QUARTERLY REPORT. Retail Funds INVESTA FUNDS MANAGEMENT LIMITED ABN AFSL

Transcription

1 QUARTERLY REPORT June 2011 Retail Funds INVESTA FUNDS MANAGEMENT LIMITED ABN AFSL

2 Message from our Group Executive Property values have increased by 5% during the last year. Welcome to the June 2011 edition of our Quarterly Report for Investa s suite of retail funds. All three of our retail funds have performed well during the last year. A number of leasing transactions have been agreed and we continually seek ways to add value to our property assets. These factors, in conjunction with improved conditions in some property markets, have generally resulted in higher property valuations. On average, property values have increased by 5% during the last year across the 12 properties that the retail funds have an interest in. We are also paying higher than normal distributions to unitholders in Investa Fifth Commercial Trust and Investa Second Industrial Trust. These distributions reflect either an asset sale or higher earnings from leasing premises earlier than expected. These distributions will be paid on 8 August On the corporate front, Investa is still working exclusively with one company to sell the retail funds business. This is progressing well and we hope to announce something more concrete imminently. I would like to reassure you that Investa has your best interests in mind and any new manager will be a very credible funds management firm with an impeccable reputation with investors. Most of you would be aware that Investa is committed to the ongoing pursuit of sustainable building management. With the introduction of the proposed carbon tax on 1 July 2012, Australia s largest emitters will pay a fixed $23 per tonne of carbon. This will increase the cost of energy for both residential homes and commercial properties. We estimate that electricity costs will increase by 11% and gas costs by 8%. At Investa, we have developed Australia s first commercial building trigeneration precinct with Origin Energy to use the excess energy generated in one building to supply power to a second building. This trigeneration precinct allows Investa to underpin more energy efficient buildings and more reliable infrastructure. Further information on this exciting initiative is set out on page 4 of this report. As always, we value your support and will continue to update all investors and their advisers on our initiatives and fund performance. Yours sincerely Ian Schilling Group Executive Funds and Operations Commercial Property Investments Investa Property Group 1 August 2011 INVESTA retail FUNDs QUARTERLY REPORT AS AT 30 JUNE 2011

3 Message from our Group Executive 2 Australia s first commercial building trigeneration precinct 4 Office market recovery remains on track 5 Investa Diversified Office Fund (IDOF) fund report 6 Investa Fifth Commercial Trust (I5CT) fund report 14 Investa Second Industrial Trust (ISIT) fund report 20 Other information 26 Directory 27 Investa has developed Australia s first commercial building trigeneration precinct with Origin Energy to use the excess energy generated in one building to supply power to a second building 02/03

4 Australia s first commercial building trigeneration precinct The path towards distributed energy generation in Australia made another important step forward on 28th April with the switching on of Australia s first trigeneration precinct. Trigeneration plant Left to right: NSW Minister for Resources and Energy, The Hon. Chris Hartcher MP, Chairman and CEO of Investa, Scott MacDonald, Lord Mayor of Sydney, Clover Moore MP, North Sydney Mayor, Genia McCaffery, Origin Executive General Manager, Energy Markets, Frank Calabria. At an event officiated by the NSW Minister for Resources and Energy, Hon Chris Hartcher, MP, the Sydney Lord Mayor Clover Moore MP and the Mayor of North Sydney Genia McCaffery, and attended by more than 200 people from government, media and the property and energy industries, Investa and Origin Energy switched on a brand new system to distribute lower-emissions electricity between two of Investa s flagship buildings, Ark Coca-Cola Place in North Sydney and Deutsche Bank Place in the Sydney CBD. The ground breaking nature of the initiative is the precinct concept, which enables Investa to use the excess energy generated in one building to supply power to a second building. The trigeneration solution uses natural gas to produce electricity onsite, as well as heating and cooling for the building. Because the waste heat is captured to provide heating and cooling (rather than being expelled into the atmosphere), trigeneration is able to provide up to 80 per cent efficiency, significantly higher than conventional coal-fired power stations, which convert only per cent of their fuel energy into electricity. The precinct initiative considerably enhances the economics of trigeneration that can take up excess electricity when demand at the host building is inadequate. Responsible building operators strive to use as little energy as possible, said Craig Roussac, General Manager of Sustainability, Safety and Environment at Investa. Investa s partnership with Origin tackles the supply of energy, opening the door for precinct-based trigeneration systems that will underpin more efficient buildings and more reliable infrastructure Mr Roussac said. Commenting on the initiative Sydney Lord Mayor Clover Moore MP said: This is Australia s first open commercial trigeneration precinct, delivering a more efficient way to generate power, heat and cooling at the source. Genia McCaffery, Mayor of North Sydney Council added: Coca-Cola Place has a set a benchmark for sustainability and design in the North Sydney CBD. With this trigeneration project, Investa and Origin have raised the bar once again, showing commercial property owners across Australia just what is possible in generating and using energy efficiently. INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

5 Office market recovery remains on track Despite a challenging economic environment, office markets have continued to recover at a solid pace over the past twelve months. 1 Vacancy rates in most markets have fallen, and, in the majority of centres, levels currently sit at, or below historic averages. Prime gross effective rental growth AS AT 30 June 2011 Quarterly GROWTH Annual Growth SYDNEY CBD MELBOURNE CBD CANBERRA BRISBANE CBD PERTH CBD ADELAIDE CORE NORTH SYDNEY BRISBANE FRINGE NORTH RYDE PARRAMATTA MELBOURNE FRINGE % Importantly for landlords, tenant demand, which evaporated during 2008 due to uncertainty induced by the GFC, bounced back hard during CBD office space absorption (the industry measure of demand) was recorded at levels at nearly twice the historic average last year, buoyed by improving market confidence that drove business expansion. Demand has moderated to some extent since, but nonetheless remains at levels close to the historic ten year average, and this has continued to drive vacancy down. The outlook for new office tower supply remains very constrained compared to historical benchmarks. New office developments have been difficult to finance, due in part to increased risk aversion caused by the financial crisis. As a result, the number of options available for tenants with pending large expiries is limited, increasing levels of competitive tension for available office space. The combination of these factors has driven good rental returns for the year to June 2011 (see the chart to the left), particularly in markets that enjoy below average vacancy rates. Some markets, such as Canberra and Brisbane, have seen the delivery of above average levels of supply over the last few years the result of projects that commenced before the full impact of the GFC was felt. In our view, we are now nearing the tail-end of the rent correction cycle in these areas, as increases in tenant demand have absorbed much more space than most analysts would have predicted a year ago. We predict that the rate of rental growth will escalate over the medium-term, thanks to the favourable outlook for both supply and demand. Due to the long lead time in building construction, it is unlikely that the supply of new office space will be able to keep pace with tenant demand over the next few years. Similarly the outlook for employment over the medium-term is a very positive for Australia, with many economic forecasters, including the International Monetary Fund and the Reserve Bank of Australia predicting above-trend employment growth, a positive indication of future office space demand. For these reasons we believe the office sector is well placed to outperform other property asset classes over the next five years. 1. All property data sourced from Jones Lang LaSalle Research unless otherwise stated. All forecasts and market commentary is sourced from Investa Property Group. 04/05

6 Investa Diversified Office Fund (IDOF) KEY HIGHLIGHTS DISTRIBUTIONS GEARING RATIO WITHDRAWAL PRICE 1.50 cpu 45.0% $ (1.50 cpu last quarter) (45.8% last quarter) ($ last quarter) Distributions have been maintained at 1.50 cents per unit for quarter ended 30 June 2011 Positive 10.0% total return for the one year to 30 June 2011 The portfolio is currently 95.3% occupied INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

