DEXUS — Investor Presentation 2016

Mar 8, 2016

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Investa Office Fund Independent Board Committee Presentation Proposal for DEXUS Property Group to acquire all of the IOF Units

9 March 2016

Disclaimer

This presentation was prepared by Investa Listed Funds Management Limited (ACN 149 175 655 and AFSL 401414) on behalf of the Investa Office Fund, which comprises the Prime Credit Property Trust (ARSN 089 849 196) and the Armstrong Jones Office Fund (ARSN 090 242 229). Information contained in this presentation is current as at 9 March 2016 unless otherwise stated.

This document is not an invitation, offer or recommendation (express or implied) to apply for or purchase or take any other action in respect of securities and is not a prospectus, product disclosure statement or disclosure document for the purposes of the Corporations Act 2001 (Cth) and has not been lodged with ASIC.

Distribution of this document outside Australia may be restricted by law. Persons who come into possession of this document who are not in Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. No action has been taken to register securities outside Australia.

This document contains forward-looking statements and forecasts. These forward-looking statements and forecasts are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance to differ materially from those expressed or implied by the forward-looking statements and forecasts contained in this document. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved. Similarly, no representation is given that the assumptions upon which forward-looking statements and forecasts may be based are reasonable. These forward-looking statements and forecasts are based on information available to us as of the date of this document. Except as required by law or regulation (including the ASX Listing Rules) we undertake no obligation to update or revise these forward-looking statements or forecasts. To the maximum extent permitted by law, neither ILFML nor other parties associated with the Proposal (including all persons named in this presentation), are liable for any loss or damage arising as a result of reliance placed on the contents of this presentation or use of information contained in this presentation (including in relation to the accuracy or completeness of the information, statements, opinions or matters, express or implied, contained in, arising out of or derived from, or omissions from, this presentation including without limitation any financial information, estimates or projections and any other information derived there from) and all such liability is expressly disclaimed.

This document contains a summary of information included in the Notice of Meeting and Explanatory Memorandum (EM) dated 9 March 2016, and accordingly no reliance may be placed for any purpose whatsoever on the sufficiency or completeness of such information. You are encouraged to read the EM in its entirety and if you have any questions about the Proposal to call the IOF Unitholder Information Line on 1300 308 902 (callers within Australia) or on + 61 2 9098 9228 (callers from outside Australia) at any time from 8.30am to 5.30pm (Sydney time) Monday to Friday.

Defined terms in this document have the same meaning as in the EM.

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Introduction

The Independent Board Committee has unanimously recommended that IOF Unitholders vote in favour of the DEXUS Proposal, in the absence of a Superior Proposal

• The Independent Board Committee (IBC) determined the DEXUS Proposal to be in the best interest of IOF Unitholders and superior to all options considered under the strategic review, having regard to in particular:

• governance structure and conflicts : the Merged Group will form one of Australia’s pre-eminent internallymanaged office property groups, and for IOF Unitholders, provides the opportunity to transition to internal management, a governance structure that has been adopted by IOF’s listed peer group;

• value proposition : the DEXUS Proposal delivers IOF Unitholders annualised FY16 FFO accretion of 17.5%* per IOF Unit, significant diversification and scale benefits, and exposure to additional revenue streams with enhanced growth opportunities within the DEXUS business;

• management platform : the DEXUS platform provides a highly capable management proposition for IOF Unitholders, with a strong track record of operational performance in commercial real estate;

• Independent Expert, KPMG Corporate Finance, has concluded the DEXUS Proposal is fair and reasonable to, and in best interests of, IOF Unitholders in the absence of a superior proposal

• Notice of Meeting and Explanatory Memorandum dated 9 March 2016 in relation to the DEXUS Proposal has been released to ASX.

