direct MACQUARIE MARTIN PLACE TRUST ARSN NO. 1 MARTIN PLACE, SYDNEY MACQUARIE DIRECT PROPERTY PROSPECTUS 10

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1 direct MACQUARIE MARTIN PLACE TRUST ARSN NO. 1 MARTIN PLACE, SYDNEY MACQUARIE DIRECT PROPERTY PROSPECTUS 10

2 important notice Investments in Macquarie Martin Place Trust (ARSN ) (MMPT or Trust) are not deposits with or other liabilities of Macquarie Bank Limited (ABN ) or of any other entity in the Macquarie Bank Group and are subject to investment risk, including possible delays in repayment and loss of income or capital invested. None of Macquarie Bank Limited, Macquarie Direct Property Management Limited (ABN ), Macquarie Office Management Limited (ABN ) or any other member of the Macquarie Bank Group guarantees any particular rate of return or the performance of Macquarie Martin Place Trust nor do they guarantee the repayment of capital from Macquarie Martin Place Trust. This is not Investment Advice. You Should Seek Your Own Financial Advice. The Offer does not take into account the investment objectives, financial situation and particular needs of the investor. It is important that you read the entire Prospectus before making any decision to invest in MMPT Units. In particular, in considering the prospects of Macquarie Martin Place Trust it is important that you consider the risk factors that could affect the financial performance of the Trust. You should carefully consider these factors in light of your particular investment needs, objectives and financial circumstances (including financial and taxation issues) and seek professional advice from your accountant, stockbroker, lawyer or other professional adviser before deciding whether to invest. Some of the risk factors that should be considered by prospective investors are in Section 6, Risks. Prospectus This Prospectus is dated 8 May A copy of this Prospectus has been lodged with the Australian Securities & Investments Commission (ASIC). The ASIC takes no responsibility for the contents of this Prospectus. No units in MMPT will be allotted or issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. No person is authorised to give any information or to make any representation in connection with the Offer described in this Prospectus which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Manager in connection with the Offer. This Prospectus has been issued by Macquarie Direct Property Management Limited. It has also been issued by Macquarie Office Management Limited to the extent it contains an offer of securities in Macquarie Office Trust (ARSN ). Defined terms and abbreviations included in the text of this Prospectus are explained in the Glossary in Section 12. This Prospectus contains important information and you should read it carefully. Investors participating in the Offer will have all the risks of ownership associated with owning this type of property, including competing properties, property vacancy, financial strength of tenants, capital expenditure, rental levels and selling risks. This Prospectus is only open to persons resident in and receiving this Prospectus in Australia. Printed copies of this Prospectus are available free of charge from the Manager or are available on the internet at If you have any questions, please contact your stockbroker or financial adviser or Ask Macquarie on (local call cost).

3 key features Minimum Investment Nil Entry Fee The minimum investment in Macquarie Martin Place Trust (MMPT or Trust) is $10,000 with amounts over this sum to be in multiples of $1,000. No entry fee will be charged on your investment. Specific Property Investment You are invited to participate in the ownership of a 50% interest in No. 1 Martin Place, Sydney (Property), a recently completed prime commercial office tower and underground car park. This investment opportunity is outlined in this Prospectus which relates solely to the asset described herein. Long Term Lease Expiry Profile The average unexpired lease term of the Property s office tenants is 11.8 years. Major tenants (who account for 90% of the net income of the Property) include Macquarie Bank for a 15 year lease until December 2014 and the Australian Securities & Investments Commission for a 10 year lease until June Tax Benefits Over the financial years 1 July 2002 to 30 June 2007 (Forecast Period), the Manager is forecasting all the distributable income to be 100% Tax Sheltered. Annual Returns The forecast distributions for MMPT are estimated to provide an average return of 8.33% pa over the Forecast Period. The annualised forecast return is 7.8% for the period to 30 June 2003, 8.0% for the year to 30 June 2004, 8.2% to 30 June 2005, 8.4% to 30 June 2006, and 9.2% to 30 June Refer to Sections 1, 4, 5 and 6 for more information. Limited Investment Liquidity The Property has been acquired 50% by MMPT and 50% by Macquarie Office Trust (ARSN ) (MOF). An investment made under this Prospectus should be considered long term. However, the Manager has arranged the ability for investors to sell a limited number of MMPT Units on a first come, first served basis pursuant to a facility provided by MOF which has agreed to acquire up to one million MMPT Units per calendar quarter. Additionally, MOF may, at its discretion, acquire any additional MMPT Units (refer Section 1.7) that may be offered for sale, subject to there being no change to stamp duty laws (or the interpretation of them) that would give rise to a liability to pay ad valorem duty at property conveyancing rates on the MMPT Units it acquires (refer Section 11.6). Further, MOF has an option to acquire all MMPT Units from 1 July 2007 until 31 March Other than this, there is currently no secondary market or redemption facility in relation to MMPT Units. Exit Strategy Unitholders will have a clear exit strategy based on either the sale of all MMPT Units to MOF under MOF s call option (refer Section 1.8) at net asset value from 1 July 2007 to 31 March 2009 or the termination of MMPT and disposal of its interest in the Property after 31 March Interest Rate Hedging The Manager will utilise interest rate hedging to mitigate against future rises in interest rates during the Forecast Period (refer Section 6.1). Limited Liability No investor is at risk for any more than the amount paid by them on application. Superannuation Suitable Complying and self-managed superannuation funds can participate in the Offer. The Manager expects that MMPT will be a widely held trust pursuant to Subdivision C of Division 1 of Part 8 of the Superannuation Industry (Supervision) Act 1993 and will therefore be an allowable investment for the trustees of self-managed superannuation funds under the investment rules introduced by the Superannuation Laws Amendment Act No Expertise of the Manager The Macquarie Bank Group, of which the Manager is a member, manages approximately $34.5 billion in superannuation, institutional and personal investments across a broad range of assets. In terms of property, Macquarie s Property division, together with an associate, currently manage listed property trusts and unlisted property trusts with combined gross assets in excess of $5.1 billion. 1

4 0 head contents 2

5 0 head contents 1. Overview 5 2. How to Invest 9 3. The Property Financial Forecasts Financial Forecast Assumptions Risks Details of the Offer MMPT Macquarie Office Trust Experts Reports Details of the Manager Additional Information Glossary Application Forms Directory 73

6 0 head Office Tower No. 1 Martin Place, Sydney 4

7 1 overview This Section provides an overview of MMPT and the Property and should be read in conjunction with the information contained elsewhere in this Prospectus. 1.1 Summary of the Offer This Prospectus offers investors the opportunity to participate in MMPT, which has acquired a 50% interest in the office tower and car park located at No. 1 Martin Place, Sydney (refer to Section 3). Macquarie Bank has provided MMPT with initial funding to enable it to secure the Property (refer to Section 7.6). The remaining 50% interest of the office tower and car park has been acquired by MOF, being a listed entity on the Australian Stock Exchange (ASX) and part of the ASX 200 index. The managers of MMPT and MOF are related parties and are both wholly owned subsidiaries of Macquarie Bank Limited (Macquarie Bank). The investment has several attributes which are summarised below: Income Returns The Manager has forecast the initial annualised return of MMPT to be 7.8% in the period ending 30 June 2003, increasing to 9.2% in the year to 30 June % Tax Sheltered During the Forecast Period, the Manager is forecasting 100% of the distributable income to be Tax Sheltered. The Tax Shelter is a result of the depreciation allowances available from a newly completed building and tax expenses. Quality Assets The Manager is offering investors an opportunity to participate in the ownership of an office tower of 40,535 sqm and associated 382 space car park at No. 1 Martin Place, Sydney. The Property was completed in 1999 and, together with the Westin Hotel and associated retail complex, comprises the award-winning refurbishment and redevelopment of the Sydney GPO. The Offer does not include any ownership of the Westin Hotel or the retail complex within No. 1 Martin Place. Prime Location The Property forms part of the historic GPO complex at Martin Place and is centrally located in the city core precinct of the Sydney CBD, between George Street and Pitt Street. Income Stability and Capital Growth Potential The office leases average 11.8 years to expiry and provide for regular rental income adjustments by fixed increases during the Forecast Period. The Manager anticipates the long term lease expiry profile and predetermined rental reviews will provide investors with secure income and the opportunity for capital growth. Your decision to participate in the Offer could be driven by your view of the income stability and capital growth potential of the Property. In particular, you should assess the risk of changes in market fundamentals adversely impacting future performance expectations. Your investment will deliver characteristics of direct property ownership and the investment returns will directly reflect the performance of the Property. MMPT will not buy or sell additional real estate without prior approval of investors. 1.2 Purpose of the Offer MMPT is raising $102 million of equity to partially fund the acquisition of the 50% interest in the Property. The balance of the purchase and acquisition costs will be funded with a debt facility. 1.3 Payment of Distributions It is intended to pay income distributions quarterly. Distributions will occur as soon as practical after the end of each calendar quarter (June, September, December and March). The first distribution is expected to be for the period ending 30 September 2002 and is expected to be paid at the beginning of November The distribution for this period is forecast to be at the annualised rate of 7.8% from allotment of MMPT Units until 30 September

8 1.4 Summary of Financial Forecasts The table below summarises the distribution forecasts, after interest costs, of MMPT for the Forecast Period. The average return over the Forecast Period is forecast to be 8.33% pa and the average Tax Sheltered component of this distribution is forecast to be 100% pa. For further details, please refer to Sections 4, 5 and 6. Please note that the average return is the simple average of the first five full years and does not include the time value of money. 2003* Forecast Return on Application Monies 7.8% 8.0% 8.2% 8.4% 9.2% Total Tax Sheltered Component of the Distribution 100% 100% 100% 100% 100% * The return for the period to 30 June 2003 has been annualised. 1.5 Active Property Management Strategy The management of the Property will be overseen by the Manager which can call on the skills of Macquarie Asset Services Limited, as well as external service providers. The No. 1 Martin Place complex comprises the Westin Hotel, associated retail, the office tower and car park. MMPT and MOF have acquired the office tower and car park, with the remaining components, being the Westin Hotel and retail complex, potentially being acquired by a third party. MMPT has entered into a joint ownership agreement with MOF to ensure the appropriate management of the office tower and car park. MMPT, MOF and the owner of the hotel and retail components will develop an ongoing management plan to facilitate the efficient management of the overall complex (refer to Section 10.7). 6

9 1.6 Relationship Between Macquarie Martin Place Trust and Macquarie Office Trust Macquarie Direct Property Management Limited (MDPML), being the Responsible Entity and Manager of MMPT, is a wholly owned subsidiary of Macquarie Bank. MMPT has acquired 50% of the office tower and car park component of No. 1 Martin Place, Sydney. The remaining 50% has been acquired by MOF, which is managed by Macquarie Office Management Limited (MOML), an associated entity of MDPML. 1.7 Investment Liquidity The Manager expects the life of MMPT to be approximately five years following which MOF has a call option from 1 July 2007 to 31 March 2009 (refer to Section 1.8). However, if individual investors need, for whatever reason, to exit prior to this timeframe, MOF or a nominee has (subject to certain conditions) undertaken to acquire up to one million MMPT Units per calendar quarter. Additionally, MOF may, at its discretion, acquire any additional MMPT Units that might be offered for sale. MOF will acquire these MMPT Units at the net tangible asset (NTA) value per MMPT Unit, last determined prior to the acquisition, less costs of the transfer (including stamp duty). NTA will be calculated at least annually in accordance with applicable Accounting Standards (refer to Section 4.6). Acquisitions will be finalised on or before the end of each calendar quarter, with consideration paid in cash. In order to be eligible for the MOF acquisition, Unitholders will be required to submit their applications to the Manager by 15 business days prior to the quarter end. Application forms will be available from the Manager. Entitlement to participate in the MOF acquisition will be on a first come, first served basis. If a Unitholder sells their MMPT Units pursuant to the MOF facility, they will not be entitled to the distribution for the quarter in which the transaction occurs. Further details of these arrangements are set out in Section Exit Strategy at End of the Forecast Period The Manager has granted MOF a call option to acquire the MMPT Units (by way of issue and redemption by the Manager) during the period between 1 July 2007 and 31 March 2009 (subject to a limited number of acceleration events). MOF may at its discretion, acquire the MMPT Units in exchange for either cash or MOF Units or a combination of both. The type of consideration is solely at the election of MOF and investors will have no choice in what they receive. The price of MMPT Units will be determined having regard to the average of two independent valuations of the Property. Should MOF elect to provide MOF Units in exchange for MMPT Units, the issue price will be equal to the volume weighted average price of MOF Units sold on the ASX during the 10 business days immediately preceding completion of the acquisition by MOF. At the time of issue of this Prospectus, the Manager considers that the receipt of MOF Units in exchange for MMPT Units may be eligible for rollover relief from Australian capital gains tax. The Manager cannot predict the form of the capital gains tax legislation that will be in force at the end of the Forecast Period, and investors will need to take their own advice and make their own assessment in this regard. Further details of these arrangements are set out in Section Should MOF elect not to exercise its call option during the MOF Option Period, MMPT s intention is to sell the Property and terminate the Trust. 7

10 1.9 Pre-emptive Rights Both MOF and MMPT will have first and last rights of refusal in any sale transaction, allowing each party to acquire 100% ownership of the Property in the event of the other party opting to dispose of their interest. In the event that either MMPT/MDPML or MOF/MOML is subject to a change of control or change of Responsible Entity, the other party has the right to acquire the other s interest in the Property, or to put its interest to the other party, at valuation. In the event that either MMPT/MDPML or MOF/MOML defaults, the other party may acquire the other s interest in the Property. If either MOF or MMPT should seek to sell their interest in the Property, and either party does not exercise their first or last right of refusal, each party has a tag along right to require that the other party use their reasonable endeavours to procure the sale of that interest in the Property on the same terms as the sale of the seller s interest in the Property. Further details of these additional rights are set out in Section

11 2 how to invest 2.1 The Offer Investors are invited to participate in the Offer of 102,000,000 MMPT Units at an Issue Price of $1.00 per MMPT Unit. The Manager is seeking to raise $102,000,000 from the proceeds of the Offer to part fund the acquisition of MMPT s 50% interest in the Property. The balance of the purchase price will be funded with the proceeds of a Loan (on terms that there is no recourse under the Loan to Unitholders). The minimum investment in MMPT is $10,000 comprising 10,000 MMPT Units. Complying and self-managed superannuation funds can participate in the Offer. The Manager expects that MMPT will be a widely held trust pursuant to Subdivision C of Division 1 of Part 8 of the Superannuation Industry (Supervision) Act 1993 and will therefore be an allowable investment for the trustees of self-managed superannuation funds under the investment rules introduced by in the Superannuation Laws Amendment Act No Investment Structure Diagram The investment structure is broadly summarised below (refer to Section for details): Investors Responsible Entity Macquarie Direct Property Management Limited Custodian Trust Company of Australia Limited Lender Loan MMPT 50% Office Tower and Car Park No. 1 Martin Place Sydney NSW 9

