MACQUARIE DIRECT PROPERTY FUND ARSN Open- ended, unlisted property fund PRODUCT DISCLOSURE STATEMENT WHOLESALE APIR CODE MAQ0448AU

Transcription

1 MACQUARIE DIRECT PROPERTY FUND ARSN Open- ended, unlisted property fund PRODUCT DISCLOSURE STATEMENT WHOLESALE APIR CODE MAQ0448AU

2 Important notice and disclaimers Capital and investment returns are not guaranteed Investments in Macquarie Direct Property Fund ( ARSN ) ( MDPF or Fund ) are not deposits with or other liabilities of Macquarie Bank Limited ( ABN ) ( MBL ), Macquarie Direct Property Management Limited ( AFSL No ) ( ABN ) ( MDPML, Manager, we, our, us ) or any entity in the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MBL, MDPML or any other member of the Macquarie Group, guarantees any particular rate of return or the performance of MDPF, nor do they guarantee any repayment of capital from MDPF. Offer of an interest in MDPF This Product Disclosure Statement ( PDS ) has been prepared by us in our capacity as Manager based on information within our knowledge or provided by our advisers. It contains an invitation for an investment in MDPF ( Offer ). An investment in MDPF comprises Stapled Securities. Please refer to Section for more information. ASIC not liable for contents of PDS The Australian Securities and Investment Commission ( ASIC ) takes no responsibility for the contents of this PDS. IDPS Operators are authorised to use this PDS In this PDS, an administration service or an investor directed portfolio service such as a master trust, wrap account or nominee service is referred to as an IDPS. The trustee or operator of the IDPS is referred to as an IDPS Operator. We consent to the use of this PDS by IDPS Operators that include the Fund on their investment menus. PDS available electronically or in hardcopy ( conditions apply ) This PDS is dated 7 February You can obtain a copy of the PDS electronically on MDPF s website at / mdpf or you can obtain a printed copy of this PDS free of charge during the term of MDPF by calling ( local call cost ) ( Monday to Friday 8.30am to 5.30pm, Sydney time ). Applications must be made on an Application Form accompanying this PDS You may only make an application for an interest in MDPF as described in this PDS on an Application Form accompanying this PDS. Application Forms must contain original signatures. Photocopied signatures will not be accepted. Financial information is stated as at date of PDS All fi nancial and operational information contained in this PDS is stated as at the date of this PDS, unless otherwise specifi ed. Overseas Investors can use PDS only if received in Australia This PDS can only be used by Investors receiving it ( electronically or otherwise ) in Australia. Updated information detailed in supplementary PDS ( if material ) or on website Information relating to the Offer may change from time to time. Information that is not materially adverse may be updated and made available on MDPF s website at / mdpf. A printed copy of the updated information is available free of charge on request. We may issue a supplementary PDS from time to time in connection with the Offer to supplement any relevant information not contained in this PDS. If we do, any supplementary PDS should be read together with this PDS. A copy of any supplementary PDS and any other information regarding the Offer will be made available on MDPF s website with a paper copy available free of charge on request. Information on Offer is contained only in this PDS No person is authorised to give any information or to make any representation in connection with the Offer, which is not contained in this PDS. Any information or representation obtained outside of this PDS may not be relied upon as having been authorised by us in connection with the Offer. This PDS is not investment advice; you should seek your own financial advice The information in this PDS is general advice only and not personal advice. It does not take into account your individual investment objectives, fi nancial situation or particular needs. You should read this PDS in its entirety before making any decision whether to invest in MDPF. It is important that you consider the risk factors that could affect the fi nancial performance of MDPF. You should carefully consider these factors in light of your particular investment needs, objectives and fi nancial circumstances ( including fi nancial and taxation issues ) and seek professional advice from your fi nancial adviser, stockbroker, or other professional adviser before deciding whether to invest. Some of the risk factors that should be considered by Investors are set out in Section 4. Forward looking statements This PDS contains forward looking statements which are subject to known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of MDPF or any of the Stapled Entities to be materially different from those expressed or implied by such statements. Some of the risk factors that impact on forward looking statements in this PDS are set out in Section 4. Past performance is not a reliable indicator of future performance. Fees We are entitled to fees for acting as the Manager. Refer to Section 5. Macquarie Group privacy policy has been adopted We have adopted the Macquarie Group privacy policy. You can obtain a copy of that policy by visiting the Macquarie website at / au / privacy_policy.htm. PDS uses terms with defined meanings Certain terms used in this PDS have defi ned meanings. Refer to the Glossary in Section 8 for defi nitions. Property photographs in this PDS are assets held directly or indirectly by MDPF The Properties depicted in photographs in this PDS are assets in which MDPF has a direct or indirect interest, at the date of this PDS unless otherwise stated.

3 Macquarie Direct Property Fund (MDPF or Fund) is an open-ended, unlisted property fund. The Fund aims to provide regular, tax effective income and capital growth by investing in, and actively managing, a diversifi ed and growing portfolio of quality direct property and listed and unlisted property securities. Enhanced return potential and diversifi cation is achieved by seeking to take advantage of opportunities within Macquarie Group s global property investment pipeline, including international real estate acquisitions. Investors also benefi t from a range of additional features not ordinarily available when investing in direct property: you can add to your investment at any time, increase your investment at a discount by electing the distribution reinvestment option and you may access your funds as you need them via the limited liquidity facility 1. Daily unit pricing refl ects regular valuation of all fund assets including the direct property assets. 1 Subject to conditions. Refer to Section 6.8 for full terms and conditions. Macquarie Direct Property Fund Product Disclosure Statement 1

4 Contents Section 1 Fund snapshot An overview of the Fund Page 3 2 Key features of MDPF Outlines the key features and benefi ts of investing in the Fund 4 3 How we manage the Fund Outlines the Fund s investment objectives and the strategy by which we aim to grow the Fund and your investment returns 4 Risks Outlines the main risks associated with an investment in the Fund Fees and other costs A description of the fees and charges relating to the Fund, including any fees paid to your fi nancial adviser (as applicable) 6 Other information you need to know Includes legal and regulatory and tax related information How to invest in the Fund All the information you need to know to invest, make additional contributions or withdraw from the Fund and monitor your investment 8 Glossary Defi nitions provided for the terms with which you may not be familiar Application Forms The documents you need to submit if you choose to invest in the Fund 32 2

5 1 Fund snapshot Below is a table of key information about investing in Macquarie Direct Property Fund ( MDPF or Fund ) with relevant sections where further details can be found: Investment type Manager Investment objective MDPF is an open-ended, unlisted property fund primarily investing in direct property assets and a tailored portfolio of listed and unlisted property securities. Other categories of property investment that the Fund may undertake are sub-underwriting property securities and pre-initial Public Offer ( IPO ) property investments. The Fund is managed by MDPML ( Responsible Entity ), a subsidiary of Macquarie, which is managed within Macquarie Real Estate. MDPML has over 8 years of specialist experience in managing unlisted property funds. To deliver regular, tax effective income and capital growth by investing in, and actively managing, a diversifi ed and growing portfolio of quality direct property and listed and unlisted property securities. The Fund will also pursue opportunities to enhance returns by seeking to take advantage of opportunities which may arise within the Macquarie Group s global property investment pipeline, including international real estate acquisitions. Fund performance Information on the Fund s performance can be found in Section 3.4 and on our website / mdpf. Investment timeframe Property is a medium to long term investment ( usually a minimum fi ve year investment period ). Portfolio The MDPF portfolio contains quality real estate, including direct properties and listed 3 and unlisted property securities in Australia and overseas. Risks Key risks of an investment in MDPF include a decline in property values, a decrease in Fund revenue ( due to low occupancy rates or rent levels or tenant defaults ) and limitations on the liquidity of your investment. 4 Investments and withdrawals Minimum initial investment Minimum additional investment Minimum withdrawal Minimum balance ( after withdrawal ) $ 50,000 $1,000 $1,000 $10,000 We suggest you contact your IDPS Operator for minimum transaction and balance requirements. Fees and costs Transaction Costs ( Buy Spread ) Transaction Costs ( Sell Spread ) Management costs 1 ( on gross assets ) Acquisition fee ( on direct property ) Limited liquidity Valuations Distributions Superannuation fund suitable 1% ( payable to the Fund ) 0.5% ( payable to the Fund ) 0.71% pa plus performance fee if applicable 1% ( payable to the Manager ) Investors may be able to withdraw all or part of their investment 2. Withdrawal applications are processed on a daily basis with withdrawals generally being available within 10 Business Days of processing. All Properties undergo regular independent valuation reviews with approximately 25% of direct property ( in value ) being independently valued each quarter. We also assess Property values when we become aware of circumstances which we consider would signifi cantly impact the Entry / Exit Price. Payable quarterly or may be reinvested into the Fund by electing the Distribution Reinvestment Option ( DRO ). Complying and self-managed superannuation funds can participate in the Offer. 9.2 Contact details Internet / mdpf Inside Phone Fund enquiries: back Registry enquiries: cover ( Monday to Friday, 8.30am to 5.30pm, Sydney time ) propfunds@macquarie.com Refer to the inside back cover for a full contact listing. Section , Management costs comprise a base management fee of 0.5% pa, expenses estimated to be 0.21% pa and a performance fee if applicable. 2 Subject to conditions. Refer to Section 6.8 for full terms and conditions. Macquarie Direct Property Fund Product Disclosure Statement 3

6 2 Key features of MDPF Opportunity for regular income MDPF derives most of its income from Property rental returns while maintaining a broad property investment mandate. Distributions are payable quarterly, aiming to provide you with regular cash fl ow. Low income volatility is a priority and we aim to achieve this in a number of ways: diversifi cation the Fund s portfolio diversifi cation reduces its reliance on any one sector, tenant, building or country. Diversifi cation may extend to investment in institutional funds that provide access to assets that are not generally available to Australian Retail Clients quality covenants we focus on attracting quality corporate tenants on long leases with structured rental increases quality properties we aim to maintain high occupancies by targeting quality properties that are well located within established markets tailored listed property securities portfolio our portfolio of listed property securities is carefully selected to limit exposure to residential, construction, development and hotel markets. This mitigates associated risks and return volatility often associated with these sectors hedging strategy our hedging strategy aims to protect ( i ) income against potential interest rate increases and ( ii ) international income and capital from foreign exchange movements. Return potential The return potential of an investment in the Fund is supported by our active management of the Fund s Properties with a view to increasing their value. Active management may include capital works to improve the building s appeal to tenants to either maintain high rates of occupancy or attract new tenants, arranging fl oor layouts to attract both full fl oor tenants as well as smaller tenants that require only a portion of a fl oor or lease negotiation to maximise the level and security of income to the Fund. Acquisition opportunities MDPF will seek to access Macquarie Group s global property investment pipeline to potentially enhance returns while providing Investors with opportunities normally reserved for institutional investors, although there will be no guaranteed right to do so. With over 470 staff working in 10 countries, Macquarie Real Estate has established a platform to capture property funds management opportunities worldwide. Further, its vast partnership network comprising some of the world s largest and most successful real estate companies may present international acquisition opportunities. This platform has already delivered an investment in the Macquarie Goodman Hong Kong Wholesale Fund ( MGHKWF ). Robust industrial markets in Hong Kong, MGHKWF s strong growth pipeline and Macquarie Goodman Asia s property management expertise are all expected to deliver attractive total returns to MDPF Investors. In addition, MDPF has acquired an investment in the Macquarie Wanda Real Estate Fund, a wholesale fund managed by a joint venture with a Chinese retail property developer. Exposure to European warehouse and distribution centres has been obtained by MDPF subscribing for units in the Arlington European Logistics Fund. Generating fee income from sub-underwriting capital raisings is another benefi t of the Macquarie Real Estate platform that has added to MDPF s earnings. MDPF earned a sub-underwriting fee for its role in the oversubscribed placement of Macquarie Leisure Trust Group s securities in September You can read more about these investments in Section 3. Reduced capital volatility Australian direct property has historically experienced lower volatility than Australian and international shares and listed property trusts. As a result, investing in direct property can potentially lower overall portfolio risk. Because MDPF is not listed on a stock exchange, the Entry / Exit Price is a more accurate refl ection of the value of underlying assets. Tax deferred return potential Direct property investment funds can contain a Tax Deferred Component of income. A Tax Deferred Component of income arises through the different treatment of expenses and depreciation allowances on buildings and plant and equipment within a building for accounting and taxation purposes. Refer to Section 6.3 for further information on the tax implications of investing in MDPF. Diversify your investment portfolio Investing in MDPF enables you to achieve diversifi cation benefi ts for your portfolio. Many investment portfolios have a low exposure to direct property, so MDPF could complement other investments by adding less volatile income and total returns (as evidenced by the asset class comparison graph on the next page). A diversifi ed portfolio may decrease the risk of negative returns overall, as individual assets or asset classes are less likely to impact the portfolio generally. MDPF may also offer signifi cant benefi ts relative to investing directly in residential real estate, including higher income yields, higher levels of tax deferred income and greater diversifi cation. 4

