Property Update Capstone PD Days February 09

1. Property UpdateCapstone PD Days February 09 Presented by: Chris Smith, Portfolio Manager - Healthcare & Industrial Property Daniel Thomas, Regional Manager VIC,TAS,SA

2. Agenda • Australian Unity Investments - Overview • Australian Unity Investments – Property Expertise • General Property Overview • Healthcare Property • Australian Unity Healthcare Property Trust

3. Australian Unity Investments - Overview

4. Australian Unity Investments (AUI) • Investment specialists • Source a variety of differentiated products across multiple asset classes • Elite investment talent • Currently manage over $5.5 billion in FUM AUI aims to improve the financial wellbeing of investors by creating investment opportunities that add true value “We believe to be better than your peers, you can’t be doing the same as them” David Bryant, Head of AUI

5. An overview AUI • Internal • Property • Mortgages • Cash • Balanced Funds • JV’s & Affiliations • Aust. Equities (Platypus) • Microcaps (Acorn) • Fixed Interest (Vianova) • International Equities (Intech & Wingate) We identify, select and manage talented investment specialists

6. Australian Unity InvestmentsProperty Expertise

7. AUI property • Focus on delivering reliable, sold income to investors • Focus on capital stability • AUI offers a range of property investments • Hybrid property trusts • Unlisted property trusts • Property syndicates

8. Our property expertise • In-house property team is responsible for over $1b FUM • Manage more than 50 properties across Australia • Leasing and building management experience • Access to first-class research • Highly skilled Property Team with sector experience in : • retail, industrial, commercial and healthcare

9. Our property expertise Martin Hession Head of Property 41 yrs experience in Property with 30 in the property funds management including roles with AXA/National Mutual Peter Lambden Portfolio Manager – Retail Property 35 yrs experience in the industry including roles with AXA/National Mutual Chris Smith Portfolio Manager – Healthcare and Industrial Property 22 yrs experience in the industry Including Coles Myer and Jones Lang Lasalle

10. General Property Overview

11. Property update: residential property • Rising rents • Affordability • Declining residential investment • Housing shortages • Inflation

12. Property update: office property • Nationally • Moderation in tenant demand across most monitored markets • Incentives rising, impacting rental growth • Vacancies rising, reduced tenant enquiry, completions and sub lease space • Yields softening for prime and secondary assets in most office locations

13. Property update: office property • Sydney • Increase in incentives, impacting rental growth • Softening tenant demand and an increase in sub lease space is expected to result in continued increase in vacancy. • Prime yields moved 100 points in 2008 • Melbourne • A large supply pipeline currently under construction will impact vacancy rate • Prime yields have moved 75 points at the upper end • Adelaide • Demand remains strong as a result vacancy rate is low • Yields for prime office site in the region of 7.75 to 9.00% • Brisbane • Vacancy remains extremely low, supply pipeline under construction is 50% pre-committed • Prime yields have moved 150 points in 2008 to be at 7.0% • Perth • Supply should begin to impact vacancy and rental growth in 2009

14. Property update - office space Office space – vacancy December 2008 Source: Jones Lang LaSalle – Real Estate Intelligence Service December 2008

15. Property update: retail property Nationally • Challenging economic conditions have begun to impact the retail market. • Turnover growth has slowed, leasing enquires and demand for space has weakened • Reduced tenant activity particularly in secondary centres. • Supply remains large • Yields softening

16. Property update: retail property Sydney • Prime CBD and Regional centres rental growth remains healthy • Yields have softened 100 points is 2008 for prime CBD and 50 points for regional retail Melbourne • Prime CBD and regional centre rental growth moderated in 2008. • Yields for prime and regional centres have softened by 25 points at the upper end in 2008 Brisbane • Prime CBD rental growth has eased in 2008, growing 2.8% in 2008 • Prime and Regional yield have softened 50 points in 2008 Adelaide • Regional rents outperformed in 2008, returning 4.8% • Yields moved 25 points for prime and regional centres at the upper end Perth • Prime CBD rents had healthy 7.5% growth, yields have moved 100 points in 2008