12 3 the property 3.1 Key Details MMPT has acquired a 50% interest in the office tower and car park at No. 1 Martin Place, Sydney. The Property details are summarised below, with the financial analysis of the 50% share acquired by MMPT detailed in Section 4. Property Office Tower and Car Park No. 1 Martin Place, Sydney New South Wales Purchase Price: $213,125,000 (50% interest) Market Valuation: $213,125,000 (50% interest) Date of Valuation: 31 March 2002 Valuer: Average Net Office Rental: Title: Net Lettable Area (NLA): Current Vacancy Rate: Valuer s Comments: CB Richard Ellis Pty Ltd $ per sqm Office tower Stratum freehold Car park Part strata, part long term leasehold 40,535.2 sqm plus 382 car parking spaces Nil Lease expiry profile of the Property is exceptional. Property fundamentals for Sydney s CBD office market remain positive. Vacancy levels are still below historic averages. Expected lower growth in office rents is likely to be offset by increased investor demand. Growth rates are expected to increase ahead of completion of new office space. Majority of proposed new office developments are situated outside of city core area. 10

13 3.2 Tenancy Details The Property s income stream is characterised by long term leases to quality tenants. The office tower is let to two significant tenants Macquarie Bank and the Australian Securities & Investments Commission (ASIC), with the car park let to Secure Parking Pty Ltd (Secure Parking). Macquarie Bank is the only substantial majority Australian owned investment bank and is currently capitalised in the top 25 Australian companies listed on the ASX. The ASIC is an independent Commonwealth body responsible for enforcing company and financial services laws. Secure Parking is a national car park operator. All leases, except for Macquarie Bank on levels 1 to 16, allow for a full recovery of GST. The vendor has agreed to a cash retention sum of $9 million plus interest to cover the GST payable over levels 1 to 16 from 2005 to the first market review in 2010, to the extent it is not recovered from the tenant. Major Tenants Area (sqm) % of NLA Lease Expiry Rent Reviews Options Macquarie Bank 29,775 73% Dec % pa until 2 x 5 years Levels 1 17 market reviews in 2010, 2012, 2014 ASIC Levels ,360 26% June % every 2 years 2 x 5 years Incidental Storage 400 1% Secure Parking 382 spaces Dec x 5 years Tenancy Profile as a % of Current Passing Net Rent ASIC 17% Secure Parking 10% Macquarie Bank Limited 73% 11

14 3.3 Property Details The Property comprises a recently completed 40,535 sqm office tower and a 382 space car park. The building was completed in 1999 and provides 24 levels of prime office accommodation. The office tower houses Macquarie Bank over the first 17 levels, with the ASIC occupying the top seven floors. Major features include: recently developed prime office building built to premium grade tenant requirements; exceptional tenancy profile; long term lease profile with an average unexpired lease term of the office tenants of 11.8 years; predetermined rental growth rates throughout the Forecast Period; 382 car spaces, providing an excellent car parking ratio; large office floor plates average size 1,677 sqm per floor, plus a mezzanine reception; and direct access to hotel lobby, basement restaurants, bars, shops and fitness centre. The ASIC has the right to hand back two floors on six months notice, with six months penalty but, as their rent is considered to be below current market, the Manager has assumed this right will not be exercised (refer to Section 5.3). 12

15 Cross Section of Office Tower, No. 1 Martin Place, Sydney NSW ASIC lease to June 2010 Macquarie Bank lease to December 2014 Secure Parking lease to December Note: not to scale, refer to Section 3.2 for further details.

16 0 head 3.4 Prime Location The Property is: located in the centre of the city core precinct of Sydney; part of the GPO complex an historic landmark, and Sydney s award-winning heritage redevelopment project; surrounded by several landmark office complexes, including MLC Centre, Angel Place and 363, 388 and 400 George Street; close to public transport being within 200 metres of both Wynyard and Martin Place railway stations; conveniently located to the Pitt Street Mall. Office Tower, No. 1 Martin Place, Sydney 14

17 0 head 3.5 Benefits of the Property Investors will benefit from the following characteristics of the Property: investment in a recently completed, high quality CBD property; 100% of distributable income is forecast to be Tax Sheltered; fixed rental growth rates throughout the Forecast Period; excellent location; quality tenant profile; secure long term leases; excellent car parking ratio; quality fitout; and direct access to hotel and retail areas. 15

18 04 financial head forecasts This Section provides details of the Manager s forecasts for MMPT for the period to 30 June The assumptions underlying the forecasts are set out in Section Income for MMPT Year to Year to Year to Year to Year to 30 Jun Jun Jun Jun Jun 07 $ $ $ $ $ Income Gross Income 18,950,138 19,159,505 19,515,533 19,894,059 20,788,831 Less Outgoings (2,245,089) (2,281,553) (2,399,852) (2,524,497) (2,655,852) Net Income before Expenses 16,705,049 16,877,952 17,115,681 17,369,562 18,132,979 Interest Earned on Cash in Bank 95,560 93,283 90,957 88,726 89,585 Total Income 16,800,609 16,971,235 17,206,638 17,458,288 18,222,564 Expenses Manager s Fees 573, , , , ,941 Custodian s Fees 22,000 22,760 23,329 23,913 24,510 Other Expenses 96,101 94,404 96,764 99, ,662 Interest Expenses 1 8,120,063 8,120,063 8,120,063 8,120,063 8,120,063 Total Expenditure 8,812,114 8,824,339 8,834,342 8,845,153 8,871,176 Distributable Net Income 7,988,495 8,146,896 8,372,296 8,613,135 9,351,388 Return on Application Monies 2 Annual Returns 7.8% 8.0% 8.2% 8.4% 9.2% Total Tax Sheltered 3 100% 100% 100% 100% 100% Notes: 1. Interest rates on borrowings refer Sections 5.11 and Returns are expressed as a percentage of Application Monies subscribed by investors. 3. Tax Sheltered components have been arrived at after deducting Offer costs, borrowing costs, and depreciation and Building Allowances estimated from reports obtained by the Manager. Actual amounts may vary from those shown. Where the distributable net income of MMPT exceeds the amount forecast in any year, the excess will be retained within MMPT as an allowance against any increase in capital expenditure requirements, vacancy, tenant incentives or outgoings. 16

19 0 head 4.2 Statement of Financial Position of MMPT This table represents the pro-forma statement of financial position for MMPT and its interest of 50% in the unit trusts through which MMPT s interest in the Property is held. The table also assumes that the Offer is fully subscribed. Assets $ Value of Interest in No. 1 Martin Place, Sydney 222,011,875 Cash at Bank* 1,232,787 Total Assets 223,244,662 Liabilities Borrowings 127,875,000 Net Assets 95,369,662 Unitholders Equity MMPT Units on Issue 102,000,000 Offer Costs (3,341,250) Borrowing Costs (3,289,088) Total Unitholders Equity 95,369,662 Number of MMPT Units on Issue 102,000,000 Net Tangible Assets per Fully Paid MMPT Unit $0.93 The Property is included in the statement of financial position at purchase price plus acquisition costs. *Refer Section

20 0 head 4.3 Sources and Application of Funds for MMPT The forecast sources and application of funds in respect of the Offer and the acquisition of the Property are set out in the following table: Sources of Funds $ $ Equity Subscribed 102,000,000 Loan Funds 127,875,000 Total 229,875,000 Application of Funds Acquisition of the Property (50% interest) 213,125,000 Cash at Bank* 1,232,787 Estimated Property Acquisition Costs Legal Fees 75,000 Property Due Diligence Costs 1,215,625 Establishment and Acquisition Fees 7,596,250 8,886,875 Estimated Offer and Borrowing Costs Legal Fees 70,000 Advisory Costs 26,250 Debt Arrangement and Hedging Costs 3,249,088 Prospectus Costs 205,000 Brokerage and Commissions 3,060,000 Contingencies 20,000 6,630,338 Total 229,875,000 *Refer Section

21 0 head 4.4 Tax Considerations Under existing Australian capital gains tax rules, individual investors holding their investment for a period greater than 12 months are only taxed on 50% of their realised capital gain; therefore, capital growth in the value of an investment and/or the receipt of Tax Sheltered income will be more attractive to some investors. The Property offers investors an income stream which is forecast to be, on average, 100% Tax Sheltered over the Forecast Period. This Tax Sheltered income is income that is not taxable in the year of receipt but will potentially result in an increase in the concessionally-taxed capital gain on either sale of MMPT s interest in the Property and wind-up of MMPT or disposal of MMPT Units. 4.5 Potential for Capital Gains The prospects for capital gains for the Property are a function of rental growth and investment demand. Rental growth can be affected by the supply of competing property, tenant demand and economic conditions. Investment demand is a function of alternative investment opportunities, interest rates, inflation and capital market flows. 4.6 Key Accounting Policies The key policies which have been adopted in the preparation of the preceding financial information are outlined below to assist in its general understanding: Basis of Preparation The financial information has been prepared under the convention of historical cost accounting and, except where stated, does not take into account current valuations of non-current assets. The financial information has been prepared in accordance with the requirements of the Constitution, as amended, and in accordance with applicable Accounting Standards, Urgent Issues Group Consensus Views and the Corporations Act Valuation of Investments The Property is expected to be revalued to market by an independent valuer at least every two years or earlier, if there is a significant change in market value. The revaluations would be based on market value that represents the price that the Property could be sold for at the date of revaluation, assuming a reasonable exposure to the market and settlement period, and must be prepared in accordance with the Corporations Act Revaluation increments will be credited directly to an asset revaluation reserve. Revaluation decrements will be recognised as a charge against MMPT s net income and then transferred to a capital reserve before arriving at a distributable amount, unless the revaluation increment was previously credited to and is still included in the asset revaluation reserve, in which case it will be debited to that reserve. Depreciation Land and buildings have the function of an investment and are regarded as composite assets. In accordance with applicable Accounting Standards, an investment property is not subject to depreciation. Accordingly, the buildings and any component thereof (including plant and equipment) are not depreciated for accounting purposes. However, taxation allowances in respect of buildings and plant and equipment are currently available for taxation purposes. Distributable net income (refer to Section 4.1) excludes any property revaluation increments or decrements. Under proposed Accounting Standard ED 103 Investment Property, such amounts may be required to be recorded as items of income or expense. As the proposed standard is still at the exposure draft stage, the Manager has elected not to apply the requirements of ED 103 in this Prospectus. Income Tax Under current Australian income tax legislation, MMPT is not liable to pay income tax provided Unitholders are presently entitled to all of the taxable income of MMPT. Investors are referred to the Taxation Report in Section

22 0 head Repairs and Maintenance Costs Repairs and maintenance costs relating to the Property are charged against income as forecast to be incurred. These repairs and maintenance costs will consist of those that, under the relevant lease agreements, are non-recoverable from tenants. Financial Instruments The Manager will enter into interest rate hedging agreements on behalf of MMPT. The net receipts due under these agreements will be accounted for on an accruals basis and are included in interest expenses (refer Section 4.1). Net Property Income Net property income represents income earned from the rental of the Property, less outgoings, and is brought to account on an accruals basis. Capital Reserve The capital reserve represents amounts transferred to the distribution account in order to pay distributions where MMPT s taxable income exceeds its accounting income. Offer Costs Offer costs have been recognised directly against Unitholders equity as a reduction of the proceeds from the issue of MMPT Units, and separately disclosed in the statement of financial position. For income tax purposes only, these costs will be amortised over the first five tax years of the investment. Borrowing Costs Costs in respect of borrowings to fund the acquisition of MMPT s 50% interest in the Property will be written off at the time of allotment. For income tax purposes only, these amounts will be amortised over five years. Distribution of Income Where the distributable net income of MMPT exceeds the amount forecast in any year, the excess may be retained within MMPT as an allowance against any increase in the capital expenditure requirements, vacancy, tenant incentives, or outgoings. 20

23 05 financial head forecast assumptions The Manager s distribution forecasts and Return on Equity calculations for the period from 1 July 2002 to 30 June 2007 have been prepared based on various assumptions. Investors should appreciate that many factors which affect results are outside the control of the Manager and its Directors or may not be capable of being foreseen or accurately predicted. As such, actual results may differ from these financial forecasts. The more significant assumptions are outlined below: 5.1 Net Property Income Net property income includes a vendor guarantee amount and is net of non-recoverable Property Outgoings (refer to Section 11.2). Allowances have been made for property expenditure not recoverable from tenants under leases. Rentals have been projected on an accruals basis. 5.2 Rent Reviews All office rent reviews during the Forecast Period are predetermined under the terms of the leases and these preset levels have been used in all financial forecasts. 5.3 Vacancies The office tower is fully let on long term leases that do not expire in the Forecast Period. The Manager has assumed the ASIC s right to hand back two floors is not exercised during the Forecast Period or that if handed back, they will be relet on the same terms. The car park lease expires during the Forecast Period (2004). The Manager has assumed that the car park will be relet on the same terms as those currently in place (refer to Section 6.2). 5.4 Interest Income It is assumed that interest income will be earned on MMPT s cash balances at the rate of 3.75% pa. 5.5 Manager s Fees The Manager is entitled to an establishment and acquisition fee of 5% of the purchase price of the 50% interest of the Property from which the Manager will pay any relevant brokerage and commissions in relation to the equity raising. The Manager will also receive an annual management fee of 3.6% of the total income of MMPT, being the net property income plus interest income calculated and payable quarterly in arrears. The Manager may waive or postpone its management fee in any year, in which case the postponed fee may be recovered in a later year. On the sale of the Property, the Manager is entitled to a performance fee of 2% of the net proceeds of sale, or such lesser amount, provided that after payment of this fee, the net proceeds of sale are sufficient to repay the Unitholders Application Monies and the Loan Funds. In addition, provided that Unitholders are due to receive an amount in excess of their original Application Monies from the net sale proceeds and the wind-up of MMPT, the Manager is entitled to receive an incentive fee of 10% of that amount in excess of the original investment. 21