7 Flexibility and control makes investing easier Because the Fund is open ended, you can increase your investment at any time. The Fund s limited liquidity facility means you may be able to withdraw all or part of your capital when you need to 1. may reinvest distributions at a discounted 2 price by electing the Distribution Reinvestment Option ( DRO ). are not able to directly reinvest distributions. Access to information Investors can keep up to date on the Fund s Entry / Exit Price and performance through regular updates on the website, / mdpf, or you may contact us for details ( refer to the inside back cover ). Please contact your IDPS Operator for information on the progress of the Fund. Experienced management drives strong investment performance MDPF allows you to gain exposure to quality property investments without having to manage the direct property assets yourself. MDPML is responsible for all investment and asset management decisions made on your behalf in relation to MDPF. MDPML is staffed by members of Macquarie Real Estate, a division within the Macquarie Group. The Macquarie Group, its associates and Macquarie branded fund managers currently manage $28 billion in property assets across a global portfolio of listed and unlisted property entities and unlisted development funds. The Macquarie Group is a leading Australian investment management group that manages approximately $140 billion in superannuation, institutional and personal investments across a broad range of assets including property, infrastructure, Australian and international equities, money market, mortgages and fi xed interest securities. At November 2006, Macquarie employed almost 9,000 staff worldwide. We believe our relationship with Macquarie Real Estate and the Macquarie Group arms us with a signifi cant advantage over our competition. In addition to potential access to global property investment opportunities 3, we also benefi t from the wider resources of the specialist property team for asset and project management, funds administration, accounting and compliance, fi nancial structuring and underwriting, product distribution and corporate advisory expertise. Key risks As with all investments, an investment in the Fund is subject to certain risks. Key risks of an investment in the Fund include: property risk, or the risk that Property values decline due to changes in property market conditions revenue risk, or the risk that Fund income declines where a Property is not fully leased, rent levels decline or a tenant defaults on its obligations liquidity risk, or the risk that you have diffi culty in withdrawing your investment. Refer to Section 4 for more detailed information. 1 Refer to Section for limited liquidity facility conditions. 2 The DRO is not subject to the Buy Spread, as applicable. 3 No priority is given to MDPF for property investment opportunities and Macquarie has no obligation to present particular opportunities to the Fund. Asset Class Comparison Rolling Annual Returns ( Sep1986 Sep 2006 ) 90% Annual Return 70% 50% 30% 10% -10% -30% Direct Property Australian Equities Listed Property Australian Fixed Interest Source: Atchison Consultants Sep-86 Sep-88 Sep-90 Sep-92 Sep-94 Sep-96 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06 Investors should note that past performance is not a reliable indicator of future performance. Macquarie Direct Property Fund Product Disclosure Statement 5

8 3 How we manage the Fund 3.1 Our objective The Fund aims to deliver regular, tax effective income and capital growth by primarily investing in and actively managing a diversifi ed and growing portfolio of quality direct property and listed and unlisted property securities. The Fund also pursues opportunities to enhance returns by seeking to take advantage of opportunities within the Macquarie Group s global property investment pipeline including international real estate acquisitions and Macquarie funds. However, no priority is given to the Fund for particular property investment opportunities and Macquarie has no obligation to present particular opportunities to the Fund. From time to time, MDPF may be presented with competing investment opportunities from Macquarie and third party organisations. In such cases, the merits of each investment opportunity will be assessed by us with consideration of the Fund s objective and Investors best interests. It is acknowledged that the Manager is confl icted when comparing such opportunities as Macquarie will benefi t from fee generation if a Macquarie investment opportunity is selected over a third party opportunity. We manage this confl ict by requiring that all investments in Macquarie products be reviewed and approved by independent directors. Refer also to Section Our strategy We seek to achieve the Fund s objective by actively managing the Properties ( including through leasing campaigns and asset refurbishments ) to maximise total returns while exploring new opportunities to enhance performance and strengthen the portfolio.rigorous research on sectors and markets and due diligence are performed when evaluating new opportunities. The key components of our strategy are summarised below: invest in quality properties for the medium to long term and actively manage them to increase their values and income growth prospects grow our direct property portfolio through acquisitions or mergers that enhance income security, total return prospects and tax distribution status diversify revenues across fi ve categories of property investment: direct property, listed property securities, sub-underwriting of property securities, pre-ipo property investments and unlisted property trusts seek investment opportunities through Macquarie s property investment pipeline and joint venture partners to strengthen the current portfolio and improve overall returns enhance returns through Gearing. While the actual Gearing ratio will vary from time to time and may depend on market factors, the long term target range is 40% to 55% regularly review and rebalance the portfolio to ensure that progress and performance are consistent with our investment objective. 3.3 Our performance benchmark MDPF aims to outperform its index, the Mercer Unlisted Property Funds Index ( MUPFI ) or its sub-indices. More information about MDPF s benchmark index can be found at Section Target asset allocation Investment class Target allocation % Direct property Listed property securities 5 50 Unlisted property trusts 0 30 Sub-underwriting of property securities 0 20 Pre-IPO property investments 0 20 Cash / money market instruments 0 10 Target allocations may change due to factors that affect the Fund or its underlying portfolio. We intend that the Fund will hold a minimum 5% of total assets in listed property securities at all times to facilitate liquidity requirements. 3.4 Fund size As at 31 December 2006, MDPF was geared to 40% and comprised the following: Fund size Value ( $ m ) Direct property 337 Listed property securities 55 Unlisted property trusts and other assets 61 Total Fund size 453 Up to date information about the Fund s performance and size is detailed in the Fund Update sent to all Investors and can be found on our website at / mdpf. 6

9 3.5 Categories of property investment Direct property Up to 90% of MDPF s total assets will be allocated to direct property located in Australia and overseas. The direct property portfolio as at 31 December 2006 was as follows: Property location Net lettable area ( sqm ) Market value ( excluding Rental Guarantee, if any ) ( $ m ) Number of tenants 68 Pitt Street, Sydney 14, Walker Street, North Sydney 5, Pacifi c Highway, St Leonards ( Sydney ) 6, Queen Street, Melbourne 19, Bourke Street, Melbourne 15, Lonsdale Street, Melbourne 8, Adelaide Street, Brisbane 13, Total 82, The above portfolio s weighted average committed occupancy ( as a percentage of net lettable area ) was 98% as at 31 December Its weighted average lease term was 3.18 years as at 31 December Major tenants ( by area ) in the Properties at the date of this PDS are ANZ Banking Group, ING Australia, Australian Government Solicitor, Timbercorp, Teletech International, Meat & Livestock Australia and Maurice Blackburn Cashman. The Fund s direct property portfolio may change from time to time. Detailed, up to date information about the direct portfolio assets can be found on our website at / mdpf. Active asset management sustainability and safety MDPF is committed to adopting sustainable business practices across its Property portfolio to save energy and water, reduce greenhouse gas emissions and provide a safe working environment for tenants, visitors and contractors. By reducing waste and better managing resources, we can deliver improved services for existing tenants while making the buildings more attractive to future tenants. This translates to higher occupancies leading to increased income for Investors. Macquarie Asset Services Limited partners with Sydney Water to reduce water consumption across the portfolio. In fact, initiatives undertaken by Macquarie Asset Services Limited were recognised at the 2006 Every Drop Counts Business Program Awards run by Sydney Water in November. Upgrades that are undertaken in the Properties consider energy and water effi ciency as applicable. MDPF also has a comprehensive framework in place to provide a safe working environment in the Properties. This framework includes bi-annual property risk audits, annual assessments of health and safety performance of our external managers and regular reporting to the Manager s board on health and safety issues. Macquarie Direct Property Fund Product Disclosure Statement 7

10 How we manage the Fund continued Listed property securities Investments in listed property securities focus on listed property securities that derive a signifi cant majority of their income from property rentals. Investments of this type help us to provide fl exibility to Investors who wish to access their capital via the limited liquidity facility, whilst providing regular, reliable income and enhanced diversifi cation. The Manager will review this strategy as required. The following criteria are applied when selecting listed property securities: inclusion in S&P / ASX 300 Property Accumulation Index majority of income derived from property rentals minimal exposure to development, construction, residential and hotel activity within the portfolio of assets. International listed property securities will also be considered. The value of MDPF s holding of listed property securities is communicated to Investors quarterly in the Fund Update Unlisted property trusts MDPF may acquire or invest in unlisted property securities both locally and internationally. These investments may include property trusts managed by Macquarie or other fund managers. Examples of MDPF unlisted property trust investments include: ( i ) Macquarie Wanda Real Estate Fund ( MWREF ) initially a $25.6 million investment MWREF is a $665 million fund 1 which invests in an initial portfolio of 9 retail shopping complexes in mainland China. The investment provides sector and country diversifi cation for Investors and the potential for capital growth from a growing Chinese economy and middle class. As at 31 December 2006, the property portfolio had a strong weighted average lease expiry ( of 10.8 years ) and a high occupancy rate of ( 97% ). ( ii ) Arlington European Logistics Fund ( AELF ) initially a $21.8 million investment AELF has total equity commitments of $1.6 billion with a $464 million 1 seed portfolio of 12 European logistics properties located near major road, port and airport infrastructure. The fund is managed by Arlington Property Investment Management Limited, one of Europe s leading property fund management groups and subsidiary of the Macquarie Goodman Group, a leading global integrated property business. Investment in AELF provides further property sector and country diversifi cation for Investors and, as a foundation investor, MDPF has priority access to AELF future capital raisings on a pro rata basis Sub-underwriting of property securities MDPF can participate in sub-underwriting issues of listed property securities to generate additional fee income. The Investment Committee is responsible for recommending the Fund s participation, based on the Fund s investment capacity and the appropriateness of the sub-underwriting opportunity to MDPF s overall investment strategy. For example, in September 2006, MDPF participated in a $10 million sub-underwriting of Macquarie Leisure Trust Group s $70.5 million capital raising. As a sub-underwriter, MDPF committed to take a pro rata stake up to $10 million for any shortfall in the capital raising in return for a fee. The placement was oversubscribed. This is an example of how MDPF s relationship with the Macquarie Group has the potential to deliver higher returns to Investors Pre-IPO property investments The Fund evaluates opportunities to invest in property related investments from Macquarie Real Estate prior to their potential IPO. These investment opportunities will be compatible with MDPF s listed property securities investment strategy. Accessing investments prior to listing on a stock exchange may generate higher total returns. The Investment Committee recommends to the MDPML board whether or not the Fund should invest pre-ipo as property products are developed by Macquarie. MDPF s $20.1 million investment in the $1.1 billion 1 Macquarie Goodman Hong Kong Wholesale Fund ( MGHKWF ) is one example of a potential pre-ipo investment opportunity. MGHKWF presents attractive upside potential. As Hong Kong s industrial markets strengthen and Macquarie Goodman Asia manages and grows the portfolio, property income is expected to increase while asset values grow. 1 As at 31 December 2006 (unaudited). 8