• IOF Unitholder meeting to consider the DEXUS Proposal has been convened for 10:00am Friday 8 April 2016

IOF Unitholders should read the Explanatory Memorandum in full prior to making a decision in relation to their IOF Units or the DEXUS Proposal

• Based on the Scrip Equivalent of the Implied Offer Number

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DEXUS Proposal

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DEXUS Proposal

The DEXUS Proposal was developed following extensive engagement and negotiation

• On 18 December 2015, ILFML announced it had entered into a binding Implementation Agreement in relation to a proposal pursuant to which DEXUS would acquire all IOF Units

• If the DEXUS Proposal is approved and implemented, IOF Unitholders will receive Standard Consideration of $0.8229 in cash and 0.424 DEXUS Securities for each IOF Unit (with an alternative to elect Maximum Cash or Scrip)

• Standard Consideration: $0.8229 cash and 0.424 DEXUS securities per IOF Unit;

• Maximum Cash Consideration: $4.1147 per IOF Unit subject to any scale back to ensure the maximum cash consideration paid is approximately $505 million;

• Maximum Scrip Consideration 0.53 DEXUS Securities (rounded to two decimal places) per IOF Unit, subject to any scale back to ensure the maximum number of DEXUS Securities issued is approximately 260.4 million

• DEXUS Securities issued to IOF Unitholders under the DEXUS Proposal will rank equally with all other DEXUS Securities and therefore will have full entitlement to any DEXUS distribution for the six month period ending 30 June 2016 and subsequent distribution periods

• If the Proposal Resolutions are passed and the Conditions Precedent are satisfied and the Proposal becomes Effective and is implemented, Ineligible Overseas Unitholders will receive cash instead of DEXUS Securities through the Sale Facility

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Reasons to vote in favour of the DEXUS Proposal

A detailed discussion of these reasons is contained in Section 4.3 of the Explanatory Memorandum

1. The Independent Expert has concluded that the Proposal is fair and reasonable to, and in the best interests of, IOF Unitholders in the absence of a superior proposal

2. The Proposal represents attractive value for IOF Unitholders

Proposal – Valuation metrics		DEXUS 10-Day VWAP (to 4 Dec15)	DEXUS 5-Day VWAP (to 4 Dec 15)	DEXUS close (4 Dec 2015)	DEXUS close (3 Mar 2016)c
DEXUS Security price		$7.76	$7.79	$7.65	$7.85
Implied Announcement Value		$4.11	$4.13	$4.07	$4.15
Premia to:
IOF Close 13 August 2015a	$3.72	10.6%	10.9%	9.3%	11.6%
IOF Close 4 December 2015b	$3.83	7.4%	7.7%	6.2%	8.4%
IOF 1-month VWAP to	$3.86	6.7%	7.0%	5.4%	7.6%
4 December 2015
IOF 31 December 2015 NTA	$3.98	3.4%	3.8%	2.3%	4.3%

• a. Being the day prior to the announcement of the IOF strategic review.

• b. Being the last trading day prior to the announcement of the Proposal.

• c. Being the last trading day prior to finalisation of the Explanatory Memorandum.

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Reasons to vote in favour of the DEXUS Proposal (continued)

A detailed discussion of these reasons is contained in Section 4.3 of the Explanatory Memorandum

1. IOF Unitholders who receive DEXUS Securities will benefit from significant expected earnings and distribution accretion[1] :

2. FY16 pro forma headline FFO per unit accretion of 17.5%

3. FY16 pro forma underlying FFO per unit accretion of 7.9%

4. FY16 pro forma DPS accretion of 17.4%

5. IOF Unitholders who receive DEXUS Securities will share in significant strategic benefits:

6. combination of two complementary office portfolios

7. investment in a larger more diversified office portfolio

8. exposure to additional revenue streams, including DEXUS’ development pipeline, Third Party Funds Management business and property services business and income from Trading Profits

9. enhanced governance and alignment of interests through internal management

10. enhanced cost-effectiveness with a MER of <35bps

11. greater relevance for equity and debt investors

12. Facilitates the transition to internal management for IOF Unitholders

13. No Superior Proposal has been forthcoming

14. The Proposal provides flexibility for each IOF Unitholder to determine the optimal form of consideration

15. If the Proposal does not proceed, and no Superior Proposal emerges, the price of IOF Units may fall

16. Based on the Scrip Equivalent of the Implied Offer Number

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Risks and disadvantages of the DEXUS Proposal

