SETTING THE PACE

MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 MMP REIT Mission

Contents 01 Highlights of the year Macquarie MEAG Prime REIT 02 Financial highlights (MMP REIT) is a Singapore-based 04 At the heart of the action 06 The outlook is upbeat real estate investment trust investing 08 A glowing health report 10 Message from the Chairman and primarily in real estate used for Chief Executive Officer 14 Property portfolio summary retail and/or office purposes, both 18 The Wisma Atria Property 24 The Ngee Ann City Property in Singapore and overseas. 28 Market overview As Manager of MMP REIT, 30 Board of directors 32 Management Macquarie Pacific Star Prime REIT 36 Capital management 37 Investor relations Management Limited is committed 38 Community development to delivering long-term stable 39 Corporate governance 47 Financial statements distributions and capital growth 79 Additional information 80 Glossary to MMP REIT’s investors. IBC Corporate directory

Portfolio at a glance Wisma Atria Property Ngee Ann City Property Description 74.23% of the total share value of Description 27.23% of the total share value of Wisma Atria Ngee Ann City Net lettable area 1 227,992 sq ft Net lettable area 1 397,083 sq ft Occupancy 1 100.0% retail Occupancy 1 100.0% retail 96.7% office 98.6% office Valuation 2 $750 million Valuation 2 $748 million

Notes: 1 As at 31 December 2006 2 Valuation by Cushman & Wakefield as at 31 December 2006 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Highlights of the year 01

Highlights of the year

Consistent outperformance with new milestones achieved

Significant events in 2006

March 2006 September 2006 MMP REIT’s distributable income MMP REIT’s distributable income exceeded IPO Projection by 11.1% exceeded IPO Projection by 9.1% for 1Q06 for 3Q06

June 2006 October 2006 MMP REIT’s distributable income Launch of marketing campaign exceeded IPO Projection by 10.0% “Basement by Wisma Atria” following for 2Q06 closure of Orchard MRT linkway to Wisma Atria on 30 September July 2006 MMP REIT was assigned a first time The Manager strengthened its investment corporate family rating of “Baa1” and asset management team capabilities with a stable outlook by Moody’s for regional expansion Investors Service, reflecting MMP REIT’s high quality of assets and December 2006 strong management expertise MMP REIT recorded its highest quarterly distribution per unit of 1.47 cents for Wisma Atria was the only Singapore 4Q06; distributable income exceeded finalist in the prestigious 2006 IPO Projection by 11.5% for same period MAXI Awards, the most coveted international retail marketing award New escalators next to GAP flagship in the shopping centre industry from store installed ahead of schedule to New York-based International Council bring shopper traffic back to Wisma of Shopping Centers Atria basement

Opening of GAP’s first flagship store in Asia, outside Japan, at Wisma Atria 02 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial highlights

Financial highlights FY 2006

Actual IPO Change Projection

Gross revenue Gross revenue Percentage change $89.9m $87.8m +2.3%

Net property income Net property income Percentage change $69.3m $66.4m +4.3%

Distributable income Distributable income Percentage change $54.9m $49.7m +10.4%

Distribution per unit Distribution per unit Percentage change 5.79 cents 5.25 cents +10.3%

Annualised distribution yield Annualised distribution yield 5.91% 5.36% IPO price ($0.98) IPO price ($0.98)

4.95% 4.49% 29 Dec 2006 price ($1.17) 29 Dec 2006 price ($1.17)

Net asset value per unit Net asset value per unit Percentage change $1.16 $0.99 +17.2% As at 31 Dec 2006 As at 31 Dec 2005 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial highlights 03

MMP REIT unit price and volume since IPO 1 January to 31 December 2006 (20 Sept 2005 – 31 Dec 2006) Opening price (3 Jan 06) $0.95 Closing price (29 Dec 06) $1.17 High (29 Dec 06) $1.17 Low (31 Aug 06) $0.885 Volume traded (in million units) 465.0

$ ’000 1.20 180,000

1.10 135,000

1.00 90,000

0.90 45,000

0.80 0 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06

Source: Bloomberg Daily volume (units) Last price ($)

Balance sheet as at 31 December 2006 Total assets $1,525.8m Total liabilities $427.3m Unitholders’ equity $1,098.5m Net asset value per unit $1.16 per unit Market capitalisation 1 $1,108.0m Note: 1 Based on closing price of $1.17 per unit as at 29 December 2006. Units in issue as at 31 December 2006 were approximately 947.4 million 04 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 At the heart of the action At the heart of the action

Our prime Orchard Road properties performed spectacularly on the back of buoyant demand and strengthening rents. Retail occupancy remained resilient at 100%, while office occupancy reached 97.8%. As a result, both net property income and distributable income throughout the year exceeded our IPO Projections. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 At the heart of the action 05

Retail occupancy consistently at 100% 1 Occupancy (%)

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

As at As at As at As at 31 Mar 06 30 Jun 06 30 Sep 06 31 Dec 06 NAC WA

Office occupancy at high of 97.8% 1, 2 Occupancy (%)

98.6 94.0 95.3 95.2 97.8 95.9 98.4 96.7

As at As at As at As at 31 Mar 06 30 Jun 06 30 Sep 06 31 Dec 06 NAC WA

Notes: 1 As at 31 December 2006 2 Weighted average of WA and NAC

Net property income consistently higher than projection Net property income ($m) 17.3 17.3 17.4 16.4 16.6 16.7 16.7 17.2

1Q06 2Q06 3Q06 4Q06 IPO Projection Actual

Distributable income consistently higher than projection Distributable income ($m)

13.6 13.6 13.7 14.0 12.3 12.4 12.5 12.5

1Q06 2Q06 3Q06 4Q06 IPO Projection Actual 06 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The outlook is upbeat The outlook is upbeat

The proportion of Wisma Atria retail leases with base rent plus turnover rent continued to increase throughout 2006. This is in line with our strategy to maintain a stable base rent while growing our revenue streams from higher retailer sales. With nearly 86,000 square feet of office space expiring in 2007 at rents below market, MMP REIT is expected to ride on the momentum of Singapore’s office rental upswing. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The outlook is upbeat 07

Higher proportion of leases with base rent plus turnover rent structure Lease structure (by % of WA retail NLA)

66.0

53.0 47.0

33.0

Higher of base Base rent rent or GTO plus GTO

Dec 05 Dec 06

Rental rates of expiring office leases below market rate

96,638 85,789 6.00

5.00 5.00 41,301 5.20

5,167 2007 2008 2009 beyond 2009 Office expiry by NLA (sq ft) Expiring office leases average monthly gross rent ($ psf pm) 1 Note: 1 Average monthly gross rent rounded to nearest cent 08 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 A glowing health report A glowing health report

Since IPO, our unitholders have benefited from a trading yield of 4.99%. This is more attractive than yields from the average Singapore REIT, Singapore government bonds, CPF savings and bank fixed deposits. Our prudent capital management approach also enabled us to deliver higher returns than projected.

MMP REIT yield four times higher than bank DPU outperformed IPO Projection fixed deposit rate DPU (cents) Returns (%) 5.60 5.79 +10.3% +14.3% 4.95 5.25 4.90 3.4% 4.54 4.07% higher

3.05 3.03 2.50

0.88

MMP SREIT 10 Yr 5 Yr CPF Bank FY2005 FY2006 REIT annualised Spore Spore ordinary fixed IPO Projection FY 2006 average Govt Govt account 4 deposit yield 1 yield bond 3 bond 3 rate (12 Actual (ex MMP month) 5 REIT) 2 Notes: 1 Based on MMP REIT’s closing price of $1.17 per unit as at 29 Dec 2006 and actual distribution of 5.79 cents for FY 2006 2 SREITs 2006F DPU per IBES analyst consensus as at 29 Dec 2006 and using last closing price as at 29 Dec 2006 3 As at 29 Dec 2006 (Source: Singapore Government Securities website) 4 Based on interest paid on Central Provident Fund (CPF) ordinary account from Oct to Dec 2006 (Source: CPF website) 5 As at Dec 2006 (Source: MAS website)

Prudent capital management As at 31 December 2006 Gearing ratio 1 25.6% Interest cover 4.4x Fixed rate debt 97.2% Weighted average interest rate 3.2% p.a. Note: 1 Based on deposited property as defined in the trust deed MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 A glowing health report 09 10 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Message from the Chairman and CEO

Message from the Chairman and Chief Executive Officer Dear Unitholders

MMP REIT outperformed prospectus forecasts in each quarter of the year and delivered total distribution per unit of 5.79 cents to unitholders

From left: Stephen Girdis (Chairman) and Franklin Heng (CEO) MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Message from the Chairman and CEO 11

On behalf of the Board of Macquarie Pacific Star Prime rent sectors, an increase in variable rent contributions REIT Management Limited, as Manager of MMP REIT, and a reconfiguration of retail space, bore tangible we are pleased to present the report of MMP REIT for results in 2006 and we expect to reap even greater the financial year ended 31 December 2006. results in 2007 and going forward.

Total returns of 27% since IPO, 17.2% increase in The Wisma Atria Property had an extraordinary year in net asset value per unit 2006. Through innovative reconfiguration in the face of MMP REIT recorded strong financial results for its first 100% occupancy, we managed to secure a lease of full year of financial reporting post listing in September 9,000 square feet for the first GAP flagship store in 2005. The trust outperformed prospectus forecasts Asia outside Japan. The store’s opening in early in each quarter of the year and delivered total DPU December 2006, just before the Christmas rush, was of 5.79 cents to unitholders, 10.3% higher than the a resounding success. projected DPU of 5.25 cents1 made at the time of its IPO. Our focused branding and marketing campaigns have earned Wisma Atria “Superbrands Singapore” Strong revaluation gains of $171 million were another status for three consecutive years from 2004 to 2006. hallmark of the trust’s financial performance, Wisma Atria was also the only Singapore finalist in the contributing to a 17.2% increase in net asset value international, prestigious MAXI Awards. This award by per unit to $1.16 from $0.99 (end December 2005). the New York-based International Council of Shopping Centers (a global trade association of the shopping Unitholders who have held MMP REIT units since centre industry with 57,000 members worldwide) IPO had enjoyed a total return of 27.0% at end recognises excellence in shopping centre marketing. 2 December 2006 . This is a strong global endorsement of our marketing efforts to drive shopper traffic to increase sales and Combining active asset management with robust profitability for the retailers. property fundamentals The two properties in MMP REIT’s portfolio performed For the first time in the history of Wisma Atria, the exceptionally well last year; portfolio occupancy Orchard MRT linkway had to be temporarily closed achieved more than 99% at end December 2006, to allow for construction of a new mixed use reflecting buoyant demand amid tight supply. It was a development on the adjacent Orchard Turn site. year of focused asset management and active leasing Understandably, this created high levels of anxiety that contributed to higher portfolio net property and apprehension among retailers and shoppers. income of nearly $70 million (compared with projected We proactively managed the closure. We implemented $66 million). Despite the challenges from the a series of unprecedented measures including the temporary closure of the Orchard MRT linkway to installation of a new set of escalators from street level Wisma Atria from 30 September 2006 onwards, directly to the basement. In addition, we launched a our management team delivered results beyond concerted marketing campaign to draw shopper prospectus forecasts – testament to working in the traffic to the centre, particularly the basement, which interest of tenants for the benefit of unitholders. traditionally depended on the flow of MRT commuter traffic. The escalators were ready for use ahead of The retail assets remain resilient, having consistently schedule in early December 2006 and in time for the registered full occupancy at the end of each quarter in festive shopping period. Shopper traffic rebounded 2006. This reflects the strong demand for the prime- sharply by 84% in December compared to November, location, high-quality retail spaces with good visibility reaching nearly the 2.0 million traffic level recorded for along Orchard Road, the premier shopping district of the month of September, just before the closure of the Singapore. Our asset enhancement initiatives, which MRT linkway on 30 September 2006. included a tenancy remix in favour of higher yielding

1 Based on IPO Projections 2 Based on actual DPU of 7.37 cents paid since the listing of MMP REIT in September 2005, the IPO price of $0.98 and the last traded price of $1.17 on 29 December 2006 12 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Message from the Chairman and CEO

Message from the Chairman and Chief Executive Officer (continued)

On the acquisition front we remain focused on sourcing yield accretive and commercially attractive property assets in Asia, notably in Tier 1 countries

The office assets were star performers in 2006. This Management team gains new regional investment was not surprising given the strong momentum in the and asset management capabilities office market, which saw an increase of more than The investment and asset management teams were 50% in prime office rents compared to 2005, reorganised and strengthened to respond more underpinned by a strong economy, increased demand effectively to rapidly changing market conditions and and tight supply. The office portfolio posted record opportunities. We are thankful to Mr Graham Sugden, occupancy levels at a post-IPO high of close to 98% who left us to pursue a new role within Macquarie as at end December 2006, with new leases being Real Estate Capital, and we welcome Mr Andrew locked in at rental rates of 60% above expiring rents. Neary, Regional Asset and Development Manager of Macquarie Real Estate Capital, who is on a “Baa1” corporate rating boosts debt capacity to secondment to Macquarie Pacific Star on a full-time fund acquisitions and new investments basis as Senior Vice President, Asset Management. Our prudent approach to capital management shielded Mr Neary has close to 10 years of experience in the trust from interest rate volatility, as nearly all of the managing shopping centres in Australia and Malaysia trust’s borrowings have been fully hedged at an all-in from his time with Westfield Holdings, CCN Consulting fixed interest rate of about 3.3% per year to 2010. and Lend Lease Australia.

In July 2006 Moody’s Investors Service assigned a Total return prospects boosted by focused asset corporate family rating of “Baa1” to MMP REIT with a management and exposure to growth stable outlook. The rating reflects the high quality of opportunities and performing markets the trust’s assets, solid operating margins, strong We will focus on enhancing MMP REIT’s total returns occupancy statistics and a quality tenant base. The by building on the asset management initiatives positive rating is also an endorsement of our asset implemented in 2006 and by pursuing yield accretive management efforts by delivering growth through acquisitions of retail and/or office assets principally in innovative initiatives and prudent capital management. our Tier 1 target markets of China, Japan, Malaysia and Singapore. The trust’s balance sheet was strengthened by the revaluation of the properties. Gearing reduced to We will push ahead with the retail asset enhancement 25.6% as at end December 2006, compared to 28.8% initiatives established for Wisma Atria. Plans have been as at end September 2006. This will allow the trust to made for a reconfiguration and tenancy remix for the take on more debt if needed. To facilitate MMP REIT’s basement to Level 2, which will allow new brands and access to multiple funding sources, we are retail concepts to be introduced to the centre. This will establishing an unsecured multi-currency medium strengthen Wisma Atria’s positioning as the preferred term note programme to complement the trust’s fashion destination for young and trendy shoppers. existing CMBS programme and short-term banking We expect to increase the proportion of retail leases facilities. The expanded capital sources put MMP REIT with step-rents and variable rent contributions, in order in a more competitive position to secure attractive to boost organic growth as sales improve without acquisitions and new investments. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Message from the Chairman and CEO 13

eroding the stability of the base rent structure. We are Acknowledgments optimistic that shopper traffic will further improve as We announced various changes to our Board in shoppers become used to the new escalators leading July 2006 with Mr Frank-Rainer Vaessen stepping to and from the basement. down as Chairman of the Board after serving in this role since the IPO of MMP REIT. We extend our We are confident that the office assets will perform heartfelt thanks for his invaluable contributions. strongly again in 2007 given the robust outlook for the We also welcomed Mr Wolfgang Wente to our Board office rental market. Some 86,000 square feet of office as a Non-Executive Director. His experience in asset space is expiring in 2007 at rents significantly below management complements the real estate funds the market. We see new demand on Orchard Road for management capabilities of the Board. cheaper alternatives as office rents in the core CBD area have continued to rise. This bodes well for Ngee We wish to extend our appreciation to our fellow Ann City and Wisma Atria as two of the most sought directors and the management team for their after quality office addresses on Orchard Road. commitment and tremendous efforts in delivering an excellent set of results in 2006. We also thank On the acquisition front, we remain focused on our investors, tenants and business partners for sourcing yield accretive and commercially attractive their ongoing support and look forward to another property assets in Asia, notably in Tier 1 countries. rewarding year in 2007. We adopt a multi-pronged investment strategy, which could include a direct or indirect purchase of stand- alone assets or a portfolio of assets, taking a strategic position in locally listed REITs, co-investing with local partners and other funds such as Macquarie-managed real estate focused funds.