7 1. ABOUT IDOF Investa Diversified Office Fund (IDOF): is an established real estate fund which holds interests in office buildings in most of Australia s major centres; borrows to invest and to fund capital expenditure; aims to optimise distribution returns and provide capital growth; and was the first retail property fund to receive certification from the Responsible Investment Association Australasia (RIAA). 2. Fund Snapshot AS at 30 June 2011 Item Current Position See Section Fund size (total assets) $290.09m 6.3 NTA per unit $ Withdrawal price per unit $ & 5.3 Minimum initial investment 1 $10,000 Unit pricing Weekly 5.3 Withdrawals Suspended 4 Distribution payments Quarterly 5.2 DRP Suspended 5.2 Management fee 0.70% p.a. 8 MER 2 Indirect cost ratio % p.a. 1.73% p.a. Commission to advisers Up to 4% 5.3 Total borrowings drawn $130.40m 7 Gearing ratio 45.0% 7.1 Interest cover 1.34x 7.2 Debt maturity date March Number of investors 2,803 NOTES 1. Investors normally have the right to make applications, but applications (and withdrawals) are currently suspended (see section 4). 2. MER refers to the Management Expense Ratio and is calculated by dividing IDOF s management costs by its average total assets (excluding the value of interest rate swaps). 3. Indirect cost ratio is calculated by dividing IDOF s management costs by its average net assets. 3. Key Initiatives 3.1 Active management of IDOF Our focus remains on actively managing IDOF to maximise earnings and performance, whilst positioning the fund for future growth. Our key operational objectives for IDOF are to: position the fund for future growth; exercise suitable capital management strategies to achieve a long term gearing ratio between 40% and 45% (the gearing ratio is currently 45.0% but is forecast to increase to around 52% due to capital commitments); minimise portfolio vacancy (the portfolio is currently 95.3% occupied); and assess market conditions so that potential rental increases can be maximised. We will continue to keep all unitholders informed of any material changes that may affect their investment in IDOF. 4. Withdrawal Arrangements Investors normally have the right to make weekly withdrawals from IDOF, but withdrawals are currently suspended. Withdrawals from IDOF were previously funded from an external liquidity facility provided by Investa. Under the facility, Investa would acquire units on a weekly basis from investors until it had acquired $50 million of IDOF units. This threshold was reached in April 2008 and withdrawal arrangements were therefore suspended. Applications were also suspended at the same time. As set out on page 2 of this Quarterly Report, Investa is still working exclusively with one company to sell the retail funds business. This company has a track record of providing structured access to liquidity to investors in its property funds, and intends to determine the most appropriate manner in which this applies to the retail funds, particularly IDOF. Once the sale is complete, this company will communicate to investors their proposed liquidity mechanism. In 2007, IDOF was certified by the Responsible Investment Association Australasia (RIAA) the peak body for professionals working in responsible investment in Australia and New Zealand. 06/07

8 INVESTA DIVERSIFIED OFFICE FUND (IDOF) 5. Fund Performance Past performance is no indication of future performance. 5.1 Fund returns to 30 June 2011 IDOF s average total return since inception was 3.4% p.a. On a one year basis, IDOF s return to 30 June 2011 was 10.0%, primarily reflecting higher property valuations during the year and distributions paid. Further information on IDOF s performance is provided in the table below. PERIOD TO 30 June 2011 DISTRIBUTION RETURN P.A. growth RETURN P.A. TOTAL RETURN P.A. 1 year 1 4.9% 5.1% % 3 years 1 1.9% -12.2% -10.3% Since inception 2 4.6% -1.2% 3.4% NOTES 1. Fund performance is based on the unit price as at the start of the relevant period (e.g. the 1 year performance is based on the unit price as at 1 July 2010). 2. Inception date is 1 June The second table in section 5.3 shows the components of the 1 year growth return. 5.2 Recent distributions Distributions have been maintained at 1.50 cents per unit for quarter ended 30 June A summary of recent distributions is provided in the table below. DISTRIBUTION PAYMENT DATE AMOUNT (CENTS PER UNIT) % FROM REALISED earnings % FROM CAPITAL TAX DEFERRED 8 Nov 2010 n/a 7 Feb % 100% 1 9 May % 100% 1 8 Aug % 100% 1 NOTE 1. Estimate only. Tax components will be confirmed in your annual tax statement, scheduled to be sent to investors on 8 August The next quarterly distribution for the period ending 30 September 2011 is scheduled to be paid on 7 November Unless approved by our directors, we do not distribute unrealised gains under our distribution policy. The distribution reinvestment plan (DRP) is not currently available as all applications and withdrawals have been suspended (see section 4). 5.3 Unit pricing IDOF s unit price was relatively stable during the quarter, increasing by 0.34 cents per unit or 0.4%. IDOF s unit price since inception is illustrated in the following graph: IDOF s unit price since inception APPLICATION PRICE WITHDRAWAL PRICE JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 DATE TOTAL ASSETS JUN 09 SEP 09 NET TANGIBLE ASSETS DEC 09 MAR 10 JUN 10 SEP 10 NUMBER OF UNITS DEC 10 MAR 11 JUN 11 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $0.80 NTA PER UNIT 30 June 2011 $290.09m $151.68m 167.1m $ The relative contribution of major variables on the growth component of investor returns over the last three and twelve months is estimated in the following table: PERIOD TO 30 June 2011 LAST 3 MONTHS LAST 12 MONTHS $/unit % change $/unit % change Opening unit price $ $ Property revaluations $ % $ % Interest rate swaps -$ % $ % Other -$ % -$ % Withdrawal price at 1 July 2011 $ % $ % We calculate the withdrawal price for IDOF at the end of each week. As 30 June 2011 did not fall at the end of the week, we used the next withdrawal price after the quarter end as a proxy for valuation purposes. 468 St Kilda Road, Melbourne INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

9 10 Valentine avenue parramatta 241 ADELAIDE STREET BRISBANE Application and withdrawal prices (see table below) are based on IDOF s net tangible assets per unit plus the unamortised stamp duty on direct property. The application price also includes a buy spread of 5%. Your financial adviser may also charge you an upfront commission of up to 4%. Applications (when IDOF is open for investment) are processed after deducting the financial adviser s commission. DATE APPLICATION PRICE WITHDRAWAL PRICE 30 June 2011 $ $ A copy of IDOF s unit pricing policy and a history of application and withdrawal prices are available on IDOF s website at 6. Investment Portfolio 6.1 Investment strategy IDOF is an open ended fund (but currently closed to new applications see section 4) and we choose new properties carefully. We: invest in Australian capital cities and major regional centres only; aim to ensure IDOF s portfolio is diversified; make investment decisions with a view to the likely impact on distribution yield and net tangible assets in light of current and forecast market conditions; and limit IDOF s interest in a property to less than 50% of IDOF s total assets at the time the property is acquired. 6.2 Portfolio update Seven properties were independently revalued during the quarter, being: Elizabeth Street, Sydney, which increased 4.5% from the last valuation completed in November 2010, mainly as a result of completed capital expenditure; 10 Valentine Avenue, Parramatta which did not change from the last valuation completed in February 2011; 241 Adelaide Street, Brisbane, which reduced 5.3% from the last valuation completed in September 2010, mainly as a result of softening market conditions; 30 Pirie Street, Adelaide, which increased 16.1% from the last valuation completed in June 2010, mainly as a result of improving market conditions; 468 St Kilda Road, Melbourne which increased 4.5% from the last valuation completed in August 2010, mainly as a result of improving market conditions; 80 Stirling Street, Perth, which increased 12.7% from the last valuation completed in December 2010, mainly as a result of improving market conditions; and 64 Northbourne Avenue, Canberra, which reduced 9.3% from the last valuation completed in June 2010, mainly as a result of softening market conditions and the lower weighted average lease expiry of the property. We remain conscious of continued market volatility which may affect asset values and will continue to seek regular valuation support for all properties in line with material changes in market conditions. 08/09

