Macquarie Leisure Trust Annual Meeting of Unitholders

Chairman’s Address

Agenda

This afternoon I would like to take the opportunity to provide Unitholders with an update of the Trust’s performance and activities over the past year.

Key Objectives

In 1999/2000, Macquarie Leisure achieved three key objectives:

Operating Highlights

There were a number of highlights for the year ending June 2000 these included the following:

• The Trust’s Net Income for the year was $12.5 million, up 17.9% from the prior year.

• The Trust paid Unitholders a distribution of 10.5 cents per unit which was in line with the November 1999 prospectus forecast. The full year distribution was 83.5% tax preferred in the hands of Unitholders. A higher than normal tax-deferred component was made available to Unitholders as a result of the sale of Antarctic Adventure.

• Phase one of the Koala Country re-development at Dreamworld was successfully completed, with the entire project due to be finished on time and on budget. The upgrade of Koala Country is part of our strategy to provide a high quality Australian animal attraction for the international tourist market.

• At d’Albora Marinas, the rent earned for the period to 30 June 2000 was 7.8% above the November 1999 prospectus estimates.

• The Manager achieved progress towards the rezoning of approximately 50 hectares of vacant land to the north of Dreamworld. The proposed rezoning would allow for retail, leisure, entertainment and commercial uses in accordance with the proposed Council plans for the Coomera Town Centre.

The Manager is working in a cooperative process with the Gold Coast City Council and the Queensland State Government. On the current timetable, public exhibition of the new planning scheme will commence by April 2001.

We expect that a successful re-zoning would significantly improve the value of the vacant land.

The year’s result was also affected favourably by the Trust’s access to a two year, $2.5 million rental guarantee provided by the vendor of Antarctic Adventure and Dreamworld. This guarantee was used to top-up rental shortfalls during the year.

Asset Performance

Let me turn now to the performance of the Trust’s major asset, Dreamworld. Revenue improved by 1.7% on the prior year, but did not produce rent in line with the November 1999 prospectus forecasts.

Lower than expected revenue was primarily due to the fact that attendance at Dreamworld did not grow during 1999/2000. Factors contributing to a static market were mainly:

Attendances for 1999/2000 show that the market was soft with both the Queensland and interstate markets down compared with the prior corresponding period. Asian markets were also down compared with the prior year, however, growth in some international markets enabled Dreamworld to finish the year with a modest 5.7% decline in attendance.

In trading to October 2000 the Queensland market has recovered and in overall terms is up 11% on prior year. This positive effect is offset by the fact that the interstate and international markets, which have a higher per capita spend, have been erratic.

Per capita spend grew by 5.9% in 1999/2000, however, this has been eroded in the current financial year. In this regard we believe that the GST has had a real impact on in-park spending on merchandise and food & beverage.

Current market conditions not unique to Dreamworld. If we index the rent paid by the three major Gold Coast theme parks since 1998 when the Trust purchased Dreamworld, the statistics show that Dreamworld has significantly outperformed its peers.

It is also pleasing to note that despite the difficulties of the current trading environment Dreamworld continues to be recognised as a major tourism asset.

In August, Dreamworld won the Major Tourist Attraction category of the Queensland Tourism Awards. This latest award follows successes at both the Meetings Industry of Australia’s national awards and the Brisbane Tourism Awards, where Dreamworld was inducted into Brisbane Tourism’s Hall of Fame.

The d’Albora Marinas traded strongly for the period to June 30, 2000. This was due to increased boating activity around the Millennium celebrations and pre-Olympic activity on Sydney Harbour.

The marinas have traded strongly for each of the past five years and margins have improved over this time. Revenue from the marinas’ 3 main sources of income was significantly higher than for the prior year and in 1999/2000, total revenue increased by 11%.

We anticipate that the four marinas will continue to benefit from limited supply of quality marina berths in their regions. Berth demand since the Olympics has been good and this is expected to continue in 2001.

We are focusing on improving income from speciality tenancies at Nelson Bay. And we are also working on improving the margin on the sale of fuel.

The Trust’s 40% investment in Omni, operator and lessee of the Trust’s assets, earned the Trust a $300,000 dividend in 1999/2000. Omni is expanding its management fee income and investigating other leisure investment opportunities. During the year, Omni purchased the Australian Tour Desk ticketing business.

As at 30 June 2000, the carrying value of the Trust’s investment in Omni was re-assessed with the value of Omni increasing from $4.0 million to $4.6 million.

The Trust will benefit from the growth of this leisure management business.

Gearing

The Trust’s gearing rose from 14% to 20%, as a result of the purchase of the marinas.

Of the Trust’s total borrowings, 33% is hedged to 2001 and 50% to 2006, minimising risk exposure to Unitholders. We will continue to use interest rate derivatives to manage exposure.

Unit Price Performance

Despite the Trust achieving its prospectus forecasts for earnings, the unit price has not recovered to its original issue price, and the stock’s total return has under-performed the Listed Property Trust Index since its listing in 1998. This is, of course, very disappointing.

