PRELIMINARY SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 June 2016

Transcription

1 FORTRESS INCOME FUND LIMITED INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA REG NO 2009/016487/06 JSE SHARE CODES FFA ISIN ZAE AND FFB ISIN ZAE (APPROVED AS A REAL ESTATE INVESTMENT TRUST ( REIT ) BY THE JSE) ( FORTRESS OR THE GROUP ) PRELIMINARY SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 June 2016 DIRECTORS COMMENTARY 1 CAPITAL STRUCTURE Fortress is an internally asset managed REIT listed on the Johannesburg Stock Exchange with separately traded A and B shares. The Fortress A shares have a preferential right to income distribution and to capital participation in the event of winding-up. The growth on the A share dividend is the lower of 5% or CPI. The Fortress B shares are entitled to the residual distributable income and capital participation on winding-up. Fortress successfully acquired all the issued shares of Capital Property Fund Limited by scheme of arrangement at a swap ratio of 0,35 A and 0,35 B shares for each Capital share. Following the implementation of the acquisition, Fortress repurchased Fortress B shares held by Capital, which shares were cancelled. An accelerated bookbuild successfully undertaken on 18 February 2016 increased the Fortress shares in issue by A and B shares to A shares and B shares. In terms of the authority granted by shareholders, Fortress repurchased A shares. These shares were acquired at an average price of R14,76 per share and are held in treasury. 2 NATURE OF BUSINESS Fortress is a hybrid REIT investing in both physical property and listed property securities. Fortress owns and develops well located logistics warehouses let to corporate tenants on long leases. The group also invests in retail properties focused on transport nodes. The equity portfolio consists of both local listed REITs and international listed property securities. 3 DISTRIBUTABLE EARNINGS AND COMMENTARY ON RESULTS The dividend growth for the final period attributable to the A share was calculated using data published by Statistics SA. The growth was 5%, being the lower of CPI or 5%, and consequently the dividend for the A share for the six months ended 30 June 2016 is 64,45 cents. The final dividend for the B share increased by 90,54% from 39,20 cents to 74,69 cents over the previous comparable period. For the financial year ended 30 June 2016, the A share dividend amounts to 129,17 cents per share (4,91% increase). The dividend for the B share for the year increased by 95,28% to 137,50 cents per share. The substantial growth in the dividend of the B share was largely attributable to the Capital acquisition which was funded with equity issued at a lower yield than the yield of the Capital portfolio.

2 The logistics, industrial and office properties performed in line with budget while the retail properties were ahead. Turnover rentals collected for the year were R3,5 million ahead of budget. Equity investments generally performed in line with budget, while Resilient outperformed. The group hedged the projected June 2016 dividend income from its investments in Hammerson, Nepi and Rockcastle at R20,80, R14,84 and R13,34 against the British Pound, the Euro and the US Dollar respectively. 4 OFFER TO ACQUIRE LODESTONE REIT LIMITED A non-binding expression of interest to acquire all the issued shares of Lodestone in exchange for A and B shares has been made and shareholders are referred to the SENS announcement dated 21 July 2016 in this regard. Further announcements will be made in due course. 5 DIRECT PROPERTY INVESTMENTS LOGISTICS The following developments were completed during the year: Description % owned 100% GLA Yield Completion Montague Business Park 25% m2 7,9% Oct 2015 Montague Business Park 25% 5 294m2 7,6% Dec 2015 Linbro Logistics Park 100% m2 9,0% Jan 2016 Pomona Logistics 100% m2 9,3% Nov 2015 CiplaMED Rivergate 100% m2 8,3% Oct 2015 N1 Business Park 20% m2 12,5% Jun 2016 N1 Business Park 20% 8 260m2 9,0% Aug 2015 Tlokwe Street Louwlardia 100% 8 469m2 9,0% Mar 2016 In line with the board s strategy of increasing the group s exposure to new logistics warehouses, Fortress has made several acquisitions of prime zoned land for development. These include: Description % owned 100% GLA R21 Logistics Park ^ 50% m2 Cornubia Logistics Park ^ 50% m2 Louwlardia Logistics Park * 100% m2 Westlake Logistics * 100% m2 3rd Avenue Linbro * 50% m2 ^ Transfer subject to regulatory approval. * Transferred. The following developments have commenced: Estimated Estimated Description % owned 100% GLA yield completion Louwlardia Logistics Park 100% m2 9,5% Feb 2017 Westlake Logistics 100% m2 9,0% Feb 2017 Montague Business Park* 25% 9 000m2 8,0% Oct 2016 * 10-year lease agreement concluded. Fortress has received approval for its Environmental Impact Assessment and zoning of the proposed Clairwood Logistics Park in Durban. Once approval for the Environmental Management Plan is received, construction will commence. Demand from logistics users is strong for this strategically located development site. The group has concluded a new 15-year lease at Tradeport City Deep with C. Steinweg Bridge Group for the joint development of a new m2 logistics facility. A new 16-year lease was concluded with C. Steinweg Bridge Group on the existing m2 warehouse which will be incorporated into the joint development.