11 4 Risks As with all investments, an investment in MDPF will be subject to risks, some of which are outside our control. If they eventuate, these risks may lower ( or even halt ) your distributions and / or reduce the capital value of your investment. Before investing, you should consider your attitude towards potential risks. The risks shown below are not exhaustive. However, it is our opinion that the following are key risks of an investment in MDPF: property risk, or the risk that Property values decline due to changes in property market conditions revenue risk, or the risk that Fund income declines where a Property is not fully leased, rent levels decline or a tenant defaults on obligations liquidity risk, or the risk that you have diffi culty in withdrawing your investment. These risks are outlined in more detail below. You should read this PDS in its entirety and consider consulting your fi nancial adviser, stockbroker or another professional adviser before deciding whether to invest. 4.1 Property investment risks These risks relate to investing in direct property and listed property securities: Property risk The risk that the acquisition price and ongoing value of Properties are infl uenced by changes in property market conditions, such as increases in supply or falls in demand in any of the property market sectors, or a change in the capitalisation rates considered appropriate by Valuers or otherwise generally applied in the market. Revenue risk The risk that Fund revenue decreases because a Property is not fully leased at a point in time, rent levels decrease or because tenants default on their obligations, leading to a loss of income and increased costs as a result of enforcement action. Vacancy periods may have an adverse impact on the Fund s net income and distributions, a Property s capital value and potentially the Entry / Exit Price. We aim to manage these risks through active Property management, including ongoing liaison with tenants and arrears management procedures, maintenance and upgrading of Properties as required and marketing of Properties with local leasing agents. Stock market risk The acquisition price and carrying value of the pool of listed property securities may be negatively infl uenced by general investment risks and other asset risks, but also by general stock market conditions. Property liquidity risk As direct property assets are by their nature illiquid investments, it may be diffi cult for us to dispose of assets in a timely manner at an optimal sale price. This may affect your ability to withdraw your investment from the Fund and may reduce the Fund s value. As well, we may take minority positions in structures that hold Properties. In these situations, the positions may be illiquid and may not give us the ability to infl uence the management of those Properties or their disposal. We acknowledge the illiquid nature of direct property and have added listed property securities as an asset class to MDPF to assist in reducing liquidity risk. Natural phenomena, terrorist attacks and force majeure risk The risk that natural phenomena, terrorist attacks or force majeure may affect the Properties. There are certain events for which insurance cover is not available or the Fund does not have cover. If the Fund is affected by an event for which it has no insurance cover, this would result in a loss of capital and a reduction to the Entry / Exit Price and overall returns. Property contamination risk Property income or valuations of Properties could be adversely affected by: discovery of an environmental contamination incorrect assessment of costs associated with an environmental contamination or with Property preservation. This risk may occur irrespective of whether the contamination was caused by MDPF or a prior owner. In the unlikely event that contamination occurs regarding the Properties, we will take appropriate action. Macquarie Direct Property Fund Product Disclosure Statement 9

12 Risks continued 4.2 Fund investment risks These risks relate specifi cally to the Fund: Liquidity risk There are certain operating conditions and limits within MDPF s liquidity facility. These are detailed in Section 6.8. In addition, Macquarie has rights to redeem certain classes of Units in priority to your Units (refer to Sections 6.5, 6.11 and 6.12). Consequently, if you are a Direct Investor, your withdrawal request may be scaled back at a withdrawal date or delayed to a later withdrawal date either because of the operating conditions and limits or because of redemptions to Macquarie. If you are an Indirect Investor, any withdrawal request made on your behalf by an IDPS Operator may be delayed to a later withdrawal date so that it may be processed in a single transaction, in accordance with IDPS Operator requirements. This is either because of the operating conditions and limits or because of redemptions to Macquarie. Refer to Section 6.8 for further information. These liquidity facility restrictions have been established to protect the interests of all Investors. In ordinary operating circumstances, withdrawal applications are expected to be processed on a daily basis with withdrawals generally being available within 10 Business Days of processing. Litigation risk In the ordinary course of operations, the Fund may be involved in disputes and possible litigation. These include tenancy disputes, native title claims, environmental and occupational health and safety claims, industrial disputes and any legal claims or third party losses. It is possible that a material or costly dispute or litigation could affect the value of the assets or the expected income of the Fund. We intend to manage this risk through tenant selection and property due diligence procedures. We also conduct periodic reviews on the Properties against applicable legislation and standards. Capital expenditure risk The risk that capital expenditure could exceed expectations, resulting in increased funding costs and therefore lower distributions. We aim to manage this risk by adopting the assumptions of the Valuers or a more conservative estimate for capital expenditure requirements, and by working in conjunction with building consultants to ensure cost estimates are realistic. Revaluation risk The risk that you may be disadvantaged as a result of a downward revaluation of Properties within the Fund. We aim to manage this risk by regularly reviewing the value of the portfolio to ensure that Entry / Exit Prices accurately refl ect the true value of Properties. Refinancing and interest rate risk The risk exists because the terms of the Loan or interest rate hedge may not be available on extension or refi nancing, or when new fi nance or hedging strategies are sought. There is also a risk that interest rates may rise. These risks may have a material, adverse impact on the Fund s activities, fi nancial position and distributions. This risk is dependent on economic conditions at the time fi nance is sought. Gearing risk MDPF is a geared investment product. Gearing magnifi es the impact of any movements in the value of properties. A breach of a Loan covenant may also result in MDPF s fi nancier disposing of Properties at less than optimal sale prices, for instance, in a depressed market. We aim to manage this risk by adopting the valuation policy detailed in Section 6.14 and by monitoring compliance with debt covenants. 10

13 Underwriting risk The strategy and structure of the Fund include an ability to sub-underwrite issues of listed property securities. There is a risk that where the Fund acts as a sub-underwriter, it may be allocated some or all of the underwritten securities at the time of their allotment. Like other listed property securities, these will be subject to changes in valuation which may result in a loss to the Fund where the price falls below the issue price. We aim to manage this risk through analysis and consideration of the risks of each sub-underwriting opportunity, including an assessment of market conditions and consistency with the Fund s objectives. Conflict risk MDPF may be affected by certain inherent confl icts of interest, including those described in Sections 3.1, and There is a risk that these confl icts may not be managed appropriately. We aim to manage this risk through independent director approval of all investments in Macquarie products. Country and foreign exchange risk The risk associated with investing in another country, including legal and political risk and the risk that movements in exchange rates will affect capital values and income earned in other currencies. We aim to manage these risks by investing in countries where Macquarie s property team has an understanding of the political, legal and regulatory regime and by adopting hedging strategies where appropriate. Manager risk By investing in MDPF, you delegate your control over operations and investment decisions to us. The success of the Fund depends largely on our performance or that of our external service providers, including property managers and the Listed Property Securities Manager, and is not assured. Our considerable property funds management experience positions us to maximise performance for Investors. Further, we have aligned our goals with the success of the Fund through performance fee incentives. Insurance risk Any losses incurred due to uninsured risks may adversely affect the performance of the Fund. Increases in insurance premiums may affect the performance of the Fund. Insurance premium increases could occur, for example, if the Fund claims under any insurance policy for signifi cant losses in respect of any Property. Any failure by the company or companies providing insurance ( or any reinsurance ) may adversely affect the Fund s ability to make claims under its insurance. All claims under the insurance policies have a minimum excess. We aim to manage this risk by maintaining insurance cover in respect of Properties ( including insurance for damage, destruction and public liability ). The price of insurance for some risks cannot be negotiated. Investment risk The risk that additional property investment activities, such as sub-underwriting or pre-ipo investments, may not eventuate, or to the extent they eventuate, may not produce increased returns relative to core property investment activities. 4.3 General investment risks These risks relate to the overall risk of most investments: Economic and market risk The risk that changes in the economy and market conditions affect asset returns and values, which in turn result in reduced distributions and falls in the Entry / Exit Price. Legal and regulatory risk The risk that changes in any law, regulation or government policy affecting MDPF s business ( which may or may not have a retrospective effect ) has an impact on the Fund s performance. Macquarie Direct Property Fund Product Disclosure Statement 11

14 5 Fees and other costs The following is a general disclosure required from 1 July 2006, pursuant to the Corporations Amendment Regulations 2005: Did you know? Small differences in both investment performance and fees and costs can have a substantial impact on long term returns. For example, total annual fees and costs of 2% of your Fund balance rather than 1% could reduce your fi nal return by up to 20% over a 30 year period ( for example, reduce it from $100,000 to $80,000 ). You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs. You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the Fund or your fi nancial adviser. To find out more If you would like to fi nd out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission website ( do.asic.gov.au ) has a managed investment fee calculator to help you check out different fee options. 5.1 Fees and costs of the Offer The table below shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the Fund assets as a whole. Taxes are set out in another part of this document. The fees shown below include Goods and Services Tax ( GST ) ( less any reduced input tax credits ) and stamp duty ( if applicable ). You should read all the information about fees and costs, as it is important to understand their impact on your investment. Fees when your money moves in or out of the Fund Type of fee or cost Amount How and when paid Establishment fee The fee to open your investment Nil Not applicable Contribution fee A fee on each amount contributed to your investment Withdrawal fee A fee on each amount you take out of your investment Termination fee The fee to close your investment Nil Nil Nil Not applicable Not applicable Not applicable 12