10 INVESTA DIVERSIFIED OFFICE FUND (IDOF) 6.3 Investment portfolio as at 30 June 2011 The following table provides detailed information on IDOF s property portfolio as at 30 June Property Details Tenancy Details Major Tenant(s) All Tenants Valuation Details 1 Address LETTABLE AREA (SQUARE METRES) Ownership Interest NABERS ENERGY RATING 2 NABERS WATER RATING 3 Name % of Property by area number of Tenants Occupancy Rate (BY AREA) Weighted Average Lease Expiry (years) Current Valuation 4 Valuation Date Independent Valuer Capitalisation Rate Elizabeth Street, Sydney, NSW 10 Valentine Avenue, Parramatta, NSW 241 Adelaide Street, Brisbane, QLD 30 Pirie Street, Adelaide, SA 468 St Kilda Road, Melbourne, VIC 80 Stirling Street, Perth, WA 32 Phillip Street, Parramatta, NSW 64 Northbourne Avenue, Canberra, ACT 53, % Commonwealth Government 64% % 4.06 $55.67m 30 Jun 11 Savills 8.00% 15, % State Government 99% % 1.10 $54.00m 30 Jun 11 CBRE 9.50% 10, % The Brisbane Club 31% % 2.15 $37.20m 30 Jun 11 DTZ 8.63% 24,757 50% Telstra 100% % $32.50m 30 Jun 11 Savills 8.25% 10, % Downer EDI 13% % 2.96 $31.20m 31 May 11 Savills 9.00% 19,775 50% Telstra 100% % 1.13 $25.50m 30 Jun 11 CBRE 9.75% 6, % GE Finance 100% % 2.00 $22.50m 31 Mar 11 Colliers 9.25% 6, % Commonwealth Government 50% % 1.76 $19.50m 30 Jun 11 Savills 9.25% Cash and other assets n/a n/a n/a n/a n/a n/a $12.02m n/a n/a n/a This Quarter Total (T) / Weighted Average Previous Quarter Total (T) / Weighted Average (T) 98 (T) 95.3% 95.1% $290.09m (T) $286.78m (T) 0.03yrs yrs % 8.97% NOTES 1. Investment properties are valued by IDOF based on independent expert valuation reports generally every 12 months in accordance with relevant industry standards. The properties within the portfolio are independently revalued on a rotating basis or if we assess a change in value by more than 5%. The valuer s assessment of the valuation for each investment property: is the fair value of the investment property, which is based on an exchange between knowledgable, willing but not anxious, parties in an arm s length transaction; and uses appropriate valuation methodology, such as the value of the capitalisation of adjusted market income, the value of the discounted future cash flow, and an assessment of market conditions and property values. 2. Page 26 explains NABERS Energy. The higher this number (up to a maximum of 5), the more energy efficient the property is. 3. Page 26 explains NABERS Water. The higher this number (up to a maximum of 5), the more water efficient the property is. 4. Current valuation based on IDOF s ownership interest in the property. 5. The weighted average age of all direct property valuations. The lower this number, the more recent the valuations. 6.4 Key portfolio statistics as at 30 June 2011 Geographic Diversity Property Sector Diversity Top 5 Tenants by income Weighted Average Lease Expiry by income NSW 3 assets 47.5% QLD 1 asset 13.4% SA 1 asset 11.7% VIC 1 asset 11.2% WA 1 asset 9.2% ACT 1 asset 7.0% Office 8 assets 100% Telstra 19.9% Vacant 6.0% State Government 19.1% June % Commonwealth Govt. 16.3% June % GE Finance 7.4% June % United Group Services 3.0% June % Other 34.3% June % INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

11 32 PHILLIP STREET PARRAMATTA 64 NORTHBOURNE AVENUE CANBERRA 7. Fund Borrowings IDOF borrows to invest in properties and, as at 30 June 2011, has: borrowed $ million of debt against total assets of $ million; no borrowings against individual assets; over 65% of its borrowings hedged (fixed) using interest rate swaps with at least 70% of its forecast borrowings hedged for the next four years (a high level of hedging means that IDOF has reduced exposure to the continuing volatility in interest rate movements); an average interest rate of 7.4% p.a. as a cost of borrowing inclusive of margins and fees this interest rate may change in line with market conditions (generally limited to IDOF s unhedged borrowings and any changes in the level of interest rate swaps); $79.6 million of undrawn debt available for capital expenditure (in addition to cash and cash equivalents of $2.1 million); and complied with all loan covenants (see sections 7.1 and 7.2). The graph to the right shows the maturity profile of IDOF s borrowings (due to mature in March 2014). If we breach a covenant prior to this date, then the lender may act on its security to sell IDOF s assets. Investors rank behind creditors (like the bank) in the event the bank acts on its security. 7.1 Gearing ratio Based on IDOF s latest reviewed, but unaudited, financial report at 30 June 2011, IDOF s gearing ratio was: 45.0% based on ASIC s disclosure guidelines (debt/total assets); and 46.9% based on IDOF s debt facility agreement which has a different definition of gearing ratio to ASIC s disclosure guidelines and a covenant of 65%. There have been no material changes to IDOF s gearing ratio since 30 June The gearing ratio indicates the extent to which IDOF s assets are funded by debt (or interest bearing liabilities). If we borrow further money or the value of IDOF s properties decreases, IDOF s gearing ratio will increase. Higher gearing increases risk as returns and losses are amplified by the use of debt. IDOF s debt maturity profile AS AT 30 June 2011 DEBT UNDRAWN DEBT DRAWN $250m $200m $150m $100m BORROWINGS $50m <1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS >5 YEARS 0 DEBT MATURITY DATE 10/11

12 INVESTA DIVERSIFIED OFFICE FUND (IDOF) 7.2 Interest cover Based on IDOF s latest reviewed, but unaudited, financial report at 30 June 2011, IDOF s interest cover was: 1.34x based on ASIC s disclosure guidelines; and 2.15x based on IDOF s debt facility agreement which has a different definition of interest cover to ASIC s disclosure guidelines and a covenant of 1.50x. There have been no material changes to IDOF s interest cover since 30 June IDOF s interest cover under ASIC s disclosure guidelines is lower than usual as we restructured IDOF s interest rate swap book in January 2011 with the aim of comfortably meeting the lender s future interest cover covenant. The cost of this interest rate restructuring is excluded from the debt facility definition of interest cover. Interest cover measures the ability of IDOF to service borrowing costs from earnings. It is a key indication of IDOF s financial health and key to analysing the sustainability and risks associated with IDOF s level of borrowings. A lower interest cover means that there is less money available to pay borrowing costs and distributions. 8. Related Party Transactions Investa Funds Management Limited (Investa) is the responsible entity for IDOF. Investa or its related parties are paid a: management fee of 0.70% p.a. (plus GST) of total assets, excluding the value of interest rate swaps, some or all of which may be deferred by us at our election; performance fee of 30% (plus GST) of the amount by which the total return exceeds 10% p.a., if at the end of each five year period the pre-tax total return to investors exceeds 10% p.a. Based on current fund performance and the five year period commencing in June 2010, no performance fee has been accrued in IDOF s accounts as at 30 June 2011; custodian fee of $31,000 p.a.; and property, leasing, asset, project and/or development management fee for managing IDOF s real properties in its investment portfolio. The fee is determined using arm s length terms and conditions. Related entities of Investa hold 19.65% of the issued units in IDOF on the same terms and conditions as other investors. As Investa and related entities of Investa provide services to IDOF and transact with IDOF in various ways, Investa has developed a Resolution of Conflict Policy which aims to ensure fair dealings between Investa and the funds for which it is the responsible entity. Key features of the policy are set out on page Litigation IDOF is not currently involved in any litigation. 30 PIRIE STREET ADELAIDE 10. Sustainability Sustainability measures such as the reduction of greenhouse emissions and water consumption are very important as: many tenants (particularly government tenants) now specify a preference to be in environmentally efficient premises which increases demand and occupancy levels in energy efficient buildings this increased demand also increases the returns generated from investment properties and therefore IDOF s unit price; increasing energy, water and waste efficiency reduces building operating costs, increasing the returns generated from investment properties; and new Commonwealth Government legislation requires owners and lessors of commercial office buildings to disclose energy efficiency information whenever selling or leasing space with a net lettable area of 2,000m 2 or more. INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