The world economy has generally held up well in 2006 with Asian economies as the main engine of growth, Stephen Girdis Franklin Heng driven largely by China, which has maintained double- Chairman Chief Executive Officer digit GDP growth of 10.7%. The Singapore economy ended 2006 with better than expected GDP growth of 7.9%, placing it among the three best performing Asian economies. The economic growth prospects for Asia in 2007 continue to look bright against the backdrop of a slowing world economy, with most major Asian economies – notably China, Japan and India – expected to register healthy and sustainable economic growth. Increasing disposable incomes, rising tourism numbers, new business start-ups and expansion by existing firms provide strong impetus for capital value and rental growth in both retail and office assets across most of these Asian markets. Although some of these markets pose complexities that make the search for and execution of acquisitions difficult, we remain optimistic that, barring any unforeseen factors, we will be able to bring our acquisition efforts to fruition in 2007. 14 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Property portfolio summary

Property portfolio summary

The two landmark properties located in the heart of Orchard Road, each with a distinctive retail offering, are hugely popular with locals and tourists. The prime office component adds diversity and strength to the Portfolio

GAP at WA – first flagship store in Asia outside Japan

Luxury retailer Louis Vuitton at NAC MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Property portfolio summary 15

Hugely popular Food Republic at WA

Prime properties and provide diversity through the different markets Location, location, location they target. The Wisma Atria Property is positioned as MMP REIT Portfolio comprises two landmark a modern fashion centre offering the latest styles for properties, the Wisma Atria Property and the the trendy and discerning female shoppers while the Ngee Ann City Property. The prime location and long Ngee Ann City Property targets a wider demographic retail frontage of the Properties give them immediate segment including the affluent shoppers and the family visibility and prominence along Orchard Road, the crowd. heart of Singapore’s premier shopping and tourist precinct. Orchard Road has strong appeal to both locals and tourists and is Singapore’s most visited free-access location. The Properties are well situated to draw on the strong catchment of tourists and Gross revenue by property FY 2006 business travellers given that the Orchard Road vicinity has the highest concentration of hotels in Singapore 54.3% WA including the Four Seasons Hotel, Hilton Hotel, 45.7% NAC Grand Hyatt, Meritus Mandarin and the Marriott Hotel.

Convenient access The Properties are easily accessible via public transport, being next to Orchard MRT station (the busiest station in the MRT system) and well served by a network of major roads. The Properties enjoy a high flow of visitors from the Orchard Road street level, NLA by property Orchard MRT station, the linkway between Wisma as at 31 December 2006 Atria and Ngee Ann City and the underpass from the 63.5% NAC opposite side of Orchard Road to Ngee Ann City. 36.5% WA

Strong market positioning Strong, complementary retail positioning Each property enjoys a distinctive branding and unique positioning. Although the Properties are located alongside each other, they complement each other 16 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Property portfolio summary

Property portfolio summary (continued)

Wisma Atria Property Ngee Ann City Property Description 331 strata titles in Wisma Atria Four strata lots in Ngee Ann City representing 74.23% of the total representing 27.23% of the total share share value of the strata lots in value of the strata lots in Ngee Ann City Wisma Atria Positioning A cosmopolitan lifestyle centre offering A destination shopping mall with a wide a comprehensive range of international appeal catering to the affluent, young fashion brands targeted at the fashion- and upwardly mobile, the family crowd conscious and trendy shoppers and tourists Year of 1986 1993 completion Occupancy 1 Retail (100.0%); Office (96.7%) Retail (100.0%); Office (98.6%) Strata Area 1 227,777 sq ft 426,567 sq ft Net Lettable Area 1 227,992 sq ft 397,083 sq ft Retail – 129,082 sq ft; Retail – 256,022 sq ft; Office – 98,910 sq ft Office – 141,062 sq ft Valuation 2 $750 million $748 million Number of 135 (Retail – 91; Office – 44) 35 (Retail – 9; Office – 26) tenants 1 Tenure Leasehold estate of 99 years Leasehold estate of 69 years, 4 months commencing on 1 April 1962 and and 12 days commencing on expiring on 31 March 2061 20 November 2002 and expiring on 31 March 2072 Selected brands 1 • GAP • Louis Vuitton • Nine West • Chanel • Warehouse • Burberry • Topshop/Topman • Piaget • MAXSTUDIO.COM • Zara • BCBG Max Azria • Guess • Bebe • Max Mara • Forever 21 • Books Kinokuniya • Nike Women • FCUK • Lanvin Notes: 1 As at 31 December 2006 2 Valuation by Cushman & Wakefield as at 31 December 2006

Diversified retail and office portfolio for 33.0% of the Portfolio’s gross rent (retail and office), The Portfolio has a well diversified mix of retail and no other tenant accounted for more than 5% of the office tenants. As at 31 December 2006, the Properties Portfolio gross rent for the month of December 2006. had 170 tenants. The top 10 tenants accounted for This diversified portfolio has allowed MMP REIT to 51.5% of the Portfolio’s gross rent for the month of take advantage of the upswings in both the office and December 2006. Except for Toshin, which accounted retail rental markets in 2006.

By Portfolio retail gross rent By Portfolio retail NLA for the month of December 2006 as at 31 December 2006

39.2% Toshin 58.7% Toshin 39.0% Fashion 19.2% Fashion 6.9% F&B 9.8% F&B 5.1% Beauty & wellness 4.4% Library 4.5% Watches & jewellery 3.7% Beauty & wellness 2.7% Services 1.7% Services 1.9% Library 1.6% Watches & jewellery 0.8% General trade 1.0% General trade MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Property portfolio summary 17

Top 10 tenants Property Trade sector % of Portfolio % of Portfolio gross rent 1 NLA 2 Toshin NAC Master tenant33.0% 36.2% Wing Tai Retail Pte Ltd WA Fashion 4.4% 2.7% MWA Pte Ltd WA F&B 2.4% 3.7% G2000 Apparel (S) Pte Ltd WA Fashion 2.1% 0.6% Fashion Retail Pte Ltd WA Fashion 2.0% 0.7% F J Benjamin Lifestyle Pte Ltd WA Fashion 1.7% 1.2% Metro Holdings Ltd NAC Office 1.7% 4.6% National Library Board NAC Library 1.6% 2.7% Gamut Marketing Pte Ltd WA Fashion 1.4% 0.6% RSH (Singapore) Pte Ltd WA Fashion 1.3% 0.6% Total 51.5% 53.4% Notes: 1 For the month of December 2006 2 As at 31 December 2006

Strong lease profile Portfolio lease expiry (%) The earnings of the Properties are derived from retail as at 31 December 2006 and office leases that are generally contracted for a 25.1 25.1 By NLA period of three years in line with prevailing market 22.2 By gross rent practice. An exception is the Toshin master lease, 19.3 which expires in June 2013 with an option to renew 13.6 for a further term of 12 years. The long tenure of 10.5 the Toshin master lease provides income certainty 5.2 and stability. 4.1 2.0 1.9 The weighted average lease term expiry (by NLA) 2007 2008 2009 2010 2011 of the Properties is 3.4 years (as at 31 December 2006). Occupancy rates – by property (%) High occupancy rates As at 31 Dec 05 As at 31 December 2006, the Portfolio achieved more 99.2 99.5 97.2 98.0 98.6 than 99% occupancy on the back of an upbeat retail 95.9 As at 31 Dec 06 sector and a strong office market.

Robust office rentals continue The Properties enjoyed rising rental growth from the upswing in the office rental market in 2006 and will continue to ride on the strength of office sector in 2007 as the average rental rates of office leases Portfolio NAC WA expiring in 2007 are below current market rents.

Office lease expiry and average monthly gross rent

6.00 Office expiry (’000 sq ft) 5.00 5.00 5.20 Office average gross rent ($ psf pm) 96.6 85.8

41.3

5.2 2007 2008 2009 beyond 2009 18 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Wisma Atria Property

The Wisma Atria Property

A cosmopolitan lifestyle centre offering a comprehensive range of international fashion brands targeted at the fashion-conscious and trendy shoppers

WA gross revenue by retail and office Overview FY 2006 Strategically located landmark property 87.9% Retail Wisma Atria, with its all-glass facade, is an 12.1% Office unmistakable landmark along Orchard Road, Singapore’s busiest shopping precinct. It comprises a retail podium block with four levels and one basement, three levels of carpark space and an office tower with 13 levels of office space. Located next to Orchard MRT station, Wisma Atria enjoys high pedestrian flow from the Orchard Road street level and underground pedestrian linkway connecting WA retail gross rent Wisma Atria and Ngee Ann City. Apart from locals, for the month of December 2006 the shopping centre also enjoys a strong catchment 68.9% Fashion of tourists and business travellers staying in hotels 12.3% F&B located on and within walking distance of 7.9% Watches & jewellery 4.2% Beauty & wellness Orchard Road. 4.2% Services 2.5% General trade The Wisma Atria Property is positioned as a modern fashion mall offering a comprehensive range of international fashion labels targeted at the fashion- conscious and trendy female shoppers. The centre’s key fashion retailers include Topshop/Topman, WA retail NLA Forever21, GAP, FCUK, Warehouse, Bebe, Maxstudio, as at 31 December 2006 Paul & Joe, Nine West, Fornarina and Nike Women.

57.3% Fashion The fashion offering is well complemented by lifestyle 29.2% F&B dining options such as IndoChine, Din Tai Fung, 4.7% Watches & jewellery Starbucks, Ichiban-Boshi and the all-time favourite, 3.6% Services Food Republic. 2.9% General trade 2.3% Beauty & wellness Through its focused branding and marketing campaigns, Wisma Atria has enjoyed the “Superbrands Singapore” status for three consecutive years from 2004 to 2006.

Tenant mix Diversified tenant mix The Wisma Atria Property has a well-diversified base of tenants (91 retail and 44 office tenants as at 31 December 2006). Fashion and F&B are the two key contributors to the Wisma Atria Property’s retail gross rent. Compared to 2005, gross rental contribution from the fashion component increased by 11.4% to 68.9% in 2006 brought about by the conversion space from F&B to fashion. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Wisma Atria Property 19 20 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Wisma Atria Property

The Wisma Atria Property (continued)

External escalator from Orchard Road provides direct access to Level 4 Trendy French retail brand Lanvin

WA occupancy rates (%) New fashion concepts To reinforce the fashion lifestyle positioning of the 100.0 100.0 As at 31 Dec 05 96.7 As at 31 Dec 06 Wisma Atria Property, several new retail tenants 90.6 were introduced in 2006. These included a number of “first-in-Singapore” stores such as Porter and Fornarina, culminating in the opening of the GAP flagship store in December 2006, the first flagship store in Asia outside Japan.

The Wisma Atria Property will continue to renew Office Retail and refine its retail offerings to stay relevant to its core shoppers and deliver sustainable long-term rental growth.

Asset enhancement Conversion of F&B to fashion retail As part of the ongoing asset enhancement programme, part of the space occupied by IndoChine was recovered and transformed into an exciting new GAP flagship store. The injection of a key fashion retailer has strengthened the centre’s fashion positioning and boosted rental contributions from the fashion component. Albeit within a smaller area, the improved IndoChine concept continues to attract a strong following and efficiency for the F&B space has improved significantly as a result.

New escalators The Orchard MRT basement linkway was closed on 30 September 2006 to facilitate the construction of the adjoining Orchard Turn development. Through proactive asset management, MMP REIT mitigated the impact of the linkway closure to the centre by installing MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Wisma Atria Property 21

New set of escalators provide direct access to basement shops from street level Porter – “First-in-Singapore” store a new set of escalators next to the new GAP store HIGHLIGHTS within two months of the linkway closure, providing shoppers with an alternative direct access • The Wisma Atria Property’s positioning as a to the basement shops from street level. Since the modern fashion mall targeted at female escalators were opened on 4 December 2006, fashion was reinforced through branding and shopper traffic to the centre rebounded sharply by marketing campaigns 84% in December 2006 over November 2006. • The exciting tenant mix comprising successful retail concepts like Food Republic and Topshop Despite the closure of the MRT linkway, Wisma Atria was strengthened further by the addition of new enjoyed total shopper traffic of 22.6 million for the concepts such as GAP’s first flagship shop in Asia whole of 2006 or 2% higher than 2005. (outside Japan), Lanvin and Starbucks Coffee Increase variable rent component • Disruption caused by the temporary closure of It is MMP REIT’s strategy to align the rental structure the basement linkway to Orchard MRT station of retail leases at the Wisma Atria Property to the to make way for development of Orchard Turn prevailing market practice of a base rent plus a site was successfully mitigated through percentage of the retailers’ gross sale turnover. proactive management: This rental structure will enable the centre to derive – A new set of escalators were installed in record rental contributions from retailers in tandem with their time to provide an alternative access to the sales performance. To ensure steady rental growth basement from street level; over time, the new rent structure would also include stepping up the base rents over the lease tenure. – A comprehensive and successful marketing campaign was launched to drive awareness Advertising and promotion of the basement shops and the new Wisma Atria embarked on a focused marketing escalator access campaign in 2006 to reinforce the centre’s fashion • The office segment enjoyed high occupancy rates positioning. This was augmented by a series of and benefited from rising office market rents targeted promotional activities to drive shopper traffic to the centre and encourage spending.

Singapore Fashion Festival Wisma Atria was the co-presenter of the “Topshop Unique Fashion Show” at the Singapore Fashion 22 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Wisma Atria Property

The Wisma Atria Property (continued)

Huge crowds at the Topshop post-fashion festival show party

Festival where Topshop Unique and Topman Design labels were showcased for the first time out of London. The post-fashion show party was held at Topshop and attracted good shopper traffic to the centre. Design students from La Salle were also given the opportunity to work with the retailer to design outfits for the two labels in a design competition – Project Blossom. The event reinforced Wisma Atria’s fashion positioning and was also the centre’s first community outreach programme for young fashion designers in Singapore.

Late night shopping The Wisma Atria Property was one of the three participants in Singapore Tourism Board’s pilot initiative of regular late night shopping Fridays from Fashion show by Rayure for their grand opening July to December 2006. There were special discounts and giveaways from 9pm to 12 midnight to entice shopper spending. During the Christmas season, late night shopping was held over four nights and the event contributed to 1.9 million shoppers visiting the mall in December 2006.

Home to celebrity appearances Wisma Atria hosted many celebrity events, which drew large crowds to the centre. These included Project Superstar runner-up Kelly Poon, Taiwanese pop twin duo 2moro and Singapore Idol female finalists. Star appearance and performance by popular Taiwanese pop-group 2moro MAXI Awards 2006 Wisma Atria’s innovative and eye-catching ‘An Addiction You Can’t Resist’ Chinese New Year 2006 campaign was the only Singapore entry amongst the finalists for the prestigious annual MAXI Awards of MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Wisma Atria Property 23

Grand prize winner of $25,000 in Wisma Atria cash draws the International Council of Shopping Centers held in Chicago in September 2006.

Special promotional campaign for basement shops A targeted marketing and promotional campaign was launched in October 2006 to mitigate the impact of the MRT linkway closure on the tenants’ sales in the basement. Daily $1,000 cash giveaways with a grand prize of $25,000, coupled with special discounts and weekly events, were organised to drive spend and encourage repeat visitations to the basement shops.

A launch party was held on 9 December 2006 to celebrate the opening of our new escalators to the basement of the centre and to thank retailers for their understanding and support following the closure of Orchard MRT linkway.

Tourist marketing To tap into the fast-growing tourist arrivals, the Wisma Atria Property continued to collaborate with Singapore Airlines on the SIA Boarding Pass Privileges programme. The programme rewarded all overseas visitors flying in on SIA flights with a three-day tourist card packed with discounts and shopping privileges at the Wisma Atria Property.

With further innovative marketing initiatives and Creative campaign ‘An Addiction You Can’t Resist’ strategic tie-ups planned for 2007, tenants can look forward to sales-effective campaigns while shoppers will be delighted by the stylish shopping experience at the Wisma Atria Property. 24 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Ngee Ann City Property

The Ngee Ann City Property

A destination shopping mall with a wide appeal catering to the affluent, the young and upwardly mobile, the family crowd and tourists

NAC gross revenue by retail and office Overview FY 2006 Distinctive landmark property 81.3% Retail The distinctive architecture of Ngee Ann City makes it 18.7% Office a landmark property on Orchard Road. The location of Ngee Ann City enables it to attract tourists and business travellers from hotels located at or within walking distance of Orchard Road, to its retail outlets and restaurants. The pedestrian flows at Ngee Ann City are also sustained by the underground pedestrian walkway linking Basement 1 of Ngee Ann City to Wisma Atria and the underpass from the opposite side NAC retail gross rent of Orchard Road to Ngee Ann City. for the month of December 2006

90.2% Toshin The Ngee Ann City Property targets a wide 4.3% Library demographic segment, including the affluent shopper 4.0% Beauty & wellness with luxury retailers such as Louis Vuitton, Chanel, 0.8% General trade Piaget, Burberry; the young and upwardly mobile with 0.7% Services trendy retail stores such as Guess, Zara, Shanghai Tang and Max Mara; and the family crowd with retailers such as Books Kinokuniya and stores offering children’s apparel and toys. The Ngee Ann City Property further distinguishes itself with a wide variety NAC retail NLA of dining offerings that appeal to both the locals and as at 31 December 2006 tourists. Tenants such as library@orchard (a branch of

88.3% Toshin the National Library Board) and Books Kinokuniya in 6.6% Library the Ngee Ann City Property differentiate it from others 4.0% Beauty & wellness in the Orchard Road area. Events (such as the 0.7% Services Singapore Fashion Festival, Singapore Lion Dance 0.5% General trade Championship, product launches and festive events) held in the open concourse outside Ngee Ann City draw strong crowds to Ngee Ann City. Takashimaya Shopping Centre (the retail podium of Ngee Ann City) has won the STB’s “Best Shopping Experience” award for six consecutive years from 1999 to 2004. The strong brand recognition of the “Ngee Ann City” name reflects the strong appeal of Ngee Ann City to both shoppers and retailers. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Ngee Ann City Property 25 26 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Ngee Ann City Property

The Ngee Ann City Property (continued)

Shanghai Tang store with its new look

NAC occupancy rates (%) Tenant mix Diversified tenant mix 98.6 100.0 100.0 As at 31 Dec 05 92.4 As at 31 Dec 06 The Property is well diversified across a spread of trade sectors. As at 31 December 2006, there were nine retail tenants and 26 office tenants in the Ngee Ann City Property with Toshin accounting for 57.0% of its NLA. The Toshin lease allows for subletting and its area is occupied by a host of retailers from fashion and F&B to the book trade sectors. The retailers under Toshin include Guess, Zara and luxury retailers such Office Retail as Louis Vuitton, Chanel, Piaget and Burberry.

