Wrap Text
Report on findings of independent review
RESILIENT REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/016851/06)
JSE share code: RES ISIN: ZAE000209557
(Approved as a REIT by the JSE)
("Resilient" or "the Company")
REPORT ON FINDINGS OF INDEPENDENT REVIEW
Resilient has faced extensive negative allegations and commentaries, which it is dealing with on an ongoing basis. Resilient
has repeatedly reiterated its commitment to assist with all regulatory investigations.
On 12 February 2018, the board of Resilient announced its views based on an internal review of one of the reports published
the week before. A number of Resilient’s shareholders called for an independent review, which the board considered
appropriate. On 16 February 2018, the board of Resilient announced that it had commissioned an independent review, led
by former Auditor-General Mr Shauket Fakie.
The scope of the review, which is available on the Company’s website, was agreed between the board and Mr Fakie. The
scope of the review provided for an initial focus on allegations contained in publicly circulated reports or commentary which
questioned the integrity of certain transactions and movements in listed shares ("share activity") in Resilient and in the listed
companies in which Resilient is invested ("relevant shares").
The scope afforded Mr Fakie a wide discretion in his review of allegations that the "high valuation of the companies…
arose from insider-directed and insider-related transactions in group companies’ shares to deliberately inflate share prices
and volumes traded" (source: page 3 of undated 50 page report authored by 36One Asset Management Proprietary Limited).
Mr Fakie extended the period of his review of share activity to cover the 14 month period from 1 January 2017 to
28 February 2018.
In undertaking his review, Mr Fakie appointed an independent advocate, Mr Tony Ferreira, to assist him. Mr Ferreira is a
former Senior Forensic Specialist with the Financial Services Board, has investigated and reported on insider trading for the
Directorate of Market Abuse and is a former State Advocate with the office of the Director of Public Prosecutions.
The board is mindful of the limitations of an independent review which does not have regulatory powers. These limitations
include not having access to the full set of records of transactions in Resilient shares on the JSE in order to identify potential
insider trading or share price manipulation, and not having the power to compel all parties who may possess relevant
information to provide testimony or produce documents. However, the board has done all it can to facilitate an appropriately
thorough review within these limitations. The board will make the material reviewed and the report provided to it available
to the regulators with the objective of assisting with any regulatory investigation. On completion of the regulatory process
it is the board’s intention to report publicly.
The review has now been underway full-time for some six weeks.
The review has examined documentation provided by Resilient, its Executives and their associates as well as The Siyakha
Education Trust and The Siyakha 2 Education Trust ("the Siyakha Trusts") regarding all their share activity in relevant
shares for the review period. Mr Fakie and Mr Ferreira interviewed the Executives in order to interrogate the documentation
and the underlying reasons for the share activity. Mr Fakie requested an independent service provider to check samples of
data to Strate records. On request, Executives provided confirmatory affidavits. Mr Fakie has confirmed to the board that,
in his view, Resilient’s Executives have co-operated fully with his review.
Mr Fakie was informed by Mr H Oberholzer that an entity associated with Mr R Hafner is the financier of the four
"Oberholzer K-companies" referred to in the reports. The ultimate beneficiary of the Hafner-associated entity is his family
trust. Mr Fakie and Mr Ferreira interviewed Mr Oberholzer and Mr Hafner regarding share activity in companies directed
by Mr Oberholzer, allegations of insider trading and ownership of entities associated with Mr Hafner. On request, the
persons interviewed provided confirmatory affidavits. Mr Fakie also sample tested their share activity and flow of funds.
Mr Fakie and Mr Ferreira interviewed the Chairpersons of The Siyakha Education Trust and The Siyakha 2 Education Trust
("The Siyakha Trusts") regarding their share activity and the allegations of share price manipulation or insider trading, and
of the Trusts not being independent, in order to verify that the Trustees are independent decision-makers albeit taking into
consideration input provided by the CEO of Resilient from time to time.
Mr Fakie and Mr Ferreira interviewed Mr T Hewan, the managing trustee of the Allistar Fredericks Hockey Development
Trust regarding share activity and allegations of share price manipulation or insider trading. The CEO of Resilient is a
trustee of and personal donor to this trust and was also interviewed in this regard.
Mr Fakie and Mr Ferreira interviewed directors of Java Capital, bookrunners on placements of relevant shares.
Mr Fakie and Mr Ferreira met with representatives of Resilient’s external auditors, banks and other third parties who made
contact with Mr Fakie regarding the review.
Mr Fakie made contact and had some discussions with certain of the authors of reports or commentary regarding Resilient,
but has not delayed his report to the board in order to accommodate the availability of certain of these parties and their legal
representatives. Mr Fakie intends to continue to offer interested parties the opportunity to present evidence of wrongdoing
with a view to supplementing his report to the board if he considers it necessary.
Mr Fakie has presented his findings to the board of Resilient based on the review to-date.
For purposes of his report to the board, Mr Fakie framed the allegations under review (the "Allegations"), derived from
reports by 36One, Navigare, Arqaam Capital and Mergence (the "reports") as follows:
- "That premium valuations of listed shares did not arise from normal market activity, but rather by activities that amount
to share price manipulation by Resilient, its management and various affiliated or related parties; and
- Insider trading by parties related to Resilient and its Executives."
Mr Fakie’s key findings are that, from the evidence provided, regarding the Allegations:
- "There is no evidence of Executive misconduct and/or breaches of applicable governance rules and policies by Resilient,
its Executives and The Siyakha Trusts.
- There is no evidence of any market manipulation.
- There is no evidence of any insider trading.
- There is no evidence that Oberholzer or the companies he directs are funded, directly or indirectly, by Resilient or its
CEO or other Executives.
- There is no evidence that Hafner is funded, directly or indirectly, by Resilient or its CEO or other Executives. The
ultimate beneficiary of the Hafner-associated entity is his family trust.
- The process according to which bookbuilds are undertaken by Java Capital on behalf of issuers of shares is sound and
well-considered and there is no evidence of any impropriety or irregularity in this regard.
- The share activity figures mentioned in the reports as share trading activities are not correct and do not reflect the factual
share movements. As a general observation, information that can be derived from share registers is limited and
movements in share registers do not necessarily correlate to share trades.
- There is no evidence of any impropriety or irregularity regarding the Allistar Fredericks Hockey Development Trust."
Mr Fakie considered a review of accounting and valuation matters as unnecessary as the Annual Financial Statements of
Resilient and relevant companies have been audited and submitted to the JSE.
Certain allegations against Resilient and its Executives, originally derived from an anonymous email campaign going back
to 2009, periodically resurface. At the time, these allegations were investigated by Resilient, by an independent reviewer
appointed by Resilient, and by the authorities, and were found not to be substantiated. Mr Fakie has not considered it
necessary to reconsider these allegations.
Mr Fakie has made recommendations to the board regarding, in particular, strengthening the perceived independence of the
Siyakha Trusts and of risks as regards share activity relating to Executives where undertaken or perceived as undertaken
collectively. The board is studying the recommendations and is committed to taking all steps necessary to restore market
confidence in the Company and its Executives.
The Resilient board will continue to co-operate fully with any regulatory processes or investigations and will update
shareholders regularly.
10 April 2018
Sponsor
Java Capital
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