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ACUCAP PROPERTIES LIMITED - Interim results and dividend finalisation announcement for the 6 months ended 30 September 2014

Release Date: 14/11/2014 07:05
Code(s): ACP     PDF:  
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Interim results and dividend finalisation announcement for the 6 months ended 30 September 2014

Acucap Properties Limited
(Reg No. 2001/021725/06)
(Incorporated on 12 September 2001)
(Approved as a REIT by the JSE)
"Acucap" or "the company"
Share code: ACP
ISIN: ZAE000188660

CONDENSED GROUP RESULTS AND DECLARATION AND FINALISATION OF THE INTERIM DISTRIBUTION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014

Condensed consolidated statement of financial position at 30 September 2014
                                                  30 September                   30 September      
                                                          2014   31 March 2014           2013      
                                                     Unaudited         Audited       Reviewed      
                                                         R'000           R'000          R'000      
Assets                                                                                             
Property Assets                                     18 079 784       9 447 433      8 423 853      
Investment properties                               16 487 310       8 670 762      7 777 850      
Non-current receivable                                 286 605          94 157         83 885      
Current receivable                                      59 114          27 319         31 367      
Investment properties and related receivables       16 833 029       8 792 238      7 893 102      
Investment properties held for sale and related                                                    
receivables                                            712 768          37 350         37 350      
Investment properties under development                483 012         568 000        429 965      
Owner-occupied property                                 10 608           8 531          8 683      
Property development inventory                          40 367          41 314         54 753      
Other non-current assets                             1 398 792       2 882 963      2 728 645      
Loans in respect of unit purchase scheme               316 304         384 016        389 587      
Equipment                                                1 545           1 640          1 644      
Intangible assets and goodwill                         166 930         244 292        245 109      
Interest in associate                                        -       1 863 174      1 792 451      
Interest in joint ventures                             248 034         226 763        260 637      
Listed investment                                      407 674               -              -      
Loan receivable                                        185 186          86 303              -      
Financial instruments                                   69 529          73 854         39 217      
Deferred tax assets                                      3 590           2 921              -      
Other current assets                                   602 960         242 360        247 690      
Loans in respect of unit purchase scheme                56 021               -              -      
Trade and other receivables                            219 978         219 964        232 662      
Tax receivable                                             350             602            839      
Cash and cash equivalents                              326 611          21 794         14 189      
Total assets                                        20 081 536      12 572 756     11 400 188      
Equity and liabilities                                                                             
Total equity                                        11 260 392       5 420 817      5 094 185      
Share capital and share premium                              -       2 212 903      2 212 903      
Stated capital                                       6 618 275               -              -      
Non-distributable reserve                            3 347 537       3 393 245      3 193 461      
Retained earnings/ (accumulated loss)                  338 955       (185 331)      (312 179)      
Equity attributable to owners of the company        10 304 767       5 420 817      5 094 185      
Non-controlling interests                              955 625               -              -      
Non-current liabilities                              7 763 152       5 980 135      5 295 629      
Debentures                                                   -       1 749 150      1 749 150      
Financial liabilities                                7 761 225       4 230 985      3 339 380      
Financial instruments                                    1 927               -              -      
BEE instrument                                               -               -        179 015      
Deferred tax liabilities                                     -               -         28 084      
Current liabilities                                  1 057 992       1 171 804      1 010 374      
Trade and other payables                               295 784         135 907        127 865      
Financial liabilities                                  483 853         606 624        602 557      
Financial instruments                                   50 327               -              -      
BEE Instrument                                         195 930         142 300              -      
Sycom Property Fund distribution payable                32 098               -              -      
Debenture interest payable                                   -         286 973        279 952      
Total equity and liabilities                        20 081 536      12 572 756     11 400 188      


