Pangbourne Properties Limited

Incorporated in the Republic of South Africa Registration no 1987/002352/06 Share code: PAP ISIN: ZAE000005252
(“Pangbourne” or “the company” or “the group”)

Condensed Reviewed Consolidated Interim Financial Statements

for the six months ended 31 December 2010

Directors’ commentary Consolidated statement of Reconciliation of (loss)/profit for Notes (continued)

RESULTS
financial position the period to headline earnings 2 Summary of financial performance
Pangbourne’s interim distribution for the six months to 31 December 2010 Reviewed
Dec 2010
Restated
Jun 2010
Restated
Dec 2009
and distributable income Reviewed
Dec 2010
Restated
Jun 2010
Restated
Dec 2009
Restated
Jun 2009
amounted to 74,04 cents per linked unit. This is an increase of 5,47% over the Reviewed Restated
R'000 R'000 R'000 Distribution per
70,20 cents per linked unit distributed in the previous comparable period. for the Restated for the linked unit (cents) 74,04 76,88 70,20 70,15
ASSETS
six months for the year six months Units in issue 441 745 837 441 745 837 439 565 837 439 565 837
Non-current assets 11 857 607 11 709 169 11 703 486
ended ended ended Property operations
REVIEW Investment property 10 640 141 10 555 103 10 301 044
Straight-lining of rental revenue Dec 2010 Jun 2010 Dec 2009 Net asset value* R17,02 R16,95 R15,83 R15,73
While Pangbourne’s leases allow for the recovery of utilities and increases in rates adjustment 200 971 193 518 202 591 R'000 R'000 R'000 Gearing ratio** 29,2% 28,8% 32,0% 34,0%
and taxes, the tenants’ total cost of occupation has increased substantially which Investment property under development 279 191 248 068 252 443 Basic earnings (shares) – (loss)/profit Units in issue 441 745 837 441 745 837 439 565 837 439 565 837
in turn has limited Pangbourne’s ability to increase rentals on renewal. Investments 356 721 338 511 – for the period attributable to Consolidated
Investment in and loans to associates – 75 529 561 277 equity holders (33 011) 421 286 46 817 Net asset value* R16,90 R16,98 R16,06 R15,94
Vacancies have increased from 6,6% at 30 June 2010 to 10,8% at Loans 380 583 298 440 386 131 – interest to linked debenture holders 300 245 594 902 283 141 Gearing ratio** 33,3% 32,8% 36,2% 38,1%
31 December 2010. The vacancy in the portfolio at 31 December 2010 consisted of Basic earnings (linked units) 267 234 1 016 188 329 958 Units in issue 405 516 028 405 516 028 403 336 028 403 336 028
Current assets 479 444 502 291 294 819
commercial 12,6% (Jun 2010: 10,9%), retail 4,2% (Jun 2010: 4,0%), industrial 12,5% Adjusted for: 37 288 (429 528) 41 291 *Net asset value includes total equity attributable to equity holders and linked
Investment property held for sale – 283 000 –
(Jun 2010: 6,7%) and other 4,7% (Jun 2010: 3,4%). The manufacturing sector has – fair value loss/(gain) on investment debentures.
Loans 283 298 43 161 –
property 17 018 (468 857) 6 249 **The gearing ratio is calculated by dividing interest-bearing borrowings by total assets.
been badly affected by the strong rand, labour action and the recession. Two large Trade and other receivables 146 281 108 497 229 281
– net recognition of goodwill – (9 238) (9 907)
Cash and cash equivalents 49 865 67 633 65 538 2.1 T o comply with financial reporting requirements the group will account for entities
manufacturing tenants namely Africa Glass SA Holdings (Proprietary) Limited – income tax effect 20 270 48 567 44 949
(33 925m2) and Cullinan Holdings Limited (28 890m2) went into liquidation. Total assets 12 337 051 12 211 460 11 998 305 that do not form part of its operations, do not operate under its operating policies
Headline earnings per linked unit 304 522 586 660 371 249 and whose businesses, risk profiles and debt levels are not comparable to that of
The vacancy at 31 December 2010 does not include AGI as the liquidator had EQUITY AND LIABILITIES Fair value loss on BEE instrument 63 311 122 192 –
Total equity attributable to its own. Disclosure under “Property operations” excludes Panya Investments
occupation of the property at year end. Adjustment resulting from straight-lining
equity holders 5 027 800 5 060 811 4 660 874 of rental revenue (7 453) (50 743) (28 487) (Pty) Ltd, Meago Siyam Investments (Pty) Ltd and Tokoloho Investments (Pty) Ltd
Management has taken advantage of the downturn to undertake refurbishment Share capital 4 055 4 055 4 034 Fair value gain on investments (64 259) (138 284) (55 284) (“BEE partners”).
