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MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 CONTENTS

02 Investor Highlights 49 Financial Report 04 Chairman’s Letter 50 Directors’ Report 06 Chief Executive Ofﬁcers Report 65 Lead Auditor’s Independence Declaration 10 Group Operations 66 Statements of Financial Performance 12 Property Investments 67 Statements of Financial Position 16 Property Portfolio 68 Statements of Cash Flows 22 Completed Developments 69 Notes to the Financial Statements 23 Commenced Developments 115 Directors’ Declaration 24 Funds Management 116 Independent Audit Report 26 Property Development 117 Top 20 Securityholders 28 Property Services 118 Property Trusts 30 Capital Management 120 Investor Relations 32 Our People IBC Glossary of Terms 34 Board of Directors BC Corporate Directory 36 Senior Executives 40 Corporate Governance 48 Community and Environment

OWN We are long-term owners of industrial and business space. This means that customers are assured of an ongoing relationship with Macquarie Goodman.

MANAGE We do not outsource the management of our properties. We are diligent and creative in meeting the operational needs of our customers and maintain our assets to the very highest standards. Due to our attention to detail and dedicated service we achieve high occupancy rates and customer loyalty.

DEVELOP We have a signiﬁcant pipeline of development sites in strategically located growth areas and an innovative development team. Our projects are designed to meet the growing needs of our existing customers and to attract new customers. As long-term owners we can develop or purpose-build facilities to satisfy our customers both now and into the future.

This Annual Report for the year ended 30 June 2005 has been prepared by Macquarie Goodman Group (Macquarie Goodman Management Limited (“MGM”) ABN 69 000 123 071 and its controlled entities, including Macquarie Goodman Funds Management Limited (AFSL 223621); Macquarie Goodman Industrial Trust ARSN 091 213 839 (“MGI”) and its controlled entities ABN 48 067 796 641; collectively, “Macquarie Goodman” or the “Group”). The information in this Annual Report is general information only. It is not intended as investment or financial advice and must not be relied upon as such. You should obtain independent professional advice prior to making any decision relating to your investment or financial needs. This Annual Report is not an offer or invitation for subscription or purchase of securities or other financial products. Past performance is no indication of future performance. All values are expressed in Australian currency unless otherwise stated.

Cover Image: Forrester Distribution Centre, St Marys, NSW Macquarie Goodman is a publicly listed, integrated property group. Our operations in Australia, New Zealand and Asia encompass property investment, funds management, property development and property services, backed by a team of over 230 property professionals. Our Customer Service Model underpins our long-term commitment to our customers.

M N A W N A O G

CUSTOMER SERVICE MODEL

DEVELOP

01 INVESTOR HIGHLIGHTS

Merger of MGM and MGI to form Macquarie Goodman Group

Explanatory 2005 Memorandum Actual Forecast

Normalised full year distribution per security (cents) (1) 25.90 25.90 Normalised full year earnings per security (cents) (1) 23.96 23.65 Macquarie Goodman net proﬁt attributable to Securityholders ($M) 50.0 14.2 Total assets ($M) 5,171 4,213 Net tangible assets per security ($) 2.15 1.97 Gearing (%) 36 38 Security price ($) 4.08 3.60 Market capitalisation ($M) 5,732 4,511 (1) Normalised earnings and distributions for the six months to 30 June 2005, being the period most representative of the merged group.

> Macquarie Goodman Group paid a distribution of 12.95 (1) cents per security equivalent to 25.90 cents per security on an annualised basis in line with the Explanatory Memorandum > Macquarie Goodman Group normalised earnings of 11.98 (1) cents per security equivalent to 23.96 cents per security on an annualised basis in line with the Explanatory Memorandum > Total annual return for MGI Unitholders of 48.5% (2004: 19.8%) > Total annual return for MGM Shareholders of 20.3% (2004: 121.2%) > Capital transactions and acquisitions totalling $973 million > $1.2 billion growth in external funds under management to $2.3 billion > $7.0 billion in assets under management throughout Australia, New Zealand, Singapore and Hong Kong > Increase in market capitalisation to $5.7 billion (2)

(1) Macquarie Goodman Group normalised earnings and distributions for the six months to 30 June 2005, being the period most representative of the merged group. (2) Based on a closing price as at 30 June 2005.

02 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Example: Effect of the Merger on Former MGI Unitholders Pre Merger Change Post Merger

Number of securities 1,000 0.57 (1) 570 Price $2.05 (2) $4.08 (3)

Value $2,050.00 > 13% $2,325.60 Annual Distribution per security 13.9¢ 25.9¢

Total Distribution 139.00 > 6% $147.63 (1) MGI merger ratio. (2) MGI price at the time merger was announced. (3) Macquarie Goodman closing price as at 30 June 2005.

MGI Net Profit (After Tax) MGM Net Profit (After Tax) 250 $M 50 $M

200 40

150 30

100 20

50 10

0 0 01 02 02 03 04 05 (1) 01 02 02 03 04 05 (2) Years

(1) The profit reflected for MGI is on a normalised basis for the 2005 financial year and does not reflect any one off costs associated with the merger with MGM, totalling $13 million. (2) The profit reflected for MGM is on a normalised basis for the 2005 financial year and does not reflect any one-off costs associated with the merger with MGI, totalling $117 million.

03 Macquarie Goodman Group In February 2005, Macquarie Goodman undertook the most signiﬁcant transaction of its history with the merger of MGM and MGI.

CHAIRMAN’S LETTER

Dear Securityholder Importantly, following the merger, Macquarie Goodman has provided On behalf of the Board, I am pleased Securityholders with distributions to present the first annual report totalling $172.5 million which is for the recently merged Macquarie equivalent to a distribution of 12.95 Goodman Group. cents per security (“cps”) (25.90 cps The most significant event of the past on an annualised basis). Following year has been the merger of MGM the merger our earnings per security, and MGI to form Macquarie before the effect of the one-off merger Goodman Group. costs, was 11.98 cps (23.96 cps on an annualised basis) which was The merger consolidates our position in line with the forecasts contained in the market as the largest industrial within the Explanatory Memorandum property group listed on the Australian for the merger. Stock Exchange (“ASX”), the fourth largest listed property group in the In April 2005, we announced a one S&P/ASX 200 Property Index and one for 10 non-renounceable Priority of the largest listed industrial property Entitlement Offer and Public Offer groups globally. (the “Offer”). This initiative provided eligible Securityholders with the The merger represents a natural opportunity to purchase additional evolution for both MGM and MGI, securities in the Group at a discount as it fully integrates the core business to market price and without activities of both entities. Macquarie brokerage and transaction costs. Goodman now has an operating and The Offer was highly successful and capital structure that facilitates access received overwhelming support from to growth opportunities, focused both institutional and retail investors. on industrial and business space. Macquarie Goodman delivered a net operating profit of $50 million for the year ended 30 June 2005. This result includes a 12 month profit contribution from MGM, a five month profit contribution from MGI and the effect of the one-off merger and other related transaction costs.

04 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 MGM Total Return (per annum) MGI Total Return (per annum) 50 % 50 %

40 40

30 30

20 20

10 10

0 0 1 Year 3 Years 1 Year 3 Years

MGM MGI UBS RE Manager and Developer 300 S&P/ASX 300 Property Accumulation Index

The solid performance of all business During the year, Mr Bill Moss units has assisted in achieving a resigned from the Board. We would 48.5% total annual return for former like to thank Bill for his outstanding MGI Unitholders and a 20.3% total contribution to the growth and annual return for former MGM strategic development of Macquarie Shareholders for the 12 months to Goodman. Mr James Hodgkinson 30 June 2005. took his place as a Director of Macquarie Goodman. With his We continued to employ our unique range of experience, James brings and proven Customer Service Model significant expertise to the Group and to build long-term relationships with we are delighted to welcome him to our customers. the Macquarie Goodman Board. Our underlying business continued On behalf of the Board, I would like to perform strongly resulting in the to thank Securityholders, customers following key achievements: and the Macquarie Goodman team > organic growth in our core for their support during the year. Australian and New Zealand We will strive to continue our property investments; success in the future. > growth in our third party funds Yours faithfully management business through the expansion of Macquarie Goodman Property Trust (“MGP”) and Ascendas Real Estate Investment Trust (“A-REIT”); and David Clarke, AO > entry into an Asian joint venture Chairman with Macquarie Bank, including the establishment of an office in Hong Kong. The acquisition of our first Hong Kong property is intended to assist in the expansion of the Asian funds management business.

DAVID CLARKE, AO CHAIRMAN

05 The merger secured the relationship between MGM and MGI by the successful pairing of MGM’s proven management skills and MGI’s high quality industrial and business space portfolio to form an integrated property group.

CHIEF EXECUTIVE OFFICER’S REPORT

THE YEAR IN REVIEW On a stand alone basis, both Macquarie Goodman undertook the MGM and MGI outperformed the most significant corporate transaction forecasts outlined in the Explanatory of the Group’s history during the year Memorandum. with the merger of MGM and MGI to As at 30 June 2005, Macquarie become Macquarie Goodman Group. Goodman had a core portfolio of Approval of the merger was 125 properties across Australia, received from MGM Shareholders New Zealand and Hong Kong, with and MGI Unitholders on 25 January a value of $4.7 billion. In addition, 2005 and from the Supreme Court management capabilities are provided of NSW on 31 January 2005. throughout Australia, New Zealand, Implementation of the merger Singapore and Hong Kong with our took place in February 2005. assets under management now totalling $7.0 billion. The merger addressed structural changes occurring in the listed The performance reflects the core property trust sector, in particular values of our proven Customer the need to deliver a higher level Service Model. The model underpins of earnings growth than would have our long-term commitment to our been possible from the organic customers. It utilises the talents of growth of the portfolio. our team and differentiates us as a leading industrial and business space The merger secured the relationship provider in Australia, New Zealand between MGM and MGI by the and Asia. successful pairing of MGM’s proven management skills and MGI’s high quality industrial and business space portfolio to form an integrated property group. It should be noted that the results for the year ended 30 June 2005 are comprised of 12 months of results from MGM and five months of results from MGI.

GREGORY GOODMAN CHIEF EXECUTIVE OFFICER

06 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Security Price History

4.0 $

3.0

2.0

1.0

0.0 MGM MGI Macquarie Goodman June 00 June 01 June 02 June 03 June 04 June 05

PROPERTY INVESTMENT We continued to build valuable The New Zealand listed MGP also Our continued focus and commitment property partnerships with existing enjoyed strong growth during the to actively manage the portfolio and new customers which helped year with an increase in total assets throughout the year has assisted in secure pre-commitments for 88% from A$206 million to A$495 million, maintaining an occupancy rate of of the development projects we growth in net profit after tax of 98%, a weighted average lease term commenced this year. This saw 118.5% to A$16.2 million and entry of 5.1 years and customer retention the continued enhancement of the into the New Zealand Exchange rate of 81%. portfolio, provided security of income Limited’s (“NZX”) top 50 entity index, and assisted in the continued roll out the NZSX50. The portfolio has had an extremely of the development pipeline. active year with capital transactions MGP Unitholders were rewarded with totalling $973 million. Macquarie Goodman also holds a total return of 27% for the year, strategic cornerstone investments resulting from a 19% increase in gross Key achievements during the year in our third party managed listed distributions and a 10% increase in included: property trusts, MGP and A-REIT with unit price to A$1.01. MGP finished > $497 million in Australian interests of 30% and 7% respectively. the year with a market capitalisation acquisitions; of A$346 million at 31 March 2005. FUNDS MANAGEMENT* > $248 million in Hong Kong We continued to successfully During the year, we continued our acquisitions ($400 million post- develop our funds management expansion into Asia, facilitated by the balance date); business during the year, recording signing of a Joint Venture Agreement a $1.2 billion increase in funds (“JV Agreement”) with Macquarie > $391 million in divestments under management. In Singapore, Bank. Under the JV Agreement, (including $289 million in New A-REIT doubled its total assets to Macquarie Goodman established Zealand assets); and A$1.6 billion with the acquisition of an office in Hong Kong, headed by > $64.3 million in property 20 properties for A$800 million. It Stephen Hawkins. Our Hong Kong revaluations. consistently outperformed market office currently has a staff of 19 who expectations to deliver strong are concentrating on the growth of The investment portfolio benefited distribution and capital growth that business. from the completion of $290 million of for Unitholders. A-REIT’s total net new development space providing an investment income available for Macquarie Goodman has to date average return on cost of 8.6%. distribution reached A$65 million, secured A$400 million worth of equating to a 17% increase in high quality property in Hong Kong distributions to A7.39 cents per unit. which is in line with our strategy to Total returns to Unitholders reached launch a new real estate investment 56%, with the unit price increasing trust in Hong Kong during the first 48% to A$1.45. half of 2006. * Reflects 2005 financial year results for the respective vehicles.

07 Hong Kong Singapore People 19 * People 24 * Properties 1 Properties 43 * Service Service — Funds Management — Funds Management — Property Services — Development Management * Ascendes-MGM Joint Venture, the manager of A-REIT properties. * Macquarie Bank Limited and Macquarie Goodman Joint Venture.

Australia People 192 Properties 117 Service — Funds Management — Property Services — Development Management

New Zealand People 36 Properties 23 * Service — Funds Management — Property Services — Development Management * Includes co-owned MGP and Macquarie Goodman properties.

CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED

PROPERTY DEVELOPMENT In August 2005, Macquarie Goodman The Development Division performed partnered with one of our most strongly throughout the year with signiﬁcant customers, Toll Holdings over 242,000 sqm of completed Limited (“Toll”) to acquire, develop space and approximately 316,000 and jointly manage a portfolio of sqm of new development space Toll’s properties with a potential commenced. value of $120 million. This strategic partnership provides the basis for Toll The combination of our proven and Macquarie Goodman to work development management expertise together in a collaborative manner and extensive development pipeline in the future which will importantly allows us to accommodate the future provide our Securityholders with space requirements of existing and additional secure income streams prospective customers in key growth over the long term. markets whilst also adding new high quality property to the portfolio. PROPERTY SERVICES We manage 145 properties Key development highlights for the throughout Australia, New Zealand year included: and Hong Kong. The experience > securing the right to develop and skills of our property services a major distribution facility for team and the structure of our Coles Myer in Adelaide with operating platform has allowed the subsequent appointment in us to replicate our proven Customer July 2005 to develop a national Service Model to our third party distribution facility in Sydney; listed property trust, MGP. > planning approval for the M7 Business Hub site; and > successful acquisition of a 75% interest in the Highbrook development site in New Zealand.

08 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Macquarie Goodman’s property portfolio consists of warehouse/distribution centres, business parks, industrial estates, ofﬁce parks and suburban commercial buildings.

In 2005, the property services The Facility, which was originally Our team will continue to apply team secured more than 377,000 launched at $1.2 billion, received the fundamentals of our Customer sqm in new leasing transactions, overwhelming support from Service Model. The Model underpins with intensive asset management banks, resulting in the significant our long-term commitment to our delivering strong underlying property oversubscription and upscaling customers. It utilises the talents performance to both the Macquarie of the Facility. The purpose of the of over 230 Macquarie Goodman Goodman and MGP portfolios. Facility is to diversify sources of debt team members and differentiates funding to include highly rated local Macquarie Goodman as a leading Both portfolios enjoyed solid and international banks. It aims to industrial and business space provider customer retention, higher occupancy combine the funding requirements in Australia, New Zealand and Asia. rates and strong lease expiry profiles. of the Group and provide a robust In 2006, we intend to focus on a CAPITAL MANAGEMENT foundation for Macquarie Goodman’s number of initiatives. These include To manage Macquarie Goodman’s overall financing needs. capital requirements, we raised organically growing our Australian $565.2 million in equity during Our total borrowings at year end investment portfolio, capitalising on the period, bringing our market were $1.9 billion with gearing at 36%, our growing position in the Asian capitalisation to $5.7 billion as at which is at the lower end of our stated market by launching a Hong Kong 30 June 2005. target range. We are well positioned real estate investment trust in the first to continue to fund the development half of 2006, and growing our third In April this year we issued a one pipeline and property acquisitions. party funds management business in for 10 non-renounceable Priority both Australia and abroad. Entitlement Offer and Public Offer As at 30 June 2005, 74% of to fund our new business activity, Macquarie Goodman’s borrowings We will continue to roll-out our property acquisitions and reduce were hedged against movements development pipeline with a total Macquarie Goodman’s gearing level. in interest rates at an average cost of 2.96 million sqm of vacant land The offer was strongly supported by of 6.0% per annum. As testament available for development in Australia institutions and retail Securityholders, to our active capital management, and New Zealand. we have continued to maintain our raising $458.4 million at an issue price By focusing on our core property current gearing and hedging profiles of $3.64 per security. portfolio of industrial and business at targeted levels. In July 2005, we established a new space and maintaining a strong STRATEGY AND OUTLOOK FOR 2006 $1.4 billion Syndicated Multi-Currency customer focus, we are well Looking forward, we will continue to Debt Facility (“Facility”) which was positioned to deliver positive results strengthen our presence in Australia, used to refinance the existing MGI to Securityholders in 2006. New Zealand and Asia. We will $1.1 billion Multi-Option Facility and maintain our pursuit of expansion MGM Facility. opportunities with well located industrial and business properties which provide stability through the diversification of our customer base. Gregory Goodman Chief Executive Officer

09 GROUP OPERATIONS

PROPERTY INVESTMENTS PROPERTY PORTFOLIO FUNDS MANAGEMENT PROPERTY DEVELOPMENT PROPERTY SERVICES CAPITAL MANAGEMENT

Macquarie Goodman is a property investment and management group which specialises in the ownership, management and development of industrial and business space. Our 230 employees are specialists in managing Macquarie Goodman’s investment portfolio on behalf of our Securityholders. The Group earns additional revenue by applying its specialist management skills to the property funds it manages in New Zealand and Singapore.

10 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Projected Group Revenue by Region Projected Group Revenue by Business Activity Australia 89% Net Property Income 89% New Zealand 5% Management Income 11% Asia 6%

11 Asset Class Diversification Geographic Diversification Warehouse/Distribution Centres 33% New South Wales 73% Business Parks 29% Victoria 15% Office Parks 19% Queensland 5% Industrial Estates 18% New Zealand 3% Suburban Commercial Buildings 1% Hong Kong 3% Other 1%

PROPERTY INVESTMENTS

WEST AVENUE INDUSTRIAL ESTATE, EDINBURGH, SA* DANDENONG INDUSTRIAL ESTATE, DANDENONG, VIC McLAREN INDUSTRIAL ESTATE, NORTH ROCKS, NSW

* ARTIST’S IMPRESSION Macquarie Goodman’s core property portfolio consists of warehouse/distribution centres, industrial estates, business parks and ofﬁce parks. Located in Australia, New Zealand and Hong Kong, our core portfolio of 125 properties is valued at $4.7 billion and houses 560 customers across 3.8 million sqm of lettable area. Highlights Key highlights of the portfolio for the year include: > $973 million in acquisitions; > 311,000 sqm of existing space leased representing $35.0 million in net annual rental; > 240,000 sqm of new development space completed with an end value of $290 million; and > property revaluations adding $64.3 million in value.

12 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Top 25 Customers (By Percentage of Total Net Property Income) Toll Linfox Coles Myer ACI Woolworths Patricks CSC Exel Australia Hewlett Packard TNT Australia Ausdoc Coca-Cola Recall Unilever SCA Hygiene Australia Fuji Xerox State Government of NSW Network Ten ResMed Commonwealth Bank of Australia Salmat NYK Logistics EGL Metcash Smorgon Steel 0% 1% 2% 3% 4%

Weighted Average Intensive asset management Our top 25 customers are leading Lease Expiry Profile delivered strong underlying property local and multinational corporations. (By Net Property Income) performance, with 311,000 sqm These customers provide 50 % of existing space leased throughout approximately 37% of the Group’s the year. net property income with no one customer providing more than 4% The new leases assisted in of total net property income. 40 maintaining a portfolio occupancy rate of 98%, weighted average lease ACQUISITIONS expiry of 5.1 years, and customer During the year, Macquarie Goodman retention rate of 81%. Importantly, acquired properties valued at $973 million including $248 million in Hong 30 the new leases were secured with an increase of 3.4% on previous Kong acquisitions ($400 million post passing rentals, highlighting the balance date) and $177 million in quality of the underlying portfolio development land. and the performance of the industrial In October 2004, MGI consolidated 20 property market. its holding in the former Colonial First The portfolio is strategically diversiﬁed State Industrial Property Trust with across key asset types and is located the acquisition of the remaining 25% in established industrial areas in close minority interest held by Ascendas 10 proximity to major transport and (Australia) Pte Limited for $27.8 million infrastructure links. (excluding acquisition costs and net of $102.5 million Colonial loan arrangement). The portfolio comprises 22 industrial and high tech properties 0 located in proven industrial precincts. Years <1 1-2 2-3 3-4 4-5 >5

13 PROPERTY INVESTMENTS CONTINUED

GLOBAL GATEWAY BUILDING, TSUEN WAN, HONG KONG NORTHGATE DISTRIBUTION CENTRE, SOMERTON, VIC EVERGAIN PLAZA, KWAI CHUNG, HONG KONG

In March 2005, Macquarie Goodman secured its first high quality property in Hong Kong with the acquisition of the Global Gateway Building. This was followed by the acquisition of a significant interest in the Evergain Plaza Building in July 2005. These buildings are strategically located in close proximity to Hong Kong’s harbour and port facilities. It is intended that, together with Macquarie Bank, Macquarie Goodman will use these properties to launch a Hong Kong real estate investment trust in the first half of 2006. Major portfolio acquisitions during the year included: Property Purchase Price $M

Remaining 25% interest in former Colonial First State Industrial Property Trust 130.3 Upper Global Gateway, Tsuen Wan, Hong Kong 125.7 Lower Global Gateway, Tsuen Wan, Hong Kong (1) 122.0 IBC Business Estate, Homebush, NSW 88.0 St Leonards Corporate Centre, St Leonards, NSW 77.0 Highbrook Business Park, East Tamaki, Auckland (2) 59.6 Eden Commercial Corporate Centre, Eden Terrace, Auckland (1) 57.4 Millennium Centre (Phase 2), Greenlane, Auckland 51.5 Air New Zealand House, Viaduct Harbour, Auckland 49.0 Regal Business Park, Rowville, Vic 35.3

(1) Exchanged but not settled as at 30 June 2005. (2) 75% interest.

DIVESTMENTS During the year, we continued the rationalisation of the core portfolio, completing the sale of nine properties valued at $391 million, including $289 million of New Zealand assets to MGP. Major divestments undertaken during the year included: Property Disposal Price $M

New Zealand Portfolio 289.0 Forsyth Distribution Centre, Hoppers Crossing, Vic 41.0 Peninsula Business Park, Brookvale, NSW 21.0 Hume Distribution Centre, Chullora, NSW 19.0 Queensport Quays Business Park, Murarrie, Qld (remaining land) 9.9

14 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 CAMPUS BUSINESS PARK, HOMEBUSH, NSW WINGFIELD DISTRIBUTION CENTRE, WINGFIELD, SA MFIVE INDUSTRY PARK, MOOREBANK, NSW

INDEPENDENT PROPERTY REVALUATIONS During the year, 89 properties were independently revalued, resulting in an increase of $64.3 million or a 2.6% increase over the previous book values. Intensive management of the portfolio and strong demand for quality industrial properties in well located areas has contributed to the revaluation performance. In particular, solid increases were recorded in South Sydney, Sydney West, Victoria and Queensland. The combination of these factors has seen the average capitalisation rate for the revalued properties decrease from 8.9% to 8.5%. Weighted Increase in Capitalisation Rate Book Value Valuation Valuation Increase Pre Post Region $M $M $M % % %

New South Wales — Sydney South 555.1 572.2 17.1 3.1 8.4 8.0 — Sydney West 565.5 577.3 11.7 2.1 8.9 8.4 — Sydney Outer West 231.3 229.0 (2.3) (1.0) 9.4 8.8 — Sydney North 504.9 512.0 7.2 1.4 8.8 8.6 Victoria 412.4 432.0 19.6 4.8 9.1 8.5 Queensland 127.1 134.8 7.7 6.0 9.7 8.8 Other 40.8 44.1 3.3 8.2 10.4 10.0 Total 2,437.1 2,501.4 64.3 2.6 8.9 8.5

CORNERSTONE INVESTMENTS In addition to the core portfolio, Macquarie Goodman also holds strategic cornerstone investments in our third party managed listed property trusts, MGP and A-REIT. Strong performance from MGP and A-REIT has delivered substantial returns in 2005, with these investments reﬂecting a 47% increase ($83 million) on original investment cost. MGP A-REIT

Cornerstone Investment 30% 6.55% DPU growth – ﬁnancial year 2005 (1) up 19% to A10.3 cpu Up 17% to A7.39 cpu Total return – ﬁnancial year 2005 (1) 27% 56% Total investment $128 million $130 million Financial year 2006 forecast yield (2) 7.9% 4.3%

(1) Reflects the financial year end for the respective vehicles. (2) Based on announced forecast distribution for the financial year end and closing price as at 17 August 2005.

15 PROPERTY PORTFOLIO

Total Market Terminal Latest PROPERTY SUMMARY Lettable Capitalisation Capitalisation Independent Independent Book Value Site Area Ofﬁce Warehouse Area Rate Rate Valuation Valuation 30 June 2005 Occupancy Property Hectares sqm sqm sqm % % $M Date $M % Major Customers

Warehouse/Distribution Centres GreystanesPark, Prospect, NSW — East (Stage 1) 13.6 2,092 25,593 27,685 8.25 8.50 24.6 Jun 01 84.1 100 The Laminex Group — West (Stage 2) 10.5 5,140 38,000 43,140 8.25 8.50 19.5 Jun 02 63.9 100 Exel, Linfox 24.1 70,825 44.1 148.0 100 Upper Global Gateway, Tsuen Wan, Hong Kong 0.7 — 42,042 42,042 6.50 6.50 123.4 Apr 05 126.3 100 DHL International, Exel Hong Kong, Equinix MFive Industry Park, Moorebank, NSW 19.6 5,700 44,927 50,627 8.00 8.25 39.5 Dec 01 116.5 100 AUSDOC, Toll, Victa Lawncare Centenary Distribution Centre, Moorebank, NSW — Stage 1 7.2 1,903 40,562 42,465 8.50 9.00 44.0 Jun 04 46.4 100 Woolworths — Stage 2 4.7 — 13,457 13,457 8.50 9.00 18.5 Jun 04 20.1 100 Fowles Auctions 11.9 55,922 62.5 66.5 100 Forrester Distribution Centre, St Marys, NSW — Stage 1 12.3 263 60,176 60,439 8.50 9.00 55.0 Jun 04 55.3 100 ACI — Stage 2 5.1 — — — — — 6.0 Jun 04 7.0 — Vacant Land 17.4 60,439 61.0 62.3 100 Roberts Distribution Centre, Chullora, NSW — Building A 4.6 943 18,670 19,613 8.50 8.75 25.0 Dec 04 25.2 100 Toll — Building B 6.2 799 32,175 32,974 8.75 9.50 35.8 Sep 04 36.4 100 Toll 10.8 52,587 60.8 61.6 100 Northgate Distribution Centre, Somerton, Vic — Stages 1 and 2 10.9 224 54,288 54,512 7.25 8.00 53.6 Jun 05 53.6 100 Nylex, SCA Hygiene Australia — Stage 3 3.2 — — — — — 3.3 (1) Dec 01 1.8 100 Vacant land 14.1 54,512 56.9 55.4 100 Reservoir Distribution Centre, Wetherill Park, NSW 10.6 2,722 46,570 49,292 8.50 9.00 49.5 Dec 04 49.9 100 Canon Australia, New Wave Transport Portside Distribution Centre, Banksmeadow, NSW 4.7 4,552 25,818 30,370 7.75 8.25 47.0 Dec 04 48.5 96 Gazal Apparel, Russ Australia Wyndham Distribution Centre, Laverton, Vic 12.4 2,344 51,524 53,868 8.75 9.00 38.1 Dec 04 38.5 100 Toll Smithfield Distribution Centre, Smithfield, NSW 7.9 1,615 57,335 58,950 9.50 10.25 38.0 Dec 04 38.2 100 Coca-Cola Amatil, Linfox Great West Distribution Centre, Arndell Park, NSW 7.2 1,757 26,347 28,104 8.75 9.25 37.5 Jun 04 37.6 100 Patrick Chullora Distribution Centre, Chullora, NSW — Stage 1 3.0 1,545 20,360 21,905 8.50 8.75 25.2 Dec 04 25.3 100 McPhersons — Stage 2 1.7 246 14,985 15,231 9.00 9.75 11.4 Dec 04 11.9 100 Energy Australia 4.7 37,136 36.6 37.2 100 Angliss Distribution Centre, Laverton North, Vic 10.4 567 20,849 21,416 7.50 8.25 36.4 Jun 05 36.4 100 Kimberly-Clark, Australia Post Southend Distribution Centre, Mascot, NSW 4.3 1,789 28,034 29,823 8.00 8.50 35.0 Jun 05 35.1 100 Recall Westall Distribution Centre, Laverton North, Vic 9.1 2,580 56,291 58,871 7.75 8.75 33.1 Dec 04 33.2 100 Smorgon Steel Laverton Distribution Centre, Laverton North, Vic 12.1 437 50,493 50,930 8.25 8.75 30.6 Jun 04 30.8 100 ACI Crestmead Distribution Centre, Crestmead, Qld 12.2 4,299 28,838 33,137 8.25 8.75 8.1 Dec 03 30.3 100 Metcash Kingston Distribution Centre, Braeside, Vic 8.0 1,535 38,508 40,043 8.50 9.25 30.0 Dec 04 30.2 100 Kmart Dandenong Industrial Estate, Dandenong, Vic 19.2 3,007 30,414 33,421 8.50 9.00 28.3 Jun 05 29.9 100 Toll, General Electrical Davis Distribution Centre, Wetherill Park, NSW — Stage 1 3.1 3,772 13,186 16,958 8.50 8.75 18.5 Dec 04 18.8 100 New Food Coatings, 1st Fleet — Stage 2 2.0 — 5,527 5,527 8.25 8.75 7.9 Dec 04 8.0 100 Snow Confectionary 5.1 22,485 26.4 26.8 100 Fitzgerald Distribution Centre, Laverton North, Vic 15.1 916 21,864 22,780 8.75 9.25 25.3 Dec 04 25.4 100 Patrick Prestons Distribution Centre, Prestons, NSW 8.5 — — — — — 22.6 Nov 04 25.4 — Vacant Land Hampton Park Distribution Centre, Hampton Park, Vic 12.0 2,320 36,524 38,844 9.00 9.25 23.6 Dec 04 23.8 100 Coles Myer Berkeley Distribution Centre, Berkeley Vale, NSW 6.5 500 29,647 30,147 8.75 10.50 22.2 Dec 04 22.3 100 Master Foods Miller Distribution Centre, Villawood, NSW 7.4 1,407 11,992 13,399 8.75 9.25 21.2 Jun 04 21.4 100 BHP Port Wakefield Distribution Centre, Gepps Cross, SA 11.3 4,320 21,804 26,124 11.50 11.50 17.6 Dec 04 17.8 100 Coles Myer Boundary Distribution Centre, Laverton, Vic 9.7 1,037 22,990 24,027 8.00 9.00 17.5 Dec 04 17.6 100 Caterpillar Logistics Holroyd Distribution Centre, Smithfield, NSW 2.9 2,361 14,692 17,053 8.50 9.00 17.2 Dec 04 17.3 100 Ramset Fasteners Sheffield Distribution Centre, Welshpool, WA — Stage 1 7.5 1,360 18,205 19,565 9.25 9.75 12.6 Jun 04 12.7 100 Patrick — Stage 2 3.0 — 4,753 4,753 9.35 9.75 3.8 Jun 04 4.2 100 Orica Australia 10.5 24,318 16.4 16.9 100 Villawood Distribution Centre, Villawood, NSW 3.1 1,046 14,520 15,566 8.50 9.00 16.2 Dec 04 16.3 100 Kimberly-Clark Savill Link, Otahuhu, Auckland 23.1 — — — — — 28.5 (2) Mar 04 15.9 — Vacant Land Tranzport Distribution Centre, Port Melbourne, Vic 2.2 4,720 7,100 11,820 9.00 10.00 13.7 Sep 04 14.1 100 Air International Britton Distribution Centre, Smithfield, NSW 2.2 342 12,568 12,910 8.75 9.00 13.5 Dec 04 13.8 100 Tyre Marketers Sunshine Distribution Centre, Sunshine, Vic 4.4 804 17,602 18,406 8.25 9.00 13.1 Jun 05 13.4 100 AUSDOC Federation Distribution Centre, Laverton North, Vic 5.0 484 15,957 16,441 8.75 9.75 11.7 Sep 04 12.3 100 Fastline International Westlink Distribution Centre, Laverton, Vic 3.2 342 7,402 7,744 9.50 10.00 5.3 Jan 04 10.8 100 Toyota Australia Woodlands Distribution Centre, Braeside, Vic 2.5 2,290 8,839 11,129 8.75 8.75 10.8 Dec 04 10.8 100 Crane Distribution Keysborough Distribution Centre, Keysborough, Vic — Stage 1 1.4 687 6,188 6,875 10.50 11.50 6.5 Sep 04 6.8 100 DWN Distributors — Stage 2 2.9 — 3,612 3,612 12.00 — 2.7 Sep 04 2.8 100 Link Building Solutions 4.3 10,487 9.2 9.6 100 (1) Valuation of original parcel of land on acquisition. (2) Valuation reflects 100% adjusted interest in remaining land.

16 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Total Market Terminal Latest Lettable Capitalisation Capitalisation Independent Independent Book Value Site Area Ofﬁce Warehouse Area Rate Rate Valuation Valuation 30 June 2005 Occupancy Property Hectares sqm sqm sqm % % $M Date $M % Major Customers

17 PROPERTY PORTFOLIO CONTINUED

Warehouse/Distribution Centres Continued Wingﬁeld Distribution Centre, Wingﬁeld, SA 25.3 1,156 9,849 11,005 8.50 8.75 3.3 Apr 05 9.2 100 Toll Holbeche Distribution Centre, Arndell Park, NSW 2.2 396 5,441 5,837 8.50 8.75 8.7 Dec 04 8.8 100 Westgate Logistics Lytton Distribution Centre, Lytton, Qld 2.2 322 8,246 8,568 8.00 9.25 8.8 Jun 05 8.8 100 ACI Montague Distribution Centre, West End, Qld 0.8 1,411 4,584 5,995 10.50 10.75 8.2 Sep 04 8.3 100 Qld State Library Gippsland Distribution Centre, Dandenong, Vic 2.6 306 10,151 10,457 8.75 8.75 7.0 Dec 04 7.0 100 Amerind Beverley Distribution Centre, Beverley, SA 1.1 729 6,505 7,234 — — — — 5.9 100 Brambles West Avenue Industrial Estate, Edinburgh, SA 3.9 2,212 9,572 11,784 — — 1.6 Mar 05 4.8 100 Johnson Controls Bradford Distribution Centre, Cavan, SA 4.9 333 11,380 11,713 10.25 10.75 4.3 Jun 05 4.3 100 Patrick Wodonga Distribution Centre, Baranduda, Vic 7.8 690 9,906 10,596 10.25 9.00 3.1 Jul 04 3.3 100 Recall

Industrial Estates Erskine Park Industrial Estate, Erskine Park, NSW 27.0 1,452 29,000 30,452 8.50 9.00 11.3 Nov 02 85.1 100 Packcentre, Stramit Discovery Cove Industrial Estate, Banksmeadow, NSW 7.6 16,949 32,773 49,722 7.75 8.25 80.0 Jun 05 80.0 89 DHL International, Eagle Global Logistics Mitchell Industrial Estate, Alexandria, NSW — Stage 1 5.4 5,906 30,931 36,837 7.75 7.75 50.2 Jun 05 50.2 100 Kuehne & Nagel, Toll — Stage 2 1.5 2,915 5,078 7,993 — — 21.8 Sep 04 22.3 — — 6.9 44,830 72.0 72.5 100 Alexandria Industrial Estate, Alexandria, NSW 6.1 3,826 39,774 43,600 7.75 8.00 61.5 Jun 05 61.5 100 Bremick, Fantastic Furniture Kingsford Smith Industrial Estate, Alexandria, NSW 4.0 — — 15,000 — — 33.8 May 04 41.3 100 Goodman Fielder Cumberland Industrial Estate, Smithfield, NSW 7.5 1,641 26,906 28,547 8.25 8.50 39.0 Dec 04 40.6 100 DHL Danzas, Toll Botany Bay Industrial Estate, Botany, NSW 3.0 5,225 19,744 24,969 8.00 8.25 33.5 Dec 04 34.7 100 Associated Customs Agents, Tranzlink Gateway Industrial Estate, Arndell Park, NSW 4.6 5,989 21,976 27,965 8.50 9.00 33.8 Sep 04 34.1 100 Fujitsu, Sanyo Smithfield Industrial Estate, Smithfield, NSW — Stage 1 2.8 2,511 14,273 16,784 9.50 10.25 14.7 Sep 04 15.8 100 Coghlan — Stage 2 2.9 1,631 13,262 14,893 9.25 9.75 14.0 Sep 04 14.4 100 Speedy Corporation, Creative Finish — Stage 3 1.1 — 3,951 3,951 10.00 10.50 2.6 Mar 04 3.9 100 Simons National Carriers 6.8 35,628 31.3 34.1 100 Burrows Industrial Estate, Alexandria, NSW 4.1 2,920 24,101 27,021 8.00 8.25 33.5 Jun 05 33.5 100 Sealed Air Australia, Multigroup Distribution Services Portside Industrial Estate, Port Melbourne, Vic 6.0 1,601 43,758 45,359 9.25 9.75 32.2 Dec 04 32.4 100 Linfox McLaren Industrial Estate, North Rocks, NSW 14.9 — — 30,505 — — 29.5 Dec 04 32.0 100 Unilever Brisbane Gate Industrial Park, Hendra, Qld 8.1 2,198 41,802 44,000 8.50 8.75 30.5 Dec 04 30.8 100 Bridgestone Australia, Linfox Acacia Link Industrial Estate, Acacia Ridge, Qld 17.5 1,564 17,338 18,902 8.25 9.50 18.0 Oct 04 28.4 100 Kerry Ingredients, AUSDOC Arcadia Industrial Estate, Coopers Plains, Qld 6.8 3,966 32,040 36,006 8.25 9.25 25.0 Jun 05 25.0 100 Campbells Cash and Carry, JR Haulage Brodie Industrial Estate, Rydalmere, NSW 3.7 2,498 17,318 19,816 9.00 9.75 22.7 Sep 04 23.5 100 Eagle Global Logistics, Hewlett-Packard Riverside Centre, Parramatta, NSW 2.3 4,687 10,155 14,842 8.25 8.50 22.6 Dec 04 22.9 96 Hagar B&R, Inchape Automotive Biloela Industrial Estate, Villawood, NSW 3.7 1,622 19,045 20,667 9.00 9.50 19.0 Jun 05 20.1 100 OneSteel, Grimwood Heating Reserve Industrial Estate, Ermington, NSW 2.5 1,632 11,181 12,813 8.25 8.50 19.8 Dec 04 19.9 100 Computershare Document Services, Goodman Fielder Tingalpa Industrial Estate, Tingalpa, Qld 1.9 3,005 8,579 11,584 8.25 9.50 15.6 Jun 05 15.6 100 Queensco Unity Dairy Foods, Romacco Bosspack Ferntree Industrial Estate, Notting Hill, Vic 4.3 4,022 16,484 20,506 9.50 9.75 13.9 Dec 04 14.1 100 Onga Proprietary, Sicpa Australia Westcove Industrial Estate, Lane Cove, NSW 0.8 1,294 5,500 6,794 8.75 9.25 12.7 Sep 04 12.9 100 Doubleday Australia Citiport Industrial Estate, Eagle Farm, Qld 3.2 2,730 11,723 14,453 8.50 8.75 11.9 Dec 04 12.2 95 Mayvic, Glen Cameron Nominees Abbott Industrial Estate, Chester Hill, NSW 2.4 2,572 9,281 11,853 8.50 8.75 12.0 Dec 04 12.1 100 Salmat Greensquare Industrial Estate, Alexandria, NSW 0.7 2,090 4,006 6,096 7.75 8.25 11.4 Sep 04 11.5 100 Alders International Homebush Bay Industrial Estate, Homebush Bay, NSW 1.2 1,705 7,229 8,934 9.00 9.50 11.2 Jun 04 11.3 93 Bayer Chemicals Pavesi Industrial Estate, Smithfield, NSW 1.6 1,511 6,016 7,527 8.50 9.00 9.3 Sep 04 9.5 100 RS Components Woodpark Industrial Estate, Smithfield, NSW 1.5 889 7,621 8,510 9.00 9.50 7.9 Jun 05 7.9 100 Australian Corrugated Products Healey Industrial Estate, Dandenong, Vic 2.9 2,085 9,798 11,883 9.75 9.75 6.9 Dec 04 7.0 94 Australian Char, Carter Holt Harvey The Gate Industry Park, Penrose, Auckland 3.0 — — — — — — — 3.5 (3) — Vacant Land Westney Industry Park, Mangere, Auckland 26.6 — — — — — — — 0.0 (4) — Vacant Land

Business Parks Lidcombe Business Park, Lidcombe, NSW 11.3 14,228 57,283 71,511 7.75 8.25 150.0 Jun 05 150.0 96 CBA, Fisher & Paykel, Nick Scali, Tradelink Campus Business Park, Homebush, NSW 12.6 22,225 44,883 67,108 8.50 9.00 45.0 Jul 01 129.9 99 Fuji Xerox, Nissan, Optima Technology Solutions, UPS Logistics Slough Business Park, Silverwater, NSW 9.6 15,907 55,177 71,084 8.50 9.00 94.5 Sep 04 103.1 100 Summit Technologies, Optus, Mulford Plastics, MPM Marketing Highbrook Business Park, East Tamaki, Auckland 107.0 — — — — — 100.5 Mar 05 94.4 (5) — Vacant Land Clayton Business Park, Clayton, Vic 31.0 13,000 127,000 140,000 10.50 10.50 73.3 Jan 03 91.5 98 Australian Independent Wholesalers, Linfox Acacia Ridge Business Park, Acacia Ridge, Qld — Stage 1 17.7 4,102 82,666 86,768 11.00 12.00 35.0 Jan 03 44.2 100 Linfox, ARLL — Stage 2 20.0 8,000 5,875 13,875 — — 16.6 Jan 03 21.9 100 Smorgon Steel 37.7 100,643 51.6 66.1 100 Chullora Business Park, Chullora, NSW 10.7 10,910 35,619 46,529 8.25 8.50 64.1 Dec 04 64.6 100 Sony Australia, Coles Myer, New Wave Logistics Chiﬂey Business Park, Mentone, Vic 28.5 5,333 78,760 84,093 8.75 9.25 6.4 Jun 02 64.4 100 Coca-Cola Amatil, Storpak, Visy Airgate Business Park, Mascot, NSW — Stage 1 4.4 3,787 8,646 12,433 8.00 8.50 22.5 Dec 03 33.6 100 TNT — Stage 2 3.3 3,350 10,546 13,896 8.00 8.50 9.0 Dec 03 30.6 100 Exel, Hellmann Worldwide Logistics 7.7 26,329 31.5 64.2 100 (3) No independent valuation of vacant land. (4) Development right over leasehold land. (5) Reﬂects 75% ownership.