3 Fortress furthermore owns 25% of m2 GLA in Montague Business Park and m2 GLA (100%) in Rivergate, Cape Town for future development. INDUSTRIAL The vacancies in the industrial portfolio are low, however, tenant mix and rental growth remain a challenge. RETAIL The retail portfolio, which consists of 58 shopping centres, has been further enhanced with the completion of extensions to Nelspruit Plaza and Botlokwa Plaza and the re-development of Biyela Square and Central Park Bloemfontein. Ongoing development at The Galleria (25% owned) to accommodate H&M and Pick n Pay and the construction at Lephalale Crossing are expected to be completed in November The new extension at Lebowakgomo Centre to accommodate Mr Price and an enlarged Boxer supermarket is scheduled to open in November Refurbishment projects were also undertaken at Venda Plaza and Rustenburg Plaza which are expected to be completed in November Development at Jeffreys Bay to accommodate Food Lover s Market is expected to be completed in November The retail portfolio achieved year-on-year trading density growth of 10% which is considerably higher than the national figures. OFFICES The prevailing difficult conditions in the office market continue. Five office buildings were sold during the year and, in line with the board s mandate, exposure to this segment will continue to be reduced. Fortress will, however, continue to market and upgrade its existing offices to attract new tenants and retain its current users. Management is currently exploring several options with its partners regarding the vacant Sandton land held for the development of either offices, hotels or residential. 6 PROPERTY DISPOSALS The following non-core properties were disposed of during the year: Book Net Value proceeds Exit Transfer Property name Sector R 000 R 000 yield date Caxton House East London $ Offices ,1% May Intersite Avenue Umgeni $ Logistics ,4% Apr 2016 Anvil Road Robertville $ Industrial ,2% Feb 2016 Appleton s $ Retail ,9% Sep Kramer Road Kramerville $ Industrial ,3% # Queenstown Mall Retail ,0% Feb 2016 Westmead Road Pinetown $ Logistics ,0% Mar 2016 Westway Office Park $ Offices ,0% # Diesel Road Isando Industrial ,8% Jun Ebonyfield Ave Springfield Park $ Logistics ,9% Apr 2016 Shoprite Dundee Retail ,9% # 5 Bertie Avenue Epping 2 $ Industrial ,2% # 70 Lechwe Street Corporate Park $ Logistics ,7% Feb Impala Road Chislehurston $ Offices ,5% Jun 2016 Greenbushes Units $ Logistics ,1% Nov 2015 Lees Street Wynberg $ Logistics ,2% Dec 2015