and renovation of a number of properties to attract new tenants and upgrade Share premium 2 206 732 2 206 732 2 181 285 Fair value adjustment on interest 2.2 In total 36 229 809 linked units were issued to BEE partners and Pangbourne is
the quality of the portfolio. The refurbishment of the Thrupps Centre in Illovo Non-distributable reserves 2 817 013 2 850 024 2 475 555 rate swaps 11 723 81 724 14 145
Retained earnings – – – standing surety for the funding obligations of BEE partners in acquiring these units.
Consolidation adjustment for BEE (2 357) (2 877) (1 619)
was completed. Following the renewal of the lease with the anchor tenant at In terms of IFRS the issue did not take place and the essence of the transaction was that
Post-acquisition reserves from associate
Oxford Manor in Illovo, phase two of the refurbishment has commenced. Various Total liabilities 7 309 251 7 150 649 7 337 431 the BEE shareholders received a right/option to acquire linked units in Pangbourne at
companies – 1 337 1 207
projects at Boardwalk Inkwazi, the regional mall in Richards Bay, including tenant Non-current liabilities 6 405 168 5 687 764 5 618 231 Other – – 7 a future date at a predetermined price. As a consequence, the issue of linked units has
relocations and remedial work, are nearing completion. Fruit & Veg City Food Linked debentures 1 824 821 1 824 821 1 815 011 Income tax effect (5 242) (5 107) (18 077) been eliminated in the preparation of these financial statements. The right/option the
Interest-bearing borrowings 3 926 484 3 286 043 3 387 841 Distributable income 300 245 594 902 283 141 BEE shareholders have acquired has a value of R185 503 000 (Jun 2010: R122 192 000;
Lover’s Market has commenced trading at N1 Value Centre in Cape Town. Work Less: distribution declared (300 245) (594 902) (283 141)
BEE instrument 185 503 122 192 – Dec 2009: Rnil). The value of this right/option will be considered on an ongoing basis
is progressing at Raceway Industrial Park and proposals have been submitted to Deferred tax 468 360 454 708 415 379 Income not distributed – – –
and changes in its fair value are accounted for through profit and loss.
potential tenants for developments. Headline earnings per share (cents) 1,05 (2,04) 21,84
Current liabilities 904 083 1 462 885 1 719 200 The following table indicates the effect of consolidating BEE partners into the group
Despite the difficult economic environment, arrears only increased marginally due Trade and other payables 427 441 425 363 423 629 Headline earnings per linked unit (cents) 75,09 145,06 92,04
Diluted headline earnings per financial statements (the column “Property operations” indicates Pangbourne’s results
to firm credit control and an improvement in both tenant profile and the quality Linked debenture interest payable 300 245 311 761 283 141
share (cents) 0,97 (2,04) 20,04 had the BEE partners not been consolidated):
Income tax payable 431 1 832 62 465
of the property portfolio. Interest-bearing borrowings 175 966 723 929 949 965
Diluted headline earnings per BEE Property
linked unit (cents) 68,94 133,13 84,46
Consolidated partners operations
Total equity and liabilities 12 337 051 12 211 460 11 998 305 Basic earnings per share, basic earnings per linked unit, headline earnings per share and Dec 2010 R’000 R’000 R’000
dISPOSALS headline earnings per linked unit are based on the weighted average of 405 516 028
(Jun 2010: 404 426 028; Dec 2009: 403 336 028) shares/linked units in issue during Statement of comprehensive
The following properties were disposed of: income
the period.