Condensed consolidated statement of profit or loss and other comprehensive income
for the 6 months ended 30 September 2014
                                                                    6 months ended                   6 months ended   
                                                                      30 September      year ended     30 September   
                                                                              2014   31 March 2014             2013   
                                                                         Unaudited         Audited         Reviewed   
                                                                             R'000           R'000            R'000   
Revenue                                                                    568 184         679 829          330 082   
- Contractual                                                              563 335         671 781          328 243   
- Straight lining                                                            4 849           8 048            1 839   
Net operating expenses                                                    (64 695)        (64 385)         (26 013)   
Loss on disposal of investment properties                                    (880)           (202)                -   
Amortisation of intangible assets                                            (408)        (12 642)         (11 825)   
Profit before fair value adjustments,                                                                                 
interest and taxation                                                      502 201         602 600          292 244   
Dividend from listed investment                                             10 145               -                -   
Fair value (loss)/ gain on investment properties                           (4 849)         382 090          234 133   
Fair value loss on listed investment                                       (3 544)               -                -   
Fair value gain on cross currency swap                                       3 146               -                -   
Fair value (loss)/ gain on BEE instrument                                 (53 630)          78 219           41 504   
Loss on settlement of financial instruments                                      -        (47 528)                -   
Loss on deemed sale of associate                                         (149 608)               -                -   
Deemed settlement of pre-existing relationship                             384 834               -                -   
Transaction costs on purchase of subsidiary                                (5 502)               -                -   
Profit before interest and taxation                                        683 193       1 015 381          567 881   
Interest income                                                             36 093          85 863           55 128   
Interest expense                                                                                                      
- Debenture holders – interim                                                    -       (279 952)        (279 952)   
- Debenture holders – final                                                      -       (286 972)                -   
- Financial institutions and other                                       (206 685)       (215 623)        (104 593)   
Share of (loss)/ profit of equity accounted joint ventures                                                            
(net of income tax)                                                        (5 157)           2 803          (2 409)   
Share of profit of equity accounted associate (net of income tax)           31 422         188 098           68 082   
Profit before taxation                                                     538 866         509 598          304 137   
Taxation (expense)/ income                                                 (1 427)          14 152          (4 039)   
Profit for the period                                                      537 439         523 750          300 098   
Other comprehensive income                                                                                            
Items that may be reclassified to profit or loss                                                                      
Available -for-sale financial assets, net change in fair value                   -        (77 898)         (77 898)   
Net change in fair value of cash flow hedge                               (39 550)          60 872           15 254   
Cash flow hedge loss recognised in profit or loss                                -          47 528                -   
Items that will never be reclassified to profit or loss                                                               
Other comprehensive (loss)/ income from associate                          (5 973)           9 834                -   
Other comprehensive income for the period, net of                                                                     
taxation                                                                  (45 523)          40 336         (62 644)   
Total comprehensive income for the period                                  491 916         564 086          237 454   
Profit attributable to:                                                                                               
Owners of the company                                                      517 855         523 750          300 098   
Non-controlling interests                                                   19 584               -                -   
Profit for the period                                                      537 439         523 750          300 098   
Other comprehensive income attributable to:                                                                           
Owners of the company                                                     (44 704)          40 336         (62 644)   
Non-controlling interests                                                    (819)               -                -   
Other comprehensive income for the period                                 (45 523)          40 336         (62 644)   
Total comprehensive income attributable to:                                                                           
Owners of the company                                                      473 151         564 086          237 454   
Non-controlling interests                                                   18 765               -                -   
Total comprehensive income for the period                                  491 916         564 086          237 454   
Reconciliation of profit for the period to headline earnings                                                             
Profit for the period                                                      537 439         523 750          300 098      
Fair value adjustment to investment properties                               4 849       (382 090)        (234 133)      
Loss on disposal of investment properties                                      880             202                -      
Tax effects                                                                      -            (37)                -      
Profit attributable to non-controlling interests                          (19 584)               -                -      
Headline earnings - shares                                                 523 584         141 825           65 965      
Interest paid to debenture holders                                               -         566 924          279 952      
Headline earnings - shares/ linked units                                   523 584         708 749          345 917      
                                                                             Cents           Cents            Cents      
Basic and diluted earnings per share/ linked unit                           257.42          299.13           171.40      
Basic and diluted headline earnings per share/ linked unit                  260.27          404.79           197.57      
Interest Distribution per share/ linked unit                                168.01          323.79           159.89      
- Interim                                                                   168.01          159.89           159.89      
- Final                                                                          -          163.90                -      
                                                                            Shares    Linked units     Linked units      
Total shares/ linked units in issue at the end of the period           232 581 190     175 090 089      175 090 089      
Weighted number of shares/ linked units in issue during the                                                              
period                                                                 201 169 640     175 090 089      175 090 089      


Condensed consolidated statement of changes in equity
for the 6 months ended 30 September 2014                                                                 Attributable to owners of the company
                                                               Shares issued     Share   Share Premium   Stated capital             Non       Retained        Total          Non-        Total      
                                                                               capital                                    Distributable      earnings/                controlling       equity      
                                                                                                                                Reserve   (accumulated                  interests                   
                                                                                                                                                 loss)                                              
                                                                      Number     R'000           R'000            R'000           R'000          R'000        R'000         R'000        R'000      
Balance at 31 March 2013                                         175 090 089       175       2 212 728                -       3 020 133      (376 305)    4 856 731             -    4 856 731      
Total comprehensive income for the period                                                                                                                                                           
Profit for the period                                                      -         -               -                -               -        300 098      300 098             -      300 098      
Other comprehensive income                                                                                                                                                                          
Net change in fair value of listed investments                             -         -               -                -        (77 898)              -     (77 898)             -     (77 898)      
Net change in fair value of cash flow hedge recognised                                                                                                                                              
directly in equity                                                         -         -               -                -          15 254              -       15 254             -       15 254      
Total comprehensive income for the period                                  -         -               -                -        (62 644)        300 098      237 454             -      237 454      
Transactions with owners, recorded directly in equity                                                                                                                                               
Transfer to non-distributable reserve                                      -         -               -                -         235 972      (235 972)            -             -            -      
Total transactions with owners                                             -         -               -                -         235 972      (235 972)            -             -            -      
Balance at 30 September 2013                                     175 090 089       175       2 212 728                -       3 193 461      (312 179)    5 094 185             -    5 094 185      
Total comprehensive income for the period                                                                                                                                                           
Profit for the period                                                      -         -               -                -               -        223 652      223 652             -      223 652      
Other comprehensive income                                                                                                                                                                          
Other comprehensive income from associate                                  -         -               -                -               -          9 834        9 834             -        9 834      
Net change in fair value of cash flow hedge recognised                                                                                                                                              
directly in equity                                                         -         -               -                -          93 146              -       93 146             -       93 146      
Total comprehensive income for the period                                  -         -               -                -          93 146        233 486      326 632             -      326 632      
Transactions with owners, recorded directly in equity                                                                                                                                               
Transfer to non-distributable reserve                                      -         -               -                -         106 638      (106 638)            -             -            -      
Total transactions with owners                                             -         -               -                -         106 638      (106 638)            -             -            -      
Balance at 31 March 2014                                         175 090 089       175       2 212 728                -       3 393 245      (185 331)    5 420 817             -    5 420 817      
Total comprehensive income for the period                                                                                                                                                           
Profit for the period                                                      -         -               -                -               -        517 855      517 855        19 584      537 439      
Other comprehensive income                                                                                                                                                                          
Other comprehensive income from associate                                  -         -               -                -               -        (5 973)      (5 973)             -      (5 973)      
Net change in fair value of cash flow hedge recognised                                                                                                                                              
directly in equity                                                         -         -               -                -        (38 731)              -     (38 731)         (819)     (39 550)      
Total comprehensive income for the period                                  -         -               -                -        (38 731)        511 882      473 151        18 765      491 916      
Transactions with owners, recorded directly in equity                                                                                                                                               
Conversion of linked units to no par value shares                          -     (175)     (2 212 728)        3 962 053               -              -    1 749 150             -    1 749 150      
Issue of shares in respect of acquisition of subsidiary with                                                                                                                                        
non-controlling interests                                         47 080 975         -               -        2 134 378               -              -    2 134 378     1 496 288    3 630 666      
Issue of shares to acquire additional non-controlling                                                                                                                                               
interests                                                         10 410 126         -               -          521 844       (521 903)              -         (59)                       (59)      
Change in reserves on additional acquisition of non-                                                                                                                                                
controlling interests                                                      -         -               -                -         515 983         11 347      527 330     (527 330)            -      
Distribution paid to non-controlling interests                             -         -               -                -               -              -            -      (32 098)     (32 098)      
Transfer to non-distributable reserve                                      -         -               -                -         (1 057)          1 057            -             -            -    
Total transactions with owners                                    57 491 101     (175)     (2 212 728)        6 618 275         (6 977)         12 404    4 410 799       936 860    5 347 659      
Balance at 30 September 2014                                     232 581 190         -               -        6 618 275       3 347 537        338 955   10 304 767       955 625   11 260 392      


