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General overview and update
RESILIENT REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/016851/06)
JSE share code: RES ISIN: ZAE000209557
Bond company code: BIRPIF
(Approved as a REIT by the JSE)
("Resilient" or "Company")
GENERAL OVERVIEW AND UPDATE
INTRODUCTION
Some six months ago, on 13 December 2018, Resilient published a SENS announcement summarising key
events for Resilient during 2018, clarifying matters that remain open and those considered resolved, and
updating the market on the outcome of engagement by an independent board sub-committee (the "Committee")
with a range of stakeholders.
As regards events subsequent to December 2018, the Committee and the board of directors (the "Board") have
noted that in March 2019 the FSCA announced that it had decided to close its insider trading case relating to
shares in Resilient and on 24 May 2019 Fortress REIT Limited ("Fortress") announced the outcome and its
board's response to the findings of the PwC report, made available on its website (which Resilient refers to
below as the "PwC findings").
KEY ACTION ITEMS FOR RESILIENT THROUGH 2018 AND 2019
Resilient sets out below its table of action items updated to be current to the date of this announcement by the
additional wording that appears indicated by an asterisk (*):
Matter or concern Resilient response Status
Cross-shareholding with Fortress Addressed by in specie distribution of Resilient's Resolved
Fortress B shares.
Allegations that Resilient's Resilient appointed new independent valuers to Resolved
directly held properties were over- value all its properties as at 30 June 2018, resulting
valued in the Company's South African portfolio being
valued upwards by 3.9%, as further detailed in the
June 2018 annual financial statements.
Allegations that the share activity 14 months of share trading activity has been Resolved to the
of Resilient subsidiaries, independently reviewed by Mr Fakie, who has best of Resilient's
executives and their associates, exonerated Resilient, its executives and their ability given the
and the Siyakha Trusts was associates, and the Siyakha Trusts, based on the information
manipulative evidence available to him. One stakeholder has available to it
asked for the review period to be extended, but
absent any evidence indicating any wrongdoing,
the Committee does not consider this request
justified.
* Resilient notes the outcome of the PwC report:
"Based on their review of (1) share trades by
Fortress in Resilient Stable shares, (2) movements
in the relevant share prices, (3) share trade volumes
of Resilient Stable Companies and (4) SENS
announcements by, the Resilient Stable
companies, PwC found no evidence of market
manipulation or insider dealing by Fortress in
relation to those companies' shares, in
contravention of the FMA."
"…PwC found that there was no evidence of
market manipulation or insider dealing
in relation to Fortress shares, in contravention of
the FMA, by any of the Siyakha Trusts."
Allegations relating to third-party The investigation of these allegations can only be Ongoing
share dealings undertaken by the FSCA. The chairman of
Resilient has written to, and will as appropriate
continue to liaise with, the FSCA offering every
assistance with its investigation, as well as
periodically communicating market and
stakeholder concerns that the remaining
investigation should be resolved as urgently as is
feasible and requesting periodic meaningful
updates.
Accounting related to the Siyakha Group results have been restated reflecting Resolved
Trusts consolidation of the Siyakha Trusts.
Distributable earnings derived The decline in the price of shares held by the Resolved
from loans to the Siyakha Trusts Siyakha Trusts has resulted in the reduction of
their net asset value. For so long as the Siyakha
Trusts' total liabilities exceed the value of their
total assets Resilient will, for purposes of
calculating its distributable earnings, recognise
interest accrued on the loans advanced to the
Siyakha Trusts only to the extent that the accrued
interest is matched by dividends declared for the
same period in respect of the shares held by the
Siyakha Trusts. Resilient has updated its published
distribution guidance on this basis.
Restructure of relationship with * The restructure of the Siyakha Trusts into * Resolved, with
the Siyakha Trusts separate ownership vehicles for Resilient and the pending
Fortress has been achieved. On 20 May 2019, proposal subject
Resilient posted a circular to shareholders to shareholder
regarding a proposal to acquire all the shares held approval
by The Resilient Empowerment Trust ("the
Trust"), being 52 182 504 Resilient shares and
7 474 707 Fortress B shares, in full settlement of
the loans advanced by the group to the Trust. If this
is not approved by Resilient shareholders, the
Trust will remain a shareholder in Resilient, albeit
with a liability due to Resilient that substantially
exceeds the value of its assets.