Store upgrades for key retailers Several luxury brand retailers, namely Chanel, Shanghai Tang, Burberry and Piaget, upgraded their stores in 2006. These store enhancements have reinforced the Ngee Ann City Property’s position as the leading centre for high-end fashion.

Master tenant Toshin Toshin is a wholly-owned subsidiary of Takashimaya Company Limited (listed on the Tokyo Stock Exchange). The company is a strong and credible operator with more than 40 years of experience in the development, operation and management of shopping malls. Toshin is the master tenant that leases retail space from Basement 2 to Level 4 of the Ngee Ann City Property. It sublets to a variety of retailers from the fashion, F&B and book trade sectors. Toshin also manages all the other specialty areas within Ngee Ann City ensuring consistency of branding and positioning for the entire mall. MMP REIT’s long-term master lease with Toshin expires in June 2013 with an MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 The Ngee Ann City Property 27

Lion dance competition at the Civic Plaza draws huge crowds option to renew for 12 years. The master lease also HIGHLIGHTS provides for a rent review every three years. The lease is beneficial to MMP REIT as it provides long-term • Several luxury brand retailers upgraded their income stability with the potential for rental upside. stores, helping to reinforce the property’s status as Singapore’s premier mall for high-end fashion Level 5 MMP REIT actively manages the retail space on • Ngee Ann City’s Civic Plaza continues to be the Level 5, covering an area of approximately 30,000 sq ft. venue of choice for prominent retail events such as the Singapore Fashion Festival, the Jewel Festival To complement the shopping experience on lower and the Subaru Challenge floors, tenants on Level 5 offer a variety of services covering beauty, wellness and education. In particular, • The office segment enjoyed high occupancy rates library@orchard is the National Library Board’s first and benefited from rising office market rents. lifestyle library designed especially to appeal to young Pre-termination of office leases allow advanced Singaporeans. The library’s unique location and leasing to capitalise on the strengthening features such as music booths and cafes attract office market the youth segment of the population and is aimed at cultivating reading and learning amongst youth.

Advertising and promotion Ngee Ann City is the venue of choice for events and activities given its prime location in the heart of the major shopping belt. The large event hall, Takashimaya Square, plays host to regular bazaars and fairs that draw shoppers by the throngs. With a capacity for over 3,000 people, the large outdoor semi-circular Civic Plaza is an extremely popular venue for many prestigious events including concerts, fairs, product launches, roadshows, fashion showcases, carnivals and lifestyle launches. In 2006, these included the Singapore Fashion Festival, the Jewel Festival and the Subaru Challenge. 28 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Market overview

Market overview

Robust office demand coupled with positive retail sentiment is expected to drive real estate growth

Singapore office supply, absorption and vacancy Singapore office property market The office sector experienced a strong cyclical Supply (million sq ft) upswing in 2006 underpinned by a strong economy, Absorption (million sq ft) Availability rates (%) – right hand side increased demand, rapid tenant expansion and tight supply. Even with Grade A stock having increased 5 20 by 760,000 sq ft from One Raffles Quay in 2006, it 18 4 was reported to be 95% pre-let and Grade A vacancy 16 remained below 1%. Vacancy in fringe CBD

3 14 (including Orchard Road) dropped from 7.7% (3Q06) to 6.9% (4Q06). 12 2 10 Robust office rentals are expected to continue in 2007 1 8 due to strong demand and limited supply. Demand is expected to remain buoyant as the office sector 6 0 benefits from the expansion of companies mainly from 4 the financial institutions, and companies looking to -1 2 relocate to Singapore given its excellent infrastructure,

-2 0 relatively low occupation cost and close proximity to ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06*’07*’08*’09* ’10* the emerging Asian markets and their regional clients. * Forecast Source: URA/Cushman & Wakefield The tight availability situation is expected to persist for another three years until the first phase of the business financial district is completed in 2010, which Singapore visitor arrival and tourism records Yoy comparision: 1996-2006 (actual) and 2015 (target) will add some 1.6 million sq ft of space to the market. 30.0 The scheduled redevelopment of a number of older Visitor arrival (million) buildings in the CBD area over the next few years Tourism receipts ($ billion) 17.0 totalling approximately 1.2 million sq ft will perpetuate the limited supply problem.

Despite an already substantial increase of 50% 12.0 10.9 year-on-year in prime office rents to average 10.0 10.4 9.6 10.4 8.5 9.4 9.4 8.8 6.9 9.5 $7.81 psf pm by the end of 2006, analysts expect 8.9 8.3 the steepest rental increase in the next 12 to 18 7.7 7.5 7.6 7.3 7.2 7.0 months as demand drivers are extremely strong. 6.2 6.1 Orchard Road rentals are expected to rise in tandem with rising office rentals.

Singapore retail property market

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2015 The retail sector experienced the highest level of new supply in 2006 (2 million sq ft) in the past 10 years. Source: STB Despite this, the supply was supported by increasing tourist numbers, rising consumer spending and increasing retail demand from both domestic and international retailers with new malls registering pre- MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Market overview 29

commitment levels of more than 80%. Vacancy rates The retail outlook remains positive on the back of the for prime shopping centres fell to zero in 2006. government’s tourism drive such as ‘Visit Malaysia Year’ where tourist arrivals and tourism receipts are The average prime Orchard Road rent increased 4.4% anticipated to increase by around 15% and 29% year-on-year to $34.50 psf pm in 2006. Analysts respectively to 20.1 million and RM44.5 billion in 2007 expect absorption rates to remain firm as demand for compared to 2006. Retail sales of prime shopping quality retail space remains strong. Other than new malls are expected to grow by 8% to 10%, which retail sites along Orchard Road, which are expected to translates to an upward retail rental growth. be completed from end 2008, there is little new retail supply and the relatively low vacancy rates suggest Undersupply will be the main driver for Malaysia’s that upward pressure on rents should continue office rents in 2007, particularly in the prime areas. particularly for prime Orchard Road malls coupled There is a current squeeze on office developments with a healthy economic forecast. within the CBD (or Golden Triangle) area with only a number of prime Grade A buildings available. In addition, the development of the integrated resorts The government’s restrictions on new office at Marina Bay and Sentosa and new shopping malls developments inside the core town area has also along Orchard Road will cater to Singapore’s changing led to many multinational corporations moving out tourist dynamics to become a prime entertainment of the congested CBD to prime office buildings just destination in the region. STB ‘Tourism 2015’ targets outside the city centre to meet their needs and to increase tourist arrivals to 17 billion in 2015 (nearly expansion plans. triple the annual growth rate of 2.3% for the past 10 years with an approximate 7% compounded growth Japan property market annually). Orchard Road will remain a key draw with Japan’s economy continues to recover, resulting in government-backed initiatives to transform the an end to its zero interest rate policy of almost six shopping district into a world-class attraction years. Real GDP growth averaged approximately 2.5% comparable to shopping destinations such as Fifth p.a. from 2004 to 2006. While it is expected to slow in Avenue (New York) and Champs Elysees (Paris). 2007, growth should still remain above 2%.

China property market The retail sector has benefited immensely from rising China is one of largest global economies with a GDP consumption, employment and wages that have exceeding US$500 billion, and one of the fastest characterised the current reflationary cycle. Spending growing countries in the world with its real GDP growth has also benefited from relatively healthy and affluent greater than 9% in each of the past four years. Despite baby boomers. Within the core Tokyo area itself, the the government’s measures to curb overheating of the market is very competitive with both domestic and economy, China is expected to continue to register a foreign retailers competing for prime space. Although solid growth momentum. Ginza and Omotesando are still the key focus of most international retailers, especially the high-end market The retail sector presents vast opportunities for both retailers, other districts are rapidly emerging, reflecting its primary and secondary cities, with rising affluence, a more varied and segmental retail market, for example urbanisation, steady population growth and rising Shibuya (young adults and executives), Harajyuku tourist arrivals and increase in consumer spending. (trendy youth), Tokyo station (CBD retail) and The relaxation of restrictions on foreign retailers Roppongi Hills. entering China since end 2004 continues to drive up competition and demand for retail space, especially In the office sector, Tokyo appears to be well-placed for prime retail malls. For example in Shanghai, prime to see continued growth in its office market for the retail rents rose by approximately 15% in 2006. With remainder of the decade. The market is expected to new prime developments mostly pre-let, vacancy rates remain tight with upward pressure on both rents and will likely trend downwards and positive rental growth prices as many corporations are experiencing strong should continue in 2007. earnings and are seeking more space for expansion. Vacancy rates currently stands at below 1% and Malaysia property market demand for good quality space is robust with strong Malaysia’s 2007 GDP growth is projected at around pre-letting activity – almost all space due to come on 5% to 5.7% reflecting the thrusts of the 9th Malaysian stream before 2008 has already been pre-let. Plan targeted at growth in retail, private consumption and sustained investments. 30 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Board of directors

Board of directors

Mr Stephen Girdis Mr Franklin Heng Non-executive Chairman Executive Director Mr Girdis is Global Head of Macquarie Real Estate and Mr Heng is the Chief Executive Officer of the Manager. can be credited with the establishment and growth of He was previously engaged in real estate investments many successful property trusts. He is an Executive for ERGO AG and property funds management for the Director of Macquarie Bank Limited; a director of a Pacific Star Group. With more than 15 years of real number of property funds including the management estate and investment banking experience (including companies of Macquarie ProLogis Trust and 8 years in JP Morgan), Mr Heng is well-versed in Macquarie DDR Trust; and an alternate director of the regional mergers and acquisitions, project finance Macquarie Goodman Group. He has over 25 years of advisory, equity and debt capital markets transactions. experience in chartered accounting, property finance, He obtained a Masters in Telecommunications funds management and investment banking, and is Management from Institut National des an associate of both The Institute of Chartered Telecommunications, Evry, France in 1993 through Accountants in Australia and the Securities Institute a France Telecom Scholarship and an Honours of Australia. (Second Upper) Degree in Business Administration from the National University of Singapore in 1990.

Mr James Hodgkinson Dr Hong Hai Non-executive Director Independent Director Mr Hodgkinson is an Executive Director of Macquarie Dr Hong Hai is the Dean of Nanyang Business School, Bank Limited (MBL) and Joint Head of Macquarie Nanyang Technological University, an appointment he Bank’s Real Estate Capital (REC) Division. With over has held since 1 July 2004. Dr Hong has extensive 19 years of experience in property funds management, senior managerial experience. He was the Chief investment banking and chartered accounting, Executive Officer of Haw Par Corporation Limited from he oversees REC’s businesses, and REIT development 1990 to 2003 and the Group General Manager of in Asia and core real estate investments for MBL. He Wearne Brothers Ltd from 1981 to 1990. He sits on the was responsible for Macquarie Industrial Trust, which boards of several public-listed companies in was successfully merged with Goodman Hardie Trust Singapore, such as China Merchant Holdings Pacific to form what became known as the Macquarie Limited, Asia Food and Properties Ltd, Poh Tiong Goodman Group (MGQ). He sits on the board of MGQ, Choon Logistics Limited and IDT (Singapore) Ltd. as well as the management company of A-REIT. He was CEO of Macquarie ProLogis Trust from listing until August 2005. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Board of directors 31

Mr Timothy Chia Independent Director Mr Chia is the Chairman of Hup Soon Global Pte Ltd. He was previously the President of PAMA Group Inc. (formerly known as Prudential Asset Management Asia Limited) and retired from the PAMA Group of Companies on 1 January 2005. Mr Chia currently serves on the boards of several private and publicly listed companies and government-linked companies in Singapore and the region. In addition to the Manager, Mr Chia is also a director of FJ Benjamin Holdings Ltd, Banyan Tree Holdings Ltd, SP PowerGrid Limited, Fraser & Neave Limited and Singapore Post Limited. He is also a Trustee of the Singapore Management University.

Mr Michael Hwang Mr Wolfgang Wente Independent Director Non-executive Director Mr Hwang was one of the first 12 Senior Counsel As Head of International Joint Ventures Real Estate for appointed in Singapore and now practices as an MEAG Munich ERGO AssetManagement GmbH independent barrister and international arbitrator. His (MEAG), Mr Wente is responsible for the administration international appointments include Commissioner of and expansion of MEAG’s worldwide real estate UN Compensation Commission, Deputy Chief Justice partnership network. He has been with ERGO of the Dubai International Finance Centre, Vice Trust/MEAG since 1997 and was responsible for President of the ICC International Court of Arbitration, ERGO Treasury Centre Ltd., an ERGO Group financing Member of the Permanent Court of Arbitration at the entity, for more than 8 years. As Head of Finance in Hague and Singapore’s Non Resident Ambassador to ERGO Trust GmbH, he oversaw the accounting, Switzerland. He advised the Real Estate Development control and asset management of ERGO Trust’s direct Association of Singapore (REDAS) for many years, participations and ERGO Group companies. preparing for the establishment of REITs in Singapore. Mr Wente’s experience in asset management spans Formerly a director of PSA Corporation Ltd (the Port of more than 12 years. He continues to manage several Singapore Authority), Mr Hwang is currently also a closed-end real estate funds in Europe and the director of The Straits Trading Company Limited. United States. 32 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Management – executive officers of the Manager

Management – executive officers of the Manager

TOP (left to right): Rudi Chuan, SVP (Finance and Accounting) Cecilia Tan, EVP (Corporate Services) Christine Chan, SVP (Legal and Compliance) Ronald Teckwani, Analyst (Investments) Poon Siew Loong, VP (Investments)

BOTTOM (left to right): Kevin Chee, SVP (Asset Management) Alice Cheong, SVP (Investments) Andrew Neary, SVP (Asset Management) Franklin Heng, CEO Clare Koh, AVP (Investments) MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Management – executive officers of the Manager 33

Mr Franklin Heng spent three years as the General Manager of Suria Chief Executive Officer KLCC in Malaysia, before undertaking external Mr Heng is responsible for working with the Board to consulting work in the region. More recently, he determine the overall business, investment and worked with Lend Lease Retail in Australia, before operational strategies of MMP REIT. He also works joining Macquarie Real Estate Capital in 2006. closely with other members of the Manager and the Mr Neary holds a Graduate Certificate in Financial Property Manager to ensure the business, investment Studies from UTS, Australia and an MBA (International and operational strategies of MMP REIT are carried out Business) from Griffith University, Australia. as planned. Mr Kevin Chee Ms Cecilia Tan Senior Vice President (Asset Management) Executive Vice President (Corporate Services) Mr Chee is responsible for property management and Ms Tan oversees a wide range of corporate functions, asset management for MMP REIT. Prior to joining the from legal, compliance, strategic planning, accounting, Manager, Mr Chee was the President of the corporate finance, investor relations, corporate Property Manager and before that, a vice president communications and human resources to information in the Pacific Star Group involved in asset and technology. She was the Chief Investment Officer investment management of local and cross-border before assuming her current role in October 2006. She real estate transactions. He has 14 years of working has about 13 years of working experience, ranging experience, six in regional mergers and acquisitions from real estate investment with ERGO Tru Asia (ETA), and project finance advisory at JP Morgan and to regional investment banking with JP Morgan and Barclays Capital and four as a financial analyst at NM Rothschild & Sons, where she was involved in Shell Eastern Petroleum. advisory, mergers and acquisitions, and equity capital transactions for real estate companies, F&B Mr Chee graduated with a Bachelor of Business companies and diversified conglomerates. (Honours) in Banking from Nanyang Technological University, Singapore in 1992. She obtained a Masters Degree in Applied Finance from Macquarie University (Australia) in 2001 and Mr Rudi Chuan an Honours (Second Upper) Degree in Business Senior Vice President (Finance and Accounting) Administration from the National University of Mr Chuan is responsible for the finance function of Singapore in 1993. MMP REIT including financial reporting, taxation, treasury and capital management. He has more than Ms Alice Cheong 20 years of working experience in various industries Senior Vice President (Investments) with six years in the real estate industry. Prior to joining Ms Cheong is responsible for investments. Ms Cheong the Manager, he was the financial controller of Suntec has more than 11 years of working experience in City Development. financial advisory, mergers and acquisitions and fundraising, including three years in the real estate Mr Chuan holds a Bachelor of Commerce Degree in sector. Prior to joining the Manager, she was a vice Accounting from the University of Otago, New Zealand president in ETA from May 2003 to June 2005 involved and a Masters in Business Administration from the in the evaluation, structuring and execution of real State University of New York. He is a Certified Public estate acquisitions in Asia. Ms Cheong has had seven Accountant with the Institute of Certified Public years of investment banking experience with HSBC Accountants of Singapore. and NM Rothschild & Sons in Singapore. Ms Christine M Chan Ms Cheong graduated with First Class Honours Senior Vice President (Legal and Compliance) from Warwick University in the United Kingdom with Company Secretary a Bachelor of Science in Management Science in Ms Chan trained and worked as a barrister in England 1994. She is also a Chartered Financial Analyst and Wales and was callled to the Bar as an advocate (CFA Institute). & solicitor of the Supreme Court of Singapore. After working in Chambers in London for nearly two years, Mr Andrew Neary she returned to Singapore and was engaged in all Senior Vice President (Asset Management) aspects of commercial litigation, international Mr Neary is responsible for delivering asset arbitration, corporate advisory (for parties in China, enhancement and organic growth of MMP REIT’s Indonesia, Thailand, Burma, Korea and Singapore) properties. Mr Neary has more than 20 years of and commercial leasing/centre management for banking and property experience having worked in six years with two major law firms in Singapore. the Commonwealth Bank of Australia in Credit, After a three-year sabbatical to write, teach and Risk Management and Corporate Finance roles, train, she returned to legal practice with a focus on before spending seven years with the Westfield group corporate finance. She became Corporate Counsel in the Centre Management, Asset Management and to another REIT manager in Singapore and joined the Development divisions. While at Westfield, Mr Neary Manager in October 2006. 34 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Management – executive officers of the Property Manager

