JUnE 2011 Retail Funds · 6/30/2011 · Investa Diversified Office Fund (IDOF) fund report 6...

QUARTERLY REPORT

INVESTA FUNDS MANAGEMENT LIMITED ABN 48 120 839 447 AFSL 303614

JUnE 2011

Retail Funds

InVESTA RETAIL FUnDS | QUARTERLY REPORT | AS AT 30 JUNE 2011

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 2011.

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

02/03

‘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’

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


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.

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 30-40 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.’

Australia’s first commercial building 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.

04/05

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.

Importantly for landlords, tenant demand, which evaporated during 2008 due to uncertainty induced by the GFC, bounced back hard during 2010. 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.

Office market recovery remains on track

Prime gross effective rental growth AS AT 30 JUnE 2011

QUARTERLY GROWTH

ANNUAL GROWTH

-9

-6

-3

0

3

6

9

12

15

%

ME

LBO

UR

NE

FR

ING

E

PAR

RA

MAT

TA

NO

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RY

DE

BR

ISB

AN

E F

RIN

GE

NO

RTH

SY

DN

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AD

ELA

IDE

CO

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PE

RTH

CB

D

BR

ISB

AN

E C

BD

CA

NB

ER

RA

ME

LBO

UR

NE

CB

D

SY

DN

EY

CB

D

1. All property data sourced from Jones Lang LaSalle Research unless otherwise stated. All forecasts and market commentary is sourced from Investa Property Group.


Investa Diversified Office Fund (IDOF)

KEY HIGHLIGHTS

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

DISTRIBUTIONS GEARING RATIO WIThDRAWAL PRICE

1.50 cpu (1.50 cpu last quarter)

45.0%(45.8% last quarter)

$0.9266($0.9232 last quarter)

06/07

2. FUND SNAPSHOT AS AT 30 JUNE 2011

ITEm CURREnT POSITIOn SEE SECTIOn

Fund size (total assets) $290.09m 6.3

NTA per unit $0.9076 5.3

Withdrawal price per unit $0.9266 4 & 5.3

Minimum initial investment1 $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

MER2 0.82% p.a.

Indirect cost ratio3 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 2014 7

Number of investors 2,803

NOTES1. 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 INITIATIVES3.1 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 ARRANGEMENTSInvestors 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.

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).

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.


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 year1 4.9% 5.1%3 10.0%

3 years1 1.9% -12.2% -10.3%

Since inception2 4.6% -1.2% 3.4%

NOTES1. 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 2005.3. 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 2011. 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 Nil Nil Nil n/a

7 Feb 2011 1.50 100% Nil 100%1

9 May 2011 1.50 100% Nil 100%1

8 Aug 2011 1.50 100% Nil 100%1

NOTE1. Estimate only. Tax components will be confirmed in your annual tax statement,

scheduled to be sent to investors on 8 August 2011.

The next quarterly distribution for the period ending 30 September 2011 is scheduled to be paid on 7 November 2011.

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

UN

IT PR

ICE

$

$0.80

$0.90

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

SE

P 0

9

MA

R 1

0D

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09

JUN

09

SE

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5

DATETOTAL

ASSETSnET TAnGIBLE

ASSETSnUmBER OF UnITS

nTA PER UnIT

30 June 2011 $290.09m $151.68m 167.1m $0.9076 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:


LAST 3 mOnTHS LAST 12 mOnTHS

$/UnIT % CHAnGE $/UnIT % CHAnGE

Opening unit price $0.9232 $0.8816

Property revaluations $0.0160 1.7% $0.0597 6.8%

Interest rate swaps -$0.0109 -1.2% $0.0030 0.3%

Other -$0.0017 -0.1% -$0.0177 -2.0%

withdrawal price at 1 July 2011

$0.9266 0.4% $0.9266 5.1%

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 DIVERSIFIED OFFICE FUND (IDOF)

08/09

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.

DATEAPPLICATIOn

PRICEwITHDRAwAL

PRICE

30 June 2011 $0.9729 $0.9266 A copy of IDOF’s unit pricing policy and a history of application and withdrawal prices are available on IDOF’s website at www.investa.com.au/IDOF

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:

– 260-300 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.

10 VALENTINE AVENUEPARRAMATTA

241 ADELAIDE STREETBRISBANE


6.3 Investment portfolio as at 30 June 2011

The following table provides detailed information on IDOF’s property portfolio as at 30 June 2011.

