CHALLENGER LODGES PDS FOR CHALLENGER KENEDIX JAPAN TRUST

19 March 2007, Sydney - Challenger Financial Services Group Limited (ASX:CGF) has today announced the lodgement of a Product Disclosure Statement (PDS) with ASIC for a new listed property trust to be known as Challenger Kenedix Japan Trust (CKT). An application will be made to have CKT listed on ASX.

CKT is seeking to raise approximately \$300 million through the issue of 150 million Units in the Offer. Challenger will subscribe for 5% (or approximately 7.5 million) of available Units. CKT will use the proceeds of the Offer, together with Japanese Yen debt, to invest in an initial portfolio of 12 Japanese urban and suburban retail properties for a purchase price of \$445 million.

Chief Executive Officer, Mr Mike Tilley said: "We believe the Offer provides investors with a unique opportunity to invest in Japanese retail property sourced and managed by Kenedix, a leading Japanese real estate manager with current assets under management of ¥544 billion (\$5.9 billion). Our relationship with Kenedix provides CKT with a truly aligned management structure as well as access to a strong pipeline from which to source future opportunities."

The launch of CKT is consistent with Challenger's Asset Management strategy to establish and co-invest in both listed and wholesale investment vehicles across property, infrastructure and alternative asset classes.

The Offer is underwritten by UBS AG, Australia Branch.

Details of the Offer

Units in CKT will be issued by Challenger Listed Investments Limited, a wholly owned subsidiary of Challenger, as responsible entity of the registered managed investment scheme 'Challenger Kenedix Property Trust'.

The CKT Unit Offer PDS is attached and is also available for download at www.challenger.com.au or by calling the CKT Unit Offer Information Line on 1800 754 866. Investors should consider the PDS in full before deciding whether to invest in CKT Units.

FNDS

Challenger Kenedix Japan Trust Initial Public Offering 19 March 2007

Product Disclosure Statement Dated 19 March 2007

Challenger Kenedix Japan Trust (ARSN 124 068 971)

Responsible Entity Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887)

Financial Adviser and Underwriter UBS AG. Australia Branch (ABN 47 088 129 613)

Important Notice

If you have any questions relating to the Offer please call the Challenger Kenedix Japan Trust Unit Offer Information Line on 1800 754 866 or visit Challenger's website at www.challenger.com.au.

Responsible Entity

Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (CLIL) is the Responsible Entity of the Challenger Kenedix Japan Trust (CKT). CLIL has prepared and issued this Product Disclosure Statement (PDS) and is the entity making the Offer under this PDS.

Product Disclosure Statement

This PDS is dated 19 March 2007 and a copy of this PDS was lodged with the Australian Securities and Investments Commission (ASIC) on that date. ASIC and ASX Limited (ASX) take no responsibility for the contents of this PDS

This is not investment advice. You should seek your own financial advice.

The information provided in this PDS is not investment advice and has been prepared without taking into account your investment objectives, financial circumstances or particular needs. You should read the whole of this PDS and consider all of the risk factors that could affect the performance of CKT and other information concerning the Units in light of your own particular investment objectives, financial circumstances and particular needs (including financial and taxation issues) before deciding whether to invest in CKT

An investment in CKT is subject to investment risk and other risks, including possible loss of income and principal invested. None of the Responsible Entity, Challenger Management Services Limited (ABN 29.092.382.842) AFSL 234678) (the Manager), Challenger Financial Services Group Limited (ABN 85-106-842-371) (Challenger) or any other member of the Challenger Group gives any guarantee or assurance as to the performance of CKT or the repayment of capital, Investments in CKT are not investments, deposits or other liabilities of the Responsible Entity, the Manager, Challenger or any other member of the Challenger Group.

Members of the Challenger Group may invest in, lend or provide other services to CKT and may be paid fees, including expenses in relation to the Offer and fees in relation to the management of CKT or the Manager performing its role. Investors should note the disclosure of Challenger Group's interests set out in Sections 5 and 11.

Some of the risk factors that should be considered by potential investors are set out in Section 4. If you have any questions or are uncertain as to whether CKT is a suitable investment for you, you should seek professional advice from your stockbroker, accountant, financial adviser or other professional adviser before deciding whether to invest in CKT.

No representations other than this PDS

No person is authorised to give any information or to make any representation in connection with the Offer or CKT which is not contained in this PDS. Any information or representation that is not in this PDS may not be relied upon as having been authorised by the Responsible Entity or any associate of the Responsible Entity in connection with the Offer.

Electronic PDS

A copy of this PDS is available online at Challenger's website at www.challenger.com.au.

The electronic version of this PDS is available only to Australian residents who access, download or print the electronic version of the PDS in Australia. Persons who access the electronic version of this PDS should ensure that they download and read the entire PDS.

You must not pass the Application Form on to another person unless it is attached to a hard copy of this PDS or the complete and unaltered electronic version of this PDS.

Exposure Period

The Corporations Act prohibits the issue of Units in the seven day period after the date that this PDS is lodged with ASIC (although it may be extended by up to a further seven days (up to a total of 14 days) by ASIC). This period is the Exposure Period. The purpose of the Exposure Period is to enable this PDS to be examined by potential investors prior to the opening of the Offer. Any Application received during the Exposure Period will not be processed until the expiry of the Exposure Period. No preference will be conferred on any Applications received during the Exposure Period. This PDS will be made generally available to persons in Australia during the Exposure Period at Challenger's website at www.challenger.com.au.

PDS availability

You can obtain a printed copy of this PDS free of charge at any time until the Offer closes by calling the Challenger Kenedix Japan Trust Unit Offer Information Line on 1800 754 866.

Offering restrictions apply

No action has been taken to register or qualify the Units or otherwise to permit a public offering of the Units in any jurisdiction outside of Australia.

This PDS does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. The distribution of this PDS in jurisdictions outside Australia may be restricted by law. Persons who come into possession of this PDS who are not in Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law.

In particular, the Units have not been and will not be registered under the US Securities Act of 1933, as amended, (the 'US Securities Act') or the laws of any State of the United States and may not be offered or sold within the United States or to, or for the account or benefit of a US Person (as defined in Regulation S of the US Securities Act) except in a transaction exempt from the registration requirements of the US Securities Act or applicable US State securities laws.

This PDS has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this PDS and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Units may not be circulated or distributed, nor may the Units be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in-Singapore other than (i) to an institutional investor under section 282Y of the Securities and Futures Act, Chapter 289 of Singapore (the 'SFA'); (ii) to a relevant person, or any person pursuant to section 282Z(2), and in accordance with the conditions, specified in section 2822 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the Units are subscribed or purchased under section 282Z by a relevant person which is (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the Units under section 282Z except (1) to an institutional investor or to a relevant person, or to any person pursuant to an offer that is made on terms that such rights or interest are acquired at a consideration of not less than \$\$200,000. (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets; (2) where no consideration is given for the transfer; or (3) by operation of law.

Future performance

Except as required by law, and then only to the extent so required, neither the Responsible Entity, the Manager nor any other person warrants the future performance of CKT or any return on any investment made. pursuant to this PDS.

Financial amounts and times

All financial amounts contained in this PDS are expressed in Australian currency unless otherwise stated. Throughout this PDS the assumed exchange rate between Yen and Australian dollars is ¥92.1 to \$1.00, unless otherwise stated. Some amounts in this document have been rounded and as a result some totals may not add up exactly. A reference to time in this PDS is a reference to Sydney, Australia time.

Updating the PDS

Information contained in this PDS is subject to change from time to time and may be updated by the Responsible Entity.

Anv updated information (which is not materially adverse to investors) will be available from www.challenger.com.au. A paper copy of the updated information is available without charge by contacting the Responsible Entity or the Challenger Kenedix Japan Trust Unit Offer Information Line on 1800 754 866.

Where updated information is materially adverse to investors, the Responsible Entity will issue a supplementary PDS.

Dear investor

It is my pleasure to invite you to subscribe for Units in the initial public offering of Challenger Kenedix Japan Trust (CKT), CKT, a property trust to be listed on ASX, will invest in Japanese real estate through the investment structure described in this PDS.

CKT is in the unique position of investing in a portfolio of assets managed by Kenedix, a leading Japanese real estate fund manager. Kenedix, which is listed on the Tokyo Stock Exchange, had assets under management of over ¥544 billion (\$5.9 billion) and a market capitalisation of over ¥150 billion (\$1.6 billion) at 31 December 2006. Kenedix has a track record of generating attractive returns for investors through active asset management and value-adding acquisitions and developments. The structure of CKT's investment in Japan promotes the interests of Unitholders and strongly aligns the interests of Challenger and Kenedix.

CKT will acquire a 97% economic interest in a portfolio of 12 quality retail properties (the 'Properties') located in major population centres in Japan for ¥41 billion (\$445 million), a 3.8% discount to independent valuation. One of these Properties is proposed to be acquired in June 2007.

These properties are 100% occupied, with stable cash flows underpinned by leases with long specified terms and regular market rent reviews. The average age of the buildings in the portfolio is only 6.7 years.

Challenger and Kenedix believe that the Properties are positioned to perform well in a recovering Japanese retail market. They are well located and convenient to residential areas and transportation infrastructure. The portfolio is also diversified across a range of retailer types, tenants and Japanese cities and regions.

Kenedix will aim to enhance returns to Unitholders through active management of the Properties and expansion by acquisition and development of further retail assets. If the appropriate opportunity arises, CKT may invest in other property sectors which meet its investment criteria

Units are being offered on a partly paid basis, with \$1.50 per Unit payable on Application and a further \$0.50 per Unit payable on 4 February 2008.

CKT is seeking to initially raise \$225 million through its initial public offering, which will be combined with Yen denominated borrowings to acquire a 97% economic interest in the Properties. Payment of the Second Instalment will raise an additional \$75 million. CKT is forecast to distribute 11.64 cents per Unit for the first full financial year of operation ending 30 June 2008. resulting in a Distribution Yield of 7.76%, assuming the Second Instalment is not called and paid. For the year to 30 June 2009, CKT is forecast to distribute 12.19 cents per Unit, or a Distribution Yield of 8.12%, assuming that the Second Instalment is not called and paid. This represents growth from 2008 to 2009 of 4.7%. These distributions comprise both income and capital components. On listing, CKT will have a NTA of \$1.43 per Unit, growing to \$1.46 per Unit after the acquisition of the additional Property in June 2007.

Kenedix is currently either undertaking due diligence on, or negotiating to acquire, a number of additional retail properties which may be appropriate for investment by CKT. If the Responsible Entity is satisfied that the quality of those properties is comparable to the Properties and that investment in those properties is accretive to Unitholder distributions, the proceeds of the Second Instalment will be used to fund the investment in those properties. If the Responsible Entity is unable to secure investments in any additional properties which meet these criteria it will not call for payment of the Second Instalment and Unitholders will not be required to pay the Second Instalment.

The Responsible Entity of CKT is Challenger Listed Investments Limited (CLIL). CLIL is a Challenger subsidiary with a majority of independent directors. Challenger Management Services Limited will carry out the day-to-day funds management of CKT in Australia and Kenedix will carry out asset management and property management services in Japan.

Challenger Life will subscribe for 5% of the Units available in the Offer and expects to maintain a similar level of investment in CKT over the medium term.

This PDS contains important information regarding the Offer. I urge you to read it carefully and in its entirety, including Section 4 which sets out the key risks associated with an investment in CKT, Section 10 which sets out the financial information and underlying assumptions and sensitivities and Section 5 which sets out fees and other costs. If you have any questions you should consult your stockbroker, accountant, financial adviser or other licensed professional adviser before making an investment decision.

ty blad

Stephen Gerlach Independent Chairman Challenger Listed Investments Limited

International American International

Key details of the Offer

The Offer and use of proceeds

This PDS relates to the offer of Units in Challenger Kenedix Japan Trust (CKT).

CKT is proposed to be listed on ASX. The Offer is for 150 million Units in CKT to raise approximately \$300 million on a fully paid basis. The Units are being offered as partly paid Units. The First Instalment of \$1.50 per Unit payable on Application and the Second Instalment of \$0.50 per Unit payable on 4 February 2008, making a fully paid Issue Price of \$2.00 per Unit. If you do not pay the Second Instalment, your Units may be forfeited and sold on your behalf and you may be liable for the unpaid amount, interest and other costs.

The funds raised on allotment of the Units will be used, together with Yen denominated borrowings, to fund the acquisition of a portfolio of retail properties in Japan and to pay for costs of the Offer.

The Second Instalment will be used to fund the acquisition of additional retail properties in Japan. If the Responsible Entity is unable to secure investments in any additional properties which meet CKT's investment criteria it will not call for payment of the Second Instalment and Unitholders will not be required to pay the Second Instalment.

Summary of Financial Forecasts

	Forecast for period to 30 June 2007 ^1,2	Forecast year endina 30 June 2008	Forecast year ending 30 June 2009)
Cash distribution per Unit ³	1.42 cents	11.64 cents	12.19 cents
Cash Distribution Yield per Unit	5.17%	7.76%	8.12%
Foreign tax credit per Unit ⁴	Nii	$1.33$ cents	1.40 cents
Cash distribution per Unit plus foreign tax credit	1.42 cents	12.97 cents	13.59 cents
Cash Distribution Yield per Unit including foreign tax credit	5.17% ²	8.64%	9.06%
Pro forma net tangible asset backing per Unit at Allotment ^s	\$1.43

These forecasts have been prepared by the Responsible Entity on the basis of the accounting policies and forecast assumptions set out in Section
10, and are subject to the risk factors in Section 4. The forecast distributi include future acquisitions because there is no reasonable basis for assumptions in respect of such acquisitions. Therefore the forecasts also assume the Second Instalment is not called. It is not certain that the forecast results will be achieved. The Investigating Accountant's report on the forecasts is contained in Appendix B

The first distribution paid will be for the period from Allotment Date to 30 June 2007 and the Distribution Yield is annualised for this period. Forecast distributions comprise both income and capital components and are before the impact of Performance Fees (if any). It is anticipated
that the distributions comprise both income and capital components and are before

Withholding tax paid in Japan for the period may be credited against a Unitholder's Australian income tax payable on certain types of foreign
sourced income (including distributions of such income from CKT). Unitholders sh personal tax position that must be met in order to claim a foreign tax credit. Refer to Appendix C for an analysis of the taxation implications arising from this component of the forecast distribution

Based on the Pro Forma Consolidated Balance Sheet of CKT as at Allotment. Refer to Section 10.1.

Important dates¹

Date of PDS 19 March 2007
Broker Firm Offer opens. April 2007
Broker Firm Offer closes $20$ April $2007$
Expected Allotment Date 24 April 2007
Expected commencement of trading of Units on ASX 30 April 2007
Sacond Instalmant Paumant Data. л Естнаті 2008

These dates are indicative only and may change. The Responsible Entity has the right, in consultation with the Financial Adviser and Underwriter, to amend this indicative timetable without notice including, subject to the soon as possible after the Offer opens.

Subject to ASX granting listing.

2 Challenger Kerkedix Japan Truss Iniitial Public Offering

Structure of the Offer

The Offer to Australian investors is a Broker Firm Offer to Australian resident retail investors who receive a firm allocation of Units from their broker (Broker Firm Applicants) and an Institutional Offer to certain Institutional Investors in Australia and in certain overseas jurisdictions (Institutional Investors).

The minimum application is 2,500 Units, which is \$5,000 of Units on a fully paid basis, and thereafter in multiples of 100 Units.

All Units offered for issue under this PDS are issued subject to the disclosure in this PDS and will rank equally with each other.

How to apply for Units

Broker Firm Applicants

Broker Firm Applicants should apply for Units and submit their payment in full for such Units in accordance with the instructions received from their broker.

If you elect to participate in the Broker Firm Offer, your broker will act as your agent in submitting your Application Form and Application Monies. It will be your broker's responsibility to ensure that your Application Form and Application Monies are submitted before 5.00pm (Sydney time) on the Offer Closing Date.

None of the Responsible Entity, Manager or the Financial Adviser and Underwriter accept responsibility for any acts or omissions of any broker in connection with Applications, Application Forms or Application Monies of Broker Firm Applicants.

Broker Firm Applicants validly participating through the Broker Firm Offer will be allocated the full number of Units they apply for up to the amount of the firm allocation notified to them by their broker. It is a matter for brokers (not the Responsible Entity or Manager, nor the Financial Adviser and Underwriter) as to how each broker allocates Units among its clients in the Broker Firm Offer. It is the sole responsibility of the broker to ensure that its clients with a firm allocation receive the relevant Units.

Broker Firm Fee

A fee of up to 1.5% of the Application Monies will be paid out of CKT's assets in respect of Units allotted pursuant to the Broker Firm Offer. These fees will only be paid to market participants of ASX and members of the Financial Planning Association.

There is a \$3,000 cap on Broker Firm Fees for any one Application, or aggregate of Applications, if a single investor submits more than one Application.

Institutional Investors

The offer to Institutional Investors will be managed by the Financial Adviser and Underwriter. Institutional Investors must apply in accordance with the instructions received from the Financial Adviser and Underwriter. For details of foreign offering restrictions see the Important Notice on the inside front cover of this PDS.

All Applications

The Responsible Entity reserves the right to decline any Application in whole or in part, without giving any reason. Application Monies received in respect of Applications that are declined in whole or in part will be refunded (without interest) in whole or in part (as the case may be). Refunds for unsuccessful Applications will be posted on the same day that holding statements are posted to successful Applicants, Interest will not be paid on any Application Monies refunded to Applicants. Any interest earned on Application Monies will be retained by the Responsible Entity. The Responsible Entity reserves the right to waive or correct any errors made in completing an Application Form.

. . . . . . . . . . . . . . . . . . .

ASX listing

Application to ASX for the admission of CKT to the official list of ASX and for official quotation of the Units will be made as soon as practicable following the date of issue of this PDS, and in any event within seven days after the date of issue of this PDS. If CKT is admitted to the official list of ASX, quotation of the Units will commence as soon as practicable following the issue of holding statements.

Key details of the Offer

If ASX does not agree to quote the Units, no Units will be issued and all Application Monies received under this PDS will be returned to Applicants. Interest will not be paid on any Application Monies refunded. Any interest earned on the Application Monies will be retained by the Responsible Entity.

Following the allocation of Units to successful Applicants, Unitholders will be sent an initial statement of holding that sets out the number of Units that have been allocated and the Unitholders' Holder Identification Number (HIN), or, in the case of issuersponsored holders, the Securityholder Reference Number (SRN).

It is the responsibility of Applicants to confirm their holding before trading in Units. Applicants who sell Units before they receive their holding statement do so at their own risk. The Responsible Entity and the Financial Adviser and Underwriter disclaim all liability, whether in tort (including negligence), statute or otherwise, to persons who trade Units before receiving their holding statement, whether on the basis of the confirmation of allocation provided by the Registry or otherwise.

Risks

Section 4 sets out the key risks to achieving the forecast distribution and, more generally, the risks associated with an investment in Units.

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Overview of Challenger challenger

Listed on ASX, Challenger is an established player in Australian financial services. It is dedicated to providing smarter solutions to financial intermediaries and their clients, offering a broad spectrum of financial products and services.

Challenger's asset management division, which had assets under management of \$4.4 billion as at 31 December 2006, has particularly strong expertise in property and infrastructure and continues to develop specialist funds for institutional and retail investors. It is also an investor in its own right, raising capital through retail and wholesale annuities and other sources to invest in assets which are undervalued for risk or have value-add potential.

Through its annuity products. Challenger has built a strong reputation in the retirement market. Today, Challenger is the second largest provider of annuities in Australia. This reputation also extends to the other investment products and wealth management services that it offers.

Challenger is one of Australia's largest non-bank mortgage lenders, funding commercial loans as well as a range of residential mortgage products offered by a network of preferred lenders under their own brands. At 31 December 2006, Challenger had a mortgage book of \$21 6 billion

Challenger, which had total funds under management of over \$15.5 billion as at 31 December 2006, is highly regarded as a quality investment manager in its own right, and also acts as a gateway to other expert investment managers. This means that Challenger can offer a range of funds to help meet investment needs, across not only a variety of asset classes, but also across different investment styles.

Challenger's commitment to quality ensures clients get outstanding access to top level solutions, an ethos that is also carried into our range of financial planning services.

Challenger is always striving to challenge the status quo and deliver a smarter way forward. Challenger will provide funds management, finance, capital transactions, compliance, secretariat and investor relations skills and expertise to CKT.

Overview of Kenedix

Kenedix, Inc. is a leading provider of real estate advisory, property management and asset management services in Japan. Kenedix had assets under management of over ¥544 billion (\$5.9 billion) and an equity market capitalisation of over ¥150 billion (\$1.6 billion) as at 31 December 2006. Kenedix has a strong track record of acquiring and managing retail, office, residential and logistics facilities, being one of the first Japanese public companies to focus on real estate funds management since listing in 2002. Kenedix has a proven track record of generating strong returns for investors in associated J-REITs, pension funds and private funds through active asset management and by focusing on acquisitions that add value and increase fund investor returns. Kenedix also has extensive development experience across a range of property asset classes, including a number of the Properties.

Kenedix has an acquisition team of 11 people supported by a stringent investment committee process providing corporate governance and ensuring thorough due diligence. Part of Kenedix's strength has been the network of relationships built up within the real estate sector. These relationships have helped ensure Kenedix has access to acquisition opportunities (many of them off market) and development opportunities in conjunction with committed tenants.

Kenedix will provide property management, asset management, acquisition, debt management, development management and property reporting services.

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Key benefits

Management structure aligns interests

. Unitholders will benefit from Challenger's and Kenedix's fund management and asset management skills in Australia and Japan, respectively
CKT's aligned structure ensures it is in Challenger's and Kenedix's best interests for Kenedix to enhance Unitholder returns by improving the performance of the Properties and making further value-adding acquisitions
. Challenger Life will subscribe for 5% of the Units available under the Offer

Leading and experienced Japanese asset manager

* Kenedix is a leading provider of real estate advisory, property management and asset management services in Japan, with a track record of generating attractive returns for investors through active asset management and value-adding acquisitions
Kenedix is listed on the Tokyo Stock Exchange and had assets under management of over ¥544 billion (\$5.9 billion) and market capitalisation of over ¥150 billion (\$1.6 billion) at 31 December 2006

Experienced management in Australia

. The senior management of the Manager provide significant depth of expertise in the listed property trust market, real estate markets and real estate investment management

Attractive Distribution Yield

. CKT has a forecast Distribution Yield of 7.76% for the year ending 30 June 2008, growing to 8.12% for the year ending 30 June 2009 (based on the assumptions set out in Section 10 and assuming the Second Instalment is not called and paid). The forecast distributions comprise both income and capital components

Growth opportunities

* Active asset management of the Properties may generate organic growth
. Opportunities to expand the floor area of some Properties where town planning regulations permit
. Kenedix's strong relationships with corporate vendors of retail property
. Opportunities in other Japanese property sectors

Improving Japanese economy and real estate sector

· Japan's real estate sector investment fundamentals are improving, reflecting the improving economic conditions

Discount to valuation

· Each Property is being acquired at a Purchase Price which is at or below the independent valuation and the portfolio is being acquired at a 3.8% discount to independent valuation

Attractive property portfolio characteristics

. The Properties are 100% occupied, with stable cash flows underpinned by long-term leases (weighted average specified lease term 16.9 years¹) most with regular market rent reviews. The average age of the portfolio is only 6.7 years
. The Properties are well located and convenient to residential areas and transportation infrastructure

Asset and tenant diversification

. The portfolio is also diversified across a range of retailer types, tenants and Japanese cities and regions
. The Properties have 12 tenants with the largest tenant accounting for 20.2% of the NPI
. An average of nine months' rent is held as a security deposit
Assumes tenants do not terminate leases prior to expiry of specified lease term. Most leases may be cancelled at the tenant's option prior to the end of their specified term. Further detail is contained in Sections 3, 4.1 and 6.5.