15 Management costs Type of fee or cost Amount How and when paid The fees and costs for managing your investment 1 The estimated management costs 1 comprise: ( i ) Base management fee 0.5% pa ( ii ) Expenses Estimated to be 0.21% pa ( iii ) Performance fee 20% of outperformance over benchmark. Calculated and accrued daily based on the Fund s gross assets and payable monthly. These are payable when incurred. They are based on the Fund s gross assets and will accrue in the daily Entry / Exit Price. If paid initially by us, then they will be reimbursed on presentation of the relevant invoices. Payable quarterly if applicable, the performance fee is based on the Fund s gross assets and its excess total return over the benchmark. The fee accrues in the daily Entry / Exit Price once we are reasonably certain that a performance fee will be payable. Service fees 2 Type of fee or cost Amount How and when paid Investment switching fee The fee for changing investment options Nil Not applicable 1 Refer to Section for a description of the fees and costs comprising management costs. 2 There may be additional adviser service fees agreed between you and your adviser. Refer to Section for additional information. Example of annual fees and costs This table gives an example of how the fees and costs for this product can affect your investment over a 1 year period. You should use this table to compare this product with other managed investment products. Example Balance of $50,000 with a contribution of $5,000 during year Contribution fee Nil For every additional $5,000 you put into MDPF, you will be charged $0. PLUS Management costs EQUALS cost of Fund 0.71% pa * For every $50,000 you have in the Fund, you will be charged $710 each year *. If you put in $5,000 during a year and your balance was already $50,000, then for that year you will be charged fees of $710 *. What it costs you will depend on the fees you negotiate with your Fund or financial adviser. * Additional fees may apply: performance fees may be payable, if the Fund outperforms its benchmark. The management fee is based on gross assets of the Fund and Gearing is assumed to be 50% in the example above. Macquarie Direct Property Fund Product Disclosure Statement 13

16 Fees and other costs continued 5.2 Additional explanation of fees and costs The following fees and costs may be payable by you directly or indirectly, in relation to your investment in the Fund: Management costs These comprise: ( i ) a base management fee, ( ii ) expenses relating to the management of the Fund and ( iii ) a performance fee if applicable. These are detailed separately as follows: ( i ) Base management fee We are entitled to an annual base management fee of 0.5% 1 of the Fund s gross assets. If we defer payment for any period, the fees will accrue until paid. For every $1 million of the Fund s gross assets, the annual base management fee would be $5,000. The maximum base management fee that we may charge or defer under the Constitutions is 0.69% of the Fund s gross assets. ( ii ) Expenses relating to managing MDPF The Fund will incur daily management and operational costs including postage, printing, registry costs and audit, legal, accounting and tax consulting costs. We are entitled to be reimbursed for them, on presentation of relevant invoices. For example, if we incur expenses of $1,000 in relation to the operation of MDPF, we may recover $1,000 from the Fund s gross assets. ( iii ) Performance fee We will be entitled to a fee equivalent to 20% of the outperformance amount if MDPF exceeds its benchmark index. This may be paid in cash or interests in MDPF. The outperformance amount is calculated by multiplying the value of the Fund s gross assets by the difference between the Fund s total return over the Performance Fee Calculation Period ( expressed as a percentage ) and the increase in the benchmark index over that period ( expressed as a percentage ). The Fund s total return is calculated by dividing the net asset value ( NAV ) per Unit at the end of the Performance Fee Calculation Period ( adjusted for any income or capital distributions during that period ) by the NAV per Unit at the commencement of that same period. The amount of performance fees payable in any one year is limited to 1% of MDPF s gross assets. Any performance fee that exceeds the 1% limit will accrue until paid in a year when they can be paid within the 1% limit. If applicable, the performance fee will be paid quarterly. We may choose to receive payment in a special class of Units, being Manager Units ( refer to Section 6.11 ), at the price per Unit applicable on the day the performance fee is due for payment. Outperformance by comparison to the benchmark index will be assessed on a cumulative basis. Any underperformance will be recovered before we are entitled to any additional performance fee. In any period of negative performance, we will not be entitled to accrue a performance fee in respect of that period. We may however, accrue or be paid performance fees relating to a prior period. If we are removed as Manager, if the Fund terminates, if the Fund is compulsorily acquired or listed or if there is a material change of ownership control, all performance fees that have been accrued will be payable to us immediately. Benchmark index MDPF s benchmark index will comprise components of the MUPFI. The benchmark index may change as the proportions of the Fund s underlying asset classes change. This fl exibility is designed to match the Fund s underlying assets and risk profi le with an appropriate benchmark. Where MDPF s underlying direct property assets are concentrated in one property sub-sector ( i.e. over 70% in either commercial offi ce, retail or industrial sub-sectors ), the benchmark index will be the weighted average return of those components of the MUPFI which have greater than 70% exposure to that property sub-sector. Where MDPF s underlying Property assets are not concentrated in any one property sub-sector ( i.e. not over 70% in either commercial offi ce, retail or industrial sub-sectors ), the benchmark index will be the MUPFI. The benchmark will be reviewed at the end of each Performance Fee Calculation Period and if appropriate, will be modifi ed to refl ect the Fund s new position. If the weighting of Property changes and necessitates a change in the benchmark index ( see below ), then a new benchmark index will apply from the beginning of the following calculation period. 1 This is a reduced fee offered to Wholesale Clients or IDPS Operators due to amounts invested by them generally being higher than amounts invested by Retail Clients. 14

17 Where listed property securities comprise 30% or more of MDPF s total assets, a composite benchmark index will be applied. The composite index will comprise the S&P / ASX 300 Property Accumulation Index ( in the same percentage as the Fund s total assets comprising listed property securities ) and the MUPFI ( one minus the above listed property securities percentage ). Performance fee example Assume that the benchmark returned 2% over one quarter, the Units returned 2.5% over the same period and the Fund s gross assets are $450 million. The outperformance for the period is 0.5% i.e. 2.5% less 2%. The outperformance fee is therefore 20% of the 0.5% outperformance i.e. 0.1%. Applying this to the Fund s gross assets, the outperformance fee that we are entitled to is 0.1% of $450 million, or $450,000 ( including GST ) Changes to fees and expenses We may increase the fees and expenses referred to above, or introduce new fees, for example, if economic conditions or the law changes ( within Constitution parameters ). We will provide at least 30 days notice to you of any proposed increase in fees and expenses or introduction of new fees. This notice period should give you suffi cient time to withdraw from the Fund if so desired. We cannot charge more than the Constitutions allow, unless we obtain Investors approval to do so. 5.3 Other fees and costs incurred in the normal course of business Other fees to advisers, IDPS Operators, Wholesale Clients and intermediaries We may also pay an amount of our base management fees to your adviser, to IDPS Operators for them providing MDPF on their investment menus, or to Wholesale Clients. This is because they invest large amounts of money into the Fund. We may also pay fees to, or provide fi nancial assistance to, fi nancial services intermediaries. These may be fi xed amounts or amounts based on a percentage of funds invested. These payments will be made by us and will not affect the Fund or Investors. We maintain a register ( in compliance with the Industry Code of Practice on Alternative Forms of Remuneration ) summarising alternative forms of remuneration that are paid or provided to certain advisers. Contact us if you would like to review this register. Differential fees We may negotiate reduced management fees as permitted by the Corporations Act and ASIC relief. For example, we negotiate reduced fees with Wholesale Clients, including IDPS Operators. There is no set manner or method of negotiating fees. In addition to any fees set out in this PDS, you and your adviser may agree that you will pay an additional fee to your adviser. Such fees are between yourself and your adviser and are therefore not paid by us or the Fund. In addition to any fees set out in this PDS, you may incur IDPS fees and expenses ( as set out in the IDPS offer document ). Such fees are between yourself and your IDPS Operator and are therefore not paid by us or the Fund Listed Property Securities Manager fee This is the fee that the Listed Property Securities Manager is entitled to. This fee is paid by us from our entitlement to the base management fee. Accordingly, this fee is not an additional cost to the Fund Transaction Costs These are costs incurred by the Fund for buying and selling direct property and listed property securities, and for processing withdrawals. They include brokerage, property stamp duty and legal and tax advice and property settlement costs. They are incorporated into the daily Entry / Exit Price represented by the following spreads: Buy Spread of 1% ( paid on entry into the Fund at a premium to the NAV per Unit ) Sell Spread of 0.5% ( paid on exit from the Fund at a discount to the NAV per Unit ). If you have invested $1,000 in MDPF, the Transaction Cost is equal to $10 on entry and $5 on exit. This is an additional cost to you. However, it is paid to the Fund and no part of the Buy Spread or Sell Spread is paid to MDPML or an external manager. Macquarie Direct Property Fund Product Disclosure Statement 15

18 Fees and other costs continued Transaction Costs continued We are entitled to estimate Transaction Costs under the Master Constitution. This estimate takes into account historic costs and any other relevant factors that may impact these costs in the future. Changes in the Buy Spread or Sell Spread will occur if there are changes in Transaction Costs. Material adjustments will be detailed in a supplementary PDS. Immaterial adjustments will be detailed on our website Operational costs These costs are associated with maintaining Properties and other assets and are a cost of the Fund. They include land tax, rates, insurance and repairs costs, to the extent they are not recoverable from tenants. These costs are accrued in the Entry / Exit Price once we believe they will be incurred. Operational cost example Assume that the NAV on a particular day is $250 million. If the annual Property expenses after tenant recoveries were $9 million ( or $24,658 on average per calendar day ), then the impact of operational costs on any day s Entry / Exit Price is cents per Unit Acquisition fee We are entitled to an acquisition fee of up to 1% of the purchase price of any Property we acquire on behalf of the Fund. For example, for a Property with a purchase price of $30 million, we would be entitled to an acquisition fee of up to $300,000 ( including GST ) Underlying management costs The underlying funds into which MDPF invests will typically have their own management costs. These costs are refl ected in the net performance of those funds. Management fees are usually expressed as a percentage of funds under management or gross assets. Performance fees are generally payable on outperformance of a specifi ed benchmark. The Entry / Exit Price of the underlying funds and MDPF are net of such fees Related party costs We may seek professional services for the Fund from related parties. The fees for these services will be charged at normal commercial rates to the Fund. Services include asset and project management, funds administration and management, asset acquisition / merger and structuring, accounting and compliance, fi nancial restructuring and underwriting, product distribution and corporate advisory. All parties and the fees chargeable for these services are subject to the approval of our independent directors. Fees may also be payable to related parties in relation to any investment by the Fund in securities managed by entities within the Macquarie Group, including the Manager. These will be considered by the Investment Committee and approved by our independent directors on a case by case basis. Where MDPF invests in other MDPML products, we are potentially entitled to more than one fee, albeit in different capacities. To the extent that we are entitled to an acquisition, base management or performance fee for MDPF associated with the investment in one of our products, these will only be taken where our independent directors are of the opinion that such fees are reasonable. This is on the basis that the investment is in the best interest of Investors and the benefi t of that investment outweighs the additional fees payable to us. Where MDPF invests in other, non-mdpml Macquarie products, our entitlement to acquisition, base management and performance fees will only be taken where our independent directors are of the opinion that such fees are reasonable and the total fees payable to Macquarie are reasonable. Again, this is on the basis that the investment is in the best interest of Investors and the benefi t of that investment outweighs the additional fees payable to us. Our investment selection criteria take into account the impact of fees on total investment returns, among other things. 5.4 Other fees and costs incurred as a one off payment or in unusual circumstances Retirement fee This is the fee payable to us on retirement or removal as MDPF s Manager. This fee will be equal to 12 months of the base management fee plus any performance fees accrued up to the date of retirement or removal as Manager. 16

19 5.4.2 Abnormal expenses GST These expenses are payable as they arise. They include expenses such as the costs associated with a change of Responsible Entity or termination of the Fund. They are accrued in the Entry / Exit Price once we become reasonably certain that they will be incurred. It is not possible to estimate abnormal expense recoveries. If we are liable or become liable to pay GST on fees described in this PDS ( regardless of whether the fee is GST inclusive ), we are entitled to be reimbursed the GST liability from the Fund. However, where available, the Fund will claim input tax credits or reduced input tax credits in respect of the GST charges. 5.5 Form of payment of fees to us Fees may be paid to us as cash or in the form of Manager Units which have similar rights as Ordinary Units. 5.6 Transaction Costs payable by the Fund In respect of Underwrite, Class C and Manager Units no Sell Spread will be charged. Accordingly, the Fund will bear the Transaction Costs of the redemption of these Units. Macquarie Direct Property Fund Product Disclosure Statement 17