4 386 Main Road Bryanston $ Offices ,0% # 20 Alexander Road Westmead $ Logistics ,3% Feb Willowfield Crescent $ Logistics ,3% Mar Ivanseth Road Industrial ,0% # 19 Ebonyfield Ave Springfield Park $ Logistics ,9% Mar 2016 Bryanston Ridge Office Park Offices ,6% ## Greenbushes Erf 116 $ Land n/a Dec 2015 Greenbushes Erf 121 $ Land n/a Dec 2015 Greenbushes Erf 126 $ Land n/a Dec 2015 TOTAL # Held for sale at 30 June Transfer pending. ## Held for sale at 30 June 2016, transferred 6 July $ Details of these properties, previously owned by Capital, were included in the Revised Listings Particulars. 7 VACANCIES AND ARREARS At 30 June 2016 the total vacancy decreased to 5,7% from 6,2% as at 31 December Following the merger, the combined lettable area has increased from m2 (100% GLA) at 30 June 2015 to m2 (100% GLA) as at 30 June Included in the retail vacancy is m2 of retail space which is currently under construction. Subsequent to 30 June 2016, a new lease agreement was concluded over the m2 logistics facility at 50 Electron Avenue, Isando. This reduces the total vacancy at 30 June 2016 by 0,4% to 5,3%. There was no material change in arrears and potential bad debts are well provided for. % of property portfolio Sectoral vacancy by GLA Jun 2016 by book value Logistics 6,3% 36,6% Retail 3,6% 34,5% Offices 13,5% 15,4% Industrial 2,9% 11,8% Other 7,0% 1,7% 8 LISTED PORTFOLIO Jun 2016 Jun 2015 Number of Fair value Number of Fair value Counter shares R 000 shares R 000 Greenbay (GRP) Capital (CPF) Nepi (NEP) Resilient (RES) Hammerson (HMSO UK)# Rockcastle (ROC)* # The Hammerson position is held through local equity derivatives. * Rockcastle was treated as an associate (equity accounted) and was thus not fair valued in the financial statements. The carrying value of Rockcastle was R9 313 million and R3 213 million at 30 June 2016 and 30 June 2015 respectively. Fortress reduced its exposure to the Hammerson IDX position by shares at an average price of GBP5,74 per share since December The group acquired Greenbay shares at an average price of R1,20 per share. The increases in the

5 Nepi and Rockcastle holdings were the result of electing scrip dividends. Fortress took up shares in the Resilient bookbuild to retain its percentage holding. The board s policy is to hedge its foreign currency exposure to equity investments (Greenbay, Hammerson, Nepi and Rockcastle) to achieve a neutral effect on the first year s distribution. The following hedges were in place at 30 June 2016: Foreign Exchange Foreign ZAR fair value fair value of exchange of investment investment hedged Exchange rate Greenbay R GBP GBP GBP - R20,52 Hammerson R GBP Nepi R EUR EUR EUR - R16,90 Rockcastle R USD USD USD - R15,48 R In total, 27,6% of Fortress offshore equity exposure is hedged with the main purpose being the alignment of the funding risk profile to both the currency and income streams of the group s offshore holdings. This results in 27,6% of these investments being funded at interest rates applicable to the currencies of these investments. 9 FACILITIES AND INTEREST RATE DERIVATIVES Moody s Investors Service has recalibrated South Africa s national rating scale mapping table and repositioned the national scale ratings of non-financial corporates. Following this, Moody s has repositioned Fortress national scale ratings to Aa3.za/P-1.za from A3.za/P-2.za. Moody s furthermore assigned global scale local currency ratings of Baa3/P-3 to Fortress with a stable outlook. In April 2016, GCR reviewed Fortress rating and assigned an A(za) long term and an A1(za) short term national scale rating to Fortress with a positive outlook. Fortress extended R1 billion of its funding facilities from Standard Bank which matured in February 2016 for a further four to five years and accepted a new R250 million unsecured three-year facility from Standard Bank. In addition, Fortress accepted new secured facilities totalling R750 million from Standard Bank with maturities in four to five years. RMB facilities totalling R5,1 billion were restructured and an additional R500 million secured facility was accepted. The facilities expire in three to six years. The group accepted three new secured facilities from Libfin with tenures of five years (R200 million), six years (R200 million) and seven years (R200 million). Average Amount margin Facility expiry R million over Jibar June ,32% June ,54% June ,65% June ,69% June ,80% June ,90% June ,65% ,65%