Key risks

Use of debt

. The use of debt creates an opportunity for increased Unitholder returns, but at the same time involves a higher degree of financial risk due to increased exposure to rising interest rates and downturns in the economy, than if no debt were used

Concentration of revenue

. 100% of the anticipated rent on completion of the Offer and the acquisition of the Properties will be received from 12 tenants. Therefore, if one of these tenants defaults, or ceases to be a tenant, the performance of CKT may be adversely affected

Investing in property under Japanese law

. There are specific risks related to investing in property under Japanese law, including the possibility of acquiring invalid or encumbered title and protections afforded to tenants under Standard Leases (such as the ability to seek rent reductions based on market conditions)

Replacement of the Japan Managers

. The Master TK Operator or the Sub TK Operator may be required to appoint a replacement manager for the Properties, as well as, in some instances, pay amounts to the Japan Managers in connection with the termination of the Japan Asset Management, Japan Investment Management and Japan Property Management Agreements

Acquisition of Properties

. If any of the conditions of acquisition of any Property are not satisfied, one or more Properties may not be acquired which would impact returns to Unitholders. The Properties are being acquired from special purpose vehicles owned or controlled by Kenedix and such vehicles may not have the means to cover any losses that they may be liable for in respect of the acquisitions

Foreign exchange risk

• CKT is exposed to fluctuations in the value of the Australian dollar against the Yen to the extent that CKT has not entered into hedging arrangements to reduce its exposure to currency fluctuations

Earthquake risk

. All the Properties are located in Japan, a country with relatively high risk of magnitude and frequency of earthquakes. The Properties are not covered by earthquake insurance

Disincentives to change of Responsible Entity

. Unitholders' returns may be adversely affected if the responsible entity is not a related body corporate of Challenger as additional performance fees may become payable
. In addition, the Management Agreement will continue notwithstanding that there is a change of control of CKT

Investment opportunities and strategy

. There is a risk that CKT will be unable to acquire future investments on appropriate terms, thereby potentially limiting the growth of CKT

Other risks

. Other risks are set out in Section 4. Before investing in CKT, investors should consider these risk factors carefully and read this PDS in its entirety. Before making a decision to invest in CKT, you should consult your stockbroker, accountant, financial adviser or other professional adviser

1. Challenger Kenedix Japan Trust answers to key questions

Outlined below are answers to key questions regarding the Offer. For detailed information refer to the Sections listed on the right.

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Topic	Summary	information - Section(s)
What is the Offer?	. This PDS invites Applications for Units in CKT. CKT, which is proposed to be listed on ASX, will initially acquire economic interests in a portfolio of 12 retail properties located in major population centres in Japan (Properties)	2.2, 9
	• CKT will hold its investment through a series of TK arrangements
What type of assets is CKT investing in?	. The Properties are neighbourhood shopping centres located in urban and suburban areas	2.4
	• Kenedix is seeking and will consider investments in other property sectors, subject to CKT's investment criteria
What are the key terms of the Offer?	• The fully paid Issue Price is \$2.00 per Unit payable in two instalments: • the First Instalment of \$1.50 per Unit is payable on Application • the Second Instalment of \$0.50 is payable on 4 February 2008 If you do not pay the Second Instalment, your Units may be forfeited and sold on your behalf and you may be liable for up to the unpaid amount, interest and other costs • The Offer is for \$300 million on a fully paid basis Minimum application amount of \$5,000 on a fully paid basis • Broker Firm Offer opens on 2 April 2007 ⁺ Broker Firm Offer closes at 5.00pm (Sydney time) on 20 April 2007. . Units are expected to commence trading on ASX by 30 April 20071	2.2
Who can invest?	• The Offer is only open to persons resident in Australia who receive a Broker Firm Offer from their broker and to Institutional Investors • The PDS is not registered under the securities laws of any foreign jurisdiction and
Is the Offer underwritten?	foreign offering restrictions apply • The Offer and the payment of the Second Instalment is underwritten by the Financial Adviser and Underwriter. The underwriting is subject to certain termination events	2.2, 11.1.11
What is the allocation policy of the Issuer?	Broker Firm Applicants validly participating through the Broker Firm Offer will be $\bullet$ allocated the full number of Units applied for up to the amount of the firm allocation notified by their broker. It is a matter for brokers (not the Responsible Entity or Manager, nor the Financial Adviser and Underwriter) as to how each broker allocates Units among its clients in the Broker Firm Offer. It is the sole responsibility of the broker to ensure that its clients with a firm allocation receive the relevant Units.
Who are the Responsible Entity and the Manager and what are the relationships with the Challenger Group?	Responsible Entity: CLIL is Responsible Entity of CKT, and will receive fees for $\bullet$ acting in that capacity. It is a wholly-owned subsidiary of Challenger • Manager: CMSL has been appointed Manager by the Responsible Entity to manage CKT, and will receive fees for acting in that capacity. It is a wholly-owned subsidiary of Challenger • Challenger Group: Other entities in the Challenger Group may hold units in, or provide services to, CKT. Challenger Life will subscribe for 7.5 million Units under the Offer, resulting in Challenger Life initially holding 5% of the Units	2.1, 8.1

These dates are indicative only and may change. The Responsible Entity has the right, in consultation with the Financial Adviser and Underwriter, to amend these dates without notice including, subject to the Corporations Act and ASX Listing Rules, to close the Offer early; to extend the Offer Closing Date; to accept late Applications; either generally, or in particular cases; or, to withdraw the Offer at any time prior to the Allotment Date. If any of these dates are changed, subsequent dates may also be changed. You are encouraged to submit your Application as soon as possible after the Offer opens.

Topic	Summary	More information - Section(s)
How are the Properties managed?	Kenedix and certain of its wholly-owned subsidiaries have been engaged to provide investment advisory, asset management and property management services in respect of the Properties	8.1, 8.2 11.1.6 11.1.7 11.1.8
What is the relationship between Challenger and Kenedix?	A wholly-owned subsidiary of Challenger and Kenedix have formed a Japanese company (Japan HeadCo) (a kabushiki kaisha or Japanese limited liability company) owned 51% by a Challenger subsidiary and 49% by Kenedix (Japan HeadCo)	8, 9
	• Japan HeadCo will be the sole managing member of the Master TK Operator which will have a 3% economic interest in the Properties
What is the NTA per Unit? $\cdot$	Following completion of the Offer, the NTA per Unit is expected to be \$1.43 allowing for Offer costs. After the acquisition of Carino Chitosedai (expected in June 2007), the NTA will rise to \$1.46 per Unit. This compares with the First Instalment of \$1.50 per Unit	10
What is the purpose of the Second Instalment?	. The Second Instalment will be used to fund the acquisition of further retail properties which Kenedix is undertaking due diligence on, as well as additional properties Kenedix expects to be able to source before 4 February 2008 when the Second Instalment is due. The Responsible Entity will only call the Second Instalment if it is satisfied the quality of the assets is comparable to the Properties and if the acquisition of such assets is accretive to Unitholder distributions	2.3
	Kenedix currently has approximately ¥13.6 billion (\$148 million) of retail assets ٠ under due diligence and expects to source a total portfolio of approximately ¥13.7 billion before the Second Instalment is due
What is the forecast distribution?	Forecast Distribution Yield of 7.76% per Unit for financial year ending 30 June 2008 and a forecast Distribution Yield of 8.12% per Unit for the financial year ending 30 June 2009 (based on the assumptions set out in Section 10 and assuming that the Second Instalment is not called and paid). The forecast annualised Distribution Yield for the period from Allotment Date to 30 June 2007. is 5.17% (based on the assumptions set out in Section 10 and assuming that the Second Instalment is not called and paid). The forecast distributions comprise income and capital components (see Section 10.3) and may include a Tax Deferred Component	10
What is CKT's distribution policy?	• The Responsible Entity intends to make distributions on a half yearly basis	2.12
	• The first distribution will relate to the period ending 30 June 2007 and is expected to be paid in August 2007
	• Thereafter, distributions are expected to be paid in February and August for the six month periods ending 31 December and 30 June each year
What is the forecast Tax Deferred Component?	It is forecast that approximately 50%, 25% and 25% of the distributions for the periods to June 2007, June 2008 and June 2009, respectively, will be tax deferred primarily due to establishment costs and depreciation allowances	10
Will CKT have foreign exchange arrangements?	The Responsible Entity has entered into foreign exchange hedges for 100% of ٠ estimated distributions for the first five years and 90% of estimated distributions for years six and seven. Going forward it is the Responsible Entity's policy to maintain ongoing rolling foreign exchange hedges such that 80-100% of distributions are hedged for five years and up to 90% for years six to ten	2.14
	• The Responsible Entity has also entered into cross currency Australian dollar/Yen swaps for 40% of the initial equity capital invested in Japan. The Responsible Entity intends to implement a programme of ongoing capital hedges such that up to 50% of CKT's equity capital will be hedged against currency fluctuations

Topic	Summary	More information - Section(s)
What are the significant Australian tax implications of investing in CKT?	• Unitholders will be subject to Australian tax on their share of the taxable income of CKT. This may be different to the cash distribution received from CKT. For example, distributions from CKT could include a Tax Deferred Component	10.4, 10.5
	• Forecast foreign tax credits may be credited against a Unitholder's Australian income tax payable on certain types of foreign sourced income (including distributions of such income from CKT). Unitholders should be aware that there are requirements related to their personal tax position that must be met in order to claim a foreign tax credit
	• For further information see the Taxation Letter in Appendix C
	. Investors should consider seeking their own tax advice prior to investing in CKT
From whom are the Properties being acquired?	• The Properties are being acquired from entities owned or controlled by Kenedix. Each Property is being acquired at a Purchase Price which is at or below the independent valuation and the portfolio of Properties is being acquired at a 3.8% discount to the independent valuation	11.1.9
How will CKT hold its investments?	• CKT will hold its interest in the Properties indirectly through a series of TK arrangements	9
	• CKT will make a TK investment into the business of the Master TK Operator under a Master TK Agreement, which is a contractual relationship between CKT and the Master TK Operator recognised under the Commercial Code of Japan. This agreement entitles CKT to a proportionate share of the profits and losses of the TK Business but with no right to make any business decisions with respect to the business of the Master TK Operator
	• The Master TK Operator in turn will make a TK investment into the business of the Sub TK Operator under a Sub TK Agreement, which is also a contractual relationship recognised under the Commercial Code of Japan
	. Interests in the Properties will be held by the Sub TK Operator in the form of Trust Beneficiary Interests
	• Neither CKT, the Responsible Entity nor the Manager will be involved in the management of the Properties
What are the debt arrangements in relation to CKT?	• The Sub TK Operator will borrow money to assist in the purchase of the Properties The debt of the Sub TK Operator will be denominated in Yen -- following the ۰ acquisition of Carino Chitosedai 90% of the initial debt of the Sub TK Operator will be hedged at a fixed interest rate with a term to maturity of five years	2.13, 4.1, 10.4, 10.5, 11.1.13
	• The long-term effective Debt to Total Assets Ratio will be between 50% and 60%
	· Financing may be obtained, on a temporary basis, which may result in the Debt to Total Assets Ratio being in excess of 60% in order to facilitate the settlement of property acquisitions
	• The pro forma effective Debt to Total Assets Ratio at listing will be 37.2%, increasing to 50.1% once Carino Chitosedai is acquired (expected in June 2007). Post consumption tax refund (expected in September 2007), the effective Debt to Total Assets Ratio would be 49.2%
What are the fees and costs payable by CKT, Master TK Operator or	. There are both one-off and ongoing fees which will be paid to the Responsible Entity and the Manager from CKT and to Kenedix and its affiliates from either the Master TK Operator or Sub TK Operator	5
Sub TK Operator?	• The Responsible Entity or the Manager may also be reimbursed from CKT assets for out of pocket costs incurred in the proper performance of their duties

Topic	Summary	information - Section(s)
Does the Responsible Entity take into account labour standards, or environmental, social or ethical considerations when selecting, retaining or realising investments?	In view of the nature of property investment and the investment by CKT, the ۰ Responsible Entity will not take account of labour standards, or environmental, social or ethical considerations when selecting, retaining or realising investments
What is the dispute resolution procedure to deal with complaints?	The Responsible Entity provides a complaints handling and dispute resolution process in accordance with the Constitution
Is there a cooling-off period?	No, there is no cooling-off right in relation to the Offer. This means that, in most circumstances, you cannot withdraw your Application once it has been made
How can further information be obtained?	By speaking to your stockbroker, accountant, financial adviser or other professional ٠ adviser By calling the Challenger Kenedix Japan Trust Unit Offer Information Line on ٠
	1800 754 866, or visiting Challenger's website at www.challenger.com.au
	The Challenger Kenedix Japan Trust Unit Offer Information Line will be open ٠ from 8.30am until 5.30pm (Sydney time), Monday to Friday from the date this PDS is lodged with ASIC until the Offer Closing Date
Where do I get an Application Form?	An Application Form accompanies this PDS ٠

2. Offer summary

This overview is a summary only and should be read in conjunction with the remainder of the information in this PDS.

2.1 Issuer details

This PDS is issued by the Responsible Entity, CLIL, a wholly-owned subsidiary of Challenger. The Responsible Entity has engaged CMSL (Manager) to assist with the management of CKT.

Further information about the Responsible Entity and the Manager is in Section 8.

2.2 The Offer

The Offer is for 150 million Units to raise approximately \$300 million on a fully paid basis. The Units are being offered as partly paid Units. The First Instalment is \$1.50 per Unit payable on Application, with the Second Instalment of \$0.50 per Unit payable on 4 February 2008, making a fully paid Issue Price of \$2.00 per Unit. If you do not pay the Second Instalment, your Units may be forfeited and sold on your behalf and you may be liable for the unpaid amount, interest and other costs. Challenger Life has undertaken to subscribe for 7.5 million Units.

The Financial Adviser and Underwriter has underwritten the subscription of the Units under the Offer and the payment of the Second Instalment. The circumstances under which the Financial Adviser and Underwriter may terminate its obligations under the Underwriting Agreement are set out in Section 11.1.11. In the event that the Underwriting Agreement is terminated, the Issue of Units will not proceed and Application Monies will be refunded without interest.

The directors of the Responsible Entity, employees of the Challenger Group and other entities within the Challenger Group will have the opportunity to subscribe for Units in the Offer. Units issued to them will rank equally with all other Units on issue.

2.3 Use of proceeds

Following settlement of the Offer, the Responsible Entity will use the funds received to make a TK investment into the Master TK Operator. The Master TK Operator will, in turn, use the funds received to make a TK investment into the Sub TK Operator which will use the funds, together with debt raised by the Sub-TK Operator, to acquire an interest in a ¥41 billion (\$445 million) portfolio of Japanese retail properties from Kenedix. Funds

raised will also be used to pay the acquisition costs and the costs of the Offer.

The Second Instalment will be used to fund the acquisition of further retail properties which Kenedix is undertaking due diligence on, as well as additional properties Kenedix expects to be able to source before 4 February 2008 when the Second Instalment is due. The Responsible Entity will only call the Second Instalment if it is satisfied the quality of the assets is comparable to the Properties and if investment in such assets is accretive to Unitholder distributions.

Kenedix currently has ¥13.6 billion (\$148 million) of retail assets under due diligence and expects to source a total portfolio of ¥13.7 billion before the Second Instalment is due.

2.4 The Properties

The Properties comprise a portfolio of 12 properties with the following characteristics:

· neighbourhood shopping centres located in urban and suburban areas:
concentration of newer assets with Standard Leases with long specified terms (see Section 6.5 for further details of Japanese lease types);
located predominantly in major population centres such as Tokyo, Nagoya, Osaka and Fukuoka; and
convenient to residential areas and transportation infrastructure.

Carino Chitosedaì is currently under development and is expected to be acquired in June 2007. If this asset is unable to be acquired, the Sub TK Operator will seek to acquire other debt funded assets such that the Financial Forecasts of CKT are not materially negatively impacted.

In addition to the further retail properties expected to be acquired with the proceeds of the Second Instalment, further economic interests in property in Japan may be acquired by CKT in the future, consistent with CKT's Investment Policy. These may include acquisitions which provide the opportunity for the Japan Asset Manager to create Unitholder value through redevelopment, repositioning, or implementation of active asset. management practices. Such acquisitions may include non-retail assets. CKT's Investment Policy is detailed in Section 2.7.

2.5 Property summary¹

Property	Location	Completed	Net rentable area (Tsubo)	Net rentable area (sqm)	Purchase price $($ million $)$	Purchase price $$$ million) ²
Caríno Chitosedai	Setagaya, Tokyo	2007	3,002	9,925	¥9,489	\$103
Carino Tokiwadai	Itabashi, Tokyo	2006	2,329	7.699	¥6,029	\$65
Izumiya Hakubaicho	Kyoto, Kyoto	1989	4,999	16,525	¥5,630	\$61
Unicus Ina	Ina-machi, Saitama	2006	3,946	13,044	¥4,666	\$51
Valor Toda	Nagoya, Aichi	2005	4,513	14,921	¥3,657	\$40
Life Higashinakano	Nakano, Tokyo	1999	1,544	5,104	¥2,659	\$29
Life Asakusa	Taito, Tokyo	1998	1,135	3,753	¥2,309	\$25
Osada Nagasaki	Nishisonogi, Nagasaki	1997	3,125	10,330	¥1,750	\$19
Yaoko Sakado Chiyoda	Sakado, Saitama	2000	1,661	5,492	¥1,510	\$16
Sunny Noma	Fukuoka, Fukuoka	2007	873	2,887	¥1,417	\$15
Kansai Super Saigo	Moriguchi, Osaka	1998	799	2,642	¥1,057	\$12
Kojima Nishiarai	Adachi, Tokyo	1992	1,136	3,755	¥837	\$9
Total/Weighted average			29,063	96,077	¥41,009	\$445

¹ Data in the table represents 100% interest in the Properties.

² The Purchase Price excludes acquisition costs.

³ Initial yield equals the 2008 forecast net property income as a percentage of the Purchase Price.

⁴ Not available as property under construction.

⁶ Portfolio PML (excludes properties under construction).

Kanto area

Kansai area

Independent Independent				Net property
valuation (¥ million)	valuation (\$ million)	Occupancy (by area)	Initial yield ³	income (¥ million)	PML
¥10,000	\$108	100%	5.0%	¥471.7	n/a'
¥6,540	\$71	100%	4.9%	¥298.0	4.8%
¥5,720	\$62	100%	5.2%	¥290.1	14.4%
¥4,780	\$52	100%	4.9%	¥230.2	5.6%
¥3,700	\$40	100%	5.2%	¥189.0	12.2%
¥2,720	\$29	100%	5.0%	¥134.2	6.5%
¥2,310	\$25	100%	5.1%	¥117.6	8.4%
¥1,750	\$19	100%	6.4%	¥111.2	2.6%
¥1,530	\$17	100%	4.9%	¥74.3	8.2%
¥1,440	\$16	100%	5.7%	¥80.5	n/a ⁴
¥1,110	\$12	100%	6.0%	¥63.3	11.9%
¥971	\$11	100%	5.7%	¥47.8	6.2%
¥42,571	\$462	100%	5.1%	¥2,107.9	4.7%

Chubu area

Kyushu area

2.6 Trust strategy

CKT will initially acquire an economic interest in a portfolio of Japanese retail property assets and, in future, invest in other Japanese property sectors where it considers there is an opportunity to create value for Unitholders.

The Manager's strategy is to utilise and benefit from the Japan Asset Manager's skills to enhance CKT's earnings and capital growth prospects. In particular the Japan Asset Manager intends to provide value by:

· maximising property performance through pro-active, 'hands-on' asset management, development management, property management and leasing;
positioning both the Properties and future acquisitions to maximise exposure to any recovery in the Japanese retail sector and broader property market;
· pursuing future acquisitions of assets located in areas where the investment fundamentals are supportive of CKT's growth objectives;
undertaking development opportunities, either of existing assets or newly acquired land or assets. Such development exposure would generally be limited to 20% of CKT by asset value: and
attracting and retaining high quality real estate professionals.

Whilst the Properties comprise Japanese retail property assets, CKT may consider investment in other property sectors in Japan which are consistent with the Investment Policy of CKT detailed in Section 2.7 below. Kenedix is actively exploring such opportunities.

2.7 Investment Policy

The Investment Policy for CKT is designed to enhance Unitholder returns without adversely changing the risk profile of CKT. The main elements of this policy are:

To acquire interests in properties which:
generate a sustainable income return;
generate returns accretive to NTA per Unit and/or distributions per Unit;
offer opportunities to create Unitholder value through redevelopment, repositioning or implementation of more efficient asset management practices; or
are development projects where the risks associated with such projects can be reasonably mitigated through joint ventures, pre-commitments from tenants or other measures.
To hold interests in the form of:
Trust Beneficiary Interests:
freehold or leasehold title; or
investment through one or more TKs or other entities which hold assets in the form of Trust Beneficiary Interests, or freehold or leasehold title.
To acquire properties at or below the valuation of the property, as prepared by an independent valuation firm.
. To make acquisitions subject to due diligence on the properties, consistent with prudent market practice, to ensure in particular that each property has:
no material compliance or statutory problems;
no material unmitigated environmental problems:
no material issues related to title or survey; and
no material legal impediments which may prevent ownership being transferred.
The Responsible Entity will review its Investment Policy from time to time and may amend it without the approval of Unitholders if the Responsible Entity believes it is justified.

2.8 Summary of Financial Forecasts¹

	Forecast for period to 30 June 2007 ^1.2	Forecast year ending 30 June 2008 ¹	Forecast year ending 30 June 2009 ¹
Cash distribution per Unit ³	1.42 cents	11.64 cents	12.19 cents
Cash Distribution Yield per Unit	5.17%	776%	8.12%
Foreign tax credit per Unit ⁴	Nil	$1.33$ cents	1.40 cents
Cash distribution per Unit plus foreign tax credit	$1.42$ cents	12.97 cents	13.59 cents
Cash Distribution Yield per Unit including foreign tax credit	5.17% ²	8.64%	9.06%
Pro forma net tangible asset backing per Unit at Allotment ^s	\$1.43

These forecasts have been prepared by the Responsible Entity on the basis of the accounting policies and forecast assumptions set out in Section
10, and are subject to the risk factors in Section 4. The forecast distributi the Second Instalment is not called. It is not certain that the forecast results will be achieved. The Investigating Accountant's report on the forecasts is contained in Appendix B.

