Wrap Text
Unaudited condensed consolidated interim results for the six months ended 30 November 2016
TOWER PROPERTY FUND LIMITED
Incorporated in the
Republic of South Africa
Registration number:
2012/066457/06
JSE share code: TWR
ISIN: ZAE000179040
(Approved as a REIT by the JSE)
("Tower" or the "fund" or the "company")
UNAUDITED
CONDENSED
CONSOLIDATED
INTERIM RESULTS
for the six months ended
30 November 2016
- Core earnings increase of 8%
- Distributable earnings increased to
R130 million
- Interim distribution decreased by 15% to
38.4 cents per share
- Operating profit up 47% to R195 million
- Portfolio expanded to 50 properties
(Seven currently for sale)
- Portfolio value now R5 billion
- 28% of properties, by value, located in
Eastern Europe (Croatia)
- Acquisition of new R1 billion Croatian
retail property portfolio (Euro 66 million)
- Management company internalised
- R240 million of additional profits
expected to be realised within
30 months
Profile
Tower is an internally managed real estate
investment trust (REIT), which owns a diversified
portfolio of 50 commercial, industrial and retail
properties valued at R5 billion, located in South
Africa and Croatia. In South Africa, Gauteng has
the greatest concentration of assets by value
at 34%, with the Western Cape accounting for
28% and KwaZulu-Natal 10%. Croatia accounts
for 28% of the fund's property value. The fund
aims to add value through active property asset
management and has taken a leading role in
the market in greening its existing portfolio.
Cape Quarter Lifestyle Village, Tower`s largest
property in South Africa, was recently awarded a
4 Star existing building Green Star rating through
the Green Building Council of South Africa, the
first lifestyle centre in the country to receive this award.
The investment strategy of the fund is to expand
its portfolio by targeting well located properties
with strong cash flows with upside potential and
to ensure a diversified sectoral and geographic
spread of properties. The fund currently has a
sectoral spread by value of 47% retail, 45% office
and 8% industrial.
Financial performance
Tower's distribution per share decreased by 15%
compared to the 30 November 2015 distribution as a
result of Tower no longer distributing once-off earnings.
For some time, management has engaged with Tower's
shareholders, highlighting the difference between
core earnings (being tenant rentals, less operating
costs, less interest) and once-off earnings. The fund
is of the opinion that capital realised and once-off
earnings should be redeployed by the fund to enhance
distributable income on a sustainable basis rather
than being distributed to shareholders. This is in line
with the best practice recommendations released
by the South African Real Estate Investment Trust
Association. Once-off earnings should be reinvested to
maximise sustainable returns, with the fund currently
repurchasing shares and reducing gearing.
As a result of this policy, Tower has revised its guidance
for the year ending 31 May 2017 to within a range of
80 cents to 82 cents per share. No once-off earnings
will be paid out as a dividend in this financial year.
On a rolled forward earnings basis (to January 2018),
shareholders can expect slightly higher core earnings
distribution of between 84 cents to 86 cents per share.
The distribution guidance has not been reported on by
the company's auditors.
In a difficult trading environment, revenue increased
by 22% to R223 million and operating profit by 47% to
R195 million when compared to the 30 November 2015
results. Distributable earnings for the period totalled
R130 million and the directors are pleased to declare
a distribution of 38.4 cents per share. The number of
shares in issue has increased by 42%.
Anticipated profits
Tower anticipates generating circa R240 million in
once-off earnings from certain asset management
initiatives in the portfolio in the next 12-30 months.
These proceeds will be reinvested in the company,
initially being used to repurchase shares should current
pricing remain. These profits arise from the residential
apartment developments at the Cape Quarter precinct,
sales of non-core properties and other initiatives as
announced on SENS on 11 January 2017. These profits
have not been included in our forecast numbers.
Sale of non-core properties
Seven properties are being diposed of with a value
of R450 million. While these are attractive, mainly B
grade properties, management feels that the proceeds
of these sales will be better utilised elsewhere in the
company.
Update on developments
Tower is currently undertaking a number of value
add initiatives, all of which will be used to boost core
earnings. At Cape Quarter, Tower is in the process of
developing approximately 73 residential units. This
development is phased and will come on stream from
November 2017 to end 2018. Tower expects these
developments to generate an aggregate profit of
approximately R140 million. The fund will dispose of
all of the units given the high demand for residential
property in the area. Proceeds will be used to improve
core earnings rather than distributing capital profits
to shareholders.
