4 691) costs Net operating profit 107 033 33 888 78 086 Changes in fair values of (7 043) (7 697) 3 350 investment properties Fair value (loss)/gain on (1 708) (7 697) 6 874 investment property Adjustment resulting from (5 335) - (3 524) straight-lining of rental revenue Profit from operations 99 990 26 191 81 436 Net finance charges (30 542) (36 037) (140 573) Finance charges (31 176) (36 232) (140 895) Finance income 634 195 322 Profit/(Loss) before debenture 69 448 (9 846) (59 137) interest and taxation Debenture interest (71 156) - (5 096) Loss before taxation (1 708) (9 846) (64 233) Taxation (8 589) 1 678 9 771 Loss for the period after (10 297) (8 168) (54 462) taxation Other comprehensive income - - - Total comprehensive loss for (10 297) (8 168) (54 462) the period attributable to equity holders Reconciliation of (loss)/earnings, headline(loss)/earnings and distributable earnings Loss for the period (10 297) (8 168) (54 462) attributable to equity holders Debenture interest 71 156 - 5 096 Earnings/(Loss) 60 859 (8 168) (49 366) Change in fair value of 5 728 6 019 (3 006) properties - net of deferred taxation Change in fair value of 7 043 7 697 (3 350) properties Deferred taxation (1 315) (1 678) 344 Headline earnings/(loss) 66 587 (2 149) (52 372) attributable to linked unitholders Straight line rental income (3 841) (2 537) accrual - net of deferred taxation Straight-line rental income (5 335) (3 524) accrual Deferred taxation 1 494 987 Deferred taxation asset raised 8 410 (11 102) on tax losses and doubtful debt provisions Debt breakage costs - 71 107 Distributable earnings 71 156 5 096 attributable to linked unitholders Number of A-linked units in 105 532 393# * 105 532 393 issue Number of B-linked units in 105 532 393# * 105 532 393 issue Total number of linked units 211 064 786 * 211 064 786 Weighted average number of A- 105 532 393# * 4 336 948 linked units in issue Weighted average number of B- 105 532 393# * 4 336 948 linked units in issue Basic loss per share (cents) (4,88) * (627,88) Headline loss per share (cents) (2,16) (662,54) Basic earnings/(loss) per A- 34,81 * (560,60) linked unit (cents) Basic earnings/(loss) per B- 22,86 * (577,66) linked unit (cents) Headline earnings/(loss) per A- 37,52 * (595,26) linked unit (cents) Headline earnings/(loss) per B- 25,58 * (612,32) linked unit (cents) Distributable earnings per A- 39,685 * 2,77 linked unit (cents) Distributable earnings per B- 27,741 * 2,06 linked unit (cents) * The company had no linked units in issue during the 2011 financial year. Instead 100 ordinary shares of R1,00 each were in issue. Based on this fact basic loss per share was R81 630 per share and headline loss per share was R21 440. # Excluding 24 500 A-linked and 24 500 B-linked treasury linked units. The company does not have any dilutionery instruments in issue. Condensed consolidated statement of changes in equity Stated capital/ Fair
Share value Accumulated Total capital reserve loss equity R`000 R`000 R`000 R`000 Balance at 1 September - 111 589 (11 168) 100 421 2010 Total comprehensive loss - - (8 168) (8 168) for the six months Transfer of capital items - (6 620) 6 620 - to fair value reserve Balance at 28 February - 104 969 (12 716) 92 253 2011 Balance at 1 September 427 852 116 895 (70 936) 473 811 2011 Total comprehensive loss - - (10 297) (10 297) for the six months Transfer of capital items - (11 405) 11 405 - to fair value reserve Balance at 29 February 427 852 105 490 (69 828) 463 514 2012
Condensed consolidated statement of cash flows Unaudited Unaudited Audited Six months Six months Year ended ended ended
29 February 28 February 31 August 2012 2011 2011 R`000 R`000 R`000 Cash flows from operating 63 111 3 471 (62 319) activities Cash generated from operations 98 749 39 508 78 254 Net finance costs (30 542) (36 037) (140 573) Distributions paid (5 096) - - Cash outflows from investing (4 498) (566) (517 840) activities Cash (outflows)/inflows from - (2 725) 603 978 financing activities Net movement in cash and cash 58 613 180 23 819 equivalents Cash and cash equivalents at the 25 260 1 441 1 441 beginning of the period Cash and cash equivalents at the 83 873 1 621 25 260 end of the period Condensed consolidated statement of financial position Unaudited Unaudited Audited
29 February 28 February 31 August 2012 2011 2011 R`000 R`000 R`000 ASSETS Non-current assets 2 155 581 805 158 2 155 581 Investment property 2 107 099 801 437 2 107 099 Goodwill 48 482 - 48 482 Other non-current assets - 3 721 - Current assets 98 277 6 813 46 338 Trade and other receivables 14 404 5 192 21 078 Cash and cash equivalents 83 873 1 621 25 260 Non-current assets held for sale Investment property held for 1 400 - 21 400 sale Total assets 2 255 258 811 971 2 223 319 EQUITY AND LIABILITIES Equity 463 514 92 253 473 811 Stated capital 427 852 - 427 852 Reserves 35 662 92 253 45 959 Non-current liabilities 1 686 964 268 070 1 677 216 Debentures 900 629 - 900 629 Interest-bearing liabilities 759 550 251 878 759 500 Deferred taxation 26 785 16 192 17 087 Current liabilities 104 780 451 648 71 182 Trade and other payables 33 624 14 907 66 086 Loans from