20 6 Other information you need to know 6.1 Legal and regulatory matters Your relationship with the Fund and with us Your relationship with the Fund and with us is governed by this PDS, the Constitutions, the Corporations Act and other laws such as the general law relating to trusts and legislation about the duties of trustees. This PDS sets out some of the material rights of members of the Fund, many of which are contained in the Constitutions. If you wish to obtain a copy of the Constitutions, please contact us ( refer to the inside back cover ). In the event of any inconsistency between this PDS and the Constitutions, the Constitutions will prevail to the extent of the inconsistency. It is your IDPS Operator that has a relationship with us. Your rights are governed by your agreement with your IDPS Operator Material rights attaching to interests in the Fund The following material rights attach to interests held by members of MDPF: your liability is limited to the Issue Price paid or agreed to be paid, and remaining unpaid, for Units you are entitled to receive notice of any meeting of members of MDPF and of members of any Stapled Entity, and to receive all notices, fi nancial reports and other documents we are required to send to members you may attend meetings in person or by an attorney, representative or proxy subject to the Constitutions and the Corporations Act, you are entitled to vote on resolutions put at meetings of members of MDPF and of any Stapled Entity. You are entitled to one vote on a show of hands, and on a poll to one vote for each dollar in value of the total interests you have in MDPF and each of the Stapled Entities. For two or more joint Holders, if more than one of you is present at a meeting and votes that Unit, only the vote cast by the Holder whose name appears fi rst in the register will count towards the vote we may issue further interests for an Issue Price as specifi ed in the Constitutions based on the NAV plus Transaction Costs units in each of the Stapled Entities, which together comprise an interest in MDPF, cannot be transferred separately an interest in MDPF may be transferred in writing by using the appropriate standard transfer form referred to on our website. We may refuse to register a transfer of interests. A transfer of interests may be liable for stamp duty on the transfer you will be entitled to any income distributions pro rata with all other Holders of interests for each distribution period, subject to the rights attached to any particular interest we may, on behalf of the Stapled Entities, redeem interests for the redemption price specifi ed in the Constitutions based on NAV minus Transaction Costs. The Corporations Act restricts withdrawal from the Fund in circumstances where the Fund is not liquid, as defi ned in the Corporations Act if a Stapled Entity is wound up, then ( subject to rights attached to any particular class of Units ) you will be entitled to a share of the surplus assets of that Stapled Entity in proportion to the number of Units you hold. Your rights are governed by your agreement with your IDPS Operator Our relationship with the Fund Subject to the Constitutions and the Corporations Act, we have the same powers over the assets of the Stapled Entities comprising MDPF as we would have if we were the owner of the assets. We may hold interests in the Fund. We may contract with ourselves in another capacity, for example as trustee of another fund, and we may contract with related entities for the provision of services to the Fund paid for by the Fund. Subject to the Corporations Act, we are not liable to you for any loss suffered in any way in relation to the Fund if we have acted in good faith and without gross negligence. We are entitled to be indemnifi ed out of the assets of the Stapled Entities for any loss, damage, expense or other liability incurred by us in properly performing or exercising our powers including, to the extent allowed by the Corporations Act, liability arising from an act or omission of an agent or delegate. 18

21 6.1.4 Offers and issues under this PDS This PDS is for the offer of interests in and membership of MDPF which is registered as a managed investment scheme. Each interest in the Fund is a Stapled Security comprising one unit in each of the underlying Stapled Entities. Some Stapled Entities may cease to be registered as managed investment schemes while MDPF remains open. An up to date listing of the Stapled Entities can be found on our website or by contacting us. Your IDPS Operator can provide you with specifi c details on the Fund Stapled units An interest in MDPF has been formed by linking together, or stapling, a unit in each of the Stapled Entities. At any time that the Stapled Entities are stapled, a unit you hold in any particular Stapled Entity cannot be dealt with unless there is also an identical dealing by the same parties in respect of a unit you hold in each of the other Stapled Entities. This applies to every dealing, including for example, sale, transfer, redemption or issue of interests, and to a consolidation, subdivision, cancellation or other reorganisation of interests. If we consider it appropriate for a new entity to be stapled in the Fund, or to unstaple an existing Stapled Entity from the Fund, or to apply to list MDPF on a stock exchange such as Australian Stock Exchange Limited ( ASX Limited ), we may do so without further notice to, or approval of, Investors. In particular, the Constitutions provide that we may act as your agent and attorney to do all things necessary to give effect to any stapling. Upon listing, the Constitutions would facilitate compliance with the listing rules and the issue of interests by MDPF as a market based entity. As well, the performance fee calculation will be based, where the Fund is more than 70% weighted to a property sector, to the corresponding S&P / ASX property sector index, or where the Fund is not weighted to a particular sector, the S&P / ASX 300 Property Accumulation Index Corporate governance We will be applying the same corporate governance framework for the Fund as for other unlisted, direct property funds that we manage. Our corporate governance framework can be found on our website at / mdpf. A hardcopy of the corporate governance statement may be obtained by contacting us. The compliance plans for MDPF and each of the Stapled Entities describe the procedures that we will apply, as Responsible Entity of the Fund and each of the Stapled Entities, to ensure compliance with the Corporations Act and the Constitutions. Compliance plans are monitored by the MDPML board. As decisions about the selection, retention or realisation of the assets in the Fund are primarily based on economic decisions, we do not directly take into account labour standards or environmental, social or ethical considerations. However, sometimes these matters do indirectly affect the economic factors upon which investment decisions are based. Notwithstanding this, we are committed to adopting sustainable business practices across the Property portfolio. We will not issue Investors with a certifi cate for investments in MDPF as interests will not be certifi cated. You will receive a confi rmation for each investment in the Fund within 10 Business Days of us accepting your application ( with the exception of any distribution reinvestments ) and a distribution statement at the end of each quarter. Your IDPS Operator can provide you with confi rmation arrangements Macquarie asset allocation protocols Property assets sourced by Macquarie for inclusion in specialist funds follow formal procedures for asset entitlement based on fund mandates. Therefore, property assets are not exclusively offered to MDPF and it is possible that a new fund may be established by Macquarie and invested in by MDPF ( although Macquarie has no obligation to present such investment opportunities to MDPF ) Other information In the case of Stapled Entities which are registered schemes, the Corporations Act provides that any of the Constitutions may be modifi ed in any way by a special resolution of Investors. It also permits us to modify the Constitutions if your rights are not adversely affected. In the case of Stapled Entities which are not registered schemes, amendments may be made in accordance with the Constitutions. Macquarie Direct Property Fund Product Disclosure Statement 19

22 Other information you need to know continued Other information continued If we wish to retire as Manager, we must call an Investor meeting to explain our reasons for retirement and enable you to vote on a resolution to choose a new Responsible Entity. Also, you may call an Investor meeting to consider and vote to remove us as Manager and choose a new Responsible Entity. In each case, the resolution must be passed by at least 50% of the votes which could be cast by Investors entitled to vote on the resolution ( whether or not those persons do vote ). MDPF does not have a fi xed term and may continue to operate indefi nitely ( subject to perpetuity rules ). The Fund and each of the Stapled Entities may be terminated by us at any time by providing you a notice. The Fund and the Stapled Entities may also be terminated by a resolution of Holders passed by a majority of at least 50% of the votes which could be cast by Holders entitled to vote on the resolution ( whether or not those persons do vote ). 6.2 Cooling off period If you qualify as a Retail Client, a cooling off period of 14 days applies. In this period, you may cancel your investment by notifying us in writing. The 14 day period commences on the earlier of the date you receive your initial confi rmation notice or fi ve Business Days after your interests in the Fund are issued. If you cancel your investment during this period, the amount repaid to you may be adjusted in accordance with the Corporations Act to refl ect any increase or decrease in the value of your investment, any tax or duties payable by us, and administrative expenses and Transaction Costs associated with the acquisition and termination of your investment. The right to cooling off terminates immediately if you exercise a right or power under the terms of the Fund, such as selling part of your investment. For any subsequent contributions made under the terms of an existing agreement, or investments made by electing to reinvest distributions, the right to cooling off does not apply. You should consult your IDPS Operator about any cooling off rights you may have. 6.3 Taxation This section provides a summary of the Australian income tax considerations for individual Investors who subscribe for Units. The information below is both general in nature and a brief guide only, as the tax implications will depend on individual Investors circumstances. You should seek advice from a tax professional Trust distributions You will be subject to tax on your share of the net income of the Stapled Entities ( except for RECI Trust ) in the year in which your entitlement arises. This applies irrespective of whether distributions from the Stapled Entities are paid in the following income year or reinvested in the Fund. The net income may include rental income, interest, dividends, distributions and realised capital gains. Where the Stapled Entity has investments in foreign listed property securities or in foreign unlisted property trusts, the net income may include amounts of attributable foreign investment fund income or attributable controlled foreign company income. Income from sources outside of Australia may be subject to foreign tax. Generally speaking, distributions of such income would need to be increased by the amount of any such foreign tax for the purposes of working out your assessable income. You could be entitled to a foreign tax credit which would reduce the amount of Australian tax you are required to pay on such foreign income. Where the net income includes a dividend, you will be required to include the attached franking credit ( if any ) in your assessable income. You will generally be entitled to a tax offset equal to the amount of the franking credit, subject to satisfaction of the 45 day rule discussed below. Any Tax Deferred ( non-assessable ) Component of income will be non-taxable in the year of distribution but will be applied to reduce an Investor s cost base in the Units. Investors will be subject to tax on the Tax Deferred ( non-assessable ) Component of distributions made by the Stapled Entities ( except for RECI Trust ) to the extent the non-assessable amount exceeds the cost base of the Units. RECI Trust is taxed as a company for tax purposes as it is a public trading trust. You will be required to include the cash amount of any distributions paid by RECI Trust plus the attached franking credit ( if any ) in your assessable income. You will generally be entitled to a tax offset equal to the amount of the franking credit. In order to be entitled to a tax offset you must have held your units in the RECI Trust for at least 45 days ( not including the day of acquisition or the day of disposal ). This is known as the 45 day rule. However, we note that this rule does not apply if your tax offset entitlement ( on all shares and interests in shares held ) does not exceed $5,000 for the income year in which the distribution is paid. Each year, we will send you a tax summary to assist you to prepare your income tax return. 20