24 The Manager is also entitled to be reimbursed for any costs or expenses incurred on behalf of MMPT. The Custodian will be entitled to a fee of $22,000 pa (CPI adjusted) payable quarterly in arrears. This fee is payable by the Manager from the Manager s fees. 5.6 Other Expenses The other expenses cover the recurring operating expenses of MMPT. They include registry charges, accounting fees, bank fees, legal fees, the cost of printing annual reports, postage, audit fees and consultants fees. 5.7 Management Expense Ratio (MER) The MER is calculated by dividing the sum of the Manager s management fee and the administrative expenses by the value of the gross assets of MMPT. The average MER for MMPT over the Forecast Period is estimated to be 0.31% pa. 5.8 Property Acquisition Costs Property acquisition costs associated with the acquisition of MMPT s 50% interest in the Property, are to be capitalised in the statement of financial position of MMPT as part of the cost of that interest. 5.9 Capital Expenditure The financial forecasts have incorporated lessor s capital expenditure and repairs and maintenance requirements as identified by the external building consultants, Davis Langdon Australia Pty Ltd, over the Forecast Period. As disclosed in Section 4.2, the Manager intends to set aside $1.23 million in cash in order to carry out these works, and to provide an additional allowance towards repairs and maintenance, or additional capital items that may be required during the Forecast Period. When incurred, capital expenditure will be added to the book value of the Property Property Outgoings Allowance has been made for expected non-recoverable Property Outgoings over the Forecast Period. These amounts include an allowance for repairs and maintenance of plant and equipment which may or may not be recoverable from tenants. Repairs and maintenance costs will be recovered from tenants in accordance with lease provisions. Where repairs and maintenance costs are not recoverable from tenants and are not of a capital nature, these amounts will be expended to the distribution account Borrowings The Manager intends to enter into a rolling three year Loan facility. During the initial term, the Manager expects (subject to lender approval at the time of review) to extend the term of the Loan to expiry of the Trust on similar terms and conditions. The Manager has assumed the interest rate to be 6.35% pa (including margin) and that the Bank Bill Rate will not exceed 7.25% pa for the Forecast Period. This rate has been reflected in the financial forecasts (refer to Section 6.1) Treatment of Borrowing Costs Costs in respect of borrowings to fund the acquisition of MMPT s 50% interest in the Property will be written off at the time of allotment of MMPT Units. For income tax purposes only, these amounts will be amortised over five years Depreciation Depreciation has not been provided for accounting purposes in respect of the building (including plant and equipment). In accordance with applicable Accounting Standards, investment property is not subject to depreciation. Taxation allowances are available in respect of buildings and plant and equipment. 22

25 6 risks Investors participating in the Offer will have all the risks of ownership associated with owning this type of property. The Manager has made due and diligent efforts to identify and, where practicable, mitigate investment risks which include the following during the Forecast Period and the MOF Option Period: 6.1 External Factors Interest Rates The Manager will hedge the interest rate for the Forecast Period, which will mitigate the effect of an upward shift in interest rates on income returns during that period. It is proposed to enter into hedging arrangements that may be renewed should the Trust continue for longer than the Forecast Period. However, interest rate exposure for any such extended period may be different from that during the Forecast Period. At the end of the Forecast Period, returns will be subject to potential movements in interest rates. The following sensitivity analysis shows the Return on Equity to Unitholders in each of the years to 30 June 2007, based solely on variations in the interest rate. The Manager intends to enter into hedging arrangements that will give an overall interest rate of 6.35% pa (including margin) while the Bank Bill Rate remains below 7.25% pa and, if rates rise to 7.25% or above in the years 2004 to 2007, the interest rate will be capped at 7.25% pa. Sensitivity Analysis on Income Returns* 2003** % % % % % Income Return if Bank Bill Rate is less than 7.25% pa (as per forecast) Income Return if Bank Bill Rate is at or Exceeds 7.25% pa (every quarter) * The forecast returns are based solely on the income as forecast and do not reflect the potential for capital gains or losses on the sale of the Property. ** Return for the period to 30 June 2003 has been annualised. Investors should note that there is an interest rate and borrowing cost exposure until such time as the hedging instrument is entered into. Changes in Taxation Laws If the Australian laws change with respect to direct or indirect taxes, this could affect Unitholders distributions (refer Section 4.4 and the Taxation Report in Section 9.4). Economic Conditions Demand for property of this type from both occupiers and investors will be important in determining the level of growth for the Property. Changes in the economy and market conditions may affect such demand and Property value. Competing Property New developments may be constructed in nearby areas which could then compete directly against the Property, potentially reducing its viability. Insurance Insurance may not cover all events or all claims made. Further, appropriate cover for terrorism may not be available, or the cover that is available may not be adequate or commercially viable. 23

26 0 head 6.2 Internal Factors Property Vacancy Assumptions have been made that on lease expiry, the car park will be relet on similar commercial terms and that there is no default by any tenant on their lease terms. Abatement of Rent Tenants have certain rights to abate rent due to inadequate standards of performance of the Property s plant and equipment. Leases provide for rights to terminate in the event of full or partial destruction of the Property. Further, insurance may not cover all events. Property Value In the event of default, leases may be renewed on less favourable terms. A component of the Property is currently let at rental levels in excess of those that may be achievable today. These rents reflect specific design criteria required by the tenant and, in the case of default, an incoming tenant may not be prepared to pay the same premium for that space. In this event, the capital value of the Property may be adversely affected as the present value of the premium rental payments could be lost to Unitholders. Property Outgoings Outgoings may increase above the levels estimated by the Valuer and adopted in the forecast model which could adversely affect distributable net income. Financial Strength of Tenants The financial strength of the Property s tenants affects their ability to make rental payments. If tenants become unable to meet their lease commitments, this may affect the returns to Unitholders. Capital Expenditure Unforeseen capital expenditure requirements may require increased borrowings or a reduction in distributions. Selling Risk Unforeseen circumstances or changing market conditions may result in a sale price lower than the purchase price of MMPT s 50% interest in the Property. Loan Risk The offer of the Loan is expected to contain a number of conditions, including a maximum loan to valuation ratio of 60%. Should certain conditions be breached, the lender may enforce its security against MMPT s 50% interest in the Property and, amongst other things, sell the interest. 24

27 0 head Refinancing Risk The offer of the Loan is for an initial term of three years on a rolling three year facility. Refinancing risk exists that terms on the extension or refinancing of the Loan may not be the same as the terms currently on offer and as assumed herein. Due Diligence and Use of Experts In considering the purchase of the Property, the Manager has engaged experts to assist in the due diligence process prior to acquisition of the Property. Their reports have been relied on by the Manager in assessing the risks associated with the Property. In some cases, it is not economically possible or consistent with commercial practice to obtain an unequivocal report from these experts. The Manager was required to exercise its judgement in these circumstances, and the Manager does not have or give a guarantee that potential monetary risks to MMPT do not exist in these areas. In addition, potential liability claims against experts may be contractually limited. Ownership Entities and Vendor Undertakings The Property has been acquired by the acquisition of the trusts which hold the Property. The Manager intends to continue to hold its 50% interest in the Property in those trusts. Undertakings have been received from the vendors regarding past activities; however, a risk exists that claims may arise against the assets of those trusts that are not covered by these representations or are limited in recoverable value and which have not been taken into account in the forecasts. Further, the Manager has made assumptions in relation to issues to be resolved by the vendor after completion that if unresolved may affect the value of the Property. Assumptions Failure to achieve the assumptions used in preparing the forecasts may adversely affect Unitholder returns. 25

28 7 details of the offer MMPT 7.1 The Offer MMPT is open to investors resident in Australia. A total of 102,000,000 MMPT Units is being offered for subscription. The Offer, if fully subscribed, will raise a total of $102,000,000. The Offer will open for receipt of applications after expiry of the ASIC exposure period. 7.2 Closing Date No MMPT Units will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. The Manager reserves the right to close the Offer without notice. You should send in your Application Form as soon as possible to avoid disappointment. Applications will be dealt with on a "first come, first served" basis. 7.3 Issue Price of MMPT The Issue Price is $1.00 per MMPT Unit. 7.4 Allotment of MMPT Units The Manager reserves the right to allot less than the number of MMPT Units applied for, or to decline to accept any application. In those cases, any surplus Application Monies will be returned to the Applicant as soon as practical after the Offer closes. Interest will not be paid on any Application Monies refunded. 7.5 Minimum Subscription Condition The Offer is conditional upon the Manager receiving valid applications for 102,000,000 MMPT Units. If the minimum subscription condition is not satisfied, the Manager will return Application Monies to Applicants as soon as practical after the Offer closes. Interest will not be paid on any Application Monies refunded. The Manager may, at its discretion, issue MMPT Units in tranches or subscribe for MMPT Units in its own name or the name of an associate. 7.6 Acquisition of the Property In order to settle the acquisition of the Property prior to completion of the Offer, an associate of the Manager has subscribed for special units in MMPT at an issue price of $1.00 per unit. These units will rank with MMPT Units issued under this Prospectus for income purposes for the period in which they are redeemed on a pro rata basis having regard to the time they have been on issue relative to the other units. These units will be redeemed out of the proceeds of the Loan Funds and the issue of MMPT Units under the Offer at $1.00 per unit. 26

29 0 head 7.7 How to Invest Applications for MMPT Units will only be accepted on the Application Form in Section 13. To participate in the Offer, the Application Form must be completed in accordance with the instructions on the guide to the Application Form. Photocopied Application Forms will not be accepted. 7.8 Important Information Before investing in MMPT, you should read this Prospectus in full. It contains information about the Offer that you should know. You should attach a cheque for the total Application Monies with your Application Form. Your cheque will be deposited on the day your application is processed. If your cheque is dishonoured (for example, because you do not have enough cleared funds in your bank account to cover the cheque), your application will be rejected Where to Send Your Application Form Completed Application Forms and accompanying cheques in Australian currency drawn on an Australian bank made payable to Trust Company of Australia Limited Macquarie Martin Place Trust and crossed Not Negotiable should be mailed or delivered to one of the following addresses: mailed to: Macquarie Martin Place Trust Computershare Investor Services Pty Ltd GPO Box 7045 SYDNEY NSW 1115 or delivered to: Macquarie Martin Place Trust Computershare Investor Services Pty Ltd Level 3, 60 Carrington Street SYDNEY NSW For queries regarding investing in MMPT, consult your stockbroker or professional adviser or Ask Macquarie on (local call cost). 7.9 Brokerage The Manager will pay from its fees, brokerage on appropriately stamped Application Forms at the rate of 3% of Application Monies Minimum Subscription The minimum number of MMPT Units you can apply for is 10,000. Quantities over 10,000 MMPT Units must be in multiples of 1,000 MMPT Units. The payment due on application for each MMPT Unit offered by this Prospectus is $1.00. Your cheque must be for the full amount of your application. For example, if you apply for 10,000 MMPT Units, you must send a cheque for $10,000. The Manager may waive this minimum subscription requirement at its discretion. Investors will receive an investor statement setting out the number of MMPT Units allotted to them. 27 Clock Tower, No. 1 Martin Place, Sydney

30 8 macquarie office trust 8.1 Overview In order to give investors information on MOF, the other 50% owner of the Property and holder of the call option, outlined below are details on MOF s strategy, property portfolio, tenancy and unit price performance. This information is based on the portfolio after the acquisition of No. 1 Martin Place, Sydney and the recent sale of Energy House, Darwin. MOF was established in October MOF s strategy is to invest in a portfolio of office buildings that offers a superior total return to MOF unitholders, underpinned by a secure income stream. MOF s main objectives are to: seek property assets that provide a superior total return; sustain and improve income growth by maintaining a diversified portfolio of assets; overweight the portfolio to strengthening markets with prospects for superior rental growth; focus on major tenant renewals well before lease expiry; and maximise the investment return by preferring properties that represent good value for the level of risk, offer large floor plates to accommodate the needs of large space users, appeal to government and investment grade corporate tenants and are cost efficient. MOF has acquired a property portfolio which substantially meets the needs of larger office space users, usually characterised by stronger credit quality tenants (including government and investment grade corporate tenants). The characteristics of MOF s property portfolio include: quality properties located in and around Australia s capital cities and major regional centres, with investments in 15 distinct office markets; quality tenant profile with 74% of income derived from government and investment grade corporate tenants; an average floor plate size of approximately 1,688 sqm, which provides large space users with efficient layouts resulting in accommodation savings; a high tenant retention rate 89% of tenants have renewed their leases on expiry since inception of MOF; and an occupancy rate of 99% for the property portfolio (including rental guarantees). Distributions are paid following the expiry of each quarter. A distribution reinvestment plan is currently in operation allowing unitholders to reinvest their distributions at a 2.5% discount to the average volume weighted price of the MOF Units for the 10 days commencing from the ex-distribution date each quarter. MOF aims to utilise debt to reduce its average cost of funds and maintain an interest rate hedging profile which minimises interest rate exposure. 28

31 0 head 8.2 Diversified Portfolio of Office Property The property portfolio comprises investments in 21 properties in six states and territories of Australia. New South Wales and Victoria represent the major investment markets comprising 87% of property assets. The following chart shows the asset values by states or territories: Geographic Weighting (by Value May 2002) ACT 2% QLD 2% WA 6% SA 3% NSW 62% VIC 25% Source: Macquarie Office Management Limited MOF has further diversification across a range of tenants, a spread of lease expiries and a mixture of market and fixed rent reviews. Across the portfolio, at the next rent review, 49% of leases have market reviews and 49% have fixed reviews, with the remainder relating to CPI adjustments. The fixed reviews increase rents by an average of 5.7% at the next review. 29 Historic facade, No. 1 Martin Place, Sydney

32 8.3 Security of Income MOF derives 73% of income from government and investment grade corporate tenants across the portfolio. The average unexpired lease term for MOF is approximately 5.1 years. Lease renewal risks are diversified with no single tenancy representing more than 8% of net income of MOF. Contribution to Net Income by Tenant Type Parking 8% Other 19% Cwlth Govt 35% Telstra 10% Investment Grade Corporate 21% State Govt 7% Source: Macquarie Office Management Limited 8.4 Ordinary Unit Price Performance Below is a graph illustrating MOF Unit price performance from MOF s listing to 30 April MOF Unit Price Performance $ Dec 93 Jun 94 Dec 94 Jun 95 Dec 95 Jun 96 Dec 96 Jun 97 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Apr 02

33 0 head 8.5 Macquarie Office Trust s Property Portfolio Net Lettable Purchase Book Value Properties Area (sqm)* Date $m NSW No. 1 Martin Place, Sydney (50%) 40,535 May Citigroup Centre, Sydney (50%) 74,090 Dec Elizabeth Plaza, North Sydney 7,899 July NCR House, North Sydney 11,192 June The Denison, North Sydney 15,099 Feb Charter Grove, St Leonards 17,665 July Avaya House, North Ryde 16,677 Mar Telstra Towers, Burwood 16,305 April Wentworth Place, Parramatta 7,681 July Lang Centre, Parramatta 8,744 July Australian Taxation Office, Newcastle 14,157 Nov Victoria Argus Centre, Melbourne 33,020 Dec Celsius House, Melbourne 28,511 Dec Jetset Centre, Melbourne 17,741 Sept Zurich House, Melbourne 17,477 Jan Australian Taxation Office, Moonee Ponds 22,107 Dec South Australia Naylor House, Adelaide 17,502 May Western Australia Australian Taxation Office, Northbridge 23,536 Dec MLC House, West Perth 7,182 Dec Queensland Capital Hill, Brisbane 10,652 June ACT Australia Place, Canberra 9,383 Oct Total 417,155 1,486.8 * The net lettable area is the total area of the property. 31

