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ANNUITY PROPERTIES LTD - Condensed unaudited financial results for the six months ended 30 September 2013 and declaration of dividend

Release Date: 14/11/2013 17:35
Code(s): ANP     PDF:  
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Condensed unaudited financial results
for the six months ended 30 September 2013 and
declaration of dividend

ANNUITY PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2011/145994/06)
Share code:ANP       ISIN:ZAE000165643
("Annuity" or "the Company")

Condensed unaudited financial results
for the six months ended 30 September 2013 and
declaration of dividend and interest distribution

1. Introduction
   Annuity listed on the Real Estate  Real Estate Holdings and Development sector of the Johannesburg Stock Exchange ("JSE") on 4 May 2012 and
   transferred to the Real Estate Investment Trust sector of the JSE on 23 September 2013. The Company's property portfolio at 30 September 2013
   consisted of 14 properties, diversified between the retail, commercial, special and light industrial sectors. The Company is a variable loan stock company
   and distributes all its distributable earnings, as calculated in terms of its debenture trust deed, to its linked unitholders on a semi-annual basis.

2. Results
   The following table reflects the financial results for the six months ended 30 September 2013 compared to the corresponding previous financial year
   and the prior interim period.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
                                                                                             Unaudited        Unaudited         Audited
                                                                                          30 September     30 September        31 March
                                                                                                  2013             2012            2013
                                                                                                     R                R               R
Revenue
Property portfolio                                                                          78 290 868       27 917 655      88 927 644
Contractual rental income                                                                   67 137 276       20 641 612      69 909 932
Straight-line rental income accrual                                                         11 153 592        7 276 043      19 017 712
Recoveries and other property income                                                        23 449 673        5 986 793      19 734 723
Total revenue                                                                              101 740 541       33 904 448     108 662 367
Property expenses                                                                         (28 872 786)      (6 359 588)    (25 429 963)
Administration and corporate costs                                                         (5 514 550)      (1 172 942)     (5 882 092)
Net operating profit                                                                        67 353 205       26 371 918      77 350 312
Investment and other income                                                                 11 402 965        3 222 411      13 408 617
Gain on bargain purchase                                                                     3 300 000       20 371 000      31 623 832
Property acquisition costs                                                                 (3 230 519)      (6 846 289)    (17 069 572)
Changes in fair values                                                                     (8 732 678)      (9 600 750)      32 053 060
Net profit before finance costs, interest on linked units and taxation                      70 092 973       33 518 290     137 366 249
Finance costs                                                                             (19 480 134)      (6 298 105)    (18 693 232)
Profit before interest on linked units and taxation                                         50 612 839       27 220 185     118 673 017
Interest on linked units                                                                  (51 346 598)     (17 836 436)    (58 574 648)
(Loss)/profit before taxation                                                                (733 759)        9 383 749      60 098 369
Taxation                                                                                    10 606 165        (616 375)    (11 721 067)
Total comprehensive income for the period                                                    9 872 406        8 767 374      48 377 302

RECONCILIATIONS OF EARNINGS, HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS
                                                                                             Unaudited        Unaudited         Audited
                                                                                          30 September     30 September        31 March
                                                                                                  2013             2012            2013
                                                                                                     R                R               R

Profit for the financial period attributable to equity holders                               9 872 406        8 767 374      48 377 302
Adjusted for interest on linked units                                                       51 346 598       17 836 436      58 574 648
Earnings                                                                                    61 219 004       26 603 810     106 951 950
Deduct fair value adjustments and gains on bargain purchases                                 9 974 416     (13 880 139)    (57 909 908)
Gains on bargain purchases (net of deferred taxation)                                      (3 300 000)     (19 799 345)    (31 153 422)
Fair value adjustments (net of deferred taxation)                                           13 274 416        5 919 206    (26 756 486)
Deferred taxation reversal to account for REIT status                                      (7 607 118)                               
Headline earnings attributable to linked unitholders                                        63 586 302       12 723 671      49 042 042
Fair value adjustments on derivative instruments (net of deferred taxation)                (3 270 052)        1 673 789         611 296
Straight-line rental income accrual (net of deferred taxation)                            (11 153 592)      (5 238 751)    (13 692 752)
Amortisation of debt transaction costs                                                       1 053 675          357 074       1 108 067
Interest on other borrowings  IFRS adjustment                                               1 753 097        1 508 823       3 552 758
Deferred taxation resulting from accrued income, prepayments
and reversal of deferred tax previously raised on straight-line rental income accrual      (4 270 733)            1 285          17 826
Share-based payments                                                                           536 303                         983 222
Once-off property acquisition costs                                                          3 230 519        6 846 289      17 069 572
Available for distribution to linked unitholders                                            51 465 519       17 872 180      58 692 031
Distribution declared:
Debenture interest                                                                          51 346 598       17 836 430      58 574 648
Ordinary dividend                                                                              102 899           35 750         117 383
Total distribution                                                                          51 449 497       17 872 180      58 692 031
Interim six months ended 30 September                                                       51 449 497       17 872 180      17 872 180
Final six months ended 31 March                                                                                            40 819 851
Basic earnings per linked unit (cents)                                                           31.93            31.00           93.00
Diluted earnings per linked unit (cents)                                                         31.83            31.00           92.57
Headline earnings per linked unit (cents)                                                        33.16            14.83           42.65
Diluted headline earnings per linked unit (cents)                                                33.06            14.83           42.45
Distribution per linked unit (cents)                                                             22.14            19.15           40.91
Interim six months ended 30 September                                                            22.14            19.15           19.15
Final six months ended 31 March                                                                                                 21.76