23 Your IDPS Operator can provide you with information to assist your income tax return preparation Disposal of interests in the Fund As a result of the stapling, the component securities comprising a MDPF interest cannot be traded separately. However, for Capital Gains Tax ( CGT ) purposes each underlying security is a separate CGT asset. If you redeem or transfer a MDPF interest, you will be disposing of each underlying security. You will need to take any resultant capital gain or loss into account when determining the net capital gain to be included in your assessable income in the year in which the redemption or transfer occurs. The consideration for the disposal of each underlying interest in MDPF should be calculated as the total consideration received in respect of the MDPF interest apportioned on a reasonable basis across each underlying Unit. Quarterly, we will update the Fund s website with the relative net assets of each of the underlying trusts to assist you in apportioning the total consideration received. The CGT treatment depends on the date of acquisition and the holding period of each underlying unit. The capital gain on the disposal of the underlying units is calculated as follows: the capital gain or loss is the excess or shortfall of the allocated disposal proceeds over the cost base of the relevant underlying units if the underlying units have been held for less than 12 months, this is the amount of gain or loss included in the net capital gain calculation if the underlying units have been held for 12 months or more and there is a loss, similarly this loss is included in the net capital gain calculation if the underlying units have been held for 12 months or more and there is a gain, the gain is eligible for a CGT discount ( being half of the gain for individuals or trusts and one third of the gain for complying superannuation entities under current tax legislation ) Tax File Numbers ( TFNs ) and Australian Business Numbers ( ABNs ) You do not need to quote a TFN when applying for Units. However, if a TFN is not quoted, or no appropriate TFN exemption information is provided, tax will be deducted from income distribution entitlements at the highest marginal tax rate plus Medicare levy. If you hold interests in the Fund as part of your business, you may quote your ABN instead of your TFN Non-residents for Australian tax purposes The law may require deductions in respect of Australian taxes to be made from distributions to Investors who, for Australian tax purposes, are non-residents. We will assume all Investors with an international address are non-residents for Australian tax purposes. 6.4 Enquiries and complaints If you have an enquiry or complaint, you may contact us using the method most convenient for you as listed in the inside back cover. We are also a member of the Financial Industry Complaints Service ( FICS ). FICS is an independent fi nancial services industry complaints resolution body that you may contact if you have a complaint that is not satisfi ed within a reasonable time or if you are not satisfi ed with our response. To contact FICS, call or write to PO Box 579, Collins Street, West Melbourne VIC Please contact your IDPS Operator. 6.5 Underwrite Units From time to time, Underwrite Units may be issued to Macquarie if it invests in MDPF. No Buy Spread will apply to the issue of Underwrite Units. Underwrite Units have similar rights as other interests in the Fund, except that Macquarie may require them to be redeemed at the NAV per Unit prevailing at the time of redemption from the proceeds of the issue of new Ordinary Units in priority to any other class of interests. There will be no Sell Spread for the redemption of Underwrite Units. 6.6 Entry / Exit Price The Entry / Exit Price is derived from the NAV per Unit adjusted for Transaction Costs ( i.e. Buy Spread / Sell Spread ). Refer to Section 5 for fees and costs. The NAV is calculated by subtracting the liabilities ( including accrued expenses ) of the Fund from the assets ( including accrued income ) of the Fund. Our policy for valuing Property is set out in Section In the case of a listed property security, the value applied will be the last price at which the security was traded. The Entry / Exit Price includes income received during a distribution period. Immediately after the end of the distribution period, the Entry / Exit Price may fall to refl ect the Fund s reduced value due to distribution liability and / or payment. MDPF prices all Units at the close of business on the effective date of your transaction to avoid dilution of all Investors interests. Macquarie Direct Property Fund Product Disclosure Statement 21

24 Other information you need to know continued 6.6 Entry / Exit Price continued The last Entry / Exit Price each Business Day is published on our website at au / mdpf. Your IDPS Operator can provide you with Entry / Exit Prices Daily cut off for applications and withdrawals The daily cut off for applications is 12pm Sydney time. If we receive your application and Application Monies or withdrawal request on or before 12pm, your transaction will be processed at the Entry / Exit Price applicable at the close of business that day. If your application or Application Monies or withdrawal request is received after 12pm, we will apply the Entry / Exit Price derived on the next Business Day. Should we ever need to suspend pricing on MDPF, you will be notifi ed of this on our website. We will seek to resolve any pricing issues quickly to avoid disruption to you. Refer to Section for further information. Your IDPS Operator can provide you with details on cut off times and details on Entry / Exit Prices. 6.7 Distributions Income distributions are payable quarterly Distributions represent the income attributable to you from an investment in the Fund. Distributions will be determined by us and will primarily comprise rental income, but may also include income from interest, dividends, distributions and realised or unrealised capital gains. We may determine not to distribute all income of the Fund as an allowance against any increase in capital expenditure requirements, vacancies, tenant incentives or Property Outgoings. MDPF will have quarterly distribution periods that will end on the last day of March, June, September and December. The distribution per Unit will be determined by dividing the total amount available for distribution ( as determined by us ) for any given period by the number of Units eligible to receive distributions on the last day of the distribution period. Distributions paid may fl uctuate from quarter to quarter. Any distribution paid out to you will generally be made between 15 and 30 days after the end of a distribution period and must be made within three months. The amount distributed to each Investor will be based on the number of interests held by the Investor on the last day of each distribution period. You may elect to have distributions paid directly into an Australian bank account or other account with a fi nancial institution ( where there is a branch in Australia ), or to reinvest your distribution into additional interests in MDPF. If you do not provide valid bank account details to receive your distribution, it will be automatically reinvested into the Fund. We will not pay distributions by cheque. We will publish the estimated distribution payment dates for the current fi nancial year on our website at / mdpf. Your IDPS Operator can provide you with distribution options and the timing of any distribution payments Reinvesting your distributions You may elect to reinvest your distributions. These distributions are reinvested on the fi rst Business Day of the next distribution period at an ex-distribution price. DRO contributions are not subject to the Buy Spread. To reinvest distributions, you must nominate to do so on the Application Form ( or update your DRO status with the Registrar ). Please note however, at any time that you notify us that your address has changed to an international address, we will not be able to reinvest your distributions. Your IDPS Operator can provide you with distribution options. 6.8 Withdrawing monies You can only withdraw through your IDPS Operator in accordance with their terms and conditions. Provided the Fund has suffi cient available funds to do so and withdrawals are within our prudential guidelines, we aim to meet any valid withdrawal request within 10 Business Days of processing. We will generally process withdrawal requests in order of receipt. Under the Constitutions, we have up to 360 days to process a withdrawal request. The prudential guidelines we have adopted are set out on the next page. 22

25 6.8.1 Daily limited liquidity facility The purpose of the limited liquidity facility is to enable you to apply for withdrawals of all or part of your investment. Withdrawal applications are expected to be processed on a daily basis with withdrawals generally being available within 10 Business Days of processing. Any withdrawals from MDPF will be subject to the Sell Spread to cover Transaction Costs. Net withdrawals will be funded from the portfolio of listed property securities and other liquid assets. We intend to hold at least 5% and up to 50% of total assets in listed property securities and up to 10% in cash and other liquid assets. To facilitate an orderly procedure for withdrawals, we adopt prudential guidelines to restrict the level of withdrawals from the Fund by: ( i ) limiting the monthly value of withdrawals ( ii ) placing withdrawals on hold in certain circumstances. In exercising our powers under the Constitution to process withdrawals, we are required by the Corporations Act to act in the best interest of Investors, and to treat Investors who hold interests of the same class equally. In carrying out this duty, we may vary the conditions set out below at any time. ( i ) Limiting the monthly value of withdrawals We have the discretion to delay processing your withdrawal request where requests during the month exceed 5% of the Fund s total equity at the beginning of the month ( if we do not place withdrawals on hold under condition 2 ). If the 5% equity limit is reached in any one month, your withdrawal request will be delayed until equity in the Fund increases through new applications or until the next month ( whichever occurs fi rst ). ( ii ) Placing withdrawals on hold in certain circumstances We have a discretion to hold withdrawals or suspend pricing in certain circumstances. These circumstances include when a withdrawal request would result in: the Fund s listed property securities falling to below 10% of equity the Fund approaching trigger levels to avoid breaching debt covenants other Investors being disadvantaged. In addition, if we become aware of an event which may materially impact the NAV of the Fund, we may suspend the daily Entry / Exit Price. This could result in application and withdrawal processing being delayed. In the event that the Exit Price is suspended, we may cease processing those withdrawal requests already received. A material event might include the default of a signifi cant tenant, an uninsured force majeure event, the inability to refi nance, signifi cant litigation or changes in regulatory requirements and / or accounting standards. Example Assume the Fund s total equity is $250 million, listed property securities comprise 20% or more of equity, net withdrawal requests of $12.25 million ( i.e. 4.9% of Fund equity ) have already been received throughout the month and there are no circumstances which require us to suspend withdrawals. If you apply to withdraw: $250,000 ( i.e. 0.1% of Fund equity ), this will be processed immediately with payment within 10 Business Days $500,000 ( i.e. 0.2% of Fund equity ), a full withdrawal will result in a breach of the 5% equity limit. Hence, your request to withdraw will be processed in more than one instalment. This means that the fi rst $250,000 will be processed at the time of request, with the remaining $250,000 being processed: at a later date within the same month to the extent that new applications are received within the same month to fund your withdrawal request or during the next month. The Exit Price is reported on our website each day. The Exit Price will be the NAV per Unit discounted by the Sell Spread to cover Transaction Costs per Unit. You can download the Withdrawal Form from our website / mdpf or you may request it from us ( refer to the inside back cover for a full contact listing ). Any withdrawal request made on your behalf by an IDPS Operator will be processed in a single transaction, in accordance with IDPS Operator requirements. To the extent that suffi cient funds are not available to process an IDPS Operator s withdrawal request, the full request to withdraw will be held over until funds are available. In that respect, hold a separate class of Units. Macquarie Direct Property Fund Product Disclosure Statement 23

26 Other information you need to know continued Payment of withdrawn funds Withdrawals will generally be available within 10 Business Days of processing 1. Once a valid withdrawal request has been received, your funds will be paid to you by electronic transfer to an Australian bank account or other account with a fi nancial institution ( where there is a branch in Australia ). ( Refer to Section 7.1 for requesting a withdrawal. ) We will not issue cheques for withdrawals. If you request a partial withdrawal, you will be subject to the minimum withdrawal and minimum balance amounts as specifi ed in Section 1. Where you do not satisfy the above conditions, we have the discretion not to process your withdrawal request. Withdrawal funds will be paid in accordance with your IDPS Operator instructions Procedures to deal with unusual circumstances In the event that the Fund becomes illiquid ( as defi ned by the Corporations Act ), withdrawals will be suspended. We may subsequently make an offer to all Investors to withdraw; however, we are not obligated to do so. In these circumstances, we will advise you on the withdrawal offer, including details on the period for which withdrawal requests will be valid, and which assets will be used to accommodate the withdrawal offer. Your IDPS Operator will advise you on withdrawal procedures in the event that the Fund becomes illiquid ( as defi ned by the Corporations Act ). 6.9 Debt funding The Fund may have more than one borrowing facility. The Fund s primary borrowing facility is from a major Australian fi nancial institution for two years. The facility providers have recourse to the Fund s assets in priority to the claims of member interests. The primary debt facility in place at the time of this PDS provides a total borrowing capacity of up to 65% of the value of the Properties. We may increase the borrowing capacity from time to time. 1 The Constitutions allow us up to 360 days to process and pay withdrawals. These procedures are designed to facilitate orderly procedures for withdrawal Disclosures, consents and disclaimers Disclosures In the course of normal activity, the Macquarie Group may have a fi nancial interest in MDPF as principal, fi nancier or adviser. The Macquarie Group also may provide Loans, interest rate management and cash management products to the Fund Consents and disclaimers The parties below have given and not before the issue of this PDS withdrawn, their written consent to including their name, reports and / or statements ( as applicable ) in this PDS, and any express references to their name, reports and / or statements in the form or context in which those references are made: the Custodians as custodian in the form and context in which it is named the Registrar as registrar in the form and context in which it is named. None of the parties above has made, or claims to make, any statement that is included in this PDS or any statement on which a statement made in this PDS is based other than as specifi ed above. Each party, to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any statements in, or omission from, this PDS, other than as consented to above. Other than as required by law, no responsibility is taken by us or by any of the engaged experts for any statement made in connection to the Fund or the Offer, other than those statements contained in this PDS. We have disclosed all the current and threatened civil litigation, arbitrations, proceedings and administrative appeals, and criminal or governmental prosecutions of a material nature in which the Fund is directly or indirectly concerned, in Section 4. We are not aware of any other matters that may have a material adverse impact on the business or fi nancial position of MDPF. As a disclosing entity, the Fund is subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC in relation to the Fund may be obtained from, or inspected at, an ASIC offi ce. Of these, you have the right to obtain from us, free of charge, a copy of the most recent annual report lodged with ASIC, any half yearly report lodged after the annual report but before the date of this PDS and any continuous disclosure notices given by the Fund after the lodging of the annual report and before the date of this PDS. Your IDPS Operator can provide you with reports on the Fund. 24