Condensed consolidated statement of cash flows                                                           
for the 6 months ended 30 September 2014                                                                 
                                                              6 months ended    year ended   6 months ended   
                                                                30 September      31 March     30 September   
                                                                        2014          2014             2013   
                                                                   Unaudited       Audited         Reviewed   
                                                                       R'000         R'000            R'000   
Cash flows from operating activities                                                                          
Cash generated by operations                                         607 756       653 426          304 483   
Dividend received                                                        160             -                -   
Income tax paid                                                      (1 846)       (3 876)          (2 280)   
Interest income                                                       36 093        85 863           55 128   
Interest expense                                                   (493 658)     (769 100)        (378 119)   
Net cash (outflows)/ inflows from operating activities               148 505      (33 687)         (20 788)   
Cash outflows from investing activities                          (3 103 866)   (1 747 972)        (872 804)   
Cash inflows from financing activities                             3 260 199     1 780 457          884 785   
Net cash inflows/ (outflows) for the period                          304 838       (1 202)          (8 807)   
Cash and cash equivalents at beginning of period                      21 794        22 996           22 996   
Effect of exchange rate fluctuations on cash held                       (21)             -                -   
Cash and cash equivalents at end of period                           326 611        21 794           14 189   


1.  BASIS OF PREPARATION 
    The condensed interim financial statements are prepared in accordance with International Financial
    Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices
    Committee, the JSE Listings Requirements and the Companies Act, 2008 and are presented in accordance
    with the minimum content, including disclosures, prescribed by IAS 34, and South African Statements
    and interpretations adopted by the International Accounting Standards Board (IASB).
    
    These condensed consolidated interim financial statements are prepared on the historical cost basis,
    except for investment properties, investment properties held for sale, derivative financial instruments,
    financial assets and available-for-sale financial assets which are measured at fair value.
    
    The condensed consolidated interim financial statements are prepared on the going concern basis and all
    accounting policies applied in the preparation of these interim financial statements are consistent with those
    applied in the previous annual financial statements.
    
    The preparation of these condensed consolidated interim financial statements and this summarized report
    was supervised by the Financial Director, Mr C Kotze, CA (SA).
 
2.  Condensed segmental results
    for the 6 months ended 30 September 2014
                                                                            6 months ended   6 months ended      
                                                                              30 September     30 September      
                                                                                      2014             2013      
                                                                                 Unaudited         Reviewed      
                                                                                     R'000            R'000      
    Retail                 Segment revenue (external customers)                    363 113          233 408      
                           Dividend from listed investment                          10 145                -      
                           Net operating expenses                                 (40 544)         (37 332)      
                           Fair value adjustment to investment properties          (4 836)          192 334      
                           Fair value loss on listed investment                    (3 544)                -      
                           Loss on disposal of investment properties                 (872)                -      
                           Segmental profit                                        323 462          388 410      
                           Segmental property assets                            10 816 971        5 843 608      
    Offices                Segment revenue (external customers)                    189 814           85 516      
                           Net operating expenses                                 (21 098)         (10 319)      
                           Fair value adjustment to investment properties            (184)           41 029      
                           Loss on disposal of investment properties                   (8)                -      
                           Segmental profit                                        168 524          116 226      
                           Segmental property assets                             6 720 301        1 973 059      
    Industrial             Segment revenue (external customers)                     12 678            9 991      
                           Net operating expenses                                  (1 086)            (541)      
                           Fair value adjustment to investment properties              171              907      
                           Segmental profit                                         11 763           10 357      
                           Segmental property assets                               500 366          427 447      
    Property development   Segment revenue (external customers)                      2 579            1 167      
                           Net operating expenses                                    (980)          (1 084)      
                           Fair value adjustment to investment properties                -            (137)      
                           Segmental loss                                            1 599             (54)      
                           Segmental property assets                                42 146          179 739      
    
    Reconciliation to profit before interest and taxation for the period in the income statement
       Revenue                                                                      568 184         330 082      
       Allocated operating expenses                                                (63 708)        (49 276)      
       Unallocated operating expenses                                                 (987)          23 263      
       Loss on disposal of investment properties                                      (880)               -      
       Amortisation of intangible assets                                              (408)        (11 825)      
       Dividend from listed investment                                               10 145               -      
       Fair value adjustment to investment properties                               (4 849)         234 133      
       Fair value loss on listed investment                                         (3 544)               -      
       Fair value gain on cross currency swap                                         3 146               -      
       Fair value adjustment to BEE instrument                                     (53 630)          41 504      
       Loss on deemed sale of associate                                           (149 608)               -      
       Cancellation of pre-existing relationship                                    384 834               -      
       Transaction costs on purchase of subsidiary                                  (5 502)               -      
       Profit before interest and taxation                                          683 193         567 881      
       Total property assets                                                     18 079 784       8 423 853      

3.  Fair value of financial instruments recognised in the statement of financial position

    The fair values of all financial instruments with the exception of the BEE instrument, interest rate swaps, cross currency swaps and
    the investment in Stenham are substantially the same as the carrying amounts reflected on the statement of financial position. The
    group measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements:
    
    - Level 1: Quoted prices (unadjusted) in an active market for an identical instrument.
    - Level 2: Valuation techniques based on observable inputs, either directly (ie: as prices) or indirectly (ie: derived from prices). This
    category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical
    or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are
    directly or indirectly observable from market data.
    - Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation
    technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's
    valuation. This category also includes instruments that are valued based on quoted prices for similar instruments where significant
    unobservable adjustments or assumptions are required to reflect differences between the instruments.
    