CONDENSED STATEMENTS OF FINANCIAL POSITION
                                                                                                              Unaudited
                                                                                             Unaudited        Restated*         Audited
                                                                                          30 September     30 September        31 March
                                                                                                  2013             2012            2013
                                                                                                     R                R               R
ASSETS
Non-current assets                                                                       1 618 714 667      586 471 000   1 415 100 000
Investment property                                                                      1 611 550 000      586 471 000   1 415 100 000
Fair value of property portfolio                                                         1 581 264 910      579 081 171   1 395 968 502
Straight-line rental adjustment                                                             30 285 090        7 389 829      19 131 498
Derivative instruments                                                                       3 692 717                               
Goodwill                                                                                     3 471 950                               
Current assets                                                                             262 497 407       10 667 265      40 810 888
Trade and other receivables                                                                 19 682 122        9 259 568      17 481 192
Taxation                                                                                        14 280                          14 280
Cash and cash equivalents                                                                  242 801 005        1 407 697      23 315 416
Total assets                                                                             1 881 212 074      597 138 265   1 455 910 888
EQUITY AND LIABILITIES
Equity                                                                                      67 292 691       15 028 592      56 552 672
Stated capital                                                                               2 246 767          902 914       1 833 850
Share-based payment reserve                                                                  1 519 525                         983 222
Accumulated profit                                                                          63 526 399       14 125 678      53 735 600
Non-current liabilities                                                                  1 701 605 159      557 917 931   1 337 828 022
Debentures                                                                               1 141 616 887      446 678 549     930 956 392
Financial liabilities                                                                      557 851 682      107 290 509     393 279 853
Derivative instruments                                                                                       2 324 707         849 022
Deferred taxation                                                                            2 136 590        1 624 166      12 742 755
Current liabilities                                                                        112 314 224       24 191 742      61 530 194
Trade and other payables                                                                    27 307 602        6 305 665      20 791 978
Current portion of secured financial liabilities                                            33 660 024                               
Taxation payable                                                                                                13 897               
Linked unitholders for distribution                                                         51 346 598       17 872 180      40 738 216
Total equity and liabilities                                                             1 881 212 074      597 138 265   1 455 910 888
Number of linked units in issue                                                            232 382 553       93 340 341     189 132 917
Net asset value per linked unit (R)                                                               5.20             4.95            5.22

* Restated for re-classification referred to in note 14 "Basis of preparation and accounting policies".

CONDENSED STATEMENTS OF CHANGES IN EQUITY
                                                                          Share-based
                                                Stated     Accumulated        payment
                                               capital          profit        reserve          Total
                                                     R               R              R              R
Balance at 1 April 2012                             10       5 394 048                    5 394 058
Issue of linked units                          902 904                                     902 904
Total comprehensive income for the period                   8 767 374                    8 767 374
Dividend distribution                                        (35 744)                     (35 744)
Balance at 30 September 2012                   902 914      14 125 678                   15 028 592
Issue of linked units                          930 936                                     930 936
Total comprehensive income for the period                  39 609 922                   39 609 922
Share-based payment                                                         983 222        983 222
Balance at 31 March 2013                     1 833 850      53 735 600        983 222     56 552 672
Issue of linked units                          412 917                                     412 917
Total comprehensive income for the period                   9 872 406                    9 872 406
Share-based payment                                                         536 303        536 303
Dividend distribution                                        (81 607)                     (81 607)
Balance at 30 September 2013                 2 246 767      63 526 399      1 519 525     67 292 691