34 8.6 Effect of the Offer on MOF The Call Option Agreement is summarised in Section The effect of the call option on MOF will be a further issue of MOF Units, if MOML elects to exercise the call option and to satisfy the exercise price in whole or in part by an issue of MOF Units. However, beyond this, it is not possible to accurately state the effect of the offer of the new MOF Units on MOF. As investors will see from the summary of the Call Option Agreement: the call option may only be exercised after 1 July 2007, subject to certain acceleration events; the exercise price for the call option is determined by the net assets of MMPT at the time of exercise of the call option; and the exercise price for the call option may be satisfied by a new issue of MOF Units (valuing the new MOF Units at volume weighted average prices), by a payment in cash or by a combination of new MOF Units and cash. The call option may not be exercised and the new MOF Units may not be issued; the exercise price could be satisfied in cash; or the value of the net assets of MMPT or of the MOF Units may change prior to the time of the exercise of the call option, substantially altering the number of MOF Units to be issued in the event that the call option is exercised and MOF elects to satisfy the exercise price in whole or in part by an issue of MOF Units. In view of these and other contingencies, the board of directors of MOML believes that it would be inappropriate and potentially misleading to attempt to forecast the effect of the offer of the new MOF Units on MOF, other than to the limited extent set out herein. However, by way of example, if: the call option had been exercised on 24 April 2002; the net assets of MMPT were valued at $95,369,662 on that date; MMPT had on issue 102 million MMPT Units; and MOF elected to satisfy the exercise price wholly by way of an issue of new MOF Units, MOF would be required to issue 75,129,716 new MOF Units at an issue price of $ per MOF Unit. This would amount to an increase of approximately 9.5% in the current number of issued MOF Units. The board of directors of MOML would not ordinarily consider this to be a material event with respect to MOF (having regard to the acquisition of MMPT consequent upon exercise of the call option). MOF is a Disclosing Entity MOF is a disclosing entity, and as such is subject to regular reporting and disclosure obligations. Copies of documents lodged with the ASIC in relation to MOF may be obtained from, or inspected at, an ASIC office. 32

35 0 head Availability of Documents People have a right to obtain a copy of any of the documents listed below. Copies of those documents will be provided by MOF free of charge to any person who asks for them during the Offer period for MMPT Units: (a) the annual financial report of MOF for the financial year ended 30 June 2001; (b) the half yearly report of MOF for the six months ended 31 December 2001; and (c) any continuous disclosure notices given by MOF after lodgement of the annual financial report referred to in paragraph (a) immediately above and before lodgement of this Prospectus with the ASIC. Rights Attaching to MOF Units Other than with respect to accrued income entitlements, any new MOF Units issued on exercise of the call option will rank equally with existing MOF Units. The rights attaching to MOF Units are set out in the constitution of MOF, as supplemented by the Corporations Act Copies of the constitution of MOF are available free of charge from MOF on request. However, investors should note that the constitution of MOF may be amended prior to the exercise of the call option and the issue of any MOF Units pursuant to the exercise of the call option. The principal rights attaching to MOF Units are the right to: transfer the MOF Units; attend at and vote at meetings of members; participate in distributions of income and in the capital growth of MOF; and receive audited annual accounts. The liability of a unitholder is limited to the amount if any which remains unpaid in relation to the unitholder's subscription for their MOF Units. All MOF Units issued pursuant to the exercise of the call option will be issued as fully paid. The constitution of MOF deals with a range of other matters, including: unit application and redemption procedures; members entitlements on redemption; the life of MOF and members entitlements on winding up; complaints; income entitlements; MOML s powers as Responsible Entity for MOF; liability of MOML and its right of indemnity; retirement of MOML as Responsible Entity; and MOML s fees and right to be reimbursed for expenses. 33

36 34 0 head 0 head 9 experts reports

37 DAVIS LANGDON AUSTRALIA 9.1 Building Due Diligence Report 26 April 2002 The Directors Macquarie Direct Property Management Limited No. 1 Martin Place Sydney NSW 2000 Level Queen Street Melbourne Victoria 3000 Tel: (03) Fax: (03) melb@davislangdon.com.au Dear Sirs, RE: OFFICE AND CARPARK BUILDING NO. 1 MARTIN PLACE, SYDNEY We refer to our detailed Due Diligence Inspection Report for the Office and Carpark Building located at No. 1 Martin Place, Sydney and summarise its contents below. The building is a landmark office and carpark building located in the heart of the Sydney CBD and, together with the heritage/retail and hotel components, is known as No. 1 Martin Place. The Westin Hotel forms its western boundary with the associated retail in the heritage Sydney GPO building facing onto Martin Place, the northern boundary. The main entry to the Office, Hotel and Carpark is via a Porte Cochere from Pitt Street on the east with alternative access from Martin Place via the heritage retail and atrium retail areas. The carpark comprises parking for 382 vehicles with designated parking for office tenants and hotel patrons including 10 truck delivery bays, 11 courier bays and 30 bicycle bays. This premium grade office building of approximately 40,535 square metres was constructed by Grocon Pty Ltd and completed in May It has two major tenants namely, Macquarie Bank Limited and Australian Securities and Investments Commission whose fitouts were integrated with and completed as part of Grocon s base building construction works. As a result of its recent completion and modern standard of finishes the building services, architectural, structural and façade components were judged to be in very good to excellent condition. Our land survey shows that there are no obvious encroachments by or upon the land and that the building stands wholly within its title boundaries. In conclusion, with continued attention to regular maintenance by the on site management team, the building should continue to offer highly reliable operation. Yours faithfully, Davis Langdon Australia Pty Limited Peter Cordia Director DAVIS LANGDON & SEAH INTERNATIONAL Davis Langdon Australian Pty Ltd A.B.N : Adelaide Brisbane Cairns Hobart Melbourne Newcastle Perth Sydney With offices in New Zealand, Singapore, Hong Kong, Indonesia, Malaysia, Brunei. Philippines, Thailand, China, Vietnam, United Kingdom, Spain, France, Lebanon, Bahrain, Qatar, United Arab Emirates, Saudi Arabia, South Africa and the USA 35

38 9.2 Valuation Report CB Richard Ellis Pty Ltd ABN Level George Street Sydney NSW 2000 Australia Tel Fax DX March The Directors Macquarie Direct Property Management Limited Level 13 No. 1 Martin Place SYDNEY NSW 2000 Dear Sirs Macquarie Direct Property Management Limited Property Valuation Office Tower and Car Park, No. 1 Martin Place, Sydney 1. Instructions We refer to your instructions dated 25 March 2002, requesting us to undertake a valuation of the stratum freehold, strata and long leasehold interests in the abovementioned property, as at 31 March We have provided this abridged report on the abovementioned property for inclusion in a prospectus. For further information, reference should be made to the full valuation report dated 31 March We confirm that the valuation was prepared in accordance with the Corporations Act Valuation Summary We have assessed the market value of the stratum freehold, strata and long leasehold interests in the Office Tower and Car Park, known as No. 1 Martin Place, Sydney, subject to the existing tenancies as at 31 March 2002 as: $426,250,000 (Four Hundred and Twenty Six Million, Two Hundred and Fifty Thousand Dollars). Upon the same basis, to a 50% interest in the property, we would ascribe a value of: $213,125,000 (Two Hundred and Thirteen Million, One Hundred and Twenty Five Thousand Dollars) 3. Brief Description A 24 level landmark office tower and associated basement car park. The property was completed in 1999 and represents part of a complex which also includes the Westin Hotel and the refurbished, heritage GPO Building. The Property extends to 40,535.2 square metres of air-conditioned prime office accommodation, together with 382 car spaces. The office tower is held under stratum freehold title, whilst the car park is part strata, part long leasehold. The complex is situated on the former GPO site fronting Martin Place in the Sydney CBD city core precinct, and is arguably Sydney s most recognised address. 4. Tenancy Overview The office tower is leased to 2 significant tenants: Macquarie Bank have leases over Levels 1-17 expiring 31 December 2014; and the Australian Securities and Investment Commission (ASIC) occupy Levels under a lease expiring 30 June 2010 (albeit they have the right to hand back up to 2 floors upon 6 months notice penalties apply). The car park is leased to Secure Parking, expiring 31 December 2004, and provides parking for the office tenants, visitors to the complex and hotel guests.

39 The office tenants are on net leases, whereby they pay a proportion of building outgoings in addition to a base rental, based upon the net lettable floor area occupied in relation to the total net lettable area of the building. There is a GST recovery clause in the ASIC lease, and although the main Macquarie lease does not have such a clause, the vendor is providing a time-limited indemnity against any shortfall. 5. Market Overview 5.1 Supply The Sydney CBD is Australia s largest office market, with a total stock approaching 4.5 million square metres, of which Premium and Grade A represents 1.85 million sqm, or 41% of the total. A development cycle was completed in 2000, which saw a number of Premium and A Grade buildings added to stock, mainly in the City Core precinct and also in Mid Town and the Western Corridor. Some 450,000 square metres were added to stock, which included the subject. Little new stock is forecast to be added in the short term, and only 2 major projects are likely in the medium term in the City Core. However, across all precincts, we have estimated that there is a total of 396,000 square metres of new stock which has the potential to be added, and is estimated to already be more than 25% pre-committed, although some schemes are regarded as being unlikely to proceed unless pre-commitments can be found. 5.2 Demand The year to January 2001 represented the peak of the current cycle, with a record 270,400 square metres net absorption. This compares with -36,780 square metres in the following year as a result of the global economic slowdown and the associated corporate restructuring. However, business confidence may have turned the corner in the first quarter of 2002, and it is anticipated this will improve office demand later in Vacancy The current (January 2002) CBD vacancy factor of 6.3% shows an increase of 1.3% in the last 6 months off the cyclical low point. Nevertheless, due to the lack of supply projected in the medium term, particularly for the City Core precinct, we anticipate the average vacancy rate over the next 3 years should return to below 5%, but increasing thereafter as the supply potential is realised. 5.4 Rentals Following strong growth in 2000, rentals softened over 2001, reflecting the global economic slowdown, which in turn led to the emergence of sub-lease space (indirect vacancy) in the market. As a result we expect subdued growth through 2002, but strengthening in 2003 and 2004, before new buildings are completed in 2005, once again diluting the potential for growth. 6. Valuation Analysis and Assumptions Following sensitivity analysis, the following criteria have been adopted as part of our valuation process: (i) (ii) (iii) A Discounted Cash Flow analysis over a ten year investment horizon has been utilised based upon an internal rate of return of 10.00% and a terminal yield of 6.75%. An equivalent yield of 6.75% is applied to the estimated net income for our Capitalisation Approach. It is noted that the Macquarie Bank lease is above our current opinion of market and the ASIC lease is below. The valuation includes a capitalised amount representing rental overage, following an analysis that compares the passing rent to our opinion of market rent for each tenant. 37

40 (iv) (v) (vi) Appropriate allowances have been made as necessary for the expiry of each tenancy, together with an adjustment to the market rent at the time. Outgoings have been budgeted at $ per sqm for 2002, which appears reasonable based upon comparables and therefore we have adopted this figure for our analysis. Our valuation has taken account of capital expenditure requirements expected at the end of the 10 year cash flow. (vii) The growth rates adopted for the cash flow period are as follows: Year Ending March Average Gross Office Growth 2.90% 4.60% 6.40% 2.90% 3.50% 4.70% 4.50% 5.50% 5.40% 4.50% 4.49% Gross Market per sqm Office Rent $664 $684 $715 $761 $783 $810 $848 $887 $936 $986 Car Parking Growth 4.43% 4.97% 5.76% 4.18% 2.68% 5.20% 4.02% 4.67% 4.16% 3.80% 4.39% CPI/Outgoings Growth 2.43% 2.97% 3.76% 2.18% 0.68% 3.20% 2.02% 2.67% 2.16% 1.80% 2.39% (viii) Our valuation includes the benefit of an Income Guarantee Amount of $4 million, which we have assumed is drawn down over the first 2 years. (ix) An initial yield of approximately 7.24% and a capital value of $10,516 per sqm of lettable area is reflected by our valuation. Both of these benchmarks are higher relative to comparables, due to the MBL lease and the relatively large car park component. (x) A provision for the effect of the Goods and Services Tax has been made, following expiry of the indemnity period. (xi) In considering the investment parameters for the valuation, we have had regard to the fact that the property is held within a flexible trust structure, which would have appeal to purchasers from the listed sector. However, for the purposes of our analysis we have undertaken a discounted cash flow that provides for "conventional" property transaction costs. 7. Liability Disclaimer In the case of advice provided in this letter and our report which is of a projected nature, we must emphasise that specific assumptions have been made by us which appear realistic based upon current market perceptions. It follows that any one of our associated assumptions set out in the text of this summary may be proved incorrect during the course of time and no responsibility can be accepted by us in this event. CB Richard Ellis Pty Ltd have prepared this summary which appears in the Prospectus. CB Richard Ellis Pty Ltd were involved only in the preparation of this summary and the valuation referred to herein, and specifically disclaim any liability to any person in the event of any omission from, or false or misleading statement included in the Prospectus, other than in respect of the valuation and this summary. Yours faithfully CB Richard Ellis Pty Ltd Simon Fairfax B.Sc (Hons) MRICS AAPI Registered Valuer No Senior Director - Valuation & Advisory Services 38

41 BDO Corporate Finance Pty Limited ABN Level 19, 2 Market Street Sydney NSW 2000 GPO Box 2551 Sydney NSW 2001 Tel Fax bdosyd@bdosyd.com.au Independent Accountant s Report 7 May 2002 The Directors Macquarie Direct Property Management Limited Level 13 No. 1 Martin Place SYDNEY NSW 2000 Dear Sirs INDEPENDENT ACCOUNTANT S REPORT 1 INTRODUCTION In accordance with your request, this Independent Accountant s Report ( Report ) has been prepared for inclusion in a prospectus ( Prospectus ) to be dated on or about 7 May 2002 in connection with an offer of 102 million units at an issue price of $1.00 per unit in the Macquarie Martin Place Trust ( the Trust ). The expressions defined in the Glossary (Section 12) of the Prospectus have the same meaning in this Report. 2 BACKGROUND The Trust has been established to purchase 50% of the commercial office tower and car park located at No. 1 Martin Place, Sydney ( the Property ). The interest will be obtained through the purchase of units in two trusts ( the Sub-Trusts ), which currently own the Property. The remaining 50% interest in the Property has been acquired by Macquarie Office Trust ( MOF ), being a listed entity on the Australian Stock Exchange. Macquarie Direct Property Management Limited and MOF are related parties and are both wholly owned subsidiaries of the Macquarie Bank Group. 3 SCOPE OF EXAMINATION You have requested BDO Corporate Finance Pty Limited ( BDO Corporate Finance ) to prepare a Report on prospective financial information for the Trust as set out in Section 4 of the Prospectus and incorporating: Forecast Financial Information for the 5 years ending 30 June 2007 ( Forecasts ) The Pro-forma Statement of Financial Position as at the Completion Date ( Pro-forma Statement of Financial Position ). The Directors of Macquarie Direct Property Management Limited ( Responsible Entity ) are responsible for the preparation and presentation of the Forecasts and Pro-forma Statement of Financial Position, including the best-estimate assumptions on which they are based. 39 Liability is limited by the Accountants Scheme pursuant to the NSW Professional Standards Act 1994 ISO 9001 Lic 8142/03 Standards Australia Advisers to growing businesses