6 Amount Average Interest rate swap expiry R million swap rate June ,58% June ,34% June ,46% June ,95% June ,16% June ,99% June ,79% June ,47% June ,78% ,37% Amount Average Interest rate cap expiry R million cap rate June ,40% June ,52% June ,80% June ,76% June ,71% June ,98% ,73% Amount Variable rate instruments R 000 Loans to BEE vehicle ( ) Loans to co-owners ( ) Cash and cash equivalents (12 414) Hammerson equity derivative margin ( ) Interest-bearing borrowings (including gross-up of Hammerson equity derivative) Currency derivatives (gearing in foreign currency) ( ) Capital commitments contracted for Total interest rate derivatives Percentage hedged 110,7% Capital expenditure approved by the board Percentage hedged inclusive of approved capital expenditure 107,7% The all-in weighted average cost of funding of Fortress was 8,81% at 30 June 2016 and the average hedge term was 4,1 years. The information contained in note 5, 7, 9 and the Fair value information section of note 10 has been compiled using proportionate consolidation. This results in Fortress accounting for its share of the assets and liabilities of property investments that are not held in undivided shares (Arbour Crossing, The Galleria and Mthatha Residential). It further recognises the Rockcastle investment at fair value and the Hammerson equity derivative position on a gross basis. 10 SUMMARY OF FINANCIAL PERFORMANCE Jun 2016 Dec 2015 Jun 2015 Dec 2014 Dividend per A share (cents) 64,45 64,72 61,38 61,75 Dividend per B share (cents) 74,69 62,81 39,20 31,21 Shares in issue at period end

7 -A B Shares used for dividend per share calculation -A B A shares held in treasury Fair value information Net asset value per A share* R15,62 R16,61 R15,72 R16,19# Net asset value per B share R25,73 R24,14 R16,21 R12,04# Loan-to-value ratio** 23,8% 25,3% 27,3% 19,3% Net property expense ratio 16,8% 15,2% 15,8% 14,2% Gross property expense ratio 33,6% 35,3% 35,6% 34,6% Net total expense ratio 15,6% 13,3% 10,9% 12,2% Gross total expense ratio 28,1% 27,4% 23,1% 26,6% IFRS accounting Net asset value per A share* R15,62 R16,61 R15,72 R16,19# Net asset value per B share R23,22 R20,77 R13,15 R8,63# #Net asset value includes total equity attributable to equity holders and linked debentures. * 60-day volume weighted average traded price at reporting date limited to combined net asset value. **The loan-to-value ratio is calculated by dividing total interest-bearing borrowings adjusted for cash on hand by the total of investments in property, listed securities and loans advanced. Fair value information Jun 2016 Jun 2015 SUMMARISED STATEMENT OF FINANCIAL POSITION R 000 R 000 ASSETS Investment property Investment property under development Investments Fortress Share Purchase Trust loans Loans to BEE vehicle Loans to co-owners Current assets Total assets EQUITY AND LIABILITIES Total equity attributable to equity holders Interest-bearing borrowings net of cash on hand Deferred tax Current liabilities Total equity and liabilities SUMMARISED STATEMENT OF COMPREHENSIVE INCOME Recoveries and contractual rental revenue Property operating expenses ( ) ( ) Distributable income from investments Fair value gain on investment property, investments and currency derivatives Administrative expenses ( ) (36 997) Impairment of goodwill on Capital merger ( ) - (Loss)/profit before net finance costs ( ) Net finance costs ( ) ( )

8 (Loss)/profit before income tax ( ) Income tax (96 014) ( ) (Loss)/profit for the year attributable to equity holders ( ) BROAD-BASED BLACK ECONOMIC EMPOWERMENT Fortress issued A shares and B shares to The Siyakha Education Trust on 2 December 2015 under the authority approved by shareholders. Siyakha promotes the education of previously disadvantaged individuals. The Fortress board is evaluating several initiatives to support black-owned businesses. 12 PROSPECTS Fortress has positioned itself as a preferred logistics developer with access to the best land and a reputation for delivering a technically superior product. This will enable the group to provide sustainable attractive growth in a difficult economic environment. Although exposed to fluctuations in the value of the Rand, the offshore companies in which Fortress is invested are well positioned to show strong growth in distributions in hard currencies. On the assumption that the A share dividend will grow at 5%, the board anticipates that the B share dividend will increase by approximately 22% for the 2017 financial year. The projected dividend income from the group s offshore holdings is hedged at the following exchange rates: Greenbay Hammerson Nepi Rockcastle GBP GBP EUR USD Forward rate against ZAR: Dec 2016 R22,28 R23,72 R18,55 R16,54 Forward rate against ZAR: Jun 2017 R22,73 R22,23 R18,67 R16,73 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 was based on contractual escalations and market-related renewals. This forecast has not been audited or reviewed by Fortress auditors. By order of the board Mark Stevens Managing director Rual Bornman Financial director Johannesburg 11 August 2016 SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited Reclassified Jun 2016 Jun 2015 R 000 R 000 ASSETS Non-current assets Investment property Straight-lining of rental revenue adjustment Investment property under development Investment in and loans to associates and joint venture

