SYNERGY INCOME FUND LIMITED - Financial Effects in respect of the Atlantis acquisition and renewal of cautionary announcement

Financial Effects in respect of the Atlantis acquisition and renewal of cautionary announcement

SYNERGY INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2007/032604/06)
JSE share code for A linked units: SGA ISIN code: ZAE000161550
JSE share code for B linked units: SGB     ISIN code: ZAE000162293
(“Synergy” or the “company”)


FINANCIAL EFFECTS IN RESPECT OF THE ATLANTIS ACQUISITION AND RENEWAL OF CAUTIONARY ANNOUNCEMENT


INTRODUCTION

Linked unitholders are referred to the announcement released on SENS on 15 May 2013 in which it was announced that Synergy
had concluded an agreement with The Property Incubator Proprietary Limited to acquire the rental enterprise known as Atlantis
City Shopping Centre, Western Cape (“Atlantis”) for a preliminary purchase price of R334 million (“the acquisition”).

The purpose of this announcement is to set out the financial effects of the acquisition.

FORECAST FINANCIAL INFORMATION OF THE ACQUISITION

Set out below are the forecast revenue, operating profit, net profit after taxation and distributable earnings of Atlantis (“the
Atlantis forecasts”) for the ten months ending 30 June 2014 and the year ending 30 June 2015. The Atlantis forecasts have been
prepared on the assumption that the acquisition will be implemented on 1 September 2013.

The Atlantis forecasts, including the assumptions on which they are based and the financial information from which they are
prepared, are the responsibility of the directors of Synergy. The Atlantis forecasts have not been reviewed or reported on by an
independent reporting accountant or external auditors.

The Atlantis forecasts presented in the table below have been prepared in accordance with the company’s accounting policies and
in compliance with IFRS.

                                                                 Ten months ending                Year ending
                                                                      30 June 2014               30 June 2015
                                                                             R’000                      R’000
 Contractual rental and tenant recoveries                                      27 806                   36 154
 Straight-line rental income accrual                                            3 383                    1 913
 Rental revenue                                                                31 189                   38 067


 Operating profit*                                                             24 104                   28 910
 Net profit after taxation*^                                                   14 116                     (622)
 Distributable earnings                                                       (2 111)                     (401)
 Net property income                                                           22 130                   28 688
*Includes the effects of straight-lining rental income and asset management fees.
^ Includes the effects of a fair value adjustment, finance costs and debenture interest.

The Atlantis forecasts incorporate, inter alia, the following material assumptions:
1.    contracted revenue is based on existing lease agreements;
2.    uncontracted revenue comprises 8.3% and 10.2% of gross rental revenue for the ten months ending 30 June 2014 and the
      year ending 30 June 2015 respectively;
3.    all existing lease agreements are valid;
4.    100% of the purchase price of R338.7 million for Atlantis (including transaction costs of R4.7 million) is assumed to be
      funded through third party interest-bearing borrowings. These interest-bearing borrowings are assumed to incur interest at
      an effective melded fixed and variable rate of 8.09% per annum;
5.    a fair value adjustment of R11.7 million has been provided for in respect of the ten months ending 30 June 2014. No fair
      value adjustment has been provided for in respect of the year ending 30 June 2015;
6.    in terms of the management agreement with Capital Land Asset Management Proprietary Limited:
      6.1. Synergy will pay a monthly asset management fee equivalent to 1/12th of 0.5% of the aggregate of the market
              capitalisation and the borrowings of Synergy; and
      6.2. Synergy will pay a monthly property management fee equivalent to 4.0% of gross monthly income collected
              (including VAT); and
7.     debenture interest will be paid to A- and B-linked unitholders in accordance with the provisions of the debenture trust deed.

UNAUDITED PRO FORMA FINANCIAL EFFECTS

The unaudited pro forma financial effects of the Atlantis acquisition on Synergy’s net asset value and tangible net asset value per
A-linked unit and per B-linked unit, based on the unaudited consolidated statement of financial position as at 31 December 2012
as published on SENS on 28 February 2013, are not significant and have not been presented.

RENEWAL OF CAUTIONARY ANNOUNCEMENT

The company remains in negotiations for the acquisition of a further portfolio of properties and accordingly, Synergy linked
unitholders are advised to continue to exercise caution when dealing in their linked units until a further announcement is made.

25 June 2013


Sponsor and corporate advisor
Java Capital

Date: 25/06/2013 11:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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