CONDENSED STATEMENTS OF CASH FLOWS
                                                                                                              Unaudited 
                                                                                             Unaudited        Restated*          Audited
                                                                                          30 September     30 September         31 March
                                                                                                  2013             2012             2013
                                                                                                     R                R                R
Net cash generated from operating activities                                                 9 705 473        7 873 996       23 910 018
Cash generated from operations                                                              57 548 790       10 592 616       45 973 027
Interest received                                                                            9 649 867        1 713 588        9 855 858
Finance costs                                                                             (16 673 361)      (4 432 208)     (14 032 407)
Taxation paid                                                                                                                 (14 280)
Distribution paid to linked unitholders                                                   (40 819 823)                     (17 872 180)
Net cash utilised in investing activities                                                (184 608 270)    (387 933 415)  (1 135 883 446)
Acquisition of business combinations (net of cash acquired)                              (196 350 650)    (342 133 415)  (1 089 774 240)
Capital expenditure, tenant installations and lease commissions                            (2 120 825)                        (309 206)
Loans (advanced)/repayments                                                                 13 863 205     (45 800 000)     (45 800 000)
Net cash generated from financing activities                                               394 388 386      381 466 758    1 135 288 486
Proceeds from issue of linked units                                                        211 073 413      413 996 464      831 809 866
Increase in secured borrowings                                                             197 178 178       18 737 141      303 975 492
Repayment of unsecured borrowings                                                         (13 863 205)     (51 266 847)        (496 872)
Net movement in cash and cash equivalents                                                  219 485 589        1 407 339       23 315 058
Cash and cash equivalents at the beginning of the period                                    23 315 416              358              358
Cash and cash equivalents at the end of the period                                         242 801 005        1 407 697       23 315 416

* Restated for re-classification referred to in note 14 "Basis of preparation and accounting policies".

SEGMENTAL REPORT
Six months ended 30 September 2013 (Unaudited)
                                                                                              Light
                                                Total        Retail          Office      industrial        Special            Admin
                                                   R              R               R               R              R                R
REVENUE
Property portfolio                        78 290 868     32 947 288      40 133 945       3 644 883      1 564 752                
Contractual rental income                 67 137 276     29 785 074      33 405 961       3 000 241        946 000                
Straight-line rental income
accrual                                   11 153 592      3 162 214       6 727 984         644 642        618 752                
Recoveries and other income               23 449 673     13 253 299       9 242 851         569 530        383 993                
Total revenue                            101 740 541     46 200 587      49 376 796       4 214 413      1 948 745                
Property expenses                       (28 872 786)   (15 115 579)    (12 379 026)     (1 031 541)      (346 640)                
Administration and
corporate costs                          (5 514 550)                                                                (5 514 550)
Net operating profit                      67 353 205     31 085 008      36 997 770       3 182 872      1 602 105      (5 514 550)
Investment and other income               11 402 965                                                                 11 402 965
Gain on bargain purchase                   3 300 000        612 500                                    2 687 500                
Property acquisition costs               (3 230 519)      (312 382)       (168 877)     (1 232 866)    (1 370 657)        (145 737)
Changes in fair values                   (8 732 678)    (3 944 135)     (8 197 352)       (514 178)      (618 752)        4 541 739
Net profit before finance costs,
interest on linked units and
taxation                                  70 092 973     27 440 991      28 631 541       1 435 828      2 300 196       10 284 417
Finance costs                           (19 480 134)                                                               (19 480 134)
Net profit before interest on linked
units and taxation                        50 612 839     27 440 991      28 631 541       1 435 828      2 300 196      (9 195 717)
Interest on linked units                (51 346 598)                                                               (51 346 598)
Segment (loss)/profit
before taxation                            (733 759)     27 440 991      28 631 541       1 435 828      2 300 196     (60 542 315)
Investment property                    1 611 550 000    656 544 559     730 600 000     119 505 441    104 900 000                
Other assets                             269 662 074     14 488 422       3 563 141       3 320 986        129 419      248 160 106
Total assets                           1 881 212 074    671 032 981     734 163 141     122 826 427    105 029 419      248 160 106
Total liabilities                      1 813 919 383    159 571 920     223 949 091     108 550 707    119 063 647    1 202 784 018