13 80 STIRLING STREET PERTH 10.1 Greenhouse emissions intensity Emissions intensity (measured as carbon dioxide equivalent (CO 2 -e) greenhouse gas emissions per square metre (m 2 ) of net lettable area (NLA)) due to energy consumption during the July 2010 to February 2011 period reduced by 6.4% compared to the previous year and 35.6% since 2005/06. This is shown in the greenhouse emissions intensity graph below Water consumption intensity IDOF s year-to-date weighted average use of litres of water per square metre (L/m 2 ) of net lettable area (NLA) has reduced by 7.9% over the year to date. Overall water consumption has reduced by 28.3% since 2005/06. This is shown in the water consumption intensity graph below. Greenhouse emissions intensity 10.3 NABERS ratings NABERS Energy rating for the portfolio NABERS Water rating for the portfolio The table in section 6.3 sets out the NABERS Energy and Water ratings for each of IDOF s properties. Water consumption intensity FY05/06 FY06/07 FY07/08 FY05/06 FY06/07 FY07/08 FY08/09 FY09/10 FY10/11 kg.co 2 -e/m2 Weighted average by NLA FY08/09 FY09/10 FY10/11 L/m2 Weighted average by NLA JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN 0 JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN 0 12/13

14 Investa Fifth Commercial Trust (I5CT) KEY HIGHLIGHTS DISTRIBUTIONS GEARING RATIO UNIT PRICE cpu 10.8% $ (1.75 cpu last quarter) (47.4% last quarter) ($ last quarter) The June 2011 quarterly distribution is cents per unit, mainly sourced from the sale proceeds of 595 Collins Street, Melbourne The gearing ratio reduced from 47.4% last quarter to 10.8% also as a result of the property sale Positive 25.5% total return for the one year to 30 June 2011 INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

15 1. About I5CT Investa Fifth Commercial Trust (I5CT): is a real estate fund which holds interests in three office buildings; was established in May 2003 and is closed to new investments; terminates in 2015 unless terminated earlier by us or by operation of law, or extended by a special resolution of investors; borrows to invest and to fund capital expenditure; and aims to deliver income returns with the potential for capital growth. 2. Fund Snapshot 30 June 2011 Item Current Position See Section Fund size (total assets) $97.58m 6.3 NTA per unit $ Distribution payments Quarterly 5.2 DRP Not available 5.2 Withdrawals Not available 4 Management fee 1.00% p.a. 8 MER 1 (ex performance fee) Indirect cost ratio % p.a. 2.14% p.a. Total borrowings drawn $10.5m 7 Gearing ratio 10.8% 7.1 Interest cover 2.25x 7.2 Debt maturity date May Number of investors 874 NOTES 1. MER refers to the Management Expense Ratio and is calculated by dividing I5CT s management costs by its average total assets (excluding the value of interest rate swaps). Performance fees (see section 8) have been excluded from this calculation as they are not payable until all assets are sold. 2. Indirect cost ratio is calculated by dividing I5CT s management costs (including I5CT s total accrued performance fee pro-rated over the term of the fund) by its average net assets. 3. Key Initiatives 3.1 Special distribution of cents per unit The sale of I5CT s interest in 595 Collins Street, Melbourne was at a slight premium to the most recent independent valuation and at a significant premium to the book value of the asset. As a result of the property sale, we are paying a special distribution of cents per unit to unitholders on 8 August For the full financial year to 30 June 2011, the total distribution is 25 cents per unit. This is slightly higher than I5CT s net taxable income for the same period. 3.2 Property valuations have increased All three properties in I5CT were revalued as at 30 June 2011 and increased, on average, by 10%. The higher valuations can be attributed to Investa s active asset management, lease negotiations and improving property market conditions. This is set out further in section 6.2 of this report. Whilst the new independent property valuations added 21 cents per unit to I5CT s unit price, this increase has been offset by the special distribution of cents per unit which has been mainly sourced from the sale proceeds of 595 Collins Street, Melbourne. 3.3 The gearing ratio is now 10.8% The higher property valuations and the sale of I5CT s interest in 595 Collins Street, Melbourne last quarter has reduced I5CT s gearing ratio to 10.8%. Whilst this is expected to increase to around 24% once the special distribution is paid (we used the sale proceeds to temporarily pay down borrowings until we paid the special distribution), the level of borrowings compared to property values is low and places I5CT is a solid capital position. 4. WITHDRAWAL ARRANGEMENTS I5CT is a closed ended fund which means there are no withdrawal arrangements or redemption facilities available to its investors. I5CT terminates in 2015 unless terminated earlier by us or by operation of law, or extended by a special resolution of investors. The only other way to withdraw your investment is to transfer your units but, as I5CT is not listed on a securities exchange, there is no established secondary market. You will need to find a willing buyer for your units in I5CT if you want to sell your units through an off-market transfer. As I5CT is a closed ended fund, ASIC s hardship withdrawal provisions do not apply to I5CT. 5. FUND PERFORMANCE Past performance is no indication of future performance. 5.1 Fund returns to 30 June 2011 I5CT has performed very well over the past eight years providing an average total return since inception of 14.9% p.a. I5CT s one year return to 30 June 2011 was 25.5%, principally reflecting the special distribution and the higher property valuations (see sections 3.1 and 3.2 respectively). Further information on returns is provided in the table below. PERIOD TO 30 June 2011 DISTRIBUTION RETURN P.A. growth RETURN P.A. TOTAL RETURN P.A. 1 year % 7.2% % 3 years 1 6.9% -8.6% -1.7% Since inception 2 9.8% 5.1% 14.9% NOTES 1. Fund performance is based on the unit price as at the start of the relevant period (e.g. the 1 year performance is based on the unit price as at 1 July 2010). 2. Inception date is 16 May The first table in section 5.3 shows the components of the 1 year growth return. 14/15