² The first distribution paid will be for the period from Allotment Date to 30 June 2007 and the Distribution Yield is annualised for this period.

Forecast distributions comprise both income and capital components and are before the impact of Performance Fees (if any). It is anticipated
that the distribution will consist of a return of capital of nil cents per Unit f

⁵ Based on the Pro Forma Consolidated Balance Sheet of CKT as at Allotment. Refer to Section 10.1.

2.9 Key financial information

The above table sets out the forecast cash distribution amounts for the Forecast Period. Other than the first distribution period which is from Allotment Date to 30 June 2007, distributions will be paid half yearly in accordance with the distribution policy outlined in Section 2.12. PricewaterhouseCoopers Securities Ltd has reviewed the Financial Forecasts and its report is in Appendix B.

Further details of CKT's Financial Forecasts, including the assumptions made and the sensitivities which affect them, are in Section 10, Risks associated with the forecasts are described in Section 4.

Investors should note that the Responsible Entity and the Manager do not give any assurance that the forecast level of distributions will be achieved.

2.10 Sources and uses of funds

The sources and uses of funds after the allotment of the Units and after the acquisition of Carino Chitosedai (expected in June 2007) are set out below.

			Post acquisition
	At Allotment			of Carino Chitosedai
	¥ million	\$ million	¥ million	\$ million
Sources of funds ¹
Issue of Units	19,709.3	213.9	19,709.3	213.9
Issue of Units to Challenger Life	1,037.3	11.2	1,037.3	11.2
Minority interest (Master TK)	595.0	6.6	595.0	6.6
Debt -- long term	12,444.8	135.1	22,029.6	239.1
Tenant deposits	1,623.9	17.6	1,873.9	20.3
Consumption tax funding - short term	595.9	6.5	753.6	8.2
Total sources of funds	36,006.2	390.9	45,998.7	499.3
Uses of funds
Purchase of economic interests in Properties	31,520.0	342.1	41,008.7	445.0
Acquisition costs of economic interests in Properties	404.6	4.4	420.9	4.6
Debt establishment fees	108.7	1.2	188.5	2.1
Issue costs	1,471.1	16.0	1,471.1	16.0
Working capital (including reserves)	282.0	3.1	282.0	3.1
Tenant deposits	1,623.9	17.6	1,873.9	20.3
Consumption tax	595.9	6.5	753.6	8.2
Total uses of funds	36,006.2	390.9	45,998.7	499.3

⁵ Assuming an exchange rate of ¥92.1 to \$1.00. Further details can be found in Section 10.

The Responsible Entity will have sufficient working capital to carry on CKT's business and meet CKT's stated objectives.

The Second Instalment will raise an additional \$75 million in equity. This has not been included in the above table nor in the Financial Forecasts as it is not possible to make reliable forecasts.

2.11 Payment of Second Instalment

The amount of the Second Instalment is \$0.50 per Unit. Unitholders who are registered as Unitholders of the Units at the relevant time will be required to pay the Second Instalment by the Second Instalment Payment Date. The Second Instalment Payment Date is 4 February 2008. The Responsible Entity may not bring the Second Instalment Payment Date forward to an earlier date, but may defer it by up to six months by giving Unitholders at least two months notice in writing. The Responsible Entity will not increase the amount of the Second Instalment. The Responsible Entity will not accept payment of the Second Instalment until it is called. If a suitable investment cannot be found, the Responsible Entity, in its absolute

discretion, may choose not to call the Second Instalment in which case Unitholders will not be required to pay the Second Instalment. If the call is made and Unitholders do not pay the Second Instalment by the Second Instalment Payment Date, the Responsible Entity may take action to recover the amounts owing. While amounts are outstanding, voting and distribution rights may be suspended. The Responsible Entity may also sell the Units of Unitholders who have not paid the Second Instalment, in which case those Unitholders will be personally liable for any shortfall after the amount outstanding plus interest (calculated from the Second Instalment Payment Date) and the costs and expenses of sale are deducted from the sale proceeds. The Second Instalment is fully underwritten by the Financial Adviser and Underwriter.

2.12 Distribution policy

The Responsible Entity intends to make distributions from CKT half yearly. However, the first distribution paid will be in respect of the period from Allotment Date to 30 June 2007. Unitholders should note that there is no quarantee the forecast level of distributions will be achieved. Unitholders should refer to Section 4 for a summary of risk factors.

Unitholders will be subject to Australian tax on their share of the taxable income of CKT. This may be different from the cash distributions received from CKT. See Appendix C for further information.

The Responsible Entity has established a Distribution Reinvestment Plan (DRP). However, it is currently intended that the DRP will not be operational for the distributions payable in the Forecast Period, See Section 10 for more information

2.13 Debt policy

The Sub TK Operator, which will hold Trust Beneficiary Interests in the Properties, will borrow to partly fund the purchase of those interests. The debt of the Sub TK Operator will be denominated in Yen and will be secured against its interest in the Properties. CKT will share in the economic effect of this debt to the extent of its economic interest in the Properties. Immediately after the acquisition of Carino Chitosedai, CKT's effective share of the Sub TK Operator's debt will be ¥22.1 billion and 90% of the interest on this debt will be fixed for a term of five years. The Sub TK Agreement includes an investment policy that includes the following elements in relation to debt:

. the long-term effective Debt to Total Assets Ratio of the Sub TK Business will be 50% to 60%. The Sub TK Operator may obtain, on a temporary basis, financing which may result in the Debt to Total Assets Ratio being in excess of 60% in order to facilitate the settlement of property acquisitions:
the Sub TK Operator may use interest rate hedging instruments to reduce exposure to changes in interest rates; and
the Sub TK Operator may maintain access to debt to ensure it has sufficient working capital to carry on the Sub TK Business

In addition to the investment policy of the Sub TK Operator, the Responsible Entity's debt policy includes the following elements in relation to debt:

. the long-term effective Debt to Total Assets Ratio will be approximately 50% to 60%. CKT may obtain or permit, on a temporary basis, financing which may result in the Debt to Total Assets Ratio being in excess of 60% in order to facilitate the settlement of property acquisitions;
the Responsible Entity may use interest rate hedging instruments to reduce CKT's exposure to changes in interest rates; and
. the Responsible Entity may in the future obtain unsecured deht.

The pro forma effective Debt to Total Assets Ratio at Allotment will be 37.2%, increasing to 50.1% once Carino Chitosedai is acquired (expected in June 2007). Post consumption tax refund (expected in September 2007), the effective Debt to Total Assets Ratio will be 49.2%

Further information about debt is in Sections 4, 10 and 11.1.13.

2.14 Foreign exchange hedging policy

The Responsible Entity has a policy to undertake foreign exchange hedging (using financial instruments) of the expected distributions of CKT to insulate against movements in exchange rates, both favourable and unfavourable. The policy is to arrange foreign exchange hedges on a rolling basis equivalent to 80-100% of CKT's estimated distributions for five years and up to 90% for years six to ten. The Responsible Entity has hedged 100% of estimated distributions for the first five years and 90%. of estimated distributions for years six and seven.

Such foreign exchange hedging arrangements will be reviewed at the end of each half year and more frequently if the Responsible Entity believes there has been a material change in the expected distributions of CKT.

This policy is intended to provide a degree of certainty for Unitholders that changes in the exchange rate between the Australian and Japanese currencies will not have a significant impact on the distributions in Australia within the subsequent five to 10 year period.

With respect to the equity capital of CKT, the Responsible Entity has a policy to arrange foreign exchange hedges for up to 50% of its net investment in Japanese assets, for periods of up to six years, with staggered settlement dates.

Such foreign exchange hedging arrangements will be reviewed at the end of each half year and at any other time when the Responsible Entity considers that there has been a material change in the amount of its net investment in Japanese assets. Any additional foreign exchange hedges undertaken from such reviews would be such that hedging remains within policy.

The Responsible Entity has entered into foreign exchange hedges in respect of approximately 40% of its net investment in the Properties, with staggered settlements, of one third for four years, one third for five years and one third for six years.

The cost of implementing these hedges is incorporated into the hedged exchange rate. Security may be given over the assets of CKT to the counterparty to the foreign exchange hedges to protect the counterparty against the risk of default. The policy may be reviewed by the Responsible Entity from time to time. Further information about the hedging arrangements is contained in Section 10.

2.15 Net Tangible Asset backing and valuation policy

Either CBRE or HIRO & REAS have provided an independent valuation for each of the Properties. The Purchase Price of the Properties is at or below the independent valuation (before acquisition costs are taken into account).

Following completion of the Offer, the NTA per Unit is expected to be \$1.43, compared to the First Instalment of \$1.50 per Unit. After the acquisition of Carino Chitosedai (expected in June 2007) the NTA will rise to \$1.46 per Unit.

The fair value basis is used to measure the carrying amount of investment properties. Independent valuations of properties in which CKT has an economic interest will be obtained at least every three years (or whenever the Responsible Entity believes a material change in value has occurred) to use as a basis for measuring the carrying amount of CKT's economic interest in the properties.

Summaries of the independent property valuations are contained in Appendix A.

At reporting dates occurring between independent valuations, the directors of the Responsible Entity will review the carrying value of the economic interest in the Properties to be satisfied that, in their opinion, the carrying value is not materially different to the fair value of CKT's economic interest in the Properties at that date.

216 Investment risks

As with any investment in securities, an investment in CKT as described in this PDS is subject to a number of risks, both general and specific. Potential risks are set out in more detail in Section 4

Before making a decision to invest in CKT, you should consult your stockbroker, accountant, financial adviser or other professional adviser.

3. Investment highlights

Management structure aligns interests

Unitholders will benefit from Challenger's and Kenedix's fund management and asset management skills in Australia and Japan, respectively. Furthermore, due to CKT's aligned structure, it is in Challenger's and Kenedix's interests for Kenedix to enhance Unitholder returns by improving property performance and making further value-adding acquisitions.

Leading and experienced Japanese real estate manager

Kenedix is a leading provider of real estate advisory, property management and asset management services in Japan. Kenedix was one of the first Japanese public companies to focus on real estate funds management. At 31 December 2006, Kenedix's market capitalisation was over ¥150 billion (\$1.6 billion) and assets under management totalled over ¥544 billion (\$5.9 billion).

Kenedix has a strong track record in acquiring and managing retail, office, residential and logistics facilities, In addition, Kenedix also has extensive experience in undertaking property development. The Sub TK Business may invest in development projects undertaken by Kenedix, subject to a development exposure limit of 20% of asset value.

Kenedix's expertise, experience, relationship network and potential asset acquisition and development pipeline provide the Sub TK Business, and therefore CKT, a significant advantage in optimising returns from the Properties, as well as providing future growth.

Attractive Distribution Yield

CKT's forecast distribution is 11.64 cents per Unit for the first full financial year of operation ending 30 June 2008, resulting in a Distribution Yield of 7.76%, assuming that the Second Instalment is not called and paid. CKT is forecast to distribute 12.19 cents per Unit for the period ending 30 June 2009, resulting in a Distribution Yield of 8.12%, assuming that the Second Instalment is not called and paid. This represents growth from 2008 to 2009 of 4.7%. The forecast distributions comprise income and capital components (see Section 10.3) and may include a Tax Deferred Component.

Unitholders may be entitled to a foreign tax credit for withholding tax incurred in Japan by CKT. Foreign tax credits may be credited against a Unitholder's Australian income tax payable on certain

types of foreign sourced income, including distributions from CKT. Unitholders should be aware that there are requirements related to their personal tax position that must be met in order to claim a foreign tax credit. The yield assuming maximum utilisation of the foreign tax credit associated with the distribution is forecast to be 8.64% for the first full financial year of operation ending 30 June 2008, 9.06% for the year ending 30 June 2009 and 5.17% (annualised) for the period to 30 June 2007, assuming the Second Instalment is not called and paid.

Refer to Appendix C for further details on taxation in relation to CKT. Further information about the Financial Forecasts is provided in Section 10

Forecast Distribution Yield¹

Forecast Distribution Yield (assuming maximum utilisation of foreign tax credits)¹

Forecast distributions include a return of capital component, details of which are provided in Section 10 and may include a Tax Deferred Component. The Financial Forecasts assume that no Performance Feeis payable (for an explanation of the Performance Fee, see Section 5), that the Second Instalment is not called and no acquisitions are made because it is not possible to make reliable forecasts.

Growth opportunities

There are growth opportunities for Unitholders in CKT.

Active asset management: Kenedix may actively manage retail properties to maximise rent and enhance investor returns
Redevelopment opportunities: There is medium-term potential to expand the floor area or redesign and redevelop some Properties, and there may be similar potential for other properties acquired by CKT.
Acquisition of further retail properties: Kenedix, as a leading Japanese real estate fund manager, has a substantial acquisition opportunity pipeline. Ownership of retail property is very fragmented in Japan and CKT will participate in the consolidation of this important real estate sector through Kenedix's retail expertise and extensive network of relationships with leading Japanese national and regional retailers
Development of new retail properties: The TK Business may partner with Kenedix in the development of new retail properties (exposure limited to 20% of gross asset value).
Expansion into other property sectors: Kenedix is currently investigating opportunities to invest in other property sectors. which may satisfy CKT's investment criteria.

Pipeline of acquisition opportunities

Kenedix is currently either undertaking due diligence on, or negotiating to acquire, a number of additional retail properties in which it may be appropriate for CKT to invest. If the Responsible Entity is satisfied that the quality of those properties is comparable to the Properties and that investments in those properties is accretive to Unitholder distributions, the proceeds of the Second Instalment will be used to fund investments in those properties. If the Responsible Entity is unable to secure investments in any additional properties which meet these criteria it will not call for payment of the Second Instalment and Unitholders will not be required to pay the Second Instalment.

Kenedix currently has ¥13.6 billion (\$148 million) of retail assets under due diligence and expects to acquire a total portfolio of ¥13.7 billion before the Second Instalment is due.

Exposure to the Japanese economy through an investment in property

CKT offers investors the opportunity to gain exposure to the Japanese economy through an ASX-listed vehicle investing in Japanese property, initially including retail property.

Improvement in the Japanese economy characterised by positive GDP growth and increasing levels of employment have translated into a recovery in retail sales, growing 0.2% calendar vear-on-vear to ¥130 trillion.

Retail sales performance

Retail sales performance growth (%)

Source: METI (Ministry of Economy, Trade and Industry)

Gross Domestic Product (annualised rate of change from previous quarter)¹

Source: Economic and Social Research Institute ¹ Seasonally adjusted series.

Exposure to Japanese retail assets

The Properties are located in urban and suburban areas and include retail facilities for daily consumables, general merchandise stores, specialty malls, supermarkets (such as home centres, apparel and electronics) and service providers (such as gymnasiums and amusement centres). Neighbourhood shopping centres focus on non-discretionary items such as food and groceries, which consumers purchase on a regular basis, regardless of market conditions.

Discount to valuation

Each Property is to be acquired at a Purchase Price which is at or below the independent valuation of the Property and the portfolio of Properties is being acquired at a 3.8% discount to independent valuation.

Property portfolio with attractive characteristics

The Properties are 100% occupied and have an initial average age of only 6.7 years. Because the Properties are modern, predominantly low rise and are geographically spread throughout Japan, the portfolio exposure to earthquake damage, as measured using PML (Probable Maximum Loss), is only 4.67%1 and no completed Property has a PML above 15%1. PML is discussed in more detail in Section 4.1.

Cash flows are underpinned by leases with long specified terms (weighted average specified lease term of 16.9 years²) and regular market rent reviews.

The Properties are convenient to residential areas and transportation hubs.

Excluding Carino Chitosedai and Sunny Noma which are currently under construction.
Assumes tenants do not terminate leases prior to expiry of specified lease term. Most leases may be cancelled at the tenant's option prior to the end of their specified term. Further detail is contained in Sections 4.1 and 6.5.

Specified lease expiry profile (by income)

Tenant diversification by type³

³ By Net Property Income.

Geographic diversification⁴

⁴ By independent valuation.

man nna

Tenant exposure

The Properties have 12 tenants operating in a variety of retail sub sectors. Tenants are on Fixed Team Leases or Standard Leases with specified terms and tenant security deposits are equivalent to an average of nine months rent.

Tenant name	Industry	Lease type	Total amount of tenant security deposit $(4$ million)	Tenant NPI as a % of NPI	Lease expiry date	Remaining specified term ¹ (years)
Central Sports Co.	Fitness chain	Fixed Term Lease and Standard Term Lease	493.2	20.2	2026-2027	20 ²
Izumiya	General Merchandise Store	Fixed Term Lease	83.1	13.7	2026	19
Life Corp.	Supermarket	Standard Leases	200.0	12.1	2018-2019	12 ²
P&D Consulting	Commercial property manager	Standard Lease	136.6	10.9 ₁	2026	19.
UNIQLO	Clothing	Fixed Term Lease	100.0	9.7	2017	10
Valor Co.	Supermarket	Fixed Term Lease	61.7	9.0	2025	18
K.K. Santoku	Supermarket	Standard Lease	297.0	6.5	2026	19
Osada Ltd.	Home centre	Fixed Term Lease	300.0	5.3	2026	19
Sunny Co.	Supermarket	Fixed Term Lease	51.8	3.8	2037	30
Yaoko	Supermarket	Standard Lease	50.5	3.5	2021	14
Kansai Super Market Ltd.	Supermarket	Standard Lease	40.0	3.0	2018	11
Kojima Co.	Mass merchandiser	Standard Lease ³	60.0	2.3	2011	4
Total/weighted average			1,873.9	100.0		16.9

⁵ Assumes leases are not cancelled prior to maturity.

² Period remaining is taken as an average of the unexpired lease terms for this tenant on all of its leases.

³ Tenant will be a sub tenant from Sub TK Operator acting as sub lessor.

Experienced and established management team in Australia

Challenger has a well established property funds management and asset management capability. The senior management team of the Manager has extensive experience in the Australian listed property trust market, having previously managed two ASX 100 listed property trusts for several years prior to joining Challenger. In October 2006, Challenger successfully launched Challenger Diversified Property Group (CDI). CDI had a successful debut on ASX, trading at an 8.0% premium to its issue price at the close of trade on its listing date. Past performance is not a reliable indicator of future performance.

The Manager's 30 member core property team also draws on the diverse skills of the broader Challenger Group in areas such as finance, legal, tax, treasury and mergers and acquisitions. Detailed information on Challenger is set out on page 6.

Risks

The summary of investment highlights in this Section should be read in conjunction with the investment risks described in Section 4.

4. Investment risks

Before deciding whether to apply for Units, investors should consider whether Units are a suitable investment for them. Investors should recognise that there are a number of risks associated with investing in both property and listed securities. The price at which the Units trade on ASX can fall as well as rise. There is also a risk that the Financial Forecasts prepared by the Responsible Entity will not be met.

Investors should note that although the Responsible Entity has endeavoured to ensure that the assumptions used in the preparation of the Financial Forecasts are reasonable, there are a number of factors which may affect the achievement of the Financial Forecasts, some of which are beyond the Responsible Entity's control or not known at this time.

Major factors outside the control of the Responsible Entity and its directors, which may have an effect on the value of the Properties, the net income of CKT, distributions paid by CKT, CKT's ability to meet the Financial Forecasts and the price at which Units trade on ASX include, but are not limited to, the following:

4.1 Specific risks relating to CKT

Forecast assumptions not achieved

The assumptions on which the Financial Forecasts are based may not be achieved, such that the distributions for the Forecast Period are not achieved.

Debt and interest rates

The long-term preferred Debt to Total Assets Ratio range is 50% to 60%. Changes to the availability of debt and the interest margins required by the lenders may limit the Sub TK Business' ability to invest in further assets and may adversely affect future distributions of CKT.

CKT intends, through the Sub TK Operator, to utilise debt. The use of debt creates an opportunity for increased Unitholder returns, but at the same time involves a higher degree of financial risk due to increased exposure to rising interest rates and downturns in the economy, than if no debt were used.

Changes to the availability of borrowings and the interest margins reguired by lenders may reguire the Sub TK Operator to borrow at interest rates greater than those assumed, thereby affecting distributions.

As at the date of the PDS the Sub TK Operator has not entered into contractual borrowing arrangements with lenders. These contracts will be concluded closer to the Offer Closing Date. The assumptions as to the cost of borrowings for the Forecast Period are detailed in Section 10

At Allotment it is intended that 10% of the Sub TK Operator's indebtedness will bear a floating rate of interest. Therefore, CKT will be exposed to the risk of increasing interest rate expenses to the extent that interest rates in Japan rise.

Value of properties

The value of properties in which CKT has an economic interest may fluctuate from time to time due to market and other conditions. Factors relevant to determining value include rent, occupancy and property yield, and these may change significantly over time for a variety of reasons. Valuations represent only the analysis and opinion of qualified experts at a certain date - they are not quarantees of present or future values. The valuation of a property may be materially higher than the amount that can be obtained from the sale of a property in certain circumstances, such as under a distressed or liquidation sale.

Property acquisition

The acquisition of the Properties is subject to certain conditions precedent. If these conditions precedent are not met for one or more Properties, the Sub TK Operator may choose not to acquire those Properties, however still acquire the remaining properties, or may choose not to acquire any of the Properties. This may impact the portfolio returns, tenant mix, geographic diversification, NTA or other portfolio characteristics. In the event that the Sub TK Operator chooses to acquire none of the Properties, Unitholders' funds would be returned and the IPO would not proceed.

The Properties will be acquired from special purpose vehicles controlled or owned by Kenedix. CKT may be unable to fully recover any losses arising from a breach by a seller under a sale. and purchase agreement for a Property if the sellers do not have the means to compensate for those losses.

Risks related to investing in property under Japanese law

Aspects of Japanese law relating to real property differ significantly from Australian law. Some of the more important of these are:

. Title: There is a greater risk of acquiring encumbered or invalid title under Japanese law compared with the Australian Torrens title system. For example, in Japan registration of title does not quarantee clear title. However, the Responsible Entity has carried out due diligence in respect of the Properties to mitigate against the risk of acquiring encumbered or invalid title
Leases: Tenants in Japan benefit from greater legal protections than under Australian law. Tenants may seek rent reductions during the lease term based on rental market changes. Under Standard Leases a landlord may only require. a tenant to vacate premises at the end of the term if there is a justifiable ground for doing so. Under Standard Leases without a specified term (or for a term of less than one year), tenants may terminate a lease by three months notice or such other reasonable period of notice as is specified in the lease. See also Section 6.5 for further information on Japanese real estate practices.

Property leasing and concentration of revenue

There is a possibility that tenants may default on their rental or other obligations under leases, leading to losses or a reduction in the income of CKT.