SEGMENTAL REPORT
Six months ended 30 September 2012 (Unaudited)
                                                                                           Light
                                              Total          Retail         Office    industrial   Special           Admin
                                                  R               R              R             R         R               R
REVENUE
Property portfolio                       27 917 655       7 009 449     20 908 206                                     
Contractual rental income                20 641 612       5 448 417     15 193 195                                     
Straight-line rental income
accrual                                   7 276 043       1 561 032      5 715 011                                     
Recoveries                                5 986 793       2 960 733      3 026 060                                     
Total revenue                            33 904 448       9 970 182     23 934 266                                     
Property expenses                       (6 359 588)     (3 399 000)    (2 960 588)                                     
Administration and
corporate costs                         (1 172 942)                                                        (1 172 942)
Net operating profit                     26 371 918       6 571 182     20 973 678                           (1 172 942)
Investment and other income               3 222 411                                                          3 222 411
Gain on bargain purchase                 20 371 000       7 171 000     13 200 000                                     
Property acquisition costs              (6 846 289)     (2 319 611)    (4 526 678)                                     
Changes in fair values                  (9 600 750)     (1 561 032)    (8 039 718)                                     
Net profit before finance costs,
interest on linked units and taxation    33 518 290       9 861 539     21 607 282                             2 049 469
Finance costs                           (6 298 105)                                                        (6 298 105)
Net profit before interest on linked
units and taxation                       27 220 185       9 861 539     21 607 282                           (4 248 636)
Interest on linked units               (17 836 436)                                                       (17 836 436)
Segment profit before taxation            9 383 749       9 861 539     21 607 282                          (22 085 072)
Investment property                     586 471 000     139 171 000    447 300 000                                     
Other assets                             57 976 088       2 321 069      2 825 371                            52 829 648
Total assets                            644 447 088     141 492 069    450 125 371                            52 829 648
Total liabilities                       163 229 705      32 956 783    125 891 066                             4 381 856

SEGMENTAL REPORT
Financial year ended 31 March 2013 (Audited)
                                                                                           Light
                                              Total         R etail         Office    industrial   Special            Admin
                                                  R               R              R             R         R                R
REVENUE
Property portfolio                       88 927 644      30 303 649     58 044 482       579 513                         
Contractual rental income                69 909 932      24 915 071     44 418 074       576 787                         
Straight-line rental income
accrual                                  19 017 712       5 388 578     13 626 408         2 726                         
Recoveries                               19 734 723      11 405 198      8 309 692        19 833                         
Total revenue                           108 662 367      41 708 847     66 354 174       599 346                         
Property expenses                      (25 429 963)    (13 056 902)   (11 957 461)     (223 994)                 (191 606)
Administration and
corporate costs                         (5 882 092)                                                         (5 882 092)
Net operating profit                     77 350 312      28 651 945     54 396 713      375 352                (6 073 698)
Investment and other income              13 408 617                                                          13 408 617
Gains on bargain purchases               31 623 832      11 075 876     18 452 832     2 095 124                          
Property acquisition costs             (17 069 572)     (8 424 965)    (7 578 066)     (586 479)                 (480 062)
Changes in fair values                   32 053 060      12 037 741     28 195 757       (1 662)               (8 178 776)
Net profit before finance costs,
interest on linked units and
taxation                                137 366 249      43 340 597     93 467 236     1 882 335               (1 323 919)
Finance costs                          (18 693 232)                                                        (18 693 232)
Net profit before interest on linked
units and taxation                      118 673 017      43 340 597     93 467 236     1 882 335              (20 017 151)
Interest on linked units               (58 574 648)                                                        (58 574 648)
Segment profit before taxation           60 098 369      43 340 597     93 467 236     1 882 335              (78 591 799)
Investment property                   1 415 100 000     644 649 964    727 500 000    42 950 036                         
Other assets                             40 810 888       7 916 616      3 240 096      359 373                 29 294 803
Total assets                          1 455 910 888     652 566 580    730 740 096    43 309 409                29 294 803
Total liabilities                     1 399 358 216     193 167 690    166 819 848     5 046 688             1 034 323 990

3.  Acquisitions and commitments
    The Company acquired a 100% interest in all the assets and some liabilities of four letting enterprises during the period under review. The letting
    enterprises were acquired as going concerns and were funded through a combination of cash and linked units.
    Details of the net assets acquired are as follows:

                                             30 September    30 September         31 March
                                                     2013            2012             2013
                                                        R               R                R
Investment properties at acquisition price    196 621 950     433 577 591    1 198 724 759
Trade and other receivables                                                       91 470
Trade and other payables                        (271 300)       (586 585)      (1 784 398)
Purchase consideration                        196 350 650     432 991 006    1 197 031 831
Portion settled in linked units                             (33 580 000)     (49 980 000)
Portion settled from vendor finance                         (57 277 591)     (57 277 591)
Portion settled in cash                       196 350 650     342 133 415    1 089 774 240