PROPERTY DETAILSTENANCY DETAILS VALUATION DETAILS1

MAJOR TENANT(S) ALL TENANTS

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ATE

260-300 Elizabeth Street, Sydney, NSW

53,844 19.99% 4.53.5

-4.0Commonwealth Government 64% 34 85.9% 4.06 $55.67m 30 Jun 11 Savills 8.00%

10 Valentine Avenue, Parramatta, NSW

15,995 100% 4.5 3.0 State Government 99% 3 100.0% 1.10 $54.00m 30 Jun 11 CBRE 9.50%

241 Adelaide Street, Brisbane, QLD

10,820 100% 3.0 3.0 The Brisbane Club 31% 29 82.6% 2.15 $37.20m 30 Jun 11 DTZ 8.63%

30 Pirie Street, Adelaide, SA

24,757 50% 3.5 2.5 Telstra 100% 1 100.0% 11.67 $32.50m 30 Jun 11 Savills 8.25%

468 St kilda Road, Melbourne, VIC

10,922 100% 2.5 3.5 Downer EDI 13% 21 91.2% 2.96 $31.20m 31 May 11 Savills 9.00%

80 Stirling Street, Perth, WA

19,775 50% 5.0 3.5 Telstra 100% 1 100.0% 1.13 $25.50m 30 Jun 11 CBRE 9.75%

32 Phillip Street, Parramatta, NSW

6,759 100% 3.0 3.0 GE Finance 100% 1 100.0% 2.00 $22.50m 31 Mar 11 Colliers 9.25%

64 Northbourne Avenue, Canberra, ACT

6,508 100% 3.5 4.0Commonwealth Government

50% 9 100.0% 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 (A)

4.0 (A)

3.3 (A)

99(T)

95.3%(A)

3.34(A)

$290.09m (T)

0.03yrs5

(A)

8.87% (A)

Previous Quarter Total (T) / Weighted Average (A)

4.0 (A)

3.3 (A)

98(T)

95.1%(A)

3.39 (A)

$286.78m (T)

0.38yrs5 (A)

8.97%

(A)

6.4 Key portfolio statistics as at 30 June 2011

NOTES1. 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.

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%

Telstra 19.9%

State Government 19.1%

Commonwealth Govt. 16.3%

GE Finance 7.4%

United Group Services 3.0%

Other 34.3%

Office 8 assets 100% Vacant 6.0%

June 12 30.6%

June 13 21.1%

June 14 4.9%

June 15 10.0%

June 16+ 27.3%

Other

United Group Services

GE Finance

Commonwealth Government

State Government

Telstra

ACT

WA

VIC

SA

QLD

NSW

O�ceJun 16+

Jun 15

Jun 14

Jun 13

Jun 12

Vacant

Other


GE Finance


State Government

Telstra

ACT

WA

VIC

SA

QLD

NSW

O�ceJun 16+

Jun 15

Jun 14

Jun 13

Jun 12

Vacant

Other


GE Finance


State Government

Telstra

ACT

WA

SA

VIC

QLD

NSW

O�ceJun 15+

Jun 14

Jun 13

Jun 12

Jun 11

Vacant

Other


GE Finance


State Government

Telstra

ACT

WA

SA

VIC

QLD

NSW

O�ceJun 16+

Jun 15

Jun 14

Jun 13

Jun 12

Vacant

GEOGRAPHIC DIVERSITY

PROPERTY SECTOR DIVERSITY

TOP 5 TENANTS BY INCOME

WEIGHTED AVERAGE LEASE ExPIRY BY INCOME


10/11

7. FUND BORROWINGSIDOF borrows to invest in properties and, as at 30 June 2011, has:

– borrowed $130.40 million of debt against total assets of $290.09 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 2011.

