INVESTA FUNDS MANAGEMENT LIMITED ABN AFSL

Transcription

1 INVESTA FUNDS MANAGEMENT LIMITED ABN AFSL RETAIL FUNDS QUARTERLY REPORT

2 TABLE OF CONTENTS Message from our Group Executive 3 Sustainability at Work 4 Property Market Overview 5 Investa Diversifi ed Offi ce Fund (IDOF) Fund Report 6 Investa Fifth Commercial Trust (I5CT) Fund Report 14 Investa Second Industrial Trust (ISIT) Fund Report 20 Directory Northbourne Avenue, Canberra, ACT, an asset of Investa Diversifi ed Offi ce Fund

3 MESSAGE FROM OUR GROUP EXECUTIVE 9 February 2009 Dear Investor, Investa Funds Management Limited ABN AFSL Level 6 Deutsche Bank Place 126 Phillip Street Sydney NSW 2000 GPO Box 4180 Sydney NSW 2001 Australia We are pleased to present you with the December edition of our Quarterly Report for our suite of retail funds. Since late 2007 the global fi nancial crisis has impacted property stocks listed on the Australian Securities Exchange (ASX). During the course of the last 12 months (to 31 December 2008): listed property stocks on the ASX (S&P/ASX A-REIT Index) fell 57.4%; and the general equities market on the ASX (S&P/ASX 200) fell 41.3%. Table of Contents During the same period, Investa s suite of retail unlisted property funds have fallen in value by 14% to 27%. Whilst any negative return is disappointing, the value of having unlisted property funds in a balanced and diversifi ed portfolio is better than having a sole exposure to the general equities market for example investors benefi t from reduced risk that comes with diversifi cation. In these challenging times, we continue to proactively manage each of our funds in the best interests of investors. We aim to ensure there is limited vacancy in the portfolio, lease renewals are negotiated and signed well before their expiry and we have suffi cient capital to maintain the integrity and value of the portfolio in a time when debt is limited, if at all available. Given the economic backdrop, it s easy to forget about the value that environmental initiatives add to investment returns. Investa takes pride in practicing environmental and social responsibility in every aspect of its business and is a leader in this area. We focus on sustainability because it delivers long-term value to investors. We provide a brief overview of our approach to sustainability on page 4 of this report and provide some further detailed information on each fund, where applicable. As always, we will continue to update all investors and their advisers on our initiatives and fund performance. This information, as well as forms and publications on each fund, is available on our newly relaunched website It s defi nitely worth a look and should assist in providing a high level of service to our investors. Yours sincerely Ian Schilling Group Executive Funds Management Investa Funds Management Limited 3 RETAIL FUNDS QUARTERLY REPORT

4 SUSTAINABILITY AT WORK Investa takes pride in being one of the world s leaders in environmental and social responsibility concern to most Australians who recognise that the Earth s regenerative capacity cannot keep up with its supply of natural resources. Residential and commercial buildings present a major opportunity globally to mitigate adverse environmental impacts. The built environment accounts for: 25% to 40% of total energy use; 30% to 40% of greenhouse gas emissions; 30% to 40% of solid waste generation; and 20% of freshwater use. At Investa, we are focusing on reducing greenhouse gas emissions, waste and the use of scarce resources in all of our commercial buildings. This will benefi t the environment for all Australians, resulting in long term cost savings as the cost for these resources continues to grow. In September 2007, whilst a publicly listed company, Investa: was the leading company on the Dow Jones Sustainability World Index (regarded as the world s most authoritative ranking of the sustainability credentials of publicly listed companies) in both the Real Estate sector and also the Financial Services super-sector ; and was one of only three Australian companies included in the Global 100 list of sustainable publicly listed corporations announced at the World Economic Forum in Davos in January Investa is continuing its active commitment to sustainability under its new ownership. In July 2008, Investa was awarded one of Australia s most prestigious sustainability awards, the Banksia Foundation Climate Award for Addressing Climate Change. These awards refl ect our consistent improvements in sustainability performance. For example, between and 2007, across its portfolio of commercial offi ce buildings, Investa has reduced its usage of: water by 37%; electricity by 21%; and natural gas by 43%. In addition, we are currently diverting more than 60% of our tenants offi ce waste from landfi ll to recycling and continue to maintain our 5-star safety accreditation from the National Safety Council of Australia. We also manage Australia s only property fund for retail investors certified by the Responsible Investment Association Australasia (RIAA) In 2007, the Investa Diversifi ed Offi ce Fund (IDOF) was certifi ed by the RIAA the peak body for professionals working in responsible investment in Australia and New Zealand. IDOF is the only property fund for retail investors certifi ed by the RIAA and leverages Investa s sustainability platform around environmental, social, ethical considerations and labour standards. Further information about IDOF can be found on page 6 of this report. 4 How does sustainability add value to a fund? Lowers occupancy costs for the tenant and owner by:» reducing base building outgoings (energy, water and waste which will cost more with the introduction of the Carbon Pollution Reduction Scheme); and» reducing tenant outgoings (especially energy consumption); Attracts tenants and improves the credit quality of tenants (Government and top tier companies are increasingly seeking sustainable accommodation, with many requiring a particular environmental rating from the building and for their tenancy fi t-out); and Lowers the level of obsolescence as sustainable buildings retain a higher future value.

5 PROPERTY MARKET OVERVIEW Property vacancies likely to rise Tenant demand has continued to soften across most Australian commercial markets as a result of deteriorating global economic conditions. This was most evident in Sydney and Melbourne which have a greater exposure to the ailing fi nancial services sector. Similarly, tenant demand in Perth and Brisbane has been decreasing due to falling commodity prices and declining global demand for resources. During 2009, property vacancy rates are likely to rise in most markets as businesses respond to the economic downturn and start to reduce their workforce. Many analysts have different views about the severity of the downturn. Fortunately the Australian property market approaches this period of uncertainty from a position of relative strength, with historical low vacancy levels and limited new supply across most markets. The Australian government is also changing its monetary and fi scal policies to stimulate the economy. This may help to alleviate the economic downturn and softening tenant demand. withdrawal arrangements and reduced distributions (some even cancelling distributions) so that future debt, tenant and property maintenance obligations can be met. In addition, many development projects and extensive building upgrades have been postponed or suspended. With limited capital raising options available, a signifi cant amount of property assets are now for sale. However, due to the cautious nature and reduced number of potential purchasers, property disposal strategies require patience and fl exibility. Investment activity remains subdued Property sales continue to remain subdued during the fourth quarter of Debt and equity fi nance is diffi cult to obtain and potential investors are prepared to wait until they can quantify the extent of the downturn with some clarity prior to making investment decisions. Due to this wait and see approach, property transaction volumes in 2008 were down 80% nationally when compared to prior years. Until capital markets (debt and equity fi nance) begin to function at or near historical norms, it is likely that the reduced investment activity will continue. Capital management strategies are becoming very important The implications of the challenging capital markets have had far reaching effects on the property industry, beyond simply reduced sales transaction volumes. The inability to raise additional equity, diffi culty in refi nancing existing debt facilities and increases in debt costs, have caused market participants to review capital management strategies. As a result, many fund managers in the property funds management sector have cancelled 115 Grenfell Street, Adelaide, SA, an asset of Investa Diversifi ed Offi ce Fund 5 RETAIL FUNDS QUARTERLY REPORT