In addition, there is a risk that if lease extensions are not able to be negotiated at the end of lease terms, or it is not possible to replace the leases on expiry with leases at equivalent rates, there may be a significant impact on the distributable income of CKT and the value of that particular property. The ability to secure lease renewals, to obtain replacement tenants or to sub-let lease liabilities assumed in development activities may also be influenced by any leasing incentives granted to prospective tenants and the increased supply of new buildings, which, in turn, may increase the time required to let vacant space.

Concentration of revenue

100% of the rent from the Properties is expected to come from 12 tenants. In addition, each Property has only one or two tenants from which rent will be received, even though these tenants may sub-lease to a broader range of tenants.

There is a risk that if one or more of the major tenants ceases to be a tenant, the Japan Asset Manager will be unable to find replacement tenants prepared to lease the properties so as to deliver the same rental return

Consequently there is a risk that the overall performance of CKT will be adversely affected if one of these major tenants ceases to be a tenant.

Foreign exchange

Substantially all of CKT's underlying assets and income will be denominated in Yen. Foreign currency movements between the Australian dollar and Yen may impact returns to investors. The Australian dollar has been subject to significant fluctuations against the Yen in the past and may be subject to significant fluctuations in the future. While the foreign exchange hedging strategy of CKT (see Section 2.14) is designed to partially insulate Unitholders against movements in exchange rates, it does not remove entirely the potential impact of foreign exchange movements on Unitholder returns.

With respect to foreign exchange hedging of expected distributions, it is not always possible to align perfectly the amount or timing of hedging with the risk to be hedged. Despite the hedging policy of CKT, over time, the value of Australian dollar distributions made by CKT may reflect general trends in exchange rate movements for all amounts unhedged and for where there is a mismatch in the timing of the hedge, as well as the impact of hedging arrangements undertaken in periods after the Allotment Date.

With respect to foreign exchange hedging of its net investment in Japanese assets, the policy of the Responsible Entity is to hedge a proportion of the equity capital. Therefore, the Australian dollar value of the majority of CKT's net investment in Japanese assets will still vary with fluctuations in the exchange rate with Yen. At the time of settlement of these foreign exchange hedges, if there have been fluctuations in the Australian dollar and Yen exchange rate, a cash settlement may be required, which may entail a payment to or from CKT. If CKT were required to make a settlement payment, it would be required to fund such cash payment (most likely by borrowing funds or selling assets), which may have a negative impact on prospective earnings.

Under the terms of the hedge contracts, the counterparties can exercise an early right to terminate or can terminate in certain other circumstances (including a change of control of CKT). If this occurs, the hedge contracts will be unwound at market values and replacement hedges may need to be obtained. It may not be possible to replace the hedge contracts at such time and there may be additional costs involved in obtaining replacement hedges over and above the costs of the initial hedge contracts.

Investors should consider the impact of an adverse change in the Australian dollar and the Yen exchange rate for expected distributions and equity capital not hedged.

The TK Agreements

CKT will invest in the business of the Master TK Operator under a TK agreement (Master TK Agreement). The Master TK Operator will in turn invest in the business of the Sub TK Operator under another TK Agreement (Sub TK Agreement). The Sub TK Operator will use the invested funds to acquire the Trust Beneficiary Interests of the Properties.

CKT's rights are limited to its contractual rights under the Master TK Agreement and therefore CKT will not have any voting rights in relation to the TK Business.

The TK Business must be solely conducted by the Master TK Operator. If CKT or a representative of CKT was actively involved in the management of the TK Business it might be considered to be a Nin-i Kumiai (NK) (which is similar to an Australian general partnership) and in such circumstances CKT as a partner would be jointly and severally liable with the Master TK Operator for the operation of the TK Business and would potentially have a higher Japanese tax liability (refer to tax risks below).

Details of the Master TK Agreement and the Sub TK Agreement and the rights and obligations of CKT, the Master TK Operator, and the Sub TK Operator are included in Section 9 and Section 11.1.

Reliance on the Responsible Entity, Manager, TK Operators and Japan Managers

Unitholders will have no control over the day-to-day operations and investment decisions of CKT, and must rely on the Responsible Entity, Manager, Master TK Operator, Sub TK Operator and the Japan Managers. CKT's success depends largely on the performance of the Manager and the Japan Managers. The loss of key personnel of the Manager and/or the Japan Managers could have an adverse effect on investment performance of CKT.

Relationship between Challenger and Kenedix

Challenger and Kenedix have combined their respective skills to offer CKT Unitholders access to an economic interest in properties in Japan. Kenedix has an important role to play in implementing the business plans relating to, and the operation of, the Properties. If the relationship were to deteriorate significantly, there is a possibility that Challenger and Kenedix may want to discontinue their respective responsibilities and as a result, a replacement manager may be required.

As a deadlock mechanism, in certain circumstances the whollyowned subsidiary of Challenger which is party to the Japan. HeadCo Shareholders Agreement (or its nominee) has a right to buy, and Kenedix has a right to sell to that Challenger entity (or its nominee), Kenedix's 49% interest in Japan HeadCo. If such rights are exercised due to an unresolved deadlock or dispute between the parties to the Japan HeadCo Shareholders Agreement (other than an unresolved deadlock or dispute) relating to termination by the principal or the manager of any of the Japan Asset Management, the Japan Investment Management or the Property Management Agreements), the shareholders of Japan HeadCo will negotiate in good faith to agree an amount and source of payment to Kenedix in compensation for the loss of opportunity suffered by Kenedix or any of its related bodies corporate (including the Japan-Managers) in relation to Kenedix ceasing to be a shareholder.

If any of these events occur, this may impact CKT, including by disrupting the management of the Properties, increasing the costs associated with managing the Properties (including any costs pavable to the Japan Managers on termination) and denying CKT the benefits available from the relationship with Kenedix. See Section 11.1.4 for further information on these payments.

Dilution

Unitholders' ownership may be diluted by future capital raisings by the Responsible Entity on behalf of CKT. The Responsible Entity may issue Units to finance future acquisitions which may dilute the value of Unitholders' interests if the asset value received in the acquisition is less than the value given up by issuing Units to finance the acquisition.

Investment opportunities and strategy

Part of CKT's strategy is to identify and purchase additional investments, as well as to realise maximum value from the Properties. There is a risk that CKT will be unable to acquire future investments on appropriate terms, thereby potentially limiting the growth of CKT and reducing the need for the Second Instalment.

There is a risk that potential problems are not uncovered as part of the due diligence process undertaken in relation to the acquisition of the Properties or new acquisitions, or that risks cannot be fully mitigated by the warranties and indemnities in the sale and purchase agreements for those acquisitions. If an unforeseen liability arises in respect of which the purchaser is not able to be indemnified, this may adversely impact CKT.

Distributions (including distributions during the Forecast Period) may be adversely affected by future acquisitions and disposals. although the Responsible Entity intends to only fund acquisitions which satisfy the Investment Policy described in Section 2.7. There can be no assurance that any future acquisitions which satisfy the Investment Policy will enhance the investment returns of Unitholders.

Conflicts of interest

The goals and strategies of CKT may conflict with other aspects of Challenger's or Kenedix's businesses which may affect the operations of CKT and may also limit the growth opportunities available to CKT in the future. Also, Kenedix has an interest in the transaction as entities controlled by Kenedix will be the sellers of the Properties as well as assuming the roles of the Japan Managers. There is a risk that Kenedix may act in its own interests.

Disputes and defaults

In the ordinary course of its operations. CKT, the TK Business or the Sub TK Business may be involved in disputes and possible litigation. The extent of those disputes and litigation cannot be ascertained, however, there exists a risk that material or costly disputes or litigation could affect the value of the assets or expected income of CKT.

There is also a possibility that tenants or other groups may default on their obligations with regard to the Properties, which may lead to a loss of income and increased costs as a result of enforcement action being required.

Expenditure

The Sub TK Business will be required to incur expenditure in relation to ongoing maintenance and refurbishment of its portfolio. Any requirement for unforeseen material capital expenditure on properties, such as for rectification work to comply with environmental standards, may adversely affect the performance of CKT.

Properties acquired after IPO

It is intended Carino Chitosedai will be acquired after IPO in June 2007. It is currently under development by Kenedix and will be acquired upon practical completion and satisfaction of other conditions. If this property is not acquired, or its acquisition is delayed, there may be an adverse impact on the earnings of CKT.

Disincentives to change the Responsible Entity

There are disincentives to removing CLIL as the responsible entity of CKT:

There are two components of the Performance Fee: the Asset Performance Fee and the Trust Performance Fee. For so long as the Responsible Entity is a related body corporate of Challenger, the Performance Fees otherwise pavable under the Trust Performance Fee are reduced by Performance Fees payable under the Asset Performance Fee. Thus, if the Responsible Entity for the time being is not a related body corporate of Challenger, both the Asset Performance Fee (if any) and the Trust Performance Fee (if any) will be payable in full. This may adversely affect Unitholders' returns if CLIL ceases to be the responsible entity.
. In addition, the Management Agreement will continue notwithstanding that there is a change of the Responsible Entity. This means that fees under the Management Agreement will continue to be payable to the Manager and will continue to reduce fees payable to the Responsible Entity.

Information concerning the Properties

Certain information contained in this PDS has been derived from information made available by Kenedix. While the Responsible Entity has conducted customary due diligence on the Properties to be acquired from Kenedix, no assurance can be given as to the accuracy or completeness of the information provided for or on behalf of Kenedix as part of the due diligence process. To the extent that this information is incorrect, inaccurate or misleading, there is a risk that the future profitability and prospects of CKT may differ (including in an adverse way) from the Responsible Entity's expectations as reflected in this PDS.

Uninsured risks such as terrorist attacks and earthquake risk

The Properties will have insurance coverage which includes cover for the risk of loss caused by fire and/or accident and liabilities to third parties for bodily injury and/or property damage. There are, however, certain types of losses that are uninsurable or not generally insured against because it is not economically feasible to insure against such losses. Examples of losses that are generally not insured against include war or acts of terrorism and natural phenomena such as an earthquake, tsunami or volcanic eruptions.

The Properties are located in Japan, a country with a relatively high risk and frequency of earthquakes. Historically there have been large earthquakes that have resulted in extensive property damage. In Japan, earthquake risk is measured by what is known as Probable Maximum Loss (PML).

PML is a measure of the probable maximum loss (i.e. repair and re-procurement expenses) that would be incurred in the event of a major earthquake. Specifically, it means the loss generated by the largest earthquake that has a 10% probability of occurring during a 50 year assumed service life of a building. Earthquakes of this type have a probability of occurrence once every 475 vears. Lenders and financial investors in Japan are more likely to require as a condition of finance that earthquake insurance be obtained when a PML for a property is in excess of 15%. None of the Properties has a PML over 15% (excluding Carino Chitosedaí and Sunny Noma which are not available as these properties are under construction).

Insurance is carried for the Properties which the Responsible Entity believes is adequate and appropriate given the relative risk of loss, the cost of coverage and industry practice in Japan. In this regard, earthquake insurance will not generally be maintained on the Properties.

Should any of the Properties suffer from an uninsured loss or a loss in excess of the insured amounts, the equity invested in that Property and anticipated future revenue from that Property could be lost. In addition, any debt or other financial obligations related to that Property could continue.

Unforeseen environmental issues

Unforeseen environmental issues may affect the Properties.

Sites affected by environmental liabilities may require remediation. The cost of remediation of sites could be substantial. In addition, if a property is not able to be remediated properly, this may adversely affect the ability to sell the relevant property or for it to be used as collateral for borrowing.

Material expenditure may also be required to comply with new or more stringent environmental laws or regulations introduced in the future.

4.2 Risk factors that relate to the property market

Property market fluctuations

Like all property trusts the value of, and returns from, CKT's economic interest in assets may fluctuate depending on property market conditions. Increased supply of retail properties may affect the ability to secure lease renewals or obtain replacement tenants, and increase the time required to let vacant space. Rental and occupancy levels may change as a result of changes in the property market and this may affect the distributions paid by CKT and the market price of Units.

Further, demand for property and listed property securities may change as investor preferences for particular sectors and asset classes change. The demand for property as an asset class changes over time and can be influenced by general economic. factors such as interest rates and stock market cycles.

Potential illiquidity

Property assets are by their nature illiquid investments, and it may therefore not be possible for the Sub TK Operator to dispose of assets it wishes to dispose of in a timely manner.

As CKT has economic interests in properties which are not listed on a stock exchange, or for which there may only be a limited number of potential investors, the realisable value of those assets may be less than the full value indicated by CKT's expectations of future cash flows from those properties.

4.3 General economic risks relating to the Units

Macroeconomic factors and stock market risks

The value of the underlying assets in which CKT has an economic interest are influenced by macroeconomic factors, including changes in taxation policy, monetary policy, interest rates, inflation, regulatory policy, employment and consumer demand.

In addition, a number of factors affect the performance of stock market investments. The price at which Units trade on ASX may be affected by a range of factors including movements in international and local stock markets, recommendations by brokers, inflation, interest rates, general economic conditions, changes in government, fiscal, monetary and regulatory policies, changes to laws (particularly taxation laws) and changes in the supply and demand of listed property securities. Volatility in the Australian and international stock markets and changes in economic conditions or interest rates may affect prices at which Units trade. Changes in the stock market rating of Units relative to other listed securities, especially other listed property trusts. may also affect prices at which Units trade.

Liquidity and realisation

There can be no quarantee that an active market in the Units will develop or that the price of the Units will increase.

There may be relatively few or many potential buyers or sellers of the Units on ASX at any time. This may increase the volatility of the market price of the Units. It may also affect the prevailing market price at which Unitholders are able to sell their Units.

If a large Unitholder chooses to sell its stake, this may affect the prevailing market price at which other Unitholders are able to sell their Units. This may result in Unitholders receiving a market price for their Units that is less than or more than the price that Unitholders pay under the Offer.

4.4 Regulatory changes which may affect CKT

Law, regulatory and policy changes

Changes to existing legislation, regulation and policy in Australia and Japan may adversely affect the future earnings of CKT, asset values of investments held by the TK Business and the Sub TK Business and the market value of Units quoted on ASX.

Tax

Changes to existing legislation, case law, regulations, or interpretations thereof regarding Australian or Japanese taxation, or new rulings and determinations issued by the Australian Commissioner of Taxation, Japanese tax authorities, or divisions thereof, particularly in regard to property development activity and property investment, may adversely affect CKT's profit.

In particular, the Australian taxation system has recently undergone significant change, and in particular changes referred to as the Reform of International Tax Arrangements (RITA). These reforms are continuing and the precise meaning of much of the new legislation is unclear and untested. Accordingly, there is a degree of uncertainty as to the interpretation and application of the legislation to CKT.

Any changes to the tax regime applicable to CKT or the ability of CKT to make tax deferred distributions may adversely affect the tax treatment of distributions in the hands of Unitholders.

In relation to the foreign currency hedges entered into by CKT, as these currency hedges mature, the net amount receivable or payable under the contract will be assessable or deductible (respectively) for Australian income tax purposes. The netpayment or receipt will represent the difference between the exchange rate at the date of maturity and the rate applied under the currency hedge contract. At the time of preparing this PDS, it is not possible to forecast whether the currency hedges will give rise to a net amount payable or receivable by CKT.

The Japanese tax position of the TK Business is based on current tax laws, interpretations thereof and practice in Japan and CKT and the Master TK Operator satisfying certain requirements under Japanese tax and commercial law. Changes to these requirements or a failure of the TK Business or CKT to meet these requirements may increase the Japanese tax due on TK profit distribution to CKT and have an adverse effect on future earnings.

Under the proposed 2007 tax reforms. TK profit distributions by the Sub TK Operator to the Master TK Operator made on or after 1 January 2008 will be subject to 20% withholding tax. This is not expected to impact the forecast distributions as the tax withheld on the distribution should be creditable.

If CKT or a representative of CKT were actively involved in the conduct of the TK Business or Sub TK Business and the TK Agreements are re-characterised as a Nin-i Kumiai (NK) (see discussion at the risks related to the TK Agreement in Section 4.1), CKT may be deemed to have a permanent establishment/branch in Japan and would be subject to Japanese tax at the domestic rate including local taxes (currently approximately 42% plus interest and penalties). In such case, CKT would be required to file a tax return in Japan.

Tax considerations may differ between Unitholders. Therefore prospective investors are encouraged to seek professional tax advice in connection with any investment in Units.

Investment licensing requirements

Japan's Financial Instruments and Exchange Law (FIEL) will generally impose registration requirements in relation to the investment management activities of a TK operator if it wishes to raise capital for certain investments, including trust beneficiary certificates, after FIEL comes into force (currently expected to be around July 2007). The investment management registration requirements will be administered by Japan's Financial Services Agency (FSA). The Master TK Operator and the Sub TK Operator will not be required to be registered before FIEL comes into force but would require registration in relation to capital raising after FIEL comes into force. Such registration is expected to impose significant financial and compliance requirements. It is the current understanding that certain exemptions from registration will be available to the Master TK Operator and the Sub TK Operator after FIEL comes into force without materially affecting the investment structure.

Accounting standards

Changes in accounting standards may affect the reported earnings and financial position of CKT in future financial periods.

5. Fees and other costs

Consumer advisory warning

Did you know?

Small differences in both investment performance and fees and costs have a substantial impact on your long-term returns.

For example, total annual fees and costs of 2% of your fund balance, rather than 1%, could reduce your final return by up to 20% over a 30 year period (for example, reduce it from \$100,000 to \$80,000).

You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs.

You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your financial adviser.

To find out more

If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website (www.asic.gov.au) has a managed investment fee calculator to help you check out different fee options.

Fees and other costs

This Section shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from CKT assets as a whole.

None of the fees or other costs set out below are negotiable.

Taxes are set out in another part of this PDS (refer to Appendix C).

You should read all of the information about fees and costs because it is important to understand their impact on your investment.

5.1 Fees and costs template

Type of fee or cost	Amount ¹	How and when paid
Fees when your money moves in or out of CKT
Establishment fee
The fee to open an investment	ΝiΙ	Not applicable
Contribution fee
The fee on each amount contributed to an investment	ΝiΙ	Not applicable
Withdrawal fee
The fee on each amount taken out of an investment.	Nil	Not applicable
Termination fee
The fee to close an investment	ΝiΙ	Not applicable

Management costs

Ongoing management fees and other costs The fees and costs for managing your investment	Estimated at 1.4% per annum, e.g. \$700 for every \$50,000 invested in the Offer, based on certain assumptions ^2,3 . Additional fees and costs may be incurred. Actual costs may be significantly higher than the estimate, for example, if a Performance Fee and/or transaction based fees (which have been estimated to be nil) are charged in any year	Payable to the Responsible Entity, the Manager and relevant third parties (as applicable) from the assets of CKT and to the Japan Investment Manager from the assets of the TK Business. and to the Japan Asset Manager from the assets of the Sub TK Business when the amounts are due. (Refer to Sections 5.2 and 5.4 for more information on the ongoing management fees and other costs.)
Offer costs Fees and expenses of the Offer (including Sponsors' Fees)	Estimated at \$20.4 million, e.g. \$4,653 for every \$50,000 invested in the Offer, based on certain assumptions ²	Payable to the Responsible Entity, the Manager and relevant third parties from the assets of CKT and to the Japan Investment Manager from the assets of the TK Business, and to the Japan Asset Manager from the assets of the Sub TK. Business, at or about the time of Allotment. (Refer to Section 5.5 for more information on the fees and expenses of the Offer.)
Service fees

Investment switching fee

The fee e charged for changing investment o options ------ ---- ----- a sing story with them to	Νì -----	abplicable NOL --------------------------------------- --------------------------------------- ------

$\chi$ All amounts in this Section 5.1 are inclusive of GST less any input tax credits or reduced input tax credits (to the extent that either are applicable). Should the GST treatment vary from that anticipated or assumed in this PDS the relevant fees may be subject to change.

² These amounts are estimates only and are based on certain assumptions (refer to Section 5.2).

Assumes a Performance Fee of nil. Assumes that there will be no acquisitions or disposals of property in the relevant period and that no acquisition
fees will be charged in relation to the Properties. Refer to Section 5.4 $\bar{\mathrm{g}}$ costs are calculated.

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The following table shows a breakdown of estimated ongoing management fees and costs for the Forecast Period. It does not include the fees and expenses of the Offer.

$F = F \cdot F$

ree or cost :	Amount Included in management costs which are attributable to an investment of \$50,000 in CKT®
Base Responsible Entity Fee (including Fund Management Fee) ²	\$263
Asset Management Fee and Japan Investment Management Fee	\$266
Performance Fee ³	Nil
Debt placement fee ^®	Nil
Debt placement service fee ⁴	Nil
Acquisition fees ⁴	Nil
Acquisition service fee ⁴	Nil
Disposal fees ^*	Nil
Disposal service fee ⁺	Nil
Due diligence fees ⁴	Nil
Due diligence service fees*	Nil
Development management fees	Nil
Other expenses ⁵	\$171
Total	\$700

Refer to Section 5.4 for more information on each fee or cost.

It is assumed that GST applies to the Base Responsible Entity Fee (including Fund Management Fee) and 75% reduced input tax credits are available. However, should CKT be entitled to more than reduced input tax credits, the relevant fee may be lower.

Assumes a Performance Fee of nil.

Assumes that there will be no acquisitions or disposals of property in the relevant period and that no acquisition fees will be charged in relation to the Properties. If a call is made on the partly paid Units to fund further investment by the TK Business, acquisition fees, acquisition service fees, due diligence fees and due diligence service fees will be incurred.

⁶ Includes expenses such as ASX listing fees, accounting fees, taxation compliance and other administration expenses.

⁶ Fee calculations are based on the forecast year end to 30 June 2008.

Effect of Performance Fees

The management costs in Sections 5.1, 5.2 and 5.3 include a Performance Fee which is estimated to be nil in the Forecast Period because there is no reasonable basis to forecast this Performance Fee. However, a Performance Fee could be earned in any year (including in the Forecast Period) and could be payable in full that year, or partly carried over to a future year.

The method of calculating the Performance Fee is set out in Section 5.6. The Performance Fee paid in any one year must not exceed 0.5% of the value of CKT's direct or indirect proportionate interest in properties and other assets at the end of that year (Capped Amount).

If a Performance Fee equal to the Capped Amount was earned in a year period, for an investment of \$50,000 this would add a further \$547 in management costs based on pro forma gross asset values. If an excess Performance Fee was carried over for three years, the management costs may be increased further.

Effect of transaction based fees

The management costs in Sections 5.1, 5.2 and 5.3 assume there will be no acquisitions or disposals of property and no developments on which fees are charged in the relevant period. Accordingly, these transaction based fees are estimated to be nil in the Forecast Period. However, in any year (including the Forecast Períod), acquisitions or disposals or developments could occur. In this case, additional fees and costs are likely to be incurred. It is not possible to estimate these costs as they will depend on whether or not a transaction occurred and various other unknown factors including the nature, location and value of any property concerned (see Section 5.4 for more information).

Tax

Tax payable by a Unitholder is explained in the Taxation Letter in Appendix C.