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

0

50

100

150

200

250 Debt Undrawn

Debt Drawn

>5 YEARS4-5 YEARS3-4 YEARS2-3 YEARS1-2 YEARS<1 YEAR0

$50m

$100m

$150m

$200m

$250m

>5 YEARS4-5 YEARS3-4 YEARS2-3 YEARS1-2 YEARS<1 YEAR

BO

RR

OW

ING

S

DEBT MATURITY DATE

0

$50m

$100m

$150m

$200m

$250m

>5 YEARS4-5 YEARS3-4 YEARS2-3 YEARS1-2 YEARS<1 YEAR

BO

RR

OW

ING

S

DEBT MATURITY DATE

NilNilNilNil Nil

Debt Undrawn Debt Drawn

<1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years

Bor

row

ings

Debt Maturity Date

$0m

$50m

$100m

$150m

$200m

$250m


Bor

row

ings

Debt Maturity Date


$0m

$50m

$100m

$150m

$200m

$250m


Bor

row

ings

Debt Maturity Date


32 PhILLIP STREETPARRAMATTA

64 NORThBOURNE AVENUECANBERRA


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 2011.

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 TRANSACTIONSInvesta 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 26.

9. LITIGATIONIDOF is not currently involved in any litigation.

10. SUSTAINABILITYSustainability 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 2,000m2 or more.

30 PIRIE STREET ADELAIDE


12/13

80 STIRLING STREET PERTh

10.1 Greenhouse emissions intensity

Emissions intensity (measured as carbon dioxide equivalent (CO2-e) greenhouse gas emissions per square metre (m2) 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.

10.2 water consumption intensity

IDOF’s year-to-date weighted average use of litres of water per square metre (L/m2) 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.

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.

Greenhouse emissions intensity Water consumption intensity

kg.CO2-e/m2

Weighted average by NLA

0

2

4

6

8

10

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14

0

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10/11

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Investa Fifth Commercial Trust (I5CT)

The June 2011 quarterly distribution is 19.75 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

DISTRIBUTIONS GEARING RATIO UNIT PRICE

19.75 cpu (1.75 cpu last quarter)

10.8% (47.4% last quarter)

$1.4999($1.5219 last quarter)

KEY HIGHLIGHTS

14/15

2. FUND SNAPSHOT 30 JUNE 2011





DRP Not available 5.2

Withdrawals Not available 4


MER1 (ex performance fee) 1.10% p.a.





Debt maturity date May 2013 7

Number of investors 874

NOTES1. 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 INITIATIVES3.1 Special distribution of 19.75 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 19.75 cents per unit to unitholders on 8 August 2011.

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 19.75 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 ARRANGEMENTSI5CT 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.


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.



GROwTH RETURn P.A.

TOTAL RETURn P.A.

1 year1 18.3% 7.2%3 25.5%

3 years1 6.9% -8.6% -1.7%

Since inception2 9.8% 5.1% 14.9%


(e.g. the 1 year performance is based on the unit price as at 1 July 2010).2. Inception date is 16 May 2003.3. The first table in section 5.3 shows the components of the 1 year growth return.

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.



The June 2011 quarterly distribution is 19.75 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.




% FROm CAPITAL

TAX DEFERRED

8 Nov 2010 1.75 100% Nil 7%1

7 Feb 2011 1.75 100% Nil 7%1

9 May 2011 1.75 100% Nil 7%1

8 Aug 2011 19.75 100% Nil 7%1

NOTE1. Estimate only. Tax components will be confirmed in your annual tax statement,


Distributions for the period to 30 June 2011 are largely taxable following the sale of I5CT’s 50% interest in 595 Collins Street, Melbourne.



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

NE

T TAN

GIB

LE A

SS

ETS

PE

R U

NIT

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

31/03/1131/12/1030/09/1030/06/1031/03/1031/12/0930/09/0930/06/0931/03/0931/12/0830/09/0830/06/0831/03/0831/12/0730/09/0730/06/0731/03/0731/12/0630/09/0630/06/0631/03/0631/12/0530/09/0530/06/0531/03/0531/12/0430/09/0430/06/0431/03/0431/12/0330/09/0321/05/03

0.8

1.0

1.2

1.4

1.6

1.8

2.0

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31/03/1131/12/1030/09/1030/06/1031/03/1031/12/0930/09/0930/06/0931/03/0931/12/0830/09/0830/06/0831/03/0831/12/0730/09/0730/06/0731/03/0731/12/0630/09/0630/06/0631/03/0631/12/0530/09/0530/06/0531/03/0531/12/0430/09/0430/06/0431/03/0431/12/0330/09/0321/05/03

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

$2.20

$

JUN

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03

The relative contribution of major variables on growth returns over the last three and twelve months is estimated in the following table:





Property revaluations $0.2095 13.8% $0.3120 22.3%

Interest rate swaps -$0.0101 -0.7% -$0.0195 -1.4%

Other -$0.2214 -14.5% -$0.1918 -13.7%

Unit price at 30 June 2011

$1.4999 -1.4% $1.4999 7.2%

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 19.75 cents per unit (most of the ‘Other’ category).

I5CT’s current unit price is summarised in the following table.

DATETOTAL

ASSETSnET TAnGIBLE


nTA PER UnIT

30 June 2011 $97.58m $74.99m 49.998m $1.4999

6. INVESTMENT PORTFOLIO6.1 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.


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 FIFTh COMMERCIAL TRUST (I5CT)

16/17

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


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.


The following table provides detailed information on I5CT’s property portfolio as at 30 June 2011. 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 2011.



AD

DR

ES

S

LETT

AB

LE A

RE

A

(SQ

UA

RE

ME

TRE

S)

OW

NE

RS

hIP

INTE

RE

ST

NA

BE

RS

E

NE

RG

Y R

ATIN

G2

NA

BE

RS

W

ATE

R R

ATIN

G3

NA

ME

% O

F P

RO

PE

RTY

BY

AR

EA

NU

MB

ER

O

F TE

NA

NTS

OC

CU

PAN

CY

RAT

E(B

Y A

RE

A)

WE

IGh

TED

A

VE

RA

GE

LE

AS

E

Ex

PIR

Y (Y

EA

RS

)

CU

RR

EN

T VA

LUAT

ION

4

VALU

ATIO

ND

ATE

IND

EP

EN

DE

NT

VALU

ER

CA

PIT

ALI

SAT

ION

R

ATE

5 Eden Park Drive, North Ryde, NSW

11,073 100% 5.0 3.5Contract Pharmaceutical Services of Australia

57% 4 78.3% 1.47 $35.50m 30 Jun 11 Colliers 8.50%

30 Pirie Street Adelaide, SA

24,757 50% 3.5 2.5 Telstra 100% 1 100.0% 11.67 $32.50m 30 Jun 11 Savills 8.25%

80 Stirling Street, Perth, WA

19,775 50% 5.0 3.5 Telstra 100% 1 100.0% 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


4.3 (A)

3.1 (A)

22(T)

92.8%(A)

5.07(A)

$97.58m (T)

0.00 yrs5 (A)

8.75%

(A)


4.4 (A)

3.4 (A)

22(T)

95.1%(A)

5.04 (A)

$152.04m (T)

0.57 yrs5 (A)

8.68%

(A)

Telstra 63.7%

Contract Pharmaceutical Services of Australia 16.6%

Commonwealth Govt. 9.5%

CA (Pacific) Pty Ltd 1.8%

Du Pont (Australia) Ltd 0.5%

Vacant 7.9%

Office 3 assets 100% Vacant 7.9%

Jun 12 1.2%

Jun 13 44.2%

Jun 14 8.7%

Jun 15 0.0%

Jun 16+ 38.0%

NSW 1 asset 37.9%

SA 1 asset 34.8%

WA 1 asset 27.3%


Vacant

Du Pont (Australia) Ltd

CA (Paci�c) Pty Ltd

Commonwealth Govt.

Contract Pharmaceutical Services of Australia

Telstra

WA

SA

NSW

OFFICEJun 16+

Jun 15

Jun 14

Jun 13

Jun 12

Vacant

Vacant



Commonwealth Govt.


Telstra

WA

SA

NSW

OFFICEJun 16+

Jun 15

Jun 14

Jun 13

Jun 12

Vacant

Vacant



Commonwealth Govt.


Telstra

WA

SA

NSW

OFFICEJun 16+

Jun 15

Jun 14

Jun 13

Jun 12

Vacant

Vacant



Commonwealth Govt.


Telstra

WA

SA

NSW

OFFICEJun 16+

Jun 15

Jun 14

Jun 13

Jun 12

Vacant






7. FUND BORROWINGSI5CT borrows to invest in properties and, as at 30 June 2011, has:



– 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);



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.


I5CT’s debt maturity profileAS AT 30 JUnE 2011

DEBT UNDRAWN

DEBT DRAWN

0

20

40

60

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100 Debt Undrawn

Debt Drawn


$20m

$40m

$60m

$m

>5 YEARS4-5 YEARS3-4 YEARS

DEBT MATURITY DATE

2-3 YEARS1-2 YEARS<1 YEAR

BO

RR

OW

ING

S

NilNilNilNil Nil

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 2011.

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).

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.


7.2 Interest cover

Based on I5CT’s latest reviewed, but unaudited, financial report at 30 June 2011, I5CT’s interest cover was:


– 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 2011.

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.


8. RELATED PARTY TRANSACTIONSInvesta 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 26.

9. LITIGATIONI5CT is not currently involved in any litigation.

INVESTA FIFTh COMMERCIAL TRUST (I5CT)

18/19

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 2,000m2 or more.

10.1 Greenhouse emissions intensity

Emissions intensity (measured as carbon dioxide equivalent (CO2-e) greenhouse gas emissions per square metre (m2) 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.

10.2 water consumption intensity

Water consumption intensity (measured as litres (L) of water per square metre (m2) 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.

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 I5CT’s properties.

Greenhouse emissions intensity Water consumption intensity

0

2

4

6

8

10

12

0

2

4

6

8

10

12

10/11

09/10

08/09

07/08

06/07

05/06


kg.CO2-e/m2


JUN

MA

Y

AP

R

MA

R

FEB

JAN

DE

C

NO

V

OC

T

SE

P

AU

G

JUL

JUN

MA

Y

AP

R

MA

R

FEB

JAN

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C

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P

AU

G

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0

20

40

60

80

100

120

10/11

09/10

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05/06


L/m2


0

20

40

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80

100

120

FY05/06

FY08/09

FY06/07

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FY07/08

FY10/11

FY05/06

FY08/09

FY06/07

FY09/10

FY07/08

FY10/11


Investa Second Industrial Trust (ISIT)

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 DRIVENORTh RYDE

DISTRIBUTIONS GEARING RATIO UNIT PRICE

KEY HIGHLIGHTS

2.50 cpu(1.50 cpu last quarter)

38.3%(38.2% last quarter)

$1.0327($1.0596 last quarter)

20/21

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





DRP Not available 5.2

Withdrawals Not available 4


MER1 1.16% p.a.





Debt maturity date July 2013 7

Number of investors 573

NOTES1. 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 INITIATIVES3.1 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 2011.

3.2 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 ARRANGEMENTSISIT 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.

2 EDEN PARk DRIVENORTh RYDE

2 EDEN PARk DRIVE NORTh RYDE


5. FUND PERFORMANCEPast performance is no indication of future performance.


ISIT’s one year return to 30 June 2011 was 7.8%. This was primarily the result of the distributions paid.



GROwTH RETURn P.A.

TOTAL RETURn P.A.

1 year1 6.0% 1.8%3 7.8%

3 years1 5.0% -8.2% -3.2%

Since inception2 13.2% 0.7% 13.9%


(e.g. the 1 year performance is based on the unit price as at 1 July 2010).2. Inception date is 14 June 2002.3. The first table in section 5.3 shows the components of the 1 year growth return.


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.




% FROm CAPITAL

TAX DEFERRED

8 Nov 2010 1.50 100% Nil 16%1

7 Feb 2011 1.50 100% Nil 16%1

9 May 2011 1.50 100% Nil 16%1

8 Aug 2011 2.50 100% Nil 16%1

NOTES1. Estimate only. Tax components will be confirmed in your annual tax statement,




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 2006.

ISIT’s unit price is shown in the following graph:

ISIT’s unit price since inception

NET TANGIBLE ASSETS PER UNIT

NE

T TAN

GIB

LE A

SS

ETS

PE

R U

NIT

$0.80

$1.00

$1.20

$1.40

$1.60

$

NE

T TAN

GIB

LE A

SS

ETS

PE

R U

NIT

$0.80

$1.00

$1.20

$1.40

$1.60

$

JUN

09

JUN

08

JUN

07

JUN

06

JUN

05

JUN

04

JUN

03

JUN

02

SE

P 0

9

MA

R 1

0D

EC

09

JUN

10

SE

P 1

0D

EC

10

MA

R 1

1JU

N 1

1

JUN

09

MA

R 0

9D

EC

08

SE

P 0

8JU

N 0

8M

AR

08

DE

C 0

7S

EP

07

JUN

07

MA

R 0

7D

EC

06

SE

P 0

6JU

N 0

6M

AR

06

DE

C 0

5S

EP

05

JUN

05

MA

R 0

5D

EC

04

SE

P 0

4JU

N 0

4M

AR

04

DE

C 0

3S

EP

03

JUN

03

MA

R 0

3D

EC

02

SE

P 0

2JU

N 0

2

0.8

1.0

1.2

1.4

1.6

30/06/1131/03/1131/12/1030/09/1030/06/1031/03/1031/12/0930/09/0930/06/0931/03/0931/12/0830/09/0830/06/0831/03/0831/12/0730/09/0730/06/0731/03/0731/12/0630/09/0630/06/0631/03/0631/12/0530/09/0530/06/0531/03/0531/12/0430/09/0430/06/0431/03/0431/12/0330/09/0330/06/0331/03/0331/12/0230/09/0230/06/02