6 INVESTA DIVERSIFIED OFFICE FUND (IDOF) KEY HIGHLIGHTS Distributions maintained at 1.15cpu for the December 2008 quarter 45 Charlotte Street, Brisbane, was sold for $16m 7.8% p.a. total return since inception Negative 23.7% p.a. total return for one year to 31 December 2008 reflecting subdued capital markets 1. About IDOF Investa Diversifi ed Offi ce Fund ( IDOF ): is an established real estate fund which holds interests in quality offi ce buildings in most of Australia s major centres; will generally maintain an exposure of up to 10% of its total assets in liquid assets in the form of cash and units in listed property trusts (IDOF has no current investments in listed property trusts); borrows to invest and fund capital expenditure; and aims to optimise distribution returns and provide capital growth. 2. Fund Snapshot as at 31 December 2008 ITEM CURRENT POSITION SEE SECTION Fund size (total assets) $487.3m 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 % p.a. Indirect cost ratio % p.a. Commission to advisers Up to 4% 5.3 Total borrowings drawn $277.8m 7 Gearing ratio 57.0% 7.1 Interest cover 1.44x 7.2 Debt maturity date March Number of investors 2,791 Notes 1. Investors normally have the right to make weekly 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. 3. Indirect cost ratio is calculated by dividing IDOF s management costs by its average net assets. IDOF currently has no performance fee accrued. 3. Key Initiatives 3.1 CAPITAL MANAGEMENT We are taking a proactive approach to manage IDOF s capital. To allow IDOF to reduce debt levels, to provide fl exibility to meet future capital expenditure and to assist in facilitating liquidity for investors, IDOF is selling some of its properties, including: 45 Charlotte Street, Brisbane, which sold for $16 million in December 2008; 115 Grenfell Street, Adelaide; and 369 Royal Parade, Parkville, Melbourne. In the event that we can not sign an unconditional contract of sale for another property by April 2009, it is possible that IDOF may have to temporarily reduce distributions to nil until a sale is concluded. We consider this to be a prudent approach, particularly when properties are diffi cult to sell in the current environment Stirling Street, Perth, WA

7 3.2 NEW WITHDRAWAL ARRANGEMENTS Liquidity in this environment is increasingly important to many of our investors, and we are working on new withdrawal arrangements which may see some listed property stocks being introduced into the portfolio to assist funding withdrawals (by selling the listed property stocks as required). We have to complete our property sales campaign to implement this initiative. As the property market is not buoyant, the new withdrawal arrangements are not expected to be available until the latter part of HIGHER LEVEL OF REPORTING In these uncertain times, it is important that investors remain fully informed about their investment and what management are doing. We are committed to transparent reporting and have enclosed an update to all IDOF unitholders elaborating on some of the key initiatives that we are working on and some of the issues that have been raised by investors and their advisers. If you are not an IDOF investor but wish to read this update, it is available from our website at 4. Withdrawal Arrangements Investors normally have the right to make weekly withdrawals from IDOF, but withdrawals are temporarily suspended. Withdrawals from IDOF were 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 or owned 30% of IDOF s units on issue. The fi rst threshold was reached in April 2008 and withdrawal arrangements were therefore suspended. Applications were also suspended at the same time. We are currently reviewing alternative liquidity mechanisms which require some properties to be sold. This may take some time given that property investment markets are weak. As a result, the new withdrawal arrangements are not expected to be available until the latter part of Before they start, we will provide a clear explanation of how investors can withdraw from IDOF and any limitations that may affect their ability to withdraw funds. 64 Northbourne Avenue, Canberra, ACT 7 RETAIL FUNDS QUARTERLY REPORT

8 INVESTA DIVERSIFIED OFFICE FUND (IDOF) 5. Fund Performance 5.1 FUND RETURNS TO % p.a. This has halved since the last quarter because the global fi nancial crisis has impacted on the value of IDOF s properties and its interest rate swaps. This is explained further below. Property values have decreased further due to capital constraints limiting the ability of purchasers to source debt and equity fi nance. As a result, property demand has fallen as potential purchasers fi nd it hard to fund acquisitions. Property supply is also increasing as many owners are selling their properties to repay debt. This demand and supply mix is reducing property values and therefore IDOF s unit price and performance. IDOF s unit price has also been impacted by marking its interest rate swaps to market (as required by Australian Accounting Standards). Despite interest rates falling, the marking to market of interest rate swaps has increased IDOF s liabilities. This liability is treated as an unrealised loss but does not directly affect current distributions. The current loss from marking to market interest rate swaps will unwind over time as the term of the interest rate swaps matures or will reverse if future expectations of interest rates increase. PERIOD TO 31 DISTRIBUTION RETURN P.A. CAPITAL RETURN P.A. TOTAL RETURN P.A. 1 year 1 2.9% -26.6% -23.7% 3 years 1 6.1% 1.5% 7.6% Since inception 2 6.5% 1.3% 7.8% 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 January 2008). 2. Inception date is 1 June RECENT DISTRIBUTIONS We have maintained the December 2008 quarterly distribution at 1.15 cents per unit. This is consistent with IDOF s revised distribution policy of distributing earnings after deducting capital expenditure. This means that capital required for the maintenance and upgrades of IDOF s assets will be mainly sourced from earnings rather than available debt facilities, and IDOF will not distribute from its reserves or retained earnings. IDOF s last two distributions are signifi cantly lower than prior periods due to the change in the distribution policy described above and the higher fees charged by the fi nancier when IDOF refi nanced its debt facility in March This fall in distribution is obviously disappointing, but we believe that it is in the best long term interests of unitholders. It ensures that IDOF is better placed to meet its future funding requirements, protecting unitholder capital at a time when capital markets are uncertain. DISTRIBUTION PAYMENT DATE AMOUNT (CENTS PER UNIT) % FROM REALISED INCOME % FROM CAPITAL TAX DEFERRED 12 May % Nil 100% 11 Aug % Nil 100% 10 Nov % Nil 100% 1 9 Feb % Nil 100% 1 Note 1. Estimate. Tax deferred components will be confi rmed in August Adelaide Street, Brisbane, QLD The next quarterly distribution for the period ending 31 March 2009 is scheduled to be paid on 11 May As noted in section 3.1, in the event that we can not sign an unconditional contract of sale for another property by April 2009, it is possible that IDOF may have to temporarily reduce distributions to nil until a sale is concluded. Under our distribution policy we do not distribute unrealised gains.