9 Investments Fortress Share Purchase Trust loans Loans to BEE vehicle Loans to co-owners Current assets Investment property held for sale Straight-lining of rental revenue adjustment Fortress Share Purchase Trust loans Loans to co-owners Trade and other receivables Hammerson equity derivative Cash and cash equivalents Total assets EQUITY AND LIABILITIES Total equity attributable to equity holders Stated capital Treasury shares ( ) - Currency translation reserve (34 075) - Reserves ( ) Total liabilities Non-current liabilities Interest-bearing borrowings Deferred tax Current liabilities Trade and other payables Interest-bearing borrowings Total equity and liabilities SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited Reclassified for the year for the year ended ended Jun 2016 Jun 2015 R 000 R 000 Net rental and related revenue Recoveries and contractual rental revenue Straight-lining of rental revenue adjustment Rental revenue Property operating expenses ( ) ( ) Income from investments Fair value gain on investment property, investments and currency derivatives Fair value gain on investment property Adjustment resulting from straight-lining of rental revenue ( ) (37 095) Fair value gain on investments Fair value loss on currency derivatives ( ) ( )

10 Administrative expenses ( ) (36 852) Impairment of goodwill on Capital merger ( ) - Profit on sale of interest in associate Rockcastle Income from associates and joint venture distributable non-distributable (Loss)/profit before net finance costs ( ) Net finance costs ( ) ( ) Finance income Interest from loans Finance costs ( ) ( ) Interest on borrowings ( ) ( ) Capitalised interest Fair value adjustment on interest rate derivatives (20 897) (3 531) Interest to linked debenture holders - A linked units - ( ) - B linked units - ( ) (Loss)/profit before income tax ( ) Income tax (96 014) ( ) (Loss)/profit for the year attributable to equity holders ( ) Total comprehensive (loss)/income for the year ( ) Basic (loss)/earnings per A share (cents) (332,71) 285,89 Basic (loss)/earnings per B share (cents) (332,71) 285,89 Fortress has no dilutionary instruments in issue. RECONCILIATION OF (LOSS)/PROFIT FOR THE YEAR TO HEADLINE EARNINGS Audited for the year ended Reclassified for the year ended Jun 2016 Jun 2015 R 000 R 000 Basic earnings - (loss)/profit for the year attributable to equity holders ( ) Adjusted for: ( ) - fair value gain on investment property ( ) ( ) - profit on sale of interest in associate Rockcastle (54 004) (20 885) - fair value loss/(gain) on investment property of joint

11 venture and associate (94) - impairment of goodwill on Capital merger income tax effect ( ) (38 161) Headline earnings Headline earnings per A share (cents) 181,38 249,50 Headline earnings per B share (cents) 181,38 249,50 Basic (loss)/earnings per share and headline earnings per share are based on the following weighted average shares in issue during the year: - A share B share Given Fortress' capital conversion, detailed in the circular issued to shareholders on 3 February 2015, linked debentures no longer exist within Fortress' capital structure. SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS Audited for the year ended Reclassified for the year ended Jun 2016 Jun 2015 R 000 R 000 Cash outflow from operating activities ( ) (32 251) Cash outflow from investing activities ( ) ( ) Cash inflow from financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash and cash equivalents consist of: Current accounts SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Stated capital/ Currency share Treasury Share translation capital shares premium reserve R 000 R 000 R 000 R 000 Balance at Jun Issue of linked units (equal number of A and B units) Total comprehensive income for the year Capitalisation of linked debentures Transfer to stated capital ( ) Transfer from non-distributable reserves Balance at Jun Issue of shares (equal number of A and B shares) Issue of shares on 1 Dec Issue of shares on 2 Dec