Book value Sale price Effective Consolidated statement of Diluted earnings per share, diluted earnings per linked unit, diluted headline earnings per
Fair value loss on BEE instrument
Finance costs
(63 311) 63 311

comprehensive income
Property R’000 R’000 date share and diluted headline earnings per linked unit are based on the weighted average
of 441 745 837 (Jun 2010: 440 655 837; Dec 2009: 439 565 837) shares/linked units in – interest paid on borrowings (205 852) 24 467 (181 385)
Willowbridge 283 000 283 000 1 Nov 2010 issue during the period. – interest to linked debenture
Royal Ascot 20 000 32 287 30 Sep 2010 Reviewed Restated holders (300 245) (26 824) (327 069)
for the
Abridged consolidated statement
Shoprite Mowbray 21 000 23 850 18 Aug 2010 Restated for the Statement of financial position
Raceway (portion 16 of Erf 59 six months for the six months Total equity attributable to
Gosforth Park Ext 4)
Total
1 957
325 957
6 200
345 337
12 Nov 2010
ended
Dec 2010
year ended
Jun 2010
ended
Dec 2009 of cash flows equity holders
Share capital 4 055 362 4 417
R’000 R’000 R’000 Share premium 2 206 732 309 379 2 516 111
Reviewed Unaudited
Net rental and related revenue 485 848 1 009 084 507 091 Non-distributable reserves 2 817 013 191 632 3 008 645
for the six Audited for the six
Recoveries and contractual rental Non-current liabilities
months for the year months
ACQUISITIONS revenue 717 525 1 409 560 709 721 Linked debentures 1 824 821 163 035 1 987 856
ended ended ended
A 1 487m² office block at Fourways Office Park, known as Summer Cottage, was Straight-lining of rental revenue Interest-bearing borrowings
Dec 2010 Jun 2010 Dec 2009
adjustment 7 453 50 743 28 487 (non–current and current) 4 102 450 (494 122) 3 608 328
acquired for R14,8 million at a forward yield of 10%. Pangbourne now owns all R'000 R'000 R'000
Rental revenue 724 978 1 460 303 738 208 BEE instrument 185 503 (185 503) –
the buildings in this office park which has enabled it to secure cost savings. Cash outflow from operating activities (75 021) (39 199) (42 116) Current liabilities
Property operating expenses (239 130) (451 219) (231 117)
Cash (outflow)/inflow from investing Trade and other payables 427 441 (11 607) 415 834
Distributable income from investments 13 904 10 706 8 478 activities (35 225) 1 149 988 858 254
LISTED INVESTMENTS Linked debenture interest payable 300 245 26 824 327 069
Fair value gain on investment Cash inflow/(outflow) from financing
The investment in Fortress Income Fund Limited was reduced by 2 890 000 property and investments 47 241 607 141 49 035 activities 92 478 (1 122 701) (830 145)
Fair value (loss)/gain on investment 3 hedged borrowings
A units and 5 400 000 B units. The proceeds were utilised to reduce borrowings. Decrease in cash and cash equivalents (17 768) (11 912) (14 007) Amount % of
property (9 565) 519 600 22 238 Cash and cash equivalents at the
The intention is to sell the remaining holdings over time. Adjustment resulting from straight- Expiry R’million Rate borrowings
beginning of the period 67 633 79 545 79 545
lining of rental revenue (7 453) (50 743) (28 487) Interest rate swaps
Cash and cash equivalents at the end
Fair value gain on investments 64 259 138 284 55 284 August 2011 100,0 7,35% 2,8%
CAPITAL STRUCTURE of the period 49 865 67 633 65 538
Fair value loss on BEE instrument (63 311) (122 192) – December 2011 200,0 8,55% 5,5%
Pangbourne successfully restructured the PROPS 2 securitisation vehicle. Cash and cash equivalents consist of: October 2012 10,0 8,22% 0,3%
Administrative expenses (19 293) (39 242) (19 575) Cash on call in respect of securitisation 25 716 62 994 60 990
The R941 million of variable rate notes were repaid and 74 properties were August 2013 100,0 8,05% 2,8%
Net recognition of goodwill – 9 238 9 907 Current accounts 24 149 4 639 4 548 September 2013 400,0 9,85% 11,1%
released from the scheme. Pangbourne’s pro rata portion of the cost and fees of Income from associates – 33 462 12 529 49 865 67 633 65 538 May 2014 200,0 8,27% 5,5%
approximately R29 million in restructuring this vehicle and unwinding interest Profit before net finance costs 464 389 1 508 197 567 465 October 2014 460,0 9,36% 12,7%
rate swaps will be capitalised. This restructuring will enable management to Net finance costs (482 372) (1 043 451) (493 776) April 2015 300,0 8,26% 8,3%
Finance income 19 792 54 374 28 321
Notes
September 2015 200,0 9,61% 5,5%
progress with the disposal of non-core assets and has facilitated a significant Interest from loans 19 792 53 655 28 321 August 2016 200,0 8,51% 5,5%
improvement and balancing of Pangbourne’s interest rate swap profile. Interest on linked units issued September 2016 400,0 8,42% 11,1%
Pangbourne renewed R800 million of its Absa facility for a further period of cum distribution – 719 – March 2017 300,0 8,60% 8,3%
Finance costs (502 164) (1 097 825) (522 097)
1 PREPARATION AND review OPINION November 2017 200,0 7,91% 5,5%
two years and accepted new facilities of R240 million from Standard Bank and The condensed reviewed consolidated interim financial statements have been prepared January 2018 200,0 7,55% 5,5%
Interest paid on borrowings (205 852) (447 493) (237 684) in accordance with the measurement and recognition requirements of IFRS, the AC500
R500 million from RMB. Capitalised interest 15 656 26 294 12 873 standards, IAS34: Interim Financial Reporting, the JSE Listings Requirements and the Securitised loan
Fair value adjustment on interest requirements of the South African Companies Act. July 2012 621,0 9,98% 17,2%
rate swaps (11 723) (81 724) (14 145) The accounting policies adopted are consistent with those applied in the prior periods
PROPOSED MERGER The securitised loan is shown as nominal annual compounded semi-annually and is
Interest to linked debenture holders except for the recognition of deferred tax. In December 2010 the IASB released
Capital Property Fund (“Capital”) has made an offer to acquire all of the – interim (300 245) (283 141) (283 141) amendments to IAS 12 effective from 1 January 2012. These amendments impact on the inclusive of lending margin.