17. Property update - industrial property Nationally • Large supply pipeline impacting rental growth • Forward looking supply weakening • Yields for prime property softening 25-50 points whilst secondary yields have moved by 100 points at the upper end • Investment activity slowed across all monitored markets

18. Property update - industrial property Sydney • Large supply impacting rental growth in majority Sydney markets, exception Northern market healthy 4.7% growth for 12 months to December 2008. • Softening yields of between 50 -150 points across prime and secondary assets has been witnessed in 2008 Melbourne • Easing in rental growth with prime net rents in the North and South East recording negative rental growth for the 3 months to December 2008. • In 2008 yields softened between 125-250 points across prime and secondary assets Brisbane • Rental growth in Brisbane’s South has started to moderate • Secondary rents have outperformed prime rents in the South however only marginally • Yields softened 100 points in 2008 for Prime assets and 150 at the upper end for secondary assets

19. Property update - industrial property Adelaide • Only market showing healthy demand • Rental growth being witnessed in North/North west precinct. • Softening yields for prime and secondary assets has been witnessed, however only 50 points for 2008 Perth • Coming of a high base Perth rentals have declined between 2 – 5% across the board • Prime yields have softened 50 points, whilst secondary yields have moved 100 points at the lower end

20. Sustaining Capital Values

21. Effect of over-valuation A case in point. Net income $1 million pa Value at 6.75% yield $14.8 million Value at 6% yield $16.7 million For valuation to increase from $14.8 million to $16.7 million would require net income increases of 3% pa for four years assuming no change to the capitalisation rate of 6.75%.

22. Property Movements

23. Specialist Sector for 2009 Healthcare Property

24. What is a healthcare property? • Day surgeries • Consulting rooms • Rehabilitation units • Radiology and pathology centres Infrastructure supporting the healthcare system • Land • Hospitals • Medical clinics • Aged Care Facilities

25. Why invest in healthcare properties? • Healthcare demand • Australians are living longer • Baby Boomers - people over the age of 65 consume 3 times more health services than any other age group* • The rise of the day surgery • Regional demand for first class facilities • Diversification • Different lease profile • Immune to economic downturn • Growth potential • Supported by Federal Government 30% rebate on private health insurance *Source – Australian Institute for Health and Welfare, 2006

26. Australia’s ageing populationdriving demand • Source : ABS Population Projections Australia 2004 2101 -

27. Number of Australians Covered by Private Hospital Health Insurance • Introduction of a 30% health fund rebate being paid to members of health funds from 1 January 1999 • In the 2004-05 NHS, 51% of Australians aged 15 years and over reported having private health insurance, 47% had hospital cover (with or without ancillary cover) and 41% had ancillary cover (with or without hospital cover). • This increase in health fund membership quickly resulted in an upward re-rating of the value of private hospitals • Source : Private Hospitals Insurance Administration Council Web Site

28. Number of Australians Covered by Private Hospital Health Insurance • Source : ABS Private Hospitals . 4390.0 2006-2007 pp 20 & 22

29. Healthcare sector • The average cost per patient day is higher as hospital size increases. • The more complex medical procedures necessitate greater use of highly trained staff, expensive equipment, drugs and medical supplies. • Psychiatric and rehabilitation hospitals are more profitable than medical and surgical hospitals • The growth in the activity level and corresponding increase in revenue over the last 5 years has translated into - increased market activity - compression of yields - consolidation of the ownership of private hospitals • Source : ABS Private Hospitals . 4390.0 2006-2007

30. Private Hospital Ownership • Source : ABS Private Hospitals . 4390.0 2006-2007

31. Private Hospital Ownership • Industry consolidation shows that Ramsay Health Care currently operate some 7,200 beds whilst Healthscope operate a further 4,078 beds • These two operators account for 47.1% of the total private hospital beds and 78% of the for profit private hospital beds • Catholic Health Care Australia operate 24.8% of the total private hospital beds and 70.9% of the not for profit private beds

32. Healthcare sector • The major drivers of hospital occupancy and profitability are preferred provider agreements with the relevant health funds and the support of the referring practitioners. • The major players in the industry are in a stronger position to negotiate better deals with the health funds and are better equipped to provide the resources required by practitioners. • New players are now entering the industry such as HealthE, KGL Health and Owen Ferguson Health. • The church and charitable sector who operate some 40% of the available private beds in Australia have recently become more active in the market.

33. Healthcare sector • In recent years a number of specialised property trusts have emerged seeking higher yields through investment in hospital real estate and allied health properties. • Entities include Australian Unity Health Fund, ING Real Estate Health Fund, Orchard Funds Management and the UK based St Andrew’s Health Care. • Such interest in the private health sector has seen yields on going concern hospitals firm from 15% to 20% five years ago to 12.5% to 14% currently and hospital real estate firming from 10% to 12% five years ago to 8% to 8.75%.

34. 2008 Budget • The Medicare surcharge threshold was increased from a taxable personal income of $50,000 to $70,000 for singles, and for couples increased from $100,000 to $140,000 in October 2008. • The Federal Treasury’s estimate is that 485,000 people will exit from private insurance saving the Australian Government $232 million in the payment of the 30% health fund rebate. • A number of commentators have questioned the Treasury estimates of savings in that those who will exit health insurance will be the younger high income earners who have purchased cheaper private health insurance products because it costs less than paying the surcharge.

35. Australian Unity Healthcare Property Trust

36. AUI Healthcare Property Trust (HPT) • Regular income and opportunity for long term capital growth • 22 quality properties, with a strong acquisition pipeline • Strong diversification across four states • Conservatively geared at 40.92% • Properties are 98.90 occupied (as at 31 December 2008) • Average Weighted Lease Expiry of 8.08 years (as at 31 December 2008) • ‘Highly Recommended’ rating from Lonsec & 4.5 star rating from Adviser Edge Central QLD Eye Centre/Elite Laser, QLD Royal Prince Alfred Medical Centre, NSW Peninsula Private Hospital, VIC

37. Healthcare Property Trust – Asset and geographic allocation Asset allocation Geographic allocation as at 31 December 2008

38. Properties – Victoria • Beleura Private Hospital, Mornington • 124-bed private hospital, includes 105 overnight beds and 19 day beds • Includes a theatre suite, angiography suite, medical imaging facility, pathology centre, consulting suites, kiosk, administrative offices, staff facilities and store rooms • The property includes Beleura Medical Clinic • The major tenant is Ramsay Health • Manningham Medical Centre, Templestowe • A ‘one-stop-shop’ facility with general practitioners, medical and surgical specialists, dental, pharmacy, diagnostic imaging, day procedure centre, pathology, audiology, optometry and ancillary health services and a modern gymnasium • Key tenants are Manningham Day Procedure Centre and Manningham Medical Centre General Practice

39. The reasons for our purchase in Orange Residentialaccommodation for healthcare workersprecinct • Limited opportunity • Stamp duty savings • New buildings – better depreciation • Enhances Weighted Average Lease Expiry • Greater diversification to the Fund • Picks up ‘GAP’ on public system • Cancer Services – only one in region • Catchment of 40,000 in City of Orange; 300,000 In GWAHS Privatehospitalprecinct Orange development site precincts Hostel/Aged Care, Cancer Care, Childcare facility precinct Medi-hotel, retail and ancillary services precinct

40. Orange development – close proximity to Orange Base Hospital

41. Performance (Retail)

42. Important information Applications for investments in these products may only proceed on the respective application attached to or accompanying the current Product Disclosure Statement (PDS). A PDS containing full details should be obtained before making any investment decision. A Product Disclosure Statement (PDS) for these products is available at www.australianunityinvestments.com.au or by calling us on 1800 649 033. You should consider the PDS in deciding whether to acquire, or continue to hold the product. This information has been prepared as general information for use by financial advisers only. It does not take into account your circumstances. While every care has been taken in the preparation of this information, we cannot warranty its accuracy or completence and we reserve the right to make corrections. Information can change over time. Past performance is not a reliable indicator of future performance.