Management – executive officers of the Property Manager

TOP (left to right): Chan Shuk Ling, Marketing Manager Sandra Lee, Human Resources Manager Kevin Chee Kulanthaivelu Parameshvari, Finance Manager

BOTTOM (left to right): Andrew Neary Tan How Song, Property Operations Manager Jean Loke, Leasing Manager Amy Lim, Assistant General Manager MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Management – executive officers of the Property Manager 35

Ms Amy Lim Ms Chan Shuk Ling Assistant General Manager (Leasing and Marketing) Marketing Manager Ms Lim is in charge of the leasing, marketing functions Ms Chan is responsible for conceptualising and and tenant relationships for WA and NAC. Prior to implementing marketing programmes to attract joining the Property Manager, Ms Lim was the shoppers and increase tenants’ sales turnover at WA. Corporate Director of Leasing at Tincel Properties Ms Chan has 10 years of marketing experience. From Private Limited from 2001 to 2006 where she was 2001, she was with WDPL where she was responsible responsible for the leasing of the retail and office for advertising and promotion activities for WA. Prior spaces at Raffles City, including building tenant to that, Ms Chan worked with Seiyu Department Store relationships. Between 1994 and 2001, Ms Lim worked where she was in charge of implementing marketing with OCBC Property Services Pte Ltd where she was programmes for all the chain outlets. in charge of the leasing functions for the OCBC Ms Chan graduated with a degree in Arts from the group’s portfolio of commercial properties – OCBC National University of Singapore in 1996. Centre, OCBC Centre East, OCBC Centre South, OAC Building and Specialists’ Shopping Centre. Mr Tan How Song Property Operations Manager Ms Lim graduated with an Honours Degree in Estate Management from the National University of Singapore Mr Tan is responsible for the building operations of in 1987. the Properties. Mr Tan has more than 10 years of experience in the property management industry. Ms Kulanthaivelu Parameshvari He was a project manager at Orchard Square Finance Manager Development Corporation (OSDC), a joint developer Ms Parameshvari, with more than 20 years’ experience of NAC, from 1997 to 2003, before joining the Property in the audit and finance industry, is responsible for Manager. At OSDC, Mr Tan was involved in the daily finance, accounting and tax functions. Prior to joining operations of NAC and advised on the inter-tenancy the Property Manager, she was with Wisma configurations to maximise the net lettable area of Development Pte Ltd (WDPL) from 1986 to 2002 where NAC. Prior to OSDC, he was the project manager she was responsible for its finance, accounting and tax involved in managing construction activities, functions and served as the chairman, treasurer, upgrading, maintenance programmes and addition secretary and a council member (representing WDPL) and alteration works at Metrobilt Construction, Kmart- of the Wisma Atria Management Corporation. She also Singapore and Omni Marco Polo Hotel Singapore. worked in the audit department of Ernst and Young Mr Tan obtained an Advanced Diploma in Building from 1979 to 1986. Services Engineering from Ngee Ann Polytechnic Ms Parameshvari graduated with a Bachelor of in 1991. Science from the University of Madras in 1972. She is also a graduate of the Association of Chartered Certified Accountants (United Kingdom) as well as a member of the Association of Chartered Certified Accountants and the Certified Public Accountants of Singapore. Ms Jean Loke Leasing Manager Ms Loke is in charge of all leasing operations and tenant relationships for WA and NAC. Prior to joining the Property Manager, Ms Loke was at WDPL from 1991 to 2002 where she was responsible for all leasing operations and tenant relationships of WA and Forum The Shopping Mall. Between 1989 and 1991, Ms Loke worked with Jones Lang Wootton Pte Ltd (now Jones Lang LaSalle) where she was in charge of residential property management for Woollerton Park. Ms Loke holds a Diploma in Building Management from Ngee Ann Polytechnic gained in 1988. 36 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Capital management

Capital management

Prudent capital management to deliver stable returns to investors

High fixed rate debt component Debt highlights as at 31 December 2006 As at 31 December 2006, MMP REIT borrowings CMBS $380m comprised AAA-rated Euro-denominated $380 million Revolving credit facilities $11m equivalent CMBS and $11 million short-term Total debt $391m borrowings. The $380 million equivalent CMBS, 1 representing 97% of the total borrowings, was fully Gearing ratio 25.6% Fixed rate debt 97.2% hedged for both interest rate and currency risks Interest cover 4.4x at 3.3% per year up to September 2010. The high Weighted average interest rate 2 3.2% p.a. percentage of fixed rate debt helps to protect MMP REIT corporate rating (Moody’s) Baa1 MMP REIT overall earnings from volatility in interest CMBS rates, providing stability to unitholders’ returns. Rating (Moody’s and Fitch, Inc.) AAA Debt maturity Sep 2010 The weighted average interest rate was 3.2% for the Interest rate and currency risks 100% hedged financial year ended December 2006. Cash flow Note: generated from operating activities for the year was a 1 Based on deposited property strong $66 million. The interest service coverage ratio 2 For FY2006 was a healthy 4.4 times for the year, indicating MMP REIT can comfortably pay interest on outstanding debt. unitholders. Given MMP REIT’s low gearing level and the availability of competitively priced debt capital, the Increased debt capacity Manager intends to optimise the level of borrowings MMP REIT had a low gearing of 25.6% as at end before considering raising equity. The use of December 2006, on the strength of higher valuations borrowings does however result in returns being of its two properties, valued at $1.498 billion as at influenced by market interest rates. The Manager will end December 2006. In July 2006, MMP REIT was hedge interest rate and foreign currency risks by assigned a “Baa1” corporate family rating by Moody’s swapping foreign currency denominated debt into Investors Service. With the rating, MMP REIT can Singapore dollar denominated debt or other relevant increase its aggregate leverage limit to 60%, as local currencies to match the income that will be used provided in the Property Fund Guidelines issued to service the borrowings, and by swapping as much by the MAS. floating rate debt into fixed rate debt to protect the returns from interest rate volatility. Debt and equity management The Manager will review the use of appropriate levels of debt and equity capital to fund acquisitions and new investments, and aims to maximise the cheaper source of capital to deliver higher returns to MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Investor relations 37

Investor relations

Keeping you informed and making investing easier

SGX-ST listing The MMP REIT website provides detailed and timely MMP REIT is listed on the SGX-ST. The SGX Code information about MMP REIT`’s assets as well as under which MMP REIT trades is “MMP Reit”. Daily media releases, announcements and presentations. unit prices can be found in major Singapore The site also provides visitors with an option of signing newspapers and on the SGX-ST website up for a free email alert service. (www.sgx.com). The Unit Registrar Distributions Distributions are payable every quarter and will be Lim Associates (Pte) Ltd received by investors approximately 60 days after 3 Church Street each quarter. #08-01 Samsung Hub Singapore 049483 Contact us Phone: +65 6536 5355 If you have any enquiries or would like to find out Fax: +65 6536 1360 more about MMP REIT, please contact us: Website: www.boardroomlimited.com

(A) Unitholder enquiries (B) Unitholder depository

Macquarie Pacific Star Prime REIT The Central Depository (Pte) Limited Management Limited 4 Shenton Way 391B Orchard Road #02-01 SGX Centre 2 #21-08 Ngee Ann City Tower B Singapore 068807 Singapore 238874 Phone: +65 6535 7511 Phone: +65 6835 8633 Fax: +65 6535 0775 Fax: +65 6835 8644 Email: [email protected] Email: [email protected] Website: www.cdp.com.sg Website: www.mmpreit.com or www.macquariepacificstar.com. 38 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Community development

Community development

Non-profit organisations benefit from our community efforts

Starbucks Celebrity Coffee event in aid of the Central Java earthquake victims Adopt a MILK Angel raised funds for disadvantaged children

Share a Meal@Food Republic Adopt a MILK Angel During Chinese New Year 2006, the centre worked Another charity event we supported was MILK’s with Food Republic to sponsor and host residents Donation Drive to raise funds for MILK Fund. This from Care Corner Family Service Centre where they is in aid of disadvantaged children by allowing the were dined and entertained by singing performances. sale of donation tickets and running the MILK Angel Adoption promotion at Wisma Atria as part of the Starbucks Celebrity Coffee centre’s Christmas campaign. One of our retailers, Local comedian-host Irene Ang as well as Fly Soo Kee Jewellery, also supported the cause by Entertainment artistes Wendy Jacobs, Amy Cheng, sponsoring several jewellery pieces for the auction. Steph Song, Cynthia Koh and Jimmy T were coffee baristas for the day at Starbucks Wisma outlet to raise Public Outreach and Donation Drive funds for Singapore Red Cross Society’s “Indonesia Wisma Atria also actively supported tertiary students Disaster Relief Fund”. This was in aid of the Central with various fundraising events at our mall. These Java earthquake victims. included events like Make-A-Wish project by Raffles Institution and the Adopt-A-Crane for Children Cancer Foundation project by National Junior College. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance 39

Corporate governance

Committed to upholding the highest standards of corporate governance

Unitholders

Holding Units Distributions

Management Acts on behalf Fees of Unitholders Trustee Macquarie MEAG Prime REIT HSBC The Manager Institutional (MMP REIT) Trust Services Management Trustee Fees (Singapore) Limited Services

Ownership Net Property of Assets Income

The Properties Property Management Services The Property Manager Property Management Fees

Corporate governance Guidelines) issued by the MAS, the Securities and The Manager believes that strong and effective Futures Act, Chapter 289 of Singapore (“SFA”), corporate governance is essential to protect the the regulations thereunder and the tax ruling dated best interests of the Unitholders of MMP REIT 20 May 2005 issued by the Inland Revenue Authority (“Unitholders”) and is critical to the success of its of Singapore (the “Tax Ruling”) are complied with, performance as the Manager. and that the Manager’s obligations in the MMP REIT Trust Deed (including any supplemental deeds thereto) The following sections describe the Manager’s are honoured. primary corporate governance policies and practices. They encompass proactive measures for avoiding Manager of MMP REIT situations of conflict and potential conflicts of interest, Macquarie Pacific Star Prime REIT Management including prioritising the interests of Unitholders over Limited was appointed the Manager of MMP REIT in those of the Manager. They also ensure that applicable accordance with the terms of the Trust Deed dated 8 laws and regulations contained in the listing manual of August 2005. The terms and duration of the Manager’s the SGX-ST, the Code of Collective Investment appointment are governed by the Trust Deed, Schemes (“CIS Code”) (including the Property Funds including any supplemental deeds thereto. 40 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance

Corporate governance (continued)

The Manager of MMP REIT has general power of Pursuant to amendments made to the Property Funds management over the assets of MMP REIT. The Guidelines in October 2005, the Manager and the Manager’s main responsibility is to manage MMP Trustee entered into a First Supplemental Deed dated REIT’s assets and liabilities for the benefit of 20 April 2006 to provide for the following: Unitholders. The primary role of the Manager is to (1) The Manager may be removed by way of resolution set the strategic direction of MMP REIT and to make passed by a simple majority of Unitholders present recommendations to HSBC Institutional Trust Services and voting at general meeting, with no Unitholder (Singapore) Limited, as trustee of MMP REIT (the being disenfranchised; and “Trustee”) on acquisitions, divestments and enhancement of the assets of MMP REIT, in (2) A general meeting may be convened at the accordance with its stated business strategy. request in writing of not fewer than 50 Unitholders Other important functions and responsibilities of or Unitholders representing not less than 10% of the Manager include: the issued units.

(1) Using its best endeavours to ensure that the Board matters business of MMP REIT is carried out and The role of the Board conducted in a proper and efficient manner and The Board of Directors of the Manager (the “Board’’) to conduct all transactions with, or for MMP REIT, is responsible for the overall management and at arm’s length; corporate governance of the Manager and MMP REIT, (2) Preparing property plans on a regular basis, including establishing performance objectives for the which may contain proposals and forecasts on management team of the Manager and monitoring net income, capital expenditure, sales and the achievement of these objectives. All Board valuations, explanations of major variances to members participate in matters relating to corporate previous forecasts, written commentary on key governance, business operations and risks, and issues and underlying assumptions on rental financial performance. rates, occupancy costs and any other relevant The Board has established a framework for the assumptions. The purpose of these plans is to management of the Manager and MMP REIT, including explain the performance of MMP REIT’s assets; a system of internal controls and a business risk (3) Ensuring compliance with the applicable management process. The Board has adopted a set provisions of the SFA and all other relevant of internal controls which sets out approval limits for legislation, the listing manual of the SGX-ST, capital expenditure, investments and divestments, the CIS Code, the Trust Deed, the Tax Ruling bank borrowings and cheque signatories, amongst and all relevant contracts; others. Appropriate delegations of authority have been provided to the management to facilitate operational (4) Attending to all communications with Unitholders; efficiency. Changes to regulations, policies and and accounting standards are monitored closely. Where the changes have significant impact on MMP REIT (5) Supervising Macquarie Pacific Star Property and its obligations of continuing disclosure, the Management Pte. Ltd. which performs the directors will be briefed during Board meetings, at ad day-to-day property management functions hoc Board meetings or by circulation of Board papers. (such as leasing, marketing, maintenance, Board meetings are scheduled and held at least once promotion and accounting) for the Properties, every quarter. Directors meet to discuss and review pursuant to the property management agreements. the strategies and policies of MMP REIT, including any significant matters pertaining to acquisitions MMP REIT, constituted as a trust, is externally and disposals, the annual budget and the financial managed by the Manager and accordingly has no performance of the Manager and MMP REIT measured personnel or staff of its own. The Manager appoints against a previously approved budget. The Board also experienced and well-qualified management staff to reviews and approves the release of the quarterly, run its operations. All directors and employees of the half-yearly and annual results. The Board will generally Manager are remunerated by the Manager, and not by review matters which impact on the business risks and MMP REIT. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance 41

management of liability of MMP REIT, and will act upon Chairman and the Chief Executive Officer, facilitates a any comments from the statutory auditors of MMP vigorous professional relationship between the Board REIT. The Articles of Association of the Manager and the management. Newly appointed directors provide that directors may also convene meetings are briefed by management on their roles and by teleconference or videoconference. responsibilities as directors of the Manager, and of the business activities and strategic direction of Board composition MMP REIT. The Board presently comprises seven members, three of whom are independent directors. The non-executive Access to information Chairman of the Board is Mr Stephen Girdis and the Management provides the Board regular updates on Chief Executive Officer of the Manager is Mr Franklin financial results, market and business developments, Heng. The other members of the Board include Mr and business and operational information. Board James Hodgkinson (non-executive director) and Mr papers and agenda are provided to each director in Wolfgang Wente (non-executive director). The three advance of Board meetings so that directors can independent directors are Dr Hong Hai, Mr Timothy review the matters arising beforehand. Management Chia and Mr Michael Hwang. The composition of the staff is invited to attend the Board meetings whenever Board has been determined in accordance with the the Board decides or requests, in order that additional following principles: insight or information may be presented for the Board’s consideration. The Board has unfettered (1) The Chairman of the Board should be a non- access to members of senior management and executive director of the Manager; the Company Secretary at all times. The Company Secretary attends to corporate secretarial (2) The Board should comprise directors with a administration matters and attends Board meetings. broad range of commercial experience including The Board also has access to independent expertise in funds management and experience in professional advice (legal, financial or otherwise) all facets of the property or real estate industry; where appropriate or necessary.