5.3 Example of annual fees and costs

This table gives an example of how fees and costs for CKT can affect your investment over a one year period. You should use this table to compare this product with other managed investment products.

Example

Example		Balance of \$50,000
Management costs	1.40%	For every \$50,000 you have in CKT you will be charged \$700 each year
EQUALS Costs of fund	1.40%	If you had an investment of \$50,000 in CKT for a year, you would be charged fees of \$700

The table above has been prepared by using the assumptions and estimates set out in Section 5.2. Additional fees and costs may be incurred. Actual amounts may be significantly higher than the estimates.

The estimated fees and costs of \$700 attributable to an investment of \$50,000 (as disclosed in Sections 5.1 and 5.2). are calculated based on the equity attributable to Unitholders (i.e. the net assets of CKT (after outside equity interests)).

The Corporations Act requires disclosure of the indirect cost ratio which is calculated by dividing total management costs incurred in a year by total average net assets. Total management costs incurred in a year are estimated as \$3.1 million (which includes Base Responsible Entity Fee, asset management fees and other management expenses). Total average net assets after outside equity interests, and assuming that the Second Instalment is not called and not paid and net assets remain constant, are estimated as \$218.7 million. Each estimate is for the 12 months ending 30 June 2008.

Fees and expenses of the Offer are not included as an ongoing management cost in Sections 5.1, 5.2 or 5.3. For an initial investment of \$50,000, total fees and expenses of the Offer amount to \$4,653 (see Section 5.5).

5.4 Ongoing fees and expenses

The following table sets out more information on the ongoing management fees and costs you may be charged. All these fees and costs are management costs. However, in Sections 5.1, 5.2 and 5.3, the Performance Fee, acquisition fees, acquisition service fees, disposal fees, disposal service fee, due diligence fees, due diligence service fees and development management fees are estimated to be nil.

Fee	Amount	How and when paid
Base Responsible Entity Fee ⁶²³⁸ A fee for the management and operation of CKT	An annual fee of 0.25% of the gross value of CKT's direct and indirect proportionate interest in the assets held in the TK Business and other assets of CKT ²	Payable to the Responsible Entity from the assets of CKT. The fee is paid semi-annually within two months of the end of each half year
Asset Management Fee ^{1, 2} A fee for the management and operation of the Sub TK Business	An annual fee of 0.25% of the gross value of assets held in the Sub TK Business ² less the Japan Investment Management Fee	Payable to the Japan Asset Manager from the assets of the Sub TK Business. The fee is paid semi-annually within two months of the end of each half year
Japan Investment Management Fee	A fee of ¥6.0 million (\$65,147) ⁵ p.a.	Payable to the Japan Investment Manager from the assets of the TK Business. The fee is paid semi-annually within two months of the end of each half year
Performance Fee ^® An additional fee for the management and operation of CKT based on performance	There may also be an entitlement to a Performance Fee, with an element related to asset level performance and an element related to the relative equity level performance of CKT. See Section 5.6 for an explanation of the calculation of this fee. There is a cap on the Performance Fee payable equal to 0.50% per annum of the gross value of CKT's direct and indirect proportionate interests in the TK Business and other assets of CKT at the end of each financial year although excess fees will be carried forward and paid out after a maximum of three years	An element of this fee will be payable to the Responsible Entity and an element will be payable to the Japan Asset Manager The amount payable to the Responsible Entity will be from the assets of CKT ⁴ The amount payable to the Japan Asset Manager will be from the assets of the Sub TK Business These fees are payable two months after the end of each financial year
Debt placement fee ^® A fee for arranging borrowings	0.33% of the borrowings drawn down by the Sub TK Business	Payable to the Japan Asset Manager from the assets of the Sub TK Business on drawdown
Debt placement service fee ^4,6 A fee for reviewing the impact of new borrowings on CKT	0.17% of CKT's direct and indirect proportionate interest in the borrowings drawn down by the Sub TK Business	Payable to the Responsible Entity from the assets of CKT on drawdown
Acquisition fees ⁶ A fee for the purchase of properties	0.67% of the purchase price of the property acquired by the Sub TK Business (other than the Properties)	Payable to the Japan Asset Manager from the assets of the Sub TK Business on acquisition
Acquisition service feest A fee for reviewing the impact on CKT of the purchase of properties	0.33% of CKT's direct and indirect proportionate interest in the purchase price of the property acquired by the Sub TK Business (other than the Properties)	Payable to the Responsible Entity from the assets of CKT on acquisition
Disposal fees ^® A fee for the sale of properties	0.67% of the sale price of properties sold by the Sub TK Business	Payable to the Japan Asset Manager from the assets of the Sub TK Business on disposal
Disposal service fee ^ts A fee for reviewing the impact of the sale of properties on CKT	0.33% of CKT's direct and indirect proportionate interest in the sale price of properties sold by the Sub TK Business	Payable to the Responsible Entity from the assets of CKT on disposal
Due diligence fees ⁶ A fee for carrying out due diligence in relation to further acquisitions of additional properties	0.33% of the purchase price of properties acquired by the Sub TK Business (other than the Properties)	Payable to the Japan Asset Manager from the assets of the Sub TK Business on acquisition.

Fee	Amount	How and when paid
Due diligence service fees ⁴⁶ A fee for reviewing the due diligence in relation to further acquisitions of additional properties	0.17% of CKT's direct and indirect proportionate interests of the purchase price of the properties acquired by the Sub TK Business (other than the Properties)	Payable to the Responsible Entity from the assets of CKT on acquisition
Fund Management Fee¹³ For the fund management services provided under the Management Agreement	A fee equal to the Base Responsible Entity Fee, less 5% of the Base Responsible Entity Fee, and all of the Australian Sponsor Fee, the Performance Fee due to the Responsible Entity (if any), the debt placement service fee, the acquisition service fee, the disposal service fee, and due diligence service fees which are payable to the Responsible Entity (described above)	Payable directly to the Manager from the assets of CKT. The Responsible Entity's fee is reduced by the amount payable to the Manager
Development management fees ^® A fee for managing development of properties	At market rates	Payable to the Japan Property Manager from the assets of the Sub TK Business. The fee will be paid on actual costs incurred and payable monthly in arrears during development
Other expenses ¹ CKT's operating expenses and reimbursements.	Expenses relating to the proper performance of the Responsible Entity's or Manager's duties in connection with CKT estimated to be \$0.9 million per annum	Reimbursable to the Responsible Entity or the Manager from CKT's assets when incurred from time to time
Japan Asset Manager's expenses and reimbursements	Expenses within the scope of annual budget of the Sub TK Operator ² , plus marketing expenses ⁸	Paid or reimbursed to the Japan Asset Manager from the assets of the Sub TK Business when incurred from time to time

⁵ Included as a management cost in Sections 5.1, 5.2 and 5.3.

² The Sub TK Operator and Japan Asset Manager have agreed to negotiate in good faith an increase in the Asset Management Fee or Japan Investment Management Fee if additional personnel are employed as asset managers because the TK Business or the Sub TK Business acquires further properties. Any increase in Asset Management Fee will be offset by a decrease in the Base Responsible Entity Fee. The Japan Asset Manager is also paid fees under the Japan Property Management Agreements described in Section 11.1.8. These fees are not included as a management cost in Sections 5.1, 5.2 and 5.3.

It is assumed that GST applies to the Base Responsible Entity Fee and Fund Management Fee and that 75% reduced input tax credits are available to CKT. However, should CKT be entitled to more than reduced input tax credits, the relevant fees may be lower. It is also assumed that other fees specified in this Section 5.4 do not attract Australian GST or, if GST were to apply, full input tax credits are available. However, should this not be the case, the relevant fees may be higher.

⁴ This fee amount is reduced by the Fund Management Fee payable to the Manager described in the table.

⁵ Using exchange rate of ¥92.1 to \$1.00.

⁶ Included as a management cost in Sections 5.1, 5.2 and 5.3. Estimated to be nil.

⁷ Not included as a management cost in Sections 5.1, 5.2 and 5.3.

* Included in 'other expenses' as a management cost in Sections 5.1, 5.2 and 5.3. Estimated to be nil.

From time to time, Challenger or its subsidiaries may be appointed to provide services to the Responsible Entity or the Manager in areas where it is in the best interests of CKT to seek professional support. This may include the provision of execution services in relation to interest rate and foreign exchange hedging. Any appointment will be on an arm's length commercial basis and subject to approval by non-executive directors of the Responsible Entity.

5.5 Fees and expenses of the Offer

Fee	Amount	How and when paid
Australian Sponsor's Fee	\$2.2 million (0.5% of the purchase price of CKT's direct and indirect proportionate interest in the Properties)	Payable to the Responsible Entity from the assets of CKT on the date CKT is listed on ASX
Japan Sponsor's Fee	\$2.2 million (0.5% of the purchase price of the Properties)	Payable to the Japan Asset Manager from the assets of the Sub TK Business on completion of the first acquisition of a Property
Underwriting and management fee	\$7.1 million (2.5% of the underwritten amount (\$300 million) plus out of pocket expenses).	Payable to UBS AG, Australia Branch from the assets of CKT, with \$5.3 million payable on completion of the Offer and \$1.8 million payable upon the Second Instalment Payment Date or, if the call is not made, then on the earlier of the time Unitholders are notified that the Responsible Entity has foregone the right to make the call and 4 August 2008
Financial advisory fee	\$2.3 million	Payable to UBS AG, Australia Branch from the assets of CKT, on completion of the Offer
Broker Firm Fee (for processing applications received under the Broker Firm Offer)	Up to 1.5% of the Application Monies in respect of Units pursuant to the Broker Firm Offer. Estimated to be \$1.6 million. There is a \$3,000 cap on Broker Firm Fees for any one Application or aggregate of Applications if a single investor submits more than one Application	Payable to member organisations of ASX and members of the Financial Planning Association from the assets of CKT, on completion of the Offer
Other issue expenses (costs associated with the Offer, including legal fees, investigating accountant's fees, registry fees and printing fees)	\$2.8 million	Payable to various third parties, including ASX, registry, lawyers, accountants, printers and other providers of professional services as incurred out of the Offer proceeds
Other property acquisition costs	\$2.2 million	Payable to various third party valuers, and other providers of professional services as incurred out of the assets of the TK Business, the Sub TK Business or out of TK contributions
Total	\$20.4 million

This table breaks down the aggregate fees and expenses of the Offer of \$20.4 million (or \$4,653 for every \$50,000 invested in the Offer) as set out in the fees and costs template in Section 5.1.

Fees and expenses of the Offer are not included as an ongoing management cost in Sections 5.1, 5.2 and 5.3.

Consistent with AIFRS, certain fees and expenses of the Offer and minority interests have been deducted from the net asset. value of CKT. The total amount of fees and expenses of the Offer that have been deducted from the net asset value of CKT is \$16.0 million. The resulting net asset value per Unit post acquisition of Carino Chitosedai (expected in June 2007) is

\$1.46, assuming that the Second Instalment is not called or paid. For an initial investment of \$50,000, the total fees and expenses of the Offer that have been deducted from the net asset value of CKT amounts to \$3,650 (out of the \$4,653 calculated above).

The Australian Sponsor's Fee, underwriting and management fee, financial advisory fee and Broker Firm Fee are assumed to be subject to Australian GST and to qualify for 75% reduced input tax credits, while the Japan Sponsor's Fee is not expected to attract Australian GST. Should this not be the case, the relevant fees may vary. Other fees and expenses are merely estimates.

5.6 Additional explanation of fees and costs

Early payment of management fees in some events

If the Responsible Entity is removed as responsible entity of CKT or CKT terminates, is delisted, is the subject of a takeover or undertakes a scheme of arrangement (such scheme effecting a merger that materially changes the ownership of CKT), all amounts of Base Responsible Entity Fees, Asset Management Fees and Performance Fees, shall automatically become due and payable. This includes accrued and accruing Base Responsible Entity Fees, and Asset Management Fees, and for any Performance Fees includes entitlement to payment for any excess performance fees carried forward. This payment will not be subject to the 0.5% payment cap on Performance Fees (discussed below in this Section).

Performance Fee

There are two components of the Performance Fee, an Asset Performance Fee and a Trust Performance Fee. For so long as the Responsible Entity is a related body corporate of Challenger, the performance fees otherwise payable under the Trust Performance Fee are reduced by performance fees payable under the Asset Performance Fee. Thus, if the responsible entity for the time being is not a related body corporate of Challenger, both the Asset Performance Fee (if any) and the Trust Performance Fee (if any) will be payable in full.

Asset Performance Fee

The Asset Performance Fee is calculated in two tiers as follows:

A Tier 1 Asset Performance Fee calculated as 5% of the amount (denominated in Yen) equivalent to the amount by which the total return of the properties exceeds the Asset Benchmark up to 1% outperformance.
A Tier 2 Asset Performance Fee which is applicable only where the properties produce a total return outperformance. in excess of 1% per annum above the Asset Benchmark. This tier of the fee is calculated as 15% of the amount (denominated in Yen) equivalent to the amount by which the total return of the properties is in excess of 1% per annum above the Asset Benchmark (described below).

The total return of the properties is calculated as their internal rate of return, based on monthly period cash flows including net income, interest expense, payments with respect to acquisitions, disposals, debt and other liabilities, capital expenditure and fees but before withholding tax and currency hedging impact. The final monthly cash flow will include the market value of the properties less the value of associated interest bearing debt and other liabilities.

For the first Performance Fee Period starting 1 July 2007, the cash flow for the first month will include the market value of the properties less the value of associated interest bearing debt and other liabilities.

The Asset Benchmark is 10% p.a. The level of the Asset Benchmark will be reviewed if there has been a macroeconomic change that makes this level inappropriate. The formula for calculating the fee contemplates that CKT may invest in other properties in the future. Therefore, returns associated with any such investments will automatically be included in the calculation

Before any Asset Performance Fee is payable, any cumulative underperformance over the three year period to the calculation. date must be recovered.

50% of the Asset Performance Fee is payable to the Japan Asset Manager from the assets of the Sub TK Business denominated in Yen. The other 50% is payable to the Responsible Entity from the assets of CKT denominated in Australian dollars. The Asset Performance Fee is calculated annually, and the first period for the purpose of the calculation and payment of the Asset Performance Fee will be from 1 July 2007 to 30 June 2008.

Trust Performance Fee

The Trust Performance Fee is calculated in two tiers as follows:

A Tier 1 Trust Performance Fee equal to 5% of average monthly market capitalisation of CKT multiplied by the percentage by which the total return of CKT exceeds the Trust Benchmark, up to 2% outperformance.
A Tier 2 Trust Performance Fee which is applicable only where CKT produces a total return outperformance in excess of 2% per annum above the Trust Benchmark. This tier of the fee is calculated as 15% of average monthly market capitalisation of CKT multiplied by the percentage by which the total return of CKT is in excess of 2% per annum above the Trust Benchmark.

The total return of CKT is calculated based on CKT's accumulation index as calculated by S&P. The Trust Benchmark is the S&P/ASX 200 Property Trusts Accumulation Index (removing CKT from the Index). Before any Trust Performance Fee is payable, any cumulative underperformance over the prior three year period to the calculation date must be recovered.

50% of the Trust Performance Fee is payable to the Japan Asset Manager from the assets of the Sub TK Business denominated in Yen. The other 50% is payable to the Responsible Entity from the assets of CKT denominated in Australian dollars.

The Trust Performance Fee is calculated annually, except that the first period for the purpose of the calculation and payment of the Trust Performance Fee will be from the date of listing of the Units on ASX to 30 June 2008.

Payment Cap on Performance Fee

The Performance Fee paid in any one year must not exceed 0.5% of the value of CKT's direct or indirect proportionate interest in properties and other assets at the end of that year. Any excess will be carried forward into future years and will be paid to the extent to which the Performance Fee pavable in any year is less than the 0.5% cap. Any excess which has been carried forward for at least three years is then payable and this payment of outstanding fees will not be capped. Accordingly, it is possible that the payment of the Performance Fee within a particular year could exceed 0.5% of CKT's assets, particularly after periods where there has been three years of cumulative outperformance.

The 0.5% payment cap on performance fees also does not apply in certain events where early payment of fees is made (discussed above in this Section).

Election by the Responsible Entity to receive its portion of the Performance Fee in Units

The Responsible Entity, at its own discretion, may elect to receive its portion of the Performance Fee in any proportion of cash or Units. If the Responsible Entity elects for its portion of the Performance Fee to be paid, in whole or in part, in Units, the number of Units to be issued in consideration for the Performance Fee is calculated as:

Number of units $=$ Performance Fee Unit subscription price

where the Unit subscription price is equal to the greater of the volume weighted average daily sale price of all Units traded in normal trading on ASX during the 10 trading days after the date on which Unitholders become entitled to the final distribution for the relevant year and the net tangible asset backing per Unit at the end of the year for which the Performance Fee was earned.

The Manager may by agreement be paid its fees in Units. The number of Units to be issued to the Manager is calculated in the same way as an issue to the Responsible Entity.

Performance Fee example

These examples are indicative only and do not purport to represent the likely Performance Fees (if any) payable by CKT. The Financial Forecasts in Section 10 have assumed that no Performance Fee is payable during the Forecast Period.

Hypothetical example 1 - Asset Performance Fee (tier 1 only)

As a hypothetical example of the Asset Performance Fee calculations, if the internal rate of return of the Properties was 11%, the outperformance over the Asset Benchmark (of 10%) would be 1% for the year, such outperformance assumed for the purpose of this hypothetical example being the equivalent to an amount of ¥202.5 million.

In the example above, the amount of the Asset Performance Fee would be:

Tier 1 Asset Performance Fee: 5% excess performance amount of ¥202.5 million = ¥10.1 million; and
Tier 2 Asset Performance Fee: Nil, as total outperformance does not exceed 1% per annum.

Hypothetical example 2 - Asset Performance Fee (tier 1 and tier 2)

In a different hypothetical example, the Properties' internal rate of return for the year was 14%, being a 4% outperformance of the Asset Benchmark assumed for the purpose of this hypothetical example being the equivalent to an amount of ¥810 million and 3% outperformance of the Tier 2 performance hurdle being the equivalent to an amount of ¥607.5 million. In this example the amount of the Asset Performance Fee would be calculated as follows:

Tier 1 Asset Performance Fee: 5% x excess performance amount of ¥202.5 million (¥810 million -- ¥607.5 million) = ¥10.1 million; and
Tier 2 Asset Performance Fee: 15% x excess over Tier 2 outperformance hurdle amount of ¥607.5 million = ¥91-1 million

Therefore the total Asset Performance Fee $=$ Tier 1 Asset Performance Fee of ¥10.1 million + Tier 2 Asset Performance Fee of ¥91.1 million = ¥101.2 million for the year, that is, \$1.1 million (assuming a currency exchange rate of ¥92.1 per $$1.00$ ).

See hypothetical examples 5 and 6 below for examples of how the crediting mechanism works for the Trust Performance Fee and Asset Performance Fee.

Hypothetical example 3 - Trust Performance Fee (tier 1 only)

As a hypothetical example of the Trust Performance Fee calculations, if the Trust Benchmark had returned 8% for a year. and CKT had returned 9%, the outperformance would be 1% for the year. It is assumed for the purpose of this hypothetical example that the average monthly market capitalisation of CKT is \$235.5 million. Note that it would be expected that the market capitalisation of CKT would grow with the appreciation of the security price such that the Trust Performance Fee payable will be greater.

In the example above, the amount of the Trust Performance Fee would be:

Tier 1 Trust Performance Fee: 1% total outperformance x average monthly market capitalisation of \$235.5 million x 5% = \$117,750; and
Tier 2 Trust Performance Fee: Nil, as total outperformance does not exceed 2% per annum.

See hypothetical example 6 below for an example of how the crediting mechanism works for Trust Performance Fee and Asset Performance Fee.

Hypothetical example 4 - Trust Performance Fee (tier 1 and tier 2)

In a different hypothetical example, CKT's performance for the year was 14%, and the Trust Benchmark returned 8% during the same period (6% outperformance), the amount of the Trust Performance Fee would be calculated as follows:

Tier 1 Trust Performance Fee: 2% (Tier 1 outperformance up to 2%) x average monthly market capitalisation of \$235.5 million x 5% = \$235,500; and
Tier 2 Trust Performance Fee: 4% (6% 2%) Tier 2 outperformance x average monthly market capitalisation of \$235.5 million x 15% = \$1.4 million.

Therefore the total Trust Performance Fee = Tier 1 Trust Performance Fee of \$235,500 + Tier 2 Trust Performance Fee of \$1.4 million = \$1.6 million for the year.

See hypothetical example 5 below for an example of how the crediting mechanism works for the Trust Performance Fee and Asset Performance Fee.

Hypothetical example 5 - Crediting mechanism

As a hypothetical example of the crediting mechanism of the Performance Fee, in a year, assume that the performance fees would be calculated as follows:

total of Tier 1 and Tier 2 Asset Performance Fee = $4101.2$ million or \$1.1 million at currency exchange rate of ¥92.1 per \$1.00 (as per Hypothetical Example 2); and
total of Tier 1 and Tier 2 Trust Performance Fee = $$1.6$ million (as per Hypothetical Example 4).

The payments made under the Asset Performance Fee are credited to the payment of the Trust Performance Fee. In this case the total Performance Fee is \$1.6 million, comprising Asset Performance Fee of ¥101.2 million (\$1.1 million) and Trust Performance Fee of \$0.5 million (\$1.6 million - \$1.1 million).

This crediting mechanism only applies where the Responsible Entity is a related body corporate of Challenger.

Hypothetical example 6 - Crediting mechanism

In a different hypothetical example of the crediting mechanism of the Performance Fee, in a year, assume that the performance fees would be calculated as follows:

total of Tier 1 and Tier 2 Asset Performance Fee = ¥101.2 million or \$1.1 million at currency exchange rate of ¥92.1 per \$1.00 (as per Hypothetical Example 2); and
total of Tier 1 and Tier 2 Trust Performance Fee = $$117,750$ (as per Hypothetical Example 3).

The payments made under the Asset Performance Fee are credited to the payment of the Trust Performance Fee, and since the resultant number is less than zero (\$117.750 - \$1.1 million). the Trust Performance Fee is taken to be zero. In this case the total Performance Fee is ¥101.2 million (or the equivalent of \$1.1 million), comprising Asset Performance Fee of ¥101.2 million and Trust Performance Fee of zero.

This crediting mechanism only applies where the Responsible Entity is a related body corporate of Challenger.

Hypothetical example 7 - Payment cap mechanism

As a hypothetical example of the payment cap mechanism, assume that CKT's direct and indirect proportionate interest in properties and other assets at the end of the year was \$479 million (as per 97% of the pro forma gross asset value post acquisition of Carino Chitosedai) and assume that the Performance Fee is \$5.0 million. This is in excess of the 0.5% Performance Fee cap (being $0.5\% \times $479$ million = \$2.4 million). Therefore, of the Performance Fee, \$2.4 million is paid in that year, and \$2.6 million (\$5.0 million - \$2.4 million) is carried forward to be paid in future years. At the end of the third year, any remaining excess is payable in any event.