18 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Total Market Terminal Latest Lettable Capitalisation Capitalisation Independent Independent Book Value Site Area Ofﬁce Warehouse Area Rate Rate Valuation Valuation 30 June 2005 Occupancy Property Hectares sqm sqm sqm % % $M Date $M % Major Customers

19 PROPERTY PORTFOLIO CONTINUED

Business Parks Continued Botany Grove Business Park, Botany, NSW — Stage 1, 2, 3 6.7 4,171 39,544 43,715 7.75 8.25 55.6 Dec 04 56.1 100 Com Tech Communications, UPS Logistics Group, Penfold Buscombe — Stage 4 0.4 2,521 595 3,116 7.25 — 4.8 Dec 04 5.7 50 WA Flick and Co 7.1 46,831 60.4 61.8 95 Euston Business Park, Alexandria, NSW 2.7 11,057 10,673 21,730 8.75 9.00 46.0 — (6) 49.7 100 FedEx, Harvey World Travel, Kone Elevators TransTech Business Park, Lane Cove, NSW 3.4 6,500 18,032 24,532 9.00 9.50 38.7 Dec 03 41.9 92 BCAIT, Foundlab St Peters Business Park, St Peters, NSW 3.4 5,002 16,792 21,794 7.75 8.25 39.0 Dec 04 39.2 100 UPS Logistics Group, Optus Talavera Business Park, North Ryde, NSW — Building A 1.2 4,006 3,137 7,143 8.75 9.00 17.4 Dec 04 17.5 100 ADI — Building B 1.3 5,697 2,405 8,102 8.50 8.75 20.9 Dec 04 21.4 90 Damovo Australia, Kyocera Mita Australia 2.5 15,245 38.3 38.9 95 Regal Business Park, Roweville, Vic 23.1 2,636 17,090 19,726 8.75 9.25 38.0 Nov 04 38.6 100 Blue Circle, Manassen Foods Link Business Park, North Ryde, NSW — Building A 0.9 3,888 1,675 5,563 8.25 8.50 14.0 Dec 04 14.3 100 Konica — Building B 0.8 6,344 1,187 7,531 8.75 9.25 20.3 Sep 04 21.4 99 Henry Walker Eltin, Global Payment Technologies 1.7 13,094 34.3 35.7 99 Forestridge Business Park, Frenchs Forest, NSW 1.6 13,605 3,687 17,292 9.50 10.25 33.1 Sep 04 35.7 79 Dell Computers, Prentice Hall Showground Business Park, Castle Hill, NSW 5.7 9,646 14,175 23,821 8.50 8.75 31.6 Dec 04 32.5 95 Tarkett Sommer Australia, Waterford Wedgwood Enterprise Park, Gladesville, NSW 3.8 6,070 15,614 21,684 9.00 9.50 31.5 Dec 04 31.7 95 American Express, Beckman Coulter Toyota Business Park, Port Melbourne, Vic 7.2 — — — — — 24.1 Mar 05 27.4 100 Toyota Australia Waterloo Business Park, North Ryde, NSW 1.6 7,466 4,806 12,272 9.00 9.25 23.8 Dec 04 24.6 86 Douglas Hanly Moir Pathology, Alberto Culver Ferntree Business Park, Notting Hill, Vic 4.1 10,637 4,323 14,960 8.50 8.75 23.6 Dec 04 24.2 77 Drager Australia, CSC, Thompson Grass Valley Queensport Quays Business Park, Murarrie, Qld 13.6 9,894 7,297 17,191 — — 5.5 Sep 02 20.9 100 Linfox, NHP, QML Seville Business Park, Villawood, NSW 2.7 4,908 15,773 20,681 9.00 9.25 17.5 Dec 04 18.0 93 Packcentre Paciﬁc View Business Park, Frenchs Forest, NSW 1.7 4,393 4,043 8,436 8.25 8.50 16.3 Jun 05 16.3 88 Pharmaxis, Linvatec Australia Orion Business Park, Lane Cove, NSW 0.6 3,165 3,320 6,485 8.50 8.75 13.0 Jun 05 13.0 88 Hypercom Australia, Kyocera Mita Australia Citylink Business Park, Port Melbourne, Vic 0.5 78 5,448 5,526 8.00 8.25 9.5 Dec 04 10.3 100 Isuzu, Lanier Australia Chase Business Park, Chatswood, NSW 0.4 2,663 963 3,626 9.25 9.75 10.2 (7) Sep 04 7.5 100 Evans and Peck, Hal Data Services

Office Parks Talavera Corporate Centre, North Ryde, NSW 4.1 21,880 — 21,880 7.75 8.25 33.0 Jan 02 129.1 100 CSC Australia Homebush Corporate Park, Homebush, NSW 13.2 5,800 46,467 52,267 8.50 9.00 33.0 Jan 02 110.9 100 Rural Fire Service CityWest Office Park, Pyrmont, NSW 1.0 25,904 — 25,904 8.50 8.25 102.7 Dec 04 104.9 96 Hutchison 3G, Macquarie Radio, Network Ten, Sydney FM Radio IBC Business Estate, Homebush, NSW 12.8 1,680 62,683 64,363 8.00 8.50 88.0 May 05 92.9 89 Bax Global, National Australia Bank, Woolworths, Neway Holdings Macquarie Corporate Park, North Ryde, NSW — Building A 1.6 8,845 2,279 11,124 8.00 8.75 33.0 Dec 04 33.4 100 ResMed — Building B 1.7 14,687 — 14,687 8.25 8.50 51.4 Dec 04 52.5 100 Fuji Xerox — Building C 0.6 510 1,030 1,540 10.75 11.00 5.0 Dec 03 5.6 100 Hicom International 3.9 27,351 89.4 91.5 100 Binary Centre, North Ryde, NSW 1.8 17,712 — 17,712 7.75 8.25 79.3 Jun 04 81.2 97 Hewlett-Packard, Volante St Leonards Corporate Centre, St Leonards, NSW 3.7 19,680 15,686 35,366 8.50 9.00 78.8 May 05 77.9 88 NSW Department of Education, LAN Systems, Interactive Warringah Corporate Centre, Frenchs Forest, NSW — Stage 1 1.6 13,309 — 13,309 8.75 9.00 41.4 Dec 04 43.7 76 Yum Restaurants — Stage 2 0.7 — — — — — 3.6 Dec 04 3.7 — Vacant Land 2.3 13,309 45.0 47.4 76 Cambridge Office Park, Epping, NSW 1.3 12,816 — 12,816 8.50 8.75 45.0 Dec 04 46.1 100 Baptist Community Services, Unilever Pinnacle Office Park, North Ryde, NSW — Stage 1 2.4 7,595 4,845 12,440 9.00 9.75 25.5 Sep 04 27.4 100 Fujitsu, National Australia Bank — Stage 2 0.5 — — — — — 3.5 Sep 04 6.3 — Vacant Land 2.9 12,440 29.0 33.7 100 Hurstville Office Park, Hurstville, NSW 0.9 10,018 — 10,018 9.25 9.50 29.6 Dec 04 30.2 87 NRMA Insurance Limited, Qantas Staff Credit Union The Precinct Corporate Centre, North Ryde, NSW 1.6 7,697 — 7,697 7.75 8.25 24.6 Dec 04 27.0 100 Telstra Corporation, Seven Sydney Air New Zealand House, Auckland 0.5 15,600 — 15,600 8.25 8.75 48.8 May 05 22.9 100 Air New Zealand Millennium Centre, Greenlane, Auckland — Phase 2 1.3 19,219 — 19,219 8.50 9.75 52.5 Oct 04 2.9 — — (8) — Phase 3 0.1 — — 771 — — 1.1 Mar 05 0.6 100 1.4 19,990 53.6 3.5 100 Central Park Corporate Centre, Greenlane, Auckland 1.4 — — — — — — — (9) 3.3 98 Vacant land

Suburban Commercial Buildings Ashﬁeld Corporate Centre, Ashﬁeld, NSW 0.6 9,705 3,317 13,022 9.00 9.25 37.7 (10) Dec 04 41.4 100 NSW Land & Housing Corporation Gordon Corporate Centre, Gordon, NSW 0.4 7,440 — 7,440 8.50 8.75 25.5 Dec 04 27.3 100 Sun Microsystems, HLA Envirosciences

(6) Stage 1 valued in July 03 and Stage 2 valued in Oct 03. (7) Reﬂects valuation on acquisition of entire building. (8) Currently under construction. (9) No independent valuation of vacant land. (10) Includes valuation of development land on acquisition Dec 99.

20 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Total Market Terminal Latest Lettable Capitalisation Capitalisation Independent Independent Book Value Site Area Ofﬁce Warehouse Area Rate Rate Valuation Valuation 30 June 2005 Occupancy Property Hectares sqm sqm sqm % % $M Date $M % Major Customers

21 PROPERTY PORTFOLIO CONTINUED

COMPLETED DEVELOPMENTS Lease Initial Estimated Practical Lettable Area Term Yield End Value Completion Property sqm Years % $M Date

Sydney West Campus Business Park, Homebush —Building A1 2,096 5 8.0 6.3 Sep 04 —Building A1 Heritage 6,128 10 7.9 9.3 Sep 04 —Café 307 0 7.7 1.3 Sep 04 —Building A2 8,664 7 8.1 12.8 Oct 04 —Building A3 1,500 5 8.1 4.1 Oct 04 —Building E1 4,072 3 8.1 4.4 Jul 04 —Building E2 6,898 3 8.0 9.9 Jul 04 —Building E3 690 — 8.0 2.8 Jul 04 Homebush Corporate Park, Homebush — Building 1 5,800 10 8.1 27.0 Sep 04 36,155 7 8.1 77.9

Sydney Outer West Cumberland Industrial Estate, Smithﬁeld — Building 3 10,300 5 9.2 13.0 Jan 05 Erskine Park Industrial Estate, Erskine Park — Building 1B 13,600 10 8.8 14.4 Feb 05 — Building 3A 27,700 5 8.2 30.6 Jun 05 — Building 2 9,200 10 8.5 10.6 Jun 05 GreystanesPark East, Prospect — Building 1A 11,700 10 8.2 15.5 Feb 05 GreystanesPark West, Prospect — Building 1 15,750 5 8.5 19.6 Feb 05 88,250 7 8.3 103.7

Victoria Chiﬂey Business Park, Mentone — Building 5B 5,200 10 9.2 3.4 Dec 04 — Building 4B (1) 5,800 10 8.3 4.7 Apr 05 Clayton Business Park, Clayton — Building 1 3,500 8 9.4 3.4 Aug 04 Northgate Distribution Centre, Somerton — Building 1B 13,900 2 10.1 9.8 Dec 04 — Building 2A 14,500 10 8.1 9.5 Sep 04 Westlink Distribution Centre, Laverton — Building 2 8,400 — 9.4 5.6 Jun 05 51,300 6 9.1 36.4

Queensland Acacia Link Industrial Estate, Acacia Ridge — Stage 2 4,190 5 8.8 4.3 Feb 05 Crestmead Distribution Centre, Crestmead — Building 1 36,150 15 8.3 28.8 Nov 04 Queensport Quays Business Park, Murarrie — Building 1 4,700 10 8.3 5.4 Jun 05 — Building 2 3,000 10 10.0 8.4 Jan 05 48,040 13 8.3 46.9

New Zealand Central Park Corporate Centre, Greenlane — Building 8 6,290 10 9.5 14.7 Jun 05 The Gate Industry Park, Penrose, Auckland — Building B1 5,200 15 10.6 6.2 Dec 04 — Building D2 4,800 9 9.7 4.1 Dec 04 16,290 11 10.1 25.0

Total 240,035 8.1 8.6 289.9

22 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 COMMENCED DEVELOPMENTS Lettable Lease Initial Estimated Area Term Yield End Value Property Stage Customer sqm Years % $M

New South Wales

Sydney North Talavera Corporate Centre, North Ryde C & D Toshiba, Sanoﬁ Aventis 17,250 10 and 5 8.0 71.8 17,250 8.0 71.8

Sydney West Campus Business Park, Homebush F1 Toshiba 7,500 10 8.0 10.8 F2 Uncommitted 11,730 — 8.0 16.9 19,230 4 8.0 27.7

Sydney Outer West Centenary Distribution Centre, Moorebank 2 Coates Hire 19,800 15 8.3 17.0 Erskine Park Industrial Estate, Erskine Park 1A Pickfords 14,549 15 8.0 17.3 GreystanesPark East, Prospect 1B Recall 20,074 15 8.8 37.1 MFive Industry Park, Moorebank 4A Salmat 15,000 15 8.1 20.9 69,423 15 8.4 92.3

Victoria Angliss Distribution Centre, Laverton 1&2 Fastline International 24,578 12 8.1 17.3 Chiﬂey Business Park, Mentone 3 Visy (Expansion) 3,310 10 8.9 2.1 Clayton Business Park, Clayton Westall Frontage Craftsman Press 8,246 15 8.5 9.1 36,134 13 8.4 28.5

Queensland Acacia Link Industrial Estate, Acacia Ridge Warehouse 3 AUSDOC 7,659 12 8.6 8.0 Warehouse 3 AUSDOC 2,200 12 8.7 2.3 Queensport Quays Business Park, Murarrie Building 3 QML Pathology 9,191 10 8.3 20.2 19,050 11 8.4 30.5

South Australia Edinburgh Distribution Centre, Edinburgh — Coles Myer 64,725 20 7.5 125.0 West Avenue Industrial Estate, Edinburgh — Johnson Controls 11,800 10 8.4 13.6 76,525 19 7.6 138.6

New Zealand Air New Zealand House, Auckland — Air New Zealand 15,600 11 8.3 49.0 Highbrook Business Park, East Tamaki, Auckland 1A Exel New Zealand 23,414 5 8.4 19.8 1B Exel New Zealand 5,860 1 8.4 4.4 Millennium Centre, Greenlane, Auckland Phase 2 Uncommitted 19,219 4 10.1 51.5 Savill Link Industry Park, Otahuhu, Auckland 3 Furniture City 6,850 10 8.7 7.8 The Gate Industry Park, Penrose, Auckland — Winstone Wallboards 7,334 15 8.6 9.6 78,277 7 9.0 142.1

Total 315,889 11 8.3 531.6

23 A-REIT Growth In Assets MGP Growth In Assets Assets Under Management Under Management Under Management A-REIT Asset Allocation Macquarie Goodman 68% A$4.70 billion 1800 A$M 500 A$M Logistics and Distribution 31% A-REIT 24% A$1.70 billion Business and Science Parks 25% MGP 8% A$0.55 billion High-Tech Industrial 23% Light Industrial 21% 1600 400

1200 300

800 200 MGP Asset Allocation Office Parks 48% Industrial Estates 19% Business Parks 13% FUNDS MANAGEMENT Development 12% 400 100 Warehouse/Distribution Centres 6% FEDEX BUILDING, SINGAPORE HSBC CENTRE, ALBANY, AUCKLAND IBM CENTRE, AUCKLAND Other 2%

0 0 Year 03 04 05 Year 03 04 05

Our funds management business A-REIT is ranked 29th by market Over the past year, a total of unit provides the capability to create, capitalisation amongst all listed 102,570 sqm of space (including manage and grow new property entities in Singapore and 5th amongst expansions) was leased, contributing funds for third party investors and listed real estate entities on the to an increase in the property portfolio provides our Securityholders with Singapore Exchange Limited (“SGX”). occupancy rate to 94%. Long-term stable income streams earned from The inclusion of A-REIT in a number leases make up about 47% of those management activities. The of leading indices affirms the markets A-REIT’s portfolio, with the balance external funds which we manage confidence in A-REIT which has represented by short-term leases allow Macquarie Goodman to provide grown its market capitalisation to in multi-tenanted properties. The other management activities to those A$1.7 billion. weighted average lease expiry profile funds such as development and increased from 4.6 years to 7.4 years A-REIT doubled its total assets under property services, from which we are over the past year. The significant management for the year ended 31 able to earn income streams. extension of the weighted average March 2005, to A$1.6 billion with the lease expiry provides stability to During the year, the business acquisition of 20 properties for A$800 A-REIT’s future income. unit increased its funds under million. To fund the acquisitions, management by $1.2 billion. A-REIT issued A$557 million in NEW ZEALAND Macquarie Goodman holds strategic new equity through a number of MGP achieved a number of significant cornerstone investments in its third placements during the year to both highlights in 2005. It enjoyed growth party managed listed property trusts, institutional and retail investors. in net profit after tax of 118.5% to MGP and A-REIT with interests of A$16.2 million, an increase in total A-REIT outperformed market 30% and 7% respectively. assets from A$206.0 million to expectations for the year delivering A$494.8 million, and entry into the SINGAPORE strong distribution growth of 17% NZX top 50 entity index, the NZSX50. A-REIT was Singapore’s first listed and a total return of 56% to its industrial property trust and is Unitholders. Unitholders were rewarded with managed by Ascendas-MGM Funds a total return of 27% for the year Management Limited, a 60/40 The attractive returns to A-REIT including a 19% increase in gross joint venture between Ascendas Unitholders was delivered through distributions per unit and an increase Pte Ltd and Macquarie Goodman active property management and the in the unit price to A$1.01. MGP respectively. acquisition of new properties to its finished the year with a market portfolio which has quadrupled since capitalisation of A$346.4 million as listing. As at 31 March 2005, A-REIT at 31 March 2005. owned 36 properties.

24 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 A-REIT Growth In Assets MGP Growth In Assets Assets Under Management Under Management Under Management A-REIT Asset Allocation Macquarie Goodman 68% A$4.70 billion 1800 A$M 500 A$M Logistics and Distribution 31% A-REIT 24% A$1.70 billion Business and Science Parks 25% MGP 8% A$0.55 billion High-Tech Industrial 23% Light Industrial 21% 1600 400

1200 300

800 200 MGP Asset Allocation Office Parks 48% Industrial Estates 19% Business Parks 13% Development 12% 400 100 Warehouse/Distribution Centres 6% Other 2%

0 0 Year 03 04 05 Year 03 04 05

During the year, Macquarie Goodman As at 31 March 2005, MGP In March 2005, Macquarie Goodman (NZ) Limited (“MGNZ”) proposed owned a portfolio of 20 properties, secured its first high quality property a number of changes to MGP to of which have projects currently in the region with the acquisition of position the fund for future growth. under construction and offer the Global Gateway Building in Tsuen The proposal was approved by greenfield development land to Wan, Hong Kong. The upper portion MGP Unitholders in March 2005 provide MGP with new high quality of the building has been purchased and resulted in a restructure of assets in the future. for A$125.7 million with the lower the management fees (including portion due to settle in August 2005 MGNZ’s management was able the introduction of a performance for A$122 million excluding acquisition to strengthen MGP’s portfolio with related fee), the purchase of certain costs. As part of the transaction, strong leasing activity of 66,352 sqm interests in properties from Macquarie Macquarie Goodman agreed to producing A$8.4 million in annual net Goodman and the alignment of acquire Global Gateway Group’s rental income. MGP’s portfolio had interests between Macquarie 60% share of the Ascendas-Global an occupancy rate of 99.5% and Goodman and MGP Unitholders Gateway building in Singapore for weighted average lease expiry profile through a 30% cornerstone A$11.3 million. The property is owned of 4.4 years. investment by Macquarie Goodman. jointly with Ascendas, Macquarie The expansion program and other Goodman’s existing joint venture The transaction included: business initiatives undertaken over partner in Singapore. > the acquisition of 16 previously the past year have consolidated our Since 30 June 2005, we continue co-owned properties for a position in the New Zealand market to identify new investment purchase price of A$210.3 million; place and has provided a foundation opportunities in the region and > the acquisition of seven for future success. have acquired a 44% interest projects under development ASIAN EXPANSION in Evergain Plaza, Kwai Chung, for A$66.4 million; Following the success of our joint Hong Kong for A$130.5 million. > the acquisition of a 50% interest venture with Ascendas Investment in development land for Pte Ltd (“Ascendas”) in listing These acquisitions are in line with A$5.9 million; and A-REIT on the SGX in November our strategy to expand our Asian > an institutional placement of 75.5 2002, Macquarie Goodman entered funds management business by million new units and a non- into a Joint Venture with Macquarie acquiring high quality assets renounceable Priority Entitlement Bank to pursue new property located in key industrial areas to Offer of 66.8 million new units funds management opportunities seed and launch a new Hong Kong raising A$140.2 million. in Asia. Under the JV Agreement, real estate investment trust by the Macquarie Goodman established an first half of 2006. office in Hong Kong, headed by Stephen Hawkins.

25 Brisbane 2 Macquarie Goodman Number of development properties 19,050 sqm 103,836 sqm MGP Number of development properties Under construction (1) Land bank remaining

(1) Committed as at 1 August 2005. (2) Includes MGP and Macquarie Goodman co-owned properties.

Sydney Auckland 10 3 4 (2) — 223,354 sqm 64,093 sqm 14,184 sqm 64,791 sqm 990,179 sqm 1,020,000 sqm 516,575 sqm —

Adelaide Melbourne 2 5 72,384 sqm 49,974 sqm 13,250 sqm 314,000 sqm

PROPERTY DEVELOPMENT * ARTIST’S IMPRESSION

EDINBURGH DISTRIBUTION CENTRE, EDINBURGH, SA* CHIFLEY BUSINESS PARK, MENTONE, VIC HIGHBROOK BUSINESS PARK, EAST TAMAKI, AUCKLAND*

HIGHLIGHTS Key development highlights committed with an average weighted The development division performed for the year included: lease term of 11.5 years and an strongly in the 2005 ﬁnancial expected yield on total project > securing the right to develop year, completing $301 million of costs of 8.3%. a major distribution facility for new development product and Coles Myer in Adelaide with Our development pipeline remains commencing $532 million in new the subsequent appointment in strong with a total of 2.96 million projects. The development pipeline July 2005 to develop a national sqm of vacant land available for also continued to grow with the distribution facility in Sydney; development in Australia and addition of 2.05 million sqm of New Zealand. The pipeline is well development land to the portfolio. > planning approval for the M7 serviced by key infrastructure, Business Hub site; and On a regional basis, Macquarie which facilitates the efﬁcient Goodman together with MGP has a > the successful acquisition of a 75% transportation of goods across total of 507,830 sqm of development interest in Highbrook development our customers’ distribution bases. product over 26 properties currently site in New Zealand. Our development pipeline is designed underway. These developments OPERATIONS AND ACTIVITIES to meet the changing needs of our have an estimated end value of During the year, 242,378 sqm of new customers and to facilitate their $795 million. space was completed in Australia growth and expansion. Our focus and New Zealand with an estimated remains on establishing a leading end value of $301 million, producing position in key industrial markets a yield on total project costs of 8.6%. along with developing strategic More than 97% of developments partnerships with major customers. were pre-committed to customers by practical completion, providing stable income returns to the portfolio. Macquarie Goodman, together with MGP, commenced 315,889 sqm of development works during the year with an estimated end value of $532 million. The projects are 88% pre-

26 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Our development team manages all elements of the development process which encompasses masterplanning, architecture, planning approvals, engineering, project management, lease pre-commitments and the commercial appraisal of properties.

Weighted Estimated Average Area Initial Yield End Value % of Total Lease Term Region sqm % $M Developments Years

Developments completed during the year include: New South Wales — Sydney West 36,155 8.1 77.9 26 7.0 — Sydney Outer West 88,250 8.5 103.7 35 7.0 Victoria 51,300 9.1 36.4 12 5.8 Queensland 48,040 8.3 46.9 16 12.6 Auckland 18,633 10.1 36.1 11 8.5 Total 242,378 8.6 301.0 100 8.0

Developments commenced during the year include: New South Wales — Sydney West 19,230 8.0 27.7 5 4.0 — Sydney Outer West 69,423 8.4 92.4 17 15.0 — Sydney North 17,250 8.0 71.8 14 5.1 Victoria 36,134 8.4 28.5 5 12.8 Queensland 19,050 8.4 30.5 6 10.7 South Australia 76,525 7.6 138.6 26 18.9 Auckland 78,277 9.0 142.1 27 7.2 Total 315,889 8.3 531.6 100 11.5

COLES MYER FACILITIES The CML pre-commitments are M7 BUSINESS HUB In June 2005, Macquarie Goodman consistent with our investment Macquarie Goodman continues announced that Coles Myer Limited objective to secure major tenants over to jointly develop the 150 hectare (“CML”) had signed a 20 year long lease terms and to provide business park in Sydney’s outer west, Agreement to Lease for a new a stable income stream. with Brickworks Limited. The site is in distribution centre in Edinburgh, close proximity to the M4 motorway HIGHBROOK BUSINESS PARK South Australia. with accessibility to be substantially During the year, Macquarie Goodman enhanced through its direct access On completion, the facility will contain commenced developing 153 to the Westlink M7 orbital, due for a 64,725 sqm regional distribution hectares of land on Auckland’s completion in April 2006. centre and is expected to be Waiouru Peninsula in East Tamaki. completed by February 2007. The The property will be developed Based on the current masterplan, facility will be developed on a 28.3 into a world-class business park M7 Business Hub will be developed hectare parcel of land and provides over the next seven years with an in stages over the next seven years to the opportunity for further expansion anticipated end value of $900 million. accommodate a variety of customers. to satisfy CML’s future requirements The property offers a capacity of To date, Macquarie Goodman has for the region. The facility is forecast 550,000 sqm of commercial and focused on land subdivision and to have an end value of $125 million industrial space, making it one of sales, together with the securing of producing an initial yield of 7.5%. the largest strategic industrial land major pre-commitments such as holdings in New Zealand. CML. In February 2005, Macquarie In July 2005, CML entered into Goodman announced the exchange another Agreement to Lease In December 2004, we secured of contracts for approximately 75% for its new Western Sydney Exel Logistics as our ﬁrst customer, of the ﬁrst land release. Stages 1, National Distribution Centre at M7 committing to a 30,000 sqm 2 and 3 comprise approximately 32 Business Hub at Eastern Creek. warehouse/distribution centre. hectares of land and pre sales have The 75,230 sqm facility is to be been secured over approximately 25 developed over 17 hectares with hectares, with sales revenue totalling an end value of $113 million. approximately $70 million. The largest pre sale is to Coca-Cola Amatil, which will develop its New South Wales logistics base on the site.

27 TALAVERA CORPORATE CENTRE, NORTH RYDE, NSW ANGLISS DISTRIBUTION CENTRE, LAVERTON NORTH, VIC CITYWEST OFFICE PARK, PYRMONT, NSW

PROPERTY SERVICES

Property services capabilities are provided throughout Australia, New Zealand and Hong Kong, with a team of 66 property services specialists managing 145 properties across the region. Key highlights of the core portfolio and MGP for the year include: > 377,000 sqm in leasing activity; > high occupancy rates; > stable lease expiry proﬁles; and > strong customer retention rates.

OPERATIONS AND ACTIVITIES The property services team had an active year in 2005, with intensive asset management delivering strong underlying property performance to both the core portfolio and MGP. Over 377,000 sqm in new leasing transactions were secured, and both portfolios enjoyed strong customer retention, high occupancy rates and stable lease expiry proﬁles. As at 30 June 2005 Core Portfolio MGP (1) Hong Kong

Number of properties 124 (2) 20 (2) 1 Number of customers 530 145 30 Leasing activity for year (sqm) 310,882 66,532 n/a Occupancy levels (%) 98 99 100 Weighted average lease term (years) 5.1 4.4 2.3 Retention - 12 months (%) 81 87 n/a

(1) Reﬂects the ﬁnancial year ended 31 March 2005. (2) Includes Macquarie Goodman and MGP co-owned properties.

28 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 The core focus of the Property Services team is the management of high quality industrial property and business space of both the core portfolio and MGP.

Signiﬁcant leases signed during the period are shown below: MAJOR LEASING HIGHLIGHTS Lettable Area Net Rent Lease Term Property Customer sqm $M PA Years

Campus Business Park, Homebush, NSW Samsung 12,127 1.4 5 Tranzport Distribution Centre, Port Melbourne, Vic Air International 11,820 1.3 10 Macquarie Corporate Park, North Ryde, NSW CCH 5,308 1.2 6 Federation Distribution Centre, Laverton North, Vic Fastline International 15,342 0.9 6 Slough Business Park, Silverwater, NSW Summit Technologies 7,693 0.9 5 Campus Business Park, Homebush, NSW Exel 6,898 0.8 3 Ferntree Industrial Estate, Notting Hill, Vic Onga 11,171 0.7 3 Ferntree Business Park, Notting Hill, Vic CSC Australia 4,286 0.6 10 Forestridge Business Park, Frenchs Forest, NSW Pearsons 2,478 0.5 10

These results display the positive momentum of the industrial property sector with continued demand for quality accommodation managed by a committed long-term landlord. Our team has built valuable property partnerships with both existing and new customers, which have assisted in strengthening our presence in the industrial and business space markets throughout Australia, New Zealand and Hong Kong. Our Customer Service Model is at the heart of our business. It is designed to identify the diverse property requirements of our customers and provide a complete property solution through a range of superior products and services. From sourcing and planning to creating and managing a customer’s property solutions, Macquarie Goodman’s approach is designed to deliver mutually proﬁtable partnerships with its customers over the long-term. Over the past year we have completed 42 leasing transactions with existing customers providing $35.0 million in net annual rental. This result is a testament to our Customer Service Model.

29 Funding Diversification Currency Mix Syndicated Multi-Currency Facility – secured 40% A$ 77% Commercial Mortgaged Backed Securities – secured 39% NZ$ 10% Colonial – secured 11% HK$ 8% Overseas – secured 10% S$ 5%

CAPITAL MANAGEMENT

We continued to strengthen our balance sheet through actively managing our capital structure and maintaining our gearing and hedging proﬁle within targeted levels. EQUITY We raised $565.2 million in new equity during the period, bringing our market capitalisation to $5.7 billion as at 30 June 2005. The equity was applied to the repayment of debt and to fund both the development pipeline and a number of acquisition opportunities. Amount Raised Securities $M Issued

Priority Entitlement Offer and Public Offer 458.4 125,924,433 Distribution Reinvestment Plan (“DRP”) (1) 38.1 10,209,433 Employee Security Acquisition Plan and Executive Option Plan 30.1 17,916,668 Conversion of Reset Preference Units (“RePS”) 29.0 9,907,181 Stapling mechanism (2) 9.6 967,794,042

(1) The DRP is in relation to the March 2005 quarter. (2) Issue of MGM shares to MGI Unitholders to enable the merger. Prior to stapling, MGI raised $30.7 DRP Over the last two quarters, the million from a successful Unit The DRP continues to be an Macquarie Goodman DRP price has Purchase Plan in August 2004 important source of funding for been calculated at a 2.0% discount and $92.5 million from the DRP. Macquarie Goodman. Subsequent to the average of the daily volume to the merger of MGI and MGM, weighted average price of all sales Priority Entitlement Offer and Public Offer Macquarie Goodman established a of stapled securities recorded on In April 2005, we announced a one new DRP allowing Securityholders to the ASX for each of the ﬁrst 10 ASX for 10 non-renounceable Priority reinvest their quarterly distributions trading days following the ASX trading Entitlement Offer and Public Offer. in further securities in the Group, at day after the record date in respect The initiative provided eligible a discount to market price. The plan of the relevant distribution. raised $38.1 million in May 2005 with Securityholders with the opportunity The issue price for securities under 47% of Securityholders participating to purchase additional securities in the DRP was as follows: Macquarie Goodman at a discount to in the plan. Quarter Reinvestment market price and without brokerage Ended Price Per Security and transaction costs. 31 March 2005 $ 3.7242 The Priority Entitlement Offer and 30 June 2005 $ 3.9299 Public Offer raised approximately $458.4 million at an application price of $3.64 per security. The offer was strongly supported by institutions and retail Securityholders with the funds used to assist Macquarie Goodman deliver its objectives of pursuing expansion opportunities in Australia, New Zealand and Asia.

30 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Interest Rate Hedging Profile (1) 1400 $M 6.6% 1200 6.5 1000 6.4 800 6.3 600 6.2 400 6.1 200 6.0 0 5.9 Year ended 30 June 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Amount hedged Average interest rate (1) Including line fees and margins.

RePS The Responsible Entity must provide Gearing Policy Since 28 May 2004, RePS Holders at least 45 business days prior written Macquarie Goodman maintained have had the opportunity to request notice to RePS Holders where it gearing levels within the target conversion of their RePS into units in intends to reset the terms on which gearing range of 35% and 40%. MGI and after 1 February 2005 into the RePS are to continue. Upon As at 30 June 2005, the total securities in Macquarie Goodman. receiving this notice, RePS Holders borrowing of the Group was MGF as Responsible Entity of may elect to convert their units or $1.9 billion, resulting in a 36% Macquarie Goodman Capital Trust retain them on the new terms. gearing level for the Group. This is (“MGA”) has, since 28 May 2004 had at the lower end of the target range, Debt the right (on receipt of a conversion leaving Macquarie Goodman well Macquarie Goodman manages request) to elect to convert, purchase positioned to continue to fund its a diverse range of debt financing or arrange the purchase of RePS from active development pipeline and arrangements to deliver the Group’s RePS Holders. property acquisitions. ongoing funding requirements in key To ensure that the merger of MGI geographic regions. Debt Hedging Policy and MGM did not adversely affect Interest rate exposures continue to Our intention is to continue to RePS Holders, the MGA Constitution be actively managed by Macquarie maintain a diverse range of finance and the RePS terms were amended Goodman. As at 30 June 2005, facilities and increase the weighted to allow RePS to be converted into 74% of Macquarie Goodman’s average life of debt expiring over the stapled securities. borrowings were hedged against next 18 months. movements in interest rates at an Further, at the time of the merger, Refinancing of Syndicated average cost of 6.0% per annum. RePS Holders were offered a one-off Debt Facility Interest rate risk is hedged over a opportunity to request and receive In July 2005, we established a new 10 year period with a weighted cash in return for their RePS. RePS $1.4 billion Syndicated Multi-Currency average duration of 3.7 years. Holders requested 492,302 RePS Facility which was used to refinance Currency Hedging be converted to cash and a further the existing MGI $1.1 billion Multi- The strength of Macquarie 88,176 RePS be converted to MGI Option Facility and MGM’s Facility and Goodman’s balance sheet has units prior to the merger. At 30 June will be used for the ongoing general provided Macquarie Goodman with 2005, 1,023,155 RePS remained purposes of Macquarie Goodman. on issue, including 492,302 RePS the capacity to fund all international purchased by MGI. The Facility, which was originally investments with the equivalent launched at $1.2 billion, received currency denominated debt. During the period from 1 July 2006 overwhelming support from This provides the Group with the until 30 June 2007, MGF as the banks, resulting in the significant capacity to maintain a natural Responsible Entity of MGA may elect oversubscription and upscaling hedge against fluctuations in foreign to convert, purchase, arrange the of the Facility. The purpose of the currencies and mitigate the exchange purchase of RePS from RePS Holders Facility is to diversify sources of rate risks for Securityholders. or reset the terms on which the RePS funding to include highly rated local It is also our policy to hedge net are issued. and international banks. It aims to income from international investments combine the funding requirements over a seven year period. of the Group and provide a robust foundation for Macquarie Goodman’s overall financing needs.

31 OUR PEOPLE

BOARD OF DIRECTORS SENIOR EXECUTIVES

32 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Our team’s strategic input into the management of Macquarie Goodman ensures Securityholders receive secure income returns and potential for capital growth.

33 BOARD OF DIRECTORS

MR DAVID CLARKE, AO DR DAVID TEPLITZKY MR GREGORY GOODMAN Chairman Independent Deputy Chairman Chief Executive Officer Appointed 26 October 2000 Appointed 21 November 1990 Appointed 7 August 1998 David is the Executive Chairman of David has a PhD and honours degree in Gregory is the Chief Executive Officer of Macquarie Bank Limited. He was Engineering and a Bachelor of Science. He Macquarie Goodman and is responsible previously Managing Director and is a retired Regional Director of American for its overall operations and the then Chairman of Macquarie Bank’s Cyanamid Company and the former implementation of the strategic plan. predecessor organisation, Hill Samuel Managing Director of Cyanamid Australia, He has 23 years of experience in the Australia Limited. David was educated Formica Australia Limited and Lederle property industry with significant expertise at Sydney University (BEcon (Hons)) Pharmaceuticals Limited. He is a member in the industrial property arena. Gregory and Harvard University (MBA) and of both the Audit and the Remuneration was a co-founder of MGI and has holds an honorary degree of Doctor and Nomination Committees of Macquarie played an integral role in establishing its of Science in Economics from Goodman. He is Executive Chairman specialist position in the market-place Sydney University (Hon DScEcon). of a venture capital company that is through various corporate transactions, David has extensive experience as a developing electric power generation including takeovers, mergers and chairman and is currently Chairman of from wave energy and a director of the acquisitions. Recently, he was involved Macquarie CountryWide Management public company, HiTec Energy Limited. in the merger of MGM and MGI and the Limited, Macquarie Office Management David has been active for many years repositioning of MGP in New Zealand. Limited and Macquarie ProLogis in venture capital and high-technology Management Limited, the management companies in Australia and South East companies of Macquarie CountryWide Asia as a consultant and director. Trust, Macquarie Office Trust and Macquarie ProLogis Trust. He is also Chairman of McGuigan Simeon Wines Limited, the Wine Committee of the Royal Agricultural Society of New South Wales, Sydney Advisory Board of the Salvation Army, Opera Australia Capital Fund and Sydney University Football Club Foundation.

MR JOHN HARKNESS MR JAMES HODGKINSON MS ANNE KEATING Independent Director Non-Executive Director Independent Director Appointed 23 February 2005 Appointed 21 February 2003* Appointed 23 February 2005 John is a Fellow of The Institute of James is an Executive Director of Anne was the General Manager, Australia Chartered Accountants in Australia and Macquarie Bank Limited and Joint for United Airlines from 1993 to 2001. the Australian Institute of Company Head of Macquarie Bank Group’s She was previously on the board of Directors. John was a partner of KPMG for Property Investment Management NRMA Insurance/IAG for eight years. 24 years, National Executive Chairman for Division. James’ responsibilities include Anne is now a professional director ﬁve years and retired from KPMG in June Macquarie Bank Limited’s ongoing with board positions in a range of 2000. Since retiring from KPMG, he has investment in Macquarie Goodman and industries including advertising, property, held a number of non-executive director he also has overall responsibility for construction and banking. She is on the roles. From March 2003 until January Macquarie Bank’s Property Investment 2004 he was a director of BresaGen boards of Macquarie Leisure Management Management’s activities in Asia. James Limited, STW Communications Group Limited. John is currently Chairman of Lipa was Chief Executive Ofﬁcer of Macquarie Pharmaceuticals Limited, ICA Property Limited and Spencer Street Station Industrial Trust for six years prior to that Redevelopment Holdings Limited. Anne is Development Funds, Helmsman Capital trust’s merger with MGI. James is also Fund and Sydney Foundation for Medical also a member of the Advisory Council of a director of Ascendas–MGM Funds ABN AMRO Australia and New Zealand. Research. He is a director of Macquarie Management Limited and Macquarie CountryWide Management Limited and Goodman (NZ) Limited. James has Crane Group Limited. John is President over 18 years experience in property of the Northern Suburbs Rugby Football funds management, investment Club Limited and a member of the Sydney banking and chartered accounting. Advisory Board of the Salvation Army. * Mr James Hodgkinson was appointed as an Alternate * Mr Harkness was not on the Board during the period Director to Mr David Clarke on 21 February 2003. he was employed at KPMG. He was appointed a Director on 14 June 2005.