42 Our review of the Forecasts and Pro-forma Statement of Financial Position was conducted in accordance with Auditing Standards AUS 902 Review of Financial Reports and AUS 804 The Audit of Prospective Financial Information. Our procedures consisted primarily of inquiry and comparison and such other analytical review procedures as we considered necessary so as to adequately evaluate whether the assumptions appear reasonable in the circumstances and whether the Forecasts and Pro-forma Statement of Financial Position have been presented in a manner consistent with the Directors assumptions. In the case of assumptions which fall outside the scope of our expertise, we have relied on reports prepared by other experts, in particular the valuation report prepared by CB Richard Ellis. Summary included in Section 9.2 of the Prospectus. Our review is substantially less in scope than an audit examination conducted in accordance with all applicable Australian Auditing Standards. A review of this nature provides less assurance than an audit and, accordingly, we do not express an audit opinion on the Forecasts or Pro-forma Statement of Financial Position included in the Prospectus. 4 RESPONSIBLE ENTITY S PROSPECTIVE FINANCIAL INFORMATION The Forecasts and the Pro-forma Statement of Financial Position are based on the Responsible Entity s best-estimate assumptions, being assumptions of future events which the Responsible Entity expects to take place as at the date of this Report. The Forecasts and Pro-forma Statement of Financial Position are prepared to provide investors with a guide to the potential future performance and distributions of the Trust, based upon the achievement of certain economic, operating, development and trading assumptions about events and actions that have not yet occurred and may not necessarily occur. There is a degree of subjectivity involved in the preparation of the Forecasts and Pro-forma Statement of Financial Position. Accordingly, investors should have regard to the investment risks set out in Section 6 of the Prospectus. 5 STATEMENTS 5.1 Preparation and Presentation Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the Forecasts and Pro-forma Statement of Financial Position have not been properly prepared and presented in accordance with: the underlying assumptions set out in Section 5 of the Prospectus; the recognition and measurement principles prescribed in Accounting Standards and other mandatory professional reporting requirements in Australia; the accounting policies of the Trust; and the Trust s Constitution. 40

43 5.2 Assumptions Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the assumptions underlying the Forecasts and Pro-forma Statement of Financial Position, when taken as a whole, do not provide a reasonable basis for the preparation of the Forecasts and Pro-forma Statement of Financial Position. The underlying assumptions of the Forecasts and Pro-forma Statement of Financial Position are subject to significant uncertainties and contingencies often outside the control of the Responsible Entity. If events do not occur as assumed, actual results and distributions achieved by the Trust may vary significantly from the Forecasts and Pro-forma Statement of Financial Position. Accordingly, we do not express an audit opinion on the Forecasts or Pro-forma Statement of Financial Position, nor can we confirm or guarantee the achievement of the Forecasts or Pro-forma Statement of Financial Position, as future events, by their very nature, are not capable of independent substantiation. 6 INDEPENDENCE, DISCLOSURE OF INTERESTS AND OTHER INFORMATION The only pecuniary or other interest that BDO Corporate Finance has in relation to the Prospectus arises from the right to receive a professional fee for the preparation of this Report and other related advice. This is disclosed in Section 11 of the Prospectus. Except for the above, BDO Corporate Finance has not received, nor will receive, any pecuniary or other benefit, whether direct or indirect, for or in connection with the making of this Report. BDO Corporate Finance was not involved in the preparation of any other part of the Prospectus and did not authorise or cause the issue of any other part of the Prospectus. Accordingly, BDO Corporate Finance makes no representations or warranties as to the completeness or accuracy of the information contained in any other part of the Prospectus. BDO Corporate Finance consents to the inclusion of this Report in the Prospectus in the form and context in which it is included. At the date of this Report, this consent has not been withdrawn. Yours faithfully BDO CORPORATE FINANCE PTY LIMITED SEBASTIAN STEVENS Director 41

44 Chartered Accountants & Advisers Level 19, 2 Market Street Sydney NSW 2000 GPO Box 2551 Sydney NSW 2001 Tel Fax bdosyd@bdosyd.com.au Taxation Report 7 May 2002 The Directors Macquarie Direct Property Management Limited Level 13 No. 1 Martin Place SYDNEY NSW 2000 Dear Sirs TAXATION REPORT 1 INTRODUCTION In accordance with your request, this Taxation Report ( Report ) has been prepared for inclusion in a prospectus ( Prospectus ) to be dated on or about 7 May 2002 in connection with an offer of 102 million units at an issue price of $1.00 per unit in the Macquarie Martin Place Trust ( Trust ). The expressions defined in the Glossary (Section 12) of the Prospectus have the same meaning in this Report. 2 BACKGROUND The Trust has been established to purchase 50% of the commercial office tower and car park located at No.1 Martin Place, Sydney ( Property ). The interest will be obtained through the purchase of units in the two trusts ( Sub-Trusts ) which currently own the Property. The remaining 50% interest in the Property has been acquired by Macquarie Office Trust ( MOF ), being a listed entity on the Australian Stock Exchange. Macquarie Direct Property Management Limited and MOF are related parties and are both wholly owned subsidiaries of the Macquarie Bank Group. 3 LIMITED SCOPE OF REPORT This Report outlines the Australian taxation implications for Australian resident investors of acquiring Units on capital account pursuant to the Prospectus. It is based upon the legislation applicable at the time of its preparation and is general in nature. Unitholders should obtain and rely upon their own taxation advice. 4 TAXATION OF RESPONSIBLE ENTITY OF THE TRUST The Responsible Entity should not be subject to tax on net income derived for tax purposes provided it is fully distributed or reinvested on a Unitholder s behalf. 42 Liability is limited by the Accountants Scheme pursuant to the NSW Professional Standards Act 1994 ISO 9001 Lic 8142/03 Standards Australia Advisers to growing businesses

45 5 TAXATION OF UNITHOLDERS 5.1 Distributions from the Trust Distributions to, or reinvestments on behalf of, Unitholders will have tax implications for Unitholders in the year ended 30 June that the entitlement arises. Distributions from the Trust may include tax assessable income, tax deferred income, net capital gains and discount capital gains Tax Assessable Income Tax assessable income is a taxable income component of the income of the Trust which will be included in a Unitholder s assessable income Tax Deferred Income Tax deferred income relates to distributions associated with favourable tax timing differences including building allowances and capital allowances relating to depreciating assets forming part of the Property. Tax deferred income will not ordinarily be included in a Unitholder s assessable income. It may, however, give rise to a capital gain to the extent that the total tax deferred distributions during the period of ownership of a Unit exceeds the cost base of the Unit. The capital gain to be included in a Unitholder s assessable income may be reduced if the capital gains tax (CGT) discount is available (refer 6.1 of this letter). Tax deferred income will also impact the CGT position upon disposal of Units because it reduces their cost base Net Capital Gains If the Responsible Entity sells a capital asset it has not held for at least 12 months, any capital gain arising will be included in the calculation of the net capital gain of the Trust. This component of the distribution will be included in a Unitholder s assessable income Discount Capital Gains If the Responsible Entity sells a capital asset it has held for at least 12 months, any capital gain arising may ordinarily be reduced by 50% for the purposes of calculating the net capital gain of the Trust. The discount capital gain component of a distribution should be grossed up by the amount of the discount for the purposes of calculating a Unitholder s net capital gain. Unitholders can then claim a discount in their own right according to their circumstances (refer 6.1 of this letter). The discount capital gain component of a distribution does not result in a reduction in the cost base of the Units. 5.2 Disposal of Units in the Trust Capital gains (or losses) may arise on the disposal of Units in the Trust. Capital gains will generally equal the excess of the consideration received for disposal of Units over the cost base. Units acquired pursuant to the Prospectus will generally have a cost base of $1.00 per Unit (reduced by tax deferred distributions). The amount of the capital gain to be included in a Unitholder s assessable income may be reduced where the CGT discount is available (refer 6.1 of this letter). If MOF exercises its option to acquire all the Units in the Trust, to the extent units in MOF are provided as consideration, Unitholders should be able to choose CGT rollover relief. Relief will not be available to the extent cash proceeds are received. 43

46 6 OTHER MATTERS 6.1 CGT Discount If the Unitholder is an individual, trust or complying superannuation entity which has owned the Unit for at least 12 months, a CGT discount may be available. In this case the amount of the capital gain to be included in the Unitholder s assessable income may be reduced by 50% for individuals and trusts and 33 1 /3% by complying superannuation entities. 6.2 Trust Losses The availability of revenue losses (if any) incurred by the Trust to offset future assessable income of the Trust may be restricted, in particular, if the 50% stake test (effectively a continuity of ownership test) is failed by the Trust. 6.3 Existence of the Sub-Trusts The taxation matters discussed above have a similar application to the Sub-Trusts and the Trust (as their unitholder). As such, any revenue losses within the Sub-Trusts will, at the time of their acquisition by the Trust, cease to be available. 6.4 Limited Recourse Debt Capital allowance deductions may be limited where, on termination of a limited recourse debt financing arrangement, the debtor does not fully pay out the capital amounts owing. Excess deductions may be included in assessable income. 6.5 Complying Superannuation Entities Legislative restrictions upon the investments which a complying superannuation entity may make should not ordinarily prevent or limit an investment in the Trust. 6.6 Review of Taxation of Trusts There is some uncertainty with respect to the manner in which trusts may be taxed in the future. The Board of Taxation is currently reviewing this matter. 6.7 Tax File Numbers (TFN) Unitholders not providing their TFN or exemption details may have tax deducted from income at the highest individual marginal tax rate plus Medicare levy. Yours faithfully BDO ROD HAWKINS Tax Partner 44

47 10 details of the manager The Manager will act as Responsible Entity of MMPT. Appropriate skills may be pooled from within the Macquarie Bank Group. These skills include: asset management; funds management; general investment banking; and ASIC compliance The Macquarie Bank Group The Macquarie Bank Group is one of the leading investment management groups in Australia and has been providing investment management products and services since 1980 with the launch of Australia s first cash management trust. Including the listed property trusts described below, the Macquarie Bank Group manages approximately $34.5 billion in superannuation, institutional and personal investments across a broad range of assets including infrastructure, Australian and international equities, property equities, money market, mortgages and fixed interest securities. The Macquarie Bank Group is a leading Australian financial institution that has been trading as a licensed bank since March The Macquarie Bank Group was formed from its predecessor, Hill Samuel Australia Limited, which had been operating in Australia since The Macquarie Bank Group has grown to employ over 4,500 staff and is now involved in a range of businesses including investment management, property investment banking, foreign exchange, bullion and futures trading, corporate finance and stockbroking Property Investment Management (PIM) The PIM division of the Macquarie Bank Group was established in 1993 and currently, together with an associate, manages five listed and nine unlisted property trusts. The listed trusts are: Macquarie CountryWide Trust; Macquarie Goodman Industrial Trust; Macquarie Leisure Trust; Macquarie Office Trust; and Macquarie Park Street Trust. The unlisted trusts are: EC Direct Property Trust; VC Direct Investment Trust; JJ Direct Property Trust; PH Direct Property Trust; WP Direct Property Trust; NS Direct Property Trust; BM Direct Property Trust; NB Direct Property Trust; and Macquarie Direct Property No. 9. The combined gross assets of these trusts exceed $4.4 billion. 45

48 0 head Directors of the Manager The directors of Macquarie Direct Property Management Limited comprise: Stephen Girdis Chairman Stephen is an Executive Director of Macquarie Bank Limited and is head of Macquarie s Property division. Stephen is a director or alternate director of all of the management companies of Macquarie s listed and unlisted property funds management businesses. Stephen has over 20 years experience in chartered accounting, property finance, funds management and investment banking and is an Associate of both The Institute of Chartered Accountants in Australia and the Securities Institute of Australia. Richard Cutler Executive Director and Chief Executive Officer Richard is a Division Director of Macquarie Bank Limited. He has over 30 years experience in the property industry, during which time he has devised and implemented asset management strategies for large corporations and has been responsible for the packaging and marketing of numerous major property developments. Richard is a registered valuer and has held a number of directorships with major propertyrelated companies. Richard s areas of expertise include asset management, corporate advisory, property acquisitions and marketing. Ian Pratt Non-executive Director Ian has over 30 years experience in the accounting profession and until recently was a principal at Stockford Limited, a listed public company and Australia s sixth biggest accounting and financial advisory group. Ian is an Associate of The Institute of Chartered Accountants in Australia and also acts as a director of a number of private companies. James Rae Non-executive Director James has over 25 years experience in the accounting profession, the last 18 years as principal of his accountancy practice. James has been involved with the property and finance industries during this time and is an Associate of The Institute of Chartered Accountants in Australia. James is a director of a number of private companies.

49 0 head 10.4 The Manager s Executive Team Ian Williams General Manager Ian is an Associate Director of Macquarie Bank Limited. He has 17 years experience in finance and investment banking. Ian was previously General Manager of the Hills Motorway Trust and Operations Manager for the listed property trusts managed by Macquarie s PIM division. He is a director of the trustee of the Macquarie Bank Staff Superannuation Fund and is a member of the Australian Institute of Company Directors and the Australian Human Resources Institute. Ian is responsible for the financial administration of the unlisted property trusts. Merryn Dodd Property Trust Analyst Merryn has worked with Macquarie Bank Limited for over four years and has experience in mortgage lending, operations management and commercial and business banking. Merryn is responsible for the day-to-day operations of the Manager and the administration of the unlisted property trusts Services that May Be Provided to MMPT by the Macquarie Bank Group on a Commercial Basis In accordance with the terms of the Constitution, the Manager has the right to seek professional advice at MMPT s expense. The Macquarie Bank Group is able to offer various services in areas that MMPT will be seeking professional support. These services will be provided on an "arms length" basis at normal commercial rates. Examples of areas in which the Macquarie Bank Group may provide such services are property due diligence, property management services, property agency services (including facility management and leasing services), project management services, accounting services, print design, corporate advisory and development advisory services. 47 No. 1 Martin Place, Sydney

50 In the course of normal activity, the Macquarie Bank Group may have a financial interest in properties acquired by MMPT as principal, financier or adviser. The Macquarie Bank Group also may provide interest rate management and cash management products to MMPT Conflict Resolution The arrangements set out in the previous subsection give rise to the potential for conflicts of interest between the interests of MMPT, the Macquarie Bank Group and the Manager. No transactions will be entered into by the Manager with a member of the Macquarie Bank Group or where the Macquarie Bank Group has an interest (other than its role as Manager) unless that transaction has been approved by the independent Directors present and voting. In this context, transactions is given a very wide meaning and includes inter alia, all approvals, consents, waivers and agreements. Any decision to make a claim against any member of the Macquarie Bank Group is to be determined by the independent Directors only. This mechanism for resolving of conflicts will be employed in relation to any conflicts arising out of both MDPML s relationships with MOF as joint owner of the Property and with Macquarie Bank as tenant of MMPT. In addition to these mechanisms, the Directors are under a fiduciary duty to MMPT to act in MMPT s best interests in relation to decisions affecting MMPT when they are voting as a member of the Manager s board of Directors. The executive staff of the Manager are expected to act with integrity and honesty at all times. The executive Directors and the executive staff of the Manager are employees of the Macquarie Bank Group and have adopted the code of ethics of the Macquarie Bank Group. This code requires the maintenance of the highest standards of ethical conduct Joint Ownership Agreement MDPML, as manager of MMPT, and MOML, as manager of MOF, have agreed upon certain arrangements concerning the management and ongoing ownership of the Property, which are summarised in Section