Reimbursement of expenses

All expenses properly incurred by the Responsible Entity in connection with CKT are payable or reimbursable out of the assets of CKT to the extent the Constitution allows. This includes formation and promotion expenses for CKT and the Financial Adviser and the Underwriter's fees, establishing the acquisition structure, acquiring the Properties and work on due diligence. and the costs of producing this PDS. It also includes routine ongoing expenses such as costs of registry, listing, audit, insurance, marketing, compliance and other expenses, but no overheads or in-house administration expenses not included in an item expressly listed in the Constitution.

The Manager is entitled to reimbursement of expenses, other than overheads and in-house administration costs, arising out of or in connection with provision of the services under the Management Agreement. These expenses may only be paid out of the assets of CKT if the reimbursement relates to the proper performance of the duties of the Responsible Entity as responsible entity of CKT.

The Japan Asset Manager and Japan Investment Manager are not entitled to be reimbursed for any expenses, costs or charges which are outside the scope of the annual budget of the Sub TK Operator and the Master TK Operator, respectively. However, the Japan Asset Manager is entitled to be reimbursed for reasonable travel expenses relating to marketing trips.

Australian GST

If the Responsible Entity is or becomes liable to pay Australian GST on supplies it makes to CKT then, to the extent that the consideration is not already agreed to be GST inclusive, the Responsible Entity is entitled to be reimbursed out of the assets of CKT for an additional amount equal to the GST payable.

Japanese consumption tax

If the Master TK Operator or Sub TK Operator is or becomes liable to pay Japanese consumption tax, it is entitled to be reimbursed out of the assets of the respective TK business.

6. Japanese real estate markets

6.1 Overview of Japanese economy

The Japanese real estate market is underpinned by the Japanese economy; the world's third largest as measured by GDP. Real GDP for fiscal year 2006 was ¥548.1 trillion, reflecting an annualised growth rate of 2.2%. The Consumer Price Index as at December 2006 was up 0.3% over the previous year and unemployment levels were low by global standards at 4.1%. Retail and wholesale sales for the month of December 2006 were ¥55.3 trillion, reflecting an annual increase of 2.9%.

6.2 Japanese population and demographics

In 2005, Japan's population was measured at 128 million people, the 10th largest in the world. Japan's population is highly urbanised with a strong concentration toward large prefectures. In 2005, Tokyo had the largest population amongst Japan's 47 prefectures with 12.6 million citizens. Following Tokyo in descending order are the prefectures of Osaka, Kanagawa, Aichi and Saitama. These five prefectures each had a population of seven million or more, and together accounted for 34.8% of the total Japanese population.

Two important drivers of real estate investment performance are corporate profitability and price inflation, both of which are showing signs of improvement in Japan. As illustrated in the following charts, the prices of general goods and services have been increasing, as well as consumer confidence.

Consumer Price Index (CPI) (MoM%)

Consumer Confidence Index

6.3 Overview of Japanese real estate market

Compared with the Australian real estate market, the underlying land value in Japan generally represents a relatively larger component of the overall property value. After a lengthy period of substantial decline, land prices are now starting to recover in Japan as shown below:

Commercial urban land prices (2000=100)

6.4 Overview of Japanese retail market

Japan's retail property market has experienced a healthy period of consolidation in recent years:

the June 2000 introduction of the Large Retail Store Location Law has slowed the development of large-scale shopping centres; $\bullet$
average floor space per store has increased; and
the total number of retail properties has declined, albeit the number still stood at 1.24 million in 2004. $\bullet$

This consolidation has helped retailers, as a whole, maintain sales turnover, both on a per store and per square metre basis, which is important for retailer profitability and their ability to pay rent.

Solid economic fundamentals support a strengthening retail real estate market. Following recession, Japan's economy is recovering and is now characterised by positive GDP growth and high levels of employment. This buoyancy is feeding through to an improving retail spending environment. Total retail sales for 2006 were ¥130 trillion showing year on year growth of 0.2%, reflecting a turnaround in the Japanese economy.

Consumer confidence levels have been showing strong positive performance for the past three years based on the improving overall economic climate.

Source: METI (Ministry of Economy, Trade and Industry)

Floor space and annual sales per store

IIIIIIIIIIIIII Sales Soor area ner store

Source: METI (Ministry of Economy, Trade and Industry)

Annual sales per store

6.5 Real estate market practices

Standard Leases

Under Standard Leases a tenant has the right to continue in possession after expiry of the term of the lease unless there are justifiable grounds for the tenant's eviction. Under Standard Leases without a specified term (or for a term of less than one year), tenants may terminate a lease by three months prior notice or such other reasonable period of notice as is specified in the lease. Tenant rights may make it difficult to redevelop or consolidate blocks of property for large-scale redevelopment because requiring tenants to vacate and relocating tenants is costly and protracted due to their rights under Standard Leases. Legislation also provides that a tenant or a landlord under a Standard Lease may seek to have the rent reviewed where it is unreasonable (with such issues determined judicially). In practice this right might be used by tenants where market rates are declining and by landlords where market rates are increasing.

It is possible for Standard Leases to contain provisions dealing with the timing of rent reviews. Such provisions would usually be taken into account by a court if a dispute arose between the parties when assessing whether a party has a reasonable basis for claiming the remedy sought. Accordingly, such provisions give each party an element of commercial certainty concerning the terms of the lease.

Fixed Term Leases

Landlords and tenants have the option of entering into Fixed Term Leases that do not give tenants the rights to continue in possession described in relation to Standard Leases. Fixed Term Leases are becoming more common in larger and newer buildings.

Land title system

Land title and security interests are recorded on public registers named 'tokibo' for land. However, clear title is not quaranteed by registration. The land title system operates on a 'first in time' principle where priority of title or an interest to land is conferred upon the earlier registered title or interest holder. Land and buildings are registered separately in Japan.

Further, the land title system does not operate to quarantee boundaries or the size of the subject land. Boundaries are confirmed by agreement with individual owners of adjacent parcels of land. This from time to time leads to circumstances where boundary confirmations may not have been procured from all adjacent owners.

Trust banks

Trust banks in Japan that hold property take a greater role in property transactions than custodians in Australia. For example, trust banks undertake due diligence and have 'know your' customer' requirements. Transfers of trust interests in Japan are intended to be straightforward but trustees have the right to approve such transfers, and they may scrutinise new beneficiaries to ensure that transfers are not made to undesirable beneficiaries.

Floor area measurement

Floor space is measured and calculated from centre wall to centre wall. Although the official unit of measure is square metres, the real estate industry typically measures area in units of 'Tsubo' where:

1 Tsubo = 3.3 square metres = 35.58 square feet

Properties can be designated as 'gross space tenancies' or 'net space tenancies', depending on whether the tenant is required to pay rent on common areas such as elevator fovers. washrooms and kitchenettes. Generally, large floor plate properties which can accommodate multiple tenants per floor are contracted on a net space basis, and small single tenant per floor buildings are contracted on a gross space basis.

Rent

Rent for commercial leases is typically broken up into two parts in Japan: base rent and maintenance fees. Both base rent and maintenance fees are calculated on a per Tsubo per month or per square metre per month basis. When analysing base rent, three terms are commonly employed, as follows:

* asking rent is the advertised rent quoted by the landlord to brokers and the public;
· passing rent is the rent amount negotiated between existing tenants and the landlord at lease renewal time. Obtaining reliable information on passing rents is difficult because tenants and landlords alike treat this information very confidentially; and
taking rent is the rent amount negotiated between the landlord and tenants for a new lease.

Rents are usually paid monthly in advance for the following month via automatic bank transfer.

Common area maintenance (CAM) fees

CAM fees represent the fees charged by the landlord for general building maintenance and upkeep of common areas and may include air conditioning and heating during normal business hours. Utilities for leased space are usually separately metered and paid by the tenant, as are cleaning fees for tenant space. CAM fees are generally based on the operating cost of the building, but there is no tenant right to audit the fee. CAM fees in Japan are generally about 15-20% of the base rent depending on service quality and quantity, compared with 8-10% internationally. There is often a profit component in the maintenance fees in Japan. Maintenance fees are also subject to readjustment at contract renewal and other occasions.

Other fees

Miscellaneous fees for parking, tenant improvements and repair fees particular to tenant space, tenant usage of building signboards and other common expenses may be billed separately from the rent or maintenance fee. This practice varies by property and landlord.

Tenant security deposits

The practice for security deposits is for the tenant to pay a deposit equal to a negotiated number of months of base rental equivalent. Tenant deposits may vary widely by property, landlord and tenant

Security deposits are generally unsecured and do not earninterest for the tenant during the term of the lease. Deposit money, less any deductions for outstanding rent, damages to the property, or other claims by the landlord, is usually refunded to the tenant within a reasonable period (usually a month) after the tenant vacates and restores the premises to the original condition.

If a property is sold during the course of a tenancy, the deposit obligation falls to the new landlord, who would typically deduct the assumed deposit obligation from the cash settlement of the purchase price.

Rent-free period

If a free rent period is granted in the lease agreement, it is generally limited to the period of rental overlap that occurs while the tenant is waiting out the notice of cancellation at the tenant's prior tenancy.

Restoration

In Japan, the landlord usually provides space to the tenant in a 'white box' condition. This means all space is finished with all lighting and heating and ventilation systems, all base electrical and telephone wiring, suspended ceiling tiles, finished and painted walls, floor covering (either tile or tile carpeting), fully finished window treatment (often with blinds provided), fully furnished elevator foyer and washrooms and kitchenette.

In Japan it is the obligation of the tenant to restore premises to the original condition when space is vacated. This process is called 'making good' and includes making retrograde repairs to any system improvements made during the tenancy. Normally these repairs are completed by the landlord's designated contractor.

New building codes and earthquake risk

Building codes for improved earthquake resistant structures were implemented in 1981. For these reasons, in addition to more intensive facility usage, most foreign investors only consider modern, newly constructed facilities.

In Japan, earthquake risk is measured by Probable Maximum Loss (PML). PML is defined as the probable maximum loss (i.e. repair and re-procurement expenses) that would be incurred if an earthquake struck. Specifically, it means the loss generated by the largest earthquake that has a 10% probability of occurring during a 50 year assumed service life of a building (earthquakes of the type have a probability of occurrence once every 475 years).

Lenders and financial investors in Japan are more likely to require earthquake insurance as a condition of providing finance when a PML for a property is in excess of 15%.

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7. Property summaries

Carino Chitosedai

3-20, Chitosedai, Setagaya, Tokyo, Japan	Address:
------------------------------------------	----------	--	--	--	--	--

Under construction, expected to be acquired in June 2007

Property overview

13 minute walk from 'Chitose-Funabashi' station on the Odakyu Odawara Line

Sub-market: Setagaya, Tokyo

Property type: Fitness Gym and Apparel Parking: 227

Acquisition summary

Economic interest	97%
Purchase price (million) excluding acquisition costs	¥9.489
Initial vield	5.0%
Independent valuation
Valuer	CBRE
Valuation (million)	¥10,000
Direct capitalisation rate	4.7%
Discount rate	4.6%

Property statistics

Land area	4.939 sam
Net rentable area	9,925 sqm (3,002 Tsubo)
2008E net property income (million)	¥471 7
Occupancy	100%
Year completed	2007
PML	n/ai

¹ Not available, under construction.

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date
Central Sports Co.	Fitness Chain	Fixed Term Lease	¥266 6	56.5%	April 2027
UNIOLO	Clothina	Fixed Term Lease	¥205 1	43.5%	April 2017
Total/Average			¥471.7	100%	April 2022

Assumes tenants do not terminate leases prior to specified lease term. Most leases may be cancelled at the tenant's option prior to end of their
specified term. Further detail is contained in Sections 4.1 and 6.5. Based on $\bar{z}$

MANA

Carino Tokiwadai

Itabashi, Tokyo
Fitness Gym and Supermarket
163
Acquisition summary		Property statistics
	97%	Land area	4,511 sqm
Purchase price (million) excluding acquisition costs	¥6.029	Net rentable area	7,699 sqm (2,329 Tsubo)
	4.9%	2008E net property income (million)	¥298.0
		Occupancy	100%
		Year completed	2006
		PML	4.8%

	4.5%
	Independent valuation Direct capitalisation rate	8 minute walk from 'Tokiwadai' station on the Tobu-tojo Line CBRE ¥6,540 4.6%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date ^®
Central Sports Co.	Fitness Chain	Standard Lease	¥159 7	53.6%	March 2026
K.K. Santoku	Supermarket	Standard Lease	X1383	46.4%	March 2026
Total/Average			¥298.0	100%	March 2026

Izumiya Hakubaicho

Address:	I. Shiraumecho, Kistanoshita, Kita-ku, Kvoto-shi, Kvoto, Japan- 6–1	To be acquired before listing

Property overview

1 minute walk from 'Kitano Shiraumecho' station on the Keifuku Dentetsu Kitano Line

Sub-market:	Kvoto, Kvoto
Property type:	General Merchandise Store
Parking:	152

Acquisition summary

Economic interest	97%
Purchase price (million) excluding acquisition costs	¥5.630
Initial vield	5.2%
Independent valuation
Valuer	HIRO & REAS
Valuation (million)	¥5.720
Direct capitalisation rate	5.0%
Discount rate	5.0%

Property statistics
Land area	4.534 sqm
Net rentable area	16,525 sqm (4,999 Tsubo)
2008E net property income (million)	¥290-1
Occupancy	100%
Year completed	1989
PMIL	14 A%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date
Izumiya	General	Fixed Term Lease	¥290-1	100%	March 2026
	Merchandise Store
Total/Average			¥290.1	100%	March 2026

MANA

Unicus Ina

Address:	1125-1, Kitahara, Oobari, Ooaza, Ina-machi, Saitama Pref., Japan			To be acquired before listing
Property overview
	6 minute walk from 'Hanuki' station on the Saitama-Shintoshi-Kotsu Line
Sub-market:	Ina-machi, Saitama
Property type:	Supermarket
Parking:	682
Acquisition summary			Property statistics
Economic interest		97%	Land area	32,560 sqm
	Purchase price (million) excluding acquisition costs	¥4,666	Net rentable area	13,044 sqm (3,946 Tsubo)
Initial yield.		4.9%	2008E net property income (million)	¥230.2
			Occupancy	100%
Independent valuation			Year completed	2006
Valuer		HIRO & REAS	PML	5.6%
Valuation (million)		¥4,780
Direct capitalisation rate		4.7%
Discount rate		4.7%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date ^®
P&D Consulting	Commercial	Standard	¥230.2	100%	September 2026
	Property Manager	Lease
Total/Average			¥230.2	100%	September 2026

Valor Toda

To be acquired before listing

Address: 34th ward, Tochikukaku-Seirichi-Nai, Toda, Timita-cho Ooaza, Nakagawa-ku, Nagoya-shi, Aichi Pref., Japan

Property overview

10 minute walk from 'Haruta' station on the JR Kansai Honsen Line

Nagoya, Aichi Sub-market:
------------------------------	--

Property type: Supermarket

Parking: 174 (access to over 800)

Acquisition summary^®

Economic interest Purchase price (million) excluding acquisition costs Initial yield	97% ¥3.657 5.2%
Independent valuation
Valuer	CBRE
Valuation (million)	¥3,700
Direct capitalisation rate	5.1%
Discount rate	4.6%

Property statistics

Land area	16,438 sam
Net rentable area	14,921 sqm (4,513 Tsubo)
2008E net property income (million)	¥189.0
Occupancy	100%
Year completed	2005
PML	12.2%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date
Valor Co.	Supermarket	Fixed Term Lease	7189 U	100%	October 2025
Total/Average			¥189.0	100%	October 2025

¹ Part of the land to be acquired is by way of a long-term leasehold interest.

......................................

Lifa Hinachinakano

Address:		3-9-7, Higashi Nakano, Nakano-ku, Tokyo, Japan
Property overview
	3 minute walk from 'Higashi Nakano' station on the JR Sobu Line
Sub-market:	Nakano, Tokyo
Property type:	Supermarket
Parking:	53
Acquisition summary			Property statistics
Economic interest		97%	Land area	2,711 sqm
	Purchase price (million) excluding acquisition costs	¥2,659	Net rentable area	5,104 sqm (1,554 Tsubo)
Initial yield		5.0%	2008E net property income (million)	¥134.2
			Occupancy	100%
Independent valuation			Year completed	1999
Valuer		HIRO & REAS	PML	6.5%
Valuation (million)		¥2,720
Direct capitalisation rate		4.8%
Discount rate		4.8%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date
Life Corp.	Supermarket	Standard Lease	¥1342	100%	-September 2019
Total/Average			¥134.2	100%	September 2019

⁵ Assumes tenants do not terminate leases prior to specified lease term. Most leases may be cancelled at the tenant's option prior to end of their
specified term. Further detail is contained in Sections 4.1 and 6.5.

Life Asakusa

3-18-17, Nishi-Asakusa, Taito-ku, Tokyo, Japan Address:

To be acquired before listing

Property overview

9 minute walk from 'Tahara-machi' station on the Ginza Line

Sub-market:	Taito, Tokvo
Property type:	Supermarket
Parking:	12

Acquisition summary

Acquisition summary
Economic interest	97%
Purchase price (million) excluding acquisition costs	¥2.309
Initial yield	5.1%
Independent valuation
Valuer	HIRO & REAS
Valuation (million)	¥2.310
Direct capitalisation rate	4.8%
Discount rate	4.8%

Property statistics

Land area	1,278 sam
Net rentable area	3,753 sqm (1,135 Tsubo)
2008E net property income (million)	¥117.6
Occupancy	100%
Year completed	1998
PML	8.4%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date
Life Corp.	Supermarket	Standard Lease	¥117 6	100%	June 2018.
Total/Average			¥117.6	100%	June 2018

Assumes tenants do not terminate leases prior to specified lease term. Most leases may be cancelled at the tenant's option prior to end of their
specified term. Further detail is contained in Sections 4.1 and 6.5.

......................................

Osada Nagasaki

Address:	2145, Hinami-gou, Togitsu-cho, Nishisonogi-gun, Nagasaki-Pref., Japan			To be acquired before listing
Property overview
	30 minute bus ride from 'Nagayo' station on the JR Nagasaki-Honsen Line
Sub-market:	Nishisonogi, Nagasaki
Property type:	Home Centre
Parking:	519
Acquisition summary			Property statistics
Economic interest		97%	Land area	27,942 sqm
	Purchase price (million) excluding acquisition costs	¥1,750	Net rentable area	10,330 sqm (3,125 Tsubo)
Initial vield		6.4%	2008E net property income (million)	¥111.2
Independent valuation			Occupancy	100%
Valuer		HIRO & REAS	Year completed	1997
			PML	2.6%
Valuation (million)		¥1.750
Direct capitalisation rate		5.9%
Discount rate		5.9%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date
Osada Ltd.	Home Centre	Fixed Term Lease	¥111 2	100%	March 2026.
Total/Average			¥111.2	100%	March 2026

¹ Assumes tenants do not terminate leases prior to specified lease term. Most leases may be cancelled at the tenant's option prior to end of their
specified term. Further detail is contained in Sections 4.1 and 6.5.

Yaoko Sakado Chiyoda

Address:		2-6-70, Chiyoda, Sakado-shi, Saitama Pref., Japan
----------	--	---------------------------------------------------	--	--

To be acquired before listing

Property overview

15 minute walk from 'Wakaba' station on the Tobu-Tojo Line

Sub-market:	Sakado, Saitama
Property type:	Supermarket
Parking:	256

Acquisition summary

Economic interest Purchase price (million) excluding acquisition costs Initial yield	97% ¥1,510 4.9%
Independent valuation
Valuer	HIRO & REAS
Valuation (million)	¥1,530
Direct capitalisation rate	4.9%
Discount rate	4.9%

Property statistics

Land area	10,025 sam
Net rentable area	5,492 sqm (1,661 Tsubo)
2008E net property income (million)	¥74 3
Occupancy	100%
Year completed	2000
PML	8.2%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date ^®
Yaoko	Supermarket	Standard Lease	¥74 3	100%	September 2021
Total/Average			¥74.3	100%	September 2021

MANA

Sunny Noma

Address:	3, Noma, Minami-ku, Fukuoka-shi, Fukuoka-Pref., Japan			To be acquired before listing
Property overview
	9 minute walk from 'Takamiya' station on the Nishitetsu-Ohmuta Line
Sub-market:	Fukuoka, Fukuoka
Property type:	Supermarket
Parking:	130.
Acquisition summary $^2$			Property statistics
Economic interest		97%	Land area	5,973 sqm
	Purchase price (million) excluding acquisition costs	¥1,417	Net rentable area	2,887 sqm (873 Tsubo)
Initial yield		5.7%	2008E net property income (million)	¥80.5
Independent valuation			Occupancy	100%
			Year completed	2007
Valuer		HIRO & REAS	PML	n/a
Valuation (million)		¥1,440
Direct capitalisation rate		5.0%	Not available, under construction,
Discount rate		5.0%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date ³
Sunny Co	Supermarket	Fixed Term Lease	¥80 5	100%	March 2037
Total/Average			¥80.5	100%	March 2037

² Part of the land to be acquired is by way of a long-term leasehold interest.

Kansai Super Saigo

Addi	ch. Japar he esta . монатыр ורו *INCK* ∼. .	stinc a Healty سائلاتا . 31 P.F
----

Property overview

10 minute walk from 'Moriguchi-shi' station on the Keihan-Honsen Line

Sub-market: Moriguchi, Osaka Supermarket Property type: Parking: $71$

Acquisition summary

Economic interest Purchase price (million) excluding acquisition costs Initial vield	97% ¥1,057 6.0%
Independent valuation
Valuer	HIRO and REAS
Valuation (million)	¥1.110
Direct capitalisation rate	5.1%
Discount rate	5.1%

Property statistics

Land area	4,074 sam
Net rentable area	2,642 sqm (799 Tsubo)
2008E net property income (million)	¥63.3
Occupancy	100%
Year completed	1998
PML	11.9%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date ^®
Kansai Super Market Ltd.	Supermarket	Standard Lease	¥63.3	100%	– September 2018
Total/Average			¥63.3	100%	September 2018

To be acquired before listing

Kojima Nishiarai

1-39, Nishiaraí, Adachi-ku, Tokyo, Japan

Address:

Property overview
	7 minute walk from 'Taishi-mae' station on the Tobutaishi Line
Sub-market:	Adachi, Tokyo
Property type:	Mass Merchandiser
Parking:	42
Acquisition summary			Property statistics
Economic interest		97%	Land area	2,082 sqm
	Purchase price (million) excluding acquisition costs	¥837	Net rentable area	3,755 sqm (1,136 Tsubo)
Initial vield		5.7%	2008E net property income (million)	¥47.8
Independent valuation			Occupancy	100%
Valuer		CBRE	Year completed	1992
Valuation (million)		¥971	PML	6.2%
Direct capitalisation rate		5.6%
Discount rate		5.3%

Tenant summary

Tenant name	Industry	Lease type	2008E NPI (million)	% of total NPI	Lease expiry date
Kojima Co.	Mass
	Merchandiser	Standard Lease ²	¥47.8	100%	July 2011
Total/Average			¥47.8	100%	July 2011

² Lease to Kojima Co. is a sublease. Sub lessor will be the Sub TK Operator.