16 Investa Fifth Commercial Trust (I5CT) 5.2 Recent distributions The June 2011 quarterly distribution is cents per unit, mainly sourced from the sale proceeds of 595 Collins Street, Melbourne (see section 3.1 of this report). A summary of recent distributions is provided in the table below. DISTRIBUTION PAYMENT DATE AMOUNT (CENTS PER UNIT) % FROM REALISED earnings % FROM CAPITAL TAX DEFERRED 8 Nov % 7% 1 7 Feb % 7% 1 9 May % 7% 1 8 Aug % 7% 1 NOTE 1. Estimate only. Tax components will be confirmed in your annual tax statement, scheduled to be sent to investors on 8 August Distributions for the period to 30 June 2011 are largely taxable following the sale of I5CT s 50% interest in 595 Collins Street, Melbourne. The next quarterly distribution for the period ending 30 September 2011 is scheduled to be paid on 7 November Unless approved by our directors, we do not distribute unrealised gains under our distribution policy. A distribution reinvestment plan (DRP) is not available for I5CT as it is a closed end fund with a single use of capital and a fixed investment term. 5.3 Unit pricing I5CT s unit price is illustrated in the following graph. I5CT s unit price since inception NET TANGIBLE ASSETS PER UNIT MAY 03 SEP 03 DEC 03 MAR 04 JUN 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11 JUN 11 $2.20 $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 NET TANGIBLE ASSETS PER UNIT The relative contribution of major variables on growth returns over the last three and twelve months is estimated in the following table: PERIOD TO 30 JUNE 2011 LAST 3 MONTHS LAST 12 MONTHS $/unit % change $/unit % change Opening unit price $ $ Property revaluations $ % $ % Interest rate swaps -$ % -$ % Other -$ % -$ % Unit price at 30 June 2011 $ % $ % Whilst the new independent property valuations added 21 cents per unit to I5CT s unit price, this increase has been offset by the special distribution of cents per unit (most of the Other category). I5CT s current unit price is summarised in the following table. TOTAL NET TANGIBLE NUMBER NTA DATE ASSETS ASSETS OF UNITS PER UNIT 30 June 2011 $97.58m $74.99m m $ Investment Portfolio 6.1 Investment and disposal strategy I5CT is a fixed term fund that terminates in 2015 and is closed to new investments. We will actively monitor property markets to determine the best time to sell I5CT s assets in the lead up to the 2015 termination date of the trust. 6.2 Portfolio update All three properties were independently valued during the quarter, being: 5 Eden Park Drive, North Ryde, which increased 3.8% since the last valuation one year ago, principally as a result of a new heads of agreement with a major tenant to extend the lease of its existing premises; 30 Pirie Street, Adelaide, which increased 16.1% since the last valuation one year ago, mainly as a result of improving market conditions; and 80 Stirling Street, Perth, which increased 12.7% since the last valuation one year ago, also mainly as a result of improving market conditions. 5 EDEN PARK DRIVE North Ryde INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

17 6.3 Investment portfolio as at 30 June 2011 The following table provides detailed information on I5CT s property portfolio as at 30 June Total assets have reduced, and a number of other parameters have changed, due to the sale of I5CT s interest in 595 Collins Street, Melbourne on 5 April Property Details Major Tenant(s) Tenancy Details All Tenants Valuation Details 1 Address LETTABLE AREA (SQUARE METRES) Ownership Interest NABERS ENERGY RATING 2 NABERS WATER RATING 3 Name % of Property by area number of Tenants Occupancy Rate (BY AREA) Weighted Average Lease Expiry (years) Current Valuation 4 Valuation Date Independent Valuer Capitalisation Rate 5 Eden Park Drive, North Ryde, NSW 30 Pirie Street Adelaide, SA 80 Stirling Street, Perth, WA 11, % Contract Pharmaceutical Services of Australia 57% % 1.47 $35.50m 30 Jun 11 Colliers 8.50% 24,757 50% Telstra 100% % $32.50m 30 Jun 11 Savills 8.25% 19,775 50% Telstra 100% % 1.13 $25.50m 30 Jun 11 CBRE 9.75% Cash and other assets n/a n/a n/a n/a n/a n/a n/a n/a n/a $4.08m n/a n/a n/a This Quarter Total (T) / Weighted Average Previous Quarter Total (T) / Weighted Average (T) 22 (T) 92.8% 95.1% $97.58m (T) $152.04m (T) 0.00 yrs yrs % 8.68% Notes 1. Investment properties are valued by I5CT based on independent expert valuation reports generally every 12 months in accordance with relevant industry standards, or if we assess a change in value by more than 5%. The valuer s assessment of the valuation for each investment property: is the fair value of the investment property, which is based on an exchange between knowledgeable, willing but not anxious, parties in an arm s length transaction; and uses appropriate valuation methodology, such as the value of the capitalisation of adjusted market income, the value of the discounted future cash flow, and an assessment of market conditions and property values. 2. Page 26 explains NABERS Energy. The higher this number (up to a maximum of 5), the more energy efficient the property is. 3. Page 26 explains NABERS Water. The higher this number (up to a maximum of 5), the more water efficient the property is. 4. Current valuation of I5CT s ownership interest in the property. 5. The weighted average age of all direct property valuations. The lower this number, the more recent the valuations. 6.4 Key portfolio statistics as at 30 June 2011 Geographic Diversity Property Sector Diversity Top 5 Tenants by income Weighted Average Lease Expiry by income NSW 1 asset 37.9% SA 1 asset 34.8% WA 1 asset 27.3% Office 3 assets 100% Telstra 63.7% Vacant 7.9% Contract Pharmaceutical Jun % Services of Australia 16.6% Jun % Commonwealth Govt. 9.5% Jun % CA (Pacific) Pty Ltd 1.8% Jun % Du Pont (Australia) Ltd 0.5% Jun % Vacant 7.9% 16/17

18 Investa Fifth Commercial Trust (I5CT) 7. FUND BORROWINGS I5CT borrows to invest in properties and, as at 30 June 2011, has: borrowed $10.5 million of debt against total assets of $97.58 million; no borrowings against individual assets; over 80% of its forecast borrowings hedged (fixed) for the next two years using interest rate swaps; an average interest rate of 6.3% p.a. as a cost of borrowing inclusive of margins and fees this interest rate may change in line with market conditions (generally limited to I5CT s unhedged borrowings and any changes in the level of interest rate swaps); $44.5 million of undrawn debt available for capital expenditure (in addition to cash and cash equivalents of $0.3 million); and complied with all loan covenants (see sections 7.1 and 7.2). The following graph shows the maturity profile of I5CT s borrowings (due to mature in May 2013). If we breach a loan covenant, then the lender may act on its security to sell I5CT s assets. Investors rank behind creditors (like the bank) in the event the bank acts on its security. I5CT s debt maturity profile AS AT 30 June 2011 DEBT UNDRAWN DEBT DRAWN <1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS DEBT MATURITY DATE 4-5 YEARS >5 YEARS $60m $40m $20m 7.1 Gearing ratio I5CT s gearing ratio (debt/total assets) was 10.8% as at 30 June 2011 based on I5CT s latest reviewed, but unaudited, financial report and ASIC s disclosure guidelines. The gearing ratio decreased from 47.4% as at 31 March 2011 as a result of the sale of 595 Collins Street, Melbourne on 5 April I5CT s loan to value ratio (debt/total property value) was 11.2% as at 30 June 2011 based on I5CT s debt facility agreement (which has a covenant of 50%) and I5CT s latest reviewed, but unaudited, financial report. I5CT s gearing and loan to value ratios are expected to increase to around 24% once the special distribution is paid on 8 August 2011 (see section 3.3 of this report). 0 BORROWINGS The gearing and loan to value ratios indicate the extent to which I5CT s assets are funded by debt (or interest bearing liabilities). If I5CT borrows further money or the value of I5CT s properties decreases, I5CT s gearing and loan to value ratios will increase. Higher gearing increases risk as returns and losses are amplified by the use of debt. 7.2 Interest cover Based on I5CT s latest reviewed, but unaudited, financial report at 30 June 2011, I5CT s interest cover was: 2.25x based on ASIC s disclosure guidelines; and 2.49x based on I5CT s debt facility agreement which has a different definition of interest cover to ASIC s disclosure guidelines and a covenant of 1.50x. There have been no material changes to I5CT s interest cover since 30 June Interest cover measures the ability of I5CT to service borrowing costs from its earnings. It is a key indication of I5CT s financial health and key to analysing the sustainability and risks associated with I5CT s level of borrowings. A lower interest cover means that there is less money available to pay borrowing costs and distributions. 8. Related Party Transactions Investa Funds Management Limited (Investa) is the responsible entity for I5CT. Investa or its related parties are paid a: management fee of 1.0% p.a. (plus GST) of total assets excluding the value of interest rate swaps, some or all of which may be deferred by us at our election; performance fee of up to 2.5% (plus GST) of the net sale proceeds less borrowings if, following the sale of all properties and the repayment of borrowings, the excess exceeds the equity subscribed by investors by at least 10%. Based on the current property valuations, a total performance fee of $1.68 million has been accrued, but not paid, in I5CT s accounts as at 30 June 2011; custodian fee of $11,000 p.a.; debt facility management fee of $22,000 p.a.; and property, leasing, asset, project and/or development management fee for managing I5CT s real properties in its investment portfolio. These fees are determined using arm s length terms and conditions. As Investa and related entities of Investa provide services to I5CT and transact with I5CT in various ways, Investa has developed a Resolution of Conflict Policy which aims to ensure fair dealings between Investa and the funds for which it is the responsible entity. Key features of the policy are set out on page Litigation I5CT is not currently involved in any litigation. INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