34 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 MR PATRICK ALLAWAY MR IAN FERRIER, AO MR PATRICK GOODMAN Non-Executive Director Independent Director Non-Executive Director Appointed 23 February 2005 Appointed 1 September 2003 Appointed 14 April 1998 Patrick was educated in South Africa Ian is a co-founder of Ferrier Hodgson. He Patrick is the Managing Director before coming to Australia to attend is a Fellow of The Institute of Chartered of the Goodman Holdings Group, Sydney University where he attained a Accountants in Australia and has 41 years which is a major investor in Bachelor of Arts and Bachelor of Law. of experience in company corporate Macquarie Goodman. He is the Non-Executive Chairman of recovery and turnaround practice. Ian The diversified interests of the Reino International Limited, an Australian is also a director of a number of private Goodman Holdings Group initially parking systems technology and service and public companies. He is currently focused on direct and indirect property provider. Patrick is also Joint Managing Chairman of InvoCare Limited and development and has expanded to Director of Saltbush Funds Management Port Douglas Reef Resorts Limited include the management of a diverse Limited, a boutique funds management and a director of McGuigan Simeon portfolio across sectors covering group focused on the alternative asset Wines Limited and Reckon Limited. aviation, food, rural, private equity, class. He is also a director and trustee of His experience is essentially concerned listed equity, infrastructure and financial Giant Steps Endowment Fund, which was with understanding the financial and services throughout Australasia. established to raise funds for children with other issues confronting companies autism. Patrick has extensive experience Patrick is also a director of a which require turnaround management, number of property investment in senior management roles in international analysing those issues and implementing companies, including Citibank and and management companies both policies and strategies which lead to a in Australia and New Zealand. Swiss Bank Corporation, in Australia and successful rehabilitation. Ian has significant abroad. He was previously Managing experience in property and development, During his 25 year career, Patrick Director and an executive Board member tourism, manufacturing, retail, hospitality has had considerable public and of SBC Warburg Global Investment and hotels, manufacturing, infrastructure private company experience in both Bank, based in London (now UBS). and aviation and service industries. New Zealand and Australia.

MS LYNN WOOD MR STEPHEN GIRDIS Independent Director Alternate Director for Messrs David Appointed 23 February 2005 Clarke and James Hodgkinson Appointed 21 February 2003 Lynn obtained a MA (Psychology) from Sydney University and on MBA Stephen is an Executive Director of from the Australian Graduate School Macquarie Bank Limited and the Head of Management. She is a member of of Macquarie Property. He is or has the Foreign Investment Review Board, been a director or alternate director a compliance committee member of on many of Macquarie Property listed several major fund managers, a director and unlisted real estate funds. and vice president of the MS Society Stephen has over 23 years of of NSW and an executive coach. experience in chartered accounting, Lynn’s previous board memberships property finance, funds management include Schroders Australia Limited, and investment banking and is an Schroders Australia Property Management Associate of both The Institute of Limited, Sedgwick (Holdings) Pty Chartered Accountants in Australia and Limited, NSW Lotteries Corporation the Securities Institute of Australia. He and the Investment Funds Association is also a director of Macquarie Capital of Australia (now IFSA). Her career in Partners LLC, Macquarie’s global real financial services began at American estate investment banking joint venture. Express, including a posting in Hong Kong. Lynn was awarded the Centenary Medal for service to Australian society through business and finance in 2003.

35 SENIOR EXECUTIVES CORPORATE

MR DAVID VAN AANHOLT MR ANTHONY ROZIC MS CAROLYN SCOBIE Chief Operating Officer Chief Financial Officer Group General Counsel and David is the Chief Operating Officer of As Chief Financial Officer, Anthony is Joint Company Secretary Macquarie Goodman. He works closely responsible for Macquarie Goodman’s Carolyn is the Group General Counsel with the Chief Executive Officer and the financial management, taxation, and Joint Company Secretary of board on the strategic direction of the compliance and reporting obligations. Macquarie Goodman. She is directly business. David heads up Macquarie He has over nine years of experience responsible for the company secretarial Goodman’s investment program and has in the property investment industry and and corporate legal activities of the day-to-day responsibility for the project eight years of experience in the chartered Group. She also oversees all legal matters and development management team. accounting profession in Australia. Prior relating to property and compliance. He has over 17 years of experience in the to joining Macquarie Goodman, Anthony Carolyn has over 15 years of legal property industry including valuation, asset was Head of Finance for the Property experience in corporate and commercial management, development management Division of AMP Capital Investors Limited. property areas including three years and funds management. within the legal profession and six years as in-house Counsel with Kumagai Australia Group. She holds a Masters of Arts from Sydney University, a Bachelor of Arts/Bachelor of Laws from the Australian National University and a Graduate Diploma in Company Secretarial Practice. She is a member of Chartered Secretaries Australia.

MR MARK ALLEY MR DAMIEN SMITH MR JIM NEVILLE Chief Financial Officer, Asia and Corporate Finance Manager General Manager, People and Services Joint Company Secretary Damien manages Macquarie Goodman’s Jim is responsible for Macquarie Mark is Chief Financial Officer, Asia and internal analysis team and works closely Goodman’s human resources, IT and Joint Company Secretary of Macquarie with other members of the senior facilities management functions. He has Goodman. He is responsible for the overall management team providing advice over 30 years of professional experience financial management of Macquarie on the performance of the business in human resources management and Goodman outside of Australia and New and new business initiatives. Damien has held senior executive positions in Zealand. Mark has over 25 years of has 15 years experience in finance, major organisations including Colonial experience in finance, property investment property funds management and product State Bank and KPMG. Prior to joining and development in Australia, New development in Australia, Singapore and Macquarie Goodman, Jim consulted to Zealand, Asia and Europe. Previously, London. Damien holds a Bachelor of several organisations in the financial and he was the Group Financial Controller of Commerce and a Graduate Diploma in professional services sectors. Ipoh Limited and before that the Finance Applied Finance. Prior to joining Macquarie Director of a private group of property Goodman, Damien was the Fund Manager companies. Mark holds a Bachelor of for Lend Lease’s UK Funds. Commerce and Administration from Victoria University of Wellington, New Zealand. He is also a Fellow Certified Practicing Accountant with CPA Australia.

36 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 MR MICHAEL O’SULLIVAN MR NICK KURTIS Executive, Corporate Services Executive, Corporate Services Michael is responsible for managing the Nick is part of the Corporate Services due diligence processes of Macquarie team and is responsible for facilitating Goodman. He also manages its property and assisting with Macquarie Goodman’s advisory team and the development of major corporate transactions. He has its partnering arrangements to enhance been with Macquarie Goodman for six property product offerings to customers. years and prior to the recent merger He works closely with other senior of MGI and MGM, Nick’s primary role executives and the Board on all major was Fund Manager of MGI, in particular transactions. Michael has 18 years of responsible for the implementation experience in chartered accounting, and review of acquisition and leasing property finance and funds management, strategies and the overall financial and both locally and internationally including portfolio performance. Nick has 12 years 10 years with KPMG. He specialises in of experience in the property funds financial due diligence, corporate finance management industry. Prior to joining and structuring. Macquarie Goodman, he held various positions with PricewaterhouseCoopers, National Australia Bank and Tyndall Funds Management.

MS JAYNE GERRIE Corporate Communications Manager Jayne heads up Macquarie Goodman’s corporate communications, including media relations, brand management, advertising, website development and internal and external communications. She also manages investor relations, corporate and property related marketing campaigns and the customer relationship management program. Jayne has over 16 years of experience in the funds management industry and was previously employed as investor relations manager for Capcount Property Trust.

37 SENIOR EXECUTIVES CONTINUED

PROPERTY

MR CRAIG GOODMAN MR JOHN MARSH MR MATTHEW GIBB MR COLIN ROCKCLIFF Corporate Development Development Executive General Manager, Victoria Company Architect Manager, Asia Pacific John is responsible for Matthew is responsible Colin is the Company Architect Craig has over 15 years all development activities for acquisitions, property for Macquarie Goodman. He is of experience in property for Macquarie Goodman management, and development responsible for the planning and development, project in Australia. John is also projects throughout Victoria and design division of the Group, management and asset involved with key customer South Australia. Matthew has which encompasses master management in both Australia relationships on a national and over 12 years of experience in planning of estates, planning and New Zealand. Craig is international level regarding the property industry and was approvals, building design for responsible for new developments all aspects of their property previously a member of the development approvals and in Asia and establishing and development requirements. national industrial development ongoing design management of managing strategic relationships John has over 11 years of team for Jones Lang LaSalle. external consultant architects or with Macquarie Goodman’s experience in the property Matthew holds a Bachelor of design and construct contractors. customers throughout the Asia industry including previous roles Business in Property (Valuation Colin’s career, spanning 27 years Pacific region. at Walker Corporation and as and Agency) from the University in Australia and overseas, has General Manager, Commercial of South Australia. He is an embraced a broad spectrum of Development at Australand Associate of the Australian property related disciplines with Limited. John has a Bachelor Property Institute (Land leading architectural, property of Architecture degree from Economics) and a Licensed Real development and consulting firms Sydney University. Estate Agent and Member of the Real Estate Institutes for both Victoria and South Australia.

MR JOHN KUHN MR MURRAY BARCLAY MR TONY D’ADDONA Manager, Development Projects Project Director, General Manager, John is the manager responsible Highbrook Development Group Property Investments for the delivery of development Limited, New Zealand Tony is responsible for the projects in New South Wales Murray is Project Director for overall operations of Macquarie and Queensland. John is also Highbrook Business Park, Goodman investments. He responsible for the management a 153 hectare business park oversees the property services, of capital expenditure projects located close to the Auckland department stafﬁng requirements, within the existing portfolio. He CBD. Murray oversees all implementation of leasing and has over 20 years experience aspects of Highbrook including capital expenditure strategies, in property and construction the Highbrook Park Trust, a co-ordination of valuations and with a further six years in retail, special purpose trust established the operating performance of ﬁnancial services and information to administer the park areas the existing assets of Macquarie technology including 14 years of Highbrook, which total Goodman. Tony is also involved with Lend Lease. John holds 40 hectares. Prior to joining in acquisitions and disposals of an MBA (Executive) from the Macquarie Goodman, Murray assets. Tony has over 13 years Australian Graduate School of was General Manager- of experience in the property Management. Commercial for Auckland industry and has been with the International Airport and Group for over six years. He more recently CEO for Urbus previously held positions in both Management Limited. asset and portfolio management with Jones Lang LaSalle.

38 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 FUNDS MANAGEMENT

MR STEPHEN HAWKINS MR JOHN DAKIN MR TAN SER PING Chief Executive Officer, Asia Chief Executive Officer, New Zealand Chief Executive Officer, Stephen is responsible for Macquarie John is responsible for Macquarie A-REIT, Singapore Goodman’s operations in Asia. Previously, Goodman’s operations in New Zealand Ser Ping works with the Executive he worked with the Ascendas-MGM and is responsible for the overall Committee of A-REIT to determine the Funds Management Limited team in management and operations of MGP. business strategies and plans for the Singapore on the successful listing of John has 17 years experience in the future strategic development of the A-REIT and subsequent strategic growth property industry, including experience in Trust. He works closely with the of its asset base. He now heads up the valuation, research, asset management, members of the A-REIT team to ensure Hong Kong office with the objective of funds management and acquisitions that A-REIT is operated in accordance pursuing funds management opportunities and has held senior roles in the United with the stated business strategy. focused on industrial and business space Kingdom, Australia and New Zealand. He Previously, he was the Executive Vice properties in Asia. is a former national director of the Property President of Real Estate Development Previously, Stephen held positions in Council of New Zealand and prior to and Investment of Ascendas Pte Ltd. property funds management at Suncorp- joining Macquarie Goodman (NZ) Limited Before joining Ascendas, Ser Ping was Metway Bank and the Westfield Group in he was with the Colonial First State the Senior General Manager for the Australia. He has 18 years of experience Property Group. Residential and Commercial Business in chartered accounting, property finance Group of Singapore Suzhou Industrial and funds management. Park Development Company Ltd. He also held senior positions in various banks. Ser Ping has an MBA from the University of Leicester, United Kingdom and is an honours graduate with a Bachelor of Accountancy from the National University of Singapore.

39 CORPORATE GOVERNANCE

Corporate governance is the system by which companies 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT are directed and managed. It influences how the objectives AND OVERSIGHT of the Group and its controlled entities are set and Macquarie Goodman has adopted an overall corporate achieved, how risk is monitored and assessed, and how governance framework that is designed to meet best performance is optimised. practice and recognises that an effective corporate governance culture is critical to success. The Board of The ASX published Principles of Good Corporate Macquarie Goodman is responsible for all aspects of the Governance and Best Practice Recommendations in management of the Group and has ultimate responsibility March 2003. The Guidelines articulate 10 core principles for its corporate governance practices. that the ASX believes underlie good corporate governance. The Board has adopted a charter that is focused on giving Under the ASX Listing Rules, listed entities are required to direction and the exercise of critical but independent provide a statement disclosing the extent to which they judgement in setting Macquarie Goodman’s objectives have followed these best practice recommendations in the and overseeing their implementation. The Board’s reporting period. functions include: Entities are also required to disclose practices that > appointment of the Chief Executive Officer differ from the ASX recommendations and explain of Macquarie Goodman; why those practices are followed instead of the ASX > setting strategic direction; recommendations. > reviewing progress on strategy; Macquarie Goodman’s corporate governance practices > developing key policies which impact on generally accord with the ASX recommendations with Macquarie Goodman; the exceptions being the ongoing involvement of David > approving strategic alliances; Clarke as the non-executive Chairman of the Board and > monitoring organisational performance against set targets; the Remuneration and Nomination Committee, and a > ensuring compliance with statutory, financial and social period during the year when the Board determined that it responsibilities; and and one of its committees did not comprise a majority of > ensuring business risks are appropriately identified and independent directors. managed. The reason for the deviations from the ASX Corporate Macquarie Goodman has developed and implemented Governance Guidelines are set out in papers 41, 42 and formal letters of appointment for Directors, in order to 47 of this Report. ensure that the Directors clearly understand corporate The statement following outlines the ways in which expectations of them. Each letter outlines the terms of the Macquarie Goodman has addressed those corporate Director’s appointment and includes matters such as their governance guidelines. powers and duties, attendance at meetings, remuneration, Board Committees, induction and continuing education, disclosure of interests, and removal and resignation. The Board is responsible for the continuing growth and success of Macquarie Goodman. To this end, the Board monitors management’s performance on behalf of Securityholders and is engaged with management to ensure the appropriate development and execution of Macquarie Goodman’s strategy. The Board has developed a statement of delegated authority to management. This delegated authority stipulates which matters are dealt with by the Board and which matters are the responsibility of management. It includes areas such as finance, corporate matters and property transactions. The statement also identifies the financial limits which relate to each level of authority and the relevant authority holder. Mr Gregory Goodman is the Chief Executive Officer. The terms, conditions and responsibilities of his role are established in a formal deed between Mr Goodman and Macquarie Goodman. Mr Goodman’s role as Chief Executive Officer includes encouraging his management team to deliver the strategy devised by the Board and by management. His role also requires an intimate knowledge of all aspects of the business and the communication of the strategy to stakeholders.

40 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 2 – STRUCTURE THE BOARD TO ADD VALUE Macquarie Goodman is the combined entity produced by the stapling, in February 2005 of MGM and MGF. The Boards of MGM and MGF meet jointly as the Board of Macquarie Goodman. As a result of the merger, both Boards comprise the same Directors as shown below. The Boards of MGF and MGM have 10 Directors and one alternate Director. The composition of the Boards as at 30 June 2005 is shown below: Appointed Appointed Independent Name Description to MGF to MGM Yes No

Mr David Clarke Chairman 26 October 2000 26 October 2000 • Dr David Teplitzky (1) Independent Deputy Chairman 23 February 2005 21 November 1990 • Mr Gregory Goodman Chief Executive Ofﬁcer 17 January 1995 7 August 1998 • Mr Patrick Allaway (2) Non-Executive Director 27 May 2003 23 February 2005 • • Mr Ian Ferrier Independent Director 23 February 2005 1 September 2003 • Mr Patrick Goodman Non-Executive Director 23 February 2005 14 April 1998 • Mr John Harkness (3) Independent Director 1 September 2004 23 February 2005 • Mr James Hodgkinson (4) Director 14 June 2005 21 February 2003 • Ms Anne Keating Independent Director 6 February 2004 23 February 2005 • Ms Lynn Wood Independent Director 30 December 2002 23 February 2005 • Mr Stephen Girdis Alternate for Mr Clarke and Mr Hodgkinson 14 June 2005 21 February 2003 •

(1) Dr Teplitzky was appointed to the Board of Triden Pty Ltd in 1990. Triden subsequently changed its name to Macquarie Goodman Management Limited. Dr Teplitzky has only worked with the current management team of Macquarie Goodman since 1998. (2) Mr Allaway ceased to be considered as an independent director after he entered into business arrangements with Macquarie Bank Limited during the year. (3) Mr Harkness was not on the Board during the period he was employed at KPMG, while Mr Harkness was a partner of that ﬁrm whilst it was engaged to conduct the Audit of group entities, he was not involved in these Audits. (4) Mr Hodgkinson was appointed as Alternate Director to Mr Clarke on 21 February 2003. He was appointed a Director on 14 June 2005.

The Boards of MGM and MGF were merged as part > is free from any interest and any business or other of the stapling process. The combined Board is not a relationship which could, or could reasonably be majority independent Board. However, it was announced perceived to, materially interfere with their ability to act at the time of the merger that in order to capture the in the best interests of Macquarie Goodman. accumulated knowledge and experience of both Boards The Board considers that a material professional adviser and to facilitate the orderly transfer of information in or material consultant is one that derives more than 5% respect of the entities after the merger, Macquarie of their revenue from Macquarie Goodman. The Board Goodman would retain all previous directors from both considers that a substantial Securityholder would hold Boards for a period. It was also confirmed at that time that more than 10% of Macquarie Goodman. the Board would return to a majority independent Board by the Annual General Meeting in November 2005. It is still The skills and experience of each of the Directors are intended that this restructure will be in place by this time. summarised in the Board of Director Biography section of this report. Criteria for Assessing Independence Macquarie Goodman has assessed its Directors for Independent Decision Making independence using the definition of independence The Board has adopted policies which require the provided in the ASX Corporate Governance Guidelines. independence of Directors be assessed annually and that To be classed as independent, a Director: Directors inform the Chairman prior to accepting new Board appointments. Directors are required, annually, to > is not a member of management; confirm their ability to adequately perform their role. They > is not a substantial Securityholder of Macquarie are entitled to take independent legal advice at Macquarie Goodman; Goodman’s expense should they believe it necessary for > is not associated directly with a substantial the adequate performance of their role. Securityholder of Macquarie Goodman; > has not, within the past three years, been employed in The Independent Directors have also formed an an Executive capacity by Macquarie Goodman or been Independent Directors’ Committee which met during a Director after ceasing to hold such employment; the year without management present to discuss > has not, within the past three years, been a principal of relevant issues. a material professional adviser or a material consultant Chairman to Macquarie Goodman or an employee materially The Chairman, Mr David Clarke, has been a Non- associated with the service provider; Executive Director since October 2000. Mr Clarke does > is not a material supplier or customer of Macquarie not satisfy the definition of independence published in Goodman; the ASX Corporate Governance Guidelines. However, > has not had a material contractual relationship with Mr Clarke brings extensive experience and in-depth Macquarie Goodman other than as a Director of knowledge to the role of Chairman, as well as skills and Macquarie Goodman; experience in the fields of finance, corporate advisory and > has not served on the Board for a period which could, accounting. Macquarie Goodman has appointed a number or could reasonably be perceived to, materially interfere of independent directors to the Board as well as to key with their ability to act in the best interests of Macquarie positions on Board Committees and these independent Goodman; and Directors effectively review and assess the performance of management and exercise critical judgement. 41 CORPORATE GOVERNANCE CONTINUED

2 – STRUCTURE THE BOARD TO ADD VALUE CONTINUED The members of the Committee and their attendance Chairman Continued at meetings is shown in the table below: Macquarie Goodman considers that the introduction of an Director Eligible to Attend Attended independent Chairman would not adequately compensate Macquarie Goodman for the loss of Mr Clarke’s valuable Mr David Clarke, Chairman 3 3 contributions. Dr David Teplitzky 3 3 Mr Gregory Goodman 3 3 The Chairman’s role as leader of the Board includes Mr Ian Ferrier 1 1 ensuring that the Board functions as an effective and Ms Anne Keating 1 1 cohesive group as well as working with the Chief Executive Officer to determine the strategic direction for Macquarie Mr Ferrier and Ms Keating were appointed on 14 June Goodman. The Chairman establishes high standards of 2005 and consequently were not eligible to attend all corporate governance as well as taking an indispensable meetings of the Committee. role in strategic development and leadership. The role also Term of Appointment includes formulation of the Board meeting agendas and Macquarie Goodman has developed formal letters of papers and management of Board meetings to ensure the appointment for Directors. The letters outline the terms best performance of each participant. The Chairman acts of the Director’s appointment including tenure. Non- as a representative of, and spokesperson for, the Board. Executive Directors are subject to re-election by rotation Macquarie Goodman has appointed Mr Ian Ferrier as at least every three years and new Directors appointed to both independent Chairman of the Audit Committee the Board are required to seek election at the first general and lead independent Director, to further strengthen the meeting of Securityholders following their appointment. composition of the Board. 3 – PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING Separation of Roles of Chairman and Chief Executive Officer Macquarie Goodman has clarified the standards of The roles of Chairman and Chief Executive Officer have ethical behaviour expected of Directors, key executives been separated at Macquarie Goodman. This separation and employees and requires the observance of those avoids concentrations of influence and increases standards. Macquarie Goodman has implemented a accountability to stakeholders. Code of Conduct and Gifts, Conflicts of Interest and Securities Trading policies to provide guidance as to the The Chief Executive Officer is Mr Gregory Goodman. practices necessary to maintain confidence in Macquarie Mr Goodman’s role as Chief Executive Officer is to support Goodman’s integrity. These are summarised below: and encourage his management team to deliver the strategy developed by the Board and management. His Code of Conduct role involves an intimate knowledge of all aspects of the The Code outlines the ethical standards and personal business, communication of operational results to the conduct expected of all Directors, Committee members Board, and communication of strategy to the Board, the and employees and makes compliance with these management team and other stakeholders. standards a condition of appointment and ongoing employment. Expectations regarding the treatment Remuneration and Nomination Committee of confidential information and adherence to trading The Board of Macquarie Goodman has established a blackouts are made explicit. The Code expressly states combined Remuneration and Nomination Committee. that employees must not breach the insider trading rules The purpose of the Committee is to: set out in the Corporations Act 2001. The Code charges > identify and recommend individuals to the Board all employees with responsibility for reporting unethical for nomination as members of the Board and its or corrupt conduct. Committees; The Code is provided to Directors and all staff > ensure performance of members of the Board is upon appointment. reviewed; Gifts Policy > develop and recommend to the Board relevant corporate governance principles; All Directors and employees are prohibited from accepting payment or any other benefits in money or in kind from > ensure an appropriate Board and Committee structure is in place so that the Board can perform a proper third parties as an inducement or reward for any act or review function; in connection with any matter or business transaction undertaken by or on behalf of Macquarie Goodman. All > review and make recommendations to the Board in respect of the administration of Macquarie Goodman’s Directors and employees must exercise extreme care remuneration programs; when giving or receiving business related gifts and are requested to disclose any substantial business related > review and make recommendations to the Board in respect of the approval and remuneration of senior gifts. Whether a gift may be accepted or given will depend executive officers and Non-Executive Directors; upon a number of factors including: > prepare for approval by the Board any report on > the monetary value of the gift; Executive remuneration that may be required by > the circumstances surrounding the giving or receiving of any listing rule, legislation, regulatory body or other the gift; and regulatory requirements or proposed for inclusion > whether the gift could be perceived as being in any Annual Report; and unreasonable, excessive or imposing a right on the giver > report regularly to the Board on each of the or an obligation on the recipient. above matters.

42 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Conflicts of Interest Policy Prior to the establishment of the Macquarie Goodman Macquarie Goodman has put in place arrangements Audit Committee, MGM and MGI had separate Audit to identify, assess, manage and report on the types Committees. A summary of the members of both of conflicts of interest which it anticipates will affect or Committees and their attendance at meetings is shown arise from its business. These arrangements include in the table below: mechanisms to: MGM Audit Committee > identify conflicts of interest; Director Eligible to Attend Attended > manage conflicts of interest by assessing and evaluating identified conflicts of interests (or potential conflicts Mr Ian Ferrier 3 3 of interest) and deciding upon and implementing, an Dr David Teplitzky 3 3 appropriate response to those conflicts; and Mr Patrick Goodman 3 3 > maintain written records which demonstrate how MGF Audit Committee Macquarie Goodman manages conflicts which occur. Director Eligible to Attend Attended Directors, consultants and employees are required to comply Ms Anne Keating 3 3 with the Conflicts of Interest Policy. Ms Lynn Wood 3 3 Securities Trading Policy Mr Patrick Allaway 2 2 Macquarie Goodman issued the Policy to raise awareness Mr John Harkness 1 1 about the insider trading provisions in the Corporations Act 2001 and to strengthen those requirements with additional Responsibilities compliance standards and procedures for Directors and The purpose of the Audit Committee is to assist the employees who wish to trade in Macquarie Goodman’s Board of Directors fulfil its legal and corporate governance securities. The policy prohibits Directors and employees responsibilities in relation to: from trading when in possession of inside information and > financial reporting principles and policies, controls and also prohibits the communication of that inside information procedures; to any other person who is likely to purchase or sell Macquarie Goodman’s securities or who is likely to procure > the integrity of Macquarie Goodman’s financial a third party to purchase or sell Macquarie Goodman’s statements and the independent external auditor securities. thereof, and Macquarie Goodman’s compliance with legal and regulatory requirements relating thereto; The Policy is provided to Directors and employees on their appointment. All Policies are permanently available on > the audit functions and committees of any entity within Macquarie Goodman’s intranet site to staff and Directors. Macquarie Goodman; and 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING > any due diligence and prudential supervision procedures Statement to the Board required by regulatory bodies. The Chief Executive Officer and the Chief Financial The Committee may consider any matter which falls within Officer are required to confirm to the Board in writing that the roles and responsibilities delegated to it by the Board, Macquarie Goodman’s financial reports present a true and notwithstanding that the particular matter(s) may have fair view, in all material respects, of Macquarie Goodman’s been previously referred to and considered by another financial condition and operational results and are in Board Committee. accordance with relevant accounting standards. Subject to any resolution of the Macquarie Goodman Audit Committee Board, the Committee has the power delegated by the Macquarie Goodman has established an Audit Committee Board to do all things necessary to perform its duties and which operates under a formal charter. The charter sets fulfil its purpose including: out the Committee’s role and responsibilities, composition, structure and membership requirements. > approving principles, policies, strategies, processes and control frameworks for the management of audit Committee Structure matters; and As at 30 June 2005, the Macquarie Goodman Audit Committee is chaired by Mr Ian Ferrier. The other members > sub-delegate its powers and discretions to Executives of the Committee are Dr David Teplitzky and Mr James of Macquarie Goodman, with or without the power Hodgkinson. All three members of the Committee are to delegate further. Non-Executive and the majority of the members are The Committee has unlimited access to the Executives independent Directors. A summary of the members of of Macquarie Goodman, external auditors and internal the Audit Committee and their attendance at meetings is auditors. shown in the table below: Reporting Macquarie Goodman Audit Committee The Audit Committee reports to the Board on the outcome Director Eligible to Attend Attended of its reviews and discussions with the external auditors Mr Ian Ferrier 1 1 and its findings on matters which have or are likely to Dr David Teplitzky 1 1 have a material impact on the operating results or financial Mr James Hodgkinson 1 1 position of Macquarie Goodman.

43 CORPORATE GOVERNANCE CONTINUED

5 – MAKE TIMELY AND BALANCED DISCLOSURE The Board regards the meeting as an excellent forum Macquarie Goodman is committed to providing timely, in which to discuss issues relevant to Macquarie balanced and readily available disclosure of material Goodman. The Board encourages the full participation information to Securityholders, the investing community of Securityholders at these meetings to ensure a high generally, other stakeholders and regulators. Macquarie level of accountability and identification with Macquarie Goodman is also committed to ensuring the transparency Goodman’s strategy and objectives. of those communications. Macquarie Goodman requires its external auditors to Macquarie Goodman has developed and implemented a attend the meeting and be prepared to answer questions Continuous Disclosure Policy that outlines the procedures from Securityholders about the conduct of the audits as followed internally to ensure timely and full disclosure of well as the preparation and content of the independent material through the ASX. audit report. Compliance with the Policy is monitored on a monthly Macquarie Goodman’s Independent Directors also play basis by internal compliance audits. The Policy is also an important role in protecting the rights of minority monitored quarterly through external compliance audits. Securityholders. Information on continuous disclosure is provided to 7 – RECOGNISE AND MANAGE RISK all employees on commencement of employment Effective risk management is a fundamental part of and reminder emails on the Policy are forwarded to all Macquarie Goodman’s business strategy and is central to employees at least annually. protecting Securityholders’ interests. Macquarie Goodman Any enquiries regarding the continuous disclosure operates within overall guidelines and specific parameters requirements are directed to Group General Counsel in set by the Board. the first instance. ASX announcements are coordinated The Board has established several Committees which by the Group General Counsel and Corporate ensure the monitoring of risk. A summary of the work of Communications Manager. Macquarie Goodman also those Committees is set out below: relies on the input and sign-off of key employees in each division to which the ASX announcement relates. Risk Committee The purpose of the Committee is to assist the Board Macquarie Goodman’s website contains ASX and fulfil its corporate governance and oversight media releases, newsletters, annual reports and frequently responsibilities in relation to: asked questions. > internal risk management systems; 6 – RESPECT THE RIGHTS OF SECURITYHOLDERS > business continuity planning and support processes; Macquarie Goodman has implemented a number of > internal and external audit functions; and processes in order to facilitate the effective and efficient > internal compliance systems. exercise of the rights of all Securityholders. The members of the Risk Committee are: Macquarie Goodman communicates information to Securityholders through a range of media, including annual > Mr John Harkness, Chairman; reports, newsletters, general communications and ASX > Mr Patrick Goodman; and announcements. Key financial information and stock > Mr Gregory Goodman. performance are also available on Macquarie Goodman’s The Committee is currently comprised of a majority of website. Securityholders can raise questions by Non-Executive members as these Directors have been contacting Macquarie Goodman by telephone, facsimile, determined by the Board to have a particular expertise email or post. Contact details are provided on the in the monitoring and management of risk. Macquarie Goodman website and on the back cover of this Annual Report. The Board has adopted a Risk Management Policy and Plan which establishes policies on risk oversight The Communications Strategy is available on Macquarie and management. The Plan outlines the roles and Goodman Group’s website. responsibilities of key risk management personnel, risk Securityholders are invited to attend the Group Annual reporting procedures, the process for identifying and General Meeting either in person or by proxy. The assessing risks and risk controls, and the process for meeting is webcast to further inform Securityholders monitoring and reviewing risk management controls. who are unable to attend and the address of the The risks are reviewed and reported against on a Chairman is immediately announced to the ASX. Voting quarterly basis. results (including a summary of proxy voting) on matters Risk is further monitored at an Executive level by an considered at the meeting are released to the ASX as Executive Risk Management Committee. This Committee soon as they are determined. meets monthly and at other times when required and its findings are reported to the Risk Committee of the Board. The Audit Committee has, as part of its charter, a formal role in the oversight of risk management practices within Macquarie Goodman, with an emphasis on financial risk management.

44 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 MR MICHAEL BRAHAM MS LYNN WOOD MR RAY KELLERMAN MR NICK KURTIS

Compliance Committee Due Diligence Committee Further, Macquarie Goodman has, since January 2000, The Board establishes a Due Diligence Committee had a majority independent membership of its Compliance whenever an offer document, such as a prospectus or Committee to monitor MGF performance of its duties as a information memorandum, is to be issued by Macquarie Responsible Entity. The Committee members are: Goodman. The Due Diligence Committee will usually include at least one independent Director of Macquarie > Mr Michael Braham, Chairman and Independent Goodman and other personnel considered relevant and Member; appropriate for that particular transaction. > Ms Lynn Wood, Independent Director; > Mr Ray Kellerman, Independent Member; and Internal Audit > Mr Nicholas Kurtis, Non-Independent Member Macquarie Goodman has outsourced its internal (a member of Macquarie Goodman’s senior audit function to Horwath (NSW) Pty Ltd, an external executive team). third party service provider. The internal audit function involves a rolling program of reviews and control testing The Committee meets quarterly and reviews compliance of Macquarie Goodman’s business processes. The with the Compliance Plan and the Australian Financial findings of the internal auditor are regularly reported to Services Licence. The Curriculum Vitaes of the the Audit Committee and management responds to the Committee’s members are set out below. recommendations of the internal auditor with improved Mr Michael Braham, Chairman, processes wherever necessary. and Independent Member Executive Confirmations Michael is chairman and director of several listed and The Chief Executive Officer and the Chief Financial Officer unlisted companies and he is also a member of various have provided the Board with written confirmation that: compliance committees. Formerly, he was a partner of a major accounting firm, investment banker and Regional > the statement given to the Board on the integrity of Commissioner for New South Wales with Australian Macquarie Goodman’s financial statements is founded Securities and Investment Commission (“ASIC”). on a sound system of risk management and internal compliance and control which implements the policies Ms Lynn Wood, Independent Director Please refer to page 35 of this Annual Report. adopted by the Board; and Mr Ray Kellerman, Independent Member > Macquarie Goodman’s risk management and internal Ray has over 15 years of experience in the funds compliance and control system are operating efficiently management and corporate and structured finance and effectively in all material aspects. industries. He has specialised in legal and compliance These statements are based on a Group wide and activities and worked on some of Australia’s largest broad ranging series of annual confirmations from senior and most complex funds management, infrastructure executives and department heads in regard to the financial and project financings. He was with Perpetual Trustees integrity, risk management and internal compliance and Australia for 10 years before establishing his own control systems within each department. compliance consulting and advisory business in 2001. Ray currently acts as a compliance committee, audit and risk committee member and director for a number of major fund managers and financial institutions. Mr Nick Kurtis, Macquarie Goodman Executive Please refer to page 37 of this Annual Report. Compliance Officer Ms Sheelagh Callaghan is the Compliance Officer and Secretary to the Committee. The Compliance Officer is responsible for reviewing and monitoring the efficiency of the compliance systems on an ongoing basis and for reporting on the results of these activities to the Compliance Committee.

45 CORPORATE GOVERNANCE CONTINUED

8 – ENCOURAGE ENHANCED PERFORMANCE Directors are also provided with regular tours of the Performance Evaluation properties of Macquarie Goodman. The Remuneration and Nomination Committee is Directors and senior executives are encouraged to charged with the responsibility for ensuring that the participate in further education. Macquarie Goodman performance of Directors is reviewed. Its charter includes reimburses the costs of further education which is relevant developing and recommending to the Board relevant to the Director or Executive’s role in Macquarie Goodman. corporate governance principles and ensuring that an appropriate Board and Committee structure is in place Information on the training undertaken by the responsible so that the Board can perform a proper review function. officers is reported to the Compliance Committee on a The Committee is required to assess the necessary and quarterly basis. desirable competencies of Board members, develop and Access to Information review the Board succession plan, evaluate the Board’s Macquarie Goodman has a formal policy allowing Directors performance and recommend the appointment and to take independent legal advice at Macquarie Goodman’s removal of Directors. expense should they believe it necessary for the adequate The Board reviews its performance and that of its performance of their role. Committees every two years. An assessment of the The Company Secretaries are always available to the performance of each of the Boards of MGM and MGI Directors to provide them with information or clarification was conducted during the year ended 30 June 2004. as required. The process for conducting this review consisted of the Directors completing a self-assessment questionnaire, Joint Company Secretaries which also elicited comments and key issues the Director Ms Carolyn Scobie wished to raise at that time, the Chairman has also met Ms Scobie is a solicitor with more than 15 years with each Director individually to discuss their Board experience and has completed a Graduate Diploma in participation. Company Secretarial Practice with Chartered Secretaries Australia. Please refer to page 36 of this Annual Report. The questionnaires completed by the Directors covered the following matters: Ms Scobie is responsible for the preparation and dissemination of Board papers and prepares the minutes > Board contribution to developing strategy and policy; of the Board meetings. Ms Scobie is accountable to the > interaction between the Board and management and Board, through the Chairman, on all governance issues. between Board members; > Board processes to monitor business performance and Mr Mark Alley compliance, control risk and evaluate management; Mark is Chief Financial Officer, Asia and joint Company > Board composition and structure; and Secretary of Macquarie Goodman. Mark has over 25 > operation of the Board, including the conduct of Board years of experience in finance, property investment and meetings and committee meetings. development in Australia, New Zealand, Asia and Europe. Mark holds a Bachelor of Commerce and Administration The next formal review is scheduled to occur prior to from Victoria University of Wellington, New Zealand. He 30 June 2006. is also a Fellow Certified Practicing Accountant with CPA Directors’ Education Australia. Please refer to page 36 of this Annual Report. All new Directors are provided with a substantial information pack regarding the operations of Macquarie Goodman. The information includes the terms of their appointment, Macquarie Goodman’s expectations and requirements of Directors, copies of key company policies and guidelines, constitutions for MGM and the principal trusts and copies of the compliance plans. All members of the senior executive team are available to discuss any questions or issues with Directors, to enable them to participate fully and actively in Board decision making at the earliest opportunity. These senior executives also present information at Board meetings in order to provide the Directors with unfettered access to all relevant information and the ability to candidly question senior management in regard to any matter they deem necessary.

46 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 9 – REMUNERATE FAIRLY AND RESPONSIBLY 10 – RECOGNISE THE LEGITIMATE INTERESTS OF Remuneration Policies SECURITYHOLDERS Macquarie Goodman follows the methods of remuneration Macquarie Goodman believes that ethical and responsible which are set out in the ASX Guidelines. These include decision making is critical to the success of our business. a policy of rewarding staff with a mixture of fixed, Macquarie Goodman also believes that the transparency performance and equity-based remuneration. Further of these processes promotes market and Securityholder information in regard to the Remuneration Policies of confidence in our integrity and sustainability. Macquarie Goodman are set out in the Remuneration Macquarie Goodman has developed several policies and Report. conduct guides which apply to employees, management Equity-based Executive remuneration is made in and Directors alike. The policies include the following: accordance with the Employee Security Acquisition Plan Code of Conduct Policy (“ESAP”) approved by Shareholders at the General Meeting Please refer to page 42 of this Annual Report. held in January 2005. Continuous Disclosure Policy Options are available to non-resident employees. Macquarie Goodman is committed to providing Securityholders, regulators and the market with timely, The policy for management is designed to encourage balanced and readily available disclosure of material superior performance and long-term commitment to information concerning Macquarie Goodman and its Macquarie Goodman and, at the same time, align the activities. The policy outlines the internal procedures which interests of management and Securityholders. The Policy ensure timely and full disclosure of material through the is structured as follows: ASX. > fixed remuneration in line with market rates and regularly Employee Handbook benchmarked against relevant industry standards; The Handbook is a guide for employees about their > performance remuneration in the form of bonuses obligations and entitlements as employees of Macquarie based on Macquarie Goodman achieving set returns on Goodman. The rules and policies in the Handbook apply equity hurdles; and to all employees in Australia and overseas and form part > equity remuneration through participation in options of each employee’s employment contract. The Handbook or the ESAP to ensure long-term commitment to covers matters such as diversity, remuneration, insurance, Macquarie Goodman. presentation, leave, performance management, grievance The Policy for Non-Executive Directors is designed handling, substance abuse, internet/email usage and to remunerate them at market levels for their time, disciplinary proceedings. commitment and responsibilities. Non-Executive Directors Occupational Health and Safety Manual of Macquarie Goodman are paid Directors’ fees. Non- Macquarie Goodman recognises its obligations under the Executive Directors are also required to purchase Occupational Health and Safety (“OH&S”) legislation and is Macquarie Goodman securities on market with their committed to the implementation and proper management Director’s fees until they have acquired the equivalent of of appropriate risk management procedures to protect the two years fees in securities. safety of its employees, contractors, tenants and visitors. Securities issued as options or through the ESAP are Macquarie Goodman’s commitment to OH&S extends to restricted for 3 years, with securities becoming unrestricted all facets of its business with the overall responsibility for in 3 tranches, subject to return on equity hurdles. OH&S resting at the highest level of management and the Board. However, every employee is required to comply Annual Disclosure with the OH&S Manual and to perform all duties in a safe The salary and/or fees of the each Director and of each of and responsible manner. the five highest paid officers of the Group are disclosed in the Remuneration Report. Related Party Policy Macquarie Goodman has implemented a Related Party Remuneration and Nomination Committee Policy for the disclosure and resolution of any matter that The Remuneration and Nomination Committee assists the may give rise to actual, potential or perceived conflicts of Board to consider remuneration issues more efficiently and interest between the interests of a Director and Macquarie fully and to provide recommendations on remuneration Goodman. The Policy ensures that all transactions issues to the Board for approval. involving related parties of Macquarie Goodman conform The Committee’s charter and its membership is set out to the requirements of the Corporations Act 2001. on page 42 of this Annual Report. Securities Trading Policy The Committee is chaired by Mr Clarke. Mr Clarke Please refer to page 43 of this Annual Report. does not satisfy the ASX Guidelines requirement that the Committee be chaired by an independent Director; however, the Board considers that Mr Clarke’s experience in these matters is invaluable. Further, during the year, the Committee was comprised of a majority of non-executive directors rather than a majority of independent directors. This composition arose as the Committee was comprised of directors from the previous MGM Board to which less independent directors were appointed and available for committee work. However, as from 14 June 2005 the Committee comprised a majority of independent directors. 47 COMMUNITY AND ENVIRONMENT

Macquarie Goodman recognises the importance of supporting community and environmental initiatives and aims to develop programs that provide practical support.