8. Overview of Board and management

8.1 Management of CKT

Responsible Entity

The Responsible Entity of CKT is CLIL, a wholly-owned subsidiary of Challenger. The Responsible Entity will hold the investments of CKT as trustee or through a custodian. The Responsible Entity must operate CKT in accordance with the Corporations Act and its Constitution and is generally responsible for the management of CKT and its contributions to the TK Business. It has engaged the Manager to assist it in discharging its responsibilities.

The key responsibilities of the Responsible Entity in relation to CKT include:

reporting to Unitholders; $\bullet$
financial management and administration: $\bullet$
governance and compliance;
investment evaluation and implementation with the benefit of advice from the Manager;
ASX listing management and all securities exchange compliance; and
approval of accounts and distribution policy.

The Responsible Entity is also subject to various duties under the Corporations Act, including duties to act honestly and exercise care and diligence and to act in the best interests of Unitholders.

The Manager

The Responsible Entity has entered into a Management Agreement with Challenger Management Services Limited (CMSL or Manager) to provide management services for CKT.

The primary responsibilities of the Manager in relation to CKT include the following:

managing CKT's investments on behalf of the Responsible Entity, including currency hedging and assessing and implementing proposals to increase or decrease investments in assets;
providing support for investor relations and communications;
accounting, treasury and tax management services;
arranging CKT's investment in the TK Business;
providing support services for the issue of Units; and
any additional services requested by the Responsible Entity and agreed to by the Manager.

Fees

The Responsible Entity receives fees from CKT which will be reduced by the amount of the Fund Management Fee payable to the Manager. Further details on these fees and expenses are specified in Section 5.

Related party transactions

The Responsible Entity is a wholly-owned subsidiary of Challenger, which is the listed parent company of the Challenger Group. Various entities in the Challenger Group have entered (or may enter) into related party transactions with the Responsible Entity in relation to the Offer and operations of CKT:

the Responsible Entity has agreed to issue 7.5 million Units to Challenger Life (see Section 2.2);
the Responsible Entity may issue Units to members of the Challenger Group under the Offer (see Section 2.2);
. the Responsible Entity has entered into the Management Agreement with the Manager (see Section 11.1.5); and
the Responsible Entity, the Manager and other members of the Challenger Group will receive fees out of the assets of CKT (see Section 5).

8.2 Japanese asset, investment and property management

Asset management

The Sub TK Operator has engaged the Japan Asset Manager under the Japan Asset Management Agreement to provide asset management services to the Sub TK Operator. Details of the Japan Asset Management Agreement are specified in Section 11.1.6. Fees will be paid for providing these services which are summarised in Section 5.

Investment management

The Master TK Operator has entered into the Japan Investment Management Agreement appointing the Japan Investment Manager to provide investment management advisory services to the Master TK Operator as described in Section 11.1.7. Fees will be paid for providing these services which are summarised in Section 5.

Property management

The Japan Property Manager will provide property management services directly to the relevant trust banks and the Sub TK Operator. These services will be provided under a series of similar property management agreements in respect of each Property. The Japan Property Management Agreements are described in Section 11.1.8.

8.3 Challenger management

Bevan Towning Joint Managing Director, Property

Mr Towning joined Challenger in February 2006 as Joint Managing Director, Property. In this role, Mr Towning is jointly responsible for Challenger's property funds management and investment strategy and has direct responsibility for the management and performance of all Challenger listed property vehicles.

Prior to joining Challenger, Mr Towning spent five years as the General Manager, Listed Funds for Colonial First State's property division. In this role Mr Towning was responsible for the strategic direction, management and performance of two ASX-100 listed property trusts with combined gross assets in excess of \$7.5 billion, namely CFS Gandel Retail Trust (of which he was also Fund Manager) and Commonwealth Property Office Fund.

Mr Towning has 25 years' experience in the property investment industry, including roles in funds management, asset management, property leasing and valuation with Colonial First State, Lend Lease, Armstrong Jones and Richard Ellis International.

Trent Alston Joint Managing Director, Property

Mr Alston joined Challenger in February 2006 as Joint Managing Director, Property. In this role, Mr Alston is jointly responsible for Challenger's property funds management and investment strategy and has direct responsibility for the management and performance of all Challenger wholesale property vehicles.

Prior to joining Challenger, Mr Alston spent seven years at Colonial First State, most recently in the role of General Manager, Wholesale Funds in the property division. In this role Mr Alston was responsible for the management and performance of a portfolio of unlisted funds and client mandates valued at in excess of \$8 billion.

Mr Alston has over 20 years' experience in the property investment industry, including roles in property funds management, corporate real estate, development and project management with Colonial First State and Lend Lease.

Brett McCarthy Fund Manager

Mr McCarthy joined Challenger in September 2006 in the role of Fund Manager. Mr McCarthy has specific responsibility for the establishment and ongoing management of CKT. This includes responsibility for strategy, financial and investment performance and transaction evaluation and execution.

Prior to joining Challenger, Mr McCarthy was a Director at UBS Investment Bank in Japan and Australia, holding roles over a seven year period including structuring and marketing of Japanese real estate investment trusts, global real estate securities market analysis and Australian listed property trust analysis. Mr McCarthy has 16 years' experience in the property industry, and has worked in commercial property valuation and sales positions in Knight Frank, Richard Ellis and Raine & Horne Commercial.

Mr McCarthy has lived for a total of nine years in Japan, and speaks and reads Japanese fluently.

Mark Simons Head of Property Finance

Mr Simons joined Challenger in September 2005 in the role of Head of Property Finance, with specific responsibility for the financial management of Challenger's unlisted property funds. Mr Simons' responsibilities now include responsibility for Challenger Wine Trust, Challenger Diversified Property Group and the Challenger Group properties.

Prior to joining Challenger, Mr Simons spent four years at Perpetual where he headed up a number of divisions within Perpetual's corporate trust business, with specific responsibility for service delivery to funds management clients.

Mr Simons has 18 years' experience in the financial services industry, including roles in listed property trust accounting, financial reporting, trustee services and audit at Perpetual, Tyndall and KPMG.

Susie McPherson Manager, Investor Relations

Ms McPherson joined Challenger in April 2006 in the role of Manager, Investor Relations for all Challenger listed products. In this role Ms McPherson is responsible for managing relationships with investors, as well as fund marketing and communications.

Prior to joining Challenger. Ms McPherson spent five years with Colonial First State where she held positions in investor relations, marketing and communications for the property division, and more recently held the position of Head of Marketing and Investor Communications for Colonial First State Global Asset Management, with responsibility for all marketing, communications, investor relations and reporting to institutional investors.

Ms McPherson has 10 years' experience in marketing and investor communications, eight of these in property funds management at Colonial First State, Deutsche Asset Management and Paladin Australia.

8.4 Kenedix management

Ryosuke Homma Chief Executive Officer and President of Kenedix

Mr Homma joined Kenedix in 1996 and is currently the Chief Executive Officer and President of Kenedix.

Prior to joining Kenedix, Mr Homma was employed by Mitsubishi Corporate for 29 years, where he was CEO and President of Mitsubishi Realty, Inc., a wholly-owned subsidiary based in the United States. Mr Homma also held positions in the real estate investment business where he was responsible for all forms of corporate finance, project finance and investment management.

Mr Homma has over 39 years' experience in the property investment industry, including roles in construction/development with Mitsubishi Corporation and its subsidiaries.

Atsushi Kawashima Chief Operating Officer

Mr Kawashima joined Kenedix in 1998 and is currently the Chief Operating Officer of Kenedix. In this role Mr Kawashima is responsible for Kenedix's fund management and investment strategy. Mr Kawashima is also directly responsible for managing Kenedix's ¥540 billion portfolio of real estate investments.

Prior to joining Kenedix, Mr Kawashima was employed by Mizuho Trust & Banking Co., Ltd, most recently in the role of Senior Manager in the real estate business division. In this role Mr Kawashima was responsible for deal sourcing and brokerage of real estate investments.

Mr Kawashima has over 24 years' experience in the property investment industry, including roles in real estate investment advisory with Mitsubishi Corporation and Mizuho Trust & Banking Co., Ltd.

Taiji Yoshikawa Chief Financial Officer

Mr Yoshikawa joined Kenedix in 1998 and is currently the Chief Financial Officer of Kenedix. In this role Mr Yoshikawa is responsible for managing Kenedix's financial and administrative requirements, including raising funds from Kenedix investors.

Prior to joining Kenedix, Mr Yoshikawa was employed by Mitsubishi Corporation, most recently in the role of Manager of the domestic and overseas real estate investments and development projects division. In this role Mr Yoshikawa was responsible for managing the investments.

Mr Yoshikawa has over 26 years' experience in the property investment industry, including roles in construction and development with Mitsubishi Corporation and Fudo Construction Co., Ltd.

Overview of Board and management

Akira Tanaka Executive Officer and General Manager

Mr Tanaka joined Kenedix in 2000 and is currently the Executive Officer and the General Manager for the special investment division of Kenedix. In this role Mr Tanaka is responsible for managing the investments and procuring the debt financing.

Prior to joining Kenedix, Mr Tanaka was employed by Mizuho Trust & Banking Co., Ltd for 12 years, most recently in the role of Senior Manager in the consulting business division. In this role Mr Tanaka was responsible for managing the consulting business related to the real estate investments.

Mr Tanaka has over 19 years' experience in the property investment industry with Mizuho Trust & Banking Co., Ltd and Kenedix.

Jiro Okawa Executive Officer of Kenedix Advisors

Mr Okawa joined Kenedix in 2001 and is currently the Executive Officer of Kenedix Advisors, Inc. In this role Mr Okawa is responsible for managing all of the unlisted corporate pension funds

Prior to joining Kenedix, Mr Okawa was employed by Toyo Real Estate Co., Ltd, most recently in the role of Deputy General Manager in the overseas business division, In this role Mr Okawa was responsible for managing the overseas projects, including the asset and property management business.

Mr Okawa has over 23 years' experience in the property investment industry with Toyo Real Estate Co., Ltd and Kenedix.

Harutaka Hamaguchi Assistant to the President

Mr Hamaguchi joined Kenedix in 2003 and is currently the Assistant to the President of Kenedix. In this role Mr Hamaguchi is responsible for coordination of internal matters and special assignments related to investment opportunities.

Prior to joining Kenedix, Mr Hamaguchi was employed by Mitsubishi Corporation for 28 years, most recently in the role of Deputy General Manager of the infrastructure project division. In this role Mr Hamaguchi was responsible for promoting and coordinating the infrastructure projects. Mr Hamaguchi worked at the World Bank - Washington Headquarters as a financial analyst for more than four years.

Mr Hamaguchi has over seven years' experience in the property investment industry, including roles as Senior Managing Director in charge of asset management with Mitsui & Co., Logistics Partners Ltd, manager of Japan Logistics Fund, a J-REIT specialising in logistics facilities.

Akihiro Asano Senior Investment Manager

Mr Asano joined Kenedix in 2004 and is currently the Senior Investment Manager of Kenedix. In this role Mr Asano is responsible for deal sourcing and acquisition of investments.

Prior to joining Kenedix, Mr Asano was employed by Mitsubishi Corporation, most recently in the role of Senior Manager of Mitsubishi Corp. - UBS Realty Inc., an affiliate of Mitsubishi Corporation and manager of Japan Retail Fund, a J-REIT specialising in retail properties. In this role Mr Asano was responsible for the acquisition of properties.

Mr Asano has over 12 years' experience in the property investment industry, including roles in development and acquisition with Mitsubishi Corporation and Mitsubishi Corp. - UBS Realty.

8.5 Responsible Entity Board of directors

Stephen Gerlach Chairman

Mr Gerlach has extensive experience as a corporate adviser and company director, having held positions on the boards of several public companies. At present he is on the Board of Santos Limited (Chairman) and Futuris Corporation Limited (Chairman).

Mr Gerlach is the former Managing Partner of Adelaide legal firm Finlaysons, and is a former director of Elders Australia Limited (Chairman), Elders Rural Bank Limited, Equatorial Mining Limited (Chairman), Penrice Soda Products Limited (Chairman), Southcorp Limited and Brunner Mond Holdings Limited (UK).

Mr Gerlach is a member of the AICD, its Corporate Governance Committee and is Chairman of Foodbank SA Inc, a Director of Foodbank Australia Inc and a Trustee of the Australian Cancer Research Enundation

Mr Gerlach is a member of the CLIL Challenger Wine Trust Investment Committee.

Russell Hooper Non-executive Director

Mr Hooper has extensive experience in financial services. including over 13 years at St George Bank Limited and Advance Bank Limited, where he held senior management positions in life insurance, wealth management and listed investment trusts. including the role of Chief General Manager, Funds Management.

Mr Hooper is also a Director of Challenger, Challenger Life and Century Australia Investments Limited, and was previously a director of (and Chairman of the Audit Committee for) Commonwealth Insurance Limited, a subsidiary of the

Commonwealth Bank. Mr Hooper is a Fellow of the Australian Institute of Company Directors, the Australian Society of Certified Practising Accountants and the Financial Services Institute of Australasia

Mr Hooper is a member of the CLIL Audit and Compliance Committee, the CLIL Property Investment Committee and the CLIL Infrastructure Investment Committee.

lan Martens Non-executive Director

Mr Martens is a chartered accountant and was senior partner at BDO Chartered Accountants (SA), where he is now a consultant. Throughout his career Mr Martens has advised a broad range of public and private companies on financial measurement and reporting, strategy development and evaluation and merger and acquisitions activities.

Mr Martens is currently Chairman of RAA Insurance Ltd and a Director of RAA Investments Pty Ltd and the Royal Automobile Association of 5A Inc.

Mr Martens is Chairman of the CLIL Audit and Compliance Committee and the CLIL Challenger Wine Trust Investment Committee.

lan Moore

Non-executive Director

Mr Moore has extensive experience in investment banking and structured finance. Mr Moore was Head of Corporate Finance at Bankers Trust Investment Bank where he was responsible for all forms of corporate, project and asset backed financings. Mr Moore is currently a director of Artesian Capital Management and a Fellow of the Institute of Actuaries of Australia and the Institute of Actuaries in London.

Mr Moore is a member of the CLIL Audit and Compliance Committee and Chairman of the CLIL Infrastructure Investment Committee.

Geoff McWilliam Non-executive Director

Mr McWilliam has had an extensive career in the Australian property investment industry. Most recently, Mr McWilliam spent 10 years building the Commonwealth Bank's property funds management division, Colonial First State Property. As head of this business, he was responsible for the management and performance of over \$16 billion in listed and unlisted property funds. Prior to this, Mr McWilliam spent 23 years with Lend Lease Corporation in a variety of senior management roles.

Mr McWilliam is a director of Lend Lease Funds Management Limited, Lend Lease Asian Retail Investments Limited, Lend Lease Real Estate Investments Limited, St Laurence Limited (NZ), Dunmore Lang College Limited and the Dusseldorp Skills Forum Incorporated, and a Fellow of the Australian Property Institute.

Mr McWilliam is Chairman of the CLIL Property Investment Committee.

Robert Woods Executive Director

Mr Woods is Chief Executive, Asset Management at Challenger. In this role, Mr Woods is responsible for managing Challenger's \$4.4 billion portfolio of investments in direct property. infrastructure and fixed income. The Asset Management business manages assets for third party investors, policyholders and shareholders, generating spread and fee based income.

Prior to joining Challenger, Mr Woods was a founder of Zurich Capital Markets Asia, where he was responsible for the alternative asset business. Prior to this, Mr Woods spent 11 years with Bankers Trust in investment banking.

Peter Brook Executive Director

Mr Brook is the Chief Financial Officer of Challenger's Asset Management division, In this role. Mr Brook is responsible for overseeing the financial management and reporting of the Asset Management division's investment portfolio and specialist funds across direct property, infrastructure and fixed income.

Mr Brook has over 20 years' experience in finance roles, most recently with MLC Limited and National Australia Bank.

8.6 Corporate Governance

The Board recognises the importance of good corporate governance and is committed to complying with the highest standards in corporate governance which it believes is fundamental to the success of CKT's operations. The corporate governance framework for the Board is underpinned by the ASX Principles of Good Corporate Governance and Best Practice Recommendations (ASX Guidelines).

Listed entities are required to disclose in their annual reports the extent of their compliance with the ASX Guidelines and to explain why they have not adopted an ASX Guideline if they consider it to be inappropriate to do so in their particular circumstance.

The Board has put in place policies to ensure that CLIL has met all applicable standards of disclosure pursuant to the ASX Listing Rules. CLIL will include on CKT's website details of its corporate governance regime and a corporate governance statement will be included in CKT's annual report.

Role of the Board

The Board of the Responsible Entity is responsible for the overall management of CKT and CKT's assets (being the investment in the TK Business), including the determination of the Responsible Entity's strategic direction with the aim of increasing Unitholder wealth through the performance of CKT.

The Board has adopted a Board Charter which outlines the responsibilities and functions of the Board. The responsibilities and functions of the Board include:

· providing strategic direction and deciding upon CKT's business strategies and objectives;
approval of business plans, budgets and financial policies: $\bullet$
approval of all material transactions of CKT; $\bullet$
approval of all equity raising;
consideration of management recommendations on strategic business matters:
establishment, promotion and maintenance of proper processes and controls to maintain the integrity of financial accounting, financial records and reporting;
adoption and oversight of implementation of appropriate corporate governance practices;
oversight of the establishment, promotion and maintenance of effective risk management policies and processes:
· determination and adoption of CKT's distribution policy in accordance with the Constitution: and
compliance with the Australian Financial Services Licence and Compliance Plan and other rules and regulations.

The Board has established the:

Audit and Compliance Committee: and
Property Investment Committee

to assist it in undertaking its duties and responsibilities.

Audit and Compliance Committee

The duties and responsibilities of the Audit and Compliance Committee are contained in the Audit and Compliance Committee Charter. The duties and responsibilities include:

effective management of financial and operational risks;
compliance with laws and regulations (including compliance with CKT's Compliance Plan);
accurate management and financial reporting;
facilitating an effective and efficient audit; and
. maintaining a high standard of business ethics.

The Audit and Compliance Committee must comprise at least three directors with the majority being independent directors. The chairperson will be appointed by the Committee who must be an independent director and not the chairperson of the Board. The chairperson will report the activities of the Committee to the Board after each meeting.

Property Investment Committee

The duties and responsibilities of the Property Investment Committee are contained in the Property Investment Committee Charter. The duties and responsibilities include:

review and approval of CKT investments and divestments;
. monitoring and reporting of market, liquidity and credit risk exposures to the Board; and
monitoring of investment policies and limits and reporting breaches of policies and limits to the Board.

The Property Investment Committee will consist of at least three members. The current committee membership consists of two independent directors, one of whom will act as chairperson. and three senior executives within the Challenger Group. The chairperson will report the activities of the Committee to the Board after each meeting.

Compliance Plan

Pursuant to Part 5C of the Corporations Act governing managed investment schemes, the Responsible Entity has prepared and lodged with ASIC a Compliance Plan for CKT. The Compliance Plan for CKT describes the procedures that the Responsible Entity will apply in operating CKT to ensure compliance with the Corporations Act, Constitution, this and any other disclosure document, the Responsible Entity's Australian Financial Services Licence and how these procedures will be monitored.

Risk management and compliance

The management of risk is fundamental to CKT's operations and to building value for Unitholders. The Board recognises the broad range of risks which apply to CKT. These risks include, but are not limited to, market risk, liquidity risk, credit risk, legal risk, operational risk and reputational risk (see Section 4 for more information). The Board is responsible for CKT's risk management strategy. Management is responsible for implementing the Board's strategy and for developing policies and procedures to identify, manage and mitigate risks across CKT's operations.

The Board has adopted the Challenger Group Operational Risk Framework and formal policies in respect of compliance and operational risk management. These policies are made available to all relevant staff.

Conflicts of interest

Various potential conflicts of interest between CKT, the Challenger Group and Kenedix may arise in a number of areas relating to the ongoing relationships between CKT, the Challenger Group and Kenedix, including potential acquisitions or dispositions of businesses or properties, the removal of the Responsible Entity, payment of distributions, incurrence of indebtedness, financial commitments, services and management arrangements and issuance of additional Units in CKT.

The Challenger Group and Kenedix personnel, who will manage and operate CKT and provide services to the TK Business respectively, will also generally be respectively involved in the management and operations of the Challenger Group's and Kenedix's other businesses. Simultaneous service to their respective other businesses could create or appear to create potential conflicts of interest when such persons are faced with decisions that could have different implications for CKT, the Challenger Group and Kenedix. In addition, those persons will devote significant time and effort to managing and operating the Challenger Group's and Kenedix's other respective businesses.

Code of Conduct

The Board has adopted the Challenger Group Code of Conduct. The Code of Conduct articulates the standards of honest and ethical behaviour to be carried out by all relevant staff in undertaking their duties. Employees of the Manager are encouraged to report any breaches of the Code of Conduct to management or the Board.

Securities Trading Policy

The Board has adopted the Challenger Group Securities Trading Policy. The Securities Trading Policy applies to all directors and staff and places restrictions and reporting requirements. including limiting trading in Units in CKT (and other Challenger listed securities) to specific trading windows and in a specified manner. The policy also requires those staff designated as potentially having access to inside information to seek approval to trade in non-Challenger related listed securities.

Continuous Disclosure Policy and Unitholder communication process

The Responsible Entity is committed to providing relevant information to all Unitholders about the operations of CKT and to fulfil its duties to comply with its continuous disclosure. obligations to the market generally.

The Board has a Continuous Disclosure Policy in place which is designed to ensure compliance with the ASX Listing Rules and contínuous disclosure obligations.

The Responsible Entity has established a Continuous Disclosure Committee which is responsible for:

. making decisions on what information should be disclosed to the market:
· maintaining a watching brief on information; and
. ensuring disclosure is made in a timely and efficient manner.

Unitholders will receive an annual report and a half yearly update. Newsletters may also be sent to Unitholders from time to time.

9. Overview of the investment structure

entimeler a a e sia Responsible Entity Management Agreement awa Manager TK investment 97% Australia Japan Menterik Master TK Eprintlation Bikiness Operator TK investment TK investment 3.0% 100% kwestment Management Agreement Sto ik oberator Sub TK Business TK interest $0.1%$ ∿
‴ 2‰ Asset Management Trust Beneficiary Adreement Interests Reference Japan Investment Manager Property Management Agreement irte: Bark Lapan Asset Manager laosi Property Mareola Properties

9.1 Overview of the investment structure

CLIL is the Responsible Entity of CKT and is the issuer of this PDS. CMSL is the Manager of CKT.

Japan HeadCo is owned 51% by a wholly-owned subsidiary of Challenger and 49% by Kenedix. Japan HeadCo has established the Master TK Operator and is its sole managing member.