Croatia
Tower's portfolio in Croatia is now valued at
Euro 92 million. The risk on these properties is low,
with long-term head leases from the sellers. Growth
is achieved, through market increases in rental (due to
the timing of the acquisitions, properties have been
purchased at historical rental lows) and turnover
growth. Croatia is growing steadily from a low base
after the recession which ended in 2015. GDP growth
is anticipated to be 2.5% for 2017. Tower has established
an excellent reputation in the region, and has formed
strong partnerships with some of the most respected
companies there. Tower anticipates ring-fencing its
Croatian properties into a new investment vehicle
which provides greater opportunity for growth in this
exciting region.
Operating performance
During the period the following properties, located in Croatia, were acquired for Euro 66.6 million:
- Superkonzum, Vukovarska, Zagreb GLA 3 223 m2 Big box retail
- Meridijan 16, Gracani, Zagreb GLA 9 362 m2 Convenience shopping centre
- Superkonzum, Velika Gorica GLA 5 510 m2 Big box retail
- Sub City Centre, Dubrovnik GLA 12 259 m2 Convenience shopping centre
Portfolio vacancies have reduced to 4.0% at the end of the period. 4.6% represents the vacancies in South Africa. South
African vacancies are further broken down to 1.7% office, 2.2% retail and 0.7% industrial. There are zero vacancies in the
Croatian portfolio given the long head leases currently in place.
The weighted average lease expiry of the fund is 4.5 years with the South African portfolio at 3.5 years.
Borrowings
Tower has loan facilities totalling R2.1 billion at 30 November 2016 (36% ZAR debt, 64% Euro debt). Interest rates are
hedged on 70% of the total loan facility (ZAR debt 68%, Euro debt 72%) and the weighted average rate of interest is
5.81% (ZAR debt 9.16%, Euro debt 3.91%) for the portfolio. Based on investment properties valued at R5 billion, the loan
to value (LTV) ratio of the group was 40% at the end of the period. The LTV is calculated as other financial liabilities less
cash divided by investment property plus amounts receivable for the sale of investment property.
Prospects
The company is well positioned to grow its core earnings into the future. The reinvestment of the anticipated once-off
earnings in the portfolio present a material boost to earnings which we believe will be realised in the short to medium-term.
Assuming property net income growth of 6-8% per annum, total distribution growth is expected to be strong in 2018
(this assumes no major tenant failures nor major macro-economic declines). The additional R240 million of profits
have not been included in these forecasts. This forecast has not been reviewed or reported on by the fund's auditors.
Consolidated statement of profit and loss and other comprehensive income
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
2016 2015 2016
R'000 R'000 R'000
Revenue
Contractual rental income 216 508 168 411 355 686
Straight-line lease accrual 6 208 14 484 20 765
222 716 182 895 376 451
Net property operating expenses (16 631) (19 220) (30 733)
Net property income 206 085 163 675 345 718
Administration expenses (9 110) (12 503) (23 946)
Other income 809 - 10 377
Impairment of goodwill (102 168) - -
Foreign exchange gain/(loss) 99 759 (18 324) (30 519)
Net operating profit 195 375 132 848 301 630
Fair value adjustments on investment properties 183 234 59 242 (10 604)
Fair value adjustments on interest rate derivatives (7 721) (6 558) (7 533)
Profit from operations 370 888 185 532 283 493
Finance income 1 538 1 182 2 635
Finance costs (66 158) (51 330) (117 675)
Indirect capital raising expenses (557) (489) (894)
Profit before taxation 305 711 134 895 167 559
Taxation - (177) -
Profit for the period 305 711 134 718 167 559
Other comprehensive income - items that may subsequently be reclassified to
profit and loss