9 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 has reduced over the December quarter refl ecting the impact of the global fi nancial crisis on property valuations and the value of IDOF s interest rate swaps. This was explained in section 5.1. UNIT PRICE SINCE INCEPTION IDOF $1.60 $1.50 $1.40 APPLICATION PRICE ($ PER UNIT) WITHDRAWAL PRICE ($ PER UNIT) $1.30 $1.20 $1.10 $1.00 $0.90 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 NET TANGIBLE ASSETS NUMBER OF UNITS ON ISSUE TOTAL NTA PER DATE ASSETS UNIT 31 Dec 08 $487.3m $168.4m 167.1m $ Application and withdrawal prices are based on IDOF s NTA per unit plus the unamortised stamp duty on direct property. The application price also includes a buy spread of 5%. Your fi nancial adviser may also charge you an upfront commission of up to 4%. Applications (when IDOF is open for investment) are processed after deducting the fi nancial adviser s commission. We calculate the withdrawal price for IDOF at the end of each week. As 31 December 2008 did not fall at the end of the week, we use the next withdrawal price after the month end as a proxy for valuation purposes (see table below). APPLICATION WITHDRAWAL DATE PRICE PRICE 2 Jan 09 $ $ A copy of our unit pricing policy and a history of application and withdrawal prices are available on our website at 6. Investment Portfolio 310 Pitt Street, Sydney, NSW 6.1 INVESTMENT STRATEGY IDOF is an open ended fund and we choose new properties carefully. We: invest in Australian capital cities and major regional centres only; aim to ensure IDOF s portfolio is diversifi ed; make investment decisions with a view to the likely impact on distribution yield and NTA 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 Property values have been reducing globally and the average value of IDOF s portfolio has reduced by 6.6% since January Capitalisation rates have also reduced over this same period by 1%. IDOF s interest in 45 Charlotte Street, Brisbane, was sold for $16 million in December 2008, a $0.7 million discount to book value. Most of the proceeds from the sale of this asset were used to permanently reduce IDOF s debt facility. We currently obtain independent external valuations for all direct properties every three months to ensure that the unit price and portfolio returns are refl ective of current market conditions. 9 RETAIL FUNDS QUARTERLY REPORT

10 INVESTA DIVERSIFIED OFFICE FUND (IDOF) 6.3 INVESTMENT PORTFOLIO AS AT 31 The following table provides detailed information on IDOF s property portfolio as at 31 December PROPERTY DETAILS MAJOR TENANT(S) TENANCY DETAILS ALL TENANTS VALUATION DETAILS 1 ADDRESS STATE OWNERSHIP INTEREST NAME % OF PROPERTY BY AREA NUMBER OF TENANTS OCCUPANCY RATE WEIGHTED AVERAGE LEASE EXPIRY (YEARS) CURRENT VALUATION 2 VALUATION DATE INDEPENDENT VALUER CAPITALISATION RATE 310 Pitt St, Sydney NSW 50% Telstra 99% % 3.95 $90.0m 10 Dec 08 Savills 6.75% Elizabeth St, NSW 19.99% Commonwealth Knight 6.50%- 57% % 3.12 $60.8m 20 Oct 08 Sydney Government Frank 7.00% 10 Valentine Ave, NSW 100% State Knight 99% % 3.48 $57.5m 15 Dec 08 Parramatta Government Frank 8.50% 115 Grenfell St, SA 100% University Adelaide of Adelaide 46% % 3.26 $45.0m 20 Nov 08 Savills 8.50% 241 Adelaide St, The Brisbane QLD 100% Brisbane Club 31% % 6.64 $44.0m 10 Nov 08 CBRE 8.25% 468 St Kilda Rd, Jardine Lloyd VIC 100% Melbourne Thompson 16% % 3.37 $36.9m 5 Dec 08 CBRE 8.00% 30 Pirie Street, Adelaide SA 50% Telstra 99% % 3.70 $30.0m 5 Oct 08 CBRE 8.25% 60 Martin Place, Knight 6.75% - NSW 12.5% Westpac 99% % 2.49 $29.3m Sydney 21 Oct 08 Frank 7.00% 369 Royal Parade, VIC 100% FRH Parkville, Melbourne Group 15% % 2.12 $26.1m 15 Oct 08 Savills 8.25% 80 Stirling St, Perth WA 50% Telstra 100% % 3.63 $24.5m 10 Oct 08 Savills 10.25% 32 Phillip St, Parramatta NSW 100% GE Finance 100% % 0.84 $22.2m 5 Nov 08 CBRE 8.50% 64 Northbourne Ave, ACT 100% Commonwealth Knight 52% % 1.84 $21.9m 15 Nov 08 Canberra Government Frank 9.00% Cash and other assets n/a n/a n/a n/a n/a $7.0m n/a n/a n/a This Quarter Total (T) / Weighted Average Previous Quarter Total (T) / Weighted Average 128 (T) 129 (T) 99.5% 99.5% $487.3m (T) $525.1m (T) 0.13yrs yrs % 7.47% Notes 1. For direct property investments, we use an independent valuer to conduct a valuation on each property generally every 12 months in accordance with relevant industry standards. Given the current economic climate, independent valuations are obtained every three months. The properties within the portfolio are independently revalued on a rotating basis or if we assess a change in value by more than 5%. 2. Current valuation based on IDOF s ownership interest in the property. 3. IDOF s interest in 60 Martin Place is held indirectly through Martin Place Trust and is equity accounted in IDOF s books at $21.5 million. This value is lower than the asset value due to debt in Martin Place Trust. 4. The weighted average age of all direct property valuations. The lower this number, the more recent the valuations are. GEOGRAPHIC DIVERSITY PROPERTY SECTOR DIVERSITY TOP 5 TENANTS BY INCOME WEIGHTED AVERAGE LEASE EXPIRY BY INCOME 10 NSW 5 assets 53.2% SA 2 assets 15.4% VIC 2 assets 12.9% QLD 1 asset 9.0% WA 1 asset 5.0% ACT 1 asset 4.5% Offi ce 12 assets 100% Telstra 26.6% State Government 14.9% Commonwealth Government 11.7% GE Finance 5.7% University of Adelaide 4.8% Other 36.3% Vacant 0.5% June % June % June % June % June % June %

11 7. Fund Borrowings IDOF borrows to invest in properties and, as at 31 December 2008, has: borrowed $277.8 million of debt against total assets of $487.3 million; over 95% of its borrowings hedged (fi xed) using interest rate swaps with at least 80% of its 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 8.0% 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); $7.2 million of undrawn debt available for investment and capital expenditure (in addition to cash and cash equivalents of $2.4 million); and complied with all loan covenants. IDOF s debt is secured against its assets. This means that the $277.8 million owing to IDOF s lenders ranks ahead of an investor s interest in IDOF. The following graph shows the maturity profi le of IDOF s borrowings (due to mature in March 2011). IDOF S DEBT MATURITY PROFILE AS AT 31 $300m 7.1 GEARING RATIO IDOF s gearing ratio is 57.0% (57.5% on a look through basis) as at 31 December 2008 (based on IDOF s latest reviewed, but unaudited, fi nancial report and ASIC s disclosure guidelines). There have been no material changes to IDOF s gearing ratio since then. 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 decrease, IDOF s gearing ratio will increase. Higher gearing increases risk as returns and losses are amplifi ed by the use of debt. 7.2 INTEREST COVER IDOF s interest cover is 1.44x as at 31 December 2008 (based on IDOF s latest reviewed, but unaudited, fi nancial report and ASIC s disclosure guidelines). There have been no material changes to IDOF s interest cover since then. Interest cover measures the ability of IDOF to service borrowing costs from earnings. It is a key indication of IDOF s fi nancial 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. $250m BORROWINGS $200m $150m $100m $50m 0 Nil Nil Nil Nil Nil < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years DEBT MATURITY DATE DEBT DRAWN DEBT UNDRAWN 468 St Kilda Road, Melbourne, VIC 11 RETAIL FUNDS QUARTERLY REPORT

12 INVESTA DIVERSIFIED OFFICE FUND (IDOF) 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 0.7% p.a. of total assets, some or all of which may be deferred by us at our election ($3.7 million has been deferred as at 31 December 2008); a performance fee of 30% of the amount by which the total return exceeds 10% p.a., if at the end of each fi ve year period the pre-tax total return to investors exceeds 10% p.a. Based on current fund performance, no performance fee has been accrued in IDOF s accounts as at 31 December 2008; a custodian fee of $41,000 p.a.; and property and/or asset management fees 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 22% 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 Confl ict 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: Investa s Board (which includes a majority of independent directors) must approve all transactions between Investa (and its related entities) and IDOF; 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 confl icts, 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 confi rmation that the policy has been followed for all relevant transactions. 9. Litigation IDOF is not currently involved in any litigation Martin Place. Sydney, NSW

13 10. Sustainability Energy production and use releases greenhouse gases into the atmosphere and contributes to climate change. For property operations, burning coal to produce electricity used in powering buildings is the primary contributor to greenhouse gas emissions. Reducing energy consumption therefore reduces operating costs and also reduces the amount of these emissions. In line with its recognition as a Sustainable Responsible Investment, IDOF s year-to-date weighted average emission of carbon dioxide equivalent (CO 2 ) greenhouse gas emissions per square metre (m 2 ) of net lettable area (NLA) has reduced 11.2% since last year and 20.7% since 2005/06. This is shown in the graph below. Emissions intensity is greater during summer time due to higher electricity consumption required to service air conditioning and ventilation systems. GREENHOUSE EMISSIONS INTENSITY kg.co 2 /m 2 Weighted average by NLA Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Reducing water consumption intensity is another example of our commitment to a sustainable future. 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 20.9% since last year and 48.6% since 2005/06. This is shown in the graph below. Water consumption intensity is also greater during the summer period primarily due to greater demand from cooling towers which service air conditioning systems. WATER EMISSIONS INTENSITY L/m 2 Weighted average by NLA Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY08/09 FY07/08 FY06/07 FY05/06 FY08/09 FY07/08 FY06/07 FY05/ Elizabeth Street, Sydney, NSW 13 RETAIL FUNDS QUARTERLY REPORT

14 INVESTA FIFTH COMMERCIAL TRUST (I5CT) KEY HIGHLIGHTS Distributions maintained at 2.00cpu for the December 2008 quarter 99.9% portfolio occupancy across 4 assets Over 75% of the portfolio leased to Telstra or Government Departments 18.3% p.a. total return since inception Negative 18.0% p.a. total return for one year to 31 December 2008 reflecting subdued capital markets 1. About I5CT is a real estate fund which holds interests in four offi ce buildings throughout Australia; was established in May 2003 and is closed to further investment; terminates in 2015 unless terminated earlier by us or by operation of law, or extended by a special resolution of unitholders; borrows to invest and fund capital expenditure; and aims to deliver income returns with the potential for capital growth. 2. Fund Snapshot as at 31 December 2008 ITEM CURRENT POSITION SEE SECTION Fund size (total assets) $160.9m 6.4 NTA per unit $ Distribution payments Quarterly 5.2 DRP Not available 5.2 Withdrawals Not available 4 Management fee 1.0% p.a. 8 MER (ex performance fee) % p.a. Indirect cost ratio % p.a. Total borrowings drawn $74.55m 7 Gearing ratio 46.3% 7.1 Interest cover 1.62x 7.2 Debt maturity date May Number of investors 836 Notes 1. MER refers to the Management Expense Ratio and is calculated by dividing I5CT s management costs by its average total assets. Performance fees have been excluded from this calculation as they are not payable until the 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 MID-TERM REVIEW In line with our obligations under the Prospectus, we have commenced a mid-term strategic review of I5CT. This review will consider a number of options, including whether to continue I5CT in its current form, to sell all properties and wind up I5CT or to restructure I5CT. Once the review is completed, we intend to prepare an Explanatory Memorandum outlining the options considered as well as our recommendation. This should be issued in mid-2009 together with a feedback form which provides an opportunity for unitholders to provide comments to us on our recommendation. 3.2 CAPITAL MANAGEMENT We continue to pursue the sale of I5CT s 50% interest in 595 Collins Street with a number of interested parties. If sold, we intend to use the net proceeds from the sale to fund future capital expenditure commitments and to repay debt which will reduce gearing Collins Street, Melbourne, VIC