CKT will make its investment in the Properties through a series of TK structures. Following the Allotment Date:

CKT will apply the proceeds of the Issue, after expenses, to make a TK investment in the business of the Master TK Operator under a Tokumei Kumiai agreement (Master TK Agreement); and
the Master TK Operator will in turn make a TK investment in the business of the Sub TK Operator under another TK agreement (Sub TK Agreement). The Sub TK Operator will use the contributed equity and debt to acquire the Trust Beneficiary Interests of the Properties.

In connection with these investments, Kenedix has entered into the Japan Investment Management Agreement with the Master TK Operator and the Japan Asset Management Agreement with the Sub TK Operator. Kenedix Advisors, Inc., a wholly-owned subsidiary of Kenedix, will enter into the Japan Property Management Agreements with the Sub TK Operator, the Japan Asset Manager and the Trust Bank for some or all of the Properties.

9.2 Description of Japanese elements of the investment structure

Under Japanese Commercial Code a TK ('Tokumei Kumiai') is not a legal entity but a contractual relationship between an investor and the TK operator.

In a TK arrangement, an investor provides capital to a business which is defined by the contractual agreement (TK business) and is to be conducted by a TK operator, which carries on such business entirely in its own name and under its sole control in accordance with the terms of a TK agreement. The TK operator is responsible for the management of the TK business. An investor in a TK does not own any equity capital in the TK operator and has no voting rights in relation to the TK operator or the business of the TK, Instead, there is only a contractual relationship between the TK operator and the investor. The investor is generally entitled to a proportional share (based on its equity contribution to the TK) of the profits and losses of the business of the TK operator. Depending on the express terms of the TK agreement, the liability of the investor can be limited to the amount of its initial investment or the investor can be subject to additional capital calls.

The net effect of these contractual arrangements under Japanese tax law is that the investor is taxed in Japan on its share of TK income (by the TK operator withholding Japanese tax from the TK profit distributions to the investor) even though the business is conducted and relevant assets are held in the name of the TK operator. The TK operator reports the amount of profits to which the investor is entitled as a deduction in computing its taxable income.

9.3 CKT investment structure

The Master TK Operator is owned by Japan HeadCo.

The Master TK Operator (a godo Kaisha or a Japanese limited liability company) has been established specifically for the purpose of operating the business defined by the Master TK Agreement (TK Business) and its activities for that purpose will include to acquire, hold and dispose of the Sub TK Interests and to acquire, hold and dispose of interests in other special purpose companies, the business of which is similar to the TK Business.

The parties to the TK Agreement are the Responsible Entity on behalf of CKT and the Master TK Operator. Under the TK Agreement, in exchange for making a TK investment of 97% of the initial capital required for the TK Business, CKT is entitled to 97% of the profits and losses of the TK Business and 97% of any surplus upon winding up the TK Business. The remaining 3% of the initial capital in the TK Business has been supplied by the Master TK Operator. There is no obligation on CKT to make additional TK investments, however, the Master TK Operator

may make calls on CKT and CKT may decide in its sole discretion whether to make an additional TK investment.

The Master TK Operator is entitled to 3% of the profits and losses of the TK Business and 3% of any surplus upon winding up of the TK Business.

CKT does not own any of the equity capital of the Master TK Operator and does not have any voting rights in relation to the Master TK Operator or the TK Business. Instead, CKT has a contractual claim against the Master TK Operator. It is possible CKT may undertake additional investments in one or more other TK arrangements. It is also possible that the initial TK arrangement will serve as the vehicle for future property investments by CKT. Further details of the TK Agreements are contained in Section 11.

The Master TK Operator will enter into the Sub TK Agreement with the Sub TK Operator under which the Master TK Operator contributes capital to the Sub TK Operator for use in the Sub TK Business. The Master TK Operator will contribute 100% of the initial capital required for the Sub TK Business in exchange for an entitlement to 99.9% of the profits and losses of the Sub TK Business

The Sub TK Operator will invest in the Trust Beneficiary Interests, as described below

Trust bank(s) and Trust Beneficiary Interests

For those Properties which will be held through the TK structure at the date of listing of CKT, the Sub TK Operator will hold the beneficial interest (Trust Beneficiary Interest) in those Properties. It is common practice in Japan for a TK operator to hold its investments in property through Trust Beneficiary Interests.

The Sub TK Operator, as the holder of the Trust Beneficiary Interest in the Properties and therefore the beneficiary of the trusts, effectively has substantially the same economic rights and obligations as if it were the legal owner of the property which is the subject of the trust.

10. Financial Forecasts

This Section contains a summary of certain financial information about CKT for the period from Allotment to 30 June 2007, the vear ending 30 June 2008 and the year ending 30 June 2009 includina:

Pro Forma Consolidated Balance Sheets:
Forecast Consolidated Income Statements: $\bullet$
Forecast Consolidated Distribution Statements:
significant accounting policies:
key forecast assumptions; and $\bullet$
$\bullet$ sensitivity analysis.

Investors should be aware that future events cannot be predicted with certainty and as a result, deviations from the Financial Forecasts are to be expected. The following Financial Forecasts should be read in conjunction with the accounting policies detailed in Section 10.4, the key assumptions set out in Section 10.5, the sensitivity analysis in Section 10.6 and the risk factors outlined in Section 4. The Responsible Entity can give no assurance that the Financial Forecasts will be achieved or that CKT will be able to make distributions during or after the Forecast Period at the distribution levels forecast for the Forecast Period. This is because CKT's actual financial results and distributions will be affected by many factors that are beyond the Responsible Entity's, its directors' and the Manager's control. A number of these factors are set out in Section 4.

The Responsible Entity has appointed PricewaterhouseCoopers Securities Ltd as the investigating accountant to prepare a report in relation to the forecast financial information of CKT (see Appendix B). PricewaterhouseCoopers Securíties Ltd does not quarantee the future performance or capital return of CKT.

The financial information in this Section is presented in an abbreviated form and does not contain all of the disclosures in an annual report prepared in accordance with the Corporations Act.

10.1 Pro Forma Consolidated Balance Sheets^1,2

	At Allotment (¥ million)	At Allotment (\$ million)	Pro forma post acquisition of Carino Chitosedai $(*$ million)	Pro forma post acquisition of Carino Chitosedai $(5$ million)
Current assets
Cashi	92.1	1.0	92.1	1.0
Other current assets	595.9	6.5	753.6	8.2
Total current assets	688.0	7.5	845.7	9.2

Non-current assets
Investment properties	32,571.4	353.5	42,571.4	462.0
Tenant deposits	1,623.9	17.6	1,873.9	20.3
Other non-current assets	189.8	2.0	189.8	2.0
Total non-current assets	34,385.1	373.1	44,635.1	484.3
Total assets	35,073.1	380.6	45,480.8	493.5
Non-current liabilities
Borrowings	12,932.0	140.4	22,594.6	245.2
Tenant deposits	1,623.9	17.6	1,873.9	20.3
Deferred tax liability	129.3	1.4	228.4	2.5
Total non-current liabilities	14,685.2	159.4	24,696.9	268.0
Total liabilities	14,685.2	159.4	24,696.9	268.0
Net assets	20,387.9	221.2	20,783.9	225.5
Investors' equity
Investors' contributed capital	20,746.6	225.1	20,746.6	225.1
Equity raising costs	(1,471.1)	(16.0)	(1, 471.1)	(16.0)
Retained profit	497.4	5.4	878.1	9.6
Outside equity interest ³	615.0	6.7	630.3	6.8
Total investors' equity	20,387.9	221.2	20,783.9	225.5
Units on issue	150.1	150.1	150.1	150.1
NTA per unit ⁴	131.7	1.43	134.3	1.46
Debt to Total Assets Ratio ^s	37.2%	37.2%	50.1%	50.1%

¹ The Financial Forecasts assume the Second Instalment is not called and no further acquisitions are made.

² Assumes a spot ¥/\$ exchange rate of 92.1.

³ The contribution to the TK Business by the Master TK Operator.

⁴ Net assets less outside equity interests divided by the number of Units.

⁵ Borrowings divided by total assets adjusted by debt establishment fees.

10.2 Forecast Consolidated Income Statements¹

	Forecast period ending 30 June 2007 (¥ million)	Forecast year ending 30 June 2008 (¥ million)	Forecast year ending 30 June 2009 (¥ million)
Net property income	266.3	2.107.9	2,108.6
Interest expense	(50.2)	(492.6)	(491.8)
Net property income after interest expense	216.1	1,615.3	1,616.8
Gains from fair value movements of properties -
revaluation increment on acquisition	1,141.8
Management fee	(16.0)	(107.2)	(106.9)
Other expenses	(12.8)	(38.2)	(38.2)
Less outside equity interest	(5.9)	(46.1)	(46.2)
Withholding tax	(20.7)	(173.4)	(173.2)
Net property income less expenses and outside equity interests	1,302.5	1,250.4	1,252.3
Weighted average exchange rate ²	92.0	86.8	82.3
	(\$ million)	(\$ million)	(\$ million)
Net income from Japan	14.2	14.4	15.2
Contribution from capital hedge	0.7	4.2	4.2
Interest income
Operating expenses	(0.2)	(0.4)	(0.4)
Base management fee	(0.2)	(1.1)	(1.1)
Net profit before deferred tax	14.5	17.1	17.9
Deferred tax expense	(2.7)	(1.3)	(1.4)
Net profit after tax ³	11.8	15.8	16.5
Net transfers from reserves	(9.7)	1.7	1.8
Cash distribution to Unitholders	2.1	17.5	18.3
Distribution per Unit (cents)	1.42	11.64	12.19
Annualised Distribution Yield	5.17%	7.76%	8.12%

⁵ The Financial Forecasts assume the Second Instalment is not called and no further acquisitions are made.

² The foreign currency hedging strategy for distributions is detailed in Section 2.14. The rates used for the translation during the Forecast Period are ¥92.0 per \$1.00 for 2007, ¥86.8 per \$1.00 for 2008 and ¥82.3 per \$1.00 for 2009.

³ The forecast net profit after tax does not include future revaluations of properties or movements in the market value of derivatives as required by
Australian Accounting Standards as the Responsible Entity does not bel

10.3 Forecast Consolidated Distribution Statements¹

	Forecast period ending 30 June 2007	Forecast year ending 30 June 2008	Forecast year ending 30 June 2009
Cash distribution per Unit ² (cents)	1.42	11.64	12.19
Cash Distribution Yield	5.17%	7.76%	8.12%
Tax Deferred Component ^2,3	50%	25%	25%
Foreign tax credit per Unit (cents) ^«	Nil	1.33	1.40
Cash distribution plus foreign tax credit per Unit (cents)	1.42	12.97	13.59
Cash Distribution Yield including foreign tax credit	5.17%	8.64%	9.06%

The Financial Forecasts assume the Second Instalment is not called and no further acquisitions are made.

It is anticipated that the distributions will consist of a return of capital of nil cents per Unit, 1.14 cents per Unit and 1.20 cents per Unit for the periods ending 30 June 2007, 30 June 2008 and 30 June 2008 and 30 June

The tax deferred effect of distributions, its impact on the cost base of the Units and potential capital gains, and the potential impact of foreign currency movements are explained in Section 4.1 and Appendix C.

The reconciliation between net profit and distributions for the Forecast Period is summarised below. The amount of the distribution which exceeds net profit represents a return of capital component.

	Forecast period ending 30 June 2007 $$$ million)	Forecast year ending 30 June 2008 (\$ million)	Forecast year ending 30 June 2009 (\$ million)
Net profit	11 R	15.8	165
Plus: Deferred tax expense	27	1.3	14
Amortisation of borrowing costs	0 O	0.4	04
Less: Adjustments to property fair value	(12.4)
Transfer from Unitholders' funds	(9.7)		1.8
Distribution to Unitholders		17.5	18.3
Cash distribution per Unit (cents)	1 A7	l 1.64	12 19.

10.4 Significant accounting policies

The key policies, which have been adopted in the preparation of the financial information, are outlined below to assist in its general understanding:

Basis of preparation

The Pro Forma Consolidated Balance Sheets and the Forecast Consolidated Income Statements have been prepared on a going concern basis adopting the accruals and historical cost accounting convention except for investment properties and derivative financial instruments which are carried at fair value. The Forecast Consolidated Income Statements and Pro Forma Consolidated Balance Sheets are also prepared in accordance with the requirements of the Constitution, the requirements of the Corporations Act, and the recognition and measurement requirements of applicable Australian Accounting Standards being AIFRS issued by the Australian Accounting Standards Board.

Consolidation

The forecast financial information of CKT incorporates all the assets and liabilities of the controlled entities of CKT. The effects of all transactions between entities in the consolidated entity are eliminated in full

Investment properties

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are recognised in the income statement in the period in which they arise.

Independent valuations of investment properties will be obtained at least every three years from suitably qualified valuers. Such valuations are reflected in the financial statements. Notwithstanding, the directors of the Responsible Entity assess the carrying value of each investment property at each reporting date to ensure that its carrying value does not materially differ from its fair value. Where the carrying value differs from fair value, that asset is adjusted to its fair value.

Expenditure capitalised to properties includes the cost of acquisition, capital and refurbishment additions.

Land and buildings have the function of a single investment and are regarded as a composite asset. The applicable accounting standards do not require that investment properties be depreciated. Accordingly, the buildings and any components thereof, including plant and equipment, are not depreciated.

Transaction costs on issue of Units in CKT

Transaction costs arising on the issue of Units in CKT, are recognised directly in Unitholders' funds as a reduction of the Unit proceeds received.

Interest bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Borrowing costs are expensed as incurred.

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Revenue brought to account but not received at balance date is recognised as receivable. The following specific recognition criteria must also be met before revenue is recognised:

Rental income

Rental income from operating leases is recognised on a straightline basis over the lease term. Fixed rental increases (whereapplicable) which do not represent direct compensation for underlying cost increases or capital expenditure are recognised on a straight-line basis over the term of the lease or over the period until the next market review date. An asset is recognised to represent the portion of operating lease revenue in a reporting period relating to fixed increases in operating lease rentals in future periods. The receivable is treated as a component part of the relevant investment property carrying value.

Interest

Revenue is recognised as the interest accrues using the effective interest method.

Leasing fees and lease incentives

Leasing fees on operating leases, in relation to the initial leasing of the property after a redevelopment, are capitalised to the carrying value of the property and amortised on a straight-line basis over the period to which the lease relates.

Costs that are directly associated with negotiating and executing the ongoing renewal of tenant lease agreements (including commissions, legal fees and costs of preparing and processing documentation for leases) are also capitalised as part of the carrying value of the property and amortised on a straight-line basis over the lease term on the same basis as the lease income.

Lease incentives which may take the form of rent-free periods. up-front payments, contributions to certain lessees' costs, relocation costs, fitouts and improvements are recognised as part of the carrying value of the investment properties. The aggregate cost of incentives is recognised on a straight-line over the lease term as a reduction of rental income.

Tenant deposits

Tenant deposits are recognised as part of cash and cash equivalents with a corresponding liability for the obligation to return the deposits to tenants.

Expenditure

Expenditure is brought to account on an accruals basis. Responsible Entity and Manager Fees payable are recognised as expenses when the services are received.

Distribution

A distribution payable is recognised when the Unitholders' right to receive the payment is established. Distributions determined are paid every six months for the period ended 30 June and 31 December.

Income tax

CKT is not liable to pay Australian income tax provided that the Unitholders are presently entitled to CKT's income each year.

Non-refundable Japanese withholding tax payable on the distribution of profits under a TK agreement is recognised as an expense as incurred.

For Australian tax purposes this withholding tax paid on the distribution from the Master TK Operator to CKT would not be deductible to CKT, instead Unitholders may be entitled to a foreign tax credit for the withholding tax incurred. These foreign tax credits may be credited against the Unitholder's Australian income tax payable on certain types of foreign source income, including distributions from CKT (Unitholders should be aware that there are requirements related to their personal tax position that must be met in order to claim the foreign tax credit).

A deferred tax liability or asset and related deferred tax expense or credit is recognised on differences between the carrying values of assets and liabilities in the Forecast Consolidated

Balance Sheet and their tax cost base, principally due to property revaluations and tax depreciation. Whilst accounting for deferred tax due to tax depreciation gives rise to a tax expense in the Forecast Consolidated Income Statement, it will not impact on cash flows from operations nor the cash distribution paid to Unitholders.

Any deferred tax liability or asset is calculated using the current Japanese withholding tax rate applicable to the distribution of profits under a TK agreement of 20%.

Foreign currency translation

(a) Transactions

Foreign currency transactions are initially translated into Australian dollars, being the functional and presentation currency of CKT at the rate of exchange at the date of the transactions or at hedge rates where applicable. At balance date, amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date. Resulting exchange differences are brought to account in determining the net profit for the financial year.

(b) TK beneficial interest

As the Master TK Operator is self-sustaining, the beneficial interest in the assets and liabilities arising from the TK are translated into Australian currency at rates of exchange current at balance date, while their income and expenditures are translated at the average of foreign exchange rates during the financial year or at hedge rates where applicable. Exchange differences arising on translation are taken to the foreign currency translation reserve.

Derivatives

CKT is exposed to changes in interest rates and foreign currency rates and will use derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to the income statement for the year.

10.5 Key forecast assumptions

The material best estimate assumptions that the Responsible Entity has made to prepare the Financial Forecasts are set out below. While the Responsible Entity considers these assumptions to be appropriate and reasonable at the time of preparation of this PDS, investors should appreciate that many factors which may affect results are outside the control of the Responsible Entity and its directors or may not be capable of being foreseen or accurately predicted. Accordingly, actual results may differ materially from those contained in the Financial Forecasts. Investors should be aware that the nature and timing of events and the magnitude of their impact might differ from that assumed in preparing the Financial Forecasts, and this may have a material positive or negative effect on the financial performance of CKT and its ability to make distributions to Unitholders. There can be no assurance that the forecast results are indicative of CKT's future performance or that actual results will not differ materially from those presented in the Financial Forecasts. Inclusion of the Financial Forecasts in this PDS should not be regarded as a representation by any person that the results contained in the Financial Forecasts will be achieved.

Investors are advised to review the assumptions and financial forecasts and make their own independent assessment of the future performance and prospects of CKT.

Pro forma transactions adopted in preparing balance sheet

The Pro Forma Consolidated Balance Sheet at Allotment assumes the following pro forma transactions:

150 million Units are issued at \$1.50 per Unit, raising \$225.1 million under the Offer from the First Instalment and are allotted on 24 April 2007;
the acquisition of interests in the TK Business for \$342.1 million plus acquisition costs of \$4.4 million;
TK borrowings of \$141.6 million plus borrowing establishment costs of \$1.2 million:
estimated issue costs of \$16.0 million, being recognised as a reduction of the proceeds of Unitholders' funds to which the costs relate;
refundable consumption tax of \$6.5 million imposed on acquisition of the buildings and other expenses in Japan;
working capital (including reserves) of \$3.1 million;
tenant deposit cash and liabilities of \$17.6 million are taken on from the vendor: and

• the recognition of the Properties at fair value resulting in a revaluation increment of \$7.0 million and consequent deferred tax expense of \$1.4 million.

The Pro Forma Consolidated Balance Sheet post acquisition of Carino Chitosedaì assumes the following additional pro forma transactions:

acquisition by the Sub TK Operator of Carino Chitosedai for \$102.9 million plus \$0.2 million in acquisition costs;
. TK borrowings of \$105.7 million plus borrowing establishment costs of \$0.9 million;
refundable consumption tax of \$1.7 million imposed on acquisition of the buildings and other expenses in Japan:
tenant deposit cash and liabilities of \$2.7 million are taken on from the vendor: and
the recognition of the properties at fair value resulting in a revaluation increment of \$5.4 million and consequent deferred tax of \$1.1 million.

The Offer

The Offer is implemented as proposed and is completed on 24 April 2007, fully subscribed. There are 150 million Units issued at \$1.50 per Unit, raising \$225 million from the First Instalment. The proceeds of the Offer are used as set out in Section 2.3.

Properties' acquisition costs

The Properties' acquisition costs total \$4.6 million. These costs comprise taxes, legal expenses, asset manager's sponsor's fee and consultants' fees associated with the purchase of the Properties.

Change in fair value of investment properties

There are no forecasts of future valuations of properties as the Responsible Entity does not believe there is any reasonable basis to make forecasts in relation to future capitalisation rates, property yields or general market conditions, all of which are outside its control. For these reasons, the Responsible Entity is unable to accurately quantify the impact on the Financial Forecasts of these matters, reflecting, in particular, the potential volatility of property values. All properties are carried at valuation in the Pro Forma Consolidated Balance Sheet. The forecast profit incorporates the gain from the excess of the fair value, at the time of acquisition, of the Properties to be acquired, as determined by CBRE and HIRO & REAS in their independent valuations, over the proposed cost to CKT of acquiring the Properties.

	¥ million	\$ million
Property purchase price	41.008.7	445.0
Acquisition costs	420.9	4.6
Independent valuation	42,571.4	462.0
Net revaluation	1.141.8	12.4

Tenant deposits

It is common in the Japanese real estate market for tenants to pay security deposits to the landlord upon execution of tenant leases. The deposits are held by the landlord and are designed to secure all the tenants' obligations with respect to the tenancy. Upon acquisition of a property the new landlord assumes the tenant deposit obligation: however, it is common that the obligation is netted from the purchase price paid for the property.

At the time of IPO \$17.6 million (\$20.3 million post acquisition of all 12 properties) in security deposits will be placed in a reserve account to meet the obligation assumed by the new landlord. These cash reserves are held by the trust bank and are restricted until such time as the landlord receives written consent from the tenant that the deposits can be released. For the purpose of the forecasts it is assumed that no interest income is recognised on tenant deposits while reserved or after any release.

Net property income

Property income has been forecast based on existing leases, all of which have terms beyond the Forecast Period. It has been assumed that no tenants exit their leases early. Net property income comprises gross rental and all other income, including recoverable expenses, after deducting property expenses. The forecast net property income is subject to a number of assumptions.

A summary of the key assumptions for the Forecast Period is outlined below:

rental growth of zero; and
expense growth rate of zero.

Interest income

It is assumed that no interest income will be earned on cash balances.

Capital expenditure

Allowance has been made for the following forecast capital expenditure commitments during the Forecast Period:

Period	¥ million
Period to 30 line 2007	88 S
Year to 30 June 2008	64
Year to 30 June 2009	14 R

Debt

While the initial Debt to Total Assets Ratio of CKT will be approximately 50%, post the acquisition of Carino Chitosedai, the long-term target Debt to Total Assets Ratio range will be 50% to 60%.

It has been assumed that consumption tax paid on the Properties at acquisition of \$8.2 million will be refunded in September 2007.

Drawdowns on debt facilities may include both fixed rate and floating rate debt.

Property acquisitions and disposals

Other than Carino Chitosedaí, which is expected to be acquired by 30 June 2007 for \$103 million, it is assumed that no additional properties or interests in properties are bought or sold in the Forecast Period. Notwithstanