Background

LEX Retail Property Trust is a direct property fund investing in the largest single-tenant retail store in Adelaide which is occupied by the IKEA franchisee.

Historical Performance

The fund successfully completed a capital raising of $18 million in October 2005 and paid cash distributions to investors to date as follows:

* 30 June 2006 - 2.65 cpu      (100% tax deferred)

* 30 June 2007 - 9.95 cpu      (100% tax deferred)

* 30 June 2008 - 10.40 cpu     (100% tax deferred)

* 30 June 2009 - 10.70 cpu     (100% tax deferred)

* 30 June 2010 - 11.25 cpu     (75.634% tax deferred)

* 30 June 2011 - 11.80 cpu     (48.8201% tax deferred)

cents per unit ("cpu")

As at 30 June 2010, the fund's property was independently valued at $47.0 million. The Directors adopted an unchanged valuation, for fair value reporting purposes as of 30 June 2011.

Based on this current property value, the unaudited net asset backing per unit at 30 June 2011 is $1.09 (June 2010: $1.09). This compares to the original allotment price of $1.00 per unit paid by investors in October 2005.

Financial Year (FY12)

The directors of the responsible entity continue to monitor the capital and debt position of the fund and are pleased to report that the fund has a stable financial position and is not in breach of any of its banking covenants.

The fund has paid the first quarterly distribution of 3.10 cpu on 27 October 2011. This quarterly distribution equates to an annualised cash distribution of 12.40 cpu.

Distributions for the financial year to 30 June 2012 are forecast to be approximately 47% tax deferred and Annual Tax Statements issued to investors by 31 August 2012.

Strategic Review and Results of Unitholder Meeting

As outlined in the product disclosure statement of the Fund dated 9 September 2005, the Responsible Entity undertook to convene a meeting of the unitholders before 31 October 2010 to determine the future strategy of the Fund. Alternatives to be considered at this meeting of unitholders may include the sale of the Fund’s property over a defined period or other strategies which would provide unitholders with a clear exit mechanism from the Fund by 31 October 2012.

Following an analysis of the available strategies for the Fund, the Responsible Entity convened the meeting on 28 October 2010 and unitholders voted to authorise the Responsible Entity to use its best endeavours to investigate and pursue a sale of the Fund’s property asset by 31 October 2012 on terms which the Responsible Entity considers are in the best interests of unitholders having regard to the independent valuation of the property asset at 30 June 2010.

The Responsible Entity commenced this process in early 2011 and appointed Colliers International as the selling agent for the Property. A sales and marketing campaign commenced based on an Expressions of Interest (“EOI”) Campaign which was scheduled to close on 18 August 2011.

The directors advised investors in the September 2011 Quarterly Update that the fund has entered into a Heads of Agreement with a third party for the conditional sale of the Property. The Heads of Agreement provided for an exclusive due diligence period of 6 weeks which commenced on 31 October 2011. All other terms and conditions of the proposed sale were subject to commercial confidentiality arrangements until the execution of a Contract of Sale, which was expected to be 7 days following completion of the due diligence period.

The directors also announced that the fund was required to address the first right processes which existed with both Cebas Pty Ltd and Adelaide Airport Limited

Those first right processes were concluded and the directors advised unitholders on 9 December 2011 that Cebas Pty Ltd had exercised its right to purchase the Property on terms which the directors considered to be acceptable to the fund, in the best interests of unitholders and comparable the open market value.

The sale of the Property to Cebas Pty Ltd is unconditional in nature and delivers sale proceeds equivalent to the current fair market value of the Property after an extensive independent marketing campaign conducted by Colliers International.

The directors intend to provide investors with a further update following execution of the Contract of Sale with Cebas Pty Ltd, including the likely timing of distribution payments to unitholders following completion of the sale.