15 3.3 DEBT FACILITIES I5CT s gearing has increased from 42.1% to 46.3% last quarter due to property values falling. Whilst signifi cant headroom in the debt facility exists, we retained a portion of I5CT s earnings for the quarter to reduce debt levels. We consider this to be prudent capital management, particularly in light of future capital expenditure commitments and the May 2010 expiry of the debt facility. 4. Withdrawal Arrangements I5CT is a closed ended fund which means there are no withdrawal arrangements or redemption facilities available to its investors. 5. Fund Performance 5.1 FUND RETURNS TO 31 I5CT has performed well over the past fi ve years providing an average total return since inception of 18.3% p.a. However, the one year return to 31 December 2008 of -18.0% has been signifi cantly impacted by falling property values and the value of I5CT s interest rate swaps. This is explained in detail in section 5.3. Further information on fund returns is provided in the table below. PERIOD TO 31 DECEMBER 2008 DISTRIBUTION RETURN P.A. CAPITAL RETURN P.A. TOTAL RETURN P.A. 1 year 1 3.8% -21.8% -18.0% 3 years 1 9.2% 12.2% 21.4% Since inception 2 9.7% 8.6% 18.3% 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 January 2008). 2. Inception date is 16 May RECENT DISTRIBUTIONS Distributions were maintained at 2.0 cents per unit for the quarter to 31 December This is a result of stable income fl owing from the properties, a relatively high level of the interest costs being fi xed as well as relatively low levels of capital expenditure in the period. Earnings for the quarter were 2.6 cents per unit. We retained 0.6 cents per unit from I5CT s earnings to reduce debt and assist with funding future capital expenditure. A summary of recent distributions is provided in the table below. DISTRIBUTION PAYMENT DATE AMOUNT (CENTS PER UNIT) % FROM REALISED % FROM INCOME CAPITAL TAX DEFERRED % Nil 100% 11 Aug % Nil 100% 10 Nov % Nil 100% 1 9 Feb % Nil 100% 1 Note 1. Estimate. Tax deferred components will be confi rmed in August The next quarterly distribution for the period ending 31 March 2009 is scheduled to be paid on 11 May Under our distribution policy we do not distribute unrealised gains. A distribution reinvestment plan (DRP) is not available for I5CT. 5.3 UNIT PRICING I5CT s unit price peaked in December 2007 as capitalisation rates for properties reached historic lows. Since then, I5CT s unit price has reduced due to the global fi nancial crisis impacting on the value of I5CT s properties and its interest rate swaps. This is explained further on the next page. UNIT PRICE SINCE INCEPTION I5CT NET TANGIBLE ASSETS PER UNIT $2.20 $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 JUN 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 Stirling Street, Perth, WA 15 RETAIL FUNDS QUARTERLY REPORT

16 INVESTA FIFTH COMMERCIAL TRUST (I5CT) During the quarter ending 31 December 2008, the average value of I5CT s properties reduced by $13.1 million or 7.6%, following the revaluation of all properties during the quarter. This has reduced the value of I5CT s net assets and its unit price by 26 cents (equivalent to 13.9% given the effect of I5CT s gearing). The average capitalisation rate for I5CT s properties increased by 0.70% during the quarter, bringing the total increase since the December 2007 peak to 1.13%. This softening of capitalisation rates is in line with the general market and capitalisation rates are now approaching more sustainable levels. I5CT s unit price has also been adversely impacted by marking its interest rates swaps to market (as required by Australian Accounting Standards). Interest rate swaps are used to fi x I5CT s borrowing costs to provide investors with some protection against rising interest rates and to reduce the volatility of earnings. Despite interest rates falling, the current marking to market of the interest rate swaps is treated as an unrealised loss, reducing I5CT s unit price by 5 cents. It does not directly affect current distributions. The current loss from marking to market interest rate swaps will unwind over time as the term of the interest rate swap matures, or will reverse if future expectations of interest rates increase. The current unit price of I5CT is summarised in the following table. NET TANGIBLE ASSETS NUMBER OF UNITS ON ISSUE TOTAL NTA PER DATE ASSETS UNIT 31 Dec 08 $160.9m $79.3m m $ Investment Portfolio 6.1 INVESTMENT AND DISPOSAL STRATEGY I5CT is a fi xed term fund and is closed to new investments. We are continuing to explore the potential for a sale of I5CT s 50% interest in 595 Collins Street in conjunction with our co-owner s intention to sell, subject to acceptable pricing and terms. An acceptable offer has yet to be received and the marketing process is continuing. 6.2 REVALUATIONS The value of I5CT s investment portfolio has fallen by 8.7% this fi nancial year following the independent revaluations of all properties in either October or December The average age of valuations for the properties as at 31 December 2008 is two months. We remain conscious of continued market volatility which may affect asset values and will continue to seek regular valuation support for all properties. 6.3 LEASING The portfolio is 99.9% leased, with the only vacancy limited to one small retail tenancy in 595 Collins Street (62m 2 ). Heads of Agreement have been signed for this tenancy and a lease has been issued. Only one tenancy of 1,851m 2, or 2% of the portfolio, is subject to expiry over the next six months. Negotiations are underway with the incumbent tenant to exercise their option over this space. The portfolio is subject to numerous rent reviews over the fi nancial year ending 30 June The market rent reviews are being actively managed to ensure optimum outcomes for unitholders. Tenant arrears are also being closely monitored given the current economic circumstances Eden Park Drive, North Ryde, NSW

17 6.4 INVESTMENT PORTFOLIO AS AT 31 The following table provides detailed information on I5CT s property portfolio as at 31 December PROPERTY DETAILS MAJOR TENANT(S) TENANCY DETAILS ALL TENANTS VALUATION DETAILS 1 ADDRESS 595 Collins St, Melbourne STATE OWNERSHIP INTEREST NAME VIC 50% Commonwealth of Australia % OF PROPERTY BY AREA NUMBER OF TENANTS OCCUPANCY RATE WEIGHTED AVERAGE LEASE EXPIRY (YEARS) CURRENT VALUATION 2 VALUATION DATE INDEPENDENT VALUER 67% % 6.07 $65.0m 31 Oct 08 Ernst & Young 5 Eden Park Drive, NSW 100% Contract 57% % 3.04 $38.8m 31 Dec 08 Savills 7.50% North Ryde Pharmaceutical Services of Australia 30 Pirie St, SA 50% Telstra 99% % 3.70 $30.0m 5 Oct 08 CBRE 8.25% Adelaide 80 Stirling St, WA 50% Telstra 100% % 3.63 $24.5m 10 Oct 08 Savills 10.25% Perth Cash and other assets n/a n/a n/a n/a n/a $2.6m n/a n/a n/a CAPITALISATION RATE 7.50% This Quarter Total (T) / Weighted Average 22 (T) Previous Quarter Total (T) / Weighted Average 22 (T) 99.9% 99.9% $160.9m (T) $173.8m (T) 0.15yrs yrs % 7.37% Notes 1. For direct property investments, we use an independent valuer to conduct a valuation on each property generally every 12 months in accordance with relevant industry standards, or if we assess a change in value by more than 5%. 2. Current valuation of I5CT s ownership interest in the property. 3. The weighted average age of all direct property valuations. The lower this number, the more recent the valuations are. GEOGRAPHIC DIVERSITY PROPERTY SECTOR DIVERSITY TOP 5 TENANTS BY INCOME WEIGHTED AVERAGE LEASE EXPIRY BY INCOME VIC 1 asset 41.0% NSW 1 asset 24.5% SA 1 asset 19.0% WA 1 asset 15.5% Offi ce 4 assets 100.0% Telstra 38.9% Commonwealth of Australia 36.9% Contract Pharmaceutical Services of Australia 10.2% ANZ Banking Group 5.1% Connex 2.5% Other 6.4% Vacant 0.1% June % June % June % June % June % June % 17 RETAIL FUNDS QUARTERLY REPORT