    If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy,
    then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that
    is significant to the entire measurement.
    
    As the group does not hold financial instruments that are traded in active markets, fair values are not based on quoted market prices or
    dealer price quotations. As such, the group determines fair values using valuation techniques. Valuation techniques include net present
    value and discounted cash flow models and comparison to similar instruments for which market observable prices exist. Assumptions
    and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in
    estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price
    volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the
    financial instrument at the reporting date, that would have been determined by market participants acting at arm's length.
    
    The group uses widely recognised valuation models and techniques for determining the fair value of common and more simple
    financial instruments, like the interest rate and currency swaps that use only observable market data and require little management
    judgement and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity securities,
    exchange traded derivatives and simple over the counter derivatives like interest rate swaps. Availability of observable market prices
    and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with
    determination of fair values.
    
    The table below analyses financial instruments carried at fair value, by valuation method:
    
                            Level 1        Level 2       Level 3          Total      
    30 September 2014                                                                
    Financial assets                                                                 
    Listed investment             -              -       407 674        407 674      
    Interest rate swaps           -         69 529             -         69 529      
    Financial liabilities                                                            
    BEE instrument                -      (195 930)             -      (195 930)      
    Cross currency swap           -       (50 327)             -       (50 327)      
    Interest rate swaps           -        (1 927)             -        (1 927)      
    30 September 2013                                                                
    Financial assets                                                                 
    Interest rate swaps           -         39 217             -         39 217      
    Financial liabilities                                                            
    BEE instrument                -      (179 015)             -      (179 015)      
    
    A reconciliation of the opening balances to the closing balances for the level 3 valuations is disclosed as follows:                  
                                                                                    Unaudited at   
                                                                                     30 Sep 2014   
                                                                                         (R'000)   
    Balance as at beginning of period                                                          -   
    Investment acquired as part of acquisition of Sycom Property Fund                    411 218   
    Fair value loss on revaluation recognised in profit or loss                          (3 544)   
    Carrying value at end of period                                                      407 674   
    
    Level 2 fair values - BEE instrument, interest rate swaps and cross currency swaps
    The following table shows the valuation techniques used in measuring level 2 fair values:
    
    Type                   Valuation technique                          Significant unobservable inputs          
    BEE instrument         Fair valued bi-annually by Alt Re            Not applicable - observable inputs are   
                           Capital (Pty) Ltd (trading as                used in the valuation                    
                           "Alternative Real Estate") using the                                                  
                           Black-Scoles call option valuation                                                    
                           method (to price a European option).                                                  
                           This involves using the option expiry                                                 
                           date, volatility estimate based on the                                                
                           historical volatility of Acucap unit price                                            
                           and a dividend assumption of 0%.                                                      
    Interest rate swaps    Fair valued monthly by Nedbank Capital       Not applicable - observable inputs are   
                           using mark to market mid market values.      used in the valuation                  
                           This involves, inter alia, discounting the                                            
                           future cash flows using the curves at the                                             
                           reporting date and the credit risk                                                    
                           inherent in the contract                                                              
    Cross currency swaps   Fair valued bi-annually by Nedbank           Not applicable - observable inputs are   
                           Capital using mark to market valuation       used in the valuation                    
                           methodology. This involves, inter alia,                                               
                           calculating the present value of the                                                  
                           future cross currency swap cash flows                                                                 
    
    Level 3 fair value - Investment in Stenham European Shopping Centre Fund
    The investment in Stenham European Shopping Centre Fund is an investment in a closed fund without an actively traded price. The
    significant underlying asset per the statement of financial position of Stenham is the investment property balance, which is valued
    using a discounted cash flow model (refer valuation technique below). Acucap's valuation in Stenham is based on the net asset value
    per share of the investment translated at the period end ruling exchange rate.
    The investment property has been valued at 30 September 2014 by Jones Lang LaSalle, who are independent and qualified in
    accordance with the Appraisal and Valuation Manual published by the Royal Institute of Chartered Surveyors (RICS). The valuation
    was prepared in accordance with the RICS Valuation - Professional Standards published by the Royal Institute of Chartered Surveyors
    as well as the International Valuation Standards (IVS) on the basis of Market Value.
    
                                                                              Significant               Inter-relationship between key                
                                                                              unobservable              unobservable inputs and fair                  
    Valuation technique                                                       inputs                    value measurements                            
    The Market Value of the property has been assessed using the              a) Financial              The fair value would increase/                
    Discounted Cash Flow (DCF) calculation method. The valuation                 information used to    (decrease) based on (1)                       
    takes into account the agreed rent for the signed leases, the market         calculate rental       increases/(decreases) in the stabilised net   
    rent for currently vacant space and estimated rents for re-letting of        growth forecasts       operating income,(2)                          
    the space after lease term expiry. In all instances, the valuers                                    (decreases)/increases in the yield used to    
    calculated the DCF for a 10-year period and assumed a capitalised         b) Net initial yield      calculate the Terminal Value Indication,      
    value based on a stabilised rental income of the properties thereafter.      (6.39%)                (3) (decreases)/increases in the discount     
    After the DCF-period of 10 years, the valuers calculate a stabilised                                rate used to calculate the Gross Capital      
    rental income. The capitalised value takes this stabilised rental         c) Discount rate          Value                                         
    income and subtracts the stabilised expenses, resulting in the               (6.85%)                                                              
    Stabilised Net Operating Income. This result is capitalised into                                                                               
    perpetuity applying an equivalent (growth implicit) yield and             d) Terminal                                                          
    produces the Terminal Value Indication. The resulting value is then          capitalisation rate                                                  
    discounted to the valuation date using the discount rate from term           (6.5%)                                                               
    years 1-10. Discounting the remaining Cash Flows for years 1 to 10                                                                             
    and the Terminal Value for year 11 to the valuation date (i.e. the Net    e) Non recoverable                                                   
    Present Value) produces the Gross Capital Value. After deductions            expenses                                                             
    for Purchaser's Costs, the Market Value is obtained. 