19 10. Sustainability Sustainability measures such as the reduction of greenhouse emissions and water consumption are very important as: many tenants (particularly government tenants) now specify a preference to be in environmentally efficient premises which increases demand and occupancy levels in energy efficient buildings this increased demand also increases the returns generated from investment properties and therefore I5CT s unit price; increasing energy, water and waste efficiency reduces building operating costs, increasing the returns generated from investment properties; and new Commonwealth Government legislation requires owners and lessors of commercial office to disclose energy efficiency information whenever selling or leasing space with a net lettable area of 2,000m 2 or more Greenhouse emissions intensity Emissions intensity (measured as carbon dioxide equivalent (CO 2 -e) greenhouse gas emissions per square metre (m 2 ) of net lettable area (NLA)) due to energy consumption reduced by 2.7% compared to the previous year and 34.8% since 2004/05. This is shown in the greenhouse emissions intensity graph below Water consumption intensity Water consumption intensity (measured as litres (L) of water per square metre (m 2 ) of net lettable area (NLA)) decreased by 6.8% over the corresponding previous year period, and 30.3% since 2004/05. This is shown in the water consumption intensity graph below NABERS ratings NABERS Energy rating for the portfolio NABERS Water rating for the portfolio The table in section 6.3 sets out the NABERS Energy and Water ratings for each of I5CT s properties. Greenhouse emissions intensity Water consumption intensity FY05/06 FY06/07 FY07/08 FY05/06 FY06/07 FY07/08 FY08/09 FY09/10 FY10/11 kg.co 2 -e/m2 Weighted average by NLA FY08/09 FY09/10 FY10/11 L/m2 Weighted average by NLA JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN 0 JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN 0 18/19

20 Investa Second Industrial Trust (ISIT) KEY HIGHLIGHTS DISTRIBUTIONS GEARING RATIO UNIT PRICE 2.50 cpu 38.3% $ (1.50 cpu last quarter) (38.2% last quarter) ($ last quarter) The June 2011 quarterly distribution is 2.50 cents per unit reflecting higher than expected earnings Positive 7.8% total return for one year to 30 June 2011 The portfolio is currently 95.9% occupied 2 Eden PArk driv NORTH RYD INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

21 1. About ISIT Investa Second Industrial Trust (ISIT): is a real estate fund which holds interests in three industrial buildings; was established in June 2002 and is closed to new investments; terminates in 2014 unless terminated earlier by us or by operation of law, or extended by a special resolution of investors; borrows to invest and to fund capital expenditure; and aims to deliver income returns with the potential for capital growth. 2. FUND SNAPSHOT AS AT 30 June 2011 Item Current Position See Section Fund size (total assets) $48.95m 6.3 NTA per unit $ Distribution payments Quarterly 5.2 DRP Not available 5.2 Withdrawals Not available 4 Management fee 1.00% p.a. 8 MER 1 Indirect cost ratio % p.a. 2.28% p.a. Total borrowings drawn $18.75m 7 Gearing ratio 38.3% 7.1 Interest cover 2.53x 7.2 Debt maturity date July Number of investors 573 NOTES 1. MER refers to the Management Expense Ratio and is calculated by dividing ISIT s management costs by its average total assets (excluding the value of interest rate swaps). Performance fees (see section 8) have been excluded from this calculation as they are not payable until all assets are sold. 2. Indirect cost ratio is calculated by dividing ISIT s management costs (including ISIT s total accrued performance fee pro-rated over the term of the fund) by its average net assets. 3. Key Initiatives 3.1 Higher June 2011 quarterly distribution ISIT s earnings in the year to 30 June 2011 were higher than expected. This was mainly due to better than expected leasing outcomes at 2 Eden Park Drive, North Ryde. As a result, the June 2011 quarterly distribution has increased to 2.5 cents per unit. This comprises the normal distribution of 1.5 cents per unit and the higher than expected earnings to 30 June 2011, which equates to 1.0 cent per unit. This distribution will be paid on 8 August Active management of ISIT Our focus remains on the active management of ISIT to maximise earnings and performance. Our key operational objectives for ISIT are to: minimise portfolio vacancy (the portfolio is currently 95.9% occupied); assess market conditions so that potential rental increases can be maximised; maintain suitable capital management strategies and the gearing ratio below 50% (the gearing ratio is currently 38.3%); and assess market conditions so that assets can be sold at prices which maximise unitholder returns bearing in mind the 2014 termination date of the trust. We will continue to keep all unitholders informed of any material changes that may affect their investment in ISIT. 4. Withdrawal Arrangements ISIT is a closed ended fund which means there are no withdrawal arrangements or redemption facilities available to its investors. ISIT terminates in 2014 unless terminated earlier by us or by operation of law, or extended by a special resolution of investors. The only other way to withdraw your investment is to transfer your units but, as ISIT is not listed on a securities exchange, there is no established secondary market. You will need to find a willing buyer for your units in ISIT if you want to sell your units through an off-market transfer. As ISIT is a closed ended fund, ASIC s hardship withdrawal provisions do not apply to ISIT. e E 2 EDEN PARK DRIVE NORTH RYDE 20/21