51 11 0 head additional information 11.1 MMPT Summary of Constitution The following is a summary of the material provisions of the Constitution of MMPT. The rights and obligations of members and the Manager as Responsible Entity of MMPT are governed by the Constitution and the Corporations Act As MMPT is a managed investment scheme registered under Chapter 5C of the Corporations Act 2001, the Constitution has been lodged with the ASIC and is available from the Manager free of charge. The Constitution deals with a wide range of matters, including: unit application and redemption procedures; members entitlements on redemption; the life of MMPT and members entitlement on winding up; complaints; the nature of a member s interest in MMPT; income entitlements; the Manager s powers; members meetings; liability of the Manager and its right of indemnity; liability of members; and the Manager s fees and right to be reimbursed for expenses. The Constitution also confers power on the Manager to implement the transactions contemplated by the Call Option Agreement. These powers are set out in a schedule to the Constitution. The provisions of the schedule prevail over any inconsistent provisions in the main body of the Constitution. The provisions of the schedule are summarised in Section 11.5 below. The Constitution is dated 10 April It is in the form of a deed poll signed by the Manager, and binds the Manager as Responsible Entity of MMPT and each present and future member and any person claiming through any of them as if each of them had been party to the Constitution. The Manager may amend the Constitution at any time, subject to complying with the requirements of the Corporations Act The Responsible Entity As Responsible Entity, the Manager is trustee of MMPT and is responsible to members for its operation. The Manager may retire as Responsible Entity in the circumstances set out in the Corporations Act Members may also remove the Manager by following the procedures set out in the Corporations Act Nature of MMPT Units and Transferability A MMPT Unit represents an equal undivided beneficial interest in the assets of MMPT, as defined in the Constitution. MMPT Units may be transferred. MMPT Units may be issued with different income entitlements, so that they participate fully, partly or not at all in the income distribution for the period in which they are issued. Fractions of MMPT Units may be issued. Redemption of MMPT Units The Manager does not intend to offer any unit redemption facility. However, if it does, the withdrawal offer must comply with the Corporations Act 2001 and the Constitution. A facility exists for the acquisition by MOF for up to one million MMPT Units per calendar quarter. Please see Section 1.7 for further information. Income Entitlements and Other Distributions The Manager will determine the distributable income of MMPT for each distribution period. It is currently proposed that distribution periods will end on each normal quarter (June, September, December and March), although the Manager can vary this. Members on MMPT s register at midnight on the last day of a distribution period are presently entitled to the distributable income for that period. Each member is entitled to the distributable income pro-rata according to the number of MMPT Units they hold at that time and the time those units have been on issue during the period. In addition, if units are redeemed during any period the Manager may determine that those units are entitled to share in the distribution on a pro-rata basis for the time in which those units were on issue. 49

52 50 The Manager may decide whether to permit or require members to reinvest some or all of their distributions in additional MMPT Units. Powers of the Responsible Entity The Manager is given very wide powers under the Constitution. It has all the powers in respect of MMPT that it is possible under the law to confer on a trustee and as though it were the absolute owner of the assets of MMPT and acting in its personal capacity. The Manager may appoint agents and delegates under the Constitution. Limitation of Liability and Indemnity The Constitution provides that if the Manager acts in good faith and without gross negligence it is not liable in contract, tort or otherwise to members for any loss suffered in any way relating to MMPT. The liability of the Manager to any person other than a member in respect of MMPT (including any contracts entered into as trustee of MMPT or in relation to any assets of MMPT) is limited to the Manager s ability to be indemnified from the assets of MMPT. The Manager is entitled to be indemnified out of the assets of MMPT for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to MMPT. To the extent permitted by the Corporations Act 2001, the indemnity includes any liability incurred as a result of any act or omission of a delegate or agent appointed by the Manager. The Constitution contains a provision to the effect that, except as required by the Corporations Act 2001, all obligations of the Manager which might otherwise be implied or imposed by law or equity are expressly excluded to the extent permitted by law, including any obligation of the Manager in its capacity as trustee of MMPT arising under any statute. To the extent permitted by the Corporations Act 2001, members of MMPT s compliance committee (if any) may be indemnified out of the assets of MMPT if they incur a liability in good faith. Liability of Members The Constitution contains provisions designed to limit a member s liability in respect of MMPT to the amount, if any, which remains unpaid in relation to the member s subscription for their MMPT Units (note that this is subject to the following paragraph and any agreement with a member). However, the Australian courts have not finally determined the liability of members in a unit trust such as MMPT. The Manager is entitled to be indemnified by a member to the extent that the Manager incurs any liability for tax as a result of the member s action or inaction. Joint members are jointly and severally liable in respect of all payments, including payments of tax or any other such expense. Remuneration and Expenses of the Manager Under the Constitution, the Manager is entitled to management fees as follows: a fee of 5% of the purchase price of all real properties which it is proposed in this or a later prospectus to acquire or retain as an asset of MMPT, payable on the completion date of the relevant acquisition; a fee of 3.6% of the total income of MMPT, being the net property income plus interest income calculated and payable quarterly in arrears; if a profit is made on the sale of the Property, a performance fee of 2% of the net sale proceeds of the Property (or the amount of the net profit, whichever is the lesser), payable when the sale proceeds are received; and if the amount to be distributed to members on termination exceeds 100% of the aggregate of Application Monies paid by members, a performance fee of 10% of the amount in excess of members original Application Monies. The Constitution provides that the Manager may be reimbursed from MMPT for all costs incurred in relation to the proper performance of its duties. For example, this would include expenses in connection with promoting MMPT, dealing with Trust assets, tax, agents and delegates fees, the compliance committee established under the Corporations Act 2001 and preparing MMPT s compliance plan.

53 0 head The fees described above do not include any amount referable to goods and services tax (GST). If the Manager becomes liable to pay GST in respect of any matter arising under the Constitution, then in addition to any other amount to which the Manager is entitled, the Manager is also entitled to be paid or reimbursed from the assets, an amount equal to the amount of the GST liability. Termination of MMPT MMPT terminates on the earliest of: (a) the 80th anniversary of the day before MMPT commenced; (b) the date specified by the Manager as the date of termination of MMPT in a notice given to members; and (c) the date on which MMPT terminates by law. It is the Manager s present intention to give a notice under paragraph (b) above upon MOF exercising its call option for the acquisition of the MMPT Units. This is anticipated to be in approximately five years, with MOF retaining the call option to acquire the MMPT Units at anytime from 1 July 2007 to 31 March Should MOF not exercise its call option, it is anticipated the Manager would give notice under paragraph (b) above on 31 March 2009 (refer Section 1.8). Following termination, the Manager must realise the assets of MMPT. This must be completed in 180 days if practical and in any event as soon as possible after that. The net proceeds of realisation, after making allowance for all liabilities of MMPT (actual and anticipated) and meeting the expenses (including anticipated expenses) of the termination, must be distributed pro-rata to members according to the number of MMPT Units they hold. Complaints Members may lodge any complaints in relation to the Manager s conduct in its management or administration of MMPT, by writing to the Manager at the address shown in the Directory at the back of this Prospectus. The Constitution contains provisions governing how complaints must be dealt with. Compliance Plan The Manager has established a compliance plan for MMPT which is monitored by the board of Directors. The compliance plan addresses compliance with laws, regulations and the Manager s ethical standards and comprises structural, operational and maintenance elements. Matters covered by the compliance plan include procedures for complaints handling, unit applications, redemptions and distributions, monitoring and resolution of suspected breaches of the Corporations Act 2001, audits, fees, related party transactions, conflicts of interest and disclosure and reporting requirements. 51 Part of retail complex, No. 1 Martin Place, Sydney

54 Material Contracts Summary No. 1 Martin Place, Sydney Implementation Deed No. 1 Martin Place Office Tower Trust (Office Trust) and No. 1 Martin Place Car Park Trust (Car Park Trust) The Manager and MOML will gain control of the Property through the redemption of existing units and subscription for new units in the Office Trust and the Car Park Trust, the principal assets of which is the Property. The material aspects of the deed are summarised below. Parties Exiting Unitholders No.1 Martin Place (No. 2) Pty Limited (ACN ) and No. 1 Martin Place (No. 3) Pty Limited (ACN ). Exiting Manager Grollo Bros. Pty Limited (ACN ). Trustees N1MP (T No. 2) Pty Limited (ACN ) (Office Trustee) and N1MP (T No. 3) Pty Limited (ACN ) (Car Park Trustee). Grocon Grocon Pty Limited (ACN ). Applicants for New Units The Manager (or its sub-trust) and MOML or their respective nominees (Macquarie Parties). Details Date of Deed 1 May Deposit $4,000,000 refundable together with accrued interest (if any) if terminated not on account of default by the Macquarie Parties. Otherwise, interest (if any) to be shared equally. Completion Date 15 May 2002 or on two business days notice, whichever is earlier. Completion occurred on 3 May Condition Precedent If the underwriting agreement is terminated such that the Macquarie Parties cannot raise the necessary equity; or due to a change in law, stamp duty payable on the transaction exceeds $10,000, then the Macquarie Parties may terminate the deed. The deposit and accrued interest (if any) is refundable in that instance. Price $426,250,000 (subject to adjustments). Other Terms and Conditions Completion On completion: the Macquarie Parties will subscribe for units in the Office Trust and the Car Park Trust, the principal assets of which is the Property; in consideration of payment of the application price, each Macquarie Party will subscribe for 50% of the new units for the issue price in the Office Trust and the Car Park Trust and the Exiting Unitholders will procure that the Office Trustee and the Car Park Trustee issue those new units; the Exiting Unitholders will redeem their units in the Office Trust and the Car Park Trust; the Exiting Unitholders will procure that the Office Trustee and the Car Park Trustee discharge and release all existing debts and liabilities of the Office Trust and the Car Park Trust; the Manager and MOML will each acquire 50% of the issued share capital of the Office Trustee and the Car Park Trustee. The Manager proposes to acquire its 50% interest through a wholly owned sub-trust; Grocon will procure the grant of the Concurrent Sublease (refer Section ) by N1MP (T No.4) Pty Limited (ACN ) (Heritage Trustee) to the Car Park Trustee (refer Section );

55 0 head all tenancy agreements will be stamped and (if appropriate) registered or handed over in registrable form; the Office Trustee and the Car Park Trustee must enter into the Car Park User Agreement with the owner of the hotel; Grocon will procure the grant of the licence to the Office Trustee in relation to the entrance vestibule on Martin Place; and all title documents, management, financial, accounting, and corporate records, trust deeds, manuals, plans and drawings for the Property, of the Office Trust, the Car Park Trust, the Office Trustee and the Car Park Trustee will be handed over. Rent Guarantee The Exiting Unitholder of the Office Trust will on completion pay to the Macquarie Parties an amount of $4,000,000 in consideration for the purchaser s warranties. This amount will be invested in an interest bearing account operated by the Macquarie Parties. All accrued interest on the investment of the rent guarantee sum will be payable to the Macquarie Parties. Warranties Grocon and the Exiting Manager have provided a number of warranties in relation to the Office Trust and the Car Park Trust, the Office Trustee and the Car Park Trustee, and the Property. Specifically, warranties provided include: in relation to the Office Trust and the Car Park Trust, the business and assets, the accounts and financial position, solvency, records, disclosure of material matters, records, litigation, insurance, the Office Trustee and the Car Park Trustee, the taxation position; and in relation to the Property, encumbrances, tenancy agreements, disclosure of material information, environmental matters and generally in relation to unregistered easements and covenants. The minimum value of any individual claim must be more than $100,000 and claims can only be made once in aggregate they total in excess of $1,000,000. The total of all claims cannot exceed $25,000,000 and can be made at any time within 12 months after completion. Limitations and Several Liability The Manager s and MOML s usual clauses relating to the limitation of liability of those parties have been included in the deed. MOML and the Manager are severally liable under the deed as to 50% each. Building Warranties All assignable third party warranties in relation to the Property, plant and equipment, labour and materials used will be assigned to the Macquarie Parties. Any not assignable will be held for the benefit of the Macquarie Parties. GST Indemnity In addition to the rent guarantee, the Exiting Unitholder of the Office Trust will on completion, pay to the Macquarie Parties an amount of $9,000,000. This amount will be invested in an interest bearing account operated by the Macquarie Parties with Macquarie Bank. The GST retention sum will be used and applied by the Macquarie Parties (together with all accrued interest) in respect of the shortfall in recovery of GST under the leases to Macquarie Bank in the Office Tower during the period up to the earlier of the first review opportunity on the Office Tower tenancy space and 31 December Adjustments Completion adjustments will be made in accordance with pro-forma accounts attached to the deed. Final adjustments will be made once consolidated completion accounts have been prepared and agreed. The consolidated completion accounts must be prepared by no later than 40 days after completion. Conduct Pending Completion The deed places the usual restrictions on the Office Trustee and Car Park Trustee from engaging in conduct other than in the normal course of business and they must obtain the consent of the Macquarie Parties to conduct affecting the tenancies, the allotment or issue of units or anything which may be adverse to the interests of the Macquarie Parties. 53

56 54 Rectification of Defects Post Completion Grocon has agreed to undertake and complete rectification of specified defects in the Property to specified standards within 12 months following completion. The deed provides for a retention account to be established. Under this arrangement, the sum of $500,000 will be paid into the income guarantee account and held by Grocon s solicitor as stakeholder until the works are completed or drawn down by the Macquarie Parties in order to rectify the defects if the work has not been completed by Grocon within the period of 12 months. All interest accrued on the investment of this sum will be paid to Grocon. Other Counterparty Risk Measures Grocon has agreed within five years after completion to procure: the partial surrender of the head lease over the heritage title relating to that part of the complex which is the subject of the Concurrent Sublease and secure the grant to the Car Park Trustee of a direct long term lease from Australian Postal Corporation for a nominal rent of that area substantially in the form of the lease attached to the deed; and finalisation and registration of other minor easement matters in respect of which the sum of $100,000 will be paid into the an account and held by Grocon s solicitor as stakeholder until the easements are registered. All interest accrued on the investment of this sum will be paid to Grocon Joint Ownership Agreement between the Manager and MOML On completion of the Implementation Deed, the Office Trustee and the Car Park Trustee will enter into a deed with the Manager and MOML under which the parties have agreed that certain joint ownership arrangements in relation to the management, operation and administration of the Office Trust, the Car Park Trust, the Office Trustee, the Car Park Trustee and the Property will apply. The material aspects of the agreed joint ownership arrangements that will apply are summarised below. Parties Trustees N1MP (T No. 2) Pty Limited (ACN ) (Office Trustee) and N1MP (T No. 3) Pty Limited (ACN ) (Car Park Trustee). Unitholders of the Office Trust and Car Park Trust The Manager on behalf of MMPT and MOML on behalf of MOF. Other Terms and Conditions Condition Precedent Completion of the Implementation Deed. Purpose and Implementation MOML and the Manager will jointly exercise day-to-day control of the Office Trust, the Car Park Trust, the Office Trustee and the Car Park Trustee. MOML and the Manager have agreed to convene the first meeting of the unitholders committee to allocate management responsibilities, agree reporting mechanisms, agree accounting principles and deal with any other issues for ongoing management. Trustees and Trusts The Manager and MOML: will each be 50% shareholders of the Office Trustee and the Car Park Trustee; have jointly appointed three directors to the boards of each of the Office Trustee and the Car Park Trustee; have agreed to ensure that the Office Trustee and the Car Park Trustee are adequately capitalised and administered; have agreed to restrict sales in shares of the Office Trustee and the Car Park Trustee in order to ensure that ownership of the shares in the Office Trustee and the Car Park Trustee will generally follow ownership of the units in the Office Trust and the Car Park Trust; acknowledge that certain obligations in relation to the Office Trustee and the Car Park Trustee have been entered into by the Manager and MOML in their personal capacities; and