                                                                               f) Market lease  
                                                                                  assumptions for 
                                                                                  contract expiry/  
                                                                                  vacant space   
                                                                      
4.  Declaration of dividend after reporting date                     
    In line with IAS 10, Events after the Reporting Period, the declaration of the dividend occurred 
    after the end of the reporting period resulting in a non-adjusting event that is not recognised 
    in the financial statements. In prior periods the distribution consisted of debenture interest 
    that accrued on a daily basis.                                                                                                                                   
5.  Acquisition of Sycom Property Fund ("Sycom")
    
    On 7 July 2014, Acucap acquired 40.56% of the units and voting interest in Sycom. As a result, 
    Acucap's interest in Sycom increased to 74.43%. Acucap has determined that it obtained control 
    of Sycom from 7 July 2014 as from this date it was exposed to or had rights to variable returns 
    from its involvement with Sycom and had the ability to affect those returns by virtue of its 
    ability to pass unitholders' resolutions through its majority holding together with its 
    100% shareholding in Sycom Property Fund Managers Limited, the manager of Sycom. As such, Sycom 
    has been consolidated into the Acucap results from this date. As at 30 September 2014, Acucap's 
    holding in Sycom had increased to 83.40%. Based on Acucap's strategy to ultimately obtain 100% of 
    the Sycom issued units, resulting in a merger of the two funds and an enlarged Acucap:
    
        - The Acucap Board is of the view that the Sycom property portfolio is complementary to that
          of Acucap. Therefore, the enlarged Acucap would benefit from greater sectorial
          diversification and reduced asset concentration risk.
    
        - The enlarged Acucap would offer a single entry-point for investors which would be expected
          to result in the attraction of interest from a wider group including tracker funds and
          international investors.
    
        - Assuming that post the merger, the enlarged Acucap would represent approximately 5% of
          the listed property index, mutual funds and tracker funds that track the listed property index,
          or investors that include any form of index weighting in their investment strategy, would be
          expected to adjust their portfolios in favour of the enlarged Acucap. This increased interest
          would be expected to have a positive impact on the enlarged Acucap's rating and liquidity
          thereby adding impetus to the JSE traded price and also enhancing Acucap's ability to raise
          capital for meaningful acquisitions.
    
        - The enlarged Acucap could be expected to achieve operational synergies post the
          implementation of the acquisition that include, inter alia, cost efficiencies, streamlining of
          operations, more efficient allocation of top-end management's time and the alignment of
          strategic objectives. The acquisition would result in an increased critical mass of the asset
          base of the enlarged Acucap. The significantly larger asset base would in turn reduce large-
          tenant risk and concentration risk as well as allow for redevelopment given that the asset
          being redeveloped will be a smaller percentage of the total asset base. Furthermore, a larger
          asset base and balance sheet would provide reach into larger transactions, in line with the
          strategy of owning a smaller number of individually significant assets. This would be
          expected to add further impetus to the trading price of the enlarged Acucap securities.
    
    The acquisition was implemented through an offer to Sycom unitholders, other than Acucap or Sycom
    Property Fund Managers Limited (SPFM), to acquire all Sycom units held on the offer closing date of
    16 May 2014. A follow on offer was implemented on the same terms as the original offer which
    extended the offer closing date to 26 September 2014.
    The acquisition was settled by means of Acucap scrip consideration which was issued to each Acucap
    scrip consideration recipient with reference to an exchange ratio of 58 no par value Acucap shares, for
    every 100 Sycom units held by the accepting Sycom unitholder on the respective offer closing dates.
    
    In the three months to 30 September 2014, Sycom contributed revenue of R176.06m* and total profit
    of R99.60m (R80.02m to Acucap parent equity holders and R19.58m to non-controlling interests) to
    Acucap's results.

    If the acquisition had occurred on 1 April 2014, management estimates that consolidated revenue
    would have been R735.73m* and consolidated profit for the period would have been R598.3m.** In
    determining these amounts, management has assumed that the fair value adjustments, determined
    provisionally, that arose on the date of acquisition would have been the same if the acquisition had
    occurred on 1 April 2014.
    
    *  When calculating the revenue of Sycom, Acucap has excluded ad hoc recoveries of Sycom from
       revenue as it interprets these contracts to say that Sycom acts as agent of the lessee.
    ** The consolidated profit for the period includes the effect of the gains and losses relating to the
       acquisition date accounting.
    
    Acquisition date consideration
    
    The acquisition date fair value of the total consideration transferred by Acucap for the additional
    40.56% interest was R2 756 730 291.

    The consideration took the form of Acucap scrip shares, issued on the terms described above, adjusted
    by the amount used to settle the pre-existing relationship at acquisition.
    
    The following table summarises the acquisition date fair value of consideration transferred:
                                                          R'000       
    Equity instrument  (47 080 975 ordinary shares)   2 134 651   
    Settlement of pre-existing relationship             622 079     
    Total consideration transferred                   2 756 730   
    
    Equity instruments issued
    The fair value of the ordinary shares issued was based on the listed share price of Sycom on 3 July
    2014 of R26.30 per unit.
    
    Deemed settlement of pre-existing relationship
    Acucap owns Sycom's asset management and property management agreements, and earns
    management fees in terms of this pre-existing relationship. The acquisition of these agreements
    resulted in an intangible asset being recognised by Acucap.
    