18 INVESTA FIFTH COMMERCIAL TRUST (I5CT) 7. Fund Borrowings I5CT borrows to invest in properties and, as at 31 December 2008, has: borrowed $74.55 million of debt against total assets of $160.9 million; over 85% of its borrowings hedged (fi xed) for the remainder of the current fi nancial year using interest rate swaps; an average interest rate of 7.7% 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); $10.45 million of undrawn debt available for capital expenditure (in addition to cash and cash equivalents of $0.7 million); and complied with all loan covenants. I5CT s debt is secured against its assets. This means that the $74.55 million owing to I5CT s lenders ranks ahead of an investor s interest in I5CT. The following graph shows the maturity profi le of I5CT s borrowings (due to mature in May 2010). The gearing ratio indicates the extent to which I5CT s assets are funded by debt (or interest bearing liabilities). If we borrow further money or the value of I5CT s properties decrease, I5CT s gearing ratio will increase. Higher gearing increases risk as returns and losses are amplifi ed by the use of debt. 7.2 INTEREST COVER I5CT s interest cover was 1.62x as at 31 December 2008 (based on I5CT s latest reviewed, but unaudited, fi nancial report and ASIC s disclosure guidelines). There have been no material changes to I5CT s interest cover since then. Interest cover measures the ability of I5CT to service borrowing costs from its earnings. It is a key indication of I5CT s fi nancial 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. I5CT DEBT MATURITY PROFILE AS AT 31 $100m $80m BORROWINGS $60m $40m $20m 0 < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years DEBT MATURITY DATE DEBT DRAWN DEBT UNDRAWN 7.1 GEARING RATIO I5CT s gearing ratio was 46.3% as at 31 December 2008 (based on I5CT s latest reviewed, but unaudited, fi nancial report and ASIC s disclosure guidelines). There have been no material changes to I5CT s gearing ratio since then Pirie Street, Adelaide, SA

19 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. of total assets, some or all of which may be deferred by us at our election; performance fee of up to 2.5% 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 unitholders by at least 10%. Based on the current property valuations, a total performance fee of $2.1 million has been accrued in I5CT s accounts as at 31 December 2008; custodian fee of $10,000 p.a.; and property management fee for managing I5CT 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 I5CT and transact with I5CT in various ways, Investa has developed a Resolution of Confl ict 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 I5CT; 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 confl icts, 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 confi rmation that the policy has been followed for all relevant transactions. 9. Litigation I5CT is not currently involved in any litigation. 10. Sustainability Energy production and use releases greenhouse gases into the atmosphere and contributes to climate change. For property operations, burning coal to produce electricity used in powering buildings is the primary contributor to greenhouse gas emissions. Reducing energy consumption therefore reduces operating costs and also reduces the amount of these emissions. I5CT s year-to-date weighted average emission of carbon dioxide equivalent (CO 2 ) greenhouse gas emissions per square metre (m 2 ) of net lettable area (NLA) has reduced 13.9% since last year and 22.7% since 2003/04. This is shown in the graph below. Emissions intensity is greater during summer time due to higher electricity consumption required to service air conditioning and ventilation systems. GREENHOUSE EMISSIONS INTENSITY kg.co 2 /m 2 Weighted average by NLA Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY08/09 FY07/08 FY06/07 FY05/06 Reducing water consumption intensity is another example of our commitment to a sustainable future. I5CT 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 18.9% since last year and 36.3% since 2003/04. This is shown in the graph below. Water consumption intensity is also greater during the summer period primarily due to greater demand from cooling towers which service air conditioning systems. WATER EMISSIONS INTENSITY L/m 2 Weighted average by NLA FY04/05 FY03/04 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY08/09 FY07/08 FY06/07 FY05/06 FY04/05 FY03/04 19 RETAIL FUNDS QUARTERLY REPORT

20 INVESTA SECOND INDUSTRIAL TRUST (ISIT) KEY HIGHLIGHTS Distributions maintained at 1.10cpu for the December 2008 quarter 98.4% portfolio occupancy across 4 assets 16.3% p.a. total return since inception Negative 10.7% p.a. total return for one year to 31 December 2008 reflecting subdued capital markets 1. About ISIT Investa Second Industrial Trust ( ISIT ): is a real estate fund which holds interests in four industrial buildings throughout Australia; was established in June 2002 and is closed to new investment; terminates in 2014 unless terminated earlier by us or by operation of law, or extended by a special resolution of unitholders; borrows to invest and fund capital expenditure; and aims to deliver income returns with the potential for capital growth. 2. Fund Snapshot as at 31 December 2008 ITEM CURRENT POSITION SEE SECTION Fund size (total assets) $60.2m 6.4 NTA per unit $ Distribution payments Quarterly 5.2 DRP Not available 5.2 Withdrawals Not available 4 Management fee 1.0% p.a. 8 MER (ex performance fee) % p.a. Indirect cost ratio % p.a. Total borrowings drawn $23.85m 7 Gearing ratio 39.6% 7.1 Interest cover 1.69x 7.2 Debt maturity date July Number of investors 556 Notes 1. MER refers to the Management Expense Ratio and is calculated by dividing ISIT s management costs by its average total assets. Performance fees have been excluded from this calculation as they are not payable until the 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 Kitchen Road, Dandenong, VIC