Exchange difference on foreign operations (115 629) 16 332 42 968
Total comprehensive profit for the period 190 082 151 050 210 527
Profit for the period attributable to:
Equity shareholders of Tower Property Fund Limited 305 142 129 660 158 840
Non-controlling interest 569 5 058 8 719
305 711 134 718 167 559
Total comprehensive income attributable to:
Equity shareholders of Tower Property Fund Limited 192 726 145 962 200 789
Non-controlling interest (2 644) 5 088 9 738
190 082 151 050 210 527
Basic and diluted earnings per share (weighted average shares in issue) (cents) 91.3 55.9 67.1
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
Consolidated statement of financial position 2016 2015 2016
R'000 R'000 R'000
Assets
Non-current assets
Investment property 4 937 918 3 860 989 3 889 664
Straight-line lease accrual 58 890 46 400 52 682
Other financial assets - - 3 184
Goodwill 141 932 - -
5 138 740 3 907 389 3 945 530
Current assets
Trade and other receivables 104 951 73 790 77 053
Cash and cash equivalents 35 614 39 080 63 620
Amounts receivable for the sale of investment property 111 000 - 111 000
251 565 112 870 251 673
Investment property held for sale - 119 332 -
251 565 232 202 251 673
Total assets 5 390 305 4 139 591 4 197 203
Equity and liabilities
Equity
Stated capital 3 039 980 2 238 482 2 239 098
Treasury capital (4 636) (1 962) (2 854)
Foreign currency translation reserve (70 467) 16 302 41 949
Retained income 235 464 168 619 89 390
Shareholders' interest 3 200 341 2 421 441 2 367 583
Non-controlling interest 17 584 14 052 20 228
Total equity 3 217 925 2 435 493 2 387 811
Liabilities
Non-current liabilities
Other financial liabilities 1 674 181 1 153 677 1 023 828
Loan payable to shareholder 24 872 27 056 30 920
1 699 053 1 180 733 1 054 748
Current liabilities
Other financial liabilities 403 771 466 091 691 354
Trade and other payables 69 556 57 274 63 290
473 327 523 365 754 644
Total equity and liabilities 5 390 305 4 139 591 4 197 203
Consolidated statement of cash flows
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
2016 2015 2016
R'000 R'000 R'000
Cash generated from operations 168 577 102 352 303 019
Investment income 1 538 1 182 2 626
Finance costs (64 830) (53 189) (115 447)
Net cash from operating activities 105 285 50 345 190 198
Acquisition of investment property (298 141) (628 063) (921 594)
Acquisition of Sub Dubrovnik (227 917) - -
Acquisition of management company (67 859) - -
Proceeds on sale of investment property 4 800 - 5 000
Net cash from investing activities (589 117) (628 063) (916 594)
Proceeds from issue of linked units 740 395 500 000 500 000
Capital raising expenses (15 936) (7 500) (7 500)
Acquisition of treasury shares (1 782) (750) (1 642)
Loans raised 141 840 678 897 1 099 714
Loans repaid (769 936) (459 550) (640 315)
Foreign loan raised 520 313 - 30 920
Dividends paid (159 068) (107 691) (204 553)
Acquisition of interest rate derivatives - (2 066) (2 066)
Net cash from financing activities 455 826 601 340 774 558
Net movement in cash and cash equivalents (28 006) 23 622 48 162
Cash and cash equivalents at beginning of period 63 620 15 458 15 458
Cash and cash equivalents at end of period 35 614 39 080 63 620
Consolidated statement of changes in equity
Foreign
currency
translation Non-
Stated Treasury reserve Retained Shareholders' controlling
capital capital (FTCR) income interest interest Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 May 2015 1 519 601 (1 212) - 146 650 1 665 039 - 1 665 039
Shares issued during the period 715 450 - - - 715 450 - 715 450
Share issue expenses (7 500) - - - (7 500) - (7 500)
Antecedent dividends 10 931 - - - 10 931 - 10 931
Acquisition of treasury shares - (750) - - (750) - (750)
Acquisition of foreign subsidiary - - - - - 8 964 8 964
Profit for the year - - - 129 660 129 660 5 058 134 718
Foreign currency translation differences - - 16 302 - 16 302 30 16 332
Dividends paid - - - (107 691) (107 691) - (107 691)
Balance at 30 November 2015 2 238 482 (1 962) 16 302 168 619 2 421 441 14 052 2 435 493
Antecedent dividends 616 - - 616 - 616
Acquisition of treasury shares - (892) - - (892) - (892)
Acquisition of foreign subsidiary - - - - - 1 526 1 526
Profit for the year - - - 29 180 29 180 3 661 32 841
Foreign currency translation differences - - 25 647 - 25 647 989 26 636
Dividends paid - - - (108 409) (108 409) - (108 409)
Balance at 31 May 2016 2 239 098 (2 854) 41 949 89 390 2 367 583 20 228 2 387 811
Issue of 67,549,375 shares effective 8 June 2016 540 395 - - - 540 395 - 540 395
Issue of 7,199,601 shares effective 24 June 2016 72 500 - - - 72 500 - 72 500
Issue of 25,000,000 shares effective 17 June 2016 200 000 - - - 200 000 - 200 000
Share issue expenses (15 936) - - - (15 936) - (15 936)
Antecedent dividends 3 923 - - - 3 923 - 3 923
Acquisition of treasury shares - (1 782) - - (1 782) - (1 782)
Profit for the year - - - 305 142 305 142 569 305 711
Foreign currency translation differences - - (112 416) - (112 416) (3 213) (115 629)
Dividends paid - - - (159 068) (159 068) - (159 068)
Balance at 30 November 2016 3 039 980 (4 636) (70 467) 235 464 3 200 341 17 584 3 217 925
Calculation of headline earnings and distributable earnings reconciliation
Unaudited Unaudited
6 months 6 months Audited
ended ended 12 months
30 November 30 November ended
2016 2015 31 May 2016
R'000 R'000 R'000
Gross Net
Profit attributable to ordinary equity holders 305 142 129 660 158 840
Adjusted for:
Change in fair value of investment properties net of non-controlling interests (183 234) (183 234) (54 484) 15 908
Impairment of goodwill 102 168 - -
Profit on sale of investment property (809) (809) - (10 377)
Headline earnings 223 267 75 176 164 371
Adjusted for:
Straight-line lease accrual (6 208) (14 484) (20 765)
Antecedent dividends 2 557 15 396 15 396
Change in fair value of interest rate derivatives 7 721 6 558 7 533
Profit on sale of investment property - - 10 377
Distributable profit 227 337 82 646 176 912
Adjusted for:
Indirect capital raising expenses 557 489 894
Foreign exchange (gain)/loss (99 759) (100 648) 18 324 30 820
Contracted adjustment 1 822 6 233 10 575
Amortisation of debt raising fees 1 328 818 1 677
Distributable earnings 130 396 108 510 220 878
Distributable income 130 396 108 510 220 878
Taxable dividend (declared on 31 January 2017) 130 396 - -
Taxable dividend (declared on 4 August 2016) - - 112 368
Taxable dividend (declared on 4 February 2016) - 108 510 108 510
Notes
Weighted average number of shares in issue 334 059 215 231 896 563 236 655 769
Number of shares in issue at year end (including treasury shares) 340 100 686 240 351 709 240 351 709
Number of shares in issue at year end (excluding treasury shares) 339 549 647 240 132 451 240 023 530
Distribution per share 38.4 45.2 92.0
Six months ended 31 May - - 46.8
Six months ended 30 November 38.4 45.2 45.2
Headline and diluted headline earnings per share (weighted average shares
in issue) (cents) 66.8 32.4 69.5
Distributable earnings per share (weighted average shares in issue) (cents) 39.0 46.8 93.3
Net asset value per share (shares in issue at period end) (cents) 941 1 007 985
Segmental analysis
For the six months ended 30 November 2016 (R'000) Retail Office Industrial Total
Property assets 2 340 204 2 245 945 410 659 2 147 115
Segment liabilities 1 009 841 962 451 174 823 4 996 808*
Revenue (excluding straight line lease adjustments) 90 633 106 603 19 272 216 508
Net operating costs (6 846) (8 475) (1 310) (16 631)
Segment profit 83 787 98 128 17 962 199 877
Straight-line lease adjustment 6 208
Non-property related expenses (9 110)
Other income 809
Impairment of goodwill (102 168)
Foreign exchange loss 99 759
Net operating profit 195 375
For the six months ended 30 November 2015 (R'000) Retail Office Industrial Total
Property assets 1 328 696 2 171 651 407 042 3 907 389