    From the date on which Acucap acquired control of Sycom, Sycom's financial statements are
    included in Acucap's consolidated financial statements. The pre-existing relationship is deemed to
    have been disposed of immediately prior to this date, and fees charged in terms of the pre-existing
    relationship after this date are eliminated in Acucap's consolidated financial statements.
    
    The gain resulting from the deemed settlement of the pre-existing relationship amounted to R384.8
    million and is disclosed in the statement of profit or loss and other comprehensive income as "deemed
    settlement of pre-existing relationship". The gain is calculated as the difference between the fair value
    of the agreements and their carrying value. The fair value of the agreements was calculated using the
    discounted cash flow model.
    
    
    Acquisition-related costs
    Acucap incurred acquisition-related costs of R5.5m on professional fees. These costs have been
    included in the line "transaction costs on purchase of subsidiary" in the statement of profit or loss and
    other comprehensive income.
    
    Identifiable assets acquired and liabilities assumed
    
    The following fair value amounts were recognised at the acquisition date for each major class of
    assets acquired and liabilities assumed:
                                                                           R'000   
    Property assets                                                    8 206 185   
    Other non-current assets                                             445 876   
    Receivables                                                           79 501   
    Cash and cash equivalents                                            219 661   
    Total assets                                                       8 951 223   
    Borrowings                                                       (2 903 795)   
    Other non-current liabilities                                        (1 361)   
    Current liabilities (excluding trade payables)                      (53 473)   
    Trade payables                                                     (140 866)   
    Total liabilities                                                (3 099 495)   
    Total identifiable net assets acquired                             5 851 728   
    Acucap share of identifiable net assets acquired (74.43%)          4 355 441   
    Acquired receivables by major class                                    R'000   
    Debtors Control                                                        7 823   
    Impairment allowance                                                 (3 145)   
    Tenant procurement cost                                               36 461   
    Municipal recoveries                                                  17 498   
    Local interest receivable from Nedbank                                 1 634   
    Other                                                                 19 230   
    Total                                                                 79 501   
    
    Other than the debtors control balance, for which the impairment allowance is disclosed above, the
    fair values and contractual amounts do not differ materially for the acquired receivables. The
    impairment allowance represents the best estimate at the acquisition date of the contractual cash flows
    not expected to be collected.
    
    Measurement of fair value
    
    The valuation techniques used for measuring the fair values of material assets acquired and liabilities
    assumed were as follows:
    
    Asset Acquired / liabilities    Valuation technique                                                 
    Assumed                                                                                             
    Property assets                 Fair valued by Quadrant Properties by capitalising the forecast     
                                    property net income into perpetuity and then making specific        
                                    adjustments to the valuations. The capitalisation of net income     
                                    valuation method assumes a rental stream into perpetuity and        
                                    uses the capitalisation rate to account for the risk of projected   
                                    market, business and financial volatility and to adjust for the     
                                    sustainability of the cash flow going forward in perpetuity.        
    Listed Investment in Stenham    The investment is in a closed fund without an actively traded       
    European Shopping Centre Fund   price. The significant underlying asset per the statement of        
                                    financial position of Stenham is the investment property           
                                    balance, which is valued using a discounted cash flow model.       
                                    The valuation of Stenham is based on the net asset value per       
                                    share of the investment translated at the ruling exchange rate.    
    Non-current liabilities         Valued using the present value of the expected cash flows at a     
                                    market expected rate.                                              
    Interest rate Swap              Fair valued by Nedbank Capital using mark to market mid            
                                    market values. This involves, inter alia, discounting the future   
                                    cash flows using the curves at the reporting date and the credit   
                                    risk inherent in the contract.                                     
    Cross currency Swap             Fair valued by Nedbank Capital using mark to market                
                                    valuation methodology. This involves, inter alia, calculating      
                                    the present value of the future cross currency swap cash flows     
    
    Goodwill
    
    Goodwill arising from the acquisition has been recognised as follows:
    
                                                                         R'000   
    Consideration transferred                                        2 756 730   
    Fair value of pre-existing interest in Sycom                     1 759 002   
    Fair value of identifiable net assets (Acucap's share)         (4 355 441)   
    Goodwill                                                           160 291   
    
    The remeasurement to fair value of Acucap's pre- existing 33.87% interest in Sycom resulted in a
    loss of R149.6m (R1 759m less the R1 908.6m carrying amount of the equity-accounted investee at
    the date of acquisition). This amount has been included in the line "loss on deemed sale of associate"
    in the statement of profit or loss and other comprehensive income.
    
    Non-Controlling Interest
    The amount of the non-controlling interest in Sycom recognised at the acquisition date was
    R1 496.3m. The non-controlling interest at acquisition was calculated using the proportionate interest
    method. Under the proportionate interest method, the non-controlling interest is calculated as the non-
    controlling interest holders' share of Sycom's identifiable net assets at the acquisition date.
    
    Acucap continued to acquire additional interest of 8.97% in Sycom up to 30 September 2014 through
    the follow on offer increasing its ownership from 74.43% to 83.40%.
    
    As a result of acquiring the additional interest in Sycom, Acucap recognised (in aggregate) a
    reallocation of R527.3m from non-controlling interest to parent equity at the dates on which
    additional interest in Sycom was acquired from the non-controlling interests. This reallocation
    included retained earnings of R11.3m and NDR of R516m.
    
    The proportion of ownership interests and voting rights held by non-controlling interests amounted to
    16.60% at 30 September 2014.

COMMENTARY

1.  REVIEW OF RESULTS AND OPERATIONS

    Acucap's board is pleased to report a dividend of 168.01 cents per share for the six months ended
    30 September 2014, which represents an increase of 5.1% over the corresponding period in the
    previous financial year.

    Acucap obtained control of Sycom on 7 July 2014, and has accordingly included Sycom's financial statements 
    in the Acucap consolidated financial statements on a line-by-line basis from that date.