PICTURED LEFT TO RIGHT: RONNIE KAHN, FOUNDER OF OZHARVEST WITH A FELLOW VOLUNTEER

HELP US SAVE THE ENVIRONMENT WITH ETREE SUPPORTING OUR COMMUNITIES We have partnered with eTree in an initiative that will help Macquarie Goodman continues to provide practical to restore degraded plant, animal and water resources, support to targeted community, based areas of need. In by decreasing the amount of paper we produce each year particular, we work with causes that resonate with our for our Securityholder communications. employees and will progress this objective through the establishment of the Macquarie Goodman Foundation By registering your email address with eTree you can during 2005. The Foundation will enable employees to receive communications electronically, which will create make payroll deductions as charitable donations and a positive environmental impact and reduce printing and Macquarie Goodman will also fund worthwhile causes mailing costs for Macquarie Goodman. through the Foundation. Macquarie Goodman will donate $2 to Landcare Australia Following the tragic events of the December 2004 Tsunami for each Securityholder that registers for eTree, which will in Asia, Macquarie Goodman and its employees donated help support reforestation projects in your state or territory. $100,000 to various Tsunami Appeals. To register, simply visit www.etree.com.au/mgq and The other major charity supported by Macquarie ensure you have your Holder Identification Number or Goodman this year was OzHarvest. OzHarvest is a non- Securityholder Reference Number, postcode and donominational charity that collects high quality excess email address handy. food that would otherwise go to waste and delivers it to ENVIRONMENTAL SUSTAINABLE DESIGNS hostels, shelters and refuges that feed those in need. This environmental initiative is not limited to our In its first 10 months of operation, OzHarvest delivered investor relations practices. We have implemented an 280,000 meals. Macquarie Goodman meets the expense environmentally sustainable design program which extends for leasing two refrigerated vans and has provided office to our industrial facilities. accommodation at no charge for the OzHarvest operations centre at one of our sites in Alexandria, New South Wales. The initiatives under the program include design principles that reduce energy use and maximise building and occupant benefits with smart planning. They also conserve and harvest water use for landscaping, improve indoor air quality and comfort for customers and reduce emissions and waste in material choice and construction methodology.

48 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 FINANCIAL REPORT

Macquarie Goodman Management Limited and its Controlled Entities ABN 69 000 123 071 30 JUNE 2005

CONTENTS

50 Directors’ Report 87 Note 16 Plant and Equipment 65 Lead Auditor’s Independence Declaration 87 Note 17 Intangible Assets 66 Statements of Financial Performance 88 Note 18 Payables 67 Statements of Financial Position 88 Note 19 Interest Bearing Liabilities 68 Statements of Cash Flows 89 Note 20 Provisions 69 Notes to the Financial Statements 90 Note 21 Contributed Equity 69 Note 1 Statement of Significant Accounting Policies 91 Note 22 Reserves 75 Note 2 Change in Accounting Policy 92 Note 23 (Accumulated Losses)/Retained Profits 76 Note 3 Other Revenue from Operating Activities 92 Note 24 Outside Equity Interests 76 Note 4 Profit from Ordinary Activities 93 Note 25 Notes to the Statements of Cash Flows 77 Note 5 Auditors’ Remuneration 95 Note 26 Controlled Entities 77 Note 6 Taxation 97 Note 27 Segment Reporting 78 Note 7 Earnings per Security (“EPS”) 101 Note 28 Investments Accounted for Using the Equity Method 79 Note 8 Dividends and Distributions 102 Note 29 Interest in Joint Venture Operation 80 Note 9 Cash Assets 103 Note 30 Commitments 80 Note 10 Receivables 103 Note 31 Contingent Liabilities 80 Note 11 Inventories 104 Note 32 Director and Executive Disclosures for Disclosing Entities 80 Note 12 Other Assets 107 Note 33 Employee Benefits 81 Note 13 Investment Properties 108 Note 34 Related Party Disclosures 87 Note 14 Investments Accounted for Using the Equity Method 110 Note 35 Additional Financial Instruments Disclosure 87 Note 15 Other Financial Assets 112 Note 36 Impact of Adopting Australian Equivalents to International Financial Reporting Standards 114 Note 37 Events Subsequent to Reporting Date 115 Directors’ Declaration 116 Independent Audit Report

49 DIRECTORS’ REPORT

The Directors of Macquarie Goodman Management Limited (“the Company” or “Parent Entity”) present their Directors’ Report on the Consolidated Entity consisting of the Company and the entities it controlled (“Macquarie Goodman”) at the end of, or during, the year ended 30 June 2005 (“year”) and the audit report thereon. DIRECTORS The Directors of the Company at any time during or since the end of the year are: Mr David Clarke, AO (Chairman) Appointed 26 October 2000 Dr David Teplitzky (Independent Deputy Chairman) Appointed 21 November 1990 Mr Gregory Goodman (Chief Executive Ofﬁcer) Appointed 7 August 1998 Mr Patrick Allaway (Non-Executive Director) Appointed 23 February 2005 Mr Ian Ferrier, AO (Independent Director) Appointed 1 September 2003 Mr Patrick Goodman (Non-Executive Director) Appointed 14 April 1998 Mr John Harkness (Independent Director) Appointed 23 February 2005 Mr James Hodgkinson (Non-Executive Director) Appointed 21 February 2003 (1) Ms Anne Keating (Independent Director) Appointed 23 February 2005 Ms Lynn Wood (Independent Director) Appointed 23 February 2005 Mr Stephen Girdis (Alternate for David Clarke and James Hodgkinson) Appointed 21 February 2003 Mr Bill Moss (Non-Executive Director) Appointed 26 October 2000, Resigned 13 June 2005

(1) Mr James Hodgkinson was appointed as an Alternate Director to Mr David Clarke on 21 February 2003. He was appointed a Director on 14 June 2005.

Details of the Directors’ qualiﬁcations and independence status are set out in the Directors’ Report. COMPANY SECRETARY The Company Secretaries at any time during or since the end of the year are: Ms Carolyn Scobie; and Mr Mark Alley. Details of the Company Secretaries’ qualiﬁcations and experience are set out in the Directors’ Report. DIRECTORS’ MEETINGS The number of Directors’ meetings (including meetings of committees of Directors) and the number of meetings attended by each of the Directors of Macquarie Goodman during the year are: Remuneration and Nomination Audit Committee Committee Board meetings meetings meetings Director Held (1) Attended Held (1) Attended Held (1) Attended

Mr David Clarke 17 17 3 3 Dr David Teplitzky 17 17 4 4 3 3 Mr Gregory Goodman 17 17 3 3 Mr Patrick Allaway 8 7 Mr Ian Ferrier 17 16 4 4 1 1 Mr Patrick Goodman 17 16 3 3 Mr John Harkness 8 8 Mr James Hodgkinson 1 1 1 1 Ms Anne Keating 8 7 1 1 Ms Lynn Wood 8 7 Mr Stephen Girdis (Alternate) 5 5 Mr Bill Moss 17 12

(1) Reﬂects the number of meetings individuals were entitled to attend.

Directors absented themselves from meetings where they had a personal interest in matters being discussed. The Remuneration Committee and Nomination Committee were combined during the year.

50 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 PRINCIPAL ACTIVITIES The principal activities of the Consolidated Entity during the course of the year were funds management, property services, development management and investment. As a consequence of the successful merger with Macquarie Goodman Industrial Trust (“MGI”) effective 1 February 2005, the Consolidated Entity’s principal activities now include property investment. Review and Results of Operations Effective 1 February 2005, Macquarie Goodman Group was formed following the merger of Macquarie Goodman Management Limited and Macquarie Goodman Industrial Trust. The performance of the Consolidated Entity, as represented by the results of its operations for the year, was as follows: Consolidated 2005 2004

Total net assets ($M) 3,093.1 134.1 Revenue from ordinary activities ($M) 494.5 78.8 Net proﬁt attributable to Securityholders of Macquarie Goodman ($M) 50.0 37.0 Basic earnings per security (cents) 7.4 13.9 Adjusted basic earnings per security (cents) (refer Note 7 to the ﬁnancial statements) 22.0 13.9 Dividends and distributions paid by Macquarie Goodman ($M) 194.6 17.1 Number of securities on issue (M) 1,405.0 273.2 Net tangible assets per security ($) 2.15 0.13

Dividends and Distributions Dividends and distributions declared by Macquarie Goodman since the end of the previous year are as follows: $M

Dividends from Macquarie Goodman Management Limited 22.1 Distributions from Macquarie Goodman Industrial Trust since 1 February 2005 172.5 194.6

Dividends from Macquarie Goodman Dividend Total amount Franked/ Franked Date of Management Limited cps $M unfranked % payment

Final 2004 dividend 3.5 9.6 Partly franked 57 22 Sep 04 Interim 2005 dividend 4.5 12.5 Partly franked 30 2 Feb 05 22.1

Distributions from Macquarie Goodman Distribution Total amount Date of Industrial Trust cpu $M payment

March 2005 quarter distribution from the Trust 6.475 81.5 3 May 05 Final 2005 distribution from the Trust 6.475 91.0 19 Aug 05 172.5

51 DIRECTORS’ REPORT CONTINUED

STATE OF AFFAIRS Key changes in Macquarie Goodman’s state of affairs during the year were as follows: a) Merger with Macquarie Goodman Industrial Trust Effective 1 February 2005, the Company merged with Macquarie Goodman Industrial Trust. This is reflected in the financial statements as an acquisition of Macquarie Goodman Industrial Trust by Macquarie Goodman. b) Restructuring of Interests in New Zealand On 29 March 2005, Macquarie Goodman sold its interest in certain New Zealand properties to Macquarie Goodman Property Trust in return for cash and equity in Macquarie Goodman Property Trust. c) Interest in Hong Kong As at 30 June 2005, Macquarie Goodman has acquired a property in Hong Kong and is committed to the purchase of additional properties. Subsequent to 30 June 2005, Macquarie Goodman has entered into further commitments for the purchase of investment properties in Asia. These transactions have been undertaken pursuant to Macquarie Goodman’s strategy for further expansion in Asia. Hong Kong acquisitions have been fully debt funded using Hong Kong dollars. d) Entitlement Offer On 24 May 2005, Macquarie Goodman successfully completed an Entitlement Offer which allowed all Securityholders to acquire one new security for every 10 securities held, at the price of $3.64 per security. This Offer raised $458 million with the issue of 126 million securities. In the opinion of the Directors, there were no other significant changes in the state of affairs of Macquarie Goodman that occurred during the year. STRATEGY AND OUTLOOK Looking forward, we will continue to strengthen our presence in Australia, New Zealand and Asia with a focus on pursuing expansion opportunities and yield-accretive properties that are well located and provide stability through the diversification of our customer base, asset and geographic mix. Likely developments in the near future include launching a property fund in Hong Kong in the first half of 2006 with a view to expanding Macquarie Goodman’s third party funds management operations. Expansion of the third party funds management opportunities will be actively pursued in Australia. Further information as to other likely developments in the operations of the Consolidated Entity and the expected results of those operations in future years has not been included in the Financial Report because disclosure of the information would be likely to result in unreasonable prejudice to the Consolidated Entity. ENVIRONMENTAL REGULATIONS The Consolidated Entity’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation in relation to its property activities. An Environmental Committee monitors compliance with environmental regulations prior to the acquisition of properties and during the development or redevelopment of the properties. The Directors are not aware of any breaches during the period covered by the Directors’ Report. Where necessary, an independent expert’s advice is sought to review environmental issues affecting Macquarie Goodman. The Directors believe that Macquarie Goodman has adequate systems in place for the management of its environmental requirements under the various Acts and guidelines currently in place, as they relate to industrial and commercial property.

52 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 EVENTS SUBSEQUENT TO REPORTING DATE Other than the matters discussed below, there has not arisen in the interval between the end of the year and the date of the Directors’ Report, any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect significantly the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity, in future financial years. a) Refinancing of Loan Facilities Subsequent to year end, Macquarie Goodman agreed terms with its bankers for the refinancing of certain of its bank debts. Existing facilities totalling $1.1 billion were replaced with new facilities totalling $1.4 billion. b) Introduction of Australian Equivalents to International Financial Reporting Standards (“AIFRS”) For reporting periods beginning on or after 1 July 2005, the Consolidated Entity must comply with AIFRS as issued by the Australian Accounting Standards Board. The implementation plan and potential impact of adopting AIFRS are detailed in Note 36 to the financial statements. c) Acquisition and Sale of Properties Macquarie Goodman has exchanged and/or settled contracts for the purchase of properties in Australia, New Zealand, Singapore and Hong Kong for $380.4 million. Subsequent to 30 June 2005, Macquarie Goodman has exchanged and/or settled contracts for the sale of properties in Australia for $32.9 million. OPTIONS GRANTED DURING THE YEAR During or since the end of the year, Macquarie Goodman has not issued any options over unissued securities of Macquarie Goodman to its Directors or Executive Officers. The following options over unissued securities were issued by the Company under the Executive Option Scheme to other employees during the year: Exercise price Options Date granted Expiry date $ issued

23 Jul 04 23 Jul 09 3.1859 300,000 23 Jul 04 23 Jul 09 3.4448 100,000 400,000

UNISSUED STAPLED SECURITIES UNDER OPTION At the date of the Financial Report, unissued stapled securities of Macquarie Goodman under option are: Exercise price Number of Date granted Expiry date $ securities

10 Oct 01 10 Oct 06 0.7810 133,334 13 Dec 01 13 Dec 06 1.1423 500,000 28 Oct 03 28 Oct 08 2.5761 700,000 23 Jan 04 23 Jan 09 2.8255 500,000 23 Jul 04 23 Jul 09 3.1714 300,000 2,133,334

All options expire on the earlier of their expiry date or termination of the employee’s employment. In addition, the ability to exercise the options is conditional on the Consolidated Entity achieving certain performance hurdles. The performance hurdle applicable to the above options issued under the Executive Option Scheme requires compound annual growth in earnings per security for Macquarie Goodman of 10% or more since the end of the previously reported 12 month period immediately preceding the date of grant (as reported in the Annual Report or Half Yearly Report of the Consolidated Entity).

53 DIRECTORS’ REPORT CONTINUED

SECURITIES ISSUED ON EXERCISE OF OPTIONS During or since the end of the year, Macquarie Goodman issued securities as a result of the exercise of options as follows: Amount paid Number of per security securities issued $

750,000 0.2291 100,000 0.5033 4,599,999 0.5178 66,667 0.7810 1,833,335 0.7955 500,000 1.1568 1,250,000 1.2778 166,667 1.3478 7,550,000 2.5906 100,000 3.4448 1,000,000 3.7564

DIRECTORS’ INTERESTS The relevant interest of each Director in the contributed equity of Macquarie Goodman as notiﬁed by the Directors to the Australian Stock Exchange Limited (“ASX”) in accordance with section 205G (1) of the Corporations Act 2001, at the date of the Financial Report is as follows: Securities held through Directors Total securities held associated interests

Non-Executive Mr David Clarke 206,901 89,044 Dr David Teplitzky — — Mr Patrick Allaway 65,400 65,400 Mr Ian Ferrier — — Mr Patrick Goodman 100,500,347 100,500,347 Mr John Harkness — — Mr James Hodgkinson 158,817 48,106 Ms Anne Keating 15,675 15,675 Ms Lynn Wood 18,984 18,984 Mr Stephen Girdis 1,105 1,105 Mr Bill Moss 97,997 97,997

Executive Mr Gregory Goodman 108,381,164 100,500,347

None of the Directors held any options over unissued securities at 30 June 2005.

54 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 REMUNERATION REPORT The Board, based on advice from the Remuneration and Nomination Committee (referred to herein as the Remuneration Committee) has developed policies dealing with the short, medium and long-term remuneration of Macquarie Goodman’s staff. The role of the Remuneration Committee and these policies are set out below. Remuneration Committee The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Chief Executive Officer, senior executives and Directors themselves. It is also responsible for various incentive performance packages, including the Bonus Policy, Executive Option Plan, Employee Security Acquisition Plan (“ESAP”), superannuation entitlements, termination entitlements, gifts and the fringe benefits policy. The members of the Remuneration Committee during the year were: a) Mr David Clarke (Non-Executive Chairman); b) Dr David Teplitzky (Independent Member); c) Mr Gregory Goodman (Executive Member); d) Mr Ian Ferrier (Independent Member, appointed 14 June 2005); and e) Ms Anne Keating (Independent Member, appointed 14 June 2005). The Remuneration Committee meets as required to review and recommend to the Board annual bonuses and salary reviews. Decisions are made by the Committee during the year either in meeting or via circular resolutions in relation to new appointments and promotions. The Committee has the resources and authority appropriate to discharge its duties and responsibilities. It is able to engage external professionals to advise on any relevant matters. The Committee engaged external consultants during the year in order to benchmark the appropriate fees for the new Board of Macquarie Goodman as a stapled entity. The Committee members’ attendance record is disclosed in the table of Directors’ meetings in the Directors’ Report. On 14 June 2005, the Committee was combined with the Nomination Committee and expanded its functions to include those previously performed by the Nomination Committee. Further information relating to the activities of the Committee is available on the Macquarie Goodman’s website. Remuneration Policies Overview of Remuneration Policies The Board recognises that Macquarie Goodman’s performance is dependent on the quality of its people. Remuneration levels are competitively set to attract and retain appropriately qualified and experienced Directors and senior executives. The Remuneration Committee obtains independent advice on the appropriateness of remuneration packages, given trends in comparative companies. Remuneration packages include a mix of fixed remuneration, short- term performance-based remuneration, and equity-based remuneration. The remuneration structures explained below are designed to attract suitably qualified candidates and are aligned to effect the broader outcome of increasing Macquarie Goodman’s return on equity. Fixed Remuneration Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any Fringe Benefits Tax charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds. Remuneration levels are reviewed annually by the Remuneration Committee through a process that considers individual, segment and overall performance of the Consolidated Entity. In addition, external consultants provide analysis and advice to ensure the Directors’ and senior executives’ remuneration is competitive in the market-place. A senior executive’s remuneration may also be reviewed on promotion.

55 DIRECTORS’ REPORT CONTINUED

REMUNERATION REPORT CONTINUED Performance-Linked Remuneration Performance-linked remuneration is reviewed on an annual basis and includes both short-term and long-term incentives and is designed to reward Executive Directors and senior executives for meeting or exceeding their financial and personal objectives. a) Short-Term Incentive (“STI”) The STI provides cash bonuses for individual performance against peers and objectives set for the year. Total STIs are calculated in accordance with a Bonus Policy approved by the Remuneration Committee and the Board. The Bonus Policy determines a bonus pool which is allocated across all staff with the Chief Executive Officer entitled to between 15% and 20% of the total bonus pool. Individual allocations are made based on an assessment by senior managers and the Chief Executive Officer of each individual’s performance. The Bonus Pool is calculated based on the Consolidated Entity achieving return on equity targets on average greater than 11% for that year. The Bonus Policy provides that the first $50,000 of any bonus granted is paid in cash in August of the year following the year in which the bonus was earned. The remainder is paid fortnightly over three years subject to the conditions attaching to senior executives’ service agreements described later in this report. Executives will only receive unpaid bonuses if they remain as employees of the Consolidated Entity. b) Long-Term Incentive (“LTI”) The LTI provides equity-based remuneration through the issue of options or participation in the ESAP. The purpose of these plans is to provide alignment of the interests of employees and Securityholders by matching rewards under the LTI with the long term growth and prosperity of Macquarie Goodman. Details of equity-based remuneration are as follows: i) Options Macquarie Goodman has an Executive Option Plan which was approved at the Annual General Meeting on 14 September 1999. Due to anomalies in the Australian tax rules that apply to options over stapled securities, the future issue of options will be limited to non-resident employees. During or since the end of the year, no options over unissued securities were granted to Directors or to Executive Officers. Future issues of options will be subject to the following broad terms: > options will expire on the earlier of five years or termination of the employee’s employment; > the ability to exercise options will be conditional on the Consolidated Entity achieving return on equity hurdles on average greater than 11% over the period of the option; > options will vest equally over the end of years three, four and five; and > exercise price of options will be based on the weighted average market price of securities traded on ASX during five trading days immediately prior to the date options are offered to the employee. ii) ESAP Macquarie Goodman’s ESAP was approved at the Shareholders’ meeting on 25 January 2005. Initially, participants of the ESAP were Australian Option Holders who rolled over into the ESAP. Generally, Option Holders who rolled into the ESAP had similar restrictions and benefits applying to their securities as would have applied if they continued to hold their options. The broad terms of future grants under the ESAP are as follows: > subject to offers made from time to time by the Company, eligible employees will be able to acquire securities at the market price prevailing at the time of issue using funds borrowed from Macquarie Goodman. Securities may only be acquired during the periods permitted under the Company’s policies for employees dealing in the Company’s securities; > the market price will be the five day volume weighted average price at which securities are traded on the ASX; > securities will be restricted for three years, with one third of the securities becoming unrestricted each year at the end of years three, four and five, subject to return on equity hurdles; > restrictions will be based on the participant remaining an employee and the Consolidated Entity achieving return on equity targets on average greater than 11% over the period of the offer; > loans to purchase securities will be non-recourse and interest bearing at Macquarie Goodman’s weighted average cost of debt; and > the after-tax amount of any dividends or distributions paid on restricted securities acquired with the loan must be applied towards payment of interest and the principal of the loan. Tax is deducted at the highest marginal rate for individuals.

56 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 SERVICE AGREEMENTS Senior Executives The service agreements for nominated senior executives including Mr Gregory Goodman, Mr David van Aanholt, Mr Nick Kurtis, Mr Michael O’Sullivan and Ms Carolyn Scobie were amended in January 2005 to provide that: > each Executive agreed not to resign from Macquarie Goodman for a period of at least two years from January 2005; > the Company agreed that in the event that Macquarie Goodman terminated the Executive’s employment during the two year term to December 2006 (for reasons other than serious or wilful misconduct) that it would pay an amount equivalent to one year of remuneration plus any unpaid amounts of short-term incentive pay that had been awarded but not yet received by the Executive. This provision was inclusive of any notice periods in existing employment contracts; > each Executive has agreed to “non-compete” and “non-poach” conditions that will apply for a period of twelve months following termination of employment; and > each Executive agreed to the effective conversion of outstanding Executive options to restricted securities in Macquarie Goodman under the ESAP with restrictions lapsing on the same timetable that operated under the Executive Option Plan applying to the Executive. Other aspects of Executive service agreements including compliance with the Company’s Code of Conduct and Human Resource Policies remain unaltered. Other Employees All employees are engaged under written employment agreements that provide for usual conditions of employment applying in the industry, including the need for compliance with speciﬁc policies of the Company in relation to its Code of Conduct and Human Resource Policies. Notice provisions vary from periods of one month to six months depending upon the role of the employee. Non-Executive Directors Total remuneration payable by the Company for all Non-Executive Directors, last voted upon by Shareholders at its meeting on 25 January 2005, is not to exceed $950,000 per annum. Remuneration is set based on advice from external advisers with reference to fees paid to other non-executive directors of comparable companies. Directors’ base fees are presently up to $75,000 per annum with additional amounts paid for committee membership, chairing of committees and the Board along with per diem allowances for due diligence or special projects. The following also applies to Non-Executives Directors’ remuneration: > Non-Executive Directors do not receive any long-term or short-term incentives; > Macquarie Goodman does not operate an incentive or retirement scheme for Non-Executive Directors; > 25% of the after tax remuneration must be applied to the on-market purchase of securities until the value of securities held by the Director equals two years of fees for that Director. Securities may only be acquired during the periods permitted for purchases of Macquarie Goodman securities. These securities will be held in escrow until the Director’s retirement; and > all Non-Executive Directors must act as a member of at least one Board Committee.

57 DIRECTORS’ REPORT CONTINUED

DIRECTORS’ REMUNERATION Details of the nature and amount of each major element of the remuneration of each Director of Macquarie Goodman in relation to the management of Macquarie Goodman’s affairs are set out below. This excludes amounts paid prior to the merger to individuals who were Directors of the Responsible Entity of Macquarie Goodman Industrial Trust and its controlled entities in relation to the management of the affairs of those trusts. All information provided within this Remuneration Report has been subject to audit except where otherwise indicated. Salary including superannuation Other (3) Bonus (4) Options Total $ $ $ $ $ Paid By

For the year ended 30 June 2005 Directors Non-Executive Mr David Clarke (1) 75,660 — — — 75,660 Consolidated Entity/MBL Dr David Teplitzky 83,418 11,000 — — 94,418 Consolidated Entity Mr Patrick Allaway 34,063 — — — 34,063 Consolidated Entity Mr Ian Ferrier 67,303 6,000 — — 73,303 Consolidated Entity Mr Patrick Goodman 68,761 — — — 68,761 Consolidated Entity Mr John Harkness 40,875 — — — 40,875 Consolidated Entity Mr James Hodgkinson (2) 42,500 270,792 — 12,360 325,652 MBL Ms Anne Keating 36,333 — — — 36,333 Consolidated Entity Ms Lynn Wood 36,333 — — — 36,333 Consolidated Entity Mr Stephen Girdis (2) 12,320 98,634 — 5,316 116,270 MBL Mr Bill Moss (1) — — — — — MBL

Executive Mr Gregory Goodman 484,615 9,916 450,000 460,000 1,404,531 Consolidated Entity

For the year ended 30 June 2004 Directors Non-Executive Mr David Clarke (1) — — — — — MBL Dr David Teplitzky 68,003 6,120 — — 74,123 Consolidated Entity Mr Ian Ferrier 46,326 — — — 46,326 Consolidated Entity Mr Patrick Goodman 55,591 — — — 55,591 Consolidated Entity Mr Bill Moss (1) — — — — — MBL

Executive Mr Gregory Goodman 399,998 10,864 400,000 542,917 1,353,779 Consolidated Entity

(1) There is no meaningful basis on which to allocate the remuneration of Mr David Clarke and Mr Bill Moss to the entities of which they are directors. Mr David Clarke is Executive Chairman and Mr Bill Moss is a director of Macquarie Bank Limited (“MBL”) and their total remuneration is disclosed below. The basis for calculating the MBL proﬁt share and option amounts are disclosed in MBL’s Annual Report for the years ended 31 March 2005 and 31 March 2004. In addition, Mr Clarke received remuneration from Macquarie Goodman commencing 1 February 2005. Salary including MBL proﬁt MBL superannuation (primary) share (primary) options (equity) Total $ $ $ $

Mr David Clarke 2005 329,662 8,727,805 237,778 9,295,245 2004 329,666 5,741,523 168,726 6,239,915 Mr Bill Moss 2005 470,945 14,205,956 467,357 15,144,258 2004 470,952 4,217,339 322,151 5,010,442

(2) Mr James Hodgkinson and Mr Stephen Girdis are employed by MBL. The remuneration shown above is an apportionment of their total remuneration paid by MBL. The basis for calculating the MBL profit share and option amounts are disclosed in the MBL Annual Report for the year ended 31 March 2005. Messrs Hodgkinson and Girdis did not receive any remuneration from Macquarie Goodman in their capacity as Directors or Alternate Directors. (3) For all the Directors except James Hodgkinson and Stephen Girdis, Other includes reportable fringe benefits, car parking and per diem allowances. Refer above for details of amounts paid by MBL to Messrs Hodgkinson and Girdis. (4) Bonus payments are paid in accordance with the policy determined by the Remuneration Committee. The first $50,000 of any bonus payment is paid as cash with the balance being paid in equal fortnightly cash instalments for three years following the year in which it was earned. Any unpaid amount is forfeited on termination of employment in the mean time. The portion of Mr Gregory Goodman’s bonus for the year unpaid at 30 June 2005 was 59% (2004: 67%).

58 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 EXECUTIVE OFFICERS’ REMUNERATION Details of the nature and amount of each major element of the remuneration of each of the named Executive Officers who receive the highest remuneration and those specified Executives identified in accordance with AASB 1046 Director and Executive Disclosures by Disclosing Entities are set out in the tables below: Salary including superannuation Other (1) Bonus (2) Options Total $ $ $ $ $

For the year ended 30 June 2005 Consolidated Entity Executive Ofﬁcers (excluding Directors) Mr David van Aanholt A,B 399,039 9,916 350,000 230,000 988,955 Mr Nick Kurtis A,B 322,116 10,315 300,000 349,979 982,410 Mr Michael O’Sullivan A,B 304,374 10,315 300,000 154,063 768,752 Mr Stephen Hawkins (3) B 346,729 — 300,000 91,438 738,167 Mr John Marsh A 300,000 9,756 100,000 292,500 702,256 Mr John Dakin A,B 272,795 4,869 46,236 120,000 443,900

For the year ended 30 June 2004 Consolidated Entity Executive Ofﬁcers (excluding Directors) Mr David van Aanholt A,B 325,000 10,817 324,999 224,208 885,024 Mr Nick Kurtis A,B 260,000 10,201 175,000 261,225 706,426 Mr Stephen Hawkins (3) A,B 236,683 — 226,575 199,500 662,758 Mr Michael O’Sullivan A,B 260,000 13,430 150,000 154,063 577,493 Mr Craig Goodman A 233,365 17,824 125,000 59,646 435,835 Ms Carolyn Scobie A 250,576 7,391 100,000 75,604 433,571 Mr John Dakin B 104,171 — — 60,000 164,171

A Executive is included as one of the five named Company Executives who receive the highest remuneration in the current financial year in accordance with section 300A of the Corporations Act 2001. B Executive is included as a Specified Executive in accordance with AASB 1046 Directors and Executive Disclosures for Disclosing Entities for the Consolidated Entity. (1) Other includes reportable fringe benefits and car parking. (2) Bonuses paid by the Consolidated Entity are paid in accordance with the Bonus Policy. The Specified Executives’ bonuses are based on individual performance amongst their peers. This Policy includes the requirement for any amount above $50,000 to be withheld and paid to employees fortnightly over a period of three years. Subject to the conditions of their service contracts, Specified Executives will only receive their unpaid bonuses if they remain as employees of the Consolidated Entity.

The proportion of bonuses included as remuneration for the year remaining unpaid at the end of the year is as follows: 30 June 2005 30 June 2004 % %

Mr David van Aanholt 57 66 Mr Nick Kurtis 56 66 Mr Michael O’Sullivan 56 67 Mr Stephen Hawkins 66 58 Mr John Dakin Mr John Marsh 33 Mr Craig Goodman 55 Ms Carolyn Scobie 51

(3) Mr Stephen Hawkins is now employed directly by a Joint Venture in which Macquarie Goodman has a 50% interest. He is included in this table by virtue of his role as Fund Manager, Singapore which he held up to 30 November 2004 and his direct employment by Macquarie Goodman from November 2004 to January 2005. Mr Hawkins’ remuneration details for the year are summarised on the following page.

59 DIRECTORS’ REPORT CONTINUED

EXECUTIVE OFFICERS’ REMUNERATION CONTINUED Salary including Period superannuation Other Bonus Options Total Employers covered $ $ $ $ $

Funds Manager, Singapore 1 Jul to 30 Nov 127,278 — — — 127,278 The Company 1 Dec to 31 Jan 52,784 — 300,000 91,438 444,222 Hong Kong Joint Venture 1 Feb to 30 Jun 166,667 — — — 166,667 Total 346,729 — 300,000 91,438 738,167

REMUNERATION AND PAST FINANCIAL PERFORMANCE (UN-AUDITED) The level of fixed remuneration and performance-linked remuneration has been a function of the growth undertaken by Macquarie Goodman Management Limited and the Company’s ability to attract and retain qualified and experienced management. Key financial drivers used to determine the level of remuneration in the past and moving forward include: net profit after tax; earnings per share/security; total Shareholder returns and return on equity. Return on equity will be the most significant factor moving forward of which Executives will be remunerated by exceeding a benchmark performance of return on equity. Historical performance for these financial drivers over the past four years for Macquarie Goodman Management Limited is as follows:

Earnings Net Profit After Tax Per Share/Security Total Shareholder Return Return On Equity NPAT EPS Total Return ($M) (cents per Shareholder on Equity share/security) Return (%) (%) 40 20 120 20

30 15 90 15

20 10 60 10

10 05 30 05

0 0 0 0 Years 02 03 04 (1) 05 (2) Years 02 03 04 (1) 05 (2) Years 02 03 04 05 Years 02 03 04 (3) 05 (2)

(1) Before performance fee. (2) Before performance fee and merger cost. (3) Before performance fee (35.0% after performance fee).

As demonstrated by the above historical performance, total performance remuneration is directly linked to pre-determined benchmarks which have historically been achieved based on the Consolidated Entity’s ﬁnancial performance.

60 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 ANALYSIS OF MOVEMENTS IN OPTIONS (UN-AUDITED) None of the Non-Executive Company Directors were granted, exercised, or forfeited any options over shares or securities during the year. The value of options over Macquarie Goodman securities exercised by the Chief Executive Officer and by each of the five named Executive Officers during the reporting period, are detailed below. This information is not subject to audit. No options were granted to or forfeited by these individuals during the year. Value of options exercised during the year Exercised prior Restricted to merger under ESAP Unrestricted $ $ $

Executive Director Mr Gregory Goodman 4,853,668 9,319,131 881,442

Consolidated Entity Executive Ofﬁcers Mr David van Aanholt 1,631,100 3,435,500 261,805 Mr Nick Kurtis 174,968 2,992,621 52,555 Mr Michael O’Sullivan — 3,640,250 536,588 Mr John Dakin — — — Mr John Marsh — 433,600 —

The value of options exercised during the year is calculated as the market price of shares/securities of the Company on the Australian Stock Exchange at close of trading on the date the options were exercised after deducting the price paid or payable to exercise the option. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS Macquarie Goodman has insured current and former Directors and officers of Macquarie Goodman and its controlled entities in respect of Directors and officers’ liability and legal expenses. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors and officers’ liability and legal expenses insurance contracts, as such disclosure is prohibited under the terms of those contracts. The auditors of the Consolidated Entity are not indemnified in any way by this insurance cover. NON-AUDIT SERVICES During the year, KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties. The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Audit Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: > all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of the auditor; and > the non-audit services provided do not undermine the general principles relating to auditor independence as set out in Professional Statement F1 Professional Independence, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

61 DIRECTORS’ REPORT CONTINUED

NON-AUDIT SERVICES CONTINUED Details of the amounts paid to the auditors of the Company, KPMG and its related practices for the audit and non-audit services, provided during the year are set out below. In addition, amounts paid to other auditors for the statutory audit have been disclosed. Consolidated 2005 2004 $ $

Statutory audit Auditors of the Company — audit and review of financial reports (KPMG Australia) 376,766 68,000 — audit and review of financial reports (overseas KPMG firms) 28,088 13,520 404,854 81,520

Other auditors — audit and review of ﬁnancial reports (non-KPMG ﬁrms) 18,495 1,387 423,349 82,907

Services other than statutory audit Other regulatory services (KPMG Australia) 68,500 13,000

Other assurance services — investigative accounting services (KPMG Australia) 1,412,828 —

Other services — taxation compliance services (KPMG Australia) 264,293 141,592 — taxation compliance services (overseas KPMG ﬁrms) 15,584 24,202 1,761,205 178,794

2,184,554 261,701

The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is attached to this Directors’ Report. ROUNDING Macquarie Goodman is an entity of a kind referred to in Australian Securities & Investments Commission (“ASIC”) Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the Financial Report and Directors’ Report have been rounded to the nearest million dollars, unless otherwise stated. QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES OF DIRECTORS AND COMPANY SECRETARIES Board of Directors Mr David Clarke, AO – Chairman Appointed 26 October 2000 David is the Executive Chairman of Macquarie Bank Limited. He was previously Managing Director and then Chairman of Macquarie Bank’s predecessor organisation, Hill Samuel Australia Limited. David was educated at Sydney University (BEcon (Hons)) and Harvard University (MBA) and holds an honorary degree of Doctor of Science in Economics from Sydney University (Hon DScEcon). David has extensive experience as a chairman and is currently Chairman of Macquarie CountryWide Management Limited, Macquarie Ofﬁce Management Limited and Macquarie ProLogis Management Limited, the management companies of Macquarie CountryWide Trust, Macquarie Ofﬁce Trust and Macquarie ProLogis Trust. He is also Chairman of McGuigan Simeon Wines Limited, the Wine Committee of the Royal Agricultural Society of New South Wales, Sydney Advisory Board of the Salvation Army, Opera Australia Capital Fund and Sydney University Football Club Foundation.

62 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Dr David Teplitzky – Independent Deputy Chairman Appointed 21 November 1990 David has a PhD and honours degree in Engineering and a Bachelor of Science. He is a retired Regional Director of American Cyanamid Company and the former Managing Director of Cyanamid Australia, Formica Australia Limited and Lederle Pharmaceuticals Limited. He is a member of both the Audit and the Remuneration and Nomination Committees of Macquarie Goodman. He is Executive Chairman of a venture capital company that is developing electric power generation from wave energy and a director of the public company, HiTec Energy Limited. David has been active for many years in venture capital and high technology companies in Australia and South East Asia as a consultant and director. Mr Gregory Goodman – Chief Executive Officer Appointed 7 August 1998 Gregory is the Chief Executive Officer of Macquarie Goodman and is responsible for its overall operations and the implementation of the strategic plan. He has 23 years of experience in the property industry with significant expertise in the industrial property arena. Gregory was a co-founder of Macquarie Goodman Industrial Trust and has played an integral role in establishing its specialist position in the market-place through various corporate transactions, including takeovers, mergers and acquisitions. Recently, he was involved in the merger of Macquarie Goodman Industrial Trust and Macquarie Goodman Management Limited and the repositioning of Macquarie Goodman Property Trust in New Zealand. Mr Patrick Allaway – Non-Executive Director Appointed 23 February 2005 Patrick was educated in South Africa before coming to Australia to attend Sydney University where he attained a Bachelor of Arts and Bachelor of Law. He is the Non-Executive Chairman of Reino International Limited, an Australian parking systems technology and service provider. Patrick is also Joint Managing Director of Saltbush Funds Management, a boutique funds management group focused on the alternative asset class. He is also a director and trustee of Giant Steps Endowment Fund, which was established to raise funds for children with autism. Patrick has extensive experience in senior management roles in international companies, including Citibank and Swiss Bank Corporation, in Australia and abroad. He was previously Managing Director and an executive Board member of SBC Warburg Global Investment Bank, based in London (now UBS). Mr Ian Ferrier, AO – Independent Director Appointed 1 September 2003 Ian is a co-founder of Ferrier Hodgson. He is a Fellow of The Institute of Chartered Accountants in Australia and has 41 years of experience in company corporate recovery and turnaround practice. Ian is also a director of a number of private and public companies. He is currently Chairman of InvoCare Limited and Port Douglas Reef Resorts Limited and a director of McGuigan Simeon Wines Limited and Reckon Limited. His experience is essentially concerned with understanding the financial and other issues confronting companies which require turnaround management, analysing those issues and implementing policies and strategies which lead to a successful rehabilitation. Ian has significant experience in property and development, tourism, manufacturing, retail, hospitality and hotels, manufacturing, infrastructure and aviation and service industries. Mr Patrick Goodman – Non-Executive Director Appointed 14 April 1998 Patrick is the Managing Director of the Goodman Holdings Group, which is a major investor in Macquarie Goodman. The diversified interests of the Goodman Holdings Group initially focused on direct and indirect property development and has expanded to include the management of a diverse portfolio across sectors covering aviation, food, rural, private equity, listed equity, infrastructure and financial services throughout Australasia. Patrick is also a director of a number of property investment and management companies both in Australia and New Zealand. During his 25 year career, Patrick has had considerable public and private company experience in both New Zealand and Australia. Mr John Harkness – Independent Director Appointed 23 February 2005 John is a Fellow of The Institute of Chartered Accountants in Australia and the Australian Institute of Company Directors. John was a partner of KPMG for 24 years, National Executive Chairman for five years and retired from KPMG in June 2000. Since retiring from KPMG, he has held a number of non-executive director roles. From March 2003 until January 2004 he was a director of BresaGen Limited. John is currently Chairman of Lipa Pharmaceuticals Limited, ICA Property Development Funds, Helmsman Capital Fund and Sydney Foundation for Medical Research. He is a director of Macquarie CountryWide Management Limited and Crane Group Limited. John is President of the Northern Suburbs Rugby Football Club Limited and a member of the Sydney Advisory Board of the Salvation Army.