related parties - 291 391 - Interest-bearing liabilities - 145 350 - Unitholders for distribution 71 156 - 5 096 Non-current liabilities held for sale Investment property held for - - 1 110 sale - Deferred taxation Total equity and liabilities 2 255 258 811 971 2 223 319 Net asset value per A-linked 659,01 659,81 unit (excluding deferred taxation) (cents) Net asset value per B-linked 659,01 659,81 unit (excluding deferred taxation) (cents) Net asset value per A-linked 646,31 651,19 unit (cents) Net asset value per B-linked 646,31 651,19 unit (cents) Segmental information For the six months ended 29 February 2012 Extracts from the Retail Industrial Offices Total condensed consolidated statement of comprehensive income R`000 R`000 R`000 R`000 Rental income 75 209 20 921 41 287 137 417 Property expenses (15 965) (5 854) (8 936) (30 755) Net property income 59 244 15 067 32 351 106 662 Extracts from the condensed consolidated statement of financial position Investment property 1 124 730 332 300 650 069 2 107 099 For the six months ended 28 February 2011 Extracts from the Retail Industrial Offices Total condensed consolidated statement ofcomprehensive income R`000 R`000 R`000 R`000 Rental income 25 148 3 193 20 508 48 849 Property expenses (5 503) (787) (6 621) (12 911) Net property income 19 645 2 406 13 887 35 938 Extracts from the condensed consolidated statement offinancial position Investment property 408 387 47 400 345 650 801 437 Notes 1. Basis of preparation The unaudited condensed consolidated interim financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards, the AC 500 series of interpretations, IAS 34: Interim Financial Reporting, the JSE Limited ("JSE") Listings Requirements and the requirements of the South African Companies Act, 2008, as amended. These results have been prepared by the Financial Director, Brigitte de Bruyn, CA(SA). The accounting policies adopted are consistent with those applied in the prior periods. The directors are not aware of any matters of circumstances arising subsequent to 29 February 2012 that require any additional disclosure or adjustments to the financial statements. These interim results have not been audited or reviewed by the company`s external auditors. 2. Summary of financial performance Unaudited Unaudited Audited
29 February 28 February 31 August 2012 2011 2011 Distribution per A-linked 39,69 N/A 2,77 unit (cents) Distribution per B-linked 27,74 N/A 2,06 unit (cents) A-linked units in issue 105 532 393 N/A 105 532 393 B-linked units in issue 105 532 393 N/A 105 532 393 Net asset value per combined 1 292,62 N/A 1 302,38 linked unit (cents)* Net asset value per A-linked 646,31 N/A 651,19 unit (cents) Net asset value per B-linked 646,31 N/A 651,19 unit (cents) Gearing ratio (%)** 33,7 34,2 * Net asset value includes total equity attributable to equity holders and linked debentures. ** The gearing ratio is calculated by dividing interest-bearing liabilities, excluding linked debenture liabilities, by total assets. 3. Debt facilities Margin Rate below over jibar prime for for Fixed floating floating
Expiry Type Amount rate facility facility R`million % % % 2015 Fixed 506,7 8,63 2016 Fixed 100,0 9,26 2016 Floating 137,3 2,04 2016 Floating 99,4 0,95 843,4 4. Payment of final distributions The Board has approved and notice is hereby given of interim cash interest distributions (distribution No. 2) of 39,685 cents per A-linked unit and 27,741 cents per B-linked unit for the period ended 29 February 2012 in accordance with the abbreviated timetable set out below: Last date to trade cum distribution Friday, 1 June 2012 Linked units trade ex distribution Monday, 4 June 2012 Record date Friday, 8 June 2012 Payment date Monday, 11 June 2012 Linked unit certificates may not be dematerialised or rematerialised between Monday, 4 June 2012 and Friday, 8 June 2012, both days inclusive. COMMENTARY PROFILE AND PROPERTY PORTFOLIO Dipula was formed in 2011 out of a merger between Mergence Africa Property Fund and Dipula Property Fund ("the merger"), two majority black-owned property funds. Dipula listed on the JSE on 17 August 2011 following a successful capital-raising exercise. Investors in Dipula can invest in either A-linked units or B-linked units or both. A-linked units entitle the investor to a preferential 5% annual growth in distributions until 2017, and thereafter distributions will grow at the lower of 5% or CPI. B-linked unitholders receive all the residual income not distributed to the A-linked unitholders, thus benefiting from any growth in distributions above 5%. The Fund has a well-diversified portfolio, both sectorally and geographically, with a retail bias. The portfolio comprises 55% retail, 30% office and 15% industrial properties by gross rental revenue. Approximately 75% of the portfolio is concentrated in Gauteng with properties in all eight other provinces. The portfolio has a total of 175 properties spread throughout South Africa. The Fund is externally managed by Dipula Asset Management Trust with exceptional BEE credentials in terms of management control and shareholding. The Fund recently announced a transaction where