(3) At least one-third of the Board should comprise Audit Committee independent directors; and The Audit Committee is appointed by the Board from (4) The composition will be reviewed regularly to amongst the directors of the Manager and currently ensure that the Board has the appropriate mix comprises three members, all of whom (including the of expertise and experience. Chairman of the Audit Committee) are independent directors. The members of the Audit Committee are The positions of non-executive Chairman and Chief Dr Hong Hai (Chairman), Mr Timothy Chia and Mr Executive Officer are held by two separate persons Michael Hwang. The Audit Committee assists the in order to maintain an effective segregation of duties. Board in overseeing the risk management framework The Chairman ensures that the Board members work and any matters of significance affecting financial together with management in a constructive manner to reporting and internal controls of MMP REIT. The address strategies, business operations and enterprise terms of reference for the Audit Committee include: issues. The Chief Executive Officer has full executive responsibilities over the business direction and (1) Reviewing audit reports to ensure that where operational decisions of the Manager of MMP REIT. deficiencies in internal controls have been The majority of the Board members is non-executive identified, appropriate and prompt remedial with at least one third of the Board being independent action is taken by management; directors. This enables the management to benefit (2) Monitoring the procedures in place to ensure from the directors’ external and objective perspectives compliance with applicable legislation, the on issues that are brought before the Board. In this listing manual of the SGX-ST and the Property way, the Board is also better able to interact and work Funds Guidelines; with management through a healthy exchange of ideas and views to help shape the strategic process. This, (3) Reviewing and making recommendations to the together with the clear separation of roles between the Board in relation to the financial statements of MMP REIT; 42 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance

Corporate governance (continued)

(4) Monitoring the procedures established to regulate The Audit Committee will review and recommend a Related Party Transactions (as defined below), “whistle-blowing” policy for the Board to approve and and ensuring compliance with the provisions of adopt in the coming year. The Audit Committee will be the relevant regulations; tasked with the review of arrangements by which members of staff may, in confidence, raise concerns (5) Making recommendations to the Board on the about potential or actual improprieties in matters of appointment, reappointment or removal of external financial reporting or otherwise, so as to facilitate auditors, and approving the remuneration and independent investigations of such matters and ensure terms of engagement of such auditor; and that appropriate remedial and follow-up action is taken in every instance. (6) Ensuring that the internal audit function is adequately resourced by outsourcing the The Audit Committee meets before the Board is appointment to a reputable accounting firm convened, generally once in every calendar quarter. where appropriate. Internal audit The role of the Audit Committee is to monitor and The Manager has put in place a system of internal evaluate the effectiveness of the Manager’s internal controls, compliance procedures and processes to controls. The Audit Committee also reviews the quality safeguard MMP REIT’s assets, Unitholders’ interests, and veracity of information prepared for inclusion in manage risks and ensure compliance and the financial reports. The Audit Committee is responsible highest standard of corporate governance. The Audit for the nomination of external auditors and internal Committee has appointed BDO Raffles Consultants auditors, and reviewing the adequacy of existing Pte Ltd, a member firm of BDO International, to audits in respect of cost, scope and performance. perform the internal audit functions. The internal The Audit Committee meets with the internal and auditor is mandated to provide risk assessment external auditors without the presence of the services and compliance audits in order to ensure management, at least once a year. internal controls are aligned to business objectives and related risks, and are effectively performed. The Audit Committee is authorised to investigate Management is responsible for rectifying and any matters within its terms of reference. It enjoys addressing issues identified by the internal auditor, unfettered access to and cooperation from and the internal auditor will audit and report to the management and may invite any director or executive Audit Committee when the issues have been officer of the Manager to attend its meetings. The redressed. The internal auditor will also audit and Audit Committee has unfettered access to reasonable report on the appropriateness and effectiveness of resources to enable it to discharge its functions. The processes for the management of Related Party Audit Committee has also conducted a review of all Transactions at least twice a year. In addition, the non-audit services provided by the external auditors Trustee also has the right to review the internal and is satisfied that the nature and extent of such audit reports so to ascertain that the Property Funds services will not prejudice the independence and Guidelines have been complied with. The internal objectivity of the external auditors.

Board and audit committee meetings attendance Board Audit Committee No. of meetings No. of meetings held in 2006: 4 held in 2006: 4 Attended Attended Mr Frank-Rainer Vaessen* 3 n.a. Mr Stephen Girdis 4 n.a. Mr Franklin Heng 4 n.a. Mr James Hodgkinson 4 n.a. Mr Wolfgang Wente* 1 n.a. Dr Hong Hai 4 4 Mr Timothy Chia 4 4 Mr Michael Hwang* 4 4 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance 43

auditor will report directly to the Audit Committee on (2) Transactions (either individually or as part of a audit matters and to the Chief Executive Officer of the series or if aggregated with other transactions Manager on administrative matters. involving the same interested party during the same financial year) equal to or exceeding 3.0% Attendance at Board and Audit Committee meetings but below 5.0% of MMP REIT’s net tangible assets The Manager believes that contributions from each will be subject to the review and prior approval of director go beyond his/her attendance at Board and the Audit Committee. Such approval shall only be committee meetings. A director of the Manager would given if the transactions are on normal commercial have been appointed on the principles outlined earlier terms and consistent with similar types of in this statement, and his/her ability to contribute to the transactions made by the Trustee with third proper guidance of the Manager in its management of parties who are unrelated to the Manager; and MMP REIT. (3) Transactions (either individually or as part of a * Save for Mr Wolfgang Wente who was appointed series or if aggregated with other transactions to the Board in July 2006 and Mr Michael Hwang involving the same interested party during the who was appointed to the Board on 1 January same financial year) equal to or exceeding 5.0% 2006, the rest of the directors were appointed in of MMP REIT’s net tangible assets will be reviewed 2005. Mr Frank-Rainer Vaessen, who was also and approved by the Audit Committee which may, appointed to the Board in 2005, made invaluable as it deems fit, request advice on the transaction contributions as the first Chairman of the Board from independent sources or advisers, including (which the Board acknowledges with gratitude), obtaining valuations from professional valuers. until his resignation in July 2006. Further, under the listing manual of the SGX-ST and the Property Funds Guidelines, such Dealing with related party transactions transactions would have to be approved by Review procedures for related party transactions Unitholders at a meeting of Unitholders. Where The Manager has established internal control matters concerning MMP REIT relate to procedures to ensure that transactions involving transactions entered into or to be entered into by the Trustee and any related party of the Manager the Trustee for and on behalf of MMP REIT with (“Related Party Transactions’’) are undertaken on a related party of the Manager, the Trustee is normal commercial terms, which are generally no required to ensure that such transactions are more favourable than those extended to unrelated conducted on normal commercial terms and third parties. As a general rule, the Manager would are not prejudicial to the interests of MMP REIT have to demonstrate to the Audit Committee that such or Unitholders and are in accordance with all transactions satisfy the foregoing criteria, which may applicable requirements of the Property Funds entail obtaining (where practicable) quotations from Guidelines and/or the listing manual of the SGX-ST parties unrelated to the Manager, or obtaining relating to the transaction in question. Further, valuations from independent professional valuers the Trustee has the ultimate discretion under the (in accordance with the Property Funds Guidelines). Trust Deed to decide whether or not to enter into In addition, the following procedures are followed: a transaction involving a related party of the (1) Transactions (either individually or as part of a Manager. If the Trustee is to sign any contract series or if aggregated with other transactions with a related party of the Trustee or the Manager, involving the same interested party during the the Trustee will review the contract to ensure that same financial year) equal to or exceeding it complies with the requirements relating to $100,000 in value but below 3.0% of MMP REIT’s interested party transactions in the Property Funds net tangible assets will be subject to review by Guidelines (as may be amended from time to time) the Audit Committee at regular intervals; and the provisions of the listing manual of the SGX-ST relating to interested person transactions (as may be amended from time to time) as well as such other guidelines as may from time to time be prescribed by the MAS and the SGX-ST to apply to real estate investment trusts. 44 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance

Corporate governance (continued)

Internal control procedures (3) All resolutions in writing of the directors of The Manager’s internal control procedures are the Manager in relation to matters concerning intended to ensure that Related Party Transactions MMP REIT must be approved by a majority are conducted at arm’s length and on normal of the directors, including at least one commercial terms and are not prejudicial to independent director; Unitholders. The Manager maintains a register to (4) At least one-third of the Board shall comprise record all Related Party Transactions (and the basis, independent directors; including, where practicable, the quotations obtained to support such basis, on which they are entered into) (5) All Related Party Transactions must be reviewed which are entered into by MMP REIT. The Manager has by the Audit Committee and approved by a incorporated into its internal audit plan a review of all majority of the Audit Committee in accordance Related Party Transactions entered into by MMP REIT. with the materiality thresholds and procedures The Audit Committee reviews the internal audit reports outlined above. If a member of the Audit to ascertain that the guidelines and procedures Committee has an interest in a transaction, established to monitor Related Party Transactions he or she will abstain from voting; and have been complied with. The Audit Committee periodically reviews all Related Party Transactions to (6) In respect of matters in which a director of the ensure compliance with the internal control procedures Manager or his Associates (as defined in the listing and with the relevant provisions of the listing manual manual of the SGX-ST) have an interest, direct or of the SGX-ST and the Property Funds Guidelines. indirect, such interested director will abstain from The review includes the examination of the nature of voting. In such matters, the quorum must comprise the transaction and its supporting documents or such a majority of the directors of the Manager and must other data deemed necessary by the Audit Committee. exclude such interested directors; If a member of the Audit Committee has an interest The Trust Deed also provides that if the Manager is in a transaction, he is to abstain from participating required to decide whether or not to take any action in the review and approval process in relation to that against any person in relation to any breach of any transaction. The Manager discloses in MMP REIT’s agreement entered into by the Trustee for and on annual report the aggregate value of Related Party behalf of MMP REIT with a related party of the Transactions entered into during the relevant Manager, the Manager shall be obliged to consult with financial year. a reputable law firm (acceptable to the Trustee) which In relation to the Manager’s internal controls, nothing shall provide legal advice on the matter. If the said law has come to the attention of the Board to suggest that firm is of the opinion that the Trustee, on behalf of such internal controls are not adequate. MMP REIT, has a prima facie case against the party allegedly in breach under such agreement, the Dealing with conflicts of interest Manager shall be obliged to take appropriate action The Manager has instituted the following procedures in relation to such agreement. The directors of the to deal with potential conflicts of interest issues: Manager (including its independent directors) have a duty to ensure that the Manager so complies. (1) The Manager will not manage any other real Notwithstanding the foregoing, the Manager shall estate investment trust which invests in the same inform the Trustee as soon as it becomes aware of type of properties as MMP REIT; any breach of any agreement entered into by the (2) All executive officers will be employed by Trustee for and on behalf of MMP REIT with a related the Manager; party of the Manager and the Trustee may take such action as it deems necessary to protect the rights MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance 45

of Unitholders and/or which is in the interests of The Audit Committee has also been tasked by the Unitholders. Any decision by the Manager not to take Board to review and consider all matters of risk action against a related party of the Manager shall not management, and to make recommendations to the constitute a waiver of the Trustee’s right to take such Board where necessary or appropriate. This entails the action as it deems fit against such related party. review, assessment and analysis of risks which could arise with respect to the business operations of the Risk assessment and management Manager and MMP REIT; the assets of MMP REIT; Effective risk management is a fundamental part prospective transactions, acquisitions or investments of MMP REIT’s business strategy. Recognising by MMP REIT; matters relating to funding, hedging or and managing risk is central to the business and treasury transactions which MMP REIT may enter into to protecting Unitholders’ interests and value of in order to effectively execute on its stated investment such interests. The Manager has in place a risk strategy. Guidelines and parameters within which management framework and policies that provide a such risks are recognised, identified, managed and structured approach to identifying and managing the mitigated are defined by the Board. The primary risks that could arise in the course of managing MMP objective is to protect the interests of Unitholders REIT. The framework and policies are monitored and whilst effectively enhancing the value of their interests. reviewed by the Board at least once a year, and In accordance with this objective, the Board requires major developments or significant revisions to the that comprehensive due diligence be carried out in framework or policies are submitted to the Board for relation to prospective investments so as to determine approval. Risks at both the Manager and MMP REIT (amongst other matters) whether the anticipated return levels which are managed through this risk on investment is appropriate, having regard to all levels management framework, include: of risk which may be ascertained. The Board also requires that written proposals with comprehensive (1) Regulatory and reporting risk; risk assessment analyses be submitted to it in advance (2) Financial risk (such as liquidity, interest rate, of each major investment decision being made. currency, investment, credit); Dealing in MMP REIT units (3) Legal risk (such as contract enforceability, The Trust Deed requires each director of the Manager covenants, litigation); to give notice to the Manager of his/her acquisition of units or of changes in the number of units which (4) Operational risk (such as people, processes, he/she holds or in which he/she has an interest, within infrastructure, technology, systems); two business days after such acquisition or the occurrence of the event giving rise to changes in the (5) Environmental risk; number of units which he/she holds or in which he/she (6) Project risk; has an interest. All dealings in units by directors of the Manager are announced via SGXNET, with the (7) Asset performance risk; announcement being posted on the internet at http://www.sgx.com. The directors and employees (8) Reputational risk (such as investor relations, media of the Manager are encouraged, as a matter of internal management); and policy, to hold units but are prohibited from dealing in the units: (9) Strategic risk. 46 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Corporate governance

(1) In the period commencing one month before to Unitholders. The website also provides visitors with the public announcement of MMP REIT’s annual the option of signing up for a free email alert service and semi-annual results and (where applicable) which notifies whenever public materials are released property valuations and two weeks before the by the Manager in relation to MMP REIT. In the spirit public announcement of MMP REIT’s quarterly of upholding active and open communication, the results, and ending on the date of announcement Manager conducts briefings for analysts and media of the relevant results or, as the case may be, representatives, which generally coincide with the property valuations; and release of MMP REIT’s results. During these briefings, the Manager will review MMP REIT’s most recent (2) At any time while in possession of price-sensitive performance as well as discuss the business outlook information. The directors and employees are for MMP REIT. In line with the Manager’s objective of advised not to deal in the units on short-term transparent communication, briefing materials are considerations. In addition, the Manager has given released to the SGX-ST via SGXNET and also made an undertaking to the MAS that it will announce available on MMP REIT’s website. The Manager also to the SGX-ST the particulars of its holdings in participates in real estate focused conferences locally the units and any changes thereto within two and in the region as part of its efforts to cultivate and business days after the date on which it acquires maintain regular contact with investors and analysts or disposes of any units, as the case may be. and to build interest in and strengthen the branding The Manager has also undertaken that it will not of MMP REIT. deal in the units in the period commencing one month before the public announcement of MMP REIT’s annual and semi-annual results and (where applicable) property valuations and two weeks before the public announcement of MMP REIT’s quarterly results, and ending on the date of announcement of the relevant results or, as the case may be, property valuations.

Communication with Unitholders The SGX-ST listing rules require that a listed entity discloses to the market matters that could or might be expected to have a material effect on the price of the entity’s securities. The Manager upholds a strong culture of continuous disclosure and transparent communication with Unitholders and the investing community. The Manager has developed a communications policy, the cornerstone of which is delivery of timely and full disclosure of all material information relating to MMP REIT by way of public releases or announcements through the SGX-ST via SGXNET at first instance and then posting the release on MMP REIT’s website at www.mmpreit.com. MMP REIT’s website contains recent announcements, press releases, presentations, past and current reports MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements 47

Financial statements

Contents 48 Report of the Trustee 49 Statement by the Manager 50 Auditors’ report 51 Balance sheet 52 Statement of total return 53 Distribution statement 54 Statement of movements in net assets attributable to unitholders 55 Investment properties portfolio statement 56 Cash flow statement 58 Notes to the financial statements 48 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Report of the Trustee

Report of the Trustee

HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”) is under a duty to take into custody and hold the assets of Macquarie MEAG Prime Real Estate Investment Trust (“MMP REIT”) in trust for the unitholders. In accordance with the Securities and Futures Act (Cap. 289), its subsidiary legislation and the Code on Collective Investment Schemes (collectively referred to as the “laws and regulations”), the Trustee shall monitor the activities of Macquarie Pacific Star Prime REIT Management Limited (the “Manager”) for compliance with the limitations imposed on the investment and borrowing powers as set out in the trust deed dated 8 August 2005 between the Trustee and the Manager (the “Trust Deed”) in each annual accounting period and report thereon to unitholders in an annual report which shall contain the matters prescribed by the laws and regulations as well as the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certified Public Accountants of Singapore and the provisions of the Trust Deed. To the best knowledge of the Trustee, the Manager has, in all material respects, managed MMP REIT during the period covered by these financial statements, set out on pages 51 to 76, comprising the balance sheet, statement of total return, distribution statement, statement of movements in net assets attributable to unitholders, investment properties portfolio statement, cash flow statement and a summary of significant accounting policies and other explanatory notes, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed, laws and regulations and otherwise in accordance with the provisions of the Trust Deed.

For and on behalf of the Trustee, HSBC Institutional Trust Services (Singapore) Limited

Arjun Bambawale Director

Singapore 28 February 2007 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Statement by the Manager 49

Statement by the Manager

In the opinion of the directors of Macquarie Pacific Star Prime REIT Management Limited (the “Manager”), the accompanying financial statements set out on pages 51 to 76, comprising the balance sheet, statement of total return, distribution statement, statement of movements in net assets attributable to unitholders, investment properties portfolio statement, cash flow statement and a summary of significant accounting policies and other explanatory notes are drawn up so as to present fairly, in all material respects, the financial position of Macquarie MEAG Prime Real Estate Investment Trust (“MMP REIT”) as at 31 December 2006, the total return, distributable income, movements in net assets attributable to unitholders and cash flows for the period then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certified Public Accountants of Singapore and the provisions of the Trust Deed. At the date of this statement, there are reasonable grounds to believe that MMP REIT will be able to meet its financial obligations as and when they materialise.