22 JUN 04 Investa Second Industrial Trust (ISIT) 5. Fund Performance Past performance is no indication of future performance. 5.1 Fund returns to 30 June 2011 ISIT s one year return to 30 June 2011 was 7.8%. This was primarily the result of the distributions paid. PERIOD TO 30 June 2011 DISTRIBUTION RETURN P.A. Growth RETURN P.A. TOTAL RETURN P.A. 1 year 1 6.0% 1.8% 3 7.8% 3 years 1 5.0% -8.2% -3.2% Since inception % 0.7% 13.9% Notes 1. Fund performance is based on the unit price as at the start of the relevant period (e.g. the 1 year performance is based on the unit price as at 1 July 2010). 2. Inception date is 14 June The first table in section 5.3 shows the components of the 1 year growth return. ISIT s unit price since inception NET TANGIBLE ASSETS PER UNIT JUN 02 SEP 02 DEC 02 MAR 03 JUN 03 SEP 03 DEC 03 MAR 04 SEP 04 DEC 04 MAR 05 JUN 05 SEP 05 DEC 05 MAR 06 JUN 06 SEP 06 DEC 06 MAR 07 JUN 07 SEP 07 DEC 07 MAR 08 JUN 08 SEP 08 DEC 08 MAR 09 JUN 09 SEP 09 DEC 09 MAR 10 JUN 10 SEP 10 DEC 10 MAR 11 JUN 11 $1.60 $1.40 $1.20 $1.00 $0.80 NET TANGIBLE ASSETS PER UNIT 5.2 Recent distributions The distribution for the June 2011 quarter is 2.50 cents per unit reflecting higher than expected earnings (see section 3.1 of this report). A summary of recent distributions are in the table below. DISTRIBUTION PAYMENT DATE AMOUNT (CENTS PER UNIT) % FROM REALISED earnings % FROM CAPITAL INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011 TAX DEFERRED 8 Nov % 16% 1 7 Feb % 16% 1 9 May % 16% 1 8 Aug % 16% 1 Notes 1. Estimate only. Tax components will be confirmed in your annual tax statement, scheduled to be sent to investors on 8 August The next quarterly distribution for the period ending 30 September 2011 is scheduled to be paid on 7 November Unless approved by our directors, we do not distribute unrealised gains under our distribution policy. A distribution reinvestment plan (DRP) is not available for ISIT as it is a closed end fund with a single use of capital and a fixed investment term. 5.3 Unit pricing The value of ISIT s properties peaked in December 2007 as capitalisation rates for properties reached historic lows. ISIT s unit price would have also peaked at this time had the gains following the sale of 131 Beenleigh Road, Acacia Ridge, been retained and the 42 cents per unit distribution not been paid to unitholders in December ISIT s unit price is shown in the following graph: The relative contribution of major variables on growth returns, over the last three and twelve months is estimated in the following table: PERIOD TO 30 June 2011 LAST 3 MONTHS LAST 12 MONTHS $/unit % change $/unit % change Opening unit price $ $ Property revaluations -$ % $ % Interest rate swaps -$ % -$ % Other -$ % $ % Unit price at 30 June 2011 $ % $ % ISIT s current unit price is summarised in the following table. DATE TOTAL ASSETS NET TANGIBLE ASSETS NUMBER OF UNITS NTA PER UNIT 30 June 2011 $48.95m $27.99m 27.1m $ Investment Portfolio 6.1 Investment and disposal strategy ISIT is a fixed term fund and is closed to new investments. We will actively monitor property markets to determine the best time to sell ISIT s assets in the lead up to the 2014 termination date of the trust (see section 3.2). 6.2 Portfolio update Two properties were independently revalued during the quarter being: Waterloo Road, North Ryde, which decreased 2.8% from the previous valuation dated 30 September 2010; and 101 Beenleigh Road, Acacia Ridge, which did not change from the previous valuation dated 31 December We remain conscious of continued market volatility which may affect asset values and will continue to seek regular valuation support for all properties in line with material changes in market conditions. During the quarter, one tenant vacated their suite at 2 Eden Park Drive, North Ryde following the expiry of their lease. This vacancy has reduced the occupancy rate of ISIT s portfolio to 95.9%. This vacant space is now being actively marketed for lease.

23 6.3 Investment portfolio as at 30 June 2011 The following table provides detailed information on ISIT s property portfolio as at 30 June Property Details Tenancy Details Major Tenant(s) All Tenants Valuation Details 1 Address LETTABLE AREA (square metres) Ownership Interest Name % of Property by area Number of Tenants Occupancy Rate (by area) WEIGHTED AVERAGE LEASE EXPIRY (YEARS) Current Valuation Valuation Date Independent Valuation Capitalisation Rate 2 Eden Park Drive, North Ryde, NSW Waterloo Road, North Ryde, NSW 101 Beenleigh Road, Acacia Ridge, QLD 10, % NuSkin Australia 14% % 1.81 $30.30m 31 Mar 11 Knight Frank 8.90% 4, % Fujitsu 100% % 4.59 $12.00m 30 Jun 11 Savills 8.00% 3, % Bluestar Logistics 100% % 2.27 $5.00m 30 Jun 11 Colliers 8.50% Cash and other assets n/a n/a n/a n/a n/a $1.65m n/a n/a n/a This Quarter Total (T) / Weighted Average 19 (T) 95.9% 2.64 $48.95m (T) 0.16yrs % Previous Quarter Total (T) / Weighted Average 20 (T) 100.0% 2.77 $49.57m (T) 0.16yrs % Notes 1. Investment properties are valued by ISIT based on independent expert valuation reports generally every 12 months in accordance with relevant industry standards, or if we assess a change in value by more than 5%. The valuer s assessment of the valuation for each investment property: is the fair value of the investment property, which is based on an exchange between knowledgeable, willing but not anxious, parties in an arm s length transaction; and uses appropriate valuation methodology, such as the value of the capitalisation of adjusted market income, the value of the discounted future cash flow, and an assessment of market conditions and property values. 2. The weighted average age of all direct property valuations. The lower this number, the more recent the valuations. 6.4 Key portfolio statistics as at 30 June 2011 Geographic Diversity Property Sector Diversity Top 5 Tenants by income Weighted Average Lease Expiry by income NSW 2 assets 89.4% QLD 1 asset 10.6% Industrial 3 assets 100% Fujitsu Australia 28.2% Vacant 4.1% Bluestar Logistics 10.3% Jun % NuSkin Australia 8.4% Jun % Carl Zeiss 6.7% Jun % Enterix 6.0% Jun % Other 40.4% Jun % 22/23

24 Investa Second Industrial Trust (ISIT) 101 beenleigh road acacia ridge 7. Fund Borrowings ISIT s debt maturity profile ISIT borrows to invest in properties and, as at 30 June 2011, has: AS AT 30 June 2011 borrowed $18.75 million of debt against total assets of $48.95 million; no borrowings against individual assets; DEBT UNDRAWN DEBT DRAWN over 80% of its forecast borrowings hedged (fixed) for the next two years using interest rate swaps; $30m an average interest rate of 6.4% p.a. as a cost of borrowing inclusive of margins and fees this interest rate may change in line with market conditions (generally limited to ISIT s unhedged borrowings and any changes in the level of interest rate swaps); $4.45 million of undrawn debt available for capital expenditure (in addition to cash and cash equivalents of $0.4 million); and <1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS $20m $10m 0 >5 YEARS BORROWINGS complied with all loan covenants (see sections 7.1 and 7.2). DEBT MATURITY DATE The graph to the right shows the maturity profile of ISIT s borrowings (due to mature in July 2013). If we breach a loan covenant then the lender may act on its security to sell ISIT s assets. Investors rank behind creditors (like the bank) in the event the bank acts on its security. INVESTA RETAIL FUNDS QUARTERLY REPORT AS AT 30 JUNE 2011

