FORTRESS/CAPITAL-further details of interest expressed by fortress to acquire Capital and renewal of cautionary CAPITAL PROPERTY FUND LIMITED FORTRESS INCOME FUND LIMITED (previously Friedshelf 1497 Proprietary Limited) (Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa) (Registration number 2009/016487/06) (Registration number 2013/226575/06) JSE share codes: FFA ISIN: ZAE000192787 JSE share code: CPF ISIN: ZAE000186821 FFB ISIN: ZAE000192795 (Approved as a REIT by the JSE) (Approved as a REIT by the JSE) (“Capital”) (“Fortress”) JOINT ANNOUNCEMENT OF FURTHER DETAILS OF THE INTEREST EXPRESSED BY FORTRESS TO ACQUIRE ALL OF THE ISSUED SHARES OF CAPITAL AND RENEWAL OF CAUTIONARY Introduction With reference to the joint cautionary announcement released on SENS on 15 May 2015, shareholders are advised of further details regarding the non-binding expression of interest of Fortress in a transaction (the “transaction”) to acquire all of the issued shares of Capital not already owned by Fortress. Fortress has not communicated a firm intention to make any offer to Capital or its shareholders. Spin-off of NewReit Fortress envisages that the spin-off by Capital of its office portfolio in order to establish a new JSE-listed REIT (“NewReit”), referred to in the cautionary announcement released by Capital on SENS on 19 May 2015, would be implemented as a component of the transaction. It is envisaged that approximately 25% of the price of the office portfolio will be settled in issued shares of NewReit, amounting to approximately R1 billion in shares in NewReit (the “NewReit consideration shares”). The NewReit consideration shares will be delivered to Capital shareholders on implementation of the transaction. It is anticipated that the management of NewReit will bring focus and specialist attention to the initially office- weighted NewReit and that NewReit would have the advantage of the liquidity in its issued shares that results from a broad shareholding. The benefits to shareholders of the specialist focus will be more marked, given the smaller market capitalisation of NewReit. Envisaged consideration and swap ratio It is envisaged that the transaction would result in Capital shareholders exchanging their Capital shares for a basket of shares comprising, per Capital share, 0.355 Fortress A shares, 0.355 Fortress B shares and a proportionate number of the NewReit consideration shares (the proportionate number per Capital share of the aggregate of approximately R1 billion in NewReit shares will be announced with the listing of NewReit) (together referred to as the “consideration shares”). Prospects for Fortress for 2016 In order to facilitate the consideration by Capital and its shareholders of the swap ratio in respect of Fortress A and Fortress B shares envisaged by Fortress, Fortress is making available the view of its board of its prospects for the 2016 financial year. The Fortress board is confident that Fortress will achieve overall growth in distributions of approximately 18% for the 2016 financial year. The forecast assumes exchange rates of R13.00 to the Euro, R11.80 to the US Dollar and R18.00 to the Pound Sterling. The growth is further based on the assumptions that a stable macro- economic environment will prevail, no major corporate failures will occur and that tenants will be able to absorb the recovery of rising utility costs and municipal rates. Budgeted rental income is based on contractual escalations and market related renewals. This forecast has not been audited or reviewed by Fortress’ auditors. Envisaged benefits of the transaction The transaction would result in a substantially enlarged market capitalisation for Fortress, with economies of scale and the benefits of enhanced liquidity and index inclusion working for all Fortress A and Fortress B shareholders. It is anticipated that, for Capital shareholders, the basket of consideration shares offered in exchange for Capital shares will be value enhancing and will afford shareholders greater flexibility in retaining only the investment exposure of their choice, with a liquid market in the event that there is any preference to dispose of any of the consideration shares. Illustrative financial effects to Capital shareholders The table below sets out the illustrative financial effects of the transaction on a Capital shareholder, assuming that the transaction is implemented on 1 July 2015, and based on the market prices per Capital, Fortress A and Fortress B shares on 14 May 2015, being the day before the first joint cautionary announcement on SENS by Capital and Fortress. The illustrative financial effects are not pro forma financial effects and are provided for illustrative purposes only. The illustrative financial effects are based on Java Capital’s analysis of market consensus regarding the projected dividend of Capital for the 12 months ending 30 June 2016 and the 2016 guidance made available by Fortress in this announcement. The illustrative financial effects are the responsibility of the directors of Capital and Fortress, and have not been reviewed or reported on by independent reporting accountants. Capital shareholder: illustrative financial Before the After the % change effects transaction transaction Dividend per share (cents) 94.4 (1) 86.42 (2) (8.5%) Market price per share (cents) 1 347 (3) 1 607 (4) 19.3% Notes and assumptions: 1. The dividend per share amount in the “Before the transaction” column has been prepared based on Java Capital’s analysis of market consensus as to the projected dividend of Capital for the 12 months ending 30 June 2016, and comprises: a. 48.2 cents per share for the six months ending 31 December 2015 based on a dividend of 44.2 cents for the six months ended 31 December 2014 and guidance of 9% in Capital’s integrated report for the year ending 31 December 2015; and b. 46.2 cents per share for the six months ending 30 June 2016 based on the market consensus of 8.1% growth in dividend over the six months ending 30 June 2015. 2. The dividend per share amount in the “After the transaction” column assumes – a. a projected dividend of 227.8 cents for the financial year ending 30 June 2016 per combined Fortress A and Fortress B share, based on the market guidance provided by Fortress referred to above in this announcement; b. a swap ratio of 0.355 Fortress A shares and 0.355 Fortress B shares per Capital share; c. the transaction will have no impact on the projected dividend per combined Fortress share; and d. each Capital shareholder will receive a dividend of 5.50 cents in respect of its proportion of the NewReit consideration shares for the 12 months ending 30 June 2016. 3. The market price per share in the “Before the transaction” column is the closing market price per Capital share on 14 May 2015, being the day before the first joint cautionary announcement on SENS by Capital and Fortress. 4. The market price per share in the “After the transaction” column assumes – a. a market price of 4 359 cents per combined Fortress share based on closing market prices per Fortress A share and Fortress B share of 1 609 cents and 2 750 cents respectively on 14 May 2015; b. an equivalent market price per Capital share of 1 547 cents based on the swap ratio of 0.355 Fortress A shares and 0.355 Fortress B shares per Capital share; c. the establishment of NewReit will have no impact on the market prices of the Capital, Fortress A and Fortress B shares, but each Capital shareholder will receive a proportionate value of 60 cents in NewReit consideration shares for each Capital share held; and d. no increase in value will be derived from the application of the better rating and lower yield of the Fortress A and Fortress B shares on a melded basis compared to the Capital share to the overall increase in distributions by Fortress that would result from the transaction. Renewal of cautionary Shareholders of Capital and Fortress are advised to continue to exercise caution in their dealings in Capital and Fortress shares, pending further announcements. 1 June 2015 Corporate advisor and sponsor to Capital and Fortress Java Capital Legal Adviser to the transaction DLA Cliffe Dekker Hofmeyr Date: 01/06/2015 02:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.