12 - Issue of shares on 8 Dec Issue of shares on 26 Feb Total comprehensive loss for the year Repurchase of A shares ( ) Repurchase and cancellation of B shares on 3 Dec 2015 ( ) Exchange differences on translation of Rockcastle associate (34 075) Dividends paid Balance at Jun ( ) - (34 075) Non- Equity distribu- attributable table to equity reserves Reserves holders R 000 R 000 R 000 Balance at Jun Issue of linked units (equal number of A and B units Total comprehensive income for the year Capitalisation of linked debentures Transfer to stated capital - Transfer from non-distributable reserves ( ) Balance at Jun Issue of shares (equal number of A and B shares) Issue of shares on 1 Dec Issue of shares on 2 Dec Issue of shares on 8 Dec Issue of shares on 26 Feb Total comprehensive loss for the year ( ) ( ) Repurchase of A shares ( ) Repurchase and cancellation of B shares on 3 Dec 2015 ( ) Exchange differences on translation of Rockcastle associate (34 075) Dividends paid ( ) ( ) Balance at Jun ( ) NOTES 1 PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION The preliminary summarised audited consolidated financial statements have been prepared in accordance with the requirements of the JSE Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa applicable to summary financial statements. The JSE Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards ( IFRS ), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34: Interim Financial Reporting. This report complies with the SA REIT Association Best Practice Recommendations. This report was compiled under the supervision of Rual Bornman CA(SA), the financial director. The accounting policies applied in the preparation of the consolidated financial statements, from which the summarised consolidated financial statements were

13 derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the previous consolidated financial statements, with the exception of the adoption of new and revised standards which became effective during the year. The group s investment properties were externally valued by an independent valuer. In terms of IAS 40: Investment Property and IFRS 7: Financial Instruments: Disclosure, investment properties are measured at fair value and are categorised as level 3 investments. The revaluation of investment property requires judgement in the determination of future cash flows from leases and an appropriate capitalisation rate which varies between 8,00% and 14,50% (Jun 2015: 7,5% and 14,00%). Changes in the capitalisation rate attributable to changes in market conditions can have a significant impact on property valuations. A 25 basis points increase in the capitalisation rate will decrease the value of investment property by R659,9 million (Jun 2015: R201,1 million). A 25 basis points decrease in the capitalisation rate will increase the value of investment property by R697,1 million (Jun 2015: R212,8 million). In terms of IAS 39 and IFRS 7, the group s currency and interest rate derivatives as well as the Hammerson equity derivative are measured at fair value through profit or loss and are categorised as level 2 investments. In terms of IAS 39, investments are measured at fair value being the quoted closing price at the reporting date and are categorised as level 1 investments. There were no transfers between levels 1, 2 and 3 during the year. The valuation methods applied are consistent with those applied in preparing the previous consolidated financial statements. The board has resolved to impair the R8,8 billion of goodwill that arose on the Capital merger due to all the cash flows from Capital's assets being carried at fair value. The directors are not aware of any matters or circumstances arising subsequent to 30 June 2016 that require any additional disclosure or adjustment to the financial statements. The auditors, Deloitte & Touche, have issued their opinion on the consolidated financial statements for the year ended 30 June The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit opinion. These preliminary summarised consolidated financial statements have been derived from the consolidated financial statements and are consistent, in all material respects, with the consolidated financial statements. This preliminary report has been audited by Deloitte & Touche and an unmodified audit opinion has been issued. Copies of their audit reports and the consolidated financial statements are available for inspection at Fortress registered address. The auditor s report does not necessarily report on all of the information contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor s engagement, they should obtain a copy of that report together with the accompanying financial information from Fortress registered address. 2 LEASE EXPIRY PROFILE Based on Based on contractual Lease expiry rentable area rental revenue Vacant 5,7% Jun ,5% 22,3% Jun ,5% 21,8% Jun ,8% 19,7% Jun ,2% 10,5% Jun ,7% 10,2%

14 > Jun ,6% 15,5% 100,0% 100,0% 3 SEGMENTAL ANALYSIS Audited for the year ended Audited for the year ended Jun 2016 Jun 2015 R 000 R 000 Segmental revenue - rental revenue Logistics Industrial Offices Retail Other (Loss)/profit after tax Logistics Industrial Offices Retail Other Corporate - South Africa ( ) Corporate - Europe ( ) Total assets Logistics Industrial Offices Retail Other Corporate - South Africa Corporate - Europe TOTAL Reconciliation of (loss)/profit for the year to dividend declared (Loss)/profit for the year ( ) Fair value gain on investment property ( ) ( ) Fair value gain on investments ( ) ( ) Fair value loss on currency derivatives Impairment of goodwill on Capital merger Profit on sale of interest in associate Rockcastle (54 004) (20 885) Non-distributable income from associates and joint venture (99 843) ( ) Fair value adjustment on interest rate derivatives Interest to linked debenture holders Income tax Antecedent dividend* Dividends accrued Amount available for distribution under best practice Interim dividend declared