    Annuity acquired the newly developed "Virgin Active  Bryanston" letting enterprise ("the Virgin Active Building") on the intersection of William Nicol Drive
    and Main Road, which consists of a Virgin Active gym and retail component, at a purchase price of R119 million on 19 August 2013. A light industrial
    property with an office component ("the Aveng Building") was acquired on 8 August 2013 at an acquisition price of R63,6 million. The letting enterprise
    is located in the Stormill industrial area and occupied by Alpret Control Specialists, a subsidiary of the JSE-listed Aveng Limited. Two further properties, a
    warehouse in the Ormonde industrial area ("the Clarins Modulus Road Property") and a small office building in Gardens, Cape Town ("the Clarins Dunkley
    House Property"), both tenanted by Clarins South Africa were acquired on 16 September 2013 and 27 September 2013 respectively. The acquisition
    price for the two properties amounted to R14 million. A further property tenanted by Clarins South Africa being the Clarins Head Office, situated in Scott
    Street, Waverley ("the Clarins Scott Street Property") has not yet transferred into Annuity's name as at 30 September 2013. The Virgin Active Building
    and the Aveng Building were funded from Annuity's debt facilities whilst the Clarins Modulus Road Property and the Clarins Dunkley House Property
    were funded through cash raised from an issue of linked units on 20 September 2013 in terms of a private placement.

    The investment properties were recognised on acquisition at their fair values of R196,4 million resulting in a gain on bargain purchase of R3,3 million and
    goodwill of R3,5 million. The net operating income (excluding the straight-lining of income accrual) earned by the Company from these letting enterprises
    during the six months under review were R2,1 million. Based on the net operating income which the Company earned during the period, it would have
    earned R8,6 million had the Company owned all four of these letting enterprises for the entire six-month period.

    The Company earned gross rental income (excluding the straight-lining of income accrual) of R2,2 million from these letting enterprises during the period
    under review. Based on the gross rental income which the Company earned during the period, it would have earned gross rental income of R9,2 million
    had it owned all four of these letting enterprises for the entire six-month period.

    As at 30 September 2013 the Company was committed to acquire a further five letting enterprises, namely the Clarins Scott Street Property, the
    McCarthy/Unitrans portfolio and the Coricraft Distribution Centre, from various vendors for a total purchase consideration of R293,5 million. Details of
    the transactions are set out in the SENS announcement dated 29 July 2013.

4.  Related party transactions
    The Company paid transaction fees of R2,0 million and asset management fees of R3,2 million to Annuity Asset Managers Proprietary Limited and
    property management fees and letting commission of R2,6 million to Annuity Property Managers Proprietary Limited, which two entities are considered
    to be related parties to Annuity, during the six-month period under review.

    At the time of acquiring the Sasfin Head Office in May 2012, the Company granted an option to Sasfin Financial Services Proprietary Limited (who has
    subsequently been superceded by Sasfin Private Equity Fund Managers Proprietary Limited ("Sasfin Private Equity")), which is a 25% shareholder in
    Annuity Asset Managers Proprietary Limited, to sell to the Company, its shareholding in, and claims against Annuity Asset Managers Proprietary Limited
    at a price to be determined which is 0.875% of the Company's enterprise value, being the market capitalisation plus debt, less trade creditors and cash.

    The shares and claims so acquired, in the event that Sasfin Private Equity should exercise the option, shall subsequently be purchased and cancelled by
    Annuity Asset Managers Proprietary Limited in consideration for a reduction in the annual asset management fee charged to the Company, which has
    the effect of making the transaction non-dilutionary to earnings during the term of the asset management contract. Based on the Company's enterprise
    value as at 30 September 2013 the price at which Sasfin Private Equity could sell the shares to the Company at this date would be R13,7 million.

5.  Property portfolio (not audited)
                                                                                                       Western      KwaZulu-
                                                                                     Gauteng              Cape         Natal           Total
    Geographical profile                                                                   R                 R             R               R
    By revenue                                                                    36 527 074        25 547 729     5 062 473      67 137 276
    By rentable area (m2)                                                             57 121            42 462        12 489         112 072