management and a broad-based consortium will acquire additional linked units. Management and the consortium will then own up to 25% of Dipula. This will make Dipula the listed Fund with the highest level of black ownership and management control. Dipula invests in individual assets of between R20 million and R200 million across all sectors throughout South Africa. The strategy is to prudently grow the portfolio to R10 billion over the next four to six years, with specific focus on sustainable income growth. Management will continue to ensure first- class property and asset management whilst conservatively managing interest rate and funding risks. This set of interim results represents a six-month period ended 29 February 2012 and is Dipula`s maiden set of interim results since listing after having reported for a 15-day period ended 31 August 2011 following its listing. DISTRIBUTABLE INCOME As a result of the merger and the acquisition of the Asakhe and Redefine portfolios in August 2011, no comparison can be made to the prior year earnings. Actual earnings are in line with those presented in the forecast, with the B- linked units benefitting from the marginally better than forecast distributions mainly due to savings of costs and interest paid. Actual
Six months ended 29 February 2012
R`000 Distributable income Property portfolio rental income 137 417 Property expenses (30 755) Net property income 106 662 Administration and corporate costs (4 964) Net interest paid (30 542) Profit before debenture interest and taxation 71 156 Debenture interest (71 156) Distribution per A-linked unit (cents) 39,685 Distribution per B-linked unit (cents) 27,741 For the six months ended 29 February 2012, A-linked unitholders will receive 39.855 cents per A-linked unit per their entitlement and B-linked unitholders will receive the balance of the distributable income of 27,741 cents per B- linked unit. FINANCIAL RESULTS Dipula has achieved its forecast distributions despite the challenging economic climate. Net property income is substantially in line with the Prospectus forecast. Positive variances from net interest paid as a result of effective cash management and savings in operating expenses due to efficiencies were achieved. VACANCIES Dipula has maintained a 95% retention rate on leases that came up for renewal for the period under review. Vacancies have increased from 7.9% at listing to 8,9% at 29 February 2012. This has not impacted results as management`s letting assumptions at listing were conservative. ACQUISITIONS On 20 December 2011 it was announced on SENS that the Fund had concluded agreements for the acquisitions of Bochum and Blouberg Plaza and Nquthu Plaza for a total consideration of R250 million. These retail acquisitions are in line with the Fund`s strategy of improving the quality of its portfolio and focusing on emerging market retail. All conditions precedent have been met and transfer of the properties is imminent. This transaction will be substantially funded by debt in an amount of R208 million, with the balance of the consideration being funded by the issue of linked units. DISPOSALS The Fund has not disposed of any properties during the period under review, but is implementing a strategy to dispose of smaller non-core properties. FUNDING Dipula has an all-in blended rate of funding of 8,59% and has fixed interest debt of R506 million for 3.5 years and R100 million for 4.5 years respectively. The floating facility of R236.9 million expires in approximately four years. To ensure effective cash management, surplus cash is deposited into the floating debt facility. PROSPECTS The global economic environment remains challenging as does the South African economy with a forecast growth rate of around 2,5% for the year ahead. Tenants, and consequently rentals achieved by landlords, will continue to be under pressure. This is mainly as a result of fuel price increases, electricity costs and municipal rates increases above inflation, and secondary cost pressures throughout the economy that result from these factors. This is further exacerbated by imported inflation due to sustained Rand weakness. Despite these factors, the forecast for the year ending 31 August 2012 as presented in the Prospectus dated 28 July 2011, is expected to be achieved. It is anticipated that the portfolio will continue to deliver growth in 2013 and beyond. The forecast information presented in this Prospects section has not been reviewed or reported on by the company`s external auditors. By order of the Board Johannesburg 16 May 2012 Directors: ZJL Matlala* (Chairperson) IS Petersen (CEO) BH Azizollahoff+ B de Bruyn (FD) NS Gumede E Links* Y Waja* * Independent non-executive + British Registered office: Block B Dunkeld Park 6 North Road, Dunkeld West, 2196 PO Box 875, Parklands, 2121 Transfer secretaries: Link Market Services South Africa (Proprietary) Limited Sponsor: Java Capital Company secretary: Probity Business Services (Proprietary) Limited Website: www.dipula.co.za Date: 16/05/2012 13:00:01 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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