A detailed discussion of these risks and disadvantages is contained in Sections 4.4 and 11 of the Explanatory Memorandum

The risks and disadvantages associated with the Proposal include the following:

1. Change in the nature of the investment by IOF Unitholders

2. Reduction in IOF’s equivalent net tangible asset value per security

3. The Merged Group is expected to have higher gearing than IOF (although initial gearing of the Merged Group is expected to be within IOF’s stated range)

4. Potential variability in the implied offer price for movements in the DEXUS Security price

5. You may disagree with the Independent Directors’ recommendation or the conclusion of the Independent Expert

6. Risk relating to the fact that Proposal Participants may not receive their preferred form of Proposal Consideration due to the scale-back that you will not know the outcome of your Election until after the Record Date

7. Risk of the Proposal triggering default/pre-emptive rights on jointly owned properties, which co-owners could seek to exercise

8. Risks that repayment provisions under IOF’s USPP and MTN could be triggered by the Proposal or implementation of DEXUS RE’s intentions post implementation of the Proposal

9. Integration risks and realisation of assumed synergies not being achieved as a result of factors such as transition to different systems and resources or loss of key personnel

10. Geographic concentration risk as the Merged Group will have a greater concentration in the Sydney market

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Key dates

Proposed transaction timetable

Date of the Explanatory Memorandum	Wednesday, 9 March 2016
Latest time and date for receipt of Proxy Forms by the IOF Registry for the Meeting	10.00am Wednesday, 6 April 2016
Voting Record Date	7.00pm Wednesday, 6 April 2016
Time and date of the Meeting	10.00am Friday, 8 April 2016
If the Proposal Resolutions are approved and all other Conditions Precedent in connection with the Proposal are satisfied or
waived (if applicable), the following key dates apply:
Second Judicial Advice Date	Tuesday, 12 April 2016
Effective Date	Wednesday, 13 April 2016
Election Date	5.00pm Wednesday, 20 April 2016
Record Date	5.00pm Thursday, 21 April 2016
Implementation Date	Friday, 29 April 2016
New DEXUS Securities commence trading	Monday, 2 May 20161

All dates in the above timetable are indicative only and are subject to change. The parties may vary any or all of these dates and times and will provide reasonable notice of any such variation. Any changes will be announced by IOF to ASX and published on IOF’s website at www.investa.com.au/funds/investa-office-fund-iof/asx-media/. All times and dates refer to Sydney time.

1. Trading will commence on a normal T+2 settlement basis.

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Strategic Review and Background to DEXUS Proposal

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Background – articulation of a path to internalisation for IOF

• In March 2011, Investa Property Group (Investa) acquired the management rights to ING Office Fund

• At that time, representations were made to IOF Unitholders suggesting there would be a “path to internalisation” through which IOF would have a future opportunity to acquire the Investa Office Management Platform (Platform) or, as an initial step towards full internalisation, an interest in the Platform

• Certain rights provided to IOF in relation to this future opportunity are contained in the Investa Implementation Deed

• Internalisation was seen as an important initiative to bring IOF in line with its peers and provide a number of benefits to IOF Unitholders including superior growth, greater alignment, elimination of fees, improved earnings diversification and increased return on invested capital from undertaking funds management activities

activities
		Direct office	Office asset	Office funds	Office development
Peer	Management	ownership	management	management	management
Investa Office Fund	External	✔	✗	✗	✗
	Internal	✔	✔	✔	✔
	Internal	✔	✔	✔	✔
	Internal	✔	✔	✔	✔

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Background – IBC establishment and initial discussions with Morgan Stanley

• IBC was formed in late 2014 given the likelihood of Morgan Stanley exiting Investa

• Discussions were held between Morgan Stanley and the IBC in February 2015 (prior to the commencement of the Morgan Stanley Sale Process) in relation to the potential acquisition of the Platform by IOF

• Terms put forward by Morgan Stanley in relation to the acquisition of the Platform by IOF were not considered to be in the best interests of IOF Unitholders and therefore not acceptable to, or capable of acceptance by, the IBC