27 6.11 Manager Units Fees may be paid to us as Manager Units which have similar rights as Ordinary Units, except that we may require them to be redeemed at the NAV per Unit prevailing at the time of redemption from the proceeds of the issue of new Ordinary Units, in priority to the redemption of any other class of Units excluding Underwrite Units. There will be no Sell Spread for the redemption of Manager Units Units issued to the Macquarie Group As at the date of this PDS Macquarie Bank Limited holds Class C Units worth $30 million. These Class C Units were issued to partially fund the acquisition of shares in Macquarie Wanda Real Estate Fund and Macquarie Goodman Hong Kong Wholesale Fund as well as subscription for units in the Arlington European Logistics Fund. Refer to Section and for more information on these investments. The Class C Units were issued on terms identical to Ordinary Units with the exception that no Sell Spread will be charged and the Class C Units will have a priority right of redemption out of the proceeds of new issues of Units in MDPF but will otherwise rank pari passu with other Holders. From time to time, further issues of Units may be made to Macquarie Bank Limited on terms similar to or different to the current Class C Units Rental Guarantees Some Properties have Rental Guarantees. The provision of Rental Guarantees benefi ts MDPF by providing income certainty over particular vacancies and / or income support until the Rental Guarantee is used up or expires. Details of any Rental Guarantees over Properties may be found on our website. Your IDPS Operator can provide you with details of any Rental Guarantees over Properties Accounting policies The following key accounting policies have been adopted for MDPF: the fi nancial information is prepared in accordance with the Constitutions, Australian equivalents to International Financial Reporting Standards ( AIFRS ) and the Corporations Act fi nancial information of the Fund refl ects the assets, liabilities and results of all controlled entities the effects of all transactions between entities in the Fund are eliminated in full initially, Properties are measured at cost, including Transaction Costs. Subsequent to initial recognition, Properties are stated at fair value. Any change in the fair value of Properties will be recorded as an unrealised gain or loss in the income statement Properties will undergo regular independent valuation reviews. Approximately 25% of direct property ( in value ) is independently valued each quarter and assessed by our directors at each Reporting Date. Managers valuations will also be performed any time we become aware of circumstances which we consider would signifi cantly impact the Entry / Exit Price. Entry / Exit Prices are driven from the underlying Property values listed and unlisted property securities are recorded at their fair values and any change resulting from a revaluation will be recorded in the income statement as an unrealised gain or loss investment properties are not depreciated for accounting purposes. However, taxation allowances in respect of buildings and plant and equipment depreciation are available. These taxation deductions form part of the Tax Deferred Component of distributions refer to Section lease incentives are included in Property values and are amortised on a straight line basis over the lease period borrowing establishment costs are amortised over the period of the Loan using the effective interest rate method derivatives used to hedge the Fund s interest rate and foreign exchange risks are recorded at fair value in the balance sheet with movements recognised in the income statement Property rental income is recognised on a straight line basis over the lease term. Rental Guarantee income is recognised in accordance with the terms of the Rental Guarantee under current Australian income tax legislation, the Stapled Entities are not liable to income tax provided their taxable income ( including assessable realised capital gains ) is fully distributable to Investors by way of cash distributions or reinvestment Units on issue are classifi ed as fi nancial liabilities under AIFRS APIR Code MDPF s wholesale APIR Code is MAQ0448AU. Macquarie Direct Property Fund Product Disclosure Statement 25

28 7 How to invest in the Fund 7.1 How to invest Investing in this Fund can be done in one of two ways, depending on whether you are a Direct or Indirect Investor. You should retain a copy of this PDS and any supplementary documents for future reference and if you wish to make additional investments in the Fund. You may invest indirectly in the Fund as an Indirect Investor through an IDPS by directing your IDPS Operator to acquire Units in the Fund on your behalf. An Indirect Investor does not become an Investor in MDPF. Indirect investors do not acquire the rights of an Investor of the Fund or acquire any direct interest in the Fund. The IDPS Operator acquires these rights and can exercise, or decline to exercise, them on your behalf according to the arrangements governing the IDPS. If you invest in the Fund through an IDPS, you should ignore information in this PDS that is relevant only to. Fees and expenses applicable to the IDPS ( and set out in the IDPS offer document ) are payable in addition to the fees and expenses stated in this PDS. On or from the date of this PDS, to invest in MDPF directly, you need to complete the Application Form and submit it to us with your payment. Initial investments made directly must be for a minimum of $50,000. How to complete your Application Form Please complete the Application Form using black pen and write in CAPITAL LETTERS. The Application Form has space for two applicants details only. If more than two applicants wish to jointly invest in MDPF, please attach additional copies of the Application Form with the additional applicants details. For examples of correct forms of registrable account names refer to Section 9.2. If you are opening an account on behalf of a child, i.e. acting as a trustee, you will need to refer to the information on TFNs below. If you are opening an account on behalf of a child or another entity, we require you to provide supporting documentation as applicable, such as evidence of the capacity in which the investment is held or a power of attorney. We have included a space for you to complete your address on the Application Form. If your mailing address is care of a third party such as your adviser, be aware that all correspondence will be sent to this address, including statements. If you need help completing the Application Form, please refer to the inside back cover for a full contact listing. What happens if you don t provide your TFN or ABN It is not compulsory to provide your TFN or ABN, and it is not an offence if you decline to provide your TFN or ABN. However, tax will be deducted from the income paid at the highest marginal rate plus Medicare levy if you do not provide a TFN or ABN or claim an exemption. These numbers can be provided on the Application Form when making an initial investment. This also applies when you are opening an account on behalf of a child ( i.e. acting as a trustee ). Who should sign the Application Form? Individuals: all individual( s ) in whose name the account is opened must sign the Application Form for the application to be valid. Joint applicants will be deemed joint tenants. Corporations: must be signed either under seal or by: two directors or a director and the company secretary the sole director and secretary ( if applicable ). Incorporated associations: must be signed under seal and an original certifi ed copy 1 of the association s certifi cate of incorporation must accompany the Application Form. Unincorporated associations: the application form must be fi lled out in the name of a member( s ) of the association and signed by the individual( s ) as outlined above. Trust applications must be signed by the trustee( s ). If you are signing under a power of attorney, you will need to attach an original certifi ed copy 1 of the power of attorney and specimen signature( s ) of the attorney( s ) for us to be able to process your application. 1 A copy which is certifi ed as being a true and accurate copy of the original by a Justice of the Peace, a lawyer or a commissioner of declarations. 26

29 Application terms and conditions The Investor( s ) represent( s ) and warrant( s ) that: you have not received the PDS outside Australia and are not acting on behalf of a person residing outside Australia you have read and understood the PDS to which this Application Form relates if you are an individual, you are at least 18 years of age and are legally capable of signing the Application Form. We reserve the right to reject any Application Form in our absolute discretion. If this happens, the relevant Application Form will be returned to the applicant with their Application Monies and no Units will be allotted under that application. No interest will be paid for that application. Funding your investment application You will also need to enclose your Application Monies with the Application Form to secure your investment in MDPF. We will accept: ( i ) cheques drawn on an Australian branch of a bank or other fi nancial institution and made payable to Macquarie Direct Property Management Limited MDPF Offer Account for the total subscribed amount. All cheques should be crossed not negotiable and must be in Australian currency. ( ii ) funds transfers. Please contact us for instructions on how to deposit Application Monies via a bank transfer. Please refer to the inside back cover for a full contact listing. Borrow to invest via Macquarie Property Access Macquarie Property Access is a property loan that allows you to borrow up to 60% of your capital to invest in MDPF. For more information on this product, please telephone us on or visit / propertyaccess. After you have lodged your Application Form We will aim to send you a Statement of Account within 10 Business Days of accepting your application. If we are unable to accept your application, for example if the Application Form is completed incorrectly, we may delay processing your application for up to 30 days. If your application is not processed before the end of the 30 day period, Application Monies will be returned to you ( without interest ). If a payment is for any reason dishonoured, the respective issued interests will be cancelled. No application to withdraw or transfer interests will be accepted within fi ve Business Days of us allotting your interests. How to make additional contributions to your investment Additional investments can be made at any time by completing an Application Form attached to the PDS, which is available on our website. Additional investments must be in multiples of $1,000, and will be subject to a Buy Spread, as applicable. How to reinvest your distributions into the Fund You may nominate to reinvest your distributions into the Fund by simply ticking the appropriate box on the Application Form. Please note that if you do not provide valid bank account details to receive your distribution, it will be automatically reinvested. Distributions are reinvested on the fi rst Business Day of the next distribution period at an ex-distribution price. There is no Buy Spread payable on DRO contributions. The DRO is not available to non-australian residents. Australian residents who become non-residents will be requested to provide bank account details for an account domiciled in Australia. How to withdraw your investment You may apply to us to withdraw your interests by completing a Withdrawal Form, which is available on our website. If you change your mind about investing in MDPF, you need to apply to withdraw your interests in the same manner as for other Investors. You may also want to review the details regarding the cooling off period ( refer to Section 6.2 ). How to monitor your investment As an Investor, you will receive regular communications from us regarding the progress and the performance of the Fund. These will include: quarterly Statement of Account and Transaction Summary investment and withdrawal notices ( for all account movements ) distribution statements ( as at the end of the quarter ) quarterly Fund Updates annual tax statements and annual reports other information that may be shared with you via post or electronically. Macquarie Direct Property Fund Product Disclosure Statement 27