The relative contribution of major variables on growth returns, over the last three and twelve months is estimated in the following table:





Property revaluations -$0.0111 -1.0% $0.0185 1.8%

Interest rate swaps -$0.0069 -0.7% -$0.0113 -1.1%

Other -$0.0089 -0.8% $0.0107 1.1%

Unit price at 30 June 2011

$1.0327 -2.5% $1.0327 1.8%

ISIT’s current unit price is summarised in the following table.

DATETOTAL

ASSETSnET TAnGIBLE


nTA PER UnIT

30 June 2011 $48.95m $27.99m 27.1m $1.0327

6. 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).


Two properties were independently revalued during the quarter being:

– 23-25 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 2010.

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.

INVESTA SECOND INDUSTRIAL TRUST (ISIT)

22/23

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


2. The weighted average age of all direct property valuations. The lower this number, the more recent the valuations.


The following table provides detailed information on ISIT’s property portfolio as at 30 June 2011.



AD

DR

ES

S

LETT

AB

LE A

RE

A

(SQ

UA

RE

ME

TRE

S)

OW

NE

RS

hIP

IN

TER

ES

T

NA

ME

% O

F P

RO

PE

RTY

B

Y A

RE

A

NU

MB

ER

OF

TE

NA

NTS

OC

CU

PAN

CY

R

ATE

(BY

AR

EA

)

WE

IGh

TED

A

VE

RA

GE

LE

AS

E

Ex

PIR

Y (Y

EA

RS

)

CU

RR

EN

T

VALU

ATIO

N

VALU

ATIO

N

DAT

E

IND

EP

EN

DE

NT

VALU

ATIO

N

CA

PIT

ALI

SAT

ION

R

ATE

2 Eden Park Drive, North Ryde, NSW

10,316 100% NuSkin Australia 14% 17 92.4% 1.81 $30.30m 31 Mar 11knight Frank

8.90%

23-25 Waterloo Road, North Ryde, NSW

4,830 100% Fujitsu 100% 1 100.0% 4.59 $12.00m 30 Jun 11 Savills 8.00%

101 Beenleigh Road, Acacia Ridge, QLD

3,903 100% Bluestar Logistics 100% 1 100.0% 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


19 (T)

95.9% (A)

2.64 (A)

$48.95m (T)

0.16yrs2

(A)8.63%

(A)


20 (T)

100.0% (A)

2.77 (A)

$49.57m (T)

0.16yrs2

(A)8.65%

(A)

Fujitsu Australia 28.2%

Bluestar Logistics 10.3%

NuSkin Australia 8.4%

Carl Zeiss 6.7%

Enterix 6.0%

Other 40.4%

NSW 2 assets 89.4%

QLD 1 asset 10.6%

Industrial 3 assets 100% Vacant 4.1%

Jun 12 9.1%

Jun 13 16.4%

Jun 14 37.6%

Jun 15 2.4%

Jun 16+ 30.4%


Other

Preview Services

Carl Zeiss

NuSkin Australia

Bluestar Logistics

Fujitsu Australia

QLD

NSW

Industrial Jun-16+

Jun-15

Jun-14

Jun-13

Jun-12

Vacant

Other

Preview Services

Carl Zeiss

NuSkin Australia

Bluestar Logistics

Fujitsu Australia

QLD

NSW

Industrial Jun-16+

Jun-15

Jun-14

Jun-13

Jun-12

Vacant

Other

Preview Services

Carl Zeiss

NuSkin Australia

Bluestar Logistics

Fujitsu Australia

QLD

NSW

Industrial Jun-16+

Jun-15

Jun-14

Jun-13

Jun-12

Vacant

Other

Preview Services

Carl Zeiss

NuSkin Australia

Bluestar Logistics

Fujitsu Australia

QLD

NSW

Industrial Jun-16+

Jun-15

Jun-14

Jun-13

Jun-12

Vacant






7. FUND BORROWINGSISIT borrows to invest in properties and, as at 30 June 2011, has:



– over 80% of its forecast borrowings hedged (fixed) for the next two years using interest rate swaps;

– 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);



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.