63 DIRECTORS’ REPORT CONTINUED

QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES OF DIRECTORS AND COMPANY SECRETARIES CONTINUED Mr James Hodgkinson – Non-Executive Director Appointed 21 February 2003* James is an Executive Director of Macquarie Bank Limited and Joint Head of Macquarie Bank Group’s Property Investment Management Division. James’ responsibilities include Macquarie Bank Limited’s ongoing investment in Macquarie Goodman and he also has overall responsibility for Macquarie Bank’s Property Investment Management Division activities in Asia. James was Chief Executive Officer of Macquarie Industrial Trust for six years prior to that trust’s merger with Macquarie Goodman Industrial Trust. James is also a director of Ascendas – MGM Funds Management Limited and Macquarie Goodman (NZ) Limited. James has over 18 years experience in property funds management, investment banking and chartered accounting. * Mr James Hodgkinson was appointed as an Alternate Director to Mr David Clarke on 21 February 2003. He was appointed a Director on 14 June 2005. Ms Anne Keating – Independent Director Appointed 23 February 2005 Anne was the General Manager, Australia for United Airlines from 1993 to 2001. She was previously on the board of NRMA Insurance/IAG for eight years. Anne is now a professional director with board positions in a range of industries including advertising, property, construction and banking. She is on the boards of Macquarie Leisure Management Limited, STW Communications Group Limited and Spencer Street Station Redevelopment Holdings Limited. Anne is also a member of the Advisory Council of ABN AMRO Australia and New Zealand. Ms Lynn Wood – Independent Director Appointed 23 February 2005 Lynn obtained a MA (Psychology) from Sydney University and an MBA from the Australian Graduate School of Management. She is a member of the Foreign Investment Review Board, a compliance committee member of several major fund managers, a director and vice president of the MS Society of NSW and an executive coach. Lynn’s previous board memberships include Schroders Australia Limited, Schroders Australia Property Management Limited, Sedgwick (Holdings) Pty Limited, NSW Lotteries Corporation and the Investment Funds Association of Australia (now IFSA). Her career in financial services began at American Express, including a posting in Hong Kong. Lynn was awarded the Centenary Medal for service to Australian society through business and finance in 2003. Mr Stephen Girdis – Alternate Director for Messrs David Clarke and James Hodgkinson Appointed 21 February 2003 Stephen is an Executive Director of Macquarie Bank Limited and the Head of Macquarie Property. He is or has been a director or alternate director on many of Macquarie Property listed and unlisted real estate funds. Stephen has over 23 years of experience in chartered accounting, property finance, funds management and investment banking and is an Associate of both The Institute of Chartered Accountants in Australia and the Securities Institute of Australia. He is also a director of Macquarie Capital Partners LLC, Macquarie’s global real estate investment banking joint venture. Company Secretaries Ms Carolyn Scobie, Group General Counsel and Joint Company Secretary Carolyn is the Group General Counsel and Joint Company Secretary of Macquarie Goodman. She is directly responsible for the company secretarial and corporate legal activities of the Group. She also oversees all legal matters relating to property and compliance. Carolyn has over 15 years of legal experience in corporate and commercial property areas including three years within the legal profession and six years as in-house Counsel with Kumagai Australia Group. She holds a Masters of Arts from Sydney University, a Bachelor of Arts/Bachelor of Laws from the Australian National University and a Graduate Diploma in Company Secretarial Practice. She is a member of Chartered Secretaries Australia. Mr Mark Alley, Chief Financial Officer – Asia and Joint Company Secretary Mark is Chief Financial Officer, Asia and Joint Company Secretary of Macquarie Goodman. He is responsible for the overall financial management of Macquarie Goodman outside of Australia and New Zealand. Mark has over 25 years of experience in finance, property investment and development in Australia, New Zealand, Asia and Europe. Previously, he was the Group Financial Controller of Ipoh Limited and before that the Finance Director of a private group of property companies. Mark holds a Bachelor of Commerce and Administration from Victoria University of Wellington, New Zealand. He is also a Fellow Certified Practicing Accountant with CPA Australia. The Directors’ Report is made with a resolution of the Directors.

David Clarke, AO Gregory Goodman Chairman Director Sydney, 18 August 2005

64 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 LEAD AUDITOR’S INDEPENDENCE DECLARATION Under Section 307C of the Corporations Act 2001

To: the Directors of Macquarie Goodman Management Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the ﬁnancial year ended 30 June 2005 there have been: > no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and > no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

P M Reid Partner Sydney, 18 August 2005

KPMG, AN AUSTRALIAN PARTNERSHIP, IS PART OF THE KPMG INTERNATIONAL NETWORK. KPMG INTERNATIONAL IS A SWISS COOPERATIVE.

65 STATEMENTS OF FINANCIAL PERFORMANCE For the year ended 30 June 2005

Consolidated Parent Entity 2005 2004 2005 2004 Note $M $M $M $M

REVENUE FROM ORDINARY ACTIVITIES Gross property income 154.5 — — — Funds management 13.6 39.5 — — Proceeds from sale of investment properties 278.0 — — — Property services 10.5 13.9 — — Development management 22.8 20.4 — — Other revenue from operating activities 3 15.1 5.0 18.2 25.0 Total revenue 494.5 78.8 18.2 25.0

EXPENSES FROM ORDINARY ACTIVITIES Carrying value of investment properties sold (261.0) — — — Property expenses (27.4) — — — Employee expenses (17.4) (14.4) — — Borrowing costs (25.9) (2.7) (2.9) (1.8) Merger transaction expenses (22.5) — (39.6) — Diminution in value of management rights (95.4) — (67.8) — Other expenses from ordinary activities (17.6) (9.6) (0.6) (0.4) 4 (467.2) (26.7) (110.9) (2.2)

Share of net results of associates and joint ventures 28 6.3 1.3 — —

Profit/(loss) from ordinary activities before income tax 4 33.6 53.4 (92.7) 22.8 Income tax benefit/(expense) relating to ordinary activities 6(a) 18.1 (16.4) 27.7 (0.8) Net profit/(loss) after income tax 51.7 37.0 (65.0) 22.0 Amount attributable to outside equity interests (1.7) — — — Net profit/(loss) attributable to Securityholders of Macquarie Goodman 50.0 37.0 (65.0) 22.0

NON-OWNER TRANSACTION CHANGES IN EQUITY Net increase in revaluation reserves 22 70.6 — — — Net exchange difference relating to self-sustaining foreign operations 22 0.6 0.1 — —

Total changes in equity from non-owner related transactions attributable to Securityholders of Macquarie Goodman 121.2 37.1 (65.0) 22.0

Basic earnings per security (¢) 7 7.4 13.9 Diluted earnings per security (¢) 7 7.2 13.1 Adjusted basic earnings per security (¢) 7 22.0 13.9 Distribution/dividend per security (¢) 7 27.2 7.2

The Statements of Financial Performance are to be read in conjunction with the accompanying notes.

66 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 STATEMENTS OF FINANCIAL POSITION As at 30 June 2005

Consolidated Parent Entity 2005 2004 2005 2004 Note $M $M $M $M

CURRENT ASSETS Cash assets 9 7.2 10.3 0.1 — Receivables 10 80.7 42.4 22.4 25.9 Inventories 11 13.5 2.7 — — Current tax receivables 6(b) 6.3 0.1 2.6 0.4 Other assets 12 48.0 3.1 1.0 0.3 Total current assets 155.7 58.6 26.1 26.6

NON-CURRENT ASSETS Receivables 10 15.5 — 64.8 6.0 Investment properties 13 4,739.9 — — — Inventories 11 17.2 6.1 — — Investments accounted for using the equity method 14 120.0 1.8 — — Deferred tax assets 7.0 1.6 4.6 1.6 Other ﬁnancial assets 15 101.0 72.0 31.5 57.8 Other assets 12 5.5 — — — Plant and equipment 16 3.3 2.8 — — Intangible assets 17 6.0 99.0 — 64.9 Total non-current assets 5,015.4 183.3 100.9 130.3 Total assets 5,171.1 241.9 127.0 156.9

CURRENT LIABILITIES Payables 18 91.7 9.6 1.6 0.3 Interest bearing liabilities 19 207.0 — — — Provisions 20 93.5 0.7 — — Total current liabilities 392.2 10.3 1.6 0.3

NON-CURRENT LIABILITIES Payables 18 28.5 — 38.1 — Interest bearing liabilities 19 1,656.2 79.1 33.7 33.4 Deferred tax liabilities 0.7 18.2 — 18.2 Provisions 20 0.4 0.2 — — Total non-current liabilities 1,685.8 97.5 71.8 51.6 Total liabilities 2,078.0 107.8 73.4 51.9 Net assets 3,093.1 134.1 53.6 105.0

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF MACQUARIE GOODMAN MANAGEMENT LIMITED Contributed equity 21 162.3 126.6 162.3 126.6 Reserves 22 37.5 0.1 — — (Accumulated losses)/retained proﬁts 23 (98.9) 7.4 (108.7) (21.6) Total equity attributable to Shareholders of Macquarie Goodman Management Limited 100.9 134.1 53.6 105.0

EQUITY ATTRIBUTABLE TO UNITHOLDERS OF MACQUARIE GOODMAN INDUSTRIAL TRUST Contributed equity 21 2,815.7 — — — Reserves 22 8.1 — — — Retained proﬁts 23 99.2 — — — Total equity attributable to Unitholders of Macquarie Goodman Industrial Trust 2,923.0 — — —

Outside equity interests 24 69.2 — — — Total equity 3,093.1 134.1 53.6 105.0

The Statements of Financial Position are to be read in conjunction with the accompanying notes.

67 STATEMENTS OF CASH FLOWS For the year ended 30 June 2005

Consolidated Parent Entity 2005 2004 2005 2004 Note $M $M $M $M

CASH FLOWS FROM OPERATING ACTIVITIES Property income received 163.5 — — — Other cash receipts from services provided 93.2 50.0 — — GST collected 23.5 — — — Property expenses paid (45.2) — — — GST paid (29.9) — — — Other cash payments in the course of operations (51.2) (26.2) — (0.3) Dividends/distributions received 7.1 3.8 15.9 22.2 Interest received 2.1 0.5 1.9 2.8 Borrowing costs paid (53.8) (2.6) (2.5) (1.8) Income taxes paid (net of refunds) (10.4) (3.6) (2.4) (0.2) Net cash provided by operating activities 25(b) 98.9 21.9 12.9 22.7

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from deferred settlement and sale of investment properties 185.5 5.2 — — Proceeds from sale of investments — — 26.3 — Payments for shares issued by controlled entities — — — (1.6) Payments for investments (30.3) (38.8) — (26.3) Payments for investment properties and developments (635.9) — — — Payments for plant and equipment (1.2) (1.5) — — Payments for management rights (3.5) (42.4) (3.5) — Cash on acquisition of Macquarie Goodman Industrial Trust 20.6 — — — Merger transaction costs (23.1) — (23.0) — Net cash (used in) investing activities (487.9) (77.5) (0.2) (27.9)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of securities 462.6 38.7 26.6 38.7 Transaction costs from issue of securities (11.3) (0.7) (0.5) (0.7) Net loans from/(to) controlled entities — — 11.2 (45.6) Proceeds from borrowings 815.2 75.1 6.7 62.8 Repayment of borrowings (719.6) (40.9) (34.5) (40.9) Dividends and distributions paid (91.1) (17.1) (22.1) (17.1) Amounts paid to outside equity interests 26(c) (69.9) — — — Net cash provided by/(used in) ﬁnancing activities 385.9 55.1 (12.6) (2.8)

Net (decrease)/increase in cash held (3.1) (0.5) 0.1 (8.0) Cash at beginning of year 10.3 10.9 — 8.0 Effects of exchange rate ﬂuctuations on the balances of cash held in foreign currencies — (0.1) — — Cash at end of year 25(a) 7.2 10.3 0.1 —

The Statements of Cash Flows are to be read in conjunction with the accompanying notes.

68 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 – STATEMENT OF SIGNIFICANT Controlled Entities ACCOUNTING POLICIES The consolidated financial statements incorporate the The significant accounting policies which have been assets and liabilities of all entities controlled by the adopted in the preparation of the Financial Report are: Company as at 30 June 2005 and the results of all such entities for the year ended 30 June 2005. Macquarie a) Basis of Preparation Goodman and its controlled entities together are referred The Financial Report is a general purpose financial report to in the Financial Report as the Consolidated Entity. which has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other Where an entity either began or ceased to be controlled authoritative pronouncements of the Australian Accounting during the year, the results for that entity are included only Standards Board and the Corporations Act 2001. from/to the date control commenced or ceased. It has been prepared on the basis of historical costs and, Associates except where stated, does not take into account changing Associates are those entities over which the Consolidated money values or fair values of non-current assets. Entity exercises significant influence, but not control and which are not intended for sale in the near future. These accounting policies have been consistently applied by each entity in the Consolidated Entity and, except for In the consolidated financial statements, investments in the change in accounting policy as set out in Note 2, are associates are accounted for using the equity method. consistent with those of the previous year. Investments in associates are carried at the lower of the equity accounted amount and recoverable amount. Under b) Principles of Consolidation this method, the Consolidated Entity’s share of post- Accounting for the Acquisition of acquisition profits or losses of associates is recognised Macquarie Goodman Industrial Trust in the Statement of Financial Performance, and its share The merger of Macquarie Goodman Management Limited of post-acquisition movements in reserves is recognised and Macquarie Goodman Industrial Trust was approved in consolidated reserves. Cumulative post-acquisition at separate meetings of the respective Shareholders and movements in both profit or loss and reserves are adjusted Unitholders on 25 January 2005. Following approval of against the cost of the investment. the merger, shares in Macquarie Goodman Management Limited and units in Macquarie Goodman Industrial Trust Joint Ventures were stapled to one another and are quoted as a single A joint venture is either an entity or operation that is jointly security on the Australian Stock Exchange. controlled by the Consolidated Entity. Australian Accounting Standards require an acquirer Joint Venture Entities to be identified and an in-substance acquisition to be In the consolidated financial statements, investments recognised. In relation to the merger of Macquarie in joint venture entities are accounted for using equity Goodman and Macquarie Goodman Industrial Trust, the accounting principles. Investments in joint venture entities Company is identified as having acquired control over are carried at the lower of the equity accounted amount the assets of Macquarie Goodman Industrial Trust. To and recoverable amount. recognise the in-substance acquisition, the following The Consolidated Entity’s share of the joint venture accounting principles have been applied: entity’s net profit or loss is recognised in the consolidated i) no goodwill is recognised in acquisition of Macquarie Statement of Financial Performance from the date joint Goodman Industrial Trust because there is no direct control commences. Other movements in reserves are ownership interest by Macquarie Goodman in recognised directly in consolidated reserves. Macquarie Goodman Industrial Trust; and Joint Venture Operations ii) the equity issued by Macquarie Goodman to Macquarie The Consolidated Entity’s interests in unincorporated Goodman Industrial Trust Unitholders to give effect to joint ventures are brought to account by including its the transaction is recognised at the dollar value of the proportionate share of joint venture operations’ assets, consideration payable by the Macquarie Goodman liabilities and expenses and the Consolidated Entity’s Industrial Trust Unitholders. This is because the issue revenue from the sale of its share of output on a line-by- of shares by Macquarie Goodman was administrative line basis from the date joint control commences to the in nature rather than for the purposes of the Company date joint control ceases. acquiring an ownership interest in Macquarie Goodman Industrial Trust.

69 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 1 – STATEMENT OF SIGNIFICANT Income from Dividends and Distributions ACCOUNTING POLICIES CONTINUED Dividend revenue is recognised net of any franking credits. Transactions Eliminated on Consolidation Dividend income is recognised when a dividend has been Unrealised gains and losses and inter-entity balances declared and, if not received at balance date is reflected in resulting from transactions with or between controlled the Statement of Financial Position as a receivable. entities are eliminated in full on consolidation. Revenue from distributions from controlled entities is Unrealised gains resulting from transactions with recognised by the Parent Entity when they are declared by associates and joint ventures, including those relating to the controlled entities. contributions of non-monetary assets on establishment, are eliminated to the extent of the Consolidated Entity’s d) GST interest. Unrealised gains relating to associates and joint Revenues, expenses and assets are recognised net of the venture entities are eliminated against the carrying amount amount of GST, except where the amount of GST incurred of the investment. Unrealised losses are eliminated in the is not recoverable from the Australian Taxation Office same way as unrealised gains, unless they evidence a (“ATO”). In these circumstances, the GST is recognised as recoverable amount impairment. part of the cost of acquisition of the asset or as part of the expense. c) Revenue Recognition Rental Income Receivables and payables are stated with the amount of Rental income is brought to account on an accruals basis GST included. The net amount of GST recoverable from, and, if not received at balance date, is reflected in the or payable to, the ATO is included as a current asset or Statement of Financial Position as a receivable or if paid liability in the Statements of Financial Position. in advance, as rental in advance. Lease incentives are Cash flows are included in the Statements of Cash Flows reflected in the Statement of Financial Position as other on a gross basis. The GST components of cash flows assets and amortised over the period of the lease. arising from investing and financing activities which are Recoverable Outgoings recoverable from, or payable to, the ATO are classified as Recovery of certain outgoings is accrued on an estimated operating cash flows. basis and adjusted when the actual amounts are invoiced e) Foreign Currency Translation to respective customers. Transactions Rendering of Services Foreign currency transactions are translated to Australian Fee income derived from funds management, property currency at the rates of exchange ruling at the dates of services, development management and property advisory the transactions. Amounts receivable and payable in services is recognised progressively as the services are foreign currencies at reporting date are translated at the provided, net of the amount of Goods and Services Tax rates of exchange ruling on that date. Resulting exchange (“GST”). differences are recognised in the Statements of Financial Performance. Interest Revenue Interest is brought to account on an accruals basis and, if Translation of Controlled Foreign Operations not received at balance date, is reflected in the Statement The assets and liabilities of foreign operations, including of Financial Position as a receivable. controlled entities and associates, that are self-sustaining are translated at rates of exchange ruling at reporting Asset Sales date. Equity items are translated at historical rates. The The gross proceeds of asset sales are included as revenue Statements of Financial Performance are translated at of the Consolidated Entity when contracts for the sale weighted average rates for the year. Exchange differences have been unconditionally exchanged. The gain or loss arising on translation are taken directly to the foreign on disposal is calculated as the difference between the currency translation reserve until the disposal or partial carrying amount of the asset at the time of disposal and disposal of the operations. the net proceeds on disposal.

70 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED e) Foreign Currency Translation Continued Exchange Rates Used The following exchange rates are the main exchange rates used in translating foreign currency transactions, balances and ﬁnancial statements (expressed in Australian dollars): Average 2005 Average 2004 As at 30 June 2005 As at 30 June 2004

New Zealand dollar 1.0814 1.1356 1.0949 1.0970 Singapore dollar 1.2503 1.2257 1.2928 1.1833 Hong Kong dollar 5.8608 N/A 5.9978 N/A f) Derivatives Where a hedge transaction is terminated early and the The Consolidated Entity is exposed to changes in interest anticipated transaction is still expected to occur as rates and foreign exchange rates from its activities. The designated, the deferred gains and losses that arose on Consolidated Entity uses interest rate swaps, cross- the hedge prior to its termination continue to be deferred currency swaps and forward foreign exchange contracts to and are included in the measurement of the purchase or hedge these risks. Derivative financial instruments are not sale or interest transaction when it occurs. Where a hedge held for speculative purposes. transaction is terminated early because the anticipated transaction is no longer expected to occur as designated, Hedges deferred gains and losses that arose on the hedge prior to Transactions are designated as hedges of specific its termination are included in the Statement of Financial purchases or sales of goods or services, purchases of Performance for the year. qualifying assets, or an anticipated interest transaction, only when they are expected to reduce exposure to g) Taxation the risks being hedged. Derivative financial instruments The Consolidated Entity adopts the income statement are designated prospectively so that it is clear when an liability method of tax effect accounting. anticipated transaction has or has not occurred. Derivative Income tax expense is calculated on profit from ordinary financial instruments are designated as hedges only when activities adjusted for permanent differences between it is probable that the anticipated transaction will occur taxable and accounting income. The tax effect of timing as designated. Gains or losses on the hedge arising up differences, which arise from items being brought to to the date of the anticipated transaction, together with account in different periods for income tax and accounting any costs or gains arising at the time of entering into the purposes, is carried forward as a future income tax benefit hedge, are deferred and included in the measurement or a provision for deferred income tax. of the anticipated transaction when the transaction has occurred as designated. Any gains or losses on the hedge Future income tax benefits are not brought to account transaction after that date are included in the Statement of unless realisation of the asset is assured beyond Financial Performance. reasonable doubt, or if relating to tax losses when realisation is virtually certain. The net amounts receivable or payable under cross- currency swaps and forward foreign exchange contracts To the extent that dividends are proposed by controlled and the associated deferred gains or losses are recorded entities incorporated overseas, the Consolidated Entity has on the Statement of Financial Position from the date of provided for withholding tax where applicable. A provision inception of the hedge transaction. When recognised, the is also made for the withholding tax on the balance net receivables or payables are revalued using the foreign of unremitted profits that eventually will be remitted to currency rate current at the reporting date. Macquarie Goodman. The Consolidated Entity has entered into interest rate swap agreements to hedge against the risk of increases in interest rates on the Consolidated Entity’s debt. The net amounts receivable and payable under the swap agreements are accounted for on an accruals basis and are included in interest expense. When the anticipated transaction is no longer expected to occur as designated, the deferred gains and losses relating to the hedged transaction are recognised immediately in the Statement of Financial Performance.

71 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 1 – STATEMENT OF SIGNIFICANT i) Investment Properties ACCOUNTING POLICIES CONTINUED Investment properties comprise investment interests in Tax Consolidation land and buildings (including integral plant and equipment) Macquarie Goodman Management Limited is the held for the purpose of producing rental income. Land head entity in a tax consolidated group comprising all and buildings (including integral plant and equipment) Australian wholly-owned subsidiaries (this excludes comprising investment properties, are regarded as Macquarie Goodman Industrial Trust and its wholly- composite assets and are disclosed as such in the owned subsidiaries). The head entity recognises all of financial statements. the current and deferred tax assets and liabilities of the Where a contract of purchase includes a deferred tax consolidated group (after elimination of intra-group settlement arrangement, the acquisition value is transactions). determined as the cash consideration payable in the The tax consolidated group has entered into a tax funding future, discounted to present value at the date of arrangement that requires wholly-owned subsidiaries to acquisition. make contributions to the head entity for current tax assets The fair value basis is used to measure the carrying and liabilities and movements in deferred tax balances amount of investment properties. An independent valuation arising from external transactions during the year. of investment properties is obtained at least every three Under the tax funding arrangements, the contributions years to use as a basis for measuring the fair value of the are calculated on a “standalone basis” so that the properties. contributions are equivalent to the tax balances generated The independent registered valuer determines the market by external transactions entered into by wholly-owned value based on a willing, but not anxious, buyer and seller, subsidiaries within the tax consolidated group. The timing a reasonable period to sell the property, and that the of contributions reflects the timing of the head entity’s property is reasonably exposed to the market. Where an obligations to make payments for tax liabilities to the investment property is acquired, the property is carried at relevant tax authorities. The assets and liabilities arising cost which includes the costs of acquisition. under the tax funding arrangement are recognised as inter-company assets and liabilities with a consequential At reporting dates occurring between obtaining adjustment to income tax expense/revenue. independent valuations, the Directors review the carrying value of the Consolidated Entity’s investment properties to Macquarie Goodman Industrial Trust be satisfied that, in their opinion, the carrying value of the and its Controlled Entities investment properties is not materially different to the fair Under current Australian income tax legislation, Macquarie value of the investment properties at that date. Where the Goodman Industrial Trust and its controlled entities are carrying amount value materially differs from fair value, an not liable for income tax, including capital gains tax, adjustment is made as appropriate. provided that Securityholders are presently entitled to the distributable income of Macquarie Goodman Industrial Revaluation increments are credited directly to an asset Trust as calculated for trust law purposes. revaluation reserve. Revaluation decrements are taken directly to the Asset Revaluation Reserve to the extent Tax allowances for building and plant and equipment that such decrements are reversing amounts previously depreciation are distributed to Securityholders in the form credited to that reserve that are still available in that of tax deferred components of distributions. Any taxable reserve. Revaluation decrements in excess of amounts capital gains are distributed. available in the reserve are charged to the Statement of h) Receivables Financial Performance. Subsequent revaluation increments Trade debtors and rental debtors are carried at amounts that recover amounts previously charged to the Statement due as they are due for settlement no more than 30 days of Financial Performance are, to that extent, credited to the from the date of recognition. The collectibility of trade Statement of Financial Performance. debtors is assessed at balance date. Debts which are Disposal of Revalued Assets known to be uncollectable are written off. A provision The gain or loss on disposal of previously revalued for doubtful debts is made when some doubt as to properties is calculated as the difference between the collection exists. carrying amount of the property at the time of the disposal and the proceeds on disposal and is included in the Statement of Financial Performance in the year of disposal. Any related revaluation increment in the Asset Revaluation Reserve at the time of disposal is transferred to the Capital Profits Reserve.

72 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 1 – STATEMENT OF SIGNIFICANT m) Deferred Leasing and Tenancy Costs ACCOUNTING POLICIES CONTINUED Expenditure on direct leasing and tenancy costs is deferred j) Development Costs of Investment Properties and amortised over the lease term in proportion to the From time to time, the Consolidated Entity will undertake rental income recognised in each financial year. development of investment properties in order to enhance n) Borrowing Costs marketability for customers. The cost of any development Expenditure incurred in obtaining debt finance is is reflected as part of the cost of the investment property. deferred and written off over the period of the finance The carrying amounts of non-current assets valued on the facility. Borrowing costs relating to a qualifying asset cost basis are reviewed to determine whether they are are capitalised as part of the cost of that asset using a in excess of their recoverable amount at balance date. If weighted average cost of debt. Qualifying assets are the carrying amount of a non-current asset exceeds its assets which take more than 12 months to get ready for recoverable amount, the asset is written down to the lower their intended use or sale. All other borrowing costs are amount. The write-down is recognised as an expense expensed as incurred. in the net profit or loss in the reporting period in which it occurs. o) Investments Controlled Entities Costs of development includes the costs of all materials Investments in controlled entities are carried in Macquarie used in construction, costs of managing the project, Goodman’s financial statements at the lower of cost and holding costs and borrowing costs incurred during recoverable amount. The carrying amounts of investments construction. in controlled entities are reviewed to determine whether The Consolidated Entity’s policy is to obtain an they are in excess of their recoverable amount at balance independent valuation at practical completion of each date. If the carrying amount exceeds its recoverable development in order to assess fair value. The carrying amount, the asset is written down to the lower amount. amount of the completed development is subject to the The write-down is recognised as an expense in the net policies in Note 1(i). profit or loss in the reporting period in which it occurs. Distributions/dividends are brought to account in the k) Inventories Work in progress in respect of land subdivision and Statement of Financial Performance when they are development costs includes the costs of acquisition, declared by the controlled entities. planning, management, development and holding costs Associates such as rates and taxes. Work in progress is carried at the Investments in listed shares of associates are carried at fair lower of cost and net realisable value. value which is measured with reference to quoted market l) Depreciation values. Investments in unlisted shares of associates are Investment properties are not depreciated. Buildings and carried at the lower of cost and recoverable amount. plant integral to the property are classified as investment Other properties and accordingly are not depreciated. The Investments in other listed entities are measured at fair properties are subject to continual maintenance and value which is determined with reference to quoted market regularly revalued on the basis described above. Taxation values at reporting date. Refer Note 1(x). allowances for building, plant and equipment depreciation are claimed by the Consolidated Entity and are declared as p) Leased Assets tax deferred components of distributions. Leases under which the Consolidated Entity assumes substantially all the risks and benefits of ownership are Items of plant and equipment are initially recorded at cost classified as finance leases. Other leases are classified as and depreciated using the straight line method over their operating leases. estimated useful lives to the Consolidated Entity. The depreciation and amortisation rates or useful lives used for Finance Leases each class of asset are as follows: A lease asset and a lease liability equal to the present value of the minimum lease payments are recorded at the Plant and equipment Useful lives inception of the lease. Leasehold improvements 4 to 10 years Plant and equipment 2 to 15 years Lease liabilities are reduced by repayments of principal. The interest components of the lease payments are expensed. Contingent rentals are expensed as incurred.

73 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 1 – STATEMENT OF SIGNIFICANT u) Issue Costs ACCOUNTING POLICIES CONTINUED Transaction costs arising on the issue of equity are offset Operating Leases directly against the proceeds from the issue. Payments made under operating leases are expensed on a v) Employee Benefits straight line basis over the term of the lease, except where Wages, Salaries, Annual Leave and Sick Leave an alternative basis is more representative of the pattern of Liabilities for employee benefits for wages, salaries, annual benefits to be derived from the leased property. leave and sick leave represent present obligations resulting Lease incentives are recognised as liabilities. Lease rental from employees’ services provided to reporting date. payments are allocated between rental expense and They are calculated at undiscounted amounts based on reduction of the liability, on a straight line basis over the remuneration wage and salary rates that the Consolidated period of the incentive. Entity expects to pay as at reporting date including related on-costs, such as, workers compensation insurance and q) Intangible Assets – Management Rights Management rights are carried at the lower of cost or payroll tax. recoverable amount. Management rights are amortised on Long Service Leave a straight line basis over their useful lives. The recoverable The provision for employee benefits to long service leave amount of management rights is reviewed by the Directors represents the present value of the estimated future cash on a regular basis. Any diminution in value of management outflows to be made resulting from employees’ services rights is recognised in the Statement of Financial provided to reporting date. Performance in the period in which it occurs. The provision is calculated using expected future increases r) Payables in wage and salary rates including related on-costs and Liabilities are recognised for amounts to be paid in the expected settlement dates based on turnover history future for goods or services received by the Consolidated and is discounted using the rates attaching to national Entity prior to the end of the year. government bonds at reporting date which most closely s) Interest Bearing Liabilities match the terms of maturity of the related liabilities. The Bank loans are recognised at their principal amount. unwinding of the discount is treated as long service leave Interest expense is accrued at the contracted rate and expense. included in the Statement of Financial Position as Other Executive Option Plan creditors and accruals. Macquarie Goodman has granted options to certain Debentures and notes payable are recognised when executives under the Executive Option Plan. Costs issued at the net proceeds received with the premium or incurred in administering the Plan are expensed as discount on issue amortised over the period to maturity. incurred. Interest expense is recognised on an effective yield basis. No accounting entries are made in relation to the Executive t) Provisions Option Plan until options are exercised, at which time A provision is recognised when there is a legal, equitable amounts received are recognised in the Statement of or constructive obligation as a result of a past event and it Financial Position as contributed equity. is probable that a future sacrifice of economic benefits will The amounts disclosed for remuneration of Directors and be required to settle the obligation, the timing or amount of Executives in the Directors’ Report and Note 32 include which is uncertain. the assessed fair values of options at the date they were If the effect is material, a provision is determined by granted and have been allocated between the grant and discounting the expected future cash flows (adjusted for vesting dates of the options. expected future risks) required to settle the obligation at ESAP a pre-tax rate that reflects current market assessments of Funds advanced to employees under the ESAP are the time value of money and the risks specific to the liability recognised as receivables and at the amounts due to most closely matching the expected future payments, be repaid to Macquarie Goodman. Loans are initially except where noted below. The unwinding of the discount recognised upon approval of the loans to individual is treated as part of the expense related to the particular employees. Conversions of Executive options to ESAP provision. loans were recognised on the date the merger with Dividends/Distributions Macquarie Goodman Industrial Trust was approved. Provisions for dividends and distributions payable are recognised in the reporting period in which the dividends and distributions are declared, for the entire undistributed amount regardless of the extent to which they will be paid in cash.

74 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 1 – STATEMENT OF SIGNIFICANT y) Acquisition of Assets ACCOUNTING POLICIES CONTINUED The cost of the purchase of an ownership interest in assets v) Employee Benefits Continued acquired is measured as the fair value of the assets given Superannuation Plan up, shares issued or liabilities undertaken at the date The Consolidated Entity contributes to employees and of acquisition plus incidental costs directly attributable Directors’ defined contribution superannuation funds to the acquisition. Where settlement of any part of cash by making the required contributions to independent consideration is deferred, the amounts payable in the superannuation funds as required by legislation. These future are discounted to their present value at the date contributions are expensed in the Statement of Financial of acquisition. Performance. z) Recoverable Amount of Non-Current Assets Valued on Cost Basis Bonus Plan The carrying amounts of non-current assets valued on A liability is recognised for employee bonuses payable the cost basis are reviewed to determine whether they are as the benefit calculations are formally documented in in excess of their recoverable amount at reporting date. accordance with the Bonus Policy. If the carrying amount of a non-current asset exceeds w) Earnings per Security (“EPS”) its recoverable amount, the asset is written down to the Basic EPS is calculated by dividing the net profit lower amount. The write-down is expensed in the reporting attributable to Securityholders for the reporting period, period in which it occurs. after excluding any costs of servicing equity (other than ordinary securities), by the weighted average number of Where a group of assets working together supports ordinary securities of Macquarie Goodman, adjusted for the generation of cash inflows, recoverable amount is any bonus issue. assessed in relation to that group of assets. Diluted EPS is calculated by dividing the basic EPS In assessing recoverable amounts of non-current assets, earnings, adjusted by the after-tax effect of financing the relevant cash flows have been discounted to their costs associated with dilutive potential ordinary securities present value. and the effect on revenues and expenses of conversion aa) Rounding to ordinary securities associated with dilutive potential In accordance with ASIC Class Order 98/100, the amounts ordinary securities, by the weighted average number of shown in the Financial Report and Directors’ Report have ordinary securities and dilutive potential ordinary securities been rounded to the nearest hundred thousand dollars, adjusted for any bonus issue. unless otherwise stated. x) Revaluation of Non-Current Assets ab) Comparative figures Classes of non-current assets measured at fair value are Where applicable, certain comparative figures have been revalued with sufficient regularity to ensure the carrying restated to conform with the presentation in the current amount of each asset in the class does not differ materially year’s Financial Report. from fair value at reporting date. Revaluation increments, NOTE 2 – CHANGE IN ACCOUNTING POLICY on a class of assets basis, are recognised in the Asset Revaluation Reserve except that amounts reversing a Investments in Listed Trusts decrement previously recognised as an expense are In order to more accurately reflect the assets of the recognised as revenues. Revaluation decrements are Consolidated Entity, the accounting policy for investments only offset against revaluation increments relating to the in listed trusts, except where they are equity accounted in same class of asset and any excess is recognised as an accordance with the policy set out in Note 1(b), has been expense. changed from cost to fair value. Fair value is measured with reference to quoted market prices. Potential capital gains tax is only taken into account if the asset is held for sale and forms part of the assessable The increase in the carrying amount of the listed units income of the Consolidated Entity. in a Singapore listed property trust (“A-REIT”) by the Consolidated Entity at 30 June 2005 is $36.9 million. The corresponding increase in value has been recognised in the Asset Revaluation Reserve. If the change in accounting policy had been applied at 30 June 2004, the increase in the carrying value of the units would have been $10.1 million and the corresponding increase in value would have been recognised in the Asset Revaluation Reserve.

75 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Consolidated Parent Entity 2005 2004 2005 2004 Note $M $M $M $M

NOTE 3 – OTHER REVENUE FROM OPERATING ACTIVITIES Revenue from ordinary activities includes the following: Interest income from: — Related parties 34 — 0.7 — — — Controlled entities — — 1.5 2.6 — Other parties 2.5 0.5 0.8 0.2 Dividends from controlled entities — — 14.8 21.1 Dividends/distributions from listed property trusts 7.7 3.8 1.1 1.1 Proceeds from sale of investment in associate 4.9 — — — 15.1 5.0 18.2 25.0

NOTE 4 – PROFIT FROM ORDINARY ACTIVITIES Proﬁt from Ordinary Activities before Income Tax has been arrived at after (charging)/crediting the following items: Transaction costs (1) (22.5) — (22.4) — Performance fee waived — — (17.2) — Merger transaction expenses (22.5) — (39.6) —

Diminution in value of management rights (2) (95.4) — (67.8) —

Bank loans and overdraft interest (48.8) (2.7) (1.8) (1.8) Interest bearing loans/advances from controlled entities — — (1.1) — (48.8) (2.7) (2.9) (1.8) Capitalised borrowing costs (3) 22.9 — — — Borrowing costs (25.9) (2.7) (2.9) (1.8)

Proceeds from sale of investment properties 278.0 — — — Carrying value of investment properties sold (261.0) — — — Net proﬁt on sale of investment properties 17.0 — — —

Proceeds from sale of investment in associate 4.9 — — — Carrying value of investment sold (4.7) — — — Net proﬁt on sale of investment in associate 0.2 — — —

Depreciation of plant and equipment (0.6) (0.2) — — Amortisation of leasehold improvements (0.1) — — — Amortisation of management rights (1.1) (1.5) (1.0) (0.4) Amortisation of deferred leasing and tenancy costs (0.3) — — — Total depreciation and amortisation (2.1) (1.7) (1.0) (0.4)

Net expense in provision for employee beneﬁts (1.0) (0.4) — — Operating lease rental expenses (2.7) (1.6) — —

(1) Transaction costs incurred relates mainly to fees paid to ﬁnancial advisers, lawyers and investigating accountants in connection with the stapling of Macquarie Goodman Management Limited shares and Macquarie Goodman Industrial Trust units. (2) For details of the diminution in value of management rights, refer to Note 17. (3) Borrowing costs were capitalised to investment properties under development at a weighted average rate of 6.35% per annum.