Segment liabilities 545 835 1 054 846 75 258 1 675 939*
Revenue (excluding straight line lease adjustments) 53 713 96 512 18 186 168 411
Net operating costs (8 404) (11 154) 338 (19 220)
Segment profit 45 309 85 358 18 524 149 191
Straight-line lease adjustment 14 484
Non-property related expenses (12 503)
Foreign exchange loss (18 324)
Net operating profit 132 848
For the year ended 31 May 2016 (R'000) Retail Office Industrial Total
Property assets 1 295 970 2 237 323 409 053 3 942 346
Segment liabilities 555 202 1 148 073 74 804 1 778 079*
Revenue (excluding straight-line lease adjustments) 140 427 176 469 38 790 355 686
Net operating costs (13 279) (16 776) (678) (30 733)
Segment profit 127 148 159 693 38 112 324 953
Straight-line lease adjustment 20 765
Non-property related expenses (23 946)
Other income 10 377
Foreign exchange loss (30 519)
Net operating profit 301 630
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
2016 2015 2016
R'000 R'000 R'000
* Segment liabilities 2 147 115 1 675 939 1 778 079
Non-segment liabilities
- Trade and other payables 393 1 103 393
- Loan to non-controlling interests 24 872 27 056 30 920
Total liabilities 2 172 380 1 704 098 1 809 392
South Africa Croatia
R'000 R'000
Statement of profit or loss and other comprehensive income for the period ended
30 November 2016
Contractual rental income 166 344 50 164
Straight-line lease accrual 6 208 -
Statement of financial position extracts at 30 November 2016
Investment property 3 540 419 1 397 499
Straight-line lease accrual 58 890 -
Statement of profit or loss and other comprehensive income for the period ended
30 November 2015
Contractual rental income 158 493 9 918
Straight-line lease accrual 14 484 -
Statement of financial position extracts at 30 November 2015
Investment property 3 477 730 383 259
Straight-line lease accrual 46 400 -
Statement of profit or loss and other comprehensive income for the period ended
31 May 2016
Contractual rental income 328 565 27 121
Straight-line lease accrual 20 765 -
Statement of financial position extracts at 31 May 2016
Investment property 3 437 503 452 161
Straight-line lease accrual 52 682 -
Notes:
1. Business combinations
1.1 The fund acquired 100% of the share capital of Sub Dubrovnik d.o.o. in Dubrovnik, Croatia, for a total purchase consideration of
R227.2 million, which was settled in cash. The shares transferred on 21 June 2016.
1.2 The fund acquired 100% of the share capital of the asset management company, Tower Asset Managers Proprietary Limited
('TAM'), for R145 million. The acquisition was funded using R72.5 million debt and R72.5 million equity issued at a price of R10.07
per share, being the net asset value per share at 30 November 2015. The effective date of this acquisition was 30 June 2016.
Sub Tower Asset
Dubrovnik Managers
2016 2016
R'000 R'000
The assets and liabilities arising from the acquisition are as follows:
Investment properties 385 393 -
Property, plant and equipment - 68
Trade and other receivables** 5 272 -
Cash and cash equivalents 8 621 5 591
Deferred tax - 28
Assets 399 286 5 687
Borrowings (260 481) -
Trade and other payables (10 785) (685)
Tax payable - (4 940)
Liabilities (271 266) (5 625)
Fair value of assets and liabilities acquired 128 020 62
Total purchase consideration 227 182 145 000
Goodwill 99 162 144 938
Purchase consideration: 227 182 145 000
Add: acquisition related costs 9 356 950
Less: settled in Tower shares - (72 500)
Purchase consideration settled in cash 236 538 73 450
Cash and cash equivalents in subsidiary acquired (8 621) (5 591)
Net cash outflow on acquisition 227 917 67 859
* The goodwill arising from the TAM acquisition is attributable to the at-market component of the asset management contract
between TAM and Tower Property Fund, the TAM management and employees that transferred to Tower Property Fund and
the expected synergies from the acquisition.