Establishment of an independent An independent whistle-blower hotline has been Resolved
whistle-blower hotline established, which refers all allegations it receives
to the chair of the Board. Only one complaint has
been received via this hotline to date, relating to a
Resilient SENS announcement on 5 February 2018
and misconstruing information provided regarding
share trades by the Siyakha Trusts. A response has
been provided by the chair to the complainant.
* Up to the date of this announcement, no further
queries have arisen.
Board composition * The Board has been reconstituted by one Resolved
resignation, one retirement, four new appointments
of independent non-executives (including
candidates nominated by shareholders) and the
appointment of a new chair. In addition, two of the
newly appointed independent non-executive
directors were appointed to the audit committee
with David Brown being appointed as the new
chairman.
Capital raising The report by Mr Fakie following his independent Resolved
review dealt with the processes followed in the
implementation of the Resilient bookbuild in
August 2017 and the considerations and process
for the allocation of shares to participants. In
addition, the Committee has reviewed the
processes followed by the bookrunner, Java
Capital, in all three of the bookbuilds undertaken
by Resilient since 2014 and is satisfied that the
processes and allocations, even though
unregulated, were appropriately and fairly
considered.
Property transactions * With the release by Fortress of the PwC findings, * Resolved
the Committee has not been given any reason to
consider there to be any misconduct or wrongdoing
relating to Resilient on the part of any Resilient
director or employee regarding historic property
transactions referred to in the allegations.
B-BBEE compliance Stakeholders queried the compliance of the * Resolved
Siyakha Trusts with applicable broad-based black
economic empowerment regulations. Over the
years, Resilient has been advised by external
consultants who assessed the compliance of the
Siyakha Trusts with the applicable B-BBEE codes,
particularly in periods when the codes were
amended. This advice is available to the
Committee and does not indicate any instances of
non-compliance. While the Siyakha Trusts may be
compliant with the respective legislation which
makes them eligible to be recognised as a B-BBEE
shareholder of Resilient, their current negative net
asset value has impacted its overall recognition for
purposes of the ownership scorecard and Resilient
expects this to continue to negatively impact its B-
BBEE rating.
* In light of the advice recently provided by the
Company's rating agent that the Company is now
rated non-compliant as a result of the
circumstances relating to the Siyakha Trusts, the
Company will give consideration to its B-BBEE
status once the result of the vote put to its
shareholders is known.
Company policies governing Resilient has strong controls in place for the * Resolved
directors' dealings disclosure of directors' interests and dealings in
Resilient shares, which comply with the JSE
Listings Requirements.
* The Board has expanded these policies to require
disclosure by directors (to the chairman) of
intended trades in the shares of companies in
which the Company is invested, with the intention
of identifying potential conflicts. In addition, the
Board has noted that Resilient's management does
not currently own any retail properties and has
adopted a policy precluding management from
direct investment in retail properties without prior
Board approval.
Resilient responses to false and * In March 2019, Resilient provided its analysis of Ongoing
misleading content of analyst various reports and commentary to the FSCA for
reports, commentary and press investigation of whether the content of the reports
coverage and commentary constitutes market abuse in the
form of false, misleading or deceptive statements
in respect of Resilient's shares or in respect of the
Company's past or future performance. The FSCA
has confirmed to Resilient that the matter is under
investigation.
In addition, Resilient has instructed and briefed
media law experts regarding what action, if any,
would be achievement-orientated regarding the
many examples of press coverage that do not meet
the requirement for truthful, accurate and fair
reporting contained in the Code of Ethics and
Conduct for South African Print and Online
Media, adopted by The Press Council of South
Africa.
GENERAL
Having considered the extensive remedial actions taken, the results of the investigations performed, and the
feedback received from stakeholders, the Committee considers the only remaining open matters to be the FSCA
investigations of third-party share dealings and of possible market abuse in the form of false, misleading or
deceptive statements relating to Resilient or its shares including arising from third-party commentary and
reports, as well as the Committee's consideration of whether any action should be taken regarding the nature of
the press coverage once legal advice has been received and the FSCA investigations have been concluded. The
Committee awaits the conclusion of these investigations and remains committed to full transparency in
addressing any findings that may impact the Company or its stakeholders.
Shareholders will be kept informed of developments, if any, by further announcement.
28 May 2019
Sponsor
Java Capital
Date: 28/05/2019 03:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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