For and on behalf of the Manager, Macquarie Pacific Star Prime REIT Management Limited

Franklin Heng Director

Singapore 28 February 2007 50 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Auditors’ report

Independent auditors’ report to the unitholders of Macquarie MEAG Prime Real Estate Investment Trust (“MMP REIT”) (a trust constituted on 8 August 2005 under the laws of the Republic of Singapore)

We have audited the accompanying financial statements of MMP REIT, which comprise the balance sheet and investment properties portfolio statement as at 31 December 2006, and the statement of total return, distribution statement, statement of movements in net assets attributable to unitholders and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 51 to 76.

Manager’s and the Trustee’s responsibilities for the financial statements The Manager and the Trustee of MMP REIT are responsible for the preparation and fair presentation of these financial statements in accordance with the Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certified Public Accountants of Singapore. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Manager and the Trustee, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of MMP REIT as at 31 December 2006, the total return, distributable income, movements in net assets attributable to unitholders and cash flows for the year then ended in accordance with the Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certified Public Accountants of Singapore.

KPMG Certified Public Accountants

Singapore 28 February 2007 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements 51

Balance sheet As at 31 December 2006

Note 2006 2005 $’000 $’000 Assets

Plant and equipment 3 3,431 – Investment properties 4 1,498,000 1,327,000 Trade and other receivables 5 4,201 1,052 Cash and cash equivalents 6 20,122 25,479 1,525,754 1,353,531

Less:

Liabilities

Trade and other payables 7 (39,093) (32,684) Interest-bearing borrowings 8 (388,200) (389,357) (427,293) (422,041) Net assets 1,098,461 931,490

Represented by:

Net assets attributable to unitholders 1,098,461 931,490 Units in issue (’000) 9 948,450 944,612 Net asset value per unit ($) 1.16 0.99

The accompanying notes form an integral part of these financial statements. 52 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements

Statement of total return Year ended 31 December 2006

Note Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Gross revenue 10 89,876 25,209 Property operating expenses 11 (20,624) (5,772) Net property income 69,252 19,437 Finance income 14 344 78 Fair value adjustment on security deposits and retention sum (648) 2,712 Management fees 12 (6,549) (2,281) Trust expenses 13 (1,476) (661) Tenancy relief (1,028) – Finance expense 14 (13,483) (3,893) Net income before tax 46,412 15,392 Income tax expense 15 – – Net income after tax 46,412 15,392 Non-tax deductible/(chargeable) expenses 8,482 (481) Net income available for distribution 54,894 14,911 Non-tax deductible/(chargeable) expenses (8,482) 481 Net appreciation on revaluation of investment properties 171,000 23,126 Total return for the year/period 217,412 38,518 Earnings per unit (cents) 16 4.91 2.31

The accompanying notes form an integral part of these financial statements. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements 53

Distribution statement Year ended 31 December 2006

Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Income available for distribution to unitholders at beginning of the year/period 14,911 –

Net income before tax 46,412 15,392 Net tax adjustments (Note A) 8,482 (481) Income available for distribution 69,805 14,911

Distributions to unitholders: Distribution of 1.58 cents per unit for the period from 20/9/2005 to 31/12/2005 (14,918) – Distribution of 1.44 cents per unit for the period from 1/1/2006 to 31/3/2006 (13,612) – Distribution of 1.44 cents per unit for the period from 1/4/2006 to 30/6/2006 (13,627) – Distribution of 1.44 cents per unit for the period from 1/7/2006 to 30/9/2006 (13,642) –

(55,799) – Income available for distribution to unitholders at end of the year/period 14,006 14,911

Note A – Net tax adjustments comprise:

Non-tax deductible/(chargeable) items: – Management fees paid/payable in units 3,819 1,525 – Amortisation of transaction costs 772 217 – Interest expense 248 67 – Accretion of tenancy deposit and retention sum stated at amortised cost 648 (2,712) – Other items 2,995 422 Net tax adjustments 8,482 (481)

The accompanying notes form an integral part of these financial statements. 54 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements

Statement of movements in net assets attributable to unitholders Year ended 31 December 2006

Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 At the beginning of the financial year/period 931,490 –

Operations Net income after tax 46,412 15,392 Net appreciation on revaluation of investment properties 171,000 23,126 Increase in net assets resulting from operations 217,412 38,518

Unitholders’ transactions Creation of units: – Initial public offering – 56,840 – Private placement – 867,300 – Management fee paid in units 3,028 – – Management fees payable in units 791 1,525 Issue expenses 1,539 (32,693) Distribution to unitholders (55,799) –

(Decrease)/increase in net assets resulting from unitholders’ transactions (50,441) 892,972

At the end of the financial year/period 1,098,461 931,490

The accompanying notes form an integral part of these financial statements. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements 55

Investment properties portfolio statement As at 31 December 2006

Remaining Percentage of total Description Term term Existing Occupancy net assets attributable of property Tenure of lease of lease Location use rate At valuation to unitholders 31/12/2006 31/12/2006 31/12/2005 31/12/2006 31/12/2005 % $’000 $’000 % %

Wisma Atria Leasehold 99 years 55 years 435 Commercial 97.4 750,000 675,000 68.3 72.5 Property Orchard Road Singapore 238877

Ngee Ann Leasehold 69 years 66 years 391/391B Commercial 98.6 748,000 652,000 68.1 70.0 City Orchard Road Property Singapore 238872/238874

Investment properties, at valuation 1,498,000 1,327,000 136.4 142.5 Net liabilities (excluding net assets attributable to unitholders) (399,539) (395,510) (36.4) (42.5)

Net assets attributable to unitholders 1,098,461 931,490 100.0 100.0

The Wisma Atria Property and the Ngee Ann City Property (together the “Properties”) comprise 331 and four strata lots in Wisma Atria and Ngee Ann City, respectively. On 20 September 2005, MMP REIT acquired the Wisma Atria Property and the Ngee Ann City Property for a consideration of $663,000,000 and $640,000,000 from Aspinden Holdings Limited and Orchard Square Properties Private Limited, respectively, excluding acquisition costs of approximately $874,626 (note 4). The consideration was based on independent valuations as at 28 February 2005 undertaken by Jones Lang LaSalle. The valuations of the Properties were based on the capitalisation and discounted cash flow approaches. The carrying amount of the Properties as at 31 December 2006 were based on independent valuations undertaken by Cushman & Wakefield. The valuations were based on capitalisation and discounted cash flow approaches. The valuations adopted were $750,000,000 and $748,000,000 for the Wisma Atria Property and the Ngee Ann City Property respectively. The increase in valuation has been recognised in the statement of total return. The Manager believes that the independent valuers have appropriate professional qualifications and recent experience in the location and category of the Properties being valued. The Properties are mortgaged as security for MMP REIT’s borrowings (note 8).

The accompanying notes form an integral part of these financial statements. 56 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements

Cash flow statement Year ended 31 December 2006

Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Operating activities

Net income 46,412 15,392

Adjustments for: Finance income (344) (78) Depreciation 125 – Fair value adjustment on security deposits and retention sum 648 (2,712) Finance expense 13,483 3,893 Management fees paid/payable in units 3,819 1,525 Operating income before working capital changes 64,143 18,020

Changes in working capital: Trade and other receivables (3,109) (1,021) Trade and other payables 5,170 1,917 Cash generated from operating activities 66,204 18,916

Investing activities

Purchase of investment properties (including acquisition costs) (see Note A) – (1,270,810) Purchase of plant and equipment (2,956) – Interest received on deposits 306 48 Cash flows from investing activities (2,650) (1,270,762)

Financing activities

Units issue costs – (32,693) Refund of goods and service tax 1,539 – Proceeds from issue of units – 924,140 Borrowing costs paid (12,651) (7,122) Proceeds from borrowings 41,000 420,000 Repayment of borrowings (43,000) (27,000) Distributions paid to unitholders (55,799) – Cash flows from financing activities (68,911) 1,277,325

Net (decrease)/increase in cash and cash equivalents (5,357) 25,479 Cash and cash equivalents at beginning of year/period 25,479 – Cash and cash equivalents at end of year/period 20,122 25,479

The accompanying notes form an integral part of these financial statements. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Financial statements 57

Note:

(A) Net cash outflow on purchase of investment properties (including acquisition charges) Net cash outflow on purchase of investment properties (including acquisition charges) is set out below: Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Investment properties (including acquisition charges) – 1,303,000 Cash – 19,364 Security deposits – (19,364) Net identifiable assets acquired – 1,303,000

Purchase consideration paid – 1,303,000 Retention sum – (13,700) Acquisition cost paid – 874 Cash acquired – (19,364) Net cash outflow – 1,270,810

The accompanying notes form an integral part of these financial statements. 58 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements

These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Manager and the Trustee on 28 February 2007.

1 General Macquarie MEAG Prime Real Estate Investment Trust (“MMP REIT”) is a Singapore-domiciled unit trust constituted pursuant to the trust deed dated 8 August 2005 and any amendments or modifications thereof between Macquarie Pacific Star Prime REIT Management Limited (the “Manager”) and HSBC Institutional Trust Services (Singapore) Limited (the “Trustee”), governed by the laws of the Republic of Singapore (“Trust Deed”). On 8 August 2005, MMP REIT was declared an authorised unit trust scheme under the Trustees Act, Chapter 337. MMP REIT was formally admitted to the Official List of the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 20 September 2005 and was included under the Central Provident Fund (“CPF”) Investment Scheme on 14 June 2005. The principal activity of MMP REIT is to invest primarily in prime real estate used mainly for retail and office purposes, with the objective of delivering regular and stable distributions to unitholders and to achieve long-term growth in the net asset value per unit. MMP REIT has entered into several service agreements in relation to the management of MMP REIT and its property operations. The fee structure of these services is as follows:

(a) Property Manager’s Fee and Leasing Commission The Property Manager is entitled to receive a fee of 3.0% per annum of gross revenue of each property (excluding GST) for the provision of property management, lease management as well as marketing and marketing coordination services. The Property Manager’s fee is to be paid on a monthly basis in arrears. The Property Manager is also entitled to receive leasing commission at the rates set out below when it secures a tenant or a tenancy renewal: (a) one-month’s base rental for securing a tenancy of three years or more; (b) two-thirds of one month’s base rental for securing a tenancy of two years or more but less than three years; (c) one-third of one month’s base rental for securing a tenancy of one year or more but less than two years; (d) one-quarter of one month’s base rental for securing a renewal of tenancy of three years or more; (e) one-eighth of one month’s base rental for securing a renewal of tenancy of two years or more but less than three years; and (f) one-twelfth of one month’s base rental for securing a renewal of tenancy of one year or more but less than two years.

(b) Management Fees Under the Trust Deed, the Manager is entitled to receive a base fee and a performance fee as follows: i. Base Fee The Manager is entitled to receive a base fee of 0.5% per annum of the Value of Trust Property (excluding GST) (“Base Fee”) or such higher percentage as may be fixed by an Extraordinary Resolution of a meeting of unitholders. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 59

1 General (continued)

(b) Management Fees (continued) The Value of Trust Property means: (a) the value of all authorised investments of MMP REIT other than real estate related assets; (b) the value of real estate related assets of any entity held by MMP REIT if such holding is less than 30.0% of the equity of such entity; and (c) where MMP REIT invests in 30.0% or more of a real estate related asset of any entity, including any class of equity, equity-linked securities and/or securities issued in real estate securitisation, MMP REIT’s proportionate interest in the value of the underlying real estate of the entity issuing the equity which comprises the real estate related asset. The Manager has opted to receive, for the period ended 31 December 2005 and the year ended 31 December 2006, at least 60.0% of the Base Fee in respect of the Properties in the form of units with the balance in cash. The Manager may opt to receive the Base Fee in respect of the Properties in cash or units or a combination of cash and units (as it may determine) after the year ended 31 December 2006. In respect of any new real estate acquired by MMP REIT after 20 September 2005 (the “Listing Date”), the Manager may, at any time, opt to receive the Base Fee in cash or units or a combination of cash and units (as it may determine). The portion of the Base Fee payable in cash shall be payable monthly in arrears and the portion of the Base Fee payable in the form of units shall be payable quarterly in arrears. If a trigger event occurs, resulting in the Manager being removed, the Manager is entitled to be paid the Base Fee up to the day on which the trigger event occurs. ii. Performance Fee The Manager is entitled to a performance fee (“Performance Fee”) where the accumulated return (comprising capital gains and accumulated distributions and assuming all distributions are reinvested in MMP REIT) of the units (expressed as the “Trust Index”) in any six-month period ending 30 June or 31 December (“Half-Year”) exceeds the accumulated return (comprising capital gains and accumulated distributions and assuming reinvestment of all distributions) of a benchmark index. The Performance Fee is calculated in two tiers as follows: ■ a Tier 1 Performance Fee equal to 5.0% of the amount by which the accumulated return of the Trust Index exceeds the accumulated return of the benchmark index, multiplied by the equity market capitalisation of MMP REIT; and ■ a Tier 2 Performance Fee, which is applicable only where the accumulated return of the Trust Index is in excess of 2.0% per annum (1.0% for each Half-Year) above the accumulated return of the benchmark index. This tier of the fee is calculated at 15.0% of the amount by which the accumulated return of the Trust Index is in excess of 2.0% per annum above the accumulated return of the benchmark index, multiplied by the equity market capitalisation of MMP REIT. For the purposes of the Tier 1 Performance Fee and the Tier 2 Performance Fee, the amount by which the accumulated return of the Trust Index exceeds the accumulated return of the benchmark index shall be referred to as outperformance. The outperformance of the Trust Index is assessed on a cumulative basis and any prior underperformance will need to be recovered before the Manager is entitled to any Performance Fee. The Manager has opted to receive, for the period ended 31 December 2005 and the year ended 31 December 2006, 100.0% of the Performance Fee (if any) in the form of units. The Manager may opt to receive the Performance Fee in respect of the Properties in cash or units or a combination of cash and units (as it may determine) after the year ended 31 December 2006, having regard to the cash flow of MMP REIT. 60 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

1 General (continued)

(b) Management Fees (continued) The Performance Fee, whether payable in any combination of cash and units or solely in cash or units will be payable six monthly in arrears. If a trigger event occurs in any Half-Year, resulting in the Manager being removed, the Manager is entitled to payment of any Performance Fee (whether in cash or in the form of units) to which it might otherwise have been entitled for that Half-Year in cash, which shall be calculated, as if the end of the Half-Year was the date of occurrence of the trigger event, in accordance with Clause 15.1.4 of the Trust Deed. If a trigger event occurs at a time when any accrued Performance Fee has not been paid, resulting in the Manager being removed, the Manager is entitled to payment of such accrued Performance Fee in cash. The management fees (Base Fee and Performance Fee, including any accrued Performance Fee which has been carried forward from previous financial years but excluding any acquisition fee or divestment fee) to be paid to the Manager in respect of a financial year, whether in cash or in units or a combination of cash and units, is capped at an amount equivalent to 0.8% per annum of the Value of the Trust Property as at the end of the financial year (referred to as the “annual fee cap”). If the amount of such fees for a financial year exceeds the annual fee cap, the Base Fee of the financial year shall be paid to the Manager and only that portion of the Performance Fee equal to the balance of an amount up to the annual fee cap will be paid to the Manager. The remaining portion of the Performance Fee, which will not be paid, shall be accrued and carried forward for payment to the Manager in future Half-Years. If, at the end of a Half-Year, there is any accrued Performance Fee which has been accrued for a period of at least three years prior to the end of that Half-Year, such accrued Performance Fee shall be paid to the Manager if the accumulated return of the Trust Index in that three-year period exceeds the accumulated return of the benchmark index over the same period. The payment of such accrued Performance Fee shall not be subject to the annual fee cap.

(c) Trustee’s Fee Under the Trust Deed, the Trustee's fee shall not exceed 0.1% per annum of the value of the deposited property (subject to a minimum of $8,000 per month excluding out of pocket expenses and GST) or such higher percentage as may be fixed by an Extraordinary Resolution of a meeting of unitholders. The Trustee's fee is payable out of the deposited property of MMP REIT on a monthly basis, in arrears. The Trustee is also entitled to reimbursement of expenses incurred in the performance of its duties under the Trust Deed. Based on the current agreement between the Manager and the Trustee, the Trustee's fee is charged on a scaled basis of up to 0.03% per annum of the value of the deposited property (subject to a minimum of $8,000 per month excluding out of pocket expenses and GST). The Trustee’s fee will be subject to annual review between the Trustee and the Manager, commencing on the first anniversary of the Listing Date.