• Morgan Stanley sought a right to terminate any agreement with IOF in relation to the acquisition of the Platform, and a waiver of IOF’s rights under the Investa Implementation Deed

• Both the IBC and Morgan Stanley reaffirmed interest in pursuing internalisation and agreed to re-engage once there was more certainty about the outcome of the Investa Property Trust (IPT) sale process

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Strategic Review – rationale

• Following commencement of the Morgan Stanley Sale Process, Morgan Stanley informed the IBC that:

• IOF could not acquire the Platform; and

• the sale of the Platform was likely to be undertaken in a manner that did not trigger the pre-emptive rights in favour of IOF or require IOF Unitholder approval

• In August 2015, the IBC commenced a strategic review to explore an extensive range of options including ongoing management and ownership of IOF

• the IBC, in acting in the best interests for IOF Unitholders, focused on maximising value for IOF Unitholders

• Rationale for commencing the strategic review included:

• the “path to internalisation” for IOF Unitholders via the acquisition of the Platform upon Morgan Stanley’s exit of its investment in Investa was no longer likely; and

• there was likely to be a change in ownership of the Platform, without any requirement for IOF Unitholder approval, which gave rise to potential uncertainty regarding the ongoing management of IOF

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Strategic Review – process

• The IBC retained Macquarie Capital and Fort Street Advisers as financial advisers and Herbert Smith Freehills as legal adviser to assist in the strategic review

• The strategic review involved a comprehensive examination of an extensive range of the potential alternatives related to the management and ownership of IOF

• a summary of key alternatives considered is set out in the following slides

• see Section 4.2 of the Explanatory Memorandum for further detail

• As part of this examination, the IBC engaged extensively over a period of approximately four months with:

• Morgan Stanley in relation to the progress of the Morgan Stanley Sale Process;

• a large number of global and Australian real estate investors who had the capability and capacity to acquire IOF, including those parties shortlisted in the Morgan Stanley Sale Process in relation to the IPT portfolio;

• those parties shortlisted in the Morgan Stanley Sale Process in relation to the acquisition of the Platform; and

• ICPF

• In order to assist in assessing the value proposition of various alternatives, the IBC commissioned the revaluation of IOF’s entire portfolio as at 30 November 2015

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Strategic Review – summary of the key alternatives

Key options considered prior to, and following receipt of the DEXUS Proposal

	Continuation of External
	Management	Joint Ownership of IOM with ICPF	Implementation Deed Rights
Description	• Retention of external management	• Proposal from ICPF for IOF and ICPF	• Implementation Deed provides IOF
	under new owner of IOMH or the	to jointly own the Platform	rights:
	appointment of a new external		- Option to facilitate the acquisition of
	manager		an interest in the Platform when IOF
			assets >$3.5bn
			- Pre-emptive rights in certain
			circumstances if IPGH or IOMH
			sought to sell the Platform
Review Process	• Discussions with potential owners of	• Discussions with ICPF in relation to	• Existing rights not triggered:
	the Platform, including parties	joint ownership proposal	- Assets remain <$3.5bn
	shortlisted in Morgan Stanley Sale	• IOF proposed alternatives (to provide	- Platform sale avoided pre-emptive
	Process, and subsequently ICPF	IOF greater independence whilst	right
	• Discussions with parties interested in	maintaining scale benefits) which	• Operation / value of the rights
	becoming the new external manager	were not accepted by ICPF	considered in the context of a new
	of IOF		owner of the Platform
Key	• Peers are internally managed	• Joint ownership not equivalent to an	• Given rights not triggered, no
Considerations	• Internal management considered to	internalisation; IOF remains externally	opportunity to exercise
	provide a superior management and	managed, albeit with partial ownership	• However, rights seen to not provide
	governance structure	of management entity	the same “path to internalisation”
	• Recognised investor preference for	• Uncertainty relating to the stability and	following the sale of the Platform to a
	internal management	viability of the platform	strategic holder
	• Acknowledged the Platform had
	provided good management to IOF
	• Actual or perceived conflicts exist with
	external management