15 - A shares (net of treasury shares) ( ) ( ) - B shares ( ) ( ) Final dividend declared - A shares (net of treasury shares) ( ) ( ) - B shares ( ) ( ) - - * The antecedent dividend includes five months' performance of Capital prior to 1 December PAYMENT OF FINAL DIVIDENDS The board has approved and notice is hereby given of final dividends of 64,45 cents per A share and 74,69 cents per B share for the six months ended 30 June The dividends are payable to Fortress shareholders in accordance with the timetable set out below: Last date to trade cum dividend Tuesday, 6 September 2016 Shares trade ex dividend Wednesday, 7 September2016 Record date Friday, 9 September 2016 Payment date Monday, 12 September 2016 Share certificates may not be dematerialised or rematerialised between Wednesday, 7 September 2016 and Friday, 9 September 2016, both days inclusive. In respect of dematerialised shareholders, the dividend will be transferred to the CSDP accounts/broker accounts on Monday, 12 September Certificated shareholders dividend payments will be deposited on or about Monday, 12 September An announcement informing shareholders of the tax treatment of the dividend will be released separately on SENS. SHAREHOLDER SPREAD AT 30 JUNE 2016 AS DEFINED IN TERMS OF THE JSE LISTINGS REQUIREMENTS FORTRESS - A SHARES shareholders shareholders shares held issued shares Public ,9,% ,8% Non-public ,0% Directors and employees 116 1,1% ,2% ,0% ,0% shareholders shareholders shares held issued shares SIZE OF HOLDING 1 to shares ,6% ,4% to shares ,0% ,5% to shares ,5% ,6% to shares 453 4,4% ,2% to shares 102 1,0% ,9% More than shares 49 0,5% ,4% ,0% ,0% shares held issued share REGISTERED SHAREHOLDERS OWNING 5% OR MORE OF ISSUED SHARES Coronation Balanced Plus Fund ,00% The Siyakha Education Trust ,8% Government Employees Pension Fund ,8%

16 ,6% shares controlled issued share CONTROL OF MORE THAN 5% OF ISSUED SHARES Coronation Fund Managers ,6% Government Employees Pension Fund ,1% The Siyakha Education Trust ,8% Stanlib ,1% ,6% FORTRESS - B SHARES shareholders shareholders shares held issued shares Public ,4% ,8% Non-public ,3% Directors and employees 178 1,6% ,9% ,0% ,0% shareholders shareholders shares held issued shares SIZE OF HOLDING 1 to shares ,5% ,5% to shares ,3% ,6% to shares ,7% ,7% to shares 460 4,2% ,1% to shares 102 0,9% ,3% More than shares 47 0,4% ,8% ,0% ,0% shares held issued share REGISTERED SHAREHOLDERS OWNING 5% OR MORE OF ISSUED SHARES Resilient REIT Limited ,3% The Siyakha Education Trust ,1% Government Employees Pension Fund ,4% ,8% shares controlled issued share CONTROL OF MORE THAN 5% OF ISSUED SHARES Resilient REIT Limited ,3% Government Employees Pension Fund ,6% The Siyakha Education Trust ,1% ,0% Directors Iraj Abedian (chairman); Jeff Zidel (deputy chairman); Mark Stevens*; Rual Bornman*; Kura Chihota; Nontando Mahlati; Jan Potgieter; Wiko Serfontein*; Andrew Teixeira* (Alternate: Steven Brown*); Fareed Wania*; Banus van der Walt; Djurk Venter; Tshiamo Matlapeng-Vilakazi (*executive director) Changes to the board of directors Steven Brown and Fareed Wania were appointed on 13 April 2016 and 14 June 2016 respectively. Company secretary Tamlyn Stevens

17 Registered address 3rd Floor Rivonia Village, Rivonia Boulevard, Rivonia, 2191 (PO Box 138, Rivonia, 2128) Transfer secretaries Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg, 2000) Sponsor Java Capital