76 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 $ $ $ $

NOTE 5 – AUDITORS’ REMUNERATION Statutory audit Auditors of the Company — audit and review of financial reports (KPMG Australia) 376,766 68,000 — — — audit and review of financial reports (overseas KPMG firms) 28,088 13,520 — — 404,854 81,520 — — Other auditors — audit and review of financial reports (non-KPMG firms) 18,495 1,387 — — 423,349 82,907 — —

Services other than statutory audit Other regulatory services (KPMG Australia) 68,500 13,000 — —

Other assurance services — investigative accounting services (KPMG Australia) 1,412,828 — 1,160,875 —

Other services — taxation compliance services (KPMG Australia) 264,293 141,592 — — — taxation compliance services (overseas KPMG ﬁrms) 15,584 24,202 — — 1,761,205 178,794 1,160,875 — 2,184,554 261,701 1,160,875 —

Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 6 – TAXATION a) Income Tax Benefit/(Expense) Prima facie income tax (expense)/benefit calculated at 30% (2004: 30%) on the profit from ordinary activities (10.1) (16.0) 27.8 (6.8) (Increase)/decrease in income tax due to: — Net profit attributable to Unitholders of Macquarie Goodman Industrial Trust 40.3 — — — — Diminution in value of management rights (10.8) — (3.9) — — Other non-deductible items (0.4) (0.1) (0.2) (0.3) — Non-assessable income – intragroup dividend — — 4.4 6.3 — Net assessable foreign income (1.4) (0.3) (0.4) — — Net foreign tax credits received/(paid) 0.7 (0.1) — — — Income tax expense related to current and deferred tax transactions of the wholly-owned subsidiaries in the tax consolidated group — — — (14.3) — Recovery of income tax expense under a tax funding arrangement at transition — — — 14.3

(Under)/over provision in prior year (0.2) 0.1 — — Income tax beneﬁt/(expense) attributable to proﬁt from ordinary activities 18.1 (16.4) 27.7 (0.8)

77 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 6 – TAXATION CONTINUED b) Current Tax Receivables Balance at beginning of year 0.1 (5.4) 0.4 (0.3) Movements during the year: — Income taxes paid (net of refunds) 10.4 3.6 2.4 0.2 — Current year’s income tax expense on proﬁt from ordinary activities (4.0) (6.5) (0.2) 0.5 — Income tax refundable related to current and deferred tax transactions of the wholly-owned subsidiaries in the tax consolidated group — 8.3 — — (Under)/over provision in prior year (0.2) 0.1 — — Balance at end of year 6.3 0.1 2.6 0.4

Consolidated 2005 2004 Cents Cents

NOTE 7 – EARNINGS PER SECURITY (“EPS”) Attributable to Securityholders of Macquarie Goodman Basic earnings per security 7.4 13.9 Diluted earnings per security 7.2 13.1 Adjusted basic earnings per security - refer (i) 22.0 13.9 Distribution/dividend per security - refer (ii) 27.2 7.2

Number of securities 2005 2004

Weighted average number of securities used in calculating basic earnings per security and adjusted basic earnings per security 680,007,042 266,552,469 Effect of Executive options on issue and RePS conversion 18,997,334 15,874,729 Weighted average number of securities used in calculating diluted earnings per security 699,004,376 282,427,198

2005 2004 $M $M

i) Net profit after tax used in calculating earnings per security Net profit after tax used in calculating basic and diluted earnings per security 50.0 37.0 Add back: Merger transaction expenses 22.5 — Diminution in value of management rights (net of tax) 77.3 — Net profit after tax used in calculating adjusted basic earnings per security 149.8 37.0

ii) Dividends and distributions for the year used in calculating dividend/distribution per security 31 December 2004 dividend of 4.5 cents (2003: 3.5 cents) 12.5 9.5 31 March 2005 distribution of 6.475 cents (2003: nil) 81.5 — 30 June 2005 distribution of 6.475 cents (2003: 3.5 cents) 91.0 9.6 185.0 19.1

78 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 8 – DIVIDENDS AND DISTRIBUTIONS a) Dividends Recognised in the Current Year by Macquarie Goodman Total Dividend amount Franked/ % Date of cps $M unfranked Franked payments

2005 Final 2004 dividend 3.5 9.6 Partly franked 57 22 Sep 04 Interim 2005 dividend 4.5 12.5 Partly franked 30 2 Feb 05 22.1

2004 Final 2003 ordinary 3.0 7.6 Partly franked 56 14 Nov 03 Interim 2004 ordinary 3.5 9.5 Partly franked 85 3 Mar 04 17.1

Parent Entity 2005 2004 $M $M

Dividend Franking Account 30% franking credits available to Shareholders of Macquarie Goodman Management Limited for subsequent ﬁnancial years (0.6) 0.3

The partly franked dividends paid during the year were franked at the tax rate of 30%. The above amounts are based on the balance of the dividend franking account at year end adjusted for: a) franking credits that will arise from the payment of the current tax liability; b) franking debits that will arise from the payment of dividends recognised as a liability at year end; c) franking credits that will arise from the receipt of dividends recognised as a receivable at year end; and d) franking credits that the entity may be prevented from distributing in subsequent years. The ability to utilise the franking credits is dependent upon there being sufﬁcient available proﬁts to declare dividends. b) Distributions Declared by Macquarie Goodman Industrial Trust since the Date of Acquisition Distribution Total amount Date of cpu $M payment

2005 distributions for the quarter ended March 2005 quarter distribution from the Trust 6.475 81.5 3 May 05 Final 2005 distribution from the Trust 6.475 91.0 19 Aug 05 12.950 172.5

79 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 9 – CASH ASSETS Cash at bank and on hand 7.2 10.3 0.1 —

NOTE 10 – RECEIVABLES Current Trade debtors 20.2 12.5 1.2 — Other debtors (1) 48.8 0.6 3.5 0.2 Receivables from ESAP (2) 11.1 — 11.1 — Loans to controlled entities — — 6.6 8.5 Performance fee receivable — 17.2 — 17.2 Deferred settlement on sale of inventories — 12.1 — — Loans to related parties 0.6 — — — 80.7 42.4 22.4 25.9

Non-current Receivables from ESAP (2) 15.5 — 15.5 — Loans to controlled entities (3) — — 49.3 6.0 15.5 — 64.8 6.0

(1) Other debtors at 30 June 2005 includes $24.7 million receivable from the sale of investment properties (30 June 2004: nil). (2) Amounts receivable from employees are at the Consolidated Entity’s weighted average interest rate of 6.5% per annum and are for periods of up to ﬁve years. Loans are limited recourse to the value of the securities restricted under the ESAP. (3) Non-current loans to controlled entities are interest bearing, with the exception of $21.5 million (2004: $1.2 million) which is non-interest bearing, with no ﬁxed term of repayment. Interest is charged per the loan agreement at 9.55% per annum (2004: 7.99% per annum).

NOTE 11 – INVENTORIES Current Work in progress 13.5 2.7 — —

Non-current Work in progress 17.2 6.1 — —

Details of transactions with related parties involving work in progress are set out in Note 34. The transactions relate to the Brickworks Joint Venture and the Moorabbin Airport Corporation Pty Limited projects. NOTE 12 – OTHER ASSETS Current Prepayments 11.2 0.5 — — Deferred borrowing costs 2.0 — — — Deferred leasing and tenancy costs 1.4 — — — Other (1) 33.4 2.6 1.0 0.3 48.0 3.1 1.0 0.3

Non-current Deferred leasing and tenancy costs 4.7 — — — Other 0.8 — — — 5.5 — — —

(1) Includes refundable deposits of $33.3 million for the purchase of investment properties.

80 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 13 – INVESTMENT PROPERTIES Carrying amount at beginning of year — — — — Acquisitions — on acquisition of Macquarie Goodman Industrial Trust and its controlled entities 4,250.2 — — — — other acquisitions 498.6 — — — Capital expenditure 218.9 — — — Disposals (261.0) — — — Valuation increment 33.2 — — — Carrying amount at end of year 4,739.9 — — —

Price Cost Book Including Including Cost Disposal Revaluation Value Acquisition Capital Since During Increment/ 30 June Acquisition Costs Expenditure Valuation Valuation Acquisition the Year (Decrement) 2005 Properties Date $M $M Date $M $M $M $M $M

AUSTRALIA Warehouse/Distribution Centres GreystanesPark, Prospect, NSW — East, Stage 1 1 Feb 05 61.7 84.1 1 Feb 05 61.7 22.4 — — 84.1 — West, Stage 2 1 Feb 05 53.9 63.9 1 Feb 05 53.9 10.0 — — 63.9 115.6 148.0 115.6 32.4 — — 148.0

MFive Industry Park, Moorebank, NSW 1 Feb 05 108.7 116.5 1 Feb 05 108.7 7.8 — — 116.5 Centenary Distribution Centre, Moorebank, NSW — Stage 1 1 Feb 05 46.4 46.4 1 Feb 05 46.4 — — — 46.4 — Stage 2 1 Feb 05 19.8 20.1 1 Feb 05 19.8 0.3 — — 20.1 66.2 66.5 66.2 0.3 — — 66.5

Forrester Distribution Centre, St Marys, NSW — Stage 1 1 Feb 05 55.3 55.3 1 Feb 05 55.3 — — — 55.3 — Stage 2 1 Feb 05 6.7 7.0 1 Feb 05 6.7 0.3 — — 7.0 62.0 62.3 62.0 0.3 — — 62.3

Roberts Distribution Centre, Chullora, NSW — Building A 1 Feb 05 25.2 25.2 1 Feb 05 25.2 — — — 25.2 — Building B 1 Feb 05 36.4 36.4 1 Feb 05 36.4 — — — 36.4 61.6 61.6 61.6 — — — 61.6

Northgate Distribution Centre, Somerton,Vic — Stages 1 and 2 1 Feb 05 45.1 45.6 30 Jun 05 53.6 0.5 — 8.0 53.6 — Stage 3 1 Feb 05 2.4 2.4 1 Feb 05 2.4 — (0.6) — 1.8 47.5 48.0 56.0 0.5 (0.6) 8.0 55.4

Reservoir Distribution Centre, Wetherill Park, NSW 1 Feb 05 49.7 49.9 1 Feb 05 49.7 0.2 — — 49.9 Portside Distribution Centre, Banksmeadow, NSW 1 Feb 05 48.5 48.5 1 Feb 05 48.5 — — — 48.5

81 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 13 – INVESTMENT PROPERTIES CONTINUED AUSTRALIA CONTINUED Warehouse/Distribution Centres continued Wyndham Distribution Centre, Laverton, Vic 1 Feb 05 38.5 38.5 1 Feb 05 38.5 — — — 38.5 Smithﬁeld Distribution Centre, Smithﬁeld, NSW 1 Feb 05 38.2 38.2 1 Feb 05 38.2 — — — 38.2 Great West Distribution Centre, Arndell Park, NSW 1 Feb 05 37.6 37.6 1 Feb 05 37.6 — — — 37.6 Chullora Distribution Centre, Chullora, NSW — Stage 1 1 Feb 05 25.3 25.3 1 Feb 05 25.3 — — — 25.3 — Stage 2 1 Feb 05 11.9 11.9 1 Feb 05 11.9 — — — 11.9 37.2 37.2 37.2 — — — 37.2

Angliss Distribution Centre, Laverton North, Vic 1 Feb 05 19.2 32.9 30 Jun 05 36.4 13.6 — 3.6 36.4 Southend Distribution Centre, Mascot, NSW 1 Feb 05 35.1 35.1 1 Feb 05 35.1 — — — 35.1 Westall Distribution Centre, Clayton, Vic 1 Feb 05 33.2 33.2 1 Feb 05 33.2 — — — 33.2 Laverton Distribution Centre, Laverton North, Vic 1 Feb 05 30.8 30.8 1 Feb 05 30.8 — — — 30.8 Crestmead Distribution Centre, Crestmead, Qld 1 Feb 05 30.0 30.3 1 Feb 05 30.0 0.3 — — 30.3 Kingston Distribution Centre, Braeside, Vic 1 Feb 05 30.2 30.2 1 Feb 05 30.2 — — — 30.2 Dandenong Industrial Estate, Dandenong, Vic 30 Jun 05 29.9 29.9 30 Jun 05 28.3 — — — 29.9 Davis Distribution Centre, Wetherill Park, NSW — Building A 1 Feb 05 18.5 18.8 1 Feb 05 18.5 0.3 — — 18.8 — Building B 1 Feb 05 7.9 8.0 1 Feb 05 7.9 0.1 — — 8.0 26.4 26.8 26.4 0.4 — — 26.8

Fitzgerald Distribution Centre, Laverton North, Vic 1 Feb 05 25.4 25.4 1 Feb 05 25.4 — — — 25.4 Prestons Distribution Centre, Preston, NSW 4 Mar 05 24.8 25.4 23 Nov 04 22.6 0.6 — — 25.4 Hampton Park Distribution Centre, Hampton Park, Vic 1 Feb 05 23.8 23.8 1 Feb 05 23.8 — — — 23.8 Berkeley Distribution Centre, Berkeley Vale, NSW 1 Feb 05 22.3 22.3 1 Feb 05 22.3 — — — 22.3 Miller Distribution Centre, Villawood, NSW 1 Feb 05 21.3 21.4 1 Feb 05 21.3 0.1 — — 21.4 Port Wakefield Distribution Centre, Gepps Cross, SA 1 Feb 05 17.8 17.8 1 Feb 05 17.8 — — — 17.8 Boundary Distribution Centre, Laverton, Vic 1 Feb 05 17.6 17.6 1 Feb 05 17.6 — — — 17.6 Holroyd Distribution Centre, Smithfield, NSW 1 Feb 05 17.3 17.3 1 Feb 05 17.3 — — — 17.3 Sheffield Distribution Centre, Welshpool, WA — Stage 1 1 Feb 05 12.7 12.7 1 Feb 05 12.7 — — — 12.7 — Stage 2 1 Feb 05 4.2 4.2 1 Feb 05 4.2 — — — 4.2 16.9 16.9 16.9 — — — 16.9

Villawood Distribution Centre, Villawood, NSW 1 Feb 05 16.3 16.3 1 Feb 05 16.3 — — — 16.3 Tranzport Distribution Centre, Port Melbourne, Vic 1 Feb 05 14.1 14.1 1 Feb 05 14.1 — — — 14.1 Britton Distribution Centre, Smithﬁeld, NSW 1 Feb 05 13.8 13.8 1 Feb 05 13.8 — — — 13.8 Sunshine Distribution Centre, Sunshine, Vic 1 Feb 05 13.4 13.4 1 Feb 05 13.4 — — — 13.4 Federation Distribution Centre, Laverton North, Vic 1 Feb 05 12.3 12.3 1 Feb 05 12.3 — — — 12.3 Woodlands Distribution Centre, Braeside, Vic 1 Feb 05 10.8 10.8 1 Feb 05 10.8 — — — 10.8 Westlink Distribution, Laverton, Vic 1 Feb 05 6.7 10.6 1 Feb 05 6.7 3.9 — — 10.6 Keysborough Distribution Centre, Keysborough, Vic — Stage 1 1 Feb 05 6.7 6.8 1 Feb 05 6.7 0.1 — — 6.8 — Stage 2 1 Feb 05 2.8 2.8 1 Feb 05 2.8 — — — 2.8 9.5 9.6 9.5 0.1 — — 9.6

82 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Price Cost Book Including Including Cost Disposal Revaluation Value Acquisition Capital Since During Increment/ 30 June Acquisition Costs Expenditure Valuation Valuation Acquisition the Year (Decrement) 2005 Properties Date $M $M Date $M $M $M $M $M

NOTE 13 – INVESTMENT PROPERTIES CONTINUED AUSTRALIA CONTINUED Warehouse/Distribution Centres continued Wingﬁeld Distribution Centre, Wingﬁeld, SA 30 Jun 05 9.2 9.2 30 Jun 05 8.7 — — — 9.2 Lytton Distribution Centre, Lytton, Qld 1 Feb 05 7.6 7.6 30 Jun 05 8.8 — — 1.2 8.8 Holbeche Distribution Centre, Arndell Park, NSW 1 Feb 05 8.8 8.8 1 Feb 05 8.8 — — — 8.8 Montague Distribution Centre, West End, Qld 1 Feb 05 8.3 8.3 1 Feb 05 8.3 — — — 8.3 Gippsland Distribution Centre, Dandenong, Vic 1 Feb 05 7.0 7.0 1 Feb 05 7.0 — — — 7.0 Beverley Distribution Centre, Beverley, SA 28 Jun 05 5.7 5.9 — — 0.2 — — 5.9 Edinburgh Distribution Centre, Edinburgh, SA 28 Apr 05 1.6 4.8 11 Mar 05 1.6 3.2 — — 4.8 Bradford Distribution Centre, Cavan, SA 1 Feb 05 3.8 3.8 30 Jun 05 4.3 — — 0.5 4.3 Wodonga Distribution Centre, Baranduda, Vic 1 Feb 05 3.3 3.3 1 Feb 05 3.3 — — — 3.3

Industrial Estates Erskine Park Industrial Estate, Erskine Park, NSW 1 Feb 05 48.2 85.1 1 Feb 05 48.2 36.9 — — 85.1 Discovery Cove Industrial Estate, Banksmeadow, NSW 1 Feb 05 72.2 73.6 30 Jun 05 80.0 1.4 — 6.4 80.0 Alexandria Industrial Estate , Alexandria, NSW 1 Feb 05 60.1 63.1 30 Jun 05 61.5 3.0 — (1.6) 61.5 Mitchell Industrial Estate, Alexandria, NSW 1 Feb 05 47.2 47.5 30 Jun 05 50.2 0.3 — 2.7 50.2 Kingsford Smith Industrial Estate, Alexandria, NSW 1 Feb 05 41.3 41.3 1 Feb 05 41.3 — — — 41.3 Cumberland Industrial Estate, Smithfield, NSW 1 Feb 05 37.8 40.6 1 Feb 05 37.8 2.8 — — 40.6 Botany Bay Industrial Estate, Botany, NSW 1 Feb 05 34.1 34.7 1 Feb 05 34.1 0.6 — — 34.7 Gateway Industrial Estate, Arndell Park, NSW 1 Feb 05 34.1 34.1 1 Feb 05 34.1 — — — 34.1 Smithfield Industrial Estate, Smithfield, NSW — Stage 1 1 Feb 05 15.8 15.8 1 Feb 05 15.8 — — — 15.8 — Stage 2 1 Feb 05 14.4 14.4 1 Feb 05 14.4 — — — 14.4 — Stage 3 1 Feb 05 3.8 3.9 1 Feb 05 3.8 0.1 — — 3.9 34.0 34.1 34.0 0.1 — — 34.1

Burrows Industrial Estate, Alexandria, NSW 1 Feb 05 32.0 32.3 30 Jun 05 33.5 0.3 — 1.2 33.5 Portside Industrial Estate, Port Melbourne, Vic 1 Feb 05 32.4 32.4 1 Feb 05 32.4 — — — 32.4 McLaren Industrial Estate, North Rocks, NSW 1 Feb 05 31.1 32.0 1 Feb 05 31.1 0.9 — — 32.0 Brisbane Gate Industrial Park, Hendra, Qld 1 Feb 05 30.7 30.8 1 Feb 05 30.7 0.1 — — 30.8 Acacia Link Industrial Estate, Acacia Ridge, Qld 1 Feb 05 20.3 28.4 1 Feb 05 20.3 8.1 — — 28.4 Arcadia Industrial Estate, Coopers Plains, Qld 1 Feb 05 23.0 23.2 30 Jun 05 25.0 0.1 — 1.9 25.0 Brodie Industrial Estate, Rydalmere, NSW 1 Feb 05 23.5 23.5 1 Feb 05 23.5 — — — 23.5 Riverside Centre, Parramatta, NSW 1 Feb 05 22.8 22.9 1 Feb 05 22.8 0.1 — — 22.9 Mitchell Industrial Estate, Alexandria, NSW 1 Feb 05 20.7 22.3 1 Feb 05 20.7 1.6 — — 22.3 Biloela Industrial Estate, Villawood, NSW 1 Feb 05 19.9 20.1 1 Feb 05 19.9 0.2 — — 20.1 Reserve Industrial Estate, Ermington, NSW 1 Feb 05 19.9 19.9 1 Feb 05 19.9 — — — 19.9 Tingalpa Industrial Estate, Tingalpa, Qld 1 Feb 05 13.8 13.8 30 Jun 05 15.6 — — 1.8 15.6 Ferntree Industrial Estate, Notting Hill, Vic 1 Feb 05 14.1 14.1 1 Feb 05 14.1 — — — 14.1 Westcove Industrial Estate, Lane Cove, NSW 1 Feb 05 12.9 12.9 1 Feb 05 12.9 — — — 12.9 Citiport Industrial Estate, Eagle Farm, Qld 1 Feb 05 12.2 12.2 1 Feb 05 12.2 — — — 12.2 Abbott Industrial Estate, Chester Hill, NSW 1 Feb 05 12.1 12.1 1 Feb 05 12.1 — — — 12.1 Greensquare Industrial Estate, Alexandria, NSW 1 Feb 05 11.6 11.6 1 Feb 05 11.6 — — — 11.6 Homebush Bay Industrial Estate, Homebush, NSW 1 Feb 05 11.3 11.3 1 Feb 05 11.3 — — — 11.3 Pavesi Industrial Estate, Smithﬁeld, NSW 1 Feb 05 9.5 9.5 1 Feb 05 9.5 — — — 9.5 Woodpark Industrial Estate, Smithﬁeld, NSW 1 Feb 05 7.2 7.3 30 Jun 05 7.9 0.1 — 0.6 7.9 Healey Industrial Estate, Dandenong, Vic 1 Feb 05 7.0 7.0 1 Feb 05 7.0 — — — 7.0

83 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 13 – INVESTMENT PROPERTIES CONTINUED AUSTRALIA CONTINUED Business Parks Lidcombe Business Park, Lidcombe, NSW 1 Feb 05 142.9 143.3 30 Jun 05 150.0 0.4 — 6.7 150.0 Campus Business Park, Homebush, NSW 1 Feb 05 125.2 129.9 1 Feb 05 125.2 4.7 — — 129.9 Slough Business Park, Silverwater, NSW 1 Feb 05 101.1 103.1 1 Feb 05 101.1 2.0 — — 103.1 Clayton Business Park, Clayton, Vic 1 Feb 05 87.7 91.5 1 Feb 05 87.7 3.8 — — 91.5 Acacia Ridge Business Park, Acacia Ridge, Qld — Stage 1 1 Feb 05 44.1 44.2 1 Feb 05 44.1 0.1 — — 44.2 — Stage 2 1 Feb 05 20.3 21.9 1 Feb 05 20.3 1.6 — — 21.9 64.4 66.1 64.4 1.7 — — 66.1

Chullora Business Park, Chullora, NSW 1 Feb 05 64.4 64.6 1 Feb 05 64.4 0.2 — — 64.6 Chiﬂey Business Park, Mentone, Vic 1 Feb 05 56.6 64.4 1 Feb 05 56.6 7.8 — — 64.4 Airgate Business Park, Mascot, NSW — Stage 1 1 Feb 05 23.4 25.2 1 Feb 05 23.4 1.8 — — 25.2 — Stage 2 1 Feb 05 30.0 30.6 1 Feb 05 30.0 0.6 — — 30.6 — Stage 3 1 Feb 05 8.4 8.4 1 Feb 05 8.4 — — — 8.4 61.8 64.2 61.8 2.4 — — 64.2

Botany Grove Business Park, Botany, NSW — Stage 1 1 Feb 05 17.5 17.6 1 Feb 05 17.5 0.1 — — 17.6 — Stage 2 1 Feb 05 20.8 20.9 1 Feb 05 20.8 0.1 — — 20.9 — Stage 3 1 Feb 05 17.5 17.6 1 Feb 05 17.5 0.1 — — 17.6 — Stage 4 1 Feb 05 5.2 5.7 1 Feb 05 5.2 0.5 — — 5.7 61.0 61.8 61.0 0.8 — — 61.8

Euston Business Park, Alexandria, NSW 1 Feb 05 49.7 49.7 1 Feb 05 49.7 — — — 49.7 TransTech Business Park, Lane Cove, NSW 1 Feb 05 41.0 41.9 1 Feb 05 41.0 0.9 — — 41.9 St Peters Business Park, St Peters, NSW 1 Feb 05 39.2 39.2 1 Feb 05 39.2 — — — 39.2 Talavera Business Park, North Ryde, NSW — Building A 1 Feb 05 17.5 17.5 1 Feb 05 17.5 — — — 17.5 — Building B 1 Feb 05 21.4 21.4 1 Feb 05 21.4 — — — 21.4 38.9 38.9 38.9 — — — 38.9

Regal Business Park, Roweville, Vic 1 Feb 05 37.6 38.6 1 Feb 05 37.6 1.0 — — 38.6 Forestridge Business Park, Frenchs Forest, NSW 1 Feb 05 34.7 35.7 1 Feb 05 34.7 1.0 — — 35.7 Link Business Park, North Ryde, NSW — Building A 1 Feb 05 14.3 14.3 1 Feb 05 14.3 — — — 14.3 — Building B 1 Feb 05 21.0 21.4 1 Feb 05 21.0 0.4 — — 21.4 35.3 35.7 35.3 0.4 — — 35.7

Showground Business Park, Castle Hill, NSW 1 Feb 05 32.0 32.5 1 Feb 05 32.0 0.5 — — 32.5 Enterprise Business Park, Gladesville, NSW 1 Feb 05 31.7 31.7 1 Feb 05 31.7 — — — 31.7 Toyota Business Park, Vic — Parcel A 14 Apr 05 16.7 16.7 17 Mar 05 16.0 — — — 16.7 — Parcel B 24 Mar 05 10.7 10.7 17 Mar 05 10.1 — — — 10.7 27.4 27.4 26.1 — — — 27.4

84 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Price Cost Book Including Including Cost Disposal Revaluation Value Acquisition Capital Since During Increment/ 30 June Acquisition Costs Expenditure Valuation Valuation Acquisition the Year (Decrement) 2005 Properties Date $M $M Date $M $M $M $M $M

NOTE 13 – INVESTMENT PROPERTIES CONTINUED AUSTRALIA CONTINUED Business Parks continued Waterloo Business Park, North Ryde, NSW 1 Feb 05 24.2 24.6 1 Feb 05 24.2 0.4 — — 24.6 Ferntree Business Park, Notting Hill, Vic 1 Feb 05 23.8 24.2 1 Feb 05 23.8 0.4 — — 24.2 Queensport Quays Business Park, Murarrie, Qld 1 Feb 05 17.3 27.3 1 Feb 05 17.3 10.0 (6.4) — 20.9 Seville Business Park, Villawood, NSW 1 Feb 05 17.9 18.0 1 Feb 05 17.9 0.1 — — 18.0 Paciﬁc View Business Park, Frenchs Forest, NSW 1 Feb 05 15.9 16.2 30 Jun 05 16.3 0.3 — 0.1 16.3 Orion Business Park, Lane Cove, NSW 1 Feb 05 12.8 12.9 30 Jun 05 13.0 0.1 — 0.1 13.0 Citylink Business Park, Port Melbourne, Vic 1 Feb 05 9.6 10.3 1 Feb 05 9.6 0.7 — — 10.3 Chase Business Park, Chatswood, NSW 1 Feb 05 10.1 10.2 1 Feb 05 10.1 0.1 (2.7) — 7.5 Peninsula Business Park, Brookvale, NSW 1 Feb 05 17.7 18.5 1 Feb 05 17.7 0.8 (18.5) — — Wedgewood Business Park, Hallam, Vic 1 Feb 05 2.1 2.3 1 Feb 05 2.1 0.2 (2.3) — —

Ofﬁce Parks Talavera Corporate Centre, North Ryde, NSW 1 Feb 05 110.8 129.1 1 Feb 05 110.8 18.3 — — 129.1 Homebush Corporate Park, Homebush, NSW 1 Feb 05 106.3 110.9 1 Feb 05 106.3 4.6 — — 110.9 CityWest Ofﬁce Park, Pyrmont, NSW 1 Feb 05 104.6 104.9 1 Feb 05 104.6 0.3 — — 104.9 Macquarie Corporate Park, North Ryde, NSW — Building A 1 Feb 05 33.4 33.4 1 Feb 05 33.4 — — — 33.4 — Building B 1 Feb 05 52.4 52.5 1 Feb 05 52.4 0.1 — — 52.5 — Building C 1 Feb 05 5.4 5.6 1 Feb 05 5.4 0.2 — — 5.6 91.2 91.5 91.2 0.3 — — 91.5

IBC Business Estate, Homebush, NSW 30 Jun 05 92.9 92.9 1 May 05 88.0 — — — 92.9 Binary Centre, North Ryde, NSW 1 Feb 05 81.1 81.2 1 Feb 05 81.1 0.1 — — 81.2 St Leonards Corporate Centre, St Leonards, NSW 31 May 05 77.9 77.9 1 May 05 77.5 — — — 77.9 Warringah Corporate Centre, Frenchs Forest, NSW — Stage 1 1 Feb 05 43.7 43.7 1 Feb 05 43.7 — — — 43.7 — Stage 2 1 Feb 05 3.6 3.7 1 Feb 05 3.6 0.1 — — 3.7 47.3 47.4 47.3 0.1 — — 47.4

Cambridge Ofﬁce Park, Epping, NSW 1 Feb 05 46.1 46.1 1 Feb 05 46.1 — — — 46.1 Pinnacle Ofﬁce Park, North Ryde, NSW — Stage 1 1 Feb 05 26.8 27.4 1 Feb 05 26.8 0.6 — — 27.4 — Stage 2 1 Feb 05 5.4 6.3 1 Feb 05 5.4 0.9 — — 6.3 32.2 33.7 32.2 1.5 — — 33.7

Hurstville Ofﬁce Park, Hurstville, NSW 1 Feb 05 29.9 30.2 1 Feb 05 29.9 0.3 — — 30.2 The Precinct Corporate Centre, North Ryde, NSW — Stage 1 1 Feb 05 16.4 17.7 1 Feb 05 16.4 1.3 — — 17.7 — Stage 2 1 Feb 05 9.3 9.3 1 Feb 05 9.3 — — — 9.3 25.7 27.0 25.7 1.3 — — 27.0

85 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 13 – INVESTMENT PROPERTIES CONTINUED AUSTRALIA CONTINUED Suburban Commercial Buildings Ashﬁeld Corporate Centre, Ashﬁeld, NSW — Stage 1 1 Feb 05 28.2 28.2 1 Feb 05 28.2 — — — 28.2 — Stage 2 1 Feb 05 12.7 13.2 1 Feb 05 12.7 0.5 — — 13.2 40.9 41.4 40.9 0.5 — — 41.4

Gordon Corporate Centre, Gordon, NSW 1 Feb 05 26.9 27.3 1 Feb 05 26.9 0.4 — — 27.3 Total Australia 4,280.3 4,469.4 4,317.0 189.9 (30.5) 33.2 4,471.9

NEW ZEALAND Industrial Estates Savill Link, Otahuhu, Auckland 1 Feb 05 17.7 22.3 1 Feb 05 17.7 4.8 (6.6) — 15.9 The Gate Industry Park, Penrose, Auckland 1 Feb 05 39.0 39.7 1 Feb 05 39.0 0.7 (36.2) — 3.5 Penrose Industrial Estate, Penrose, Auckland 1 Feb 05 15.8 15.8 1 Feb 05 15.8 — (15.8) — — Business Parks Highbrook Business Park, East Tamaki, Auckland 1 Feb 05 81.1 94.4 1 Feb 05 81.1 13.3 — — 94.4 Ofﬁce Parks Air New Zealand House, Auckland 4 May 05 20.1 22.9 4 May 05 54.6 2.8 — — 22.9 Central Park Corporate Centre, Greenlane, Auckland 1 Feb 05 46.6 53.3 1 Feb 05 46.6 6.7 (50.0) — 3.3 Neilson Street, Penrose, Auckland 30 Jun 05 1.1 1.1 12 May 05 2.0 — — — 1.1 Millennium Centre, Phase 3, Greenlane, Auckland 8 Apr 05 0.6 0.6 4 Mar 05 1.1 — — — 0.6 Fletcher Head Ofﬁce, Penrose, Auckland 1 Feb 05 33.8 33.8 1 Feb 05 33.8 — (33.8) — — Millennium Centre, Greenlane, Auckland 1 Feb 05 20.4 20.4 1 Feb 05 20.4 — (20.4) — — IBM Centre, Auckland 1 Feb 05 10.1 10.1 1 Feb 05 10.1 — (10.1) — — BTI House, Newmarket, Auckland 1 Feb 05 7.9 7.9 1 Feb 05 7.9 — (7.9) — — Vector House, Newmarket, Auckland 1 Feb 05 7.6 7.6 1 Feb 05 7.6 — (7.6) — — Nestlé Building, Manukau, Auckland 1 Feb 05 3.8 3.8 1 Feb 05 3.8 — (3.8) — — Ricoh Building, Parnell, Auckland 1 Feb 05 3.6 3.6 1 Feb 05 3.6 — (3.6) — — Kodak Building, Parnell, Auckland 1 Feb 05 4.0 4.0 1 Feb 05 4.0 — (4.0) — — Windsor Court, Parnell, Auckland 1 Feb 05 3.1 3.1 1 Feb 05 3.1 — (3.1) — — EDS Building, Mt Wellington, Auckland 1 Feb 05 2.7 2.7 1 Feb 05 2.7 — (2.7) — — HSBC Centre, Auckland 1 Feb 05 10.3 10.3 1 Feb 05 10.3 — (10.3) — — HP House, Auckland 1 Feb 05 12.1 12.1 1 Feb 05 12.1 — (12.1) — — Westney Industry Park, Mangere, Auckland 1 Feb 05 0.8 2.5 1 Feb 05 0.8 1.7 (2.5) — — Total New Zealand 342.2 372.0 378.1 30.0 (230.5) — 141.7

HONG KONG Ofﬁce Parks Upper Global Gateway 20 Jun 05 126.3 126.3 1 Apr 05 123.4 — — — 126.3 Total Hong Kong 126.3 126.3 123.4 — — — 126.3

Total Investment Properties 4,748.8 4,967.7 4,818.5 218.9 (261.0) 33.2 4,739.9

Valuations dated 1 February 2005 represent Directors’ fair valuations of investment properties at the date of acquisition of Macquarie Goodman Industrial Trust. All other valuations are independent valuations.

86 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 Note $M $M $M $M

NOTE 14 – INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Associates 28 120.0 1.8 — — Joint venture entity 28 — — — — 120.0 1.8 — —

NOTE 15 – OTHER FINANCIAL ASSETS Investments in controlled entities — Unlisted shares at cost 26 — — 31.5 31.4 Investments in other entities — Listed units at fair value (1) 101.0 — — — — Listed units at cost — 72.0 — 26.4 101.0 72.0 31.5 57.8

(1) As set out in Note 2, the accounting policy for investments in listed trusts, except where they are equity accounted in accordance with the policy set out in Note 1(b), was changed during the year from cost to fair value. Fair value is determined with reference to quoted market prices at reporting date.

NOTE 16 – PLANT AND EQUIPMENT Leasehold improvements at cost 1.5 1.4 — — Accumulated amortisation (0.1) — — — 1.4 1.4 — —

Plant and equipment at cost 2.7 1.6 — — Accumulated depreciation (0.8) (0.2) — — 1.9 1.4 — — Total plant and equipment at net book value 3.3 2.8 — —

Reconciliation Leasehold improvements Carrying amount at beginning of year 1.4 — — — Additions 0.1 1.4 — — Amortisation (0.1) — — — Carrying amount at end of year 1.4 1.4 — —

Plant and equipment Carrying amount at beginning of year 1.4 0.5 — — Additions 1.1 1.1 — — Depreciation (0.6) (0.2) — — Carrying amount at end of year 1.9 1.4 — —

NOTE 17 – INTANGIBLE ASSETS Management rights at cost 106.6 103.1 68.8 65.3 Provision for diminution in value (95.4) — (67.8) — Accumulated amortisation (5.2) (4.1) (1.0) (0.4) 6.0 99.0 — 64.9

As a result of the acquisition of Macquarie Goodman Industrial Trust, a provision for diminution in the value of management rights relating to Macquarie Goodman Industrial Trust and its controlled entities is recognised at the Company and Consolidated Entity levels as revenue and proﬁts are no longer recognised in the consolidated results in respect of these assets.

87 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 18 – PAYABLES Current Trade creditors 0.9 2.2 — 0.1 Other creditors and accruals 38.2 7.4 1.6 0.2 Deferred settlements (1) 52.6 — — — 91.7 9.6 1.6 0.3

Non-current Deferred settlements (1) 19.2 — — — Loans to controlled entities (2) — — 38.1 — Other creditors and accruals 9.3 — — — 28.5 — 38.1 —

(1) Deferred settlements include amounts for acquisition of ordinary shares in Highbrook Development Limited payable within 12 months ($20.4 million) and after 12 months ($19.2 million). The amounts payable after 12 months have been discounted at the Consolidated Entity’s weighted average cost of debt (6.49% per annum) at the date of acquisition. (2) Non-current loans to controlled entities are non-interest bearing, with no ﬁxed term of repayment.

NOTE 19 – INTEREST BEARING LIABILITIES Current Other loans – deferred payment (1) 207.0 — — —

Non-current Bank loans – secured (2) 935.3 79.0 5.7 33.4 Other loans – CMBS (3) 720.9 — — — Other loans – controlled entity — — 28.0 — Lease liabilities — 0.1 — — 1,656.2 79.1 33.7 33.4

(1) Interest bearing deferred payments of $207 million (2004: nil) relate to the fair value of the deferred payment owed to Commonwealth Managed Investments Limited on the acquisition of Colonial First State Industrial Property Trust in April 2003. The vendor can call for repayment at any time up to 1 April 2006. The liability attracts a coupon rate of 8.4% per annum. The effective interest rate after fair valuation is 6.9% per annum (2004: nil). (2) Macquarie Goodman has a $575 million Syndicated Multi-Option Facility, a $225 million Syndicated Standby Facility and a $300 million (2004: nil) bridging facility with National Australia Bank Limited and Westpac Banking Corporation. Security is by way of first or second ranking mortgages and charges over various assets. The multi option and standby facilities are available to 30 April 2006 and the bridging facility is available to 31 July 2005. Amounts denominated in foreign currencies are as follows: New Zealand dollars $144.8 million (2004: nil), Singapore dollars $34.9 million (2004: nil) and Hong Kong dollars $85.2 million (2004: nil). Any resulting foreign currency exposure is hedged by property and other assets purchased in the corresponding currency with the proceeds. These facilities were refinanced subsequent to 30 June 2005. Refer to Note 37 for details. Macquarie Goodman has a further $37 million Multi-Option Facility with Westpac Banking Corporation, of which $32 million (2004: $33.5 million) is denominated in New Zealand dollars. Any resulting foreign currency exposure is hedged by corresponding New Zealand investments purchased with the proceeds. Security is by way of charges over various assets of the Consolidated Entity. The facility expires on 31 December 2005. This facility was refinanced subsequent to 30 June 2005. Refer to Note 37 for details. A controlled entity has bank loan of $87.4 million (2004: $45.6 million) which is denominated in Singapore dollars. Any resulting foreign currency exposure is hedged by corresponding Singapore investments purchased with the proceeds. Security is by way of charges over various assets of the Consolidated Entity. The facility expires on 24 November 2007.

88 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 19 – INTEREST BEARING LIABILITIES CONTINUED Controlled entities have bank loans of $65.8 million (2004: nil) which are denominated in New Zealand dollars. Any resulting foreign currency exposure is hedged by investments in New Zealand assets purchased with the proceeds. Security is by way of charges over the assets of the Consolidated Entity to which the borrowings relate. The sum of $45.6 million of the facility expires on 28 February 2007 and $20.2 million on 31 October 2005. A controlled entity has a bank loan of $130 million (2004: nil) which is denominated in Hong Kong dollars. Any resulting foreign currency exposure is hedged by corresponding Hong Kong property investments purchased with the proceeds. Security is by way of charges over the property. The facility expires in June 2007. (3) Macquarie Goodman Industrial Trust has Commercial Mortgage Backed Securities (“CMBS”) of $720.9 million (2004: nil). Standard & Poor’s has rated $510.9 million at AAA, $109 million at AA and $101 million at A. Security is by way of ﬁrst registered mortgages and charges over various assets. The sum of $233 million of CMBS matures on 7 September 2006 and $487.9 million on 7 November 2006. Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 19 – INTEREST BEARING LIABILITIES CONTINUED Financing Arrangements The Consolidated Entity has access to the following lines of credit: Total facilities available: Bank loans 1,414.7 85.6 5.7 39.9 Bank guarantees 5.5 5.1 5.1 5.1 1,420.2 90.7 10.8 45.0

Facilities utilised at reporting date: Bank loans 935.3 79.1 5.7 33.4 Bank guarantees 5.5 5.1 5.1 5.1 940.8 84.2 10.8 38.5

Facilities not utilised at reporting date: Bank loans 479.4 6.5 — 6.5 Bank guarantees — — — — 479.4 6.5 — 6.5

NOTE 20 – PROVISIONS Current Provisions for distributions to Securityholders 91.0 — — — Provisions for distributions to RePS Holders 1.0 — — — Provisions for employee beneﬁts 1.5 0.7 — — 93.5 0.7 — —

Non-current Provisions for employee beneﬁts 0.4 0.2 — —

Provision for Distributions to Securityholders Provisions for distributions 182.1 — — — Payment of distributions (91.1) — — — Closing balance 91.0 — — —

Provisions for Distributions to RePS Holders Initial provision at the date of stapling 3.4 — — — Provisions for distributions 1.7 — — — Payment of distributions (4.1) — — — Closing balance 1.0 — — —

89 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 21 – CONTRIBUTED EQUITY Parent Entity 1,404,967,533 shares (2004: 273,215,776 ordinary shares) fully paid (1) 166.0 129.6 166.0 129.6 Issue costs (3.7) (3.0) (3.7) (3.0) 162.3 126.6 162.3 126.6

Macquarie Goodman Industrial Trust 1,404,967,533 units (2004: nil) fully paid (1) 2,876.7 — — — Issue costs (61.0) — — — 2,815.7 — — —

Total contributed equity 2,978.0 126.6 162.3 126.6

(1) Reconciliation of securities of Macquarie Goodman

Terms and Conditions Stapled security means one share in the Company stapled to one unit in Macquarie Goodman Industrial Trust. Holders of Macquarie Goodman stapled securities are entitled to receive dividends and distributions as declared from time to time and are entitled to one vote per stapled security at Shareholders’ and Unitholders’ meetings. In the event of winding up of Macquarie Goodman, Securityholders rank after creditors and are fully entitled to any proceeds of liquidation. Note 33 provides details of shares/securities issued on exercise of options. Macquarie Macquarie Goodman Goodman Consolidated Industrial Management Entity Trust Limited 2005 2005 2005 2004 $M $M $M $M

Balance at 1 July 2004: 273,215,776 shares (1 July 2003: 250,854,945) 129.6 — 129.6 90.9 Contributed value of units in Macquarie Goodman Industrial Trust immediately prior to stapling 2,347.9 2,347.9 — —

Securities issued — 4,149,997 (2004: 4,433,331) from the exercise of options under the Executive Option Plan 2.4 — 2.4 2.8 — 13,766,671 issued under the Employee Security Acquisition Plan on 27 January 2005 27.7 — 27.7 — — 967,794,042 shares issued to Unitholders of Macquarie Goodman Industrial Trust at one cent per share (1) 9.6 — 9.6 — — Return of capital to Shareholders in the Company for investment in Macquarie Goodman Industrial Trust pursuant to the merger transaction — 29.1 (29.1) — — 10,209,433 issued under the Distribution Reinvestment Plan 38.1 36.2 1.9 — — 125,924,433 (2004: 17,927,500) issued under the Entitlement Offer on 19 May 2005 458.4 435.9 22.5 35.9 — 9,907,181 issued on conversion of RePS during the year 29.0 27.6 1.4 — Balance at 30 June 2005 1,404,967,533 securities (30 June 2004: 273,215,776) 3,042.7 2,876.7 166.0 129.6

Less: issue costs (64.7) (61.0) (3.7) (3.0) 2,978.0 2,815.7 162.3 126.6

(1) In order to implement the merger, 967,794,042 shares of Macquarie Goodman Management Limited were issued to Unitholders of Macquarie Goodman Industrial Trust. The number and value of the shares were calculated using the ratio approved at a meeting of Shareholders of Macquarie Goodman Management Limited held on 25 January 2005.