** Gross contractual amounts receivable in Sub Dubrovnik are R4.7 million, all of which is expected to be collected.
*** The goodwill in Sub Dubrovnik arose as a result of the expected synergies from the acquisition.
Sub
Dubrovnik
R'000
Unaudited pro forma revenue assuming the business combination for the full period ended 30 November 2016 17 775
Unaudited pro forma profit after tax assuming the business combination for the full period ended 30 November 2016 7 859
Revenue included in results 14 857
Profit after taxation included in results 4 730
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 November 30 November 31 May
2016 2015 2016
R'000 R'000 R'000
2. Related party transactions included:
Asset management fees paid to Tower Asset Managers Proprietary Limited 1 512 9 308 18 924
Property management fees paid to Spire Property Management Proprietary
Limited 9 766 10 215 20 047
Relationship: Key management personnel services entities
3. Property expenses
Insurance 776 645 1 507
Letting commission 2 505 1 352 3 682
Municipal expenses 51 710 45 654 96 877
Other operating expenses 5 190 7 149 9 450
Property management fees 6 462 7 696 16 239
Repairs and maintenance 4 224 3 411 7 257
Security and cleaning 8 565 6 914 14 518
Gross property expenses 79 432 72 821 149 530
Net property expense ratio 13% 16% 15%
Gross property expense ratio 28% 33% 32%
4. Administration and corporate costs
Asset management fees 1 508 9 308 18 924
Salaries 3 979 548 1 097
Professional service fees 1 920 1 374 1 805
Other 1 703 1 273 2 120
Total 9 110 12 503 23 946
5. Other income in the current year relates to the profit on sale of 7 Stirrup Lane and in the prior year to the profit on the sale of Tybalt
place and 73 Hertzog Boulevard.
6. Goodwill of R102.2 million has been impaired during the period. The goodwill raised on the acquisition of Sub Dubrovnik d.o.o. of
R99.2 million has been fully impaired as the property was revalued at period end which resulted in the impairment. R145 million
goodwill was raised on the acquisition of TAM. The goodwill is allocated on a pro rata basis to the properties which were held
by the fund when TAM was internalised. As these properties are disposed of, the goodwill allocated to them will be impaired.
The additional R3 million impaired during the period relates to the goodwill which was allocated to 73 Hertzog Boulevard and
7 Stirrup Lane, both which were disposed of during the period.
7. Non-controlling interest relates to the VMD Grupa d.o.o. 20% holding in Tower Europe d.o.o.
8. The foreign exchange gain/(loss) relates to the foreign denominated loan that was granted by Standard Bank to the Fund for the
acquisition of VMD KVART and the Agrokor portfolio.
Basis of preparation
The unaudited condensed consolidated interim financial results ("the financial statements") for the six months
ended 30 November 2016 have been prepared in accordance with and containing the information required by
IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and the information required by the JSE Listings Requirements and in the manner required by the
Companies Act of South Africa. The accounting policies and methods of computation applied in the preparation
of the results are in accordance with International Financial Reporting Standards ("IFRS") and are consistent with
those applied in the audited annual financial statements for the year ended 31 May 2016.
These results were prepared under the supervision of Mrs J Mabin CA(SA) in her capacity as Chief Financial Officer.
The directors take full responsibility for the preparation of the financial statements for the six months ended
30 November 2016. The directors are not aware of any matters or circumstances arising subsequent to 30 November
2016 that require any additional disclosure or adjustment to the financial statements, other than as disclosed
in this announcement. These financial statements have not been reviewed or reported on by Tower's auditors.
Fair value of financial instruments recognised in the statement of financial position
The group measures fair values using the fair value hierarchy that reflects the significance of the inputs used in
making the measurements.
The valuation of interest rate swaps uses observable market data and requires management judgement and
estimation. The availability of observable market data and model inputs reduces the need for management's
judgement and estimation and also reduces uncertainty associated with the determination of fair values.
The fair value of the interest rate swap is determined by the bank using a valuation technique that maximises
the use of observable market inputs. Interest rate swaps are valued by discounting future cash flows using the
interest rate yield curve. Interest rate swaps are classified as level 2 financial instruments.