21 3. Key Initiatives 3.1 MID-TERM REVIEW We have nearly completed a mid-term strategic review of ISIT and are preparing to consult with unitholders about the future strategy for the properties, as outlined in the Prospectus. An Explanatory Memorandum which outlines the options considered as well as our recommendation for the future of the properties is scheduled to be issued in March 2009, together with a feedback form which allows unitholders to provide comments to us on our recommendation. 3.2 CAPITAL MANAGEMENT We are continuing to explore the sale of Kitchen Road, Dandenong, with a number of interested parties. The net proceeds from any sale, after paying deferred management fees, are likely to be applied to reducing debt. 4. Withdrawal Arrangements ISIT is a closed ended fund which means there are no withdrawal arrangements or redemption facilities available to its investors. 5. Fund Performance 5.2 RECENT DISTRIBUTIONS Distributions were maintained at 1.10 cents per unit for the quarter to 31 December This is a result of stable income fl owing from the properties, a relatively high level of the interest costs being fi xed as well as relatively low levels of capital expenditure in the period. A summary of recent distributions is provided in the following table. DISTRIBUTION PAYMENT DATE AMOUNT (CENTS PER UNIT) % FROM REALISED % FROM INCOME CAPITAL TAX DEFERRED % Nil 70% 11 Aug % Nil 70% 10 Nov % Nil 72% 1 09 Feb % Nil 58% 1 Notes 1. Estimate. Tax deferred components will be confi rmed in August The next quarterly distribution for the period ending 31 March 2009 is scheduled to be paid on 11 May Under our distribution policy we do not distribute unrealised gains. A distribution reinvestment plan (DRP) is not available for ISIT. 5.1 FUND RETURNS TO 31 ISIT has performed well since inception providing an average total return of 16.3% p.a. However, the one year return to 31 December 2008 of -10.7% has been signifi cantly impacted by falling property values and the value of ISIT s interest rate swaps. This is explained in detail in section 5.3. It should be noted that these returns include a return of capital of $ per unit in December 2006 following the sale of 131 Beenleigh Road, Acacia Ridge, and excess fl oor space ratio entitlement at Waterloo Road, North Ryde. PERIOD TO 31 DECEMBER 2008 DISTRIBUTION RETURN P.A. CAPITAL RETURN P.A. TOTAL RETURN P.A. 1 year 1 3.3% -14.0% -10.7% 3 years % 9.1% 37.1% Since inception % 2.3% 16.3% 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 January 2008). 2. Inception date is 14 June Eden Park Drive, North Ryde, NSW 21 RETAIL FUNDS QUARTERLY REPORT

22 INVESTA SECOND INDUSTRIAL TRUST (ISIT) 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 if the gains following the sale of 131 Beenleigh Road, Acacia Ridge, were not distributed in December During 2008, ISIT s unit price reduced due to the global fi nancial crisis impacting on the value of ISIT s properties and its interest rate swaps. This is explained further below. UNIT PRICE SINCE INCEPTION ISIT NET TANGIBLE ASSETS PER UNIT $1.60 $1.40 $1.20 $1.00 $0.80 JUN 02 DEC 02 JUN 03 DEC 03 JUN 04 DEC 04 During the quarter ending 31 December 2008, the average value of ISIT s properties reduced by $2.95 million or 4.7%, following the revaluation of all properties during the quarter. This has reduced the value of ISIT s net assets and its unit price by 11 cents (equivalent to 8.3% given the effect of ISIT s gearing). The average capitalisation rate for ISIT s properties increased by 0.56% during the quarter, bringing the total increase since the December 2007 peak to 1.02%. This softening of capitalisation rates is in line with the general market and capitalisation rates are now approaching more sustainable levels. ISIT s unit price has also been adversely impacted by marking its interest rates swaps to market (as required by Australian Accounting Standards). Interest rate swaps are used to fi x ISIT s borrowing costs to provide investors with some protection against rising interest rates and to reduce the volatility of earnings. Despite interest rates falling, the current marking to market of the interest rate swaps is treated as an unrealised loss, reducing ISIT s unit price by 3.3 cents. It does not directly affect current distributions. The current loss from marking to market interest rate swaps will unwind over time as the term of the interest rate swap matures, or will reverse if future expectations of interest rates increase. JUN 05 DEC 05 JUN 06 DEC 06 JUN 07 DEC 07 JUN 08 DEC 08 The current unit price of ISIT is summarised in the following table. NET TANGIBLE ASSETS NUMBER OF UNITS ON ISSUE TOTAL NTA PER DATE ASSETS UNIT 31 Dec 08 $60.2m $31.4m 27.1m $ Investment Portfolio 6.1 INVESTMENT AND DISPOSAL STRATEGY ISIT is a fi xed term fund and is closed to new investments. We are continuing to explore the sale of 8-10 Kitchen Road, Dandenong, following Council s consent to the two lot subdivision, subject to acceptable pricing and terms. A satisfactory offer has yet to be received and we continue to market the property for sale. 6.2 REVALUATIONS The value of ISIT s investment portfolio has fallen by 5.2% this fi nancial year following an independent revaluation of all properties in December We remain conscious of continued market volatility which may affect asset values and will continue to seek regular valuation support for all properties. 6.3 LEASING The portfolio is 98.4% leased, with the only vacancy limited to a single tenancy in 2 Eden Park Drive (423m 2 ). This tenancy continues to be actively marketed. Leases over 2,583m 2 of space within 2 Eden Park Drive have been executed in the quarter with an additional 700m 2 under Heads of Agreement (HOA). As a result the WALE has increased from 3.90 years to 4.15 years over the quarter. Other than the current vacancy and assuming the tenancy under HOA mentioned above is converted to an executed lease, the next lease expiry within the portfolio (230m 2 ) does not occur until 30 November The portfolio is subject to numerous rent reviews over the fi nancial year ending 30 June The market rent reviews are being actively managed to ensure optimum outcomes for unitholders. Tenant arrears are also being closely monitored given the current economic circumstances.