25 7.1 Gearing ratio ISIT s gearing ratio (debt/total assets) was 38.3% as at 30 June 2011 based on ISIT s latest reviewed, but unaudited, financial report and ASIC s disclosure guidelines. There have been no material changes to ISIT s gearing ratio since 30 June ISIT s loan to value ratio (debt/total property value) was 39.8% as at 30 June 2011 based on ISIT s debt facility agreement (which has a covenant of 55%) and ISIT s latest reviewed, but unaudited, financial report. The gearing and loan to value ratios indicate the extent to which ISIT s assets are funded by debt (or interest bearing liabilities). If ISIT borrows further money or the value of ISIT s properties decrease, ISIT s gearing and loan to value ratios will increase. Higher gearing increases risk as returns and losses are amplified by the use of debt. 7.2 Interest cover Based on ISIT s latest reviewed, but unaudited, financial report at 30 June 2011, ISIT s interest cover was: 2.53x based on ASIC s disclosure guidelines; and 2.59x based on ISIT s debt facility agreement which has a different definition of interest cover to ASIC s disclosure guidelines and a covenant of 1.50x. There have been no material changes to ISIT s interest cover since 30 June Interest cover measures the ability of ISIT to service borrowing costs from its earnings. It is a key indication of ISIT s financial health and key to analysing the sustainability and risks associated with ISIT s level of borrowings. A lower interest cover means that there is less money available to pay borrowing costs and distributions. 8. Related Party Transactions Investa Funds Management Limited (Investa) is the responsible entity for ISIT. Investa or its related parties are paid a: management fee of 1.0% p.a. (plus GST) of total assets excluding the value of interest rate swaps, some or all of which may be deferred by us at our election; performance fee of up to 2.5% (plus GST) of the net sale proceeds if, following the sale of all properties and the repayment of borrowings, the excess exceeds the equity subscribed by investors by at least 10%. Based on the current property valuations, a total performance fee of $1.0 million has been accrued, but not paid, in ISIT s accounts as at 30 June 2011; custodian fee of $13,000 p.a.; debt facility management fee of $5,700 p.a.; and property, leasing, asset, project and/or development management fee for managing ISIT s real properties in its investment portfolio. The fee is determined using arm s length terms and conditions. As Investa and related entities of Investa provide services to ISIT and transact with ISIT in various ways, Investa has developed a Resolution of Conflict Policy which aims to ensure fair dealings between Investa and the funds for which it is the responsible entity. Key features of the policy are set out on page LITIGATION ISIT is not currently involved in any litigation. 10. SUSTAINABILITY We do not undertake sustainability rating measurements of electricity, gas or water consumption for ISIT due to the nature of industrial properties. 101 BEENLEIGH ROAD ACACIA RIDGE 24/25

26 Other information Disclaimer This Quarterly Report does not include all the disclosures of the annual or half-yearly financial reports, and is intended to provide general financial information only. Accordingly, it should be read in conjunction with the annual and half-yearly reports and any further announcements or communications by the relevant Fund. This Quarterly Report has been prepared by Investa Funds Management Limited ABN , as the responsible entity of each of the Fund s referred to in this Quarterly Report, without taking into account your objectives, financial situation or needs. You should consider the appropriateness of its contents having regard to your own objectives, financial situation and needs before making any investment decision. While every effort is made to provide accurate and complete information, Investa Funds Management Limited does not warrant or represent that the information in this Report is free from errors or omissions. No person, including Investa Funds Management Limited, or any other member of the Investa Property Group, accepts any responsibility for any loss or damage however occurring resulting from a use or reliance on the information given by any person. Potential investors should consider the Product Disclosure Statement (PDS) for the relevant Fund when deciding whether to invest and seek their own financial, legal and/or taxation advice. To obtain a copy of the PDS or for further information, call us on (local call cost) or visit Past performance is not a reliable indicator of future performance and no guarantee of future returns is implied or given. Investors should consult the PDS for full details of any forecasts detailed and the assumptions upon which these forecasts are based. Your investment in the relevant Fund is subject to investment and other risks, including possible delays in repayment and loss of income and principal invested. None of Investa Funds Management Limited or any other member of the Investa Property Group guarantees any particular rate of return or the performance of the relevant Fund, nor do they guarantee any repayment of capital from the Fund. Investments in the relevant Fund are not investments, deposits or other liabilities of Investa Funds Management Limited or any other member of the Investa Property Group. NABERS Energy National Australian Built Environment Rating System for energy benchmarks a building s greenhouse impact on a scale of one to five; one star being the most polluting and five stars the least. Experience shows that by implementing energy efficiency practices, many buildings can save between 20% and 40% on their energy bills and reduce the emission of greenhouse gases. Further information is available at NABERS Water National Australian Built Environment Rating System for water measures the water consumption of an office building on a scale of one to five stars, reflecting the performance of the building relative to the market, from least efficient (one star) to best practice (five stars). Further information is available at Resolution of Conflict Policy As Investa and related entities of Investa provide services to Investa s suite of retail funds and transact with these funds in various ways, Investa has developed a Resolution of Conflict Policy which aims to ensure fair dealings between Investa and the funds for which it is the responsible entity. Key features of the policy are that: Investa s Board (which includes a majority of independent directors) must approve all transactions between Investa (and its related entities) and the relevant Fund; all related party transactions must be in the best interests of investors and on arm s length terms; representatives of the parties to a proposed transaction must attempt to resolve potential conflicts, and unresolved matters must be referred to the CEO of Investa; and the Group General Counsel is responsible for implementing and monitoring adherence to the policy through staff education sessions and confirmation that the policy has been followed for all relevant transactions. Compliance Statement Investa Funds Management Limited confirms that, at all times during the quarter, the relevant Fund complied in all material respects with all investment limitations, derivative policies, corporate governance policies and all other restrictions set out in its Compliance Plan and other documentation that governs the operation of the relevant Fund. Copyright The copyright of this Quarterly Report and the information contained therein is vested in Investa Funds Management Limited.

27 Directory Responsible Entity Investa Funds Management Limited ACN AFSL Level 6, Deutsche Bank Place 126 Phillip Street Sydney NSW 2000 GPO Box 4180 Sydney NSW 2001 T: (02) F: (02) Directors of the Responsible Entity David Baffsky AO James (Jim) Evans (appointed 7 July 2011) Ming Long Scott MacDonald Dennis Wildenburg Graham Dunstan (resigned 27 June 2011) Deborah Page AM (resigned 7 July 2011) Company Secretary Jonathan Callaghan Fund Information Investa Diversified Office Fund ARSN ABN APIR IPL0001AU Investa Fifth Commercial Trust ARSN ABN APIR IPL0002AU Investa Second Industrial Trust ARSN ABN APIR IPL0003AU Unit Registry Boardroom (Victoria) Pty Limited (formerly Registries (Victoria) Pty Limited) GPO Box 3993 Sydney NSW 2001 Tel: Fax: investa@boardroomlimited.com.au Web: Auditor PricewaterhouseCoopers This report has been printed on Monza Recycled, Certified Carbon Neutral by The Carbon Reduction Institute (CRI) in accordance with the global Greenhouse Gas Protocol and ISO framework. Combined with its 55% recycled content, Monza Recycled is the trusted choice of Investa Property Group. 26/27

28 Please contact us with any questions Any questions about this Quarterly Report or the performance of our funds should be directed to Investa by contacting Claire Gannon or the relevant fund manager, Grant Nichols or Mark Lumby (our direct contact details are set out below). Any questions about your unitholding, distribution and tax statements, or any change of details should be directed to Boardroom (Victoria) Pty Limited (formerly Registries (Victoria) Pty Limited) on Full contact details for Investa and Boardroom are set out in the directory on the inside back cover of this Quarterly Report. Claire Gannon Investor Relations Co-ordinator Phone: (02) Brendan Murray Finance Manager Funds Phone: (02) Grant Nichols Fund Manager IDOF and ISIT Phone: (02) Simon Beake Fund Analyst Phone: (02) Mark Lumby General Manager Retail Funds Fund Manager I5CT Phone: (02) Investa Funds Management Limited Level 6, Deutsche Bank Place 126 Phillip Street Sydney NSW 2000 Australia Phone: ABN