Property Income Fund - Retail units Fund Update - 31 December 2011

For more than 11 years, the Fund has blended direct properties and unlisted property trusts with listed A-REITs and cash to provide investors with relatively consistent income distributions and the potential for capital growth.

By investing in a range of property assets and cash, the Fund is able to maintain a generally higher level of liquidity when compared to other direct property funds.

Investor Quarterly Distributions

1.1564 cents per unit (CPU)for the December 2011 quarter.

(1.0903 CPU for the September 2011 quarter)

Gross Asset Value

$134.13m (Retail units $35.46m)

$134.77m (Retail units $28.87m) at 31 December 2010

Withdrawal price

$0.7862($0.7767 at 30 September 2011)

Direct Portfolio occupancy

89.24% leasedby area, with a weighted average lease expiry of 3.01 years by base rental income.

The financial information in this update is extracted from the Fund’s accounting and property management records and is based upon unaudited financial records (at 31 December 2011). Past performance is not a reliable indicator of future performance.This document is issued on 5 March 2012

At Australian Unity Investments, we continue to hold a positive and optimistic outlook for the commercial property sector, which is well supported by the relative strength of the Australian economy. The wildcard, however, remains the volatility and uncertainty that dominated global investment markets in 2011.

Market momentum moderates at end 2011

Just one year ago, global investment markets appeared to be trending gradually upwards and out of the global financial crisis (GFC). International markets, in particular, were rallying strongly.

But as the year went on, volatility returned with a vengeance as market fears over Europe’s debt woes deepened, the US economy continued to languish and concerns emerged about China’s economy. Listed property sectors were caught up in the volatility, with the local Australian Real Estate Investment Trust (A-REIT) market closing down 4.64% 1 for the six months to 31 December 2011.

For the unlisted commercial property sector, the market recovery we had observed during 2010 moderated during 2011. Nonetheless, its fundamentals remain strong.

In 2011, the office property sector was well supported by Australia’s relatively strong economy. And, while there has been some softening in the economic outlook over the past six months, existing properties in the sector continue to be supported by limited supply, particularly in CBD markets.

Industrial property, too, generally performed well in 2011, although it closed the year a little flat. Given the supply dynamics in this market, our view is that investor expectations should be for stable returns.

Strong foundations set the outlook for 2012

The first six months of 2012 will continue to present challenges. The performance of the Australian commercial property market will vary according to geography and sector with the resource states of Western Australia and Queensland providing the lead. The best prospects for good performance, we believe, remain with quality assets and quality managers. We expect capitalisation rates will remain steady, with growth in property values continuing to be driven by active asset management initiatives.

Significantly, a lack of available finance for developers, which, in turn, has constrained speculative commercial development will continue limiting new supply and providing a solid base for current rental levels and future growth.

Looking ahead to 2012, for quality property assets we look forward to CPI linked rent increases, continuing low levels of vacancy and steady to positive valuation results.1 S&P/ASX 300 A-REIT Accumulation Index

Global uncertainty, but commercial property foundations in good shape for 2012

02

Australian Unity Property Income Fund - Retail units

Investment performance as at 31 December 2011

Retail Units 6 mth % 1 yr 2 yrs % p.a. 3 yrs % p.a. 5 yrs % p.a. Since inception % p.a.1

Distribution return 2.91 5.40 5.28 5.09 6.20 6.84

Growth return (0.78) (2.04) (2.70) (3.38) (6.15) (3.35)

Total return 2.13 3.36 2.58 1.71 0.05 3.49

Benchmark Total Return 2 0.72 4.75 5.15 2.77 (1.54) 3.65

Returns are calculated after fees and expenses and assume the reinvestment of distributions. Past performance is not a reliable indicator of future performance.1 Inception date for performance calculations is 31 March 2005.2 Composite index comprising: 60% Mercer Direct Property Before Tax to 30/9/09, Mercer/IPD Australian Pooled Property Fund Index thereafter, 35% S&P/ASX 200 A-REIT Accumulation Index, 5% UBSA Bank Bill Index.

How the Fund performed

The Fund performed solidly in the last six months of 2011, considerably outperforming its composite benchmark. This was primarily due to an overweight exposure to unlisted property securities and a corresponding underweight position in listed Australian Real Estate Investment Trusts (A-REITs), which declined over the period.

The Fund’s investment position

As at 31 December 2011, the Fund retained an overweight exposure to the unlisted property sector. This allocation reflects our positive outlook for the sector.

The Fund had an exposure of 22% to highly-liquid cash and listed A-REITs, with the remaining 78% of assets in direct and unlisted property securities.

Listed property activity update

In the last three months of 2011, the Fund increased its exposure to listed A-REITs following receipt of termination proceeds from the Australian Unity Property Syndicate No. 2, and partial redemptions out of other unlisted property funds.

The Fund has been progressively re-positioning its listed A-REIT exposure out of the Australian Unity Property Securities Fund and into the newly established Australian Unity A-REIT Fund. Renaissance Property Securities Pty Ltd is the manager of the listed A-REIT portfolio..

Unlisted property activity update

In October 2011 the Fund made an investment in the Australian Unity Office Property Fund. This investment positively contributed to performance in the last quarter of 2011 through positive valuations within this Fund.

The Fund also recently exited its investment in the Australian Unity Diversified Property Fund and replaced this with an investment in the Australian Unity Retail Property Fund, consistent with its strategy to pursue greater control and certainty in the Fund’s sector allocation.

Direct property activity update

Significant recent leasing results for the Fund’s direct properties include:

7-9 Siddons Way, Hallam, Victoria

In February 2012, the property was successfully leased to PackCentre Marketing Services Pty Ltd for a seven-year term commencing 1 March 2012. The lease agreement provides for a two-year option at the end of the term in 2019.

65 Beverage Drive Tullamarine, Victoria

Kings Transport Pty Ltd has exercised their two-year option term. The new lease commences 1 July 2012.

Salisbury Cinema Complex, SA

The remaining vacant suite was leased to Crazy Caterpillar Pty Ltd for a three-year term, commencing in November 2011. Additionally, another tenant at the property, Relationships Australia Pty Ltd, have exercised their three-year option term. The new lease will expire in May 2015. The property is now 100% leased.

98 Ingleston Road, Wakerley, QLD

In early 2012 the tenant indicated they will vacate the property in mid-March 2012. We have since commenced a leasing marketing campaign.

Property revaluations

Two of the Fund’s directly held properties were independently valued during December 2011:

98 Ingleston Road, Wakerley, QLD

The asset’s value increased by $415,458 on book value primarily as a result of an increase in market rent.

Salisbury Cinema Complex, Salisbury, SA

This asset experienced a fall in value of $250,000. This reflects a reduction in market rent, a lower capitalisation rate of 10% and higher letting up and capital expenditure allowances.

Outlook

In 2012 we will continue to focus on active leasing and tenant management for the Fund’s direct property portfolio. We have observed revaluations being driven by property fundamentals, rather than the macro global nervousness. A good example for the Fund was the August 2011 revaluation for the Allara Street, Canberra property, where a successful lease campaign led to a significant increase.

Further, our view is that the significant declines in the listed A-REIT sector through the second half of 2011 now provide compelling buying opportunities. Declines in this market, we believe, reflect magnified concerns over a general economic slowdown and specific refinancing concerns.

Our view is that the listed property sector’s earnings profile remains relatively solid and we expect attractive distribution yields from the sector. As a result, during 2012, we will look to increase the Fund’s exposure to listed A-REITs.

03

Portfolio details as at 31 December 2011

Fund direct property portfolio

Property Details Tenancy Details Valuation Details 1

Major Tenant(s) All Tenants

Add

ress

Lett

able

Are

a (S

quar

e M

etre

s)

Nam

e

% o

f Pro

pert

y

by a

rea

Num

ber o

f Ten

ants

Occ

upan

cy R

ate

%

(By

lett

able

are

a)

Wei

ghte

d Av

erag

e Le

ase

Expi

ry

(yea

rs) 2

Curr

ent V

alua

tion

($

m)

Valu

atio

n D

ate

Inde

pend

ent V

alue

r

Capi

talis

atio

n Ra

te %

Book

Val

ue ($

m)

40 Allara St, Canberra, ACT 5,829.70 AusAid 52 9 100 4.0 20.00 Aug 11 CBRE 9.00 20.06

98 Ingleston Road, Wakerley, Qld 6,254.00 Consolidated Paper Industries

100 1 100 0.7 7.75 Dec 11 Knight Frank 9.50 7.75

Salisbury Cinema Complex, SA 5,286.00 Hoyts 64 10 100 1.8 6.50 Dec 11 CBRE 10.00 6.62