A discussion of the alternatives considered is set out in Section 4.2 of the Explanatory Memorandum

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Strategic Review – summary of the key alternatives (continued)

Key options considered prior to, and following receipt of the DEXUS Proposal

	Standalone Internalisation	Liquidation/Wind up	Liquidation/Wind up	Control Proposal	Control Proposal
Description	• IOF internalisation via either:	•	Sale of assets or constituent trusts of	•	Acquisition of all of IOF Units or
	- Acquisition of the Platform		IOF followed by a liquidation of IOF		assets or merger with an existing A-
	- Standalone acquisition of IOF		and return of capital to IOF		REIT
	management entity		Unitholders
	- IOF vote to replace current manager
	with an IOF entity
Review Process	• IOF put a proposal for a standalone	•	Detailed analysis of potential sale	•	Engagement with Australian and
	IOF internalisation to:		proceeds and likely value leakages		global real estate investors with the
	- Morgan Stanley (as the ultimate	•	Entire portfolio revalued		capacity and capability to acquire
	owner of the Platform at the time)				IOF
	- Parties short-listed by Morgan			•	Negotiation with DEXUS following
	Stanley to acquire the Platform				receipt of initial proposal
	(including ICPF)
Key	• Despite efforts by the IBC, no	•	Inefficient mechanism to deliver	•	Control proposal needed to deliver
Considerations	substantive progress could be made		value to IOF Unitholders		attractive value proposition to IOF
	to negotiate a standalone	•	Uncertainty as to timing as well as		Unitholders and be superior to
	internalisation		market risk		alternatives in order to be
	• IOF’s lack of scale and fee				recommended
	arrangements expected to impact
	feasibility and value of management
	rights
	• Neutral to earnings; NTA dilutive

A detailed discussion of these issues is set out in Section 4.2 of the Explanatory Memorandum

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Conclusion

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Conclusion

• Notice of Meeting and Explanatory Memorandum dated 9 March 2016 in relation to the DEXUS Proposal has been released to ASX

• Independent Directors of ILMFL unanimously recommend that IOF Unitholders vote in favour of the DEXUS Proposal, in the absence of a Superior Proposal

• Independent Expert, KPMG Corporate Finance has opined that the DEXUS Proposal is fair and reasonable to, and in the best interests of, IOF Unitholders in the absence of a superior proposal

• IOF Unitholder meeting to consider the DEXUS Proposal has been convened for 10.00am Friday 8 April 2016

IOF Unitholders should read the Explanatory Memorandum in full prior to making a decision in relation to the DEXUS Proposal

If you have any questions in relation to the Proposal, please contact the IOF Unitholder information line on 1300 308 902 (callers in Australia) or +61 2 9098 9228 (callers outside Australia) between 8.30am to 5.30pm (Sydney time) Monday to Friday

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Appendix

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Change of ownership of Investa Office Management Platform

Transfer of management rights of IOF

• As announced on 7 March, Morgan Stanley has completed the sale of the Platform to an entity to be stapled to ICPF

• the Platform, now ultimately owned by ICPF investors, continues to manage IOF

• Morgan Stanley has retained the unitholding in IOF, previously held by the Platform

• In recommending the DEXUS Proposal, the IBC was aware of the likelihood of the transfer of the Platform to ICPF occurring

• the IBC considers the DEXUS Proposal to be superior to ongoing external management

• The IBC also notes:

• since December 2015, the IBC has been subject to undertakings in the Implementation Agreement with DEXUS that restricts discussions related to a management proposal from a new owner of the Platform

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Conditions precedent

The implementation of the DEXUS Proposal is subject to the satisfaction or waiver (where applicable) of a number of Conditions Precedent including (without limitation):

1. Approval of the Proposal Resolutions at the Meeting by the requisite majorities of IOF Unitholders (being 8 April 2016)

2. The receipt of the Second Judicial Advice

Further details regarding the Conditions Precedent and their status are set out in Section 14.3 of the Explanatory Memorandum.

As announced on 19 January 2016, DEXUS has been notified by the ACCC that it does not intend to conduct a public review of the Proposal.

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