2.  CORPORATE ACTIVITY

    Conversion of Capital Structure

    During the period under review Acucap successfully converted its linked unit capital structure to a
    share-only structure consisting of no par value shares.

    Merger with Sycom

    Acucap made a general offer, and a subsequent follow-on offer, to Sycom unitholders in terms
    of which Sycom unitholders were offered 0.58 Acucap shares in exchange for every Sycom unit.
    The follow-on offer closed on 26 September 2014, and resulted in Acucap increasing its
    holding in Sycom to 83.4%. Growthpoint Properties Limited holds 15.6% of Sycom's units in issue,
    and minorities hold the residual 1%.

    Acquisition by Growthpoint Properties Limited ("Growthpoint")

    As previously announced, in early April 2014 Growthpoint acquired a significant stake in Acucap
    from institutional investors. Growthpoint's shareholding as at the date of this announcement is
    34.6%.

    Shareholders are referred to the joint announcement dated 12 November 2014 setting out the
    detailed terms regarding a potential offer by Growthpoint to acquire all the shares in Acucap that
    it does not already own by way of a scheme of arrangement.


3.  PORTFOLIO INVESTMENT ACTIVITY

    Greenacres
    Phase 1 of the Greenacres redevelopment is underway and is expected to be complete by April 2015.
    This phase comprises the construction of 3,340m2 of additional retail space which will link the current
    Woolworths entrance to that of the Shoprite Hyper. The estimated total cost of phase 1 is R86 million,
    of which Acucap's contribution is R43 million. The anticipated first year return on phase 1 is 13.9%.
    Phase 1 will reflect the modern and contemporary standard to which the rest of the mall will be
    upgraded. The total capital commitment for the Greenacres project, including all non-income
    producing refurbishment work and mall upgrades, is in the order of R296 million (Acucap's share being
    R148 million) with an anticipated yield of 7,5%, and is expected to be complete by June 2016.

    WaterCrest Mall
    The development of the 43,500m2 regional mall is progressing well and is scheduled to open in
    April 2015. There has been strong interest from national tenants, with leases concluded for 94% of
    the mall's GLA.

    Key West Shopping Centre
    The final phase of the Key West redevelopment is nearing completion. The new Virgin Active gym is
    scheduled to open during the second half of November 2014. The redevelopment of the space
    previously occupied by the gym has commenced, with strong demand for the prime retail position
    that the gym previously occupied in the mall.

    Golf Park
    The development of the new RCS head office at Golf Park is well advanced, and RCS has commenced
    with its fit-out of the interior of the building. The exterior of the building will be completed by the end
    of November 2014.


4.  BORROWINGS

    The group has total borrowings of R7.76 billion, which includes Sycom's borrowings of R2.9 billion.
    The group's consolidated borrowing facility is R9.3 billion. As at September 2014, 44.3% of
    borrowings were subject to interest rate hedges. Forward starting swaps already contracted and
    detailed below will lift the hedging profile to approximately 65% of current borrowings by March
    2016. The gearing ratio as at the end of September 2014 was 43.6%, up from 38.5% at the end of
    March 2014.

    Interest rate hedging
                                                      Notional   Effective
         Start Date     Maturity Date   Fixed Rate   Amount Rm    rate
    Acucap - Swaps
         30-Sep-13          30-Sep-16       5.880%       100       7.380%
         30-Sep-13          28-Sep-18       6.450%       100       7.950%
         31-Mar-14          31-Mar-17       6.190%       100       7.690%
         31-Mar-14          31-Mar-19       6.740%       100       8.240%
         30-Sep-14          30-Sep-17       6.505%       100       8.005%
         30-Sep-14          30-Sep-19       7.015%       100       8.515%
         30-Sep-14          30-Sep-16       7.180%       500       8.680%
         31-Mar-15          31-Mar-18       6.340%       370       7.840%
         31-Mar-15          29-Mar-19       6.600%       300       8.100%
         30-Sep-15          28-Sep-18       7.650%       300       9.150%
         31-Mar-16          29-Mar-19       7.940%       600       9.440%
         31-Mar-16          31-Mar-20       8.150%       200       9.650%
         31-Mar-16          31-Mar-21       8.340%       200       9.840%
    Sycom - Swaps
         31-Mar-14          31-Mar-17       5.790%       200       7.290%
         17-Mar-14          17-Mar-17       5.785%       200       7.285%
          9-Apr-14           9-Apr-18       6.095%       100       7.595%
         30-Sep-14          29-Sep-17       6.045%       200       7.545%
         30-Sep-14          30-Sep-16       7.180%       500       8.680%
         31-Mar-15          29-Mar-18       6.305%       300       7.805%
         30-Sep-15          28-Sep-18       7.650%       300       9.150%
         31-Mar-16          31-Mar-20       8.150%       100       9.650%
         31-Mar-16          31-Mar-21       8.340%       100       9.840%
    Total - Swaps                                       5 070

    Acucap - Fra's
         26-Sep-14          29-Dec-14        6.77%     1 140       8.270%
         29-Dec-14          26-Mar-15        7.03%     1 140       8.530%
         26-Mar-15          26-Jun-15        7.34%       470       8.840%
         26-Jun-15          28-Sep-15        7.61%       470       9.110%

5.  LEASE EXPIRIES

    Over the longer-term, the fund continues to show a good, long-dated lease expiry profile. The table
    below shows the pattern of expiries for all leases in the Acucap portfolio, measured by rental
    income. There are no individually significant expiries in the profile reflected below.

    Lease expiry profile by revenue by sector

                 Total     Retail   Offices   Industrial      
    Mar-15       16.4%     14.3%       2.0%         0.1%            
    Mar-16       22.2%     15.6%       6.5%         0.1%            
    Mar-17       18.2%     15.2%       2.8%         0.2%            
    Mar-18       13.8%      7.0%       6.6%         0.2%            
    Mar-19       11.9%      7.8%       2.0%         2.1%            
    thereafter   17.5%     12.5%       4.2%         0.8%            
    Total       100.0%     72.4%      24.1%         3.5%

    New leases and renewals were entered into over 82,665m2 during the period under review, while leases over
    78,276m2 either expired or were subject to early renewals.

6.  VACANCIES AND BAD DEBTS

    Total vacancies by GLA have decreased from 3.0% at 31 March 2014 to 1.8% at the end of
    September 2014. Much of this reduction can be attributed to the successful refurbishment and
    letting of the Albion Springs office building.

    The table below shows the vacancy attributable to each segment of the Acucap portfolio by GLA:
    
    Vacancy profile by sector by GLA
                             % of Total GLA
    Retail vacancy                     0.7%
    Office vacancy                     1.0%
    Industrial vacancy                 0.1%
    GLA let                           98.2%

    The provision for bad debts increased from R2.2 million to R3.2 million during the six months under
    review. This movement, together with actual write-offs of R0.54 million, resulted in a charge of R1.5
    million to the income statement. The credit environment has remained generally stable.


7.  EVENTS AFTER THE REPORTING DATE

    Other than the Corporate Action detailed above there have been no significant events after the reporting
    date.

8.  PROSPECTS

    The board expects Acucap's dividend growth for the full financial year to be in the order of 5% to 6%.

    The growth in distribution is based on the following key assumptions:
       - Forecast investment property income is based on contractual rental escalations and market related renewals;
       - Appropriate allowances for vacancies have been incorporated into the forecast; and
       - No major corporate failures will occur.

    This guidance has not been reviewed or reported on by Acucap's auditors.


9.  PAYMENT OF DIVIDEND

    Notice is hereby given that a dividend of 168.01 cents per share has been approved in respect of
    the six month period ended 30 September 2014. The last date to trade the shares cum dividend
    is Friday, 28 November 2014 and the record date will be Friday, 5 December 2014. The shares
    will start trading ex-dividend from Monday, 1 December 2014. Dividend payments will be made to
    shareholders on Monday 8 December 2014.

    Acucap's tax number is 9801081143 and it has no STC credits available.
    
    Share certificates may not be dematerialised or rematerialised between Monday 1 December
    2014 and Friday 5 December 2014 both days inclusive.
    
    
    TAX TREATMENT OF DISTRIBUTION
    The information in this announcement is provided as a general guide to the potential South African tax
    consequences pertaining to the distribution for shareholders that are subject to South African tax. The
    information provided in this announcement is not intended as comprehensive tax advice, nor does it
    purport to take into account all of the considerations that may be relevant to shareholders in relation
    to the dividend. Shareholders should consult their tax advisors for advice on the particular tax
    consequences applicable to them.

    In accordance with Acucap's status as a REIT, shareholders are hereby advised that the interim
    dividend will meet the requirements of a "qualifying distribution" for the purposes of section 25BB of
    the Income Tax Act, No.58 of 1962 ("Income Tax Act"). The dividend will therefore be deemed to be a
    dividend for South African tax purposes, in terms of section 25BB of the Income Tax Act.

    South African tax resident shareholders
    The dividend received by or accrued to South African tax residents must be included in the gross
    income of such unitholders and will not be exempt from income tax (in terms of the exclusion to the
    general dividend exemption, contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act)
    as a result of it being a dividend distributed by a REIT. This dividend may, however, be exempt from
    dividend withholding tax in the hands of South African tax resident shareholders in which case the net
    dividend amount will be equal to the gross dividend amount disclosed above, provided that the South
    African resident shareholders provided the following forms to their CSDP or broker, as the case may
    be, in respect of uncertificated shares, or Computershare Investor Services (Pty) Ltd
    ("Computershare") (at the details contained below), in respect of certificated shares:
      - a declaration that the dividend is exempt from dividends tax; and
      - a written undertaking to inform the CSDP, broker or, in respect of certificated shareholders only,
        Computershare, should the circumstances affecting the exemption change or the beneficial
        owner cease to be the beneficial owner, in the form prescribed by the Commissioner for the 
        South African Revenue Service.

    Non-resident shareholders
    Dividends received by non-resident shareholders will not be taxable as income and instead will be
    treated as an ordinary dividend which is exempt from income tax in terms of the general dividend
    exemption in section 10(1)(k)(i) of the Income Tax Act. It should be noted that, up to 31 December
    2013, dividends received by non-residents from a REIT were not subject to dividend withholding tax.
    From 1 January 2014, any dividend received by a non-resident from a REIT is subject to dividend
    withholding tax at 15% in which case the net dividend amount will be 142.8085 cents per share, unless
    the rate is reduced in terms of any applicable Double Taxation Agreement ("DTA") between South
    Africa and the country of residence of the shareholder.

    A reduced dividend withholding rate in terms of the applicable DTA may only be relied upon if the
    non-resident shareholder has provided the following forms to its CSDP or broker, as the case may be,
    in respect of uncertificated shares, or, Computershare, in respect of certificated shares:
      - a declaration that the dividend is subject to a reduced rate as a result of the application of a
        DTA; and
      - a written undertaking to inform its CSDP, broker or Computershare, as the case may be, should
        the circumstances affecting the reduced rate change or the beneficial owner cease to be the
        beneficial owner, in the form prescribed by the Commissioner for the South African Revenue Service.


On behalf of the Board

BS KANTOR                                                     PA THEODOSIOU
Chairman                                                      Managing Director

13 November 2014

Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN

Transfer secretaries:
Computershare Investor Services Proprietary Limited
70 Marshall Street
JOHANNESBURG

Sponsor:
Questco Proprietary Limited

http://www.acucap.co.za
info@acucap.co.za

Directors: Prof BS Kantor (Chairman), PA Theodosiou*# (Managing Director), FM Berkeley, RC Frolich, C Kotze*,
N Mandindi, C B Marlow, M S Moloko, JH Rens*, B Stevens, NDC Whale
Company secretary: H H-O Steyn
* Executive # British



Date: 14/11/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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