Investa Office Fund : 5 September 2012 – IOF Further Taxation Explanation

5 September 2012
Dear Unitholder,

We refer to the Annual Taxation Statement for the income year ended 30 June 2012 (the "2012 Income Year") relating to your investment in the Investa Office Fund ("IOF"). We provide the following additional explanation to assist you in understanding the tax components relating to the distribution for the 2012 Income Year.
We anticipate that there may be some confusion because the sum of the tax components attributable to your distribution exceeds the gross distribution paid to you. We appreciate that you would be expecting the sum of the tax components to equal the gross distribution amount, which is the more common situation.
An explanation for these issues is set out below.
Your investment in IOF constitutes an investment in two unit trusts which are stapled together, being the Prime Credit Property Trust ("PCP") and the Armstrong Jones Office Fund ("AJO"). Whilst you may view your investment in IOF as a single security, for Australian tax purposes, tax law treats your investment as a separate unitholding in both of these trusts.
Under Australian tax law, the beneficiaries (i.e. the unitholders) of a trust are taxed on their share of the taxable income of each trust based on their prop orti ona te s har e of the tr us t 's dis tr i buta ble inc om e (i.e. the gross distribution amount) to which they either receive or are presently entitled. In some cases, the taxable income of a trust may exceed the distributable income of the trust. This was the case in relation to PCP for the 2012 Income Year. The tax adjustments that could lead to this outcome include, inter-alia, the grossing up of the net foreign income for foreign tax paid by PCP.
Unitholders may be entitled to a foreign income tax offset of an amount up to the amount of foreign tax paid. The foreign income tax offset may reduce the Australian tax otherwise payable by unitholders. Further information can be found in the most recent version of the "Guide to foreign income tax offset rules" published by the ATO.
The tax deferred component advised in your distribution statement relates wholly to AJO. As PCP and AJO are legally two separate trusts, the tax deferred component for AJO cannot be applied as a reduction to (or net off against) the excess of taxable income over distributable income in relation to PCP.
The outcome above is also summarised and depicted in the accompanying table below.

The above discussion is generic in nature and cannot be relied upon as tax advice. We recommend that you seek independent tax advice on to your tax position.

Australian taxable income
- Interest 15.8332%
- Rental 35.6844%

- Total Australian taxable income 51.5176%
Foreign taxable income 32.4248%
Amounts shown as foreign taxable income on the Annual Taxation Statement are already grossed up for any applicable foreign tax paid
Tax deferred amount 32.7846%

Total of Annual Taxation Statement
Components 116.7270%

Gross Distribution Amount 100.0000%

Excess of Annual Taxation Statement Components over Gross Distribution Amount
16.7270% The excess is attributable wholly to PCP

Foreign tax paid 32.1469%

Reconciliation of Annual Taxation Statement Components to Gross Distribution Amount

Total of Annual Taxation Statement
Components 116.7270%
Less partial reduction in Distribution
Amount due to Foreign tax paid by IOF -16.7270%

Gross Distribution Amount 100.0000%

2

Depending on your circumstances, you may be entitled to claim a foreign income tax offset of an amount up to your share of the Foreign tax paid

distributed by