                                                                                                         Light
                                                                   Retail            Offices        industrial       Special           Total
    Sectoral profile                                                    R                  R                 R             R               R
    By revenue                                                 29 785 074         33 405 961         3 000 241       946 000      67 137 276
    By rentable area (m2)                                          49 999             44 888            12 885         4 300         112 072
    Portfolio valuation (R)                                   656 544 559        730 600 000       119 505 441   104 900 000   1 611 550 000
    Gross lettable area (m2)                                       49 999             44 888            12 885         4 300         112 072
    Value per (m2)                                                 13 131             16 276             9 275        24 395          14 380
    Vacancy % by gross lettable area                                 1.04               0.00              2.17          0.00            0.72
    Average monthly gross rental per m2 (Rand)                     104.13             125.79             79.51        167.82          112.29
    Weighted average rental escalation (%)                           6.89               7.24              8.46          7.50            7.22
    Annualised property yield (%)                                    8.41               8.61              8.74          7.70            8.48


    Tenant analysis
    A  Large national tenants, listed tenants, government and major franchises
    Percentage of GLA                                                                                                                    77%
    Number of tenants                                                                                                             39 tenants
    B  Other national tenants, other listed tenants, franchisees and medium to large professions
    Percentage of GLA                                                                                                                    10%
    Number of tenants                                                                                                             54 tenants
    C  Other
    Percentage of GLA                                                                                                                    13%
    Number of tenants                                                                                                            103 tenants

Lease expiry profile
                                                              Light
By rentable area                        Retail   Office  industrial    Special    Total
Expiring within one year                  8.7%     6.9%        4.4%       0.0%     7.1%
Expiring between one and two years       20.8%    20.6%        2.2%       0.0%    17.8%
Expiring between two and three years     42.9%     4.4%       13.3%       0.0%    22.4%
Expiring between three and four years     1.4%     0.8%       32.8%       0.0%     4.6%
Expiring between four and five years      5.1%     4.2%        0.0%       0.0%     4.0%
Expiring between five and six years       0.5%     0.0%       47.3%       0.0%     5.6%
Expiring between six and seven years      9.3%    24.5%        0.0%       0.0%    14.0%
Expiring between seven and eight years    2.2%    38.6%        0.0%       0.0%    16.6%
Expiring between eight and nine years     0.4%     0.0%        0.0%       0.0%     0.2%
Expiring after nine years                 8.7%     0.0%        0.0%     100.0%     7.7%

                                                              Light
By revenue                              Retail   Office  industrial    Special    Total
Expiring within one year                 13.3%     5.0%        4.6%       0.0%     8.0%
Expiring between one and two years       20.3%    27.0%        2.2%       0.0%    20.9%
Expiring between two and three years     43.7%     3.8%       12.5%       0.0%    20.4%
Expiring between three and four years     1.4%     0.7%       30.8%       0.0%     3.3%
Expiring between four and five years      7.6%     5.3%        0.0%       0.0%     5.5%
Expiring between five and six years       0.9%     0.1%       49.9%       0.0%     4.3%
Expiring between six and seven years      5.7%    18.8%        0.0%       0.0%    11.1%
Expiring between seven and eight years    1.3%    39.2%        0.0%       0.0%    18.8%
Expiring between eight and nine years     0.4%     0.1%        0.0%       0.0%     0.2%
Expiring after nine years                 5.4%     0.0%        0.0%     100.0%     7.5%

6.  Development and capital projects
    The Company was not engaged in any major developments or capital projects during the six-month period under review except for R0,6 million spent
    on refurbishing the Ethos Building. The Company is committed to spend a further R1,7 million on refurbishments at the Ethos Building.

7.  Borrowings
    The Company's borrowings at 30 September 2013 consisted of two secured loans from Rand Merchant Bank (a division of FirstRand Bank Limited)
    amounting to R502,8 million and a secured loan from Standard Bank of R92,5 million. The Rand Merchant Bank loans consist of a bridge loan of
    R33,6 million expiring at the end of February 2014 and the remainder are three-year facilities of which R72,5 million expires on 23 March 2015. The
    balance expires on 18 December 2015. Interest rates are fixed, either through interest rate swap agreements or as part of the facility at an average
    interest rate of 7,97% for R363,7 million thereof whilst the balance of R139,1 million are at an average floating rate of 7.17% at 30 September 2013.
    Surplus cash is invested into the floating facilities to ensure effective cash management. The Standard Bank loan has a three-year facility for which the
    interest rates have been fixed for the term of the facility with interest rate swap agreements at an average rate of 8.32%. The Company is also party to
    vendor loans with a nominal value of R43,4 million arising from the acquisition of the Oakfields Shopping Centre and the Cell C building. The accounting
    value of these loans of R37,2 million has been netted off against loans receivable to give effect to what is considered a net settled arrangement.

    At 30 September 2013, Annuity's loan to value ratio was 38.8% based on investment properties valued at R1,6 billion. The Company had debt facilities
    available of R213 million at 30 September 2013.

8.  Share and debenture capital
    The Company issued 43 249 636 linked units on 20 September 2013 at 530.52 cents per linked unit in terms of a private placement. The issue
    price comprised of 510 cents per linked unit capital and 20.52 cents pro rata antecedent divestiture portion of the distribution for the period ending
    30 September 2013.

9.  REIT legislation
    Annuity received REIT status from the JSE Limited on 15 July 2013, effective from the financial year commencing on 1 April 2013. As a result of its REIT
    status Annuity will not be taxable on its future capital gains. The deferred tax liability raised previously on fair value adjustments to Investment Properties
    has therefore been reduced to nil. Deferred tax is no longer calculated on the staight line rental income accrual as future rental income will form part of
    the Company's distributions, which are tax deductable in terms of the REIT tax legislation.

10. Events subsequent to reporting date
    The Company took transfer of the Coricraft Distribution Centre on 7 October 2013. The acquisition was funded from linked units issued on
    20 September 2013.

11.  Strategy and prospects
     Annuity's strategy is to build a diversified portfolio of income producing properties in the retail, commercial and industrial sectors. Its growth and
     investment philosophy is focused on delivering sustainable real income distribution and capital appreciation over the long term through active portfolio
     management and the implementation of value enhancing acquisitions. Since listing in May 2012, Annuity has added properties with a value of
     R1,4 billion, which have been fully implemented or are in the process of being transferred into Annuity's name.

     Annuity has focused on the strategy communicated to the market at the time of its listing, which has included the acquisition of high quality properties,
     generally located in sought-after, well established and defensive nodes in the major metropolitan areas or commercial precincts, underpinned by national
     tenants with strong covenants and above average lease expiry profiles.

     The economic outlook remains fragile and consumer confidence is at a 10-year low. Upward pressure on administered costs, such as electricity, water
     and refuse, is outpacing the rate of income growth and coupled with higher debt levels and higher fuel costs is placing upward pressure on consumer
     disposable income and, consequently, on tenants.

     Despite the tough and highly competitive operating environment, Annuity is well placed to continue delivering sustainable real distribution growth to
     unitholders for the 12 months ahead and remains committed to the implementation of sought-after, value enhancing acquisitions.

     The financial information on which the above forecast is based has not been reviewed and reported on by the Company's external auditors.

12.  Directorate
     There were no changes to the Board of directors during the six months under review.

13.  Payments of dividend and interest distribution number 3 with an election to re-invest the distribution in return for Annuity linked units
     Notice is hereby given of the declaration of the Company's interim cash dividend and interest distribution ("Cash Distribution") of 22.14 cents per linked
     unit for the period 1 April 2013 to 30 September 2013 consisting of a gross cash dividend of 0.04428 cents (0.03764 cents net of dividend tax) and
     interest of 22.09572 cents.

     Linked unitholders will be entitled to elect to re-invest the Cash Distribution of 22.14 cents per linked unit, after deduction of the applicable dividend
     tax, in return for linked units ("Linked Unit Alternative"), failing which they will receive the net Cash Distribution in respect of all their linked unitholdings.

     Linked unitholders who have dematerialised their linked units are required to notify their duly appointed Central Securities Depository Participant
     ("CSDP") or broker of their election in the manner and time stipulated in the custody agreement governing the relationship between the linked unitholder
     and their CSDP or broker.

     Other information:

     	 The dividend portion has been declared from income reserves and no secondary tax on companies' credit has been used.
     	 A dividend withholding tax of 15% will be applicable on the dividend portion to all linked unitholders who are not exempt.
     	 The issued share capital at the declaration date is 232 382 553 linked units.
     The salient dates relating to the Cash Distribution and the Linked Unit Alternative are set out in the timetable below:

                                                                                                                                   2013
Circular and form of election posted to linked unitholders                                                       Wednesday, 20 November
Announcement of Linked Unit Alternative issue price and finalisation information                                    Friday, 29 November
Last day to trade cum distribution                                                                                   Friday, 6 December
Linked units trade ex distribution                                                                                   Monday, 9 December
Listing of maximum possible number of linked units commences on the JSE                                            Tuesday, 10 December
Last day to elect to receive the linked unit alternative (no late forms of election will be accepted)
at 12:00 (South African time)                                                                                       Friday, 13 December
Record date                                                                                                         Friday, 13 December
Announcement of results of Cash Distribution and Linked Unit Alternative on SENS                                   Tuesday, 17 December
Cash distributions posted to certificated linked unitholders and accounts credited by CSDP or broker to
dematerialised linked unitholders electing the cash alternative on or about                                        Tuesday, 17 December
Linked unit certificates posted to certificated linked unitholders and accounts credited by CSDP or broker to
dematerialised linked unitholders electing the linked unit alternative on or about                               Wednesday, 18 December
Announcement of results of Cash Distribution and Linked Unit Alternative in the press                            Wednesday, 18 December
Adjustment to linked units listed on or about                                                                    Wednesday, 18 December

