DB RREEF Trust annual report 2005 contents 1 highlights 26 third party funds under management 4 key financial data and results summary 28 summary of properties 6 letter from the chair 42 directors 8 chief executive officer’s report 45 sustainability report 14 DB RREEF Trust overview 51 corporate governance statement 17 DRT portfolio review 70 directors’ report 20 commercial portfolio – australasia 82 directors’ and executive remuneration report 22 industrial portfolio – australia 87 financial statements 24 industrial portfolio – united states 146 registry information 25 retail portfolio – australia 147 investor information directory PICTURED FRONT COVER: One Margaret Street, Sydney NSW; ABOVE: Bent Street, Sydney NSW DB RREEF Trust (ASX: DRT) comprising DB RREEF Diversified Trust ARSN 089 324 541 (“DDF”), DB RREEF Industrial Trust ARSN 090 879 137 (“DIT”), DB RREEF Office Trust ARSN 090 768 531 (“DOT”) and DB RREEF Operations Trust ARSN 110 521 223 (“DRO”). Also referred to in this annual report as “DRT”, “the Trust”, “DB RREEF Trust” or “the Trusts”. “DAL” means Deutsche Australia Limited. All amounts are in Australian dollars unless otherwise stated. The Responsible Entity of each of the Trusts is DB RREEF Funds Management Limited ABN 24 060 920 783 (“Responsible Entity”). EM or Explanatory Memorandum means Explanatory Memorandum and Product Disclosure Statement dated 30 August 2004. highlights new ground ■ stapled DB RREEF diversified trust, DB RREEF industrial trust, DB RREEF office trust and DB RREEF operations trust to form the DB RREEF trust ■ partially internalised management ■ acquired $1.0 billion of industrial assets in the United States ■ created $1.6 billion retail property joint venture with the Westfield Group ■ achieved EM forecast earnings of 10.5cps ■ distributions of 10.5cps ■ positive revaluations increased NTA by seven cents to $1.29 ■ gearing at 39 percent DB RREEF Trust Annual Report 2005 1 highlights (continued) TIMELINE OF KEY DATES, 2004/2005 October 04 September 04 Acquired Unitholders approved $1.0 BILLION STAPLING US industrial portfolio August 04 proposal Announced STAPLING August 04 proposal Announced $1.6 BILLION retail joint venture with the Westfield Group 2 DB RREEF Trust Annual Report 2005 June 05 Secured Coles Myer Limited pre-commitment for April 05 $100 MILLION WESTLAKES development redevelopment completed June 05 February 05 Issued Underwrote May 05 $99 MILLION Completed creation $204 MILLION December 04 of retail of RENTS securities Secured DRP JOINT VENTURE US$200 MILLION with the Westfield Group debt private placement DB RREEF Trust Annual Report 2005 3 key financial data and results summary 30 June 2005 Security price Highest $1.46 Low $1.23 Closing price $1.37 Number of securities on issue $2.732 billion Number of security holders 26,230 Net tangible assets per security (“NTA”) $1.29 Total assets $7.0 billion Market capitalisation $3.7 billion Distributions cents per security December 2004 5.2 cents June 2005 5.3 cents Total 10.5 cents Tax deferred percentage 41.65 percent Net income before capital items (grouped)1 $280.8 million Distributions $281.3 million Borrowings $2.8 billion Gearing as percent of total assets (net of cash) 39 percent Management expense ratio 0.47 percent Average duration of hedges 2.9 years Number of property investments 169 Portfolio occupancy rate 93 percent Portfolio average lease duration 5.3 years Third party funds under management $3.5 billion 4 DB RREEF Trust Annual Report 2005 results and em comparison Statutory accounts EM forecasts1 Actual – grouped 30 June 20051 30 June 20051 $241.0 Net profit before capital items ($m) 2 $278.9 $280.8 12.1 Earnings per security (cps) 10.5 10.5 10.5 Distributions per security (cps) 10.5 10.5 $219.5 Net profit attributable to security holders ($m) 3 $260.2 $261.3 10.1 Earnings per security (cps) 9.8 9.8 1 The “actual – grouped” figures reflect the aggregation of the four Trusts for the period to 30 June 2005. This accounting treatment is consistent with the disclosures outlined in the EM and represents the summation of the results for the four Trusts comprising the stapled entity. It should be noted that investors in DRT have been entitled to the returns of the underlying Trusts from 1 July 2004. For statutory reporting purposes, DB RREEF Diversified Trust (“DDF”) was deemed to be the acquiring entity. Accordingly, the other three entities, being DB RREEF Office Trust (“DOT”), DB RREEF Industrial Trust (“DIT”) and DB RREEF Operations Trust (“DRO”), are consolidated as subsidiary entities for accounting purposes. The financial statements reflect 12 months of DDF results and nine months of DOT, DIT and DRO results. The earnings per stapled security per the 30 June 2005 accounts are 10.1 cents (based on the weighted number of units on issue for DDF from 1 July 2004 to 30 June 2005). This is calculated based on the reported net profit after capital items. 