90 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 22 – RESERVES Asset revaluation reserve (1) 61.5 — — — Foreign currency translation reserve (2) 0.7 0.1 — — Capital proﬁts reserve (3) 4.2 — — — RePS repurchase reserve (4) (20.8) — — — Total reserves 45.6 0.1 — — The reserves of Macquarie Goodman are apportioned below between the amounts Securityholders of Macquarie Goodman are entitled by virtue of their Shareholding in Macquarie Goodman Management Limited and their Unitholding in Macquarie Goodman Industrial Trust. Unitholders Shareholders of of Macquarie Securityholders Macquarie Goodman Goodman of Macquarie Management Limited Industrial Trust Goodman 2005 2004 2005 2004 2005 2004 Consolidated $M $M $M $M $M $M

(1) Asset Revaluation Reserve Balance at beginning as at 1 July — — — — — — Balance at acquisition of Macquarie Goodman Industrial Trust — — 112.6 — 112.6 — Increases due to revaluations: — Increase on revaluation of listed investments 37.4 — — — 37.4 — — Increase on revaluation of investment properties — — 33.2 — 33.2 — Total revaluation increases for the year 37.4 — 33.2 — 70.6 — Transfers to retained proﬁts — — (121.7) — (121.7) — Balance as at 30 June 37.4 — 24.1 — 61.5 —

(2) Foreign Currency Translation Reserve Balance at beginning as at 1 July 0.1 — — — 0.1 — Balance at acquisition of Macquarie Goodman Industrial Trust — — (0.9) — (0.9) — Transfers to Capital Proﬁts Reserve — — 0.9 — 0.9 — Net exchange differences on conversion of self-sustaining operations — 0.1 0.6 — 0.6 0.1 Balance as at 30 June 0.1 0.1 0.6 — 0.7 0.1

The foreign currency translation reserve records the foreign currency differences arising from the translation of self-sustaining foreign operations in New Zealand, Singapore and Hong Kong.

(3) Capital Proﬁts Reserve Balance at beginning as at 1 July — — — — — — Balance at acquisition of Macquarie Goodman Industrial Trust — — 5.1 — 5.1 — Transfers from Foreign Currency Translation Reserve — — (0.9) — (0.9) — Balance as at 30 June — — 4.2 — 4.2 —

(4) RePS Repurchase Reserve Balance at beginning as at 1 July — — — — — — Premium paid on repurchase of RePS from Outside Equity Interests — — (20.8) — (20.8) — Balance as at 30 June — — (20.8) — (20.8) —

The RePS Repurchase Reserve arises on acquisition of RePS by Macquarie Goodman. The balance will reverse on conversion of the RePS instruments to Macquarie Goodman securities. Refer Note 24 for details. Total consolidated reserves 37.5 0.1 8.1 — 45.6 0.1 The Parent Entity did not hold any Asset Revaluation Reserve, Foreign Currency Translation Reserve, Capital Proﬁts Reserve or RePS Repurchase Reserve at any time during the year or the comparative year.

91 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 23 – (ACCUMULATED LOSSES)/RETAINED PROFITS The (accumulated losses)/retained proﬁts of Macquarie Goodman are apportioned below between the amounts Securityholders of Macquarie Goodman are entitled to by virtue of their Shareholding in Macquarie Goodman Management Limited and their Unitholding in Macquarie Goodman Industrial Trust. Unitholders Shareholders of of Macquarie Securityholders Macquarie Goodman Goodman of Macquarie Management Limited Industrial Trust Goodman 2005 2004 2005 2004 2005 2004 $M $M $M $M $M $M

Consolidated Retained profits/(accumulated losses) at 1 July 7.4 (12.5) — — 7.4 (12.5) Net (loss)/profit for the year (84.2) 37.0 134.2 — 50.0 37.0 Transfers from reserves — — 137.5 — 137.5 — Dividends/distributions declared (22.1) (17.1) (172.5) — (194.6) (17.1) (Accumulated losses)/retained profits at 30 June (98.9) 7.4 99.2 — 0.3 7.4

Parent Entity Accumulated losses at 1 July (21.6) (26.5) — — — — Net (loss)/proﬁt for the year (65.0) 22.0 — — — — Dividends declared (22.1) (17.1) — — — — Accumulated losses at 30 June (108.7) (21.6) — — — —

Consolidated 2005 2004 $M $M

NOTE 24 – OUTSIDE EQUITY INTERESTS Outside equity interests in controlled entities comprise: RePS (1) 51.0 — Other Shareholders in Highbrook Development Limited 18.2 — 69.2 —

(1) Reset Preference Shares (“RePS”) are a class of securities that provide preferred distributions fixed for an initial period; the first reset date on the RePS is scheduled to occur at the discretion of Macquarie Goodman Capital Trust during the 12 months ending 30 June 2007. The fixed return provides for a distribution rate of 7.5% per annum. Upon expiry of the initial period, known as a reset date, the issuer may convert RePS holdings into Macquarie Goodman securities at a 3% discount at the Directors’ discretion which will rank equally in all respects with existing Macquarie Goodman securities. Prior to the reset date, the RePS Holders can convert their securities into predetermined numbers of Macquarie Goodman securities. Prior to the merger with the Company, Macquarie Goodman Industrial Trust acquired 492,302 RePS from RePS Holders for consideration of $68.4 million. This amount was paid in cash subsequent to the acquisition. The Company has not exercised conversion rights at 30 June 2005. The costs of repurchasing the RePS is offset against Outside Equity Interests to the extent of the nominal value on issue of the instruments. The remaining balance of $20.8 million is recognised in the RePS Repurchase Reserve.

92 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 Note $M $M $M $M

NOTE 25 – NOTES TO THE STATEMENTS OF CASH FLOWS a) Reconciliation of Cash For the purpose of the Statement of Cash Flows, cash includes cash on hand and at bank and short-term deposits at call. Cash as at the end of the year as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows: Cash assets 9 7.2 10.3 0.1 — b) Reconciliation of Proﬁt/(Loss) from Ordinary Activities after Income Tax to Net Cash Provided by Operating Activities Proﬁt/(loss) from ordinary activities after income tax 51.7 37.0 (65.0) 22.0

Items classified as investing/financing activities Profit on sale of investment properties (17.0) — — — Profit on sale of investment in associate (0.2) — — — Interest paid capitalised (22.9) — — — Merger transaction costs 22.5 — 22.4 — Non-cash items Depreciation and amortisation 2.1 1.7 1.0 0.4 Diminution in value of management rights 95.4 — 67.8 — Share of net results of associates and joint ventures (6.3) (1.3) — — Inter-company recharges — — — (1.1) Decrease in income taxes payable — (5.4) — (0.3) (Increase) in income taxes receivable (6.2) (0.1) (2.2) (0.4) Net cash provided by operating activities before change in assets and liabilities 119.1 31.9 24.0 20.6

Change in assets and liabilities during the year: — Decrease/(increase) in receivables 66.0 (24.9) 8.9 (14.6) — (Increase) in inventories (24.9) (1.6) — — — (Increase)/decrease in tax assets (5.4) 0.1 (3.0) (1.5) — Decrease/(increase) in other assets 12.8 (2.2) — — — (Decrease)/increase in payables (52.2) — 1.2 0.1 — (Decrease)/increase in deferred taxes payable (17.5) 18.2 (18.2) 18.2 — Increase/(decrease) in provisions 1.0 0.4 — (0.1) Net cash inﬂow from operating activities 98.9 21.9 12.9 22.7

93 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 25 – NOTES TO THE STATEMENTS OF CASH FLOWS CONTINUED c) Non-Cash Financing and Investing Activities During the year, the following non-cash transactions were undertaken: (i) acquisition of Macquarie Goodman Industrial Trust; (ii) acquisition of units in Macquarie Goodman Property Trust; (iii) settlement of trust distribution liabilities; (iv) issue of securities under ESAP; (v) return of capital to Shareholders; and (vi) conversion of RePS. (i) Acquisition of Macquarie Goodman Industrial Trust As a result of the stapling, Macquarie Goodman acquired control of Macquarie Goodman Industrial Trust, effective 1 February 2005. No consideration was paid for the acquisition. The net assets of Macquarie Goodman Industrial Trust at the date of acquisition were as follows: $M

Cash 20.6 Receivables 98.4 Investment properties 4,250.2 Other assets 65.4 4,434.6

Payables 178.7 Interest bearing liabilities 1,691.0 Provisions 28.9 1,898.6 Net assets acquired 2,536.0

(ii) Acquisition of Units in Macquarie Goodman Property Trust As a result of a restructuring of Macquarie Goodman’s interests in New Zealand, Macquarie Goodman sold certain properties and investments in New Zealand to Macquarie Goodman Property Trust. The key components of the transaction are summarised as follows: Properties and investments sold 249.2

Consideration received: Cash 175.8 Units in Macquarie Goodman Property Trust 73.4 249.2

(iii) Settlement of Macquarie Goodman Industrial Trust Distribution Liabilities Since the date of acquisition of Macquarie Goodman Industrial Trust, 10,209,433 stapled securities were allocated under the Distribution Reinvestment Plan for total consideration of $36.2 million. (iv) Issue of Securities under ESAP During the year, 17,916,668 securities were issued as a result of the exercise of options. Of this amount, 13,766,671 securities were issued to the Chief Executive Ofﬁcer and the other employees under the ESAP. No cash was received on the exercise of these options and $27.7 million was recognised as a receivable on that date. (v) Return of Capital to Shareholders Pursuant to the merger transaction, Macquarie Goodman Management Limited returned capital to its Shareholders at a rate of one cent per share held. The proceeds of this transaction ($29.1 million) were used as a consideration for units in Macquarie Goodman Industrial Trust acquired by Shareholders of Macquarie Goodman Management Limited. (vi) Conversion of RePS During the year, 9,907,181 securities were issued as a result of RePS Holders’ conversion elections. The value of the securities issued was $29 million. No cash was received as a result of these transactions.

94 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Parent Entity 2005 2004 $M $M

NOTE 26 – CONTROLLED ENTITIES a) Particulars in Relation to Controlled Entities Investments in controlled entities at cost 31.5 31.4

Interest held Country of 2005 2004 incorporation % %

Controlled companies Macquarie Goodman Funds Management Limited Australia 100.0 100.0 Macquarie Goodman Property Services Pty Limited Australia 100.0 100.0 Macquarie Goodman Development Management Pty Limited Australia 100.0 100.0 Macquarie Goodman Property Development Pty Limited Australia 100.0 100.0 Macquarie Goodman Corporate Services Pty Limited Australia 100.0 100.0 Macquarie Goodman Building Services Pty Limited Australia 100.0 100.0 Macquarie Goodman Industrial Finance Pty Limited Australia 100.0 100.0 Macquarie Goodman Industrial Management Pty Limited Australia 100.0 100.0 Macquarie Goodman Vineyard Pty Limited (1) Australia 100.0 50.0 Macquarie Goodman Wholesale Limited (2) Australia 100.0 — Macquarie Goodman Acquisitions Pty Limited (2) Australia 100.0 — Macquarie Goodman Foundation Pty Limited (2) Australia 100.0 — Macquarie Goodman Holdings Pty Limited Australia 100.0 — Tallina Pty Limited (3) Australia 100.0 — Tidecard Pty Limited (3) Australia 100.0 — Mintbail Pty Limited (3) Australia 100.0 — 01 Pty Limited (3) Australia 100.0 — 02 Pty Limited (3) Australia 100.0 — Binary Centre Pty Limited (3) Australia 100.0 — Riverside 1 Pty Limited (3) Australia 100.0 — Riverside 2 Pty Limited (3) Australia 100.0 — Riverside 3 Pty Limited (3) Australia 100.0 — Tranway Pty Limited (3) Australia 100.0 — Tranway No. 1 Pty Limited (3) Australia 100.0 — Oxcap Pty Limited (3) Australia 100.0 — Ashcap Pty Limited (3) Australia 100.0 — CityCap Pty Limited (3) Australia 100.0 — Suncap Pty Limited (3) Australia 100.0 — Clayton Business Park Pty Limited (3) Australia 100.0 — Graham Street F Pty Limited (3) Australia 100.0 — Clyvina Pty Limited (3) Australia 100.0 — Keeto Pty Limited (3) Australia 100.0 — MGI HK Pty Limited (2) Australia 100.0 — MGM Acquisitions Pty Limited (2) Australia 100.0 — Macquarie Goodman (NZ) Limited New Zealand 100.0 100.0 Macquarie Goodman Highbrook Limited New Zealand 100.0 100.0 Highbrook Development Limited New Zealand 75.0 — Macquarie Goodman Property Services (NZ) Limited New Zealand 100.0 100.0 Yeung UK A Limited Cayman Islands 100.0 — MGD Asia (2) Cayman Islands 100.0 — MGI HK Investment (2) Cayman Islands 100.0 — MGPS Hong Kong Limited (2) Hong Kong 100.0 — Comfort Developments Limited Hong Kong 100.0 — Elite Bright Properties Limited Hong Kong 100.0 — MGM Singapore Pte Limited Singapore 100.0 100.0 (1) Classiﬁed as an associate at 30 June 2004. (2) Companies incorporated during the year ended 30 June 2005. (3) Controlled companies of Macquarie Goodman Industrial Trust acquired on 1 February 2005.

95 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Interest held Country of 2005 2004 establishment % %

NOTE 26 – CONTROLLED ENTITIES CONTINUED Controlled unit trusts Industrial Property Management Trust Australia 100.0 100.0

Trusts acquired on acquisition of Macquarie Goodman Industrial Trust Macquarie Goodman Industrial Trust Australia 100.0 — Macquarie Industrial Trust Australia 100.0 — O’Riordan Street Unit Trust Australia 100.0 — Homebush Subtrust Australia 100.0 — Carter Street Trust Australia 100.0 — Penrose Trust Australia 100.0 — Macquarie Goodman Capital Trust Australia 99.8 — — Biloela Street Unit Trust Australia 99.8 — — BDE Unit Trust Australia 99.8 — — Macquarie Goodman Commercial Property Trust Australia 99.8 — — Waterloo Road Office Trust Australia 99.8 — — Cambridge Office Park Trust Australia 99.8 — — Liverpool Road Trust Australia 99.8 — — Saunders Street Trust Australia 99.8 — — 828 Pacific Highway Trust Australia 99.8 — Binary No. 1 Trust Australia 100.0 — — Binary No. 2 Trust Australia 100.0 — Riverside No. 4 Unit Trust (1) Australia — — — Riverside No. 3 Unit Trust (1) Australia — — — Riverside No. 2 Unit Trust (1) Australia — — — Riverside Unit Trust (1) Australia — — Orion Road Trust Australia 100.0 — Hill Road Trust Australia 100.0 — Clayton 1 Trust Australia 100.0 — — Clayton 2 Trust Australia 100.0 — — Clayton 3 Trust Australia 100.0 — Port Melbourne 1 Trust Australia 100.0 — — Port Melbourne 2 Trust Australia 100.0 — — Port Melbourne 3 Trust Australia 100.0 — Smithfield Property Trust Australia 100.0 — — Smithfield Property Trust No. 2 Australia 100.0 — MGA Industrial Portfolio Trust Australia 100.0 — — MGA Industrial Subsidiary Trust No. 1 Australia 100.0 — — MGA Industrial Subsidiary Trust No. 2 Australia 100.0 — — MGA Industrial Subsidiary Trust No. 3 Australia 100.0 — MGA Direct Property Trust Australia 100.0 — Thomas Trust Australia 100.0 — Macquarie Goodman Thomas Trust Australia 100.0 — Euston Road Trust Australia 100.0 — — Euston Road Subtrust Australia 100.0 — Highbrook Trust Australia 100.0 — MG Holding Trust No. 1 (formerly Liverpool Showgrounds Trust) Australia 100.0 — — Regal Business Park Trust (formerly Liverpool Showgrounds Subtrust) Australia 100.0 — (1) Trusts wound up during the year ended 30 June 2005.

96 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Interest held Country of 2005 2004 establishment % %

NOTE 26 – CONTROLLED ENTITIES CONTINUED Trusts acquired subsequent to the acquisition of Macquarie Goodman Industrial Trust TMG Property Fund (1) Australia 100.0 — MGM Holding Trust (1) Australia 100.0 — Macquarie Goodman Wholesale Trust (1) Australia 100.0 — — MG Wholesale Subtrust (1) Australia 100.0 — St Leonards Trust (1) Australia 100.0 — Wacol Trust (1) Australia 100.0 — IBC Trust (1) Australia 100.0 — Q Stores Trust (1) Australia 100.0 — Woolsheds Trust (1) Australia 100.0 — (1) Trusts established during the year ended 30 June 2005. b) Acquisition of Controlled Entities Consolidated Entity’s Interest Consideration Name Date acquired % $M

Macquarie Goodman Industrial Trust and its controlled entities 1 Feb 05 100 — Highbrook Development Limited (1) 1 Feb 05 75 30.3 Comfort Development Limited 20 Jun 05 100 81.6 Elite Bright Properties Limited 20 Jun 05 100 44.4

(1) The Company acquired a 37.5% interest in Highbrook Development Limited on 19 November 2004. As a result of the acquisition of Macquarie Goodman Industrial Trust, Macquarie Goodman’s interest in Highbrook Development Limited has been increased to 75%. Macquarie Goodman Industrial Trust acquired its 37.5% interest in Highbrook Development Limited for $30.3 million. c) Amounts Paid to Outside Equity Interests Prior to the merger, Macquarie Goodman Industrial Trust acquired 492,302 RePS from RePS Holders for consideration of $68.4 million. This is included in the amount paid to Outside Equity Interests as the liability was settled by the Consolidated Entity subsequent to the merger. NOTE 27 – SEGMENT REPORTING Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, inventories, investment properties (including properties under development) and other intangible assets, net of related provisions. Segment liabilities consist primarily of trade and other creditors and employee beneﬁts. Segment assets and liabilities do not include income taxes. Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an arm’s length basis and are eliminated on consolidation. As a result of the acquisition of Macquarie Goodman Industrial Trust during the year, property investment has been recognised as an additional industry segment. This segment represents investment in industrial and commercial properties in Australia, New Zealand, Singapore and Hong Kong. The major products/services from which the below segments (based on the Consolidated Entity’s management reporting system) derive revenue are: Industry segments Products and services

Property investment Ownership of properties for investment potential and revenue returns; Funds management Management of trusts; Property services Property management, leasing services and due diligence works; Development management Design, development and project management; and Other investments Investments in third party funds managed by Macquarie Goodman or related entities.

97 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Property Funds Property Development Other investment management services management investments Eliminations Consolidated $M $M $M $M $M $M $M

NOTE 27 – SEGMENT REPORTING CONTINUED Primary Reporting – Business Segments 2005 External segment revenue 432.5 13.6 10.5 22.8 7.7 — 487.1 Internal segment revenue 3.5 0.2 5.4 9.6 — (18.7) — Unallocated revenue — — — — — — 7.4 Total revenue 494.5

Segment result 117.8 12.7 (0.1) 16.7 3.2 (4.1) 146.2 Share of net results of equity accounted investments 2.1 4.2 — — — — 6.3 Diminution in value of management rights (95.4) Merger transaction expenses (22.5) Other unallocated revenues and expenses (1.0) Profit from ordinary activities before income tax 33.6 Income tax benefit 18.1 Net profit after tax 51.7

Assets Segment assets 4,854.0 6.9 7.7 36.0 101.0 — 5,005.6 Equity accounted investments — 120.0 — — — — 120.0 Unallocated assets — — — — — — 45.5 Consolidated total assets 5,171.1

Liabilities Segment liabilities 1,893.5 101.4 8.4 2.9 64.6 — 2,070.8 Unallocated liabilities — — — — — — 7.2 Consolidated total liabilities 2,078.0 Acquisitions of non-current assets 573.5 3.5 1.2 — — — 578.2

98 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Property Funds Property Development Other investment management services management investments Eliminations Consolidated $M $M $M $M $M $M $M

NOTE 27 – SEGMENT REPORTING CONTINUED Primary Reporting – Business Segments Continued 2004 External segment revenue — 39.5 13.9 20.4 3.8 — 77.6 Unallocated revenue — — — — — — 1.2 Total revenue 78.8

Segment result — 31.1 8.1 11.6 0.9 — 51.7 Share of net results of equity accounted investments — 1.3 — — — — 1.3 Unallocated revenues and expenses 0.4 Proﬁt from ordinary activities before income tax 53.4 Income tax expense (16.4) Net proﬁt after tax 37.0

Assets Segment assets — 113.9 10.7 29.7 72.0 — 226.3 Equity accounted investments — 1.8 — — — — 1.8 Unallocated assets — — — — — — 13.8 Consolidated total assets 241.9

Liabilities Segment liabilities — 1.0 6.0 2.2 72.2 — 81.4 Unallocated liabilities — — — — — — 26.4 Consolidated total liabilities 107.8

Acquisitions of non-current assets — 37.4 7.6 — — — 45.0

99 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 27 – SEGMENT REPORTING CONTINUED Geographical Segments In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. Australia New Zealand Asia Consolidated \$M $M $M $M

2005 Revenue (property investment, funds management, property services and development management) 184.3 16.9 0.2 201.4 Proceeds from sales of assets (investment properties and other investments) 33.7 249.2 — 282.9 Distributions received from listed property trusts — 2.6 5.1 7.7 Interest income 2.5 — — 2.5 Total revenue 220.5 268.7 5.3 494.5 Share of net results of equity accounted investments — 2.7 3.6 6.3 Total 220.5 271.4 8.9 500.8

Assets Investment properties 4,471.8 141.8 126.3 4,739.9 Investments in listed property trusts — — 101.0 101.0 Investments accounted for using the equity method — 113.7 6.3 120.0 Inventories 30.7 — — 30.7 Intangible assets — 6.0 — 6.0 Other assets 114.9 27.9 30.7 173.5 Total assets 4,617.4 289.4 264.3 5,171.1

Acquisition of non-current assets 273.8 178.1 126.3 578.2

2004 Revenue (funds management, property services and development management) 70.3 3.5 — 73.8 Distributions received from listed property trusts — 1.1 2.7 3.8 Interest income 1.2 — — 1.2 Total revenue 71.5 4.6 2.7 78.8 Share of net results of equity accounted investments — — 1.3 1.3 Total 71.5 4.6 4.0 80.1

Assets Investments in listed property trusts — 26.4 45.6 72.0 Other assets 158.6 9.3 2.0 169.9 Total assets 158.6 35.7 47.6 241.9

Acquisition of non-current assets 38.5 6.5 — 45.0

100 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 28 – INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Share of net results accounted for using the equity method — Associates (a) 6.3 1.3 — — — Joint ventures (b) — — — — 6.3 1.3 — —

(a) Investments in Associates Consolidated Consolidated Country of Reporting ordinary share investment Name Principal activities incorporation date ownership interest carrying amount 2005 2004 2005 2004 % % $M $M

Ascendas-MGM Funds Management Limited (1) Funds management Singapore 31 March 40 40 6.3 1.8 Macquarie Goodman Property Trust (2) Property investment New Zealand 31 March 30 17.4 113.7 — Macquarie Goodman Vineyard Pty Limited (3) Development management Australia 30 June — 50 — — Auckland Business Park Pty Limited (4) Property investment New Zealand 30 June — — — — 120.0 1.8

(1) Ascendas-MGM Funds Management Limited is the manager of A-REIT, a Singapore-based listed property trust. (2) As a result of the Consolidated Entity restructuring its interests in New Zealand during the year, its equity interest in Macquarie Goodman Property Trust was increased from 17.4% to 30% and reclassiﬁed from Other Financial Assets to Investments in Associates. (3) As a result of the acquisition of Macquarie Goodman Industrial Trust, Macquarie Goodman now controls Macquarie Goodman Vineyard Pty Limited and this entity is consolidated at 30 June 2005. (4) As a result of the acquisition of Macquarie Goodman Industrial Trust, Macquarie Goodman acquired a 50% interest in Auckland Business Park Pty Limited. This interest was subsequently sold as part of Macquarie Goodman’s restructure of its interest in New Zealand.

Consolidated 2005 2004 $M $M

Movements in carrying amount of investments Carrying amount at beginning of year 1.8 0.5 Reclassiﬁcation of MGP units, at cost, from Other Financial Assets 26.4 — Investments in associates during the year 90.2 — Disposal of investment in Auckland Business Park Pty Limited (4.7) — Share of net results after tax of associates 6.3 1.3 Carrying amount at the end of year 120.0 1.8

Summary of ﬁnancial position of associates The aggregate assets and liabilities of associates is as follows: Assets 172.1 2.7 Liabilities (52.1) (0.9) Net asset equity adjusted 120.0 1.8

101 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

Consolidated Consolidated Joint venture ordinary share investment Name Principal activities reporting date ownership interest carrying amount 2005 2004 2005 2004 % % $M $M

NOTE 28 – INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD CONTINUED (b) Interests in Joint Venture Entities Macquarie Goodman (Hong Kong) Limited Funds management 31 March 50.0 — — —

Results of Joint Venture Entities The joint venture did not contribute any amount to the Company’s or Consolidated Entity’s result for the year. NOTE 29 – INTEREST IN JOINT VENTURE OPERATION Macquarie Goodman is in a joint venture with The Austral Brick Company Pty Ltd (“Austral”) relating to development of the Brickworks site in Sydney. Under the terms of the Joint Venture Agreement, Macquarie Goodman pays for infrastructure works and has provided Austral with a put and call option which gives Austral the right to require Macquarie Goodman to purchase unsold lots of land and Macquarie Goodman the right to acquire unsold lots of land after speciﬁed dates subject to the conditions as outlined in Note 31. For the year ended 30 June 2005, the joint venture did not contribute any amount to the operating proﬁt of the Company or the Consolidated Entity. Included in the assets and liabilities of the Company and the Consolidated Entity are the following items which represent the Company’s and the Consolidated Entity’s interest in the assets and liabilities employed in the joint venture, recorded in accordance with the accounting policies described in Note 1. Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

Total assets Trade debtors 1.2 — — — Other assets 6.8 — — — Inventories (1) 26.7 — — —

Total liabilities Trade creditors (5.3) — — — Net assets 29.4 — — —

(1) Amounts expected to be recovered after 12 months are $15.3 million. Refer to Note 31 for details of contingent liabilities.

102 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 30 – COMMITMENTS Capital expenditure commitments Contracted but not provided for and payable: Within one year – capital expenditure on investment properties 160.6 — — —

Non-cancellable operating lease commitments Future operating lease commitments not provided for in the ﬁnancial statements and payable: Within one year 2.1 1.7 — — One year or later and no later than ﬁve years (1) 5.0 5.5 — — 7.1 7.2 — —

(1) Includes lease for Levels 9 and 10, 60 Castlereagh Street, Sydney, NSW under a five year agreement expiring 16 November 2008. Acquisition of Investment Properties Contractual Commitments Amounts contracted for the acquisition of investment Under the terms of the agreement for the acquisition properties not provided for is $211.8 million (2004: nil). of the Upper Global Gateway property, the vendor has an option to repurchase up to 50% of their Hong Kong Operating Lease Commitments not Provided for in the Financial Statements property interests sold to Macquarie Goodman in the a) Gordon Corporate Centre, Gordon, NSW is subject to a event that a Hong Kong Real Estate Investment Trust 99 year ground lease that commenced in August 1991. is not formed within 30 months of the date Macquarie Rent under this lease is 17.5% of net property income, Goodman acquired the property. This consideration payable monthly in advance. payable is calculated as 50% of the contract acquisition price plus any capital expenditure incurred since the date b) Chifley Business Park, Mentone, Vic is subject to a of acquisition. sublease to April 2048, with a 49 year option to review. Under the terms of the sublease, rent is 10% of the NOTE 31 – CONTINGENT LIABILITIES freehold value of the land, calculated on each fifth Contingent Consideration anniversary of the sublease. Between these market Under the terms of the Heads of Agreement signed reviews, rent is reviewed annually subject to consumer between Macquarie Goodman and Brickworks Limited, price index changes. Rent is subject to abatements of Austral has a right to require Macquarie Goodman to between 50% and 100% until 30 June 2006. take a transfer of certain lots of land if they remain unsold after a specified time. The consideration payable over the Funding Commitments duration of the development will be the market price of A guarantee exists between Macquarie Goodman and the unsold saleable lots less a 2.5% discount if the market the Security Trustee for RePS Holders, such that in the price is in aggregate less than $10 million or a 5% discount event that Macquarie Goodman Capital Trust has either if it is in aggregate greater than $10 million. insufficient amounts to pay the distribution or insufficient funds to pay the face value in the event of a winding Bank Guarantees up of Macquarie Goodman Capital Trust, Macquarie The Consolidated Entity had contingent liabilities at 30 Goodman will, subject to some limitations, be required June 2005 of $5.5 million (30 June 2004: $5.1 million) in to pay the RePS Holders an amount equal to the respect of bank guarantees provided in support of the shortfall. The Consolidated Entity’s obligation to deliver fulfilment of financial obligations under licence conditions. securities on conversion is also guaranteed. The amount Other Guarantees that Macquarie Goodman is required to pay under the The Consolidated Entity also has provided a guarantee in guarantee in respect of distributions will not be greater support of distribution payments to RePS Holders. than the income that Macquarie Goodman Industrial Trust has available to distribute to its Securityholders. The Entities within the Consolidated Entity are, in the normal obligations of Macquarie Goodman under the guarantee course of business, called upon to provide guarantees and are subordinated to the claims of Macquarie Goodman’s indemnities in respect of the performance by controlled secured creditors. entities of their contractual and financial obligations. The value of these guarantees and indemnities is indeterminable in amount.

103 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 32 – DIRECTOR AND EXECUTIVE DISCLOSURES > loans are for periods of up to ﬁve years and are FOR DISCLOSING ENTITIES repayable at the earliest of the timetable agreed in Executive Option Plan the loan agreement with the employee, the date the Up to the date of the acquisition of Macquarie Goodman employee ceases to be an employee of Macquarie Industrial Trust, Macquarie Goodman issued options Goodman or at the time of disposal of the securities under the Executive Option Plan, providing for staff to by the employee; and receive options over ordinary shares for no consideration. > with the exception of Mr Gregory Goodman, loans to The ability to exercise the options was conditional on the eligible employees are limited recourse to the value of Consolidated Entity achieving the performance hurdles of a the Macquarie Goodman securities held under the plan. compound annual growth in EPS in Macquarie Goodman of 10% or more since the end of the previously reported 12 Total remuneration for all Non-Executive Directors, last month period immediately preceding the date of grant (as voted upon by Shareholders at the Annual General reported in the Annual Report or Half Yearly Report of the Meeting in 2004, is not to exceed $950,000 per annum. Consolidated Entity). The amount paid by Macquarie Goodman to Non- Executive Directors for the year was $459,746. Non- From the date of announcement up to the date of approval Executive Directors do not receive bonuses nor are they of the merger, Option Holders had the opportunity to issued options over Macquarie Goodman securities. exercise their options regardless of the status of their Directors’ remuneration covers all Board activities and exercise of conditions. A requirement of the early exercise membership of required committees throughout the year. was that Option Holders use a loan under the ESAP. The loans advanced are on the same conditions as described Options over Equity Instruments above. In addition, the security may be forfeited if the Up to the date of the acquisition of Macquarie Goodman performance and vesting conditions attaching to the Industrial Trust, the options were exercisable on a one-for- original Executive options are not met. one basis under the Executive Option Plan. Since the date of acquisition of Macquarie Goodman Industrial Trust, as ESAP and Executive Option Plan described more fully below, all options held by employees Subsequent to the acquisition of Macquarie Goodman who were at that time Australian residents for tax purposes Industrial Trust, current tax arrangements make it were converted to loans from Macquarie Goodman to the unfeasible to issue options to employees who are resident individuals to purchase Macquarie Goodman securities. in Australia for tax purposes. In order that Macquarie Goodman can continue to facilitate these employees’ investment in the Consolidated Entity, an ESAP has been launched, the signiﬁcant features of which are as follows: > subject to offers to subscribe made from time to time by the Company, eligible employees can acquire securities at the market price prevailing at the time of issue, using funds borrowed from Macquarie Goodman. The terms of the loans are at the discretion of the Directors. Securities may only be acquired during the periods permitted under the Company’s policies for employees dealing in the Company’s securities. The after-tax amount of any dividends or distributions paid on the securities acquired with the loan must be applied towards payment of interest, if any, and the principal of the loan;

104 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 32 – DIRECTOR AND EXECUTIVE DISCLOSURES FOR DISCLOSING ENTITIES CONTINUED Option Holdings during the Year The movement during the year in the number of options over Macquarie Goodman securities held, directly, indirectly or beneficially, by each Specified Director and Specified Executive, including their personally related entities, is as follows: Number Number of securities Amount paid/ of options issued on payable per Held at vested during exercise of security Held at 1 July 2004 the year options $ 30 June 2005

Speciﬁed Director Mr Gregory Goodman 3,333,333 3,333,333 3,333,333 0.5178 — 2,000,000 2,000,000 2,000,000 2.5906 —

Speciﬁed Executives Mr David van Aanholt 1,000,000 1,000,000 1,000,000 0.5178 — 1,000,000 1,000,000 1,000,000 2.5906 — Mr Nick Kurtis 133,334 133,334 133,334 0.7955 — 100,000 100,000 100,000 0.5178 — 1,500,000 1,500,000 1,500,000 2.5906 — Mr Michael O’Sullivan 1,250,000 1,250,000 1,250,000 1.2778 — Mr Stephen Hawkins 1,000,000 500,000 500,000 1.1568 500,000 Mr John Dakin 500,000 — — — 500,000

Equity Holdings and Transactions The movement during the reporting period in the number of Macquarie Goodman securities held, directly, indirectly or beneficially, by each Specified Director and Specified Executive, including their personally related entities is as follows: Shares in Macquarie Goodman Management Limited Securities Securities Securities at 1 July 2004 acquired disposed 30 June 2005

Speciﬁed Directors Non-Executive Mr David Clarke 107,143 99,758 — 206,901 Dr David Teplitzky — — — — Mr Patrick Allaway — 125,400 60,000 65,400 Mr Ian Ferrier — — — — Mr Patrick Goodman (1) 51,688,385 48,811,962 — 100,500,347 Mr John Harkness — — — — Mr James Hodgkinson 25,715 133,102 — 158,817 Ms Anne Keating — 15,675 — 15,675 Ms Lynn Wood 10,822 8,162 — 18,984 Mr Stephen Girdis — 1,105 — 1,105 Mr Bill Moss — 97,997 — 97,997

Executive Mr Gregory Goodman (1) 53,474,099 54,907,065 — 108,381,164

Speciﬁed Executives Mr David van Aanholt 1,959,293 1,729,507 — 3,688,800 Mr Nick Kurtis 275,598 2,033,972 170,000 2,139,570 Mr Michael O’Sullivan 11,152 1,365,358 — 1,376,510 Mr Stephen Hawkins 524,153 638,661 — 1,162,814 Mr John Dakin — — — —

(1) Mr Gregory Goodman and Mr Patrick Goodman together hold 100,500,347 securities through interests associated with them.

105 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 32 – DIRECTOR AND EXECUTIVE DISCLOSURES FOR DISCLOSING ENTITIES CONTINUED Analysis of share-based payments granted as remuneration None of the Non-Executive Directors held any options over securities at any time during the year. Details of the vesting proﬁle of the securities awarded as remuneration to the Executive Director and each of the ﬁve named Executives are detailed below: Options granted Value yet to vest Financial Percentage years in which Number Date vested in year grant vests Min (1) $ Max (2) $

Director Mr Gregory Goodman 3,333,333 30 Mar 01 100 — — — 2,000,000 28 Oct 03 100 — — —

Consolidated Entity Executives Mr David van Aanholt 1,000,000 30 Mar 01 100 — — — 1,000,000 28 Oct 03 100 — — — Mr Nick Kurtis 133,334 10 Oct 01 100 — — — 100,000 30 Mar 01 100 — — — 1,500,000 28 Oct 03 100 — — — Mr Michael O’Sullivan 1,250,000 28 Oct 02 100 — — — Mr John Dakin 166,666 23 Jan 04 — 30 Jun 06 — 218,330 166,667 23 Jan 04 — 30 Jun 07 — 218,334 166,667 23 Jan 04 — 30 Jun 08 — 218,334 Mr John Marsh 1,000,000 23 Apr 04 100 — — —

(1) The minimum value of options yet to vest is nil as the performance criteria may not be met and consequently the option may not vest. (2) The maximum value of options yet to vest is not determinable as it depends on the market price of Macquarie Goodman securities at the date the option is exercised. The maximum values presented above are based on the assumption that the stapled security price on the date the option is exercised does not exceed $4.15 for the above grants.

Loans with Speciﬁed Director and Speciﬁed Executives Interest paid Highest Balance Balance and payable balance in 1 July 2004 30 June 2005 in the year the year $ $ $ $

Speciﬁed Director Mr Gregory Goodman — 5,325,172 162,512 6,174,051

Speciﬁed Executives Mr David van Aanholt — 2,662,586 74,891 2,880,962 Mr Nick Kurtis — 4,048,386 110,227 4,050,572 Mr Michael O’Sullivan — 1,094,423 33,761 1,609,481 Mr Stephen Hawkins — — — — Mr John Dakin — — — — — 7,805,395 218,879 8,541,015

Interest on loans to Directors and Executives is charged at 6.5% per annum. The after-tax amount of any dividends or distributions paid on the securities acquired with the loans must be applied towards payment of interest, if any, and the principal of the loan. Loans are for the periods of up to ﬁve years and are repayable earlier on termination of the employee or disposal of the securities. No amounts have been written down or recorded as allowances as the balances are considered fully collectible.

106 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 Consolidated Parent Entity 2005 2004 2005 2004 $M $M $M $M

NOTE 33 – EMPLOYEE BENEFITS Aggregate liability for employee benefits including on-costs: Current: — Employee benefits provision 1.5 0.7 — — Non-current: — Employee benefits provision 0.4 0.2 — — Number of employees Number of employees at year end 231 181 — —

Options over Unissued Ordinary Securities/Shares Details of options issued over unissued ordinary shares as at the beginning of the year and movements up to the date of conversion to the ESAP are set out below: Options outstanding Total options Options Options at beginning Options exercised and outstanding exercised and of year issued securities issued at end of year shares issued Date granted Expiry date Exercise price 2005 2005 2005 2005 2004

13 Dec 99 17 Sep 04 $0.2291 750,000 — 750,000 — 500,000 30 Mar 01 10 Mar 06 $0.5033 (1) 100,000 — 100,000 — — 30 Mar 01 10 Mar 06 $0.5178 (1) 4,599,999 — 4,599,999 — 2,533,334 10 Oct 01 10 Oct 06 $0.7810 (2) 66,667 — 66,667 — — 10 Oct 01 10 Oct 06 $0.7955 (2) 1,966,669 — 1,833,335 133,334 816,664 13 Dec 01 13 Dec 06 $1.1568 1,000,000 — 500,000 500,000 500,000 13 Mar 02 13 Mar 07 $1.3478 166,667 — 166,667 — 83,333 28 Oct 02 28 Oct 07 $1.2778 1,250,000 — 1,250,000 — — 28 Oct 03 28 Oct 08 $2.5906 8,250,000 — 7,550,000 700,000 — 23 Jan 04 23 Jan 09 $2.8400 500,000 — — 500,000 — 23 Apr 04 23 Apr 09 $3.7564 1,000,000 — 1,000,000 — — 23 Jul 04 23 Jul 09 $3.1859 — 300,000 — 300,000 — 23 Jul 04 23 Jul 09 $3.4448 — 100,000 100,000 — — 19,650,002 400,000 17,916,668 2,133,334 4,433,331

(1) Of 4,699,999 options on issue at 1 July 2004, 4,599,999 were exercised prior to the merger. The remaining 100,000 options were exercised at the revised exercise price of $0.5033. (2) Of 2,033,336 options on issue at 1 July 2004, 1,966,669 were exercised prior to the merger. The remaining 66,667 options were exercised at the revised exercise price of $0.7810.