     Notes:
     1.  Linked unitholders electing the Linked Unit Alternative are alerted to the fact that the new units will be listed on LDT+2 and that these new linked units can only be traded on LDT+2
         due to the fact that settlement of the linked units will be two days after record date, which differs from the conventional one day after record date settlement process.
     2.  Linked unitholders may not dematerialise or rematerialise their linked units between Monday, 9 December 2013 and Friday, 13 December 2013, both days included.
     3.  The above dates and times are subject to change. Any changes will be released on SENS and published in the press.
     4.  The Cash Distribution or Linked Unit Alternative may have tax implications for residents and non-resident linked unitholders. Linked unitholders are therefore encouraged to consult
         their professional advisors should they be in any doubt as to the appropriate action to take.

14.  Basis of preparation and accounting policies
     The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), including the presentation and disclosure
     requirements of IAS 34, SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the requirements of the Companies
     Act of South Africa, 2008, as amended.

     The financial results above include disclosure of earnings and headline earnings per linked unit, which is obligatory in terms of IAS 33, earnings per
     share and the JSE Listings Requirements. The directors are of the view that this disclosure is not meaningful to investors as the shares are traded as
     part of a linked unit and practically all the distributable earnings are distributed in the form of debenture interest with a small dividend portion in the ratio
     of 500 to 1. In addition, headline earnings include fair value adjustments for financial liabilities, accounting adjustments to account for lease income on
     a straight-line basis, once off property acquisition costs, as well as other non-cash accounting adjustments which do not affect distributable earnings.

     The calculation of distributable earnings per linked unit as disclosed above is therefore more meaningful to investors.

     These interim financial statements have not been reviewed or audited by the Company's independent external auditors.

     The accounting policies are consistent with those applied in the most recent audited financial statements for the year ended 31 March 2013, other than
     the adoption of the amendments to the following standards that are relevant to the Company's financial information:

     -	 IFRS 7  1 January 2013
     -	 IAS 1  1 January 2013
     -	 IAS 27  1 January 2013
     -	 IAS 28  1 January 2013
     -	 IAS 32  1 January 2013
     -	 IAS 34  1 January 2013

     And adoption of the following new standards and interpretations that are relevant to the Company's financial information:

     -	 IFRS 10  1 January 2013
     -	 IFRS 11  1 January 2013
     -	 IFRS 12  1 January 2013
     -	 IFRS 13  1 January 2013
     
     There is no impact on the results from the adoption of these new and amended standards.

     The September 2012 comparative figures in the Condensed Statement of Financial Position have been restated to take into account the subsequent
     re-classification of Other Financial Assets of R47,3 million and Other Liabilities of R47,3 million, which were disclosed separately in the September 2012
     condensed results and subsequently in the March 2013 and September 2013 Condensed Statement of Financial Position netted off in terms of IFRS
     in what is considered a net settled arrangement.

     The September 2012 comparative figures in the Condensed Statement of Cash Flow have been restated to take into account the subsequent re-
     classification of trade and other payables of R0,6 million and vendor finance of R57,3 million to be part of Acquisition of Business Combinations as was
     subsequently done in the March 2013 and September 2013 Condensed Statement of Cash Flow. These were classified under Cash Generated From
     Operations and Unsecured Borrowings in the September 2012 Condensed Statement of Cash Flow.

     The financial results have been prepared by Mr S Strydom CA(SA), the Chief Financial Officer of the Company.

By order of the Board

PJ Moleketi (Chairman)	   P Theocharides (Joint Chief Executive Officer)

14 November 2013

Directors
PJ Moleketi*; P Theocharides; D Greenberg+; S Strydom;
DE Rubenstein; M Ettin#; EC Loubser*; AM Chait*; DT Soondarjee#;
SJ Williams*; NN Eppel (alternate director)#

*Independent non-executive director 
#Non-executive director
+Non-resident

Registered office
Boundary Place Office Park, 18 Rivonia Road
Illovo, Sandton
Tel: 010 595 3000 Fax: 086 718 3622
Email: info@annuityproperties.co.za
Income taxation reference number 9050/047/19/1

Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

www.annuityproperties.co.za
Date: 14/11/2013 05:35:00 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
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