The interest rate has been fixed on R500 million of borrowings at 7.70%, expiring on 31 May 2019 and the company
has entered into the following Euro denominated swaps:
Notional amount
(Euro '000)
Contract 1: 4.10% maturing 3 August 2020 7 000
Contract 2: 3.70% maturing 18 March 2021 2 540
Contract 3: 3.60% maturing 21 June 2021 30 514
Contract 4: 3.75% maturing 13 January 2022 13 199
Dividend distribution
Notice is hereby given that a gross dividend of 38.40257 cents per share (dividend number 7) has been declared
in respect of the six months ended 30 November 2016. In accordance with Tower's status as a REIT, shareholders
are advised that the distribution meets the requirements of a qualifying distribution for the purposes of section
25BB of the Income Tax Act No. 58 of 1962 (Income Tax Act) from income reserves. The distribution on the shares
will be deemed to be a dividend for South African tax purposes in terms of section 25BB of the Income Tax Act.
Accordingly the dividend received by South African tax residents must be included in their gross income and will
not be exempt in terms of the ordinary dividend exemption in section 10(1)(k)(i) of the Income Tax Act as a result
of paragraph (aa) of the proviso thereto which provides that dividends distributed by a REIT are not exempt from
income tax.
The dividend is however, exempt from dividend withholding tax in the hands of South African tax resident
shareholders, provided that the South African resident shareholders provide the following forms to their
Central Securities Depository Participant (CSDP) or broker, as the case may be in respect of uncertificated
shares or the company, in respect of certificated shares:
a) a declaration that the dividends are exempt from dividend tax; and
b) a written undertaking to inform the CSDP or broker, as the case may be, should the circumstances affecting
the reduced rate change or the beneficial owner cease to be the beneficial owner;
both in the form prescribed by the Commissioner for the South African Revenue Service. Shareholders are
advised to contact their CSDP or broker, as the case may be, to arrange for the abovementioned documents
to be submitted prior to the payment of the distribution if such documents have not already been submitted.
Dividends received by non-resident shareholders will be exempt from income tax in terms of section
10(1)(k)(i) of the Income Tax Act, but will be subject to dividend withholding tax. Dividend withholding tax is
levied at a rate of 15%, unless the rate is reduced in terms of any applicable agreement for the avoidance of
double taxation (DTA) between South Africa and the country of residence of the shareholder.
Should dividend withholding tax be withheld at a rate of 15%, the net dividend amount due to non-resident
shareholders is 32.64218 cents per share. A reduced dividend withholding rate in terms of the applicable
DTA may only be relied on if the non-resident shareholder has provided the following forms to their CSDP or
broker, as the case may be in respect of uncertificated shares or the company, in respect of certificated shares:
a) a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
b) a written undertaking to inform the CSDP or broker, as the case may be, should the circumstances affecting
the reduced rate change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service. Non-resident
shareholders are advised to contact their CSDP or broker, as the case may be, to arrange for the abovementioned
documents to be submitted prior to the payment of the distribution if such documents have not already
been submitted.
The dividend is payable to Tower shareholders in accordance with the timetable set out below:
2017
Last day to trade cum dividend distribution: Tuesday, 14 February
Shares trade ex dividend distribution: Wednesday, 15 February
Record date: Friday, 17 February
Payment date: Monday, 20 February
Share certificates may not be dematerialised or rematerialised between Wednesday,
15 February and Friday, 17 February 2017, both days inclusive.
The dividend will be transferred to dematerialised shareholders' CSDP accounts or
broker accounts on Monday, 20 February 2017.
Certificated shareholders' dividend payments will be paid to certificated
shareholders' bank accounts on or about Monday, 20 February 2017.
Shares in issue at date of declaration (excluding treasury shares): 339 549 647
Tower's income tax reference number: 9607/564/16/9
By order of the Board
Tower Property Fund Limited
31 January 2017
Registered address 2nd Floor, Spire House, Tannery Park, 23 Belmont Road,
Rondebosch, 7700 (PO Box 155, Rondebosch, 7701)
Contact details +27 (0)21 685 4020/info@towerpropertyfund.co.za
Company secretary Ovland Management Services Proprietary Limited
Auditors Mazars
Sponsor Java Capital
Transfer secretaries Link Market Services South Africa Proprietary Limited
Directors A Dalling* (Chairman), M Edwards (Chief Executive Officer),
J Bester*, K Craddock*, M Evans*, J Mabin (Chief Financial Officer),
B Kerswill*, A Magwentshu*, N Milne*, R Naidoo*
(*non-executive)
Date: 31/01/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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