Pangbourne linked units in issue that are not already held by it, pursuant to – final (311 761) rate at which deferred tax is recognised specifically on the fair value movement of the
building component of investment property as it establishes a presumption that it will Hedged borrowings 3 891,0 107,6%
a scheme of arrangement. The offer is primarily on the basis of an all-unit be recovered through disposal and hence will attract deferred tax at the capital gains Variable rate borrowings (282,7) (7,6%)
(Loss)/profit before income tax tax rate. Pangbourne has elected the early adoption of these amendments and applied
consideration which would entail Pangbourne unitholders swapping their linked Total hedged borrowings* 3 608,3 100,0%
expense (17 983) 464 746 73 689 them retrospectively as required by IAS 8. It is the view of the board that the adoption
units in Pangbourne for units in Capital at a swap ratio of 2,38 Capital units for Income tax expense (15 028) (43 460) (26 872) of this policy results in more accurate and meaningful information. *Total hedged borrowings comprises the level of external interest-bearing borrowings,
each Pangbourne unit. Following implementation of the scheme, Capital will (Loss)/profit for the period attributable The early adoption had the following effect on the results: deferred tax balance excluding those of BEE partners.
be one of the largest property funds in South Africa, by market capitalisation, to equity holders (33 011) 421 286 46 817 Jun 2009: R262,5 million decrease; Dec 2009: R231,4 million decrease; Jun 2010:
R323,1 million decrease cumulative; income tax expense Dec 2009: R31,1 million increase; 4 Lease expiry profile
differentiated by its industrial and commercial focus. The enlarged Capital may Jun 2010: R60,5 million decrease; basic earnings per share and per linked unit Dec 2009: Based on Based on
attract interest from a wider group of investors, enhancing the liquidity of Total comprehensive (loss)/profit for 7,72 cents decrease; Jun 2010: 14,97 cents increase; diluted earnings per share and per
the period (33 011) 421 286 46 817 rentable contractual
linked unit Dec 2009: 7,08 cents decrease; Jun 2010: 13,74 cents increase and no effect
its units. Increased market capitalisation and enhanced liquidity may result in on headline and diluted headline earnings per share and per linked unit. Lease expiry area rental income
Basic earnings per share (cents) (8,14) 104,17 11,61
Capital’s inclusion in a number of stock exchange and property indices and, over Deloitte & Touche has reviewed the financial information set out in this report. Vacant 10,8%
Basic earnings per linked unit (cents) 65,90 251,27 81,81
time, may result in a re-rating of Capital. The potential re-rating and lower yield The review was conducted in accordance with ISRE 2410 ‘Review of Interim Financial Jun 2011 16,0% 17,0%
Diluted earnings per share (cents) (8,14) 95,60 10,65 Information performed by the Independent Auditor of the Entity’. Their unmodified Jun 2012 18,8% 20,2%
would position Capital to make further revenue enhancing acquisitions and its Diluted earnings per linked unit (cents) 60,49 230,61 75,06 review report is available for inspection at the group’s registered address. Jun 2013 21,6% 24,5%
increased size, together with its moderate debt and secure cash flows, should Jun 2014 10,0% 11,9%
enhance Capital’s access to capital markets.