30 How to invest in the Fund continued How to monitor your investment continued You may also use our website to keep track of the Fund s daily Entry / Exit Price and view the latest independent research reports on the Fund. Alternatively, you may contact us directly to request information regarding the performance of the Fund and your investment. If you have an adviser or change your adviser If you have an adviser, your adviser may also be provided with details on your investment in MDPF. If you decide to change your adviser during the course of your investment in MDPF, it is the responsibility of your new adviser to provide us with appropriate documentation to receive ongoing trail commission. That is: redirection notice signed by you and your new adviser notice from your outgoing adviser surrendering trail commission relating to your investment in MDPF. We will endeavour to update adviser records when we receive the above documentation and are satisfi ed it meets our requirements. The change will become effective on the date the change is processed. 7.2 Use of personal information You do not need to give us any personal information requested in the Application Form or in any other document or communication relating to the products or services we supply you. However, without this information, we may not be able to process your application or provide you with an appropriate level of service. By completing the Application Form, you agree to MDPML: collecting, holding and using your personal information to process your application, as well as administering and managing the Fund. This includes monitoring, auditing and evaluating the Fund, modelling data, data testing, communicating with you and dealing with any complaints or enquiries providing your personal information to other companies in the Macquarie Group as well as to external service providers situated in Australia or offshore, which provide services in connection with MDPF. These may include for example, mail houses or professional advisers using your personal information to offer products or services that may be of interest to you unless you request us not to supplying fi nancial advisers with information about your investment, if a fi nancial adviser s stamp appears on the Application Form disclosing your personal information to other parties if you consent or if we believe that the law requires or permits us to do so, or to any person proposing to acquire an interest in our business, provided they agree to treat your information in accordance with the Privacy Act 1988 ( Cwlth ). Other Macquarie companies may use your personal information to offer products or services that may be of interest to you unless you request us not to allow this. We will not sell your personal information to other organisations to enable them to offer products or services to you. Under the Privacy Act 1988 ( Cwlth ), you may request access to any of your personal information that we hold. You can contact us to make a request relating to the privacy of your personal information. Please refer to the inside back cover for a full contact listing. Macquarie s privacy statement and details on how you may access or update your personal information can also be found at / au / privacy_policy.htm. We do not collect or hold any personal information about you in connection with your investment in MDPF. You should contact your IDPS Operator for details on the collection, storage, use and disclosure of personal information. 7.3 Authority for IDPS Operators to use this PDS We consent to the use of this PDS by IDPS Operators that include the Fund on their investment menus. 28

31 8 Glossary Term Definition $ or cents Australian currency unless otherwise stated. ABN AIFRS APIR Code Application Form Application Monies ASIC ASX Limited Business Day Buy Spread Constitution Australian Business Number. Australian equivalents to International Financial Reporting Standards. Asia Pacifi c Investment Register Code. APIR Codes are standard identifi ers for products in the fi nancial services industry. MDPF s wholesale APIR Code is MAQ0448AU. Form accompanying this PDS for use in applying under the Offer. Monies payable by you for interests in the Offer. Australian Securities and Investments Commission. Corporations Act Corporations Act 2001 ( Cwlth ). The principal exchange for trading in shares, bonds and other listed securities in Australia. Trading day in Sydney, commencing 8.30am Sydney time and fi nishing 5.30pm Sydney time. Our estimate of Transaction Costs associated with buying investments. The Entry Price at investment can differ from the NAV per Unit because of Transaction Costs. Any one of the Master Constitution or the constitution of any of the Stapled Entities as amended from time to time. Custodian Trust Company Limited ( ACN ) State Street Australia Limited ( ABN ). Direct Investor DRO Entry / Exit Price Fund Fund Update Gearing GST Holders IDPS IDPS Operator Indirect Investor Investment Committee An Investor who invests in the Fund by completing an Application Form and forwarding it to our Registrar or us for processing, without going through an IDPS Operator. Distribution Reinvestment Option. The price at which an interest in MDPF is issued or redeemed at a point in time. The Entry / Exit Price for a class of Units is calculated as the total of MDPF net assets attributable to those Units divided by the number of Units on issue and adjusted for Transaction Costs per Unit. Macquarie Direct Property Fund ( ARSN ). An open-ended, unlisted property fund comprising units in the Stapled Entities. Also referred to as MDPF. Quarterly newsletter issued to MDPF Investors providing, among other things, performance, property market and outlook information. Borrowing money to directly or indirectly fund new investments. MDPF s gearing is calculated by dividing the Loan by the sum of direct property, listed property securities and other investments. Goods and services tax. Holders of Units or units in the Stapled Entities. Investor Directed Portfolio Service. IDPS is provided by an IDPS Operator, who makes investments into products on behalf of its clients and provides a reporting service to these investors. Some master trusts and wrap accounts are examples of IDPS arrangements. The trustee or operator of an IDPS. An Investor who invests in the Fund through an IDPS by directing their IDPS Operator to acquire Units in the Fund on their behalf. A committee, comprising MDPML s senior management, responsible for recommending investment decisions to the board of the Manager. Macquarie Direct Property Fund Product Disclosure Statement 29

32 Glossary continued Term Definition Investor IPO Issue Price Listed Property Securities Manager Loan Macquarie or Macquarie Group Macquarie Bank Limited or MBL Macquarie Goodman Asia Macquarie Real Estate MDPF Manager Master Constitution MUPFI NAV NAV per Unit Offer Ordinary Units PDS Performance Fee Calculation Period Property( ies ) Property Outgoings RECI Trust Registrar Any eligible person or entity subscribing or considering subscribing for interests in MDPF under this PDS. Also referred to as you, your etc. An Initial Public Offer which is usually the fi rst opportunity for Retail Clients to subscribe for units or securities issued by a trust, fund or company. Price at which the interests will be issued. The Listed Properties Securities Manager is independent of the Manager, and is engaged to manage the listed property securities portfolio. That part of MDPF funding provided by a lender to us, in our capacity as Responsible Entity of MDPF, for investment in its Properties and other assets as permitted under the Master Constitution. MBL and its subsidiaries are referred to collectively as Macquarie or Macquarie Group. Macquarie Bank Limited ( ABN ), also referred to as MBL. A joint venture arrangement in Asia between MBL and the Macquarie Goodman Group. A division of Macquarie. The Fund. Macquarie Direct Property Management Limited ( ABN ) acting in its capacity as Responsible Entity for MDPF and each of the Stapled Entities. Also referred to as MDPML, Responsible Entity, we, our, us. The constitution of the Fund. Mercer Unlisted Property Funds Index. Net asset value attributable to unitholders of MDPF, as calculated in accordance with applicable accounting standards. NAV divided by the number of Units issued. The offer of interests as outlined in this PDS. A class of interests held by Retail Clients. This product disclosure statement, or any future product disclosure statement or supplementary product disclosure statement in relation to MDPF. Currently quarterly, or such other period as we determine. Any one or all of the current or future properties that MDPF directly or indirectly invests in. Expenses payable in relation to the Properties including items such as land tax, water rates, council rates, insurance, cleaning, repairs and maintenance and property management costs. Such expenses are often recoverable from tenants. One of the Stapled Entities of MDPF which wholly owns a company, Real Estate Capital Investment Limited, which is used primarily for sub-underwriting purposes. The Registrar records the owners of interests and maintains contact details of owners and their advisers ( as applicable ). Our Registrar may be contacted per the details set out in Section 9.1. Rental Guarantee A rental guarantee described in Section Reporting Date 30 June and 31 December. 30

33 Term Definition Responsible Entity Retail Client Retail Units Sell Spread Statement of Account Stapled Entity( ies ) Stapled Security Tax Deferred Component TFN Transaction Costs Transaction Summary Underwrite Units Units Valuers Wholesale Client Wholesale Units Withdrawal Form The Responsible Entity of a registered managed investment scheme is the company named in ASIC s records. In terms of the Offer, the Responsible Entity of MDPF is Macquarie Direct Property Management Limited ( ABN ). A person of the type defi ned in section 761G of the Corporations Act as a retail client. A class of Units held by Retail Clients. Our estimate of Transaction Costs associated with selling investments. The Exit Price at withdrawal can differ from the NAV per Unit because of Transaction Costs per Unit. Statement showing the number of Units owned, their price and the market value on a given day. As at the date of this PDS, any one or all of: BM Direct Property Trust ( ARSN ) NB Direct Property Trust ( ARSN ) Macquarie Direct Property No. 9 ( ARSN ) 200 Queen Street Melbourne Trust ( ARSN ) Real Estate Capital Investment ( RECI ) Trust. An up to date listing of the Fund s stapled entities can be found on our website at / mdpf or by contacting us. A unit in each of the Stapled Entities which are linked together ( so they cannot be separately sold ) to form a single security. The part of any distribution that is not taxable in the year of receipt due to factors such as expenses, building allowances and depreciation of plant and equipment. Generally, a reduction is required to the cost base of the investment for capital gains tax purposes in respect of any tax deferred amounts. To the extent the total Tax Deferred Component exceeds the Investor s cost base in the Units, the excess will be taxable as a capital gain in the year of payment. Tax File Number. Our estimate of the costs associated with buying and selling investments. The Entry Price at investment and Exit Price at withdrawal can differ from the NAV per Unit because of Transaction Costs per Unit. Statement showing movements in the number of Units owned and distributions paid during the quarter. A class of Units that may be issued from time to time to Macquarie if it holds Units in its capacity as MDPF s underwriter. Interests in the Fund are Stapled Securities and are a measure of your ownership share in MDPF. At any time, different classes of Units ( with different rights and entitlements ) may be on issue, including but not limited to Manager Units, Ordinary Units, Class C Units, Litigation Units or Underwrite Units. Investors who apply for and are allocated interests under this PDS will receive Ordinary Units. The persons and / or companies engaged by the Manager to independently value the Properties. A person of the type defi ned in section 761G of the Corporations Act as a wholesale client. A class of Units held by Wholesale Clients. Form available on our website at / mdpf or by contacting us for use in redeeming Units. Macquarie Direct Property Fund Product Disclosure Statement 31

34 9 Application Forms 9.1 Application Form checklist To ensure that we are able to process your application effi ciently, please ( ) check that you have: answered all sections in black pen and CAPITAL LETTERS provided correct contact details provided your TFN, ABN or Exemption Code as applicable elected your distribution payment preference attached a cheque payable to Macquarie Direct Property Management Limited MDPF Offer Account or contacted us for banking details and funded your application if you are investing via funds transfer read the declarations and checked that all Investors have signed the back page as per Section attached a copy of any documents, such as evidence of the capacity in which the investment is held ( e.g. for a child ), or a copy of a power of attorney certifi ed by a Justice of the Peace, a lawyer or a commissioner of declarations. The completed Application Form should be forwarded with your Application Monies to the Registrar: State Street Australia Limited c / - Unit Registry Department Level Pitt Street Sydney NSW Correct forms of registrable name Only legal entities ( such as companies and superannuation funds, natural persons etc ) are allowed to hold interests in MDPF. The application must be in the name( s ) of natural person( s ), companies or other legal entities acceptable to the Fund. For trusts, the name of the benefi ciary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the example of correctly registrable names shown below. Type of Investor Individuals Use given names, do not use initials Companies Use company name, do not use abbreviations Trusts Use trustee( s ) personal names, do not use name of the trust Deceased estates Use executor( s ) personal names, do not use name of the deceased Clubs / unincorporated bodies / business names Use offi ce bearer( s ) names, in addition to name of the club etc Superannuation funds Use name of trustee of the fund, do not use name of the fund Correct form of registrable name John Alfred Smith ABC Pty Ltd Sue Smith ATF <Sue Smith Family Trust> John Smith <Est Jane Smith A / c> Michael Smith < ABC Tennis Association A / c> Jane Smith Pty Ltd ATF <Super Fund A / c> Incorrect form of registrable name J A Smith ABC P / L ABC Co Sue Smith Family Trust Estate of the Late Jane Smith ABC Tennis Association Jane Smith Pty Ltd Superannuation Fund 32