23 6.4 INVESTMENT PORTFOLIO AS AT 31 The following table provides detailed information on ISIT s property portfolio as at 31 December PROPERTY DETAILS MAJOR TENANT(S) TENANCY DETAILS ALL TENANTS VALUATION DETAILS 1 ADDRESS STATE OWNERSHIP INTEREST NAME % OF PROPERTY BY AREA NUMBER OF TENANTS OCCUPANCY RATE WEIGHTED AVERAGE LEASE EXPIRY (YEARS) CURRENT VALUATION VALUATION DATE INDEPENDENT VALUER CAPITALISATION RATE 2 Eden Park Drive, North Ryde Waterloo Road, North Ryde 8-10 Kitchen Road, Dandenong 101 Beenleigh Road, Acacia Ridge NSW 100% NuSkin 14% % 3.14 $31.8m 31 Dec 08 Colliers 7.75% NSW 100% Fujitsu 100% % 7.09 $12.8m 31 Dec 08 Colliers 7.50% VIC 100% Startronics 100% % 2.79 $9.2m 31 Dec 08 CBRE 9.00% QLD 100% Bluestar Logistics 100% % 4.77 $5.5m 31 Dec 08 CBRE 8.00% Cash and other assets n/a n/a n/a n/a n/a $0.9m n/a n/a n/a This Quarter Total (T) / Weighted Average 23 (T) 98.4% 4.15 $60.2m (T) 0.00yrs % Previous Quarter Total (T) / Weighted Average 22 (T) 98.4% 3.90 $63.2m (T) 0.28yrs % Notes 1. For direct property investments, we use an independent valuer to conduct a valuation on each property generally every 12 months in accordance with relevant industry standards, or if we assess a change in value by more than 5%. 2. The weighted average age of all direct property valuations. The lower this number, the more recent the valuations are. GEOGRAPHIC DIVERSITY PROPERTY SECTOR DIVERSITY TOP 5 TENANTS BY INCOME WEIGHTED AVERAGE LEASE EXPIRY BY INCOME NSW 2 assets 75.2% VIC 1 asset 15.5% QLD 1 asset 9.3% Industrial 4 assets 100.0% Fujitsu 22.9% Startronics 14.0% Bluestar Logistics 9.4% NuSkin 7.3% Carl Zeiss 5.9% Other 40.4% Vacant 1.6% June % June % June % June % June % June % 2 Eden Park Drive, North Ryde, NSW 23 RETAIL FUNDS QUARTERLY REPORT

24 INVESTA SECOND INDUSTRIAL TRUST (ISIT) 7. Fund Borrowings ISIT borrows to invest in properties and, as at 31 December 2008, has: borrowed $23.85 million of debt against total assets of $60.2 million; over 80% of its borrowings hedged (fi xed) until July 2010 using interest rate swaps; an average interest rate of 8.6% 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); $3.15 million of undrawn debt available for capital expenditure (in addition to cash and cash equivalents of $0.6 million); and complied with all loan covenants. ISIT s debt is secured against its assets. This means that the $23.85 million owing to ISIT s lenders ranks ahead of an investor s interest in ISIT. The following graph shows the maturity profi le of ISIT s borrowings (due to mature in July 2010). ISIT DEBT MATURITY PROFILE AS AT 31 $30m 7.1 GEARING RATIO ISIT s gearing ratio was 39.6% as at 31 December 2008 (based on ISIT s latest reviewed, but unaudited, fi nancial report and ASIC s disclosure guidelines). There have been no material changes to ISIT s gearing ratio since then. The gearing ratio indicates the extent to which ISIT s assets are funded by debt (or interest bearing liabilities). If we borrow further money or the value of ISIT s properties decrease, ISIT s gearing ratio will increase. Higher gearing increases risk as returns and losses are amplifi ed by the use of debt. 7.2 INTEREST COVER ISIT s interest cover was 1.69x as at 31 December 2008 (based on ISIT s latest reviewed, but unaudited, fi nancial report and ASIC s disclosure guidelines). There have been no material changes to ISIT s interest cover since then. Interest cover measures the ability of ISIT to service borrowing costs from its earnings. It is a key indication of ISIT s fi nancial health and key to analysing the sustainability and risks associated with ISIT s level of borrowings. BORROWINGS $25m $20m $15m A lower interest cover means that there is less money available to pay borrowing costs and distributions. $10m $5m 0 Nil Nil Nil Nil Nil < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years DEBT MATURITY DATE DEBT DRAWN DEBT UNDRAWN Waterloo Road, North Ryde, NSW

25 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. of total assets, some or all of which may be deferred by us at our election ($0.6 million has been deferred as at 31 December 2008); performance fee of up to 2.5% 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 unitholders by at least 10%. Based on the current property valuations, a total performance fee of $2.1 million has been accrued in ISIT s accounts as at 31 December 2008; custodian fee of $16,000 p.a.; and property management fee for managing ISIT s real properties in its investment portfolio. The fee is determined using arm s length terms and conditions. 9. Litigation ISIT is not currently involved in any litigation. 10. Sustainability Unfortunately, we do not conduct regular measurement of electricity, gas or water consumption for ISIT due to the nature of industrial properties and given that the majority of ISIT s properties are occupied by a single tenant (and therefore have no common areas). As Investa and related entities of Investa provide services to ISIT and transact with ISIT in various ways, Investa has developed a Resolution of Confl ict 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 ISIT; 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 confl icts, 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 confi rmation that the policy has been followed for all relevant transactions. 101 Beenleigh Road, Acacia Ridge, QLD 25 RETAIL FUNDS QUARTERLY REPORT

26 26

27 Disclaimer This Quarterly Report does not include all the disclosures of the annual or half-yearly fi nancial reports, and is intended to provide general fi nancial 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, fi nancial situation or needs. You should consider the appropriateness of its contents having regard to your own objectives, fi nancial 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 fi nancial, legal and/or taxation advice. To obtain a copy of the PDS or for further information, call us on (local call cost) or visit 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. Compliance Statement Investa Funds Management Limited confi rms 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. 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. Investors should be aware that these are forecasts and may be affected by the accuracy of assumptions, risks and other uncertainties as set out in the PDS, which may cause the actual returns to differ. 27 RETAIL FUNDS QUARTERLY REPORT

28 DIRECTORY Responsible Entity Investa Funds Management Limited ABN AFSL Level 6, Deutsche Bank Place 126 Phillip Street Sydney NSW 2000 GPO Box 4180 Sydney NSW 2001 Tel: (02) Fax: (02) Web: Directors of the Responsible Entity Graham Dunstan (Chairman) Scott MacDonald Graham Monk Deborah Page AM Robert (Gary) Reid Company Secretary Jonathan Callaghan Fund Information Investa Diversified Office Fund ARSN ABN APIR IPL0001AU Investa Fifth Commercial Trust ARSN ABN Investa Second Industrial Trust ARSN ABN Unit Registry Registries (Victoria) Pty Ltd GPO Box 3993 Sydney NSW 2001 Tel: Fax: Web: Auditor PricewaterhouseCoopers QUESTIONS? Any questions about this Quarterly Report or the performance of our funds should be directed to Claire Gannon or the relevant fund manager, Grant Nichols or Paul Cull. Grant Nichols Fund Manager IDOF Phone: (02) Paul Cull Fund Manager ISIT & I5CT Phone: (02) Any questions about your unitholding, distribution and tax statements, or any change of details should be directed to Registries (Victoria) Pty Limited on Claire Gannon Investor Relations Co-ordinator Phone: (02) Mark Lumby General Manager Retail Funds Phone: (02) % 28 This report has been printed on Spicers Monza Recycled using 55% recycled content and 45% virgin fi bre sourced from sustainable forests. Cert no. SCS-COC-XXXXXX