57 0 head have agreed that the Office Trustee and Car Park Trustee will not issue further units in the Office Trust or the Car Park Trust (except to the extent necessary to retire certain existing debt), redeem units, pay trust distributions, borrow, grant security over trust assets, issue shares, acquire significant assets or enter into significant transactions or arrangements without the consent of MOML and the Manager. Dealings with and Transfer of Units in the Office Trust and the Car Park Trust Specified dealings are permitted within a MOML or the Manager s group without the consent of the other party. If there is a change of control of either MOML or the Manager, that party must give notice to the other party. A party may only deal with its entire interest in the Office Trust and the Car Park Trust. Mortgage of Units A party may not grant a mortgage or grant a security interest of the whole or any part of its respective holding in the Office Trust and the Car Park Trust without the prior written consent of the other party, which consent cannot be unreasonably withheld or delayed in certain circumstances. Pre-emptive Rights Where a party proposes to deal with or dispose of its units in the Office Trust or the Car Park Trust to a third party: it must deal only with the whole of that party's interest in the Office Trust and the Car Park Trust together with its shares in the Office Trustee and Car Park Trustee; provide the other party with the opportunity to purchase those units and shares; and the other party can also require the third party to acquire its interest. If this initial pre-emptive right is not exercised, the disposing party is to have a period of up to five months to negotiate the terms of disposal of the units to the third party. At the end of this period, the disposing unitholder must provide the other party with the opportunity to purchase the units on the same terms negotiated with the third party. The pre-emptive rights do not apply where the units are transferred to an entity which is a related body corporate (as defined in the Corporations Act 2001) of that unitholder (providing that if the transferee at any time ceases to be a related body corporate (as defined in the Corporations Act 2001) of that unitholder the relevant units must be transferred to the unitholder or a related body corporate (as defined in the Corporations Act 2001) of that unitholder or the trustee or responsible entity of a trust or scheme holding assets of a trust, fund or other entity, the trustee, responsible entity or manager of which is the unitholder or a related body corporate (as defined in the Corporations Act 2001) of the unitholder. Default and Change of Control If a party commits a breach of the agreed joint ownership arrangements that is not cured within 10 business days or that is not capable of being cured, transfers their units in breach of the joint venture arrangements and is unable to unwind the transfer, defaults under any mortgage which is secured against units in the Office Trust or the Car Park Trust or becomes insolvent, or there is a change of control of a party, then the other party has the right to purchase the firstmentioned party s interest for the fair market price as determined by an independent valuer. If there is a change of control of a party and the other party has not exercised the right to purchase the firstmentioned party s interest, then the other party can elect to acquire the firstmentioned party s interest for the fair market price as determined by an independent valuer. If there is a change of control of a party and the other party has not; exercised its right to purchase the firstmentioned party s interest; or exercised its right to require the firstmentioned party s interest to purchase its interest, then the other party can elect to require the firstmentioned party to enter into a property management agreement with Macquarie Asset Services Limited on and subject to the terms and conditions detailed in the agreement. 55

58 56 Committees A unitholders committee comprising one representative from each party (together with an alternate) will review, consider and make determinations on substantive issues with respect to the management of the Office Trust and the Car Park Trust. All decisions of the unitholders committee must be unanimous. The Office Trustee and the Car Park Trustee are bound by decisions of the unitholders committee. Where the unitholders committee cannot come to an agreement in relation to an issue, then the matter will be referred to a special committee, which will be comprised of the unitholders committee plus a senior representative from each of the parties. All decisions of the special committee must be unanimous. The Office Trustee and the Car Park Trustee are bound by decisions of the special committee. Property Valuation The Office Trustee and the Car Park Trustee must arrange a valuation of the property assets of the Office Trust and the Car Park Trust every two years, unless there is reason to believe that there has been a material change in which case a valuation will be arranged at that time. Update valuations must be obtained in each alternate year. Deadlock Resolution Where there is a dispute that is unable to be resolved by the unitholders committee or the special committee, the unitholders committee must seek the assistance of an independent third party as a mediator with a view to resolving the dispute. If the mediation is unsuccessful and the matter in dispute relates to the sale, co-ownership, management, leasing or development of the assets of the Office Trust and the Car Park Trust, the parties will confer with a view to one party selling its unit holding in the Office Trust and the Car Park Trust to the other party. If the parties have not agreed to a sale as between themselves, then either party may require the Office Trustee and the Car Park Trustee to wind up the Office Trust and the Car Park Trust and dispose of the trusts or the assets in those trusts. Property Management The parties can each appoint their own asset managers. The parties will jointly appoint a property manager. Indemnities Each party indemnifies the other party against loss and damage caused by any default or breach by the party, of the joint ownership arrangements. Limitations and Several Liability The Manager s and MOML s usual clauses relating to the limitation of liability of those parties have been included in the deed. MOML and the Manager are severally liable under the deed as to 50% each Concurrent Sublease in Respect of the Heritage Car Park Area On completion of the Implementation Deed, Grocon will procure the grant of a long term sublease by the Heritage Trustee to the Car Park Trustee (Sublease) of that part of the car park forming part of the Property that is located under the heritage building in the complex. The material aspects of the sublease arrangements that will apply are summarised below. Parties Sublessor N1MP (T No. 4) Pty Limited (ACN ) (Heritage Trustee). Sublessee N1MP (T No. 3) Pty Limited (ACN ) (Car Park Trustee). Details Date of Sublease 1 May Head Lessor Australian Postal Corporation. Premises The part of the car park under the heritage building, lot 11 in DP , namely from basement level 4 and below which is leased to the Sublessor under long term leases (Head Lease) of the structure and airspace to Australian Postal Corporation.

59 0 head Term From the date of completion of the Implementation Deed until 8 March Rent $1.00 pa. Permitted Use In accordance with approvals and as permitted by law. Other Terms and Conditions Outgoings The Sublessee must contribute to the rates and taxes, pay parking levies and pay its own outgoings. Transfers and Assignments The Sublessee may in respect of the Premises and the Sublease, without the consent of the Sublessor: sub-sublease the Premises provided it subleases it with the balance of the Car Park; assign, transfer the Sublease provided it is assigned or transferred with the title to the Office Tower; grant any licence; and grant any mortgage. The assignor/transferor is released on an assignment of the Head Lease. Concurrent Sublease The Sublease is granted as a concurrent sublease to the sublease in favour of Secure Parking Pty Limited in respect of the Premises. Restrictions on Sublessor The Sublessor must not: do anything that would cause or contribute to a breach of the Head Lease by the Sublessor; give grounds for the determination of the interest of the Sublessor; assign or transfer its interest in the Head Lease or permit a change of control of the Heritage Trustee, without the consent of the Sublessee; or vary the terms of the Head Lease. Insurances The Sublessee is required to effect insurances for public liability. Sublessee s General Obligations The Sublessee must: comply with all laws and requirements in relation to the Premises; keep the Premises clean and in good repair (excluding structural or capital repairs); keep fixtures and fittings in good repair. 57 Part of hotel complex, No. 1 Martin Place, Sydney

60 Default The Sublessee must rectify defaults. The Sublessor has no right to terminate the Sublease. Vacating and Make Good The Sublessee must vacate on the expiry date. The Sublessee must not remove any part of the structure. Limitation of Liability The Car Park Trustee s and the Heritage Trustee s clause relating to their limitation of their liability have been included Grocon Structural Warranty Deed On completion of the Implementation Deed, Grocon will grant a warranty in favour of the Office Trustee and the Car Park Trustee in relation to the structural integrity of the Property. The material aspects of the warranties that will apply are summarised below. Parties Warrantor Grocon Pty Limited (ACN ) (Heritage Trustee). Trustees N1MP (T No. 2) Pty Limited (ACN ) (Office Trustee) and N1MP (T No. 3) Pty Limited (ACN ) (Car Park Trustee). Details Date of Warranty 1 May Term Until 17 October Other Terms and Conditions Warranty Grocon warrants the structural integrity of the Property and will rectify problems arising out of defects to the complex relating to: Limitations and Several Liability The Trustees usual clauses relating to the limitation of liability of those parties have been included Car Park User Agreement On completion of the Implementation Deed, Grocon will procure the Hotel Trustee and the Car Park Trustee enter into an agreement governing the rights of the Hotel Trustee and its guests for continued use of the car park. The material aspects of the sublease arrangements that will apply are summarised below. Parties N1MP (T No. 1) Pty Limited (ACN ) (Hotel Trustee) and N1MP (T No. 3) Pty Limited (ACN ) (Car Park Trustee). Details Date of Agreement 1 May Other Terms and Conditions Use of Car Park The Car Park Trustee grants to the Hotel Trustee continual rights to park cars in the car park at rates and on commercial terms as imposed by the manager of the car park or as agreed from time to time with the Car Park Trustee. Transfer of Hotel or Car Park If the hotel is sold or the car park is sold, then any new owner must enter into a document novating this agreement. Termination on Destruction If the hotel or the car park is destroyed, this agreement comes to an end. Limitations and Several Liability The Hotel Trustee's and the Car Park Trustee's usual clauses relating to the limitation of liability of those parties' have been included. 58 design; workmanship; and materials.

61 0 head 11.3 Custodian Agreement The Manager has entered into a Custodian agreement in respect of MMPT. Trust Company of Australia Limited has agreed to act as Custodian and hold MMPT assets. The Custodian is entitled to receive a fee of $22,000 pa (CPI adjusted) and be reimbursed for recoverable costs and expenses Summary of Call Option Agreement The Call Option Agreement is made between the Manager, MOML, the Custodian and Perpetual Trustee Company Limited (the obligations and liabilities of the Custodian and Perpetual Trustee Company Limited are limited in accordance with their respective roles as custodians for the MMPT and MOF). The Call Option Agreement gives MOML the option to require MDPML as Responsible Entity of MMPT to redeem all of the existing units in MMPT not held by MOML and to issue new units to MOML as Responsible Entity of MOF. Term The term of the option is the call period. The call period commences on 1 July 2007 (unless the commencement is accelerated) and ends on 31 March 2009, or the date on which the agreement terminates (refer below), whichever is first. Acceleration of the Call Period The call period will commence immediately if any of the following occur: 1. steps are taken under Part 5C.10 of the Corporations Act 2001 to deregister MMPT; 2. the Manager convenes a meeting of Unitholders for the purposes of retiring as Responsible Entity of MMPT; 3. a meeting of Unitholders is convened for the purposes of removing the Manager as Responsible Entity of MMPT; 4. steps are taken under Part 5C.9 of the Corporations Act 2001 to wind up MMPT; 5. steps are taken to terminate MMPT in accordance with the terms of the Constitution; or 6. steps are taken to amend the Constitution in a manner that would adversely affect the interests of MOML or MOF under the Call Option Agreement. Where the call period commences early due to one of the events above, it will continue in effect until the earlier of 18 months from the date of commencement and the date on which an event referred to in points 2, 3, 4 and 5 above is brought to its conclusion (for example, in the case of point 2 above, by the retirement of the Manager as Responsible Entity of MMPT). Option Exercise Procedure At any time during the call period, MOML may give the Manager a valuation notice requesting a valuation of the Property and the making of an asset and liability determination. MOML may give more than one valuation notice during the call period. The valuation must be conducted by a valuer appointed by each party and the final value is either agreed between the valuers or decided by a third independent valuer. Once the final value is determined, the asset and liability determination must be prepared by the MMPT auditor. The assets and liability determination sets out the assets and liabilities of MMPT as determined in accordance with applicable Accounting Standards. 50% of the value of the Property as determined pursuant to the valuation procedure is required to be treated as an asset of MMPT. The determination of the MMPT auditor is final and binding on the parties. Exercise Period MOML may exercise the call option at any time during the exercise period, by MOML giving an exercise notice to the Manager. The exercise period begins when an asset and liability determination is given by the MMPT auditor. The exercise period ends at the earlier of: 60 business days after the asset and liability determination has been given to the parties; the commencement of a further exercise period (which would be on the basis of a further valuation notice given by MOML); and the occurrence of a termination event (refer over). The exercise notice may not be revoked except in certain limited circumstances specified in the Call Option Agreement. 59

62 60 Exercise Price The exercise price is the dollar value of the assets of MMPT less the dollar value of the liabilities of MMPT (as determined by the asset and liability determination), not taking into account any net assets in which MOML already has an interest arising as a result of any units held by it in MMPT. Satisfaction of the Exercise Price MOML may satisfy the exercise price in any one of the ways set out below, or by way of a combination of points 1 and 2 below, or a combination of points 1 and 3 below: 1. giving the Manager an unendorsed bank cheque in the amount of the exercise price; 2. issuing to the Manager or to its nominee the number of MOF Units that is equivalent in value to the exercise price; or 3. issuing to each of the holders of existing MMPT Units, in proportion to the number of MMPT Units held, a number of MOF Units equivalent in value to the exercise price. For the purposes of points 2 and 3 above, the value of MOF Units is determined by the volume weighted average price of MOF Units sold during the 10 business days preceding the date of completion of the exercise of the call option. Termination The Call Option Agreement automatically terminates if the Manager and MOML cease to be related bodies corporate, the Manager ceases to be Responsible Entity of MMPT, MOF ceases to be listed, or MOML ceases to be Responsible Entity of MOF. Limitation of Liability Under the Constitution, the Manager has been granted an indemnity out of MMPT assets for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to MMPT. A similar indemnity has been granted to MOML under MOF s constitution in respect of the assets of MOF Power to Implement the Transactions Contemplated by the Call Option Agreement The schedule to the Constitution confers power on the Manager to implement the transactions contemplated by the Call Option Agreement. This summary of the relevant provisions of the schedule should be read in conjunction with the summary of the Call Option Agreement in Section 11.4 above. Definitions Certain terms have defined meanings in the schedule. They are: MOF Unit Issue Price means the volume weighted average price of MOF Units sold on the ASX calculated with respect to the period of 10 business days preceding completion of the exercise of the call option under the Call Option Agreement. Relevant Amount means, from time to time, an amount equal to the net assets of MMPT, but disregarding any proportion of that amount attributable to units of MMPT held by MOML or its nominees (the Relevant Amount will be equal to the exercise price payable under the Call Option Agreement on exercise of the call option). Unitholders means the holders of MMPT Units. General Authority The Manager must do all things which are: (a) necessary or desirable to give effect to the transactions contemplated by the Call Option Agreement; and (b) reasonably incidental to giving effect to the transactions contemplated by the Call Option Agreement. Where MOML Elects to Satisfy the Exercise Price by an Issue of Units to the Manager Where MOML elects to satisfy in whole or in part its obligation to pay the exercise price under the Call Option Agreement (ie the Relevant Amount) by an issue of MOF Units to the Manager, the Manager must: (a) redeem all of the MMPT Units on issue at completion of the exercise of the call option (other than the MMPT Units held by the grantee or its nominees) for the Relevant Amount;