15 Telford Place, Arundel, Qld 3 2,057.00 Vodafone 100 1 100 3.5 5.55 3 Jun 11 Landmark White 11.00 5.55

11 Dansu Court, Hallam, Vic 4,559.00 Dayco Australia 100 2 100 7.4 5.00 Mar 11 JLL 8.00 5.00

65 Beverage Drive, Tullamarine, Vic 6,250.00 Kings Warehousing 100 1 100 0.5 4.90 Jun 11 JLL 9.00 4.90

7-9 Siddons Way, Hallam, Vic 3,647.00 Vacant 4 0 0 0 0.0 2.80 Mar 11 JLL 8.00 2.90

Total (T) / Weighted average (A) 33,882.70 (T) 24 (T) 89.24 (T) 3.01 (A) 52.50 (T) 9.26 (A) 52.78 (T)

Notes1 Valuation Policy - Regular valuation of underlying property assets is an important aspect of managing the Fund. Valuations are conducted by qualified independent valuers in accordance with industry standards. We have a policy of generally obtaining independent valuations on Fund direct properties each year.

2 Weighted Average Lease Expiry by base rental income.

3 The property was independently assessed in June 2011 on two separate bases; 1) the tenant Vodafone exercises their first 5-year option, which would extend maturity from 2015 to 2020 and results in a valuation of $5.9m, or 2) the tenant Vodaphone does not exercise their first 5-year option, so they vacate in 2015, resulting in a valuation of $4.5m.

4 The property has been leased to ParkCentre Marketing Services P/L for a seven-year term commencing 1 March 2012.

Fund asset allocation 1

Asset class % of portfolio $m

Direct property 39.35 52.78

Unlisted direct property investments 38.12 51.13

Listed A-REIT exposure 20.93 28.08

Cash & cash equivalents 1.60 2.14

Total 100 134.13

1 See how the Fund performed on page 3

Details of the investment strategy for the Fund are contained in the ‘What does the Fund invest in’ section of the PDS. The information below provides details on the current diversification of the Fund.

SA

Vic

Qld

ACT

Retail

O�ce

Industrial

Other

Hoyts

Kings Transport

Vodafone

Consolidated Paper Industries

AusAid

E2016+

D2015

C2014

B2013

A2012

Short term

Vacant

Key direct property portfolio statistics

Geographic Allocation by Value

Property Sector Diversity by Value

Top 5 Tenants by Income

Lease Expiry by Income

ACT 1 asset 38.01%

QLD 2 assets 25.20%

VIC 3 assets 24.25%

SA 1 asset 12.54%

AusAid 21.00%

Consolidated Paper Industries 14.93%

Vodafone 13.66%

Kings Transport 8.36%

Hoyts 8.20%

Other 33.85%

Vacant 3.06%

Short term 5.39%

2012 16.78%

2013 13.69%

2014 11.90%

2015 6.20%

2016+ 42.98%

Industrial 5 assets 49.45%

Office 1 asset 38.01%

Retail 1 asset 12.54%

04

Unlisted property portfolio

Investment Name ($m)

Australian Unity Retail Property Fund 25.24

Australian Unity Office Property Fund 9.29

Australian Unity Office Property Trust 6.77

Orchard Childcare Property Trust 1.90

360 Capital Industrial Property Trust 1.86

MAB Diversified Property Trust 1.74

Australian Unity Industrial Property Trust 1.62

Australian Unity Second Industrial Trust 1.22

CorVal Industry House 1.17

360 Capital Retail Property Trust 0.33

Total 51.13

Listed Australian REIT exposure

Investment name ($m)

Australian Unity Property Securities Fund 26.91

Australian Unity A-REIT Fund 1.17

Total 28.08

Related Party Transactions

Australian Unity Property Limited ABN 58 079 538 499 (AUPL) is the Responsible Entity of the Fund.

AUPL has appointed Australian Unity Property Management Pty Ltd ABN 76 073 590 600 (AUPM) and Australian Unity Funds Management Limited ABN 60 071 497 115 AFSL 234454 (AUFM) (both related parties) to provide some property management services and administrative services to the Fund. Investor approval has not been sought as the appointment have been made on arm’s length commercial terms.