We are pleased to note, however, that for the 12 months to 30 June, 2000, the Trust outperformed the LPT Index, delivering a total return of 15.4% which is 4.5% above the total return for the Index.

Legislation

Two recent legislative changes have implications for the Trust:

Firstly, to comply with new Managed Investments Act the Trust was registered as a Managed Investment Scheme by ASIC on June 27, 2000. Macquarie Leisure Management Limited is the Responsible Entity of the scheme and Trust Company of Australia the Custodian of the assets.

Secondly, the introduction of the GST has had an impact on some of the speciality tenancy leases at the marinas owned by the Trust, however, this was taken into consideration when pricing the properties. The lease to Omni for Dreamworld is exempt from GST until July 2003. We are working with Omni to attach a GST clause to this lease.

As you would be aware, Unitholders in Macquarie Leisure benefit from a relatively high level of tax advantaged distribution. In 1999/2000 this was 83.5% and in 1998/99 55.6% of the total distribution per unit. This component of the distribution does not have to be declared as income.

Upon sale of your investment, the Tax Deferred component reduces the cost base of your investment for the purposes of Capital Gains Tax, which is calculated when you sell your units.

The recent changes to CGT therefore enhance the benefit of the Tax Deferred distributions you receive.

Acquisitions and Disposals

The $36.3 million purchase of the d'Albora acquisition was completed in January 2000. The Manager believes the d'Albora Marinas group is an excellent acquisition model that can be used in other states to build a portfolio of quality marina assets. The d'Albora brand is well recognised in the boating market and is the only marina group in Australia with international rating recognition.

As previously mentioned, the Trust sold Antarctic Adventure in June 2000 to the Tasmanian Government in exchange for the cancellation of a $1.5 million deferred settlement obligation. The asset was originally purchased by the Trust as part of a package with Dreamworld. The sale resulted in a capital loss in the 1999/2000 year of $0.6 million.

The Trust recently purchased Dreamworld Parkway, which separates the car park from the theme park at Dreamworld. A new road and roundabout were constructed in 1999/2000. When the new Dreamworld Parkway is re-opened in December of this year, Dreamworld will be able to provide improved vehicle access and pedestrian safety for its patrons. The total value of this transaction was $1.9 million.

Macquarie Leisure also acquired an additional leasehold area adjoining the d’Albora Marina at The Spit for $150,000. Omni will operate a pump-out service from this area and redevelop the sea-bed to accommodate 5 additional super-yacht berths.

Outlook for 2001

As Unitholders will recall, Macquarie Leisure took the decision in August, 2000 to announce a change to our assessment of the outlook for 2001 to take account of an unusually irregular market for Dreamworld. The revised estimate for the 2000/01 distribution was 9.5 cents a unit.

The outlook for the current financial year is particularly influenced by the compound effect of several changes in the trading environment. In particular, Dreamworld has been affected by:

• the introduction of the GST and its effect on discretionary spending;

• changes to domestic travel patterns and holiday spending caused by Olympics-related travel and spending;

• increased labor costs as a result of a new Enterprise Bargaining Agreement; and

• the introduction of new attractions in the other major theme parks on the Gold Coast.

The effect of these factors have increased the variability of Dreamworld’s performance.

First quarter results confirm the impact of the GST and Olympics-related travel on attendances and per capita spending at Dreamworld. This impact is also in tune with recent economic forecasts that indicate a slow-down in growth in discretionary expenditure.

For the four months to October 2000, rent payable to the Trust in respect of Dreamworld, is 18.5% below budget. If this shortfall is not re-couped during the remainder of the year, this shortfall would result in a further distribution reduction to 8.5 cents per unit.

School holiday trading in December and January, however, is looking promising with the Gold Coast Tourism Bureau advising that hotel forward bookings are better than normal levels.

We will advise on the outlook for Dreamworld’s full year trading in February 2001 when we know the results for school holiday trading.

Also, we would expect that some positive effects will flow from:

• the opening of the eight-lane Brisbane to Gold Coast Highway;

• the long–term impact of the Olympics on international tourism to Australia; and

• medium-term benefits of the weak Australian dollar which will increase the attractiveness of Australia as a holiday destination to international visitors.

We plan to further enhance the asset’s standing in the industry in December 2001 with the installation and opening of a major new attraction.

Future Strategy

Looking forward, the Manager’s strategy is to:

• firstly, focus on maintaining and enhancing the rental income from Dreamworld;

• secondly, plan and execute delivery of a new major attraction at Dreamworld for December 2001;

• continue to market to institutional and retail investors and brokers to educate and keep them informed about the Trust’s activities; and

• and finally to selectively review potential property acquisitions that:

  • diversify the trust’s income profile;

  • enhance the quality of earnings; and

  • increase the market capitalisation of the Trust.

Questions

This concludes the formal part of my presentation. I would like to now invite Unitholders to raise any questions they might have concerning the annual report or my presentation.

Questions from the floor.

Concluding Comments

In closing, we would like to thank you for your continued support of the Trust and for attending the Annual Meeting today.

David Clarke
Chairman - Macquarie Leisure Management Limited