2 Capital items comprise net profit from asset sales and costs associated with the restructure. 3 Net profit attributable to security holders reflects the writing-off of transaction costs and includes capital profits. Pound Road West, Dandenong VIC DB RREEF Trust Annual Report 2005 5 letter from the chair dear investor I am pleased to present the first Annual Report for DB RREEF Trust for the year ending 30 June 2005. This year has been a year of significant change in the operation of your Trust. On 27 September 2004, unitholders met to consider, and subsequently approved, a proposal: ■ to staple DB RREEF Diversified Trust, DB RREEF Industrial Trust, DB RREEF Office Trust and DB RREEF Operations Trust units to create DB RREEF Trust; ■ to acquire a portfolio of A$1.0 billion of US industrial property; and ■ to partially internalise the management of your Trust. Since that day a significant amount of work has been undertaken to implement the proposal, restructure the Trust’s debt and implement the management structure necessary to drive the business into the future. While a number of implementation activities will be completed over the next few months, I am very pleased to report that the key building blocks for the future growth of DB RREEF Trust are now in place. The final distribution for the six months to 30 June 2005 is 5.3 cents per stapled security which brings the total distribution for the year to 10.5 cents per stapled security. This is in line with our forecast outlined in the Explanatory Memorandum issued as part of the stapling process in August 2004. Total assets of the Trust as at 30 June 2005 were $7.0 billion, with security holders equity of $3.5 billion. The resultant net tangible assets per security is $1.29, which is seven cents above December 2004. The Trust’s gearing as at 30 June 2005 was 39 percent which is below the forecast gearing level outlined in the EM debt forecast. Our Chief Executive Officer, Victor Hoog Antink, will in his report provide details of the activities and achievements that improved the quality and value of your Trust. Over the past year we have made significant changes to your Board and the overall corporate governance of your Trust. Your Board now comprises seven members, the majority of whom are independent. Along with the usual duties of a board, the Board has established a number of key committees that oversee various aspects of the operations of your Trust. These and other governance aspects are reviewed in the Corporate Governance Statement contained in this Annual Report. 6 DB RREEF Trust Annual Report 2005 14 Moore Street, Canberra ACT On behalf of the Board, I wish to thank you for your continued support during this period of significant change. The Board is committed to the continuing growth and development of DB RREEF Trust and is optimistic about the Trust’s future prospects. We look forward to your continued support in the years ahead. Yours sincerely Christopher T Beare Chair 25 August 2005 DB RREEF Trust Annual Report 2005 7 chief executive officer’s report TOTAL ASSETS OF DRT AS AT 30 JUNE 2005 ARE $7.0 BILLION, WITH SECURITY HOLDERS EQUITY OF $3.5 BILLION. After a year of significant change for the Trust, I am operating results particularly pleased to advise the distribution for DRT for Total assets of DRT as at 30 June 2005 are $7.0 billion, the period to 30 June 2005 is $281.3 million. This with security holders equity of $3.5 billion. The resultant NTA represents 10.50 cents per stapled security, approximately per security is $1.29, which is an increase of seven cents per 42 percent tax advantaged, which is in line with the security (six percent) since December 2004. Gearing, net of Explanatory Memorandum. cash, at 30 June 2005 is 39 percent, an improvement on the Earnings on a grouped accounting basis for the four listed EM forecast. entities, consistent with the EM disclosure, is $280.8 million We have achieved the EM forecast while improving key before capital items. Earnings, as reported in the statutory metrics such as gearing and NTA. The result supports our accounts for the Trust, which adopts DB RREEF Diversified restructure initiatives undertaken last year, and positions Trust as the parent entity, are $241.0 million before capital items. us to continue to deliver the broader strategies as outlined Consolidated pre acquisition earnings form part of the Trust for DRT. The Board and management also remain focused distributions for the interim reporting period as security holders on continuing to build our global real estate platform as are entitled to the earnings of the Trust from 1 July 2004.