AUPL, AUPM and AUFM are wholly owned subsidiaries of Australian Unity Limited (AUL) ABN 23 087 648 888 and are members of the Australian Unity Group.

Australian Unity Property Management

AUPM is a property management business that may, under a written arrangement, provide some of the following services to the Fund as nominated from time to time. Services may include strategic advice on property acquisitions and sales or arranging the sale or acquisition of property assets; management of premises; debt arranging, debt structure advice, debt facility negotiation and debt management; valuation services; leasing services; and property management and project supervision.

The appointment of AUPM for these services is not exclusive and AUPFML may engage external service providers to undertake these functions.

From 1 July 2011 up to 31 December 2011 asset management and leasing services to the value of $19,170 have been provided by AUPM.

Australian Unity Funds Management

AUFM provides the Fund with registry and accounting services under a written arrangement.

The appointment of AUFM is exclusive but may be terminated by either party by providing three months’ notice without cause or earlier if certain conditions are not met.

Investments

AUL and its subsidiaries (related parties) may invest in the Fund and the Fund may invest in related parties from time to time. Details of related party investments are included in the Fund’s Annual Report.

As at 31 December 2011 related parties of AUPL held interests in the Fund of $99.06 million (74.45%) in the Fund based on net assets.

Other related party service providers

AUPL may appoint other related parties from time to time. Please refer to our website australianunityinvestments.com.au for updates.

Monitoring of related party transaction and conflicts management

Related party transactions carry a risk that they could be assessed and reviewed less rigorously than transactions with other parties.

Australian Unity has policies and guidelines in place to manage the risk of any actual or perceived conflict of interest as a result of a related party transaction. Related party transactions with Australian Unity Group entities are reviewed and approved by senior management with clearly identified governance policies and guidelines. Decisions in relation to conflict of interest and related party transactions are documented.

Updates to related party transactions and further information

As appropriate, we will provide ongoing updates of material service engagements and financial benefits that are paid to related parties through updates to this Fund Update.

The value of related party payments are reported yearly as part of the Fund’s Annual Report. The latest Fund Update and Annual Report can be found on our website australianunityinvestments.com.au. Alternatively we can send you a copy free of charge by calling us on 13 29 39.

Distribution practices

Distributions are paid quarterly and are generally sourced from net income and net realised capital gains only. The distribution policy will be aligned to the ongoing earning capacity of the Fund.

Although it is not our intention to source future distribution payments from sources other than net income and net realised capital gains, we may do so if we consider it to be in the interests of investors (for example if rental income is suddenly reduced unexpectedly) and where payment from that source is expected to be sustainable given the circumstances. We would notify investors if this occurred.

Withdrawal arrangements

Information about the Fund’s withdrawal arrangements is contained in the Fund’s current PDS.

05

Learn more about your investment

IMPORTANT INFORMATIONThis investment product is issued by Australian Unity Property Limited ABN 58 079 538 499, AFS Licence No. 234455. The information in this document is not based on the financial objectives, situations or needs of any particular investor. In deciding whether to acquire, hold or dispose of the product, you should obtain the Product Disclosure Statement (PDS) dated 12 October 2009 and consider whether the product is appropriate for you. A copy of the PDS is available at australianunityinvestments.com.au or calling our Investor Services at 13 29 39. Investment decisions should not be made upon the basis of its past performance or distribution rate, since future returns will vary. The information provided in the document is current as at 5 March 2012.

Visit our website

Log onto australianunityinvestments.com.au for the latest information about your investment, including unit prices, announcements and regular updates on fund activity and performance.

Log onto the secure investor portal

Log onto the investor portal via the australianunityinvestments.com.au website to review your account transaction history, view your statements and update your personal details.

Call us

Contact a member of our Investor Services team on 13 29 39 if you have any questions about your investment.

Register for our Investor Briefings

Australian Unity Investments intends to hold a series of Investor Briefings, giving you the opportunity to hear directly from us about how your investment is being managed to take advantage of market opportunities.

We intend to hold the briefing sessions in key Australian capital cities in March 2012. Locations and timings will depend on the level of registered interest from our investors.

If you are interested in attending an Investor Briefing, please complete our online registration form via australianunityinvestments.com.au/register

We will contact investors who have registered for the Investor Briefings prior to the proposed date to confirm details of the event.

06