ISIT’s debt maturity profileAS AT 30 JUnE 2011

DEBT UNDRAWN

DEBT DRAWN

0

10

20

30 Debt Undrawn

Debt Drawn


$10m

$20m

$30m

$m

>5 YEARS4-5 YEARS3-4 YEARS

DEBT MATURITY DATE

2-3 YEARS1-2 YEARS

NilNilNil NilNil

<1 YEAR

BO

RR

OW

ING

S

101 BEENLEIGh ROAD ACACIA RIDGE

INVESTA SECOND INDUSTRIAL TRUST (ISIT)

24/25

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 2011.

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.


7.2 Interest cover

Based on ISIT’s latest reviewed, but unaudited, financial report at 30 June 2011, ISIT’s interest cover was:


– 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 2011.

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.


8. RELATED PARTY TRANSACTIONSInvesta 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 26.

9. LITIGATIONISIT is not currently involved in any litigation.

10. SUSTAINABILITYWe 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

Other informationDISCLAIMERThis 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 48 120 839 447, 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 1300 131 040 (local call cost) or visit www.investa.com.au.

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 ENERGYNational 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 www.nabers.com.au

NABERS WATERNational 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 www.nabers.com.au

RESOLUTION OF CONFLICT POLICYAs 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 STATEMENTInvesta 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.

COPYRIGHTThe copyright of this Quarterly Report and the information contained therein is vested in Investa Funds Management Limited.

26/27

RESPONSIBLE ENTITYInvesta Funds management Limited

ACN 120 839 447 AFSL 303614

Level 6, Deutsche Bank Place 126 Phillip Street Sydney NSW 2000

GPO Box 4180 Sydney NSW 2001

T: (02) 8226 9342 F: (02) 9844 9342

[email protected] www.investa.com.au

DIRECTORS OF THE RESPONSIBLE ENTITYDavid Baffsky AOJames (Jim) Evans (appointed 7 July 2011)Ming LongScott MacDonaldDennis Wildenburg Graham Dunstan (resigned 27 June 2011)Deborah Page AM (resigned 7 July 2011)

COMPANY SECRETARYJonathan Callaghan

FUND INFORMATIONInvesta Diversified Office Fund ARSN 113 369 627 ABN 85 913 928 169 APIR IPL0001AU

Investa Fifth Commercial Trust ARSN 104 184 072 ABN 42 365 725 538 APIR IPL0002AU

Investa Second Industrial Trust ARSN 098 325 789 ABN 19 635 318 874 APIR IPL0003AU

UNIT REGISTRYBoardroom (Victoria) Pty Limited (formerly Registries (Victoria) Pty Limited)GPO Box 3993Sydney NSW 2001

Tel: 1300 131 040Fax: 1300 653 459

Email: [email protected]: www.boardroomlimited.com.au

AUDITORPricewaterhouseCoopers

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 14040 framework. Combined with its 55% recycled content, Monza Recycled is the trusted choice of Investa Property Group.

Directory

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 1300 131 040.

Full contact details for Investa and Boardroom are set out in the directory on the inside back cover of this Quarterly Report.

Please contact us with any questions

Investa Funds Management Limited Level 6, Deutsche Bank Place 126 Phillip Street Sydney NSW 2000 Australia Phone: +61 2 8226 9300ABN 48 120 839 447

Grant nichols

Fund Manager – IDOF and ISIT Phone: (02) 8226 9386 Email: [email protected]

Claire Gannon

Investor Relations Co-ordinator Phone: (02) 8226 9342 Email: [email protected]

Brendan murray

Finance Manager – Funds Phone: (02) 8226 9482 Email: [email protected]

Simon Beake

Fund Analyst Phone: (02) 8226 9481 Email: [email protected]

mark Lumby

General Manager – Retail Funds Fund Manager – I5CT Phone: (02) 8226 9462 Email: [email protected]

JUnE 2011 Retail Funds · 6/30/2011 · Investa Diversified Office Fund (IDOF) fund report 6...

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