During the year, the vesting conditions relating to options held by non-Australian residents were changed and the resulting securities issued are dealt with under the terms of the ESAP. Refer to information set out in the Directors’ Report for further details of the ESAP. The amounts recognised in the ﬁnancial statements in relation to options exercised during the year were: Consolidated Parent Entity 2005 2004 2005 2004 Note $ $ $ $M

Contributed equity 21 30,174,713 2,814,000 30,077,341 2,814,000

Employee Share Plans In addition to ESAP, Macquarie Goodman maintains two share plans, the Exempt Employee Share Plan and the Deferred Employee Share Plan, which are available to all eligible employees to acquire ordinary shares in Macquarie Goodman. Macquarie Goodman contributes up to $500 per employee, with the balance of the cost of shares being paid by the employee. Upon successful approval of the acquisition of Macquarie Goodman Industrial Trust, the provisions of the Employee Share Plans were amended so that they relate to stapled securities. Macquarie Goodman does not intend to grant any further securities under either Employee Share Plan.

107 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 34 – RELATED PARTY DISCLOSURES During the year, the Consolidated Entity also reimbursed Directors of Macquarie Goodman travel costs totalling $23,997 to a wholly-owned subsidiary The names of the persons holding the position of Director of Goodman Holdings Group. of Macquarie Goodman during the year were: Pooles Rock Wines Pty Limited Mr David Clarke, AO On 15 January 2003, Pooles Rock Wines Pty Limited Dr David Teplitzky (a Director related entity of Mr David Clarke) entered into Mr Gregory Goodman a six year lease at CityWest Office Park, Pyrmont, Mr Patrick Allaway (appointed 23 February 2005) NSW with Macquarie Goodman Industrial Trust. Rent Mr Ian Ferrier, AO and outgoings from the date Macquarie Goodman Mr Patrick Goodman acquired Macquarie Goodman Industrial Trust to 30 June Mr John Harkness (appointed 23 February 2005) 2005 amounted to $85,095. Mr James Hodgkinson Non-Director Related Parties Ms Anne Keating (appointed 23 February 2005) The classes of non-Director related parties are: Ms Lynn Wood (appointed 23 February 2005) Mr Stephen Girdis (Alternate Director for Mr David Clarke (a) controlling entity of Macquarie Goodman; and Mr James Hodgkinson) (b) wholly-owned controlled entities; Mr Bill Moss (resigned 13 June 2005). (c) partly-owned controlled entities; (d) commonly controlled entities; Transactions with Director Related Entities (e) associates; The terms and conditions of the transactions with Directors (f) joint venture entities and operations; and and their Director related entities were no more favourable (g) directors of related parties and their personally related than those available, or which might reasonably be entities. expected to be available, on similar transactions to non- Director related entities on an arm’s length basis. Transactions with Entities in the Wholly-owned Group Transactions between Macquarie Goodman and other Macquarie Bank Group entities in the wholly-owned group during the years ended Mr David Clarke, Mr Bill Moss and Mr James Hodgkinson 30 June 2005 and 2004 included the following: are directors of Macquarie Bank Limited (“MBL”). During the year ended 30 June 2005, a total of $17,166,098 (a) payment of dividends to Macquarie Goodman; (2004: $2,283,304) was paid to MBL in relation to various (b) loans advanced by/to Macquarie Goodman; services provided. (c) sale of management rights; (d) fees for services charged by Macquarie Goodman; and Goodman Holdings Group (e) interest charged by/to Macquarie Goodman. Mr Gregory Goodman and Mr Patrick Goodman are Directors and Shareholders in Moorabbin Airport All of the above transactions were made on normal Corporation Pty Limited (“MAC”), the lessor of the Chifley commercial terms and conditions with the exception of Business Park, Mentone, Victoria. The Consolidated certain loans which are interest free and have no specified Entity has agreed with MAC to pay all infrastructure time period for repayment. costs incurred in developing the Chifley Business Park Macquarie Goodman is the head entity in the tax site. These costs, which totalled $6,498,732 at 30 June consolidated group comprising all Australian wholly-owned 2005 (2004: $5,843,679), are to be reimbursed by MAC subsidiaries of Macquarie Goodman Management Limited. progressively as the site is developed, leased and rental The head entity recognises all of the current and deferred income is being derived by MAC. To the extent that these tax assets and liabilities of the tax consolidated group (after costs are not reimbursed progressively, the balance elimination of intra-group transactions). The assets and of such costs will be repayable by MAC by 2005 and liabilities arising under the tax funding arrangement are are secured by a floating charge of certain of the recognised as inter-company assets and liabilities. assets of MAC limited to $2.5 million. Costs totalling $2 million (2004: $0.4 million) have been recharged Aggregate amounts included in the determination of net to MAC during the year. profit after income tax that resulted from transactions with entities in the wholly-owned group are disclosed in the Mr Gregory Goodman and Mr Patrick Goodman are Statement of Financial Performance and Notes 3 and 4. Directors of and Shareholders in the Goodman Holdings Group. During the year, Macquarie Goodman was also Aggregate amounts receivable and payable from entities in reimbursed by the Goodman Holdings Group for a the wholly-owned group at balance date are disclosed in portion of office rental costs to the value of $67,466 Notes 10 and 18. (2004: $61,638).

108 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 34 – RELATED PARTY DISCLOSURES CONTINUED Macquarie Goodman Industrial Trust and its Controlled Entities A subsidiary of Macquarie Goodman is the Responsible Entity for Macquarie Goodman Industrial Trust. Up to the date of acquisition by Macquarie Goodman of Macquarie Goodman Industrial Trust, the Consolidated Entity earned a majority of its revenues from Macquarie Goodman Industrial Trust. During the year and up to the date of its acquisition, the following transactions took place with Macquarie Goodman Industrial Trust: Consolidated 2005 2004 $ $

Revenue Earned from Macquarie Goodman Industrial Trust Performance fee (1) — 17,151,752 Management fees (in relation to acting as Responsible Entity) 10,184,023 16,430,795 Trustee fees (in relation to acting as Responsible Entity) 687,846 1,122,870 Property services fees (including property management, leasing and due diligence work) 8,722,721 12,793,879 Development and project fees (including development management) 16,277,445 19,395,085 35,872,035 66,894,381

Expenses Reimbursed by Macquarie Goodman Industrial Trust Building supervisor costs 1,136,694 1,534,323 Responsible Entity costs 100,625 235,539 1,237,319 1,769,862

(1) Subsequent to the merger transaction, the performance fee receivable from Macquarie Goodman Industrial Trust in respect of the half year ended 31 December 2003 was waived by the Company.

An amount of $2,621,514 representing a portion of the selling price (including interest) in relation to a property sold to Macquarie Goodman Industrial Trust during 2001, has been deferred for up to ﬁve years. The amount is repayable with interest at commercial rates as tenanted developments are completed. Total interest receivable during the year up to the date of acquisition was $510,825 (2004: $706,000). Macquarie Goodman Property Trust and its Controlled Entities A company in the wholly-owned group is the Manager of Macquarie Goodman Property Trust (“MGP”). During the year, the following transactions took place with MGP:

Revenue Earned from MGP Sale of investment properties to MGP 250,651,362 — Management fees in relation to acting as a Manager of MGP 1,726,569 711,960 Property services fees (including property management, leasing and due diligence work) 1,049,499 794,668 Development and project fees (including development management) 1,727,780 19,850 255,155,210 1,526,478

Dealings between the Consolidated Entity and other related parties are on normal commercial terms and conditions. All material dealings are, where appropriate, appraised by qualiﬁed external parties to ensure they are at commercial market rates. Brickworks Joint Venture During the year, the Consolidated Entity paid $20.5 million to its fellow venturer in respect of costs incurred in the development of the M7 Business Hub. The Consolidated Entity also charged fees to the Joint Venture totalling $2.4 million at 30 June 2005 (2004: nil). Ascendas-MGM Funds Management Limited (“AMFM”) During the year, the Consolidated Entity and AMFM each charged expenses to the other party for costs incurred in relation to their operations. The net amount reimbursed to Macquarie Goodman by AMFM was $5,504 (2004: $563,134). As at 30 June 2005, the outstanding balance to AMFM is $644 (2004: $109,143). Joint Venture with MBL During the year, the Consolidated Entity has recharged fees to the joint venture with MBL totalling $567,767. As at 30 June 2005, the outstanding balance due to Macquarie Goodman is $567,767 (2004: nil).

109 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 35 – ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE a) Interest Rate Risk The Consolidated Entity enters into interest rate swaps to manage cash flow risks associated with the interest rates on borrowings that are floating. The maturity dates of the interest rate swap contracts are principally between December 2005 and April 2013. The interest rate swap contracts are for 90 and 180 day intervals and involve quarterly and semi-annual payments or receipts of the net amount of interest. At 30 June 2005, the fixed rates varied from 1.8% per annum to 6.7% per annum and the floating rates were at bank bill rates plus a credit margin. The Consolidated Entity’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities are set out below: Weighted Fixed interest maturing in Non- average Floating 1 year 1 to 5 interest interest interest rate or less years bearing Total Note rate pa (1) $M $M $M $M $M

2005 Financial assets Cash assets 9 3.53% 7.2 — — — 7.2 Receivables 10 6.32% 31.4 — — 64.8 96.2 Other ﬁnancial assets 15, 6(b) — — — 107.3 107.3 38.6 — — 172.1 210.7

Financial liabilities Payables 18 6.49% — 20.4 19.2 80.6 120.2 Provisions 20, 33 — — — 93.9 93.9 Bank and other loans 19 6.23% 1,435.3 207.0 220.9 — 1,863.2 1,435.3 227.4 240.1 174.5 2,077.3 Interest rate swaps (2) (853.7) — 853.7 — —

2004 Financial assets Cash assets 9 4.4% 10.3 — — — 10.3 Receivables 10 6.3% 12.1 — — 30.3 42.4 Other ﬁnancial assets 15 — — — 72.0 72.0 22.4 — — 102.3 124.7

Financial liabilities Payables 18 — — — 9.6 9.6 Provisions 20 — — — 0.9 0.9 Lease liabilities 19 10.4% — — 0.1 — 0.1 Bank loans 19 5.3% 79.0 — — — 79.0 79.0 — 0.1 10.5 89.6 Interest rate swaps (2) (60.2) — 60.2 — —

(1) After incorporating the effect of interest rate swaps. (2) Notional principal amounts.

110 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 35 – ADDITIONAL FINANCIAL INSTRUMENTS d) Net Fair Value of Financial Assets and Liabilities DISCLOSURE CONTINUED Recognised Financial Instruments b) Credit Risk The Consolidated Entity’s financial assets and liabilities Credit risk represents the loss that would be recognised included in the Statement of Financial Position are carried if counterparties failed to perform as contracted. at amounts that approximate net fair value. The valuation Recognised Financial Instruments approach equates to the historical costs of the underlying The credit risk on financial assets, excluding investments, transactions. Net fair values of assets and liabilities are of the Consolidated Entity which have been recognised on reviewed by the Directors on a regular basis. the Statement of Financial Position, is the carrying amount, Unrecognised Financial Instruments net of any provision for doubtful debts. The loss on net fair value of interest rate swaps not The Consolidated Entity has a policy of assessing the recognised on the Statement of Financial Position as at the creditworthiness of all potential tenants and is not reporting date is $13.9 million (2004: gain of $0.1 million). materially exposed to any one tenant or industry group. For reporting periods beginning on or after 1 January The Consolidated Entity evaluates all tenants’ perceived 2005, the Consolidated Entity must comply with Australian credit risk and may require the lodgement of rental bonds equivalents to International Financial Reporting Standards or bank guarantees, as appropriate, to reduce credit risk. (“AIFRS”) as issued by the Australian Accounting Standards In addition, all rents are payable monthly in advance. Board. The Consolidated Entity minimises credit risk by dealing This Financial Report has been prepared in accordance with with major financial institutions in relation to cash and Australian accounting standards and other financial reporting short-term borrowings. requirements (Australian Generally Accepted Accounting Concentration of credit risk exists from time to time on Principles (“Australian GAAP” or “AGAAP”)) applicable for trade debtors for the proceeds of disposals of investment reporting periods ended 30 June 2005. properties. The credit risk is minimised as legal title is paid Transition Management only upon receipt of proceeds for the sale of those assets. A formal implementation project has been established to Unrecognised Financial Instruments assess the impact of transition to AIFRS and to achieve The credit risk in relation to derivative contracts which have compliance with AIFRS reporting for the financial year not been recognised in the Statement of Financial Position commencing 1 July 2005. is minimal, as counterparties are generally large banks. Assessment and Planning Phase Credit risk on swap contracts is limited to the net amount The assessment and planning phase generated a high level to be received from or paid to counterparties on contracts overview of the impacts of conversion to AIFRS on existing that are favourable or unfavourable to the Consolidated accounting and reporting policies and procedures, systems Entity. The accrued amount payable by the Consolidated and processes, business structures and staff. Entity at 30 June 2005 was $0.1 million (2004: nil). The assessment and planning phase is complete as at c) Foreign Exchange Risk 30 June 2005. The Consolidated Entity is exposed to foreign exchange risk Design Phase through its investments in New Zealand, Singapore and Hong The design phase for the transition to AIFRS included: Kong. Foreign exchange risk represents the loss that would be recognised from fluctuations in foreign currency prices > formulation of revised accounting policies for compliance against the Australian dollar. with AIFRS requirements; Macquarie Goodman has entered into forward foreign > identification of potential financial impacts as at the exchange contracts to hedge a proportion of the income transition date and for subsequent reporting periods prior received from its New Zealand and Singapore investments. to adoption of AIFRS; and The Consolidated Entity has contracts to sell 15.4 million > development of revised AIFRS disclosures. New Zealand dollars and sell 11.4 million Singapore dollars. The contracts settle at quarterly intervals from August 2005 The design phase is substantially complete as at to June 2008. The net fair value gain on forward foreign 30 June 2005. exchange contracts at 30 June 2005 was $0.3 million.

111 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 36 – IMPACT OF ADOPTING AUSTRALIAN a) Investment Property Revaluations EQUIVALENTS TO INTERNATIONAL FINANCIAL Under AIFRS, revaluation increments and decrements relating REPORTING STANDARDS to investment properties are recognised in the operating Implementation Phase results in the Statement of Financial Performance whereas The implementation phase includes implementation of under Australian GAAP they are recognised through the identified changes to accounting and business procedures, asset revaluation reserve. The increase in the fair value of the to enable the Consolidated Entity to generate the required investment properties recognised by the Consolidated Entity reconciliations and disclosures of AASB 1 First Time Adoption since the date of acquisition of Macquarie Goodman Industrial of Australian Equivalents to International Financial Reporting Trust is $33.2 million. The net profit after tax for the year Standards. ended 30 June 2005 determined under AIFRS is increased by $33.2 million due to the inclusion of net revaluation This phase is substantially complete as at 30 June 2005. increments. Impact of Transition to AIFRS b) Fixed Increases in Lease Rentals under AIFRS The impact of transition to AIFRS, including the transitional The Consolidated Entity has entered into lease arrangements adjustments disclosed in the reconciliations from current with customers which allow for fixed annual increases in rental Australian GAAP to AIFRS, and the selection and application income. Under AIFRS, the Consolidated Entity be required to of AIFRS accounting policies, are based on AIFRS standards recognise the total lease rental income evenly over the life of that management expects to be in place, or where applicable, the lease. As a result, lease rental income for the year ended early adopted, when preparing the first complete AIFRS 30 June 2005 is increased by $4.5 million. No adjustments financial report (being the half year ending 31 December are expected for the Company. 2005). Only a complete set of financial statements and notes together with comparative balances can provide a true and c) Loan Facilities Refinanced fair presentation of the Company’s and Consolidated Entity’s Under current Australian GAAP, loan facilities totalling financial position, results of operations and cash flows in $756 million which are due to expire within 12 months of accordance with AIFRS. This Note provides only a summary the balance sheet date have been treated as non-current therefore, further disclosure and explanations will be required liabilities. Under AIFRS, the Consolidated Entity will be in the first complete AIFRS financial report for a true and fair required to reclassify these amounts as current liabilities. view to be presented under AIFRS. No adjustment is required for the Company. There is a significant amount of judgement involved in the d) Management Rights preparation of the reconciliations from current Australian Management rights acquired will be stated at cost less GAAP to AIFRS consequently, the final reconciliations accumulated amortisation and impairment losses. presented in the first financial report prepared in accordance Under AIFRS, intangible assets relating to management rights with AIFRS may vary materially from the reconciliations over fixed life trusts are amortised and annually tested for provided in this Note. impairment. No impairment losses are expected for either the Revisions to the selection and application of the AIFRS Consolidated Entity or Parent Entity for the year ended accounting policies may be required as a result of: 30 June 2005.

> changes in financial reporting requirements that are relevant to the Company’s and Consolidated Entity’s first complete AIFRS financial report arising from new or revised accounting standards or interpretations issued by the Australian Accounting Standards Board subsequent to the preparation of the 30 June 2005 Financial Report; and

> additional guidance on the application of AIFRS in a particular industry or to a particular transaction. The signiﬁcant changes in accounting policies expected to be adopted in preparing the AIFRS reconciliations and under AASB 1 are set out below:

112 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 NOTE 36 – IMPACT OF ADOPTING AUSTRALIAN No employee benefits expense has been recognised for the EQUIVALENTS TO INTERNATIONAL FINANCIAL year ended 30 June 2005 by either the Consolidated Entity REPORTING STANDARDS CONTINUED or the Company as the value of the options exercised is e) Taxation recoverable from the employees under the ESAP. On transition to AIFRS, the balance sheet method of tax effect g) Business Combinations accounting will be adopted, rather than the income statement No change in accounting policy for the merger has been method applied currently under Australian GAAP. recognised in the reconciliations between AGAAP and AIFRS Under the balance sheet approach, income tax on the profit set out below. Whilst discussions are ongoing between the and loss for the year comprises current and deferred taxes. Australian Accounting Standards Board and its associated Income tax will be recognised in the income statement except bodies in relation to the treatment of stapling transactions to the extent that it relates to items recognised directly in under AIFRS, the Directors believe that the presentation of the equity, in which case it will be recognised in equity. merger under AIFRS is appropriate under both AGAAP and AIFRS. However, should the Australian Accounting Standards Current tax is the expected tax payable on the taxable income Board or its associated bodies issue definitive guidance for the year, using tax rates enacted or substantively enacted on this matter, changes may be required to Macquarie at reporting date, and any adjustments to tax payable in Goodman’s current accounting policy. respect of previous years. h) Financial Instruments Deferred tax is provided using the balance sheet method, Macquarie Goodman has taken advantage of the election in providing for temporary differences between the carrying AASB 1 to not restate comparatives for AASB 132 Financial amount of assets and liabilities for financial reporting Instruments: Disclosure and Presentation or AASB 139 purposes and the amounts used for taxation purposes. Financial Instruments: Recognition and Measurement. There Temporary differences will not be provided in respect of are no expected adjustments in relation to these standards either the initial recognition of assets and liabilities that affect for 1 July 2004 or the financial year ended 30 June 2005 as neither accounting or taxable profit, or differences relating current Australian GAAP is expected to continue to apply. to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of The Consolidated Entity has followed Australian GAAP in deferred tax provided will be based on the expected manner accounting for financial instruments within the scope of AASB of realisation of the asset or settlement of the liability, using tax 132 and AASB 139 as described in Note 1 Statement of rates enacted or substantively enacted at reporting date. Significant Accounting Policies. A deferred tax asset will be recognised only to the extent that As at 1 July 2005 the expected adjustments are: it is probable that future taxable profits will be available against > under current Australian GAAP, not all derivatives were which the asset can be utilised. Deferred tax assets will be recognised on the balance sheet. On adoption of AASB reduced to the extent it is no longer probable that the related 139, all derivatives will be recognised at fair value on the tax benefit will be realised. balance sheet. The effect on the Consolidated Entity is to The expected impact of the change in basis on the tax decrease fair value derivatives and the hedging reserve by expense for the financial year ended 30 June 2005 is an $13.9 million arising principally from the fair value of interest increase in tax expense by $4.3 million for the Consolidated rate swaps at 30 June 2005. No adjustment is expected Entity and nil for the Company. Deferred tax assets and for the Company. deferred tax liabilities of the Consolidated Entity are expected > currently under Australian GAAP, the RePS are classified to increase by $0.3 million and $14.8 million respectively as at as equity and distributions to RePS Holders are treated as 30 June 2005. For the Company, the expected impact at 30 payments to outside equity interests. Under AIFRS, RePS June 2005 is an increase in deferred tax assets of nil and an are regarded as a compounded financial instrument. A increase in deferred tax liabilities of nil. portion of the instrument will be recognised as debt and f) Share Based Payments classified as interest bearing liabilities. Distributions to Under current Australian GAAP, no expense is recognised for RePS Holders will include an amount which will be treated options issued to employees. as interest expense. The net profit after tax for the year ended 30 June 2005 determined under AIFRS will be Under AIFRS, the fair value of options granted must reduced by the after tax amount attributed to interest for be recognised as an employee benefits expense with the period. The amount of this adjustment has not been a corresponding increase in equity. The fair value will quantified at this time. be measured at grant date taking into account market performance conditions only, and spread over the vesting period during which the employees become unconditionally entitled to the options. The amount recognised as an expense will be adjusted to reflect the actual number of options that vest except where forfeiture is due to market related conditions.

113 NOTES TO THE FINANCIAL STATEMENTS CONTINUED

NOTE 36 – IMPACT OF ADOPTING AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS CONTINUED 30 June 2005 Consolidated 30 June 2005 Parent Entity Transition Transition AGAAP impact AIFRS AGAAP impact AIFRS $M $M $M $M $M $M

Total current assets 155.7 — 155.7 26.1 — 26.1 Total non-current assets 5,015.4 0.8 5,016.2 100.9 — 100.9 Total assets 5,171.1 0.8 5,171.9 127.0 — 127.0

Total current liabilities (392.2) (756.0) (1,148.2) (1.6) — (1.6) Total non-current liabilities (1,685.8) 743.3 (942.5) (71.8) — (71.8) Total liabilities (2,078.0) (12.7) (2,090.7) (73.4) — (73.4) Net assets 3,093.1 (11.9) 3,081.2 53.6 — 53.6

Equity Contributed equity 2,978.0 0.1 2,978.1 162.3 — 162.3 Reserves 45.6 (39.3) 6.3 — — — Retained proﬁts/(accumulated losses) 0.3 27.3 27.6 (108.7) — (108.7) Outside equity interests 69.2 — 69.2 — — — Total equity 3,093.1 (11.9) 3,081.2 53.6 — 53.6

Consolidated Parent Entity Retained proﬁts Reserves Accumulated losses Reserves $M $M $M $M

Reconciliation of retained profits/(accumulated losses) and other reserves under AIFRS for the year ended 30 June 2005 Balance as at 30 June 2005 under AGAAP 0.3 45.6 (108.7) — AIFRS reconciliation as at 1 July 2004 — deferred tax adjustment 2.0 — — — Adjustments in respect of current year’s performance — Revaluation of investment properties 33.1 (33.2) — — — Deferred tax adjustments (4.3) (10.5) — — — Straight line treatment for fixed increase leases 4.5 — — — — Other adjustments (3.7) — — — — Transfer of other net reserves to retained profits (4.2) 4.2 — — Balance as at 30 June 2005 under AIFRS 27.7 6.1 (108.7) —

NOTE 37 – EVENTS SUBSEQUENT TO REPORTING DATE Subsequent to the year end, Macquarie Goodman agreed terms with its bankers for the refinancing of certain of its bank debts. Existing facilities totalling $ 1.1 billion were replaced with new facilities totaling $1.4 billion. Since the balance sheet date, the Consolidated Entity has exchanged and/or settled contracts for the purchase of properties in Australia, New Zealand, Singapore and Hong Kong for $380.4 million, and has exchanged and settled contracts for the sale of properties in Australia for $32.9 million. The Directors are not aware of any matters or circumstances not otherwise dealt with in this Financial Report or the Directors’ Report that have significantly affected or may significantly affect the operations of the Consolidated Entity, the results of those operations or the state of affairs of the Consolidated Entity in the financial year subsequent to the year ended 30 June 2005.

114 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 DIRECTORS’ DECLARATION

In the opinion of the Directors of Macquarie Goodman Management Limited (“Macquarie Goodman”): (a) the financial statements and the accompanying notes, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the financial position of Macquarie Goodman and the Consolidated Entity as at 30 June 2005 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date; and (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001. (b) there are reasonable grounds to believe that Macquarie Goodman will be able to pay its debts as and when they become due and payable. (c) The Directors of Macquarie Goodman have received a declaration from the Chief Executive Officer and Chief Financial Officer stating that the financial statements of Macquarie Goodman Management Limited and its controlled entities present a true and fair view, in all material respects, of Macquarie Goodman Management Limited’s financial condition and operational results and are in accordance with the relevant accounting standards. Signed in accordance with a resolution of the Directors:

David Clarke, AO Gregory Goodman Chairman Chief Executive Ofﬁcer Sydney, 18 August 2005

115 INDEPENDENT AUDIT REPORT To the Shareholders of Macquarie Goodman Management Limited

SCOPE We have audited the Financial Report of Macquarie Goodman Management Limited for the financial year ended 30 June 2005, consisting of the Statements of Financial Performance, Statements of Financial Position, Statements of Cash Flows, accompanying notes 1 to 36, the disclosures made in accordance with the Corporations Regulations 2001, including the disclosures as required by AASB 1046 Director and Executive Disclosures by Disclosing Entities, in the “Remuneration Report” in pages 55 to 60 of the Directors’ Report (“remuneration disclosures”) and the Directors’ declaration, set out on page 115. The financial report includes the consolidated financial statements of the Consolidated Entity, comprising the Company and the entities it controlled at the end of the year or from time to time during the financial year. The Company’s Directors are responsible for the Financial Report, including the remuneration disclosures. We have conducted an independent audit of the financial report, including the remuneration disclosures, in order to express an opinion on it to the members of the Company. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the Financial Report is free of material misstatement and the remuneration disclosures comply with Accounting Standard AASB 1046 and the Corporations Regulations 2001. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the Financial Report, including the remuneration disclosures, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the Financial Report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in Australia and statutory requirements so as to present a view which is consistent with our understanding of the Company’s and the Consolidated Entity’s financial position, and performance as represented by the results of their operations and their cash flows and whether the remuneration disclosures comply with Accounting Standard AASB 1046 and the Corporations Regulations 2001. The audit opinion expressed in this report has been formed on the above basis. Audit opinion In our opinion, the Financial Report including the remuneration disclosures of Macquarie Goodman Management Limited are in accordance with: a) the Corporations Act 2001, including: i. giving a true and fair view of the Company’s financial position as at 30 June 2005 and of its performance for the financial year ended on that date; and ii. complying with Accounting Standards in Australia, including AASB 1046 Director and Executive Disclosures by Disclosing Entities, and the Corporations Regulations 2001; and b) other mandatory financial reporting requirements in Australia.

KPMG

P M Reid Partner Sydney, 18 August 2005

KPMG, AN AUSTRALIAN PARTNERSHIP, IS PART OF THE KPMG INTERNATIONAL NETWORK. KPMG INTERNATIONAL IS A SWISS COOPERATIVE.

116 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 TOP 20 SECURITYHOLDERS

Top 20 Securityholders as at 29 August 2005 Numbers of securities held % of total issued securities

1 Westpac Custodian Nominees Ltd 169,791,585 11.98 2 National Nominees Limited 142,400,509 10.04 3 J P Morgan Nominees Australia Limited 137,116,662 9.67 4 Citicorp Nominees Pty Limited 130,497,464 9.20 5 Macquarie Bank Limited 118,676,616 8.37 6 Goodman Holding Group 109,233,360 7.70 7 ANZ Nominees Limited 80,043,480 5.65 8 Cogent Nominees Pty Limited 59,769,017 4.22 9 RBC Global Services Australia Nominees Pty Limited 35,446,190 2.50 10 Questor Financial Services Limited 29,337,277 2.07 11 Bond Street Custodian Limited 26,082,049 1.84 12 AMP Life Limited 20,486,664 1.44 13 Queensland Investment Corp 18,316,808 1.29 14 HSBC Custody Nominees (Australia) Limited 13,544,596 0.96 15 Mr Peter Menzies, Ms Mary Mahoney and Mr Peter Mahoney 12,685,298 0.89 16 Westpac Financial Services Limited 11,482,485 0.81 17 Victorian Workcover Authority 9,512,755 0.67 18 Mormarl Pty Ltd 9,484,472 0.67 19 Transport Accident Commission 8,016,984 0.57 20 Suncorp Custodian Services Pty Limited 6,231,782 0.44 Securities held by top 20 Securityholders 1,148,156,053 80.98 Balance of securities held 269,641,573 19.02 Total issued securities 1,417,797,626 100.00

Securityholder Distribution as at 29 August 2005 Number of Securityholders Number of securities

1 – 1,000 1,641 743,937 1,001 – 5,000 7,868 24,223,861 5,001 – 10,000 6,938 50,247,397 10,001 – 100,000 6,300 125,989,918 100,001 and above 240 1,216,592,513 Total 22,987 1,417,797,626

Securityholder with less than a marketable parcel 325 13,420

Substantial Securityholder as at 29 August 2005 Numbers of Securities held

1 Macquarie Bank Limited 118,676,616 2 Goodman Holding Group 109,233,360 3 Colonial First State Global Asset Management (Group) 87,444,324

Voting Rights On a show of hands every person present who is a Voting Member shall have one vote and on a poll every person present who is a Voting Member shall have one vote for each security that the Voting Member holds or represents (as the case may be).

117 PROPERTY TRUSTS

PROPERTY TRUSTS MANAGED BY MACQUARIE GOODMAN Macquarie Goodman Capital Trust (1) Sector Industrial Number of Properties 36 Total Assets A$2.05 billion RePS Price (as at 30 June 2005) A$140.40 RePS Yield (as at 30 June 2005) 5.3% GREYSTANESPARK EAST, PROSPECT, NSW ASX Code MGA (1) MGA is a subtrust of MGI. Based on MGA’s results for the ﬁnancial year ended 30 June 2005.

Macquarie Goodman Property Trust (1) Sector Industrial Number of Properties 20 Total Assets NZ$541.8 million Unit Price (as at 31 March 2005) NZ$1.11 Yield (as at 31 March 2005) 10.2% IBM CENTRE, AUCKLAND NZX Code MGP (1) MGP is listed on the New Zealand Exchange. Based on MGP’s results for the ﬁnancial year ended 31 March 2005.

Ascendas Real Estate Investment Trust (1) Sector Business/Industrial/Logistics Number of Properties 43 Total Assets S$2.1 billion Unit Price (as at 31 March 2005) S$1.88 Yield (as at 31 March 2005) 5.0% TECHPOINT, SINGAPORE SGX Code Ascendasreit (1) Listed on the Singapore Stock Exchange. Managed by Ascendas-MGM Funds Management Limited, which is a 60/40 joint venture between Ascendas Investment Pte Ltd and Macquarie Goodman Management Limited. Based on A-REIT’s results for the ﬁnancial year ended 31 March 2005.

For more information on investing in a Macquarie Goodman product, please visit www.macquariegoodman.com, call 1300 723 040 or email us at [email protected]. For A-REIT, please visit www.a-reit.com.

118 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 PROPERTY TRUSTS MANAGED BY ASSOCIATES OF MACQUARIE GOODMAN Macquarie CountryWide Trust Sector Retail Number of Properties 249 Assets under Management $4.4 billion Current Unit Price (as at 30 June 2005) $1.92 Current Yield (as at 30 June 2005) 8.0% (1) ASX Code MCW (1) Financial year 2006 forecast yield.

Macquarie DDR Trust Sector Retail (US community shopping centres) Number of Properties 35 Assets under Management $2.6 billion Current Unit Price (as at 30 June 2005) $1.19 Current Yield (as at 30 June 2005) 8.1% ASX Code MDT

Macquarie Leisure Trust Group Sector Leisure Number of Properties 54 Assets under Management $353.4 million Current Security Price (as at 30 June 2005) $1.97 Current Yield (as at 30 June 2005) 6.0% ASX Code MLE

Macquarie Ofﬁce Trust Sector Ofﬁce Number of Properties 35 Assets under Management $3.6 billion Current Unit Price (as at 30 June 2005) $1.31 Current Yield (as at 30 June 2005) 8.2% ASX Code MOF

Macquarie ProLogis Trust Sector Industrial (North America) Number of Properties 122 Assets under Management $1.8 billion Current Unit Price (as at 30 June 2005) $1.17 Current Yield (as at 30 June 2005) 9.2% ASX Code MPR

Macquarie Direct Property Macquarie Direct Property currently manages 10 property syndicates, with properties in the commercial and retail sectors. In addition, Macquarie Direct Property also manages Macquarie Property Income Fund, a unit trust that uses gearing and debt to invest into property securities. For further information on Macquarie’s listed or unlisted property trusts, please contact your stockbroker or ﬁnancial adviser, Ask Macquarie on 1300 365 585 (local call cost), visit Macquarie’s website www.macquarie.com/propertytrusts or email Macquarie at [email protected]

119 INVESTOR RELATIONS

The objective of our investor relations team is to provide ANNUAL TAX STATEMENTS AND 2005 TAX RETURN GUIDE thorough and transparent communications and a The Annual Tax Statements were dispatched to comprehensive website to make the management Securityholders on 24 August 2005. of your investment as efficient as possible. This year, Macquarie Goodman provided Securityholders Please visit our website at www.macquariegoodman.com with a Tax Return Guide to provide basic assistance to find out more about Macquarie Goodman and to complete the 2005 TaxPack. Tax Return Guides our services. were dispatched with the Annual Tax Statements. From the Home Page: A copy of the Tax Return Guide can be downloaded > portfolio updates; from the Investor Centre page of our website or > latest news; and obtained by calling InvestorPhone 1300 723 040 > stock prices. to receive a copy by post. From the Investor Centre: Contact Us > distribution payment and reinvestment options; There are a number of ways to make enquiries about > check your holding, change your details your securityholding: or download forms; InvestorPhone operates 24 hours a day, seven days > current and historical tax information; a week and is a convenient way to check and > performance statistics and the current stapled security price; amend details relating to your securityholding – just call 1300 723 040; > set up a watch list for Macquarie Goodman; and > register for eTree and receive communications Our website www.macquariegoodman.com is a via email. great source of information including distributions, Securityholder Benefits latest news, registry forms and more. It also allows During the year, we have delivered the following benefits you to check details of your securityholding online; to our Securityholders: You can email the Security Registrar at > introduced the DRP which allows Securityholders [email protected], to use their distributions to “buy” new securities in or Macquarie Goodman at Macquarie Goodman. Investors who participate in [email protected] the DRP generally receive a discount on the issue for a quick and easy reply to your enquiries; or price, which is based on the average of the daily Please mail all correspondence to: volume weighted average price of all sales of stapled Macquarie Goodman Group securities recorded on the ASX for each of the first C/- Computershare Investor Services Pty Limited 10 ASX trading days following the ASX trading GPO Box 1903 day after the record date in respect of the relevant Adelaide SA 5001. distribution. There is also no brokerage charged on your new securities since the issue is undertaken via the Security Registrar; and > undertook a non-renounceable one for 10 Priority Entitlement Offer and Public Offer, which offered new securities at $3.64 each to all Securityholders. Distribution Details Macquarie Goodman distributes income quarterly for the periods ending 30 September, 31 December, 31 March and 30 June. Distributions are generally paid within two months after these dates.

JODIE BUCKEY INVESTOR RELATIONS MANAGER SIMONE GARNER COMMUNICATIONS CO-ORDINATOR

120 MACQUARIE GOODMAN GROUP ANNUAL REPORT 2005 GLOSSARY OF TERMS

Term Definition AIFRS Australian equivalent to International Financial Reporting Standards A-REIT Ascendas Real Estate Investment Trust ASIC Australian Securities & Investment Commission ASX Australian Stock Exchange Limited ATO Australian Taxation Office Consolidated Entity Macquarie Goodman together with all entities it controls Controlled entities Entities owned by Macquarie Goodman as detailed in Note 6 to the financial statements CPS Cents per security DRP Macquarie Goodman’s Distribution Reinvestment Plan Employee Share Plans The Employee Share Plans consist of the Exempt Employee Share Plan and the Deferred Employee Share Plan approved by Shareholders on 14 September 1999 EPS Earnings per security Executive Option Plan The Executive Option Plan was approved by Shareholders on 14 September 1999 Ex-dividend When stapled securities are traded after this date, they will not qualify for the forthcoming distribution Goodman Holdings Group Goodman Holdings Pty Limited and its controlled entities GST Goods and services tax JV Agreement The joint venture agreement between Macquarie Goodman and Macquarie Bank Limited Macquarie Bank Group Macquarie Bank Limited and its controlled entities Macquarie Goodman Macquarie Goodman Group or Macquarie Goodman Management Limited ABN 69 000 123 071 and its controlled entities including Macquarie Goodman Industrial Trust (ARSN 091 213 839) and its controlled entities, AFSL 223621 Management rights Costs of acquiring funds under management amortised over their expected useful life MBL Macquarie Bank Limited MGA Macquarie Goodman Capital Trust (ARSN 100 155 986) and its controlled entities MGI Macquarie Goodman Industrial Trust (ARSN 091 213 839) and its controlled entities MGF Macquarie Goodman Funds Management Limited (ABN 48 067 796 641; AFSL 223621) and its controlled entities MGM Macquarie Goodman Management Limited (ABN 69 000 123 071) and its controlled entities MGNZ Macquarie Goodman (NZ) Limited MGP Macquarie Goodman Property Trust and its controlled entities MGQ Macquarie Goodman Group ASX code NZX New Zealand Exchange Limited Offer The one for 10 non-renounceable Priority Entitlement Offer and Public Offer OH&S Occupational health and safety Record date The day Macquarie Goodman’s register is closed for the purpose of determining a Securityholder’s entitlement to the distribution for the relevant period RePS Reset Preference Units in MGA RePS Holder A holder of RePS Responsible Entity Responsible Entity means a public company that holds an Australian Financial Services Licence (“AFSL”) authorising it to operate a managed investment scheme. In respect of MGI, the Responsible Entity is MGF, a wholly owned subsidiary of Macquarie Goodman S&P Standard & Poor’s (an independent rating agency that provides evaluation of securities investments and credit risk) Securities One MGM share and one MGI unit stapled and traded as one Macquarie Goodman security Securityholder A person who is registered as the holder of a security in Macquarie Goodman’s register of members SGX Singapore Exchange Limited Sqm Square metres

DESIGN MONCHODAVEY.COM.AU PRODUCTION OCTOPUS SOLUTIONS CORPORATE DIRECTORY

Macquarie Goodman Group Security Registrar Macquarie Goodman Management Limited Computershare Investor Services Pty Limited ABN 69 000 123 071 Level 5 115 Grenfell Street Macquarie Goodman Industrial Trust Adelaide SA 5000 ARSN 091 213 839 Australia Responsible entity Macquarie Goodman Funds Management Limited GPO Box 1903 (ABN 48 067 796 641; AFSL 223621) Adelaide SA 5001 Registered Ofﬁce Telephone/within Australia 1300 723 040 Level 10 Telephone/outside Australia +61 3 9415 4000 60 Castlereagh Street Facsimile +61 8 8236 2305 Sydney NSW 2000 Email [email protected] Australia www.computershare.com GPO Box 4703 Custodians Sydney NSW 2001 Trust Company of Australia Limited 35 Clarence Street Telephone/within Australia 1300 791 100 Sydney NSW 2000 Telephone/outside Australia +61 2 9230 7400 Australia Facsimile +61 2 9230 7444 Email [email protected] Perpetual Trustee Company Limited www.macquariegoodman.com 1 Castlereagh Street Sydney NSW 2000 Directors Mr David Clarke, AO, Chairman Auditor Dr David Teplitzky, Independent Deputy Chairman KPMG Mr Gregory Goodman, Chief Executive Ofﬁcer 10 Shelley Street Mr Patrick Allaway, Non-Executive Director Sydney NSW 2000 Mr Ian Ferrier, AO, Independent Director Australia Mr Patrick Goodman, Non-Executive Director ASX Code Mr John Harkness, Independent Director MGQ Mr James Hodgkinson, Non-Executive Director Ms Anne Keating, Independent Director Ms Lynn Wood, Independent Director Mr Stephen Girdis, Alternate Director to Messrs David Clarke and James Hodgkinson Joint Company Secretaries Ms Carolyn Scobie Mr Mark Alley

Macquarie Goodman Group Annual Report 2005 is printed on Euro Art, an EMAS accredited paper stock from Spicers Paper. EMAS is the European Union’s regulated environmental management system. It aims to continually improve the environmental performance of a company by requesting regular public environmental performance statements, including aspects such as energy and resource efﬁciency, www.macquariegoodman.com waste reduction and pollution control.