63 0 head (b) issue to MOML or its nominee for the Relevant Amount such number of MMPT Units at $1.00 for each unit as is equal to the Relevant Amount; (c) make an in specie distribution or an allotment by direction to Unitholders (in proportion to the number of MMPT Units held by them) of the MOF Units issued to the Manager by MOML (being such number of MOF Units at the MOF Unit Issue Price as is equal to the Relevant Amount), and the Unitholders must take such MOF Units; and (d) make a distribution to Unitholders of any cash paid by MOML in part satisfaction of the Relevant Amount. Each Unitholder: (a) agrees that the distribution or allotment by direction to it of MOF Units under paragraph (c) above and cash (if any) paid to it under paragraph (d) above constitutes for all purposes full and complete satisfaction of the redemption price (and any other amount to which the Unitholder is entitled on redemption, except for accrued income) for the MMPT Units held by that Unitholder; and (b) releases the Manager from, and indemnifies the Manager against, any requirement to make a further payment in respect of redemption of the MMPT Units, except a further payment in relation to accrued income. Where MOML Elects to Satisfy the Exercise Price by an Issue of MOF Units to Unitholders Where MOML elects to satisfy in whole or in part, its obligation to pay the Relevant Amount by an issue of MOF Units to Unitholders: (a) the Manager must at completion of the exercise of the call option, redeem all of the MMPT Units on issue at completion (other than the MMPT Units held by MOML or its nominees) for the Relevant Amount; (b) Unitholders at completion of the exercise of the call option will be issued (in proportion to the number of MMPT Units held by them), such number of MOF Units at the MOF Unit Issue Price as is equal to the Relevant Amount (except to the extent, if any, that the Relevant Amount is satisfied by way of a payment of cash) and the Unitholders must take such MOF Units; and (c) Unitholders irrevocably direct the Manager to apply the Relevant Amount referred to in paragraph (a) above in satisfaction of the issue price for the MOF Units referred to in paragraph (b) above (and by way of exchange for any payment of cash made by MOML under paragraph (b) above); and (d) the Manager must at completion of the exercise of the call option, issue to MOML or its nominee for the Relevant Amount, such number of MMPT Units at $1.00 for each MMPT Unit as is equal to the Relevant Amount. Each Unitholder: (a) agrees that an issue to it of MOF Units under paragraph (b) above and the payment of cash (if any) referred to in that paragraph constitutes for all purposes full and complete satisfaction of the redemption price (and any other amount to which the Unitholder is entitled on redemption, except for accrued income) for the Units held by that Unitholder; and (b) releases the Manager from, and indemnifies the Manager against, any requirement to make a further payment in respect of redemption of the MMPT Units, except a further payment in relation to accrued income. Cash Out Facility If the Manager (and, if, the issue is by MOML to Unitholders, MOML) forms the view that, in relation to Unitholders generally or in relation to particular Unitholders (Relevant Unitholders), the issue of MOF Units would or may result in: (a) a contravention of the Corporations Act 2001 or another applicable law; or (b) the Manager or MMPT incurring costs or expenses that are unreasonable, the Manager (and, if relevant, MOML) may, instead of distributing or issuing MOF Units to Relevant Unitholders, appoint a nominee to: (i) arrange for the sale of the MOF Units to which the Relevant Unitholders would have been entitled; and (ii) remit the net proceeds of the sale to the Relevant Unitholders. 61

64 62 Each Unitholder: (a) agrees that remission to the Unitholder of the net proceeds of sale of the MOF Units to which the Unitholder would have been entitled constitutes for all purposes full and complete satisfaction of the redemption price (and any other amount to which the Unitholder is entitled on redemption, except for accrued income); and (b) releases the Manager from, and indemnifies the Manager against, any requirement to make a further payment in respect of redemption of the MMPT Units, except a further payment in relation to accrued income. Consent to Becoming a MOF Unitholder Each Unitholder irrevocably agrees: (a) to its name being entered on the register of members of MOF in respect of the MOF Units to be issued to it; (b) to be bound by the constitution of MOF as amended from time to time; and (c) that no further agreement, consent or approval of, or other exercise of discretion by, the Unitholder is required to effect on behalf of the Unitholder a transaction referred to in the Call Option Agreement. Appointment of the Manager as Agent and Attorney Each Unitholder irrevocably appoints the Manager as its agent and attorney with full power and authority without further approval from the Unitholder to do all things which are, or which the Manager considers are: (a) necessary or desirable to give effect to the transactions contemplated by the Call Option Agreement, including: (i) by voting MMPT Units at a meeting of Unitholders; (ii) through the appointment of sub-agents and sub-attorneys where considered desirable by the Manager; and (iii) by executing in the name of the Unitholder all relevant documents, forms, acknowledgments, discharges and receipts; or (b) reasonably incidental to giving effect to the transactions contemplated by the Call Option Agreement. Each Unitholder ratifies and confirms each act, matter and thing that the Manager, its subagents and sub-attorneys do or cause to be done pursuant to the Call Option Agreement Unit Acquisition Agreement The Unit Acquisition Agreement is made between the Manager and MOML. MOML undertakes to acquire either itself or through a nominee up to one million MMPT Units from Unitholders each quarter (ie the three months ending 31 March, 30 June, 30 September and 31 December) during the term of the agreement (refer below). MOML may acquire more MMPT Units at its discretion. The purchase price payable by MOML for each MMPT Unit is the net tangible asset backing of the MMPT Unit as last determined by the Manager in accordance with applicable Accounting Standards prior to the relevant acquisition less transaction costs (including stamp duty). If MOML considers that a determination by the Manager is not correct, it may require the Manager instruct the MMPT auditor to determine the net tangible asset backing of each MMPT Unit prior to the relevant acquisition. The determination of the MMPT auditor is final and binding on the parties. No later than 10 business days prior to the end of each quarter, the Manager must notify MOML of the applicable purchase price and the names of Unitholders who wish to sell MMPT Units under the agreement and the number of MMPT Units held by each of them. The Manager must also obtain from Unitholders and provide to MOML, executed transfer documentation in relation to the MMPT Units to be acquired by MOML. Each transferring Unitholder warrants that the MMPT Units being transferred are free from encumbrances and that it is legally entitled to transfer the MMPT Units.

65 0 head Within five business days of the notice from the Manager, MOML or its nominee must purchase the relevant MMPT Units by providing cheques for the amounts of the purchase price. MOML is not required to proceed with a purchase of any MMPT Units: (a) (b) if it has reasonable grounds to believe that a warranty given by the Unitholder is not correct or that a liability to stamp duty (or any similar levy) calculated on an ad valorem basis under the land rich provisions of the Duties Act 1997 (NSW), or any equivalent provisions of the law in force in another State or Territory would arise as a result of the purchase; or during any period that the Manager is in Default under the terms of the Joint Ownership Agreement made between MOML, the Manager and others, as the expression Default is defined in that agreement. Relevantly, default is defined under the Joint Ownership Agreement as: (i) (ii) (iii) (iv) a breach of any material provision of the agreement which the Manager fails to rectify within 10 business days of being given notice of the breach, or a breach which is not capable of being cured; a change of control of the Manager; defaults under certain mortgages granted by the Manager; or insolvency of the Manager. The term of the Unit Acquisition Agreement commences on 30 September 2002 and ends on the first to occur of: (A) 31 March 2009; (B) the date of termination of the Call Option Agreement or the Joint Ownership Agreement or both; 11.7 Consents and Disclaimers All of the entities listed below have given, and have not, before lodgement of this Prospectus, withdrawn their consent to the issue of this Prospectus with the statements made by them included in the form and context in which they are included. None of these entities are responsible for the issue of this Prospectus and nor are they responsible for any particular part of it other than as specified below. CB Richard Ellis Pty Ltd has given and not withdrawn its consent to the issue of this Prospectus with its valuation summary and the statements in relation to property valuations in the form and context in which such valuation summary and the statements are included. CB Richard Ellis Pty Ltd has not authorised or caused the issue of this Prospectus and expressly disclaims and takes no responsibility for issue of this Prospectus other than its valuation summary in Section 9.2 and other references in Section 3. Both BDO and BDO Corporate Finance Pty Limited have given and not withdrawn their consent to the issue of this Prospectus and the inclusion of their Taxation Report and Independent Accountant s Report in this Prospectus. BDO and BDO Corporate Finance Pty Limited have not authorised or caused the issue of this Prospectus and expressly disclaims and takes no responsibility for any part of this Prospectus other than their reports in Sections 9.3 and 9.4. Davis Langdon Australia Pty Ltd has given and not withdrawn its consent to the issue of this Prospectus. Davis Langdon Australia Pty Ltd has not authorised or caused the issue of this Prospectus and expressly disclaims any responsibility for any part of this Prospectus other than the references in Sections 5.9 and 9.1. (C) the date the call option contained in the Call Option Agreement is exercised; (D) the date a pre-emptive right or first right of refusal becomes exercisable under the Joint Ownership Agreement; and (E) the date on which the Manager is removed as the Responsible Entity of MMPT. 63

66 Other than as required by law, no responsibility is taken by the Manager or any of the experts for any statement made in relation to MMPT s acquisition, other than those statements contained in this Prospectus. Neither the Manager nor any expert (or any of their lawyers or advisers) gives any guarantee with respect to the return of any investment, any tax deduction with respect to the investment, or the performance of the investment generally Disclosure of Interests of Experts and Advisers No expert, nor any firm in which an expert is a partner, has an interest that exists at the date of lodgement of this Prospectus with the ASIC, or that existed within the two years before that date in the promotion or inception of MMPT, or in the Property. No amount has been paid or agreed to be paid to an expert in the last two years for services rendered by that expert or any firm of which the expert is a partner in connection with the promotion or inception of MMPT, other than interest or amounts disclosed elsewhere in this Prospectus and the following: BDO $25,000; Davis Langdon Australia Pty Ltd $90,965 (of which 50% is payable by MMPT); and CB Richard Ellis Pty Ltd $80,000 (of which 50% is payable by MMPT). All fees quoted are exclusive of GST. Macquarie Asset Services Limited, a related body corporate of the Manager, has provided property due diligence acquisition and structuring advice in relation to the acquisition of the Property for which it will be paid a fee of 0.5% of the Property s purchase price (of which 50% is payable by MMPT) Disclosure of Interests in MOF The following parties hold investments directly or indirectly in the number of MOF Units shown below: James Broadbent 25,000 (director of MOML) David Clarke 2,000,000 (chairman of MOML) Stephen Girdis 14,138 (director of MDPML and director of MOML) Simon Jones 8,518 (alternate director of MOML) MOML 42 William Moss 99,549 (director of MOML) Directors Interests No Director holds at the time of lodgement of this Prospectus with the ASIC, or has held in the two years before lodgement of this Prospectus with the ASIC, an interest in: the Offer; or any property acquired or proposed to be acquired by MMPT in connection with its formation or promotion or the Offer. Except as set out in this Prospectus, no party has paid or agreed to pay any amount, and no party has given or agreed to give any benefit, to any Director or proposed Director: to induce a person to become, or qualify as, a Director; or for services provided by a Director or proposed Director in connection with the formation or promotion of MMPT or the Offer ASIC Relief To the extent this Prospectus relates to an offer of MOF Units, the ASIC has granted relief from subsections 711 (5), 711 (6) and 723 (3) of the Corporations Act 2001.

67 012head glossary Applicant A person or entity who submits an Application Form. Application Form The application form in Section 13 to be used by persons wishing to subscribe for MMPT Units in the Offer. Application Monies The monies payable by an Applicant, being $1.00 per MMPT Unit. ASIC Australian Securities & Investments Commission. ASX Australian Stock Exchange Limited. Bank Bill Rate 90 day bank bill swap reference rate as set each day by major banks (code BBSY Bid). Building Allowances Capital allowances under Division 43 of Part 2.10 of the Income Tax Assessment Act Call Option Agreement The agreement between MMPT, MOF, the Custodian and Perpetual Trustee Company Limited (ACN ). CBD Central Business District. Constitution The Constitution of MMPT, being the Trust Deed dated 10 April CPI The Consumer Price Index (All Groups) published by the Australian Bureau of Statistics. Custodian The custodian (being Trust Company of Australia Limited (ABN )) of MMPT as appointed by the Manager. Directors The directors of the Manager. Forecast Period Financial years from 1 July 2002 to 30 June Issue Price Price at which the MMPT Units will be issued pursuant to this Prospectus, being $1.00 per MMPT Unit. Loan or Loan Funds That part of the funding required for the acquisition of a 50% interest in the Property provided by the lender as a loan to MMPT. Macquarie The Manager is a part of the Property Investment Management division of the Macquarie Bank Group s Banking and Property Group. Macquarie Bank Macquarie Bank Limited (ABN ). Macquarie Bank Group Macquarie Bank and its subsidiaries. Manager or MDPML Macquarie Direct Property Management Limited (ABN ) acting in its capacity as Responsible Entity for MMPT. MMPT or Trust Macquarie Martin Place Trust (ARSN ). MMPT Unit(s) An ordinary unit(s) in MMPT. 65

68 MOF Macquarie Office Trust (ARSN ). MOF Option Period Period from 1 July 2007 to 31 March MOF Units Ordinary units in the capital of MOF. MOML Macquarie Office Management Limited (ABN ) acting in its capacity as Responsible Entity of MOF. Net Tangible Assets Net tangible assets of the Trust, calculated in accordance with applicable Accounting Standards. Offer The offer of MMPT Units. Property The office tower and car park located at No. 1 Martin Place, Sydney NSW (of which MMPT is acquiring 50%). Property Outgoings Expenses payable in relation to the Property including items such as land tax, water rates, council rates, insurance, cleaning, repairs and maintenance, property management costs and landscaping. Prospectus This document dated 8 May Responsible Entity The responsible entity of a registered managed investment scheme is the company named in the ASIC s records. In terms of the Offer, the responsible entity is the Manager. Return on Equity Net distribution per year, per MMPT Unit divided by the application price for MMPT Units. Tax Sheltered That part of any distribution attributable to such factors as Building Allowances, depreciation of plant and equipment or amortisation of borrowing costs which is not generally assessable to unitholders at time of entitlement. Unitholder(s) A holder(s) of MMPT Units. Valuer CB Richard Ellis Pty Ltd (ABN ) Level George Street SYDNEY NSW

69 013head application forms MMPT Units, to which this Prospectus relates, will only be allotted or issued on receipt of an Application Form attached to this Prospectus. 67