2 Significant accounting policies

(a) Basis of preparation The financial statements have been prepared in accordance with the Statement of Recommended Accounting Practice (“RAP”) 7 “Reporting Framework for Unit Trusts” issued by the Institute of Certified Public Accountants of Singapore and the applicable requirements of the Code on Collective Investment Schemes (“CIS Code”) issued by the Monetary Authority of Singapore (“MAS”) and the provisions of the Trust Deed. RAP 7 requires that accounting policies adopted should generally comply with the principles relating to recognition and measurement of the Singapore Financial Reporting Standards (“FRS”) including related interpretations promulgated by the Council on Corporate Disclosure and Governance. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 61

2 Significant accounting policies (continued)

(a) Basis of preparation (continued) MMP REIT has not applied certain new FRS and interpretations that have been issued as of the balance sheet date but are not yet effective. The initial application of these standards and interpretations is not expected to have any material impact on MMP REIT’s financial statements. MMP REIT has not considered the impact of accounting standards issued after the balance sheet date. The financial statements, which are presented in Singapore dollars, the functional currency of MMP REIT, and rounded to the nearest thousand, have been prepared on the historical cost basis, except for investment properties which are stated at fair value. The preparation of financial statements in conformity with RAP 7 requires MMP REIT to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Other than for the valuation of investment properties, there are no instances of application of judgements or the use of estimation techniques which may have a significant effect on the amounts recognised in the financial statements. Investment properties are stated at fair value based on valuations performed by independent professional valuers. In determining the fair value, the valuers have used valuation methods which involve certain estimates. In relying on the valuation reports, the Manager is satisfied that the valuation methods and estimates are reflective of the current market conditions.

(b) Plant and equipment Plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of an asset. The cost of self- constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to MMP REIT and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the statement of total return as incurred. Depreciation on plant and equipment is recognised in the statement of total return on a straight-line basis over their estimated useful life as follows: Plant and equipment – 2 to 5 years Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date. 62 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

2 Significant accounting policies (continued)

(c) Investment properties Investment properties are stated at initial cost on acquisition, and at valuation thereafter. Valuation is determined in accordance with the Trust Deed, which requires investment properties to be valued by independent registered valuers in the following events: ■ in such manner and frequency required under the Property Funds Guidelines issued by MAS; and ■ at least once every 12 months. Any increase or decrease on revaluation is credited or charged to the statement of total return as a net revaluation surplus or deficit in the value of the investment properties. Subsequent expenditure relating to investment properties that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of originally assessed standard of performance of the existing asset, will flow to MMP REIT. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. When an investment property is disposed of, the resulting gain or loss recognised in the statement of total return is the difference between net disposal proceeds and the carrying amount of the property. Investment properties are not depreciated. The investment properties are subject to continued maintenance and regularly revalued on the basis set out above. For taxation purposes, MMP REIT may claim capital allowances on assets that qualify as plant and machinery under the Income Tax Act.

(d) Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, borrowings, and trade and other payables. Cash and cash equivalents comprise cash balances and bank deposits. Non-derivative financial instruments are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. A financial instrument is recognised if MMP REIT becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if MMP REIT’s contractual rights to the cash flows from the financial assets expire or if MMP REIT transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date, i.e., the date that MMP REIT commits itself to purchase or sell the asset. Financial liabilities are derecognised if MMP REIT’s obligations specified in the contract expire, are discharged or cancelled. Impairment of financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the statement of total return. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the statement of total return. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 63

2 Significant accounting policies (continued)

(e) Impairment of non-financial assets The carrying amounts of MMP REIT’s non-financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated at each balance sheet date. An impairment loss is recognised in the statement of total return whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised.

(f) Unit issue costs Unit issue costs represent expenses incurred in connection with the initial public offering of MMP REIT. All such expenses are deducted directly against net assets attributable to unitholders.

(g) Revenue recognition Rental income from operating leases Rental income receivable under operating leases is recognised in the statement of total return on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives granted are recognised as an integral part of the total rental to be received. Contingent rentals, which include gross turnover rental, are recognised as income in the accounting period on a receipt basis. No contingent rentals are recognised if there are uncertainties due to the possible return of amounts received.

(h) Finance income and expense Finance income comprises interest income on funds invested. Interest income is recognised as it accrues, using the effective interest method. Finance expenses comprise interest expense on borrowings. All borrowing costs are recognised in the statement of total return using the effective interest method.

(i) Expenses (i) Property expenses Property expenses are recognised on an accrual basis. Included in property expenses are Property Manager’s fee and leasing commission which is based on the applicable formula stipulated in Note 1(a). (ii) Management fees Management fees are recognised on an accrual basis based on the applicable formula stipulated in Note 1(b). (iii) Trust expenses Trust expenses are recognised on an accrual basis. Included in trust expenses is Trustee’s fee which is based on the applicable formula stipulated in Note 1(c). 64 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

2 Significant accounting policies (continued)

(j) Taxation Taxation on the return for the period comprises current and deferred tax. Income tax is recognised in the statement of total return except to the extent that it relates to items directly related to net assets attributable to unitholders, in which case it is recognised in net assets attributable to unitholders. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The temporary differences on initial recognition of assets or liabilities that affect neither accounting nor taxable profit are not provided for. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Inland Revenue Authority of Singapore (“IRAS”) has issued a Tax Ruling on the taxation of MMP REIT for income earned and expenditure incurred after its listing on the SGX-ST. Subject to meeting the terms and conditions of the Tax Ruling, the Trustee will not be assessed to tax on the taxable income of MMP REIT. Instead, the Trustee and the Manager will deduct income tax at the prevailing corporate tax rate (currently at 20%) from the distributions made to unitholders that are made out of the taxable income of MMP REIT. However, where the beneficial owners are individuals or qualifying unitholders, the Trustee and the Manager will make the distributions to such unitholders without deducting any income tax. Also, where the beneficial owners are foreign non-individual unitholders, the Trustee and the Manager will deduct Singapore income tax at the reduced rate of 10.0% for distributions made during the period from the date of constitution. A qualifying unitholder is a unitholder who is: (a) a Singapore-incorporated company which is tax resident in Singapore; (b) a body of persons, other than a company or a partnership, registered or constituted in Singapore (for example, a town council, a statutory board, a registered charity, a registered co-operative society, a registered trade union, a management corporation, a club and a trade and industry association); and (c) a Singapore branch of a foreign company which has presented a letter of approval from the IRAS granting a waiver from tax deduction at source in respect of distributions from MMP REIT. A foreign non-individual unitholder is one who is not a resident of Singapore for income tax purposes and (a) which does not have a permanent establishment in Singapore; or (b) which carries on any operation in Singapore through a permanent establishment in Singapore where the funds used to acquire the units are not obtained from that operation in Singapore. MMP REIT’s distribution policy is to distribute 100.0% of its taxable income for the period ended 31 December 2005 and the year ended 31 December 2006 and thereafter, to distribute at least 90.0% of its taxable income. For the remaining amount of taxable income not distributed, tax will be assessed on, and collected from, the Trustee on such remaining amount (referred to as retained taxable income). In the event where a distribution is subsequently made out of such retained taxable income, the Trustee and the Manager will not have to make a further deduction of income tax from the distribution. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 65

2 Significant accounting policies (continued)

(j) Taxation (continued) The above Tax Ruling does not apply to gains from sale of real properties, if considered to be trading gains derived from a trade or business carried on by MMP REIT. Tax on such gains or profits will be assessed, in accordance with Section 10(1)(a) of the Income Tax Act, Chapter 134, and collected from the Trustee. Where the gains are capital gains, it will not be assessed to tax and the Trustee and the Manager may distribute the capital gains without tax being deducted at source.

3 Plant and equipment Plant and equipment $’000 Cost

At 1 January 2006 – Additions 3,556 At 31 December 2006 3,556

Accumulated depreciation

At 1 January 2006 – Charge for the year (125) At 31 December 2006 (125)

Carrying amount

At 1 January 2006 – At 31 December 2006 3,431

4 Investment properties 2006 2005 $’000 $’000 At beginning of year/period 1,327,000 – Acquisition of investment properties – 1,303,000 Acquisition costs incurred – 874 1,327,000 1,303,874 Net appreciation on revaluation during the period 171,000 23,126 At end of year/period 1,498,000 1,327,000

The investment properties have been mortgaged as security for credit facilities granted to MMP REIT (Note 8). 66 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

5 Trade and other receivables 2006 2005 $’000 $’000 Trade receivables 715 566 Deposits 45 45 Prepayments 321 297 Lease incentives 2,950 – Other receivables 170 144 4,201 1,052

6 Cash and cash equivalents 2006 2005 $’000 $’000 Cash at bank and in hand 6,088 11,819 Fixed deposits with a financial institution 14,034 13,660 20,122 25,479

The weighted average effective interest rate for the year relating to cash and cash equivalents was 2.98% (2005: 2.24%). Interest rates are repriced at intervals of two months.

7 Trade and other payables 2006 2005 $’000 $’000 Trade payables and accrued operating expenses 3,203 2,806 Amounts due to: – the Manager (trade) 277 249 – the Property Manager (trade) 280 332 – the Trustee (non-trade) 107 30 Interest payable 403 413 Deferred income 1,580 39 Other payables 16,171 13,158 Security deposits 17,072 15,657 39,093 32,684

Included in other payables was an amount with a fair value of $13,372,275 (2005: $12,929,000), pertaining to the retention sum of $13,700,000 (2005: $13,700,000) held by the Trustee to indemnify MMP REIT against any loss, costs, expenses, claimed or incurred on the strata redevelopment of the Wisma Atria Property and for any additional property tax payable on the Properties. The retention sums will be retained until the later of (a) two years from the date of completion of the sale and purchase of the Properties or (b) finalisation of strata redevelopment and payment by MMP REIT for additional property tax assessed by IRAS. The non-trade amount due to the trustee is unsecured, interest free and repayable on demand. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 67

8 Interest-bearing borrowings 2006 2005 $’000 $’000 Term loan 380,000 380,000 Revolving credit facility 11,000 13,000 391,000 393,000 Unamortised loan acquisition expense (2,800) (3,643) 388,200 389,357

The Singapore dollar term loan and revolving credit facility for an aggregate amount of $410,000,000 (2005: $420,000,000) (the “Facilities”) are granted by a special purpose company, Orion Prime Ltd (“Orion Prime”). As at 31 December 2006, the term loan and revolving credit facility have remaining tenors of approximately 3 years 9 months (2005: 4 years 9 months) and 9 months (2005: 9 months) with an option to renew for a period of one year, at the option of MMP REIT and subject to the payment of a renewal fee, respectively. The Facilities were funded from proceeds received from a Euro note issuance programme (“Note”) and a revolving credit facility obtained by Orion Prime from certain financial institutions. As security for payments in connection with the Facilities, the investment properties (Note 4) are mortgaged and the rights, title and interests of MMP REIT in the property management agreements, insurances, leases and rental proceeds relating to the investment properties have been assigned in favour of Orion Prime. Fixed and floating charges have also been created over certain assets of MMP REIT in respect of the investment properties. Interest is payable on the term loan facility at a rate (excluding the spread, if any, to account for administrative costs and expenses of Orion Prime) which corresponds to the coupon payable by Orion Prime on the Notes of 0.22% per annum over the three-month EURIBOR. Interest is payable at a rate of 0.3% per annum over the relevant Singapore dollar swap offer rate on the revolving credit facility. Effective interest rates repricing analysis: Effective Floating Fixed Total interest rate interest interest rate maturity 1 to 5 years % $’000 $’000 $’000 2006 Interest-bearing borrowings: – term loan 3.18 – 380,000 380,000 – revolving credit facility 3.82 11,000 – 11,000 11,000 380,000 391,000 2005 Interest-bearing borrowings: – term loan 3.18 – 380,000 380,000 – revolving credit facility 2.63 13,000 – 13,000 13,000 380,000 393,000 68 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

9 Units in issue 2006 2005 No. of units No. of units ’000 ’000 Issued units at the beginning of the year/period 943,000 – Issue of units: – Initial public offering – 58,000 – Private placement – 885,000 – Management fees issued in units 4,375 – At 31 December 947,375 943,000

Units to be issued: – Management fees payable in units (base fee and performance fee) 1,075 1,612 Total issued and issuable units at 31 December 948,450 944,612

In the previous financial period, MMP REIT issued 943,000,000 units at an issue price of $0.98 per unit for cash to part finance the acquisition of the Properties. Each unit in MMP REIT represents an undivided interest in the trust. The rights and interests of unitholders are contained in the Trust Deed and include the right to:

• Receive income and other distributions attributable to the units held; • Participate in the termination of MMP REIT by receiving a share of all net cash proceeds derived from the realisation of the assets of MMP REIT less any liabilities, in accordance with their proportionate interests in MMP REIT. However, a unitholder does not have the right to require that any assets (or part thereof) of MMP REIT be transferred to him; and • Attend all unitholders meetings. The Trustee or the Manager may (and the Manager shall at the request in writing of not less than 50 unitholders or one-tenth in number of the unitholders, whichever is lesser) at any time convene a meeting of unitholders in accordance with the provisions of the Trust Deed. The restrictions of a unitholder include the following: • A unitholder’s right is limited to the right to require due administration of MMP REIT in accordance with the provisions of the Trust Deed; and • A unitholder has no right to request to redeem his units while the units are listed on SGX-ST. A unitholder’s liability is limited to the amount paid or payable for any units in MMP REIT. The Trust Deed provides that no unitholders will be personally liable to indemnify the Trustee or any creditor of the Trustee in the event that liabilities of MMP REIT exceed its assets.

10 Gross revenue Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Property rental income 89,105 24,818 Turnover rental income 714 383 Other income 57 8 89,876 25,209 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 69

11 Property operating expenses Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Depreciation expense 125 – Maintenance and sinking fund contributions 5,348 1,500 Property management fees 2,696 756 Property tax 8,588 2,396 Other operating expenses 3,867 1,120 20,624 5,772

12 Management fees Management fees include base and performance fees. Base Fee and performance fee paid and payable amounted to $6,548,579 (2005: $2,004,513). The Manager has opted to receive at least 60% and 100% of the base and performance fee, respectively, in the form of units for the period ended 31 December 2005 and the year ended 31 December 2006. In the previous financial period, performance fee payable in units was not issued to the Manager as the return on Trust Index was negative. As the Trust Index was positive for the year ended 31 December 2006, the performance fee units will be issued in the succeeding Half-Year.

13 Trust expenses Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Auditors’ remuneration 124 80 Trustee’s fees 253 71 Professional fees 396 63 Other expenses 703 447 1,476 661

Included in professional fees are non-audit fees (tax compliance) paid to the auditors amounting to $23,546 (2005: $8,500). 70 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

14 Finance income and expense Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Interest income – bank deposits 344 78 Finance income 344 78

Interest expense – financial liabilities measured at amortised cost 12,711 3,676 Amortisation of transaction costs capitalised 772 217 Finance expense (13,483) (3,893)

15 Income tax expense Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Reconciliation of effective tax rate

Net income before taxation 46,412 15,392

Income tax using Singapore tax rate of 20% 9,282 3,078 Income not subject to tax – (542) Non-tax deductible items 1,697 446 Tax transparency (10,979) (2,982) – – MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 71

16 Earnings per unit Basic earnings per unit is based on: Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Net income after tax 46,412 15,392

No. of units No. of units ’000 ’000 Weighted average number of units

Issued units at beginning of the year/period 943,000 – Effect of units issued 2,969 665,267 Weighted average number of units issued at the end of the year/period 945,969 665,267 Units to be issued as payment of management fees 3 11 Weighted average number of issued and issuable units at the end of year/period 945,972 665,278

Diluted earnings per unit is the same as the basic earnings per unit as there are no dilutive instruments in issue during the year.

17 Unit issue costs

Unit issue costs comprised professional and other fees, underwriting and selling commission and other miscellaneous issue expenses.

These expenses are deducted directly against net assets attributable to unitholders. Included in professional fees were non-audit fees paid to auditors of MMP REIT in the period ended 31 December 2005 amounting to $450,000 mainly for acting as independent reporting accountants with respect to the initial public offering of MMP REIT. 72 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

18 Commitments Lease commitments MMP REIT leases out its investment properties. Non-cancellable operating lease rentals are receivable as follows: 2006 2005 $’000 $’000 Receivable: – Within 1 year 83,208 84,022 – After 1 year but within 5 years 205,101 185,228 – After 5 years 13,091 74,587 301,400 343,837

Except for a lease with a tenant in the Ngee Ann City Property which expires in 2013, leases generally contain an initial non-cancellable period ranging from one to five years. Subsequent renewals are negotiated with the lessee.

19 Significant related party transactions For the purposes of these financial statements, parties are considered to be related to MMP REIT if MMP REIT has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where MMP REIT and the party are subject to common significant influence. Related parties may be individuals or other entities. In the normal course of the operations of MMP REIT, management, property management fees and Trustee’s fees have been paid or are payable to the Manager, Property Manager and trustee respectively. Other than related party information shown elsewhere in the financial statements, the following were significant related party transactions carried out in the normal course of business: Year ended Period from 31/12/2006 8/8/2005 to 31/12/2005 $’000 $’000 Property rental income from a related party of the Manager 2,880 803 Property rental income from the Manager and Property Manager 707 198 Reimbursements paid/payable to the Property Manager (771) (232)

20 Financial instruments

Financial risk management objectives and policies Exposure to credit, interest rate, foreign currency and liquidity risks arises in the normal course of MMP REIT’s business. MMP REIT has written policies and guidelines, which set out its overall business strategies and its general risk management philosophy.