As part of, and subject to the implementation of the scheme, it has been agreed
Consolidated statement of changes in equity Jun 2015
>Jun 2015
8,0%
14,8%
9,7%
16,7%
Total 100,0% 100,0%
Attributable to equity holders of the group
that, with effect from 1 January 2011, the asset management fee charged by
Share Share Non-distributable Retained 5 Segmental analysis
Property Fund Managers Limited in respect of Capital will be reduced from 0,5%
capital premium reserves earnings Total
to 0,4% of the market capitalisation and borrowings of Capital. Dec 2010 Jun 2010 Dec 2009
Restated R'000 R'000 R'000 R'000 R'000
Rental revenue R’000 R’000 R’000
Linked unitholders are referred to the circulars dated and posted on or about Balance at 30 June 2009 previously reported 4 034 2 181 285 2 166 199 – 4 351 518 Commercial 156 940 298 021 145 415
3 February 2011 for full details of the transaction. Industrial 324 099 633 123 324 771
Change in accounting policy 262 539 262 539
Retail 221 065 487 374 248 062
Balance at 30 June 2009 restated 4 034 2 181 285 2 428 738 – 4 614 057 Other 22 874 41 785 19 960
PROSPECTS
Total comprehensive income for the period 46 817 46 817 Total 724 978 1 460 303 738 208
Although the economy has emerged from the recession, market conditions
Transfer to non-distributable reserves 77 946 (77 946) –
remain difficult and vacancies are projected to increase further from the current Dec 2010 Jun 2010 Dec 2009
levels. Pangbourne will, however, enjoy the benefit of lower interest rates through Change in accounting policy (31 129) 31 129 – Profit before net finance costs R’000 R’000 R’000
the restructured interest rate swap profile and the board remains confident that Balance at 31 December 2009 restated 4 034 2 181 285 2 475 555 – 4 660 874 Commercial 111 421 370 920 122 495
the projected growth in distributions for the full financial year of between 6% Issue of linked units 21 25 447 25 468 Industrial 194 817 775 888 226 359
Retail 146 757 270 753 135 907
and 8% will be achieved. Total comprehensive income for the period 374 469 374 469 Other 15 830 60 380 16 082
The growth is based on the assumptions that a stable macro-economic Transfer to non-distributable reserves 282 804 (282 804) – Corporate (4 436) 30 256 66 622
environment will prevail, no major corporate failures will occur and that tenants Total 464 389 1 508 197 567 465
Change in accounting policy 91 665 (91 665) –
will be able to absorb the recovery of rising utility costs. Budgeted rental income
Balance at 30 June 2010 restated 4 055 2 206 732 2 850 024 – 5 060 811 6 Payment of interim distribution
was based on contractual escalations and market related renewals. This forecast
Total comprehensive loss for the period (33 011) (33 011) The board has approved and notice is hereby given of an interim interest distribution
has not been reviewed or reported on by Pangbourne’s auditors.
(distribution no 49) of 74,04 cents per linked unit for the six months ended
Transfer to non-distributable reserves (33 011) 33 011 – 31 December 2010. The last date to trade linked units cum distribution will be
By order of the board Balance at 31 December 2010 4 055 2 206 732 2 817 013 – 5 027 800 Friday, 4 March 2011 and trading will commence ex distribution on Monday, 7 March 2011.
The record date to participate in the distribution will be Friday, 11 March 2011.
Directors Dr Iraj Abedian (chairman) Barry Stuhler* (managing director) Des de Beer (alternate: Vuso Majija) Gerard de Rauville Ryan Falkenberg Linked unit certificates may not be dematerialised or rematerialised between
Barry Stuhler Jacques van Wyk Craig Hallowes* Bryan Hopkins Annalese Manickum Dave Savage Thando Sishuba Jacques van Wyk* Trurman Zuma (*Executive) Monday, 7 March 2011 and Friday, 11 March 2011, both days inclusive. Payment of the
Managing director Financial director Company secretary Wiko Serfontein distribution will be made to linked unitholders on Monday, 14 March 2011.
In respect of dematerialised linked unitholders, the distribution will be transferred
Registered address 3rd Floor Rivonia Village Rivonia Boulevard Rivonia 2191 (PO Box 4392 Rivonia 2128)
to the Central Securities Depository Participant accounts/broker accounts on
Johannesburg Transfer secretaries Link Market Services South Africa (Proprietary) Limited 11 Diagonal Street Johannesburg 2001 Monday, 14 March 2011. Certificated linked unitholders’ distribution payments will be
16 February 2011 Sponsor Java Capital posted on or about Monday, 14 March 2011.

3377 visual IGNITION 011 888 5511