Credit risk Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to MMP REIT, as and when they fall due. The Manager has established credit limits for MMP REIT’s customers and monitors their balances on an ongoing basis. Credit evaluations are performed by the Manager before lease agreements are entered into with customers. Cash and fixed deposits are placed with financial institutions which are regulated. The maximum exposure to credit risk is represented by the carrying value of each financial asset on the balance sheet. There was no significant concentration of credit risk at the balance sheet date. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 73

20 Financial instruments (continued)

Interest rate risk MMP REIT’s exposure to changes in interest rates relates primarily to its interest-earning financial assets and interest-bearing financial liabilities. Interest rate risk is managed by the Manager on an ongoing basis with the primary objective of limiting the extent to which net interest expense could be affected by adverse movements in interest rates.

Liquidity risk The Manager monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance MMP REIT’s operations. In addition, the Manager also monitors and observes the Property Funds Guidelines issued by MAS concerning limits on total borrowings.

Estimation of fair values Fair value of term loan, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows discounted at the market rate of interest at the reporting date. The carrying values of other financial assets and liabilities (including trade and other receivables, cash and cash equivalents, trade and other payables and security deposits) are assumed to approximate their fair values.

Interest rates used in determining fair values Interest rates used to discount estimated cash flows, where applicable, is computed from Singapore dollar swap offer rates as follows: 2006 2005 % % Term loan 3.36 3.29

The aggregate net fair values of recognised financial liabilities which are not carried at fair value in the balance sheet at 31 December are represented in the following table: Carrying Fair Percentage amount value of net assets $’000 $’000 % 2006

Financial liabilities Term loan 380,000 377,620 34.4

2005

Financial liabilities Term loan 380,000 378,182 40.6

21 Segment reporting Segment information is presented in respect of MMP REIT’s business segments. This primary format is based on MMP REIT’s management and internal reporting structure. Both investment properties are located in Singapore. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing borrowings and expenses, and trust assets and expenses. 74 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

21 Segment reporting (continued) Business segments Wisma Atria Ngee Ann City Total Property Property $’000 $’000 $’000 2006

Revenue and expenses

Total revenue from external customers 48,812 41,064 89,876 Inter-segment revenue – – – Total revenue 48,812 41,064 89,876

Property operating expenses (12,182) (8,442) (20,624) Net property income 36,630 32,622 69,252

Finance income 344 Fair value adjustment on security deposits and retention sum (648) Non-property expenses (9,053) Finance expense (13,483) Income tax expense – 46,412 Net appreciation on revaluation of investment properties 171,000 Total return for the year 217,412

2005

Revenue and expenses

Total revenue from external customers 13,703 11,506 25,209 Inter-segment revenue – – – Total revenue 13,703 11,506 25,209

Property operating expenses (3,412) (2,360) (5,772) Net property income 10,291 9,146 19,437

Finance income 78 Fair value adjustment on security deposits and retention sum 2,712 Non-property expenses (2,942) Finance expense (3,893) Income tax expense – 15,392 Net appreciation on revaluation of investment properties 23,126 Total return for the period 38,518 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements 75

21 Segment reporting (continued) Business segments Wisma Atria Ngee Ann City Total Property Property $’000 $’000 $’000 2006

Assets and liabilities

Segment assets 757,348 748,062 1,505,410

Unallocated assets 20,344

Total assets 1,525,754

Segment liabilities (29,105) (4,914) (34,019)

Unallocated liabilities (393,274)

Total liabilities (excluding net assets attributable to unitholders) (427,293)

2005

Assets and liabilities

Segment assets 675,715 652,075 1,327,790

Unallocated assets 25,741

Total assets 1,353,531

Segment liabilities (23,354) (6,647) (30,001)

Unallocated liabilities (392,040)

Total liabilities (excluding net assets attributable to unitholders) (422,041)

2006

Other segmental information

Depreciation of plant and equipment 125 – 125

2005

Other segmental information

Depreciation of plant and equipment – – – 76 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Notes to the financial statements

Notes to the financial statements (continued)

22 Contingent liabilities The Trustee, the Manager and the Property Manager had, on 8 November 2005, entered into a proprietary information licensing agreement (“PILA”) with Macquarie Bank Group (“Macquarie”) whereby Macquarie through its subsidiary, Macquarie Services Singapore Pte Limited granted a non-exclusive licence (“PILA Licence”) to MMP REIT. Pursuant to the PILA Licence, MMP REIT and permitted users may use, reproduce and adapt certain proprietary information, technology, systems and processes developed by Macquarie in the course of its property funds management and asset services business (“PILA Information”) in connection with the management and operations of MMP REIT. MMP REIT is required to pay a one-off licence fee of $21.7 million (excluding GST, which shall also be borne by MMP REIT) out of the assets of MMP REIT in consideration for the grant of the PILA Licence. Such licence fee shall be payable when: (a) Macquarie ceases to have any interest (direct or indirect) in the issued and paid-up voting share capital of the entity which is the then manager of MMP REIT (except where such cessation is due to a voluntary sale, transfer or disposal by Macquarie of its interest); or (b) the PILA Licence is terminated, without cause, by MMP REIT (except where such termination is required by law or regulation or any relevant governmental authority) with a notice period of 30 days, by written notice to such nominated subsidiary of Macquarie and shall be paid to such nominated subsidiary of Macquarie within a period of 14 days from the date of termination of the PILA Licence.

23 Subsequent event Subsequent to the period ended 31 December 2006: (a) MMP REIT issued 919,058 new units at the issue price of $1.1603 per unit as partial satisfaction of the Manager’s base fee for the period ended 31 December 2006. (b) MMP REIT issued 80,961 new units at the issue price of $1.4335 per unit as satisfaction of the Manager’s performance fee entitlement for the period ended 8 August 2005 to 31 December 2005. (c) the Manager declared a distribution of 1.47 cents per unit in respect of the period from 1 October 2006 to 31 December 2006.

24 Financial ratios 2006 2005 % % Ratio of expenses to weighted average net assets 1 0.88 0.99 Portfolio turnover rate 2 – –

Notes: 1 The annualised ratios are computed in accordance with guidelines of the Investment Management Association of Singapore. The expenses used in the computation relate to expenses at MMP REIT level only and exclude property related expenses, finance expense and performance component of the Manager’s fees. 2 The annualised ratio is computed based on the lesser of purchases or sales of underlying investment properties of MMP REIT expressed as a percentage of weighted average net asset value.

25 Comparative information The comparative information relates to the period from 8 August 2005 (date of constitution) to 31 December 2005. Accordingly, the statement of total return, distribution statement, cash flow statement and the related notes are not comparable to those for the current year. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Statistics of unitholders 77

Statistics of unitholders As at 1 March 2007

There were 948,375,699 units (voting rights: 1 vote per unit) as at 1 March 2007. Market capitalisation was $1,109,599,568 (based on closing price of $1.17 per unit on 1 March 2007).

Top 20 unitholders As listed in the Register of Unitholders Name No. of units % 1 United Overseas Bank Nominees Pte Ltd 273,453,882 28.83 2 Citibank Nominees Singapore Pte Ltd 208,360,600 21.97 3 DBS Nominees Pte Ltd 138,753,298 14.63 4 DBSN Services Pte Ltd 67,123,118 7.08 5 HSBC (Singapore) Nominees Pte Ltd 58,270,800 6.14 6 Morgan Stanley Asia (Singapore) Securities Pte Ltd 25,118,000 2.65 7 Raffles Nominees Pte Ltd 17,636,800 1.86 8 DB Nominees (S) Pte Ltd 11,570,980 1.22 9 OCBC Securities Private Ltd 9,875,940 1.04 10 DBS Vickers Securities (S) Pte Ltd 6,632,000 0.70 11 Merrill Lynch (Singapore) Pte Ltd 3,250,220 0.34 12 UOB Kay Hian Pte Ltd 2,688,000 0.28 13 Meren Pte Ltd 2,000,000 0.21 14 BMT A/C Estate of Mse Angullia 1,700,000 0.18 (Wakaff) Clause 7 Trust 15 Rosna Tjuatja 1,510,000 0.16 16 Yik Keng Yeong 1,328,000 0.14 17 Chua Hong Thuan 1,200,000 0.13 18 OCBC Nominees Singapore Pte Ltd 1,185,000 0.12 19 Economic Development Board 1,100,000 0.12 20 Hii Yu Guan 1,000,000 0.11 Total 833,756,638 87.91

Distribution of unitholders As at 1 March 2007 Size of unitholdings No. of unitholders % No. of units % 1 – 999 11 0.12 1,379 0.00 1,000 – 10,000 7,966 83.43 31,559,583 3.33 10,001 – 1,000,000 1,552 16.25 84,058,099 8.86 1,000,001 and above 19 0.20 832,756,638 87.81 Total 9,548 100.00 948,375,699 100.00 78 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Statistics of unitholders

Statistics of unitholders as at 1 March 2007 (continued)

Substantial unitholders As at 1 March 2007 Unitholders No. of units Direct interest Deemed interest 1 Macquarie Real Estate Singapore Pte Ltd – 227,003,000 2 Macquarie Bank Limited 1 – 230,492,200 3 Morgan Stanley Entities 2 – 76,839,208 4 American International Assurance Company, Limited – 64,516,000

Notes: 1 Includes the 227,003,000 units held by Macquarie Real Estate Singapore Pte Ltd 2 This includes Morgan Stanley Investment Management Company, Morgan Stanley Dean Witter (Singapore) Holdings Pte Ltd, Morgan Stanley Asia Regional (Holdings) III LLC, Morgan Stanley Asia Pacific (Holdings) Limited, Morgan Stanley International Holdings Inc., Morgan Stanley International Incorporated, Morgan Stanley (together, the “Morgan Stanley Entities”)

Unitholdings of the directors of the Manager As at 1 March 2007 Name of director No. of units Direct interest Deemed interest 1 Stephen Girdis – – 2 James Hodgkinson – – 3 Wolfgang Wente – – 4 Franklin Heng Ang Tee – 500,000 5 Hong Hai 200,000 – 6 Chia Chee Ming, Timothy 500,000 – 7 Sydney Michael Hwang – 15,000

Free float Under Rule 723 of the listing manual of the SGX-ST, a listed issuer must ensure that at least 10% of its listed securities are at all times held by the public. Based on information made available to the Manager as at 1 March 2007, no less than 60% were held in the hands of the public. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Additional information 79

Additional information

Related party transactions for 2006 Name of related party Aggregate value of all related party transactions during the financial year under review (excluding transactions less than $100,000) $'000 Macquarie Pacific Star Prime REIT Management Limited Management fees 1 6,549 Rental income 294

Macquarie Pacific Star Property Management Pte Ltd Property management fees and reimbursables 3,467 Lease commission fees 466 Rental income 413

MWA Pte Ltd 2 Rental income 2,188

Food Art Pte Ltd 3 Rental income 325

Notes: 1 The Manager has opted to receive, for the year ended 31 December 2006, 60% of the base fee in units. In respect of the period from 1 January 2006 to 31 March 2006, a total of 1,045,760 units of MMP REIT at $0.9561* were issued to the Manager on 18 April 2006. In respect of the period from 1 April 2006 to 30 June 2006, a total of 1,086,877 units at $0.9276* were issued to the Manager on 20 July 2006. In respect of the period from 1 July 2006 to 30 September 2006, a total of 1,045,419 units at $0.9760* were issued to the Manager on 19 October 2006. In respect of 1 October 2006 to 31 December 2006, a total of 919,058 units at $1.1603* were issued to the Manager on 24 January 2007. * Based on the volume weighted average price for a MMP REIT unit for all trades on the SGX-ST in the ordinary course of trading on the SGX-ST for the last ten business days immediately preceding the date of issue of the units. 2 MWA Pte Ltd is 50% owned by Ristorante Pte Ltd (a wholly-owned subsidiary of Investmore Enterprises Ltd), and 50% owned by Megabite (S) Pte Ltd, which is a non related party. Investmore Enterprises Ltd is a 25% indirect shareholder of the Manager and the Property Manager 3 Food Art Pte Ltd is a wholly-owned subsidiary of MWA Pte Ltd. 80 MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Glossary

Glossary

1Q, 2Q, 3Q, 4Q Period for 1 January to 31 March, 1 April to 30 June, 1 July to 30 September, and 1 October to 31 December, respectively Benchmark Index Provided by FTSE. Comprises all the REITs contained in the FTSE Allcap Singapore universe (as defined in the IPO Prospectus) CMBS Commercial Mortgaged Backed Securities CPF Central Provident Fund DPU Distribution per unit F&B Food and beverage FTSE FTSE International Limited FY and FY2005 Financial year for the period from 1 January to 31 December; and period from 20 September (MMP REIT’s listing) to 31 December 2005 GST Goods and services tax GTO Gross turnover IPO Initial Public Offering IPO Projection Unless otherwise stated, means figures derived by pro-rating the projection for the year ending 31 December 2006 disclosed in the IPO Prospectus by the stipulated period IPO Prospectus MMP REIT IPO Prospectus dated 13 September 2005 Manager Macquarie Pacific Star Prime REIT Management Limited MAS Monetary Authority of Singapore MMP REIT Macquarie MEAG Prime REIT MRT Mass Rapid Transit Ngee Ann City The building known as ‘Ngee Ann City’ comprising a commercial complex with 27 levels of office space in the twin office tower blocks (Tower A and B) and a seven-storey podium with three basement levels comprising retail and carpark space Ngee Ann City Four strata lots in Ngee Ann City located on: Property or NAC a) Part of Basement 1, Basement 2 and Level 1 to Level 5 of the retail podium block; b)Part of Level 13 and the whole of Level 14 to Level 19 of Tower B (office); and c) Whole of Level 21 to Level 24 of Tower B (office) NLA net lettable area pm per month Properties WA and NAC together or Portfolio Property Manager Macquarie Pacific Star Property Management Pte Ltd psf per square foot SGX-ST Singapore Exchange Securities Trading Limited STB Singapore Tourism Board Toshin Toshin Development Co., Ltd Wisma Atria The building known as ‘Wisma Atria’ comprising a podium block with four levels and one basement level of retail space, three levels of carpark and 13 levels of office space in the office block Wisma Atria 331 strata lots in Wisma Atria Property or WA yoy year-on-year

All values are expressed in Singapore currency unless otherwise stated. MACQUARIE MEAG PRIME REIT ANNUAL REPORT 2006 Page Title 2

Corporate directory

Manager Trustee Macquarie Pacific Star Prime REIT HSBC Institutional Trust Services Management Limited (Singapore) Limited 391B Orchard Road 21 Collyer Quay #21-08 Ngee Ann City Tower B #10-01 HSBC Building Singapore 238874 Singapore 049320 Phone: +65 6835 8633 Phone: +65 6534 1900 Fax: +65 6835 8644 Fax: +65 6533 1077 Email: [email protected] Unit Registrar Directors Lim Associates (Pte) Ltd Mr Stephen Girdis (Non-Executive Chairman) 3 Church Street Mr Franklin Heng (Executive Director) #08-01 Samsung Hub Mr James Hodgkinson (Non-Executive Director) Singapore 049483 Mr Wolfgang Wente (Non-Executive Director) Phone: +65 6536 5355 Mr Timothy Chia (Independent Director) Fax: +65 6536 1360 Dr Hong Hai (Independent Director) Mr Michael Hwang (Independent Director) Auditors of MMP REIT KPMG Audit Committee 16 Raffles Quay Dr Hong Hai (Chairman) #22-00 Hong Leong Building Mr Timothy Chia (Member) Singapore 048581 Mr Michael Hwang (Member) Phone: +65 6213 3388 Fax: +65 6225 4142 Joint Company Secretaries (Partner in charge since period ended 31 December 2005: Ms Eng Chin Chin) Mr Rudi Chuan Ms Christine M Chan SGX Code MMP Reit

Website www.mmpreit.com www.macquariepacificstar.com

Macquarie MEAG Prime REIT (MMP REIT) repayment of capital from MMP REIT or any particular rate This Annual Report for the period ended 31 December 2006 has of return. been prepared by Macquarie Pacific Star Prime REIT Management Past performance information included in this report is no Limited (Company Registration No. 200502123C) as the Manager indication of future performance. The Manager is entitled to fees of MMP REIT. This report does not contain investment advice nor is for acting in the capacity of the Manager. MBL, its related entities it an offer to invest in units of MMP REIT. and officers and directors of those entities, may hold units in Whilst every care has been taken in relation to the accuracy of MMP REIT from time to time. this report, no warranty is given or implied. This report has been MBL holds a 50% indirect interest in the Manager. MBL is prepared without taking into account the personal objectives, authorised by The Australian Prudential Regulation Authority in the financial situation or needs of particular individuals. Before acting, Commonwealth of Australia and The Financial Services Authority we recommend potential investors speak to a financial and/or in the United Kingdom, to carry out banking business or to accept other professional adviser. deposits in those respective jurisdictions. Members of the Investments in MMP REIT are not deposits with or other liabilities Macquarie Bank Group are not otherwise currently authorised of Macquarie Bank Limited (ABN 46 008 583 542) (MBL), the to carry out banking business or to accept deposits in any other Manager, or of any Macquarie Bank Group company and are country. The Macquarie Bank Group does not hold a licence subject to investment risk, including possible delays in under the Banking Act, Chapter 19 of Singapore and hence, repayment and loss of income or principal invested. None of the does not carry on banking business in Singapore. Accordingly, Manager, MBL or any member company of Macquarie Bank the Macquarie Bank Group is not subject to the supervision of Group guarantees the performance of MMP REIT or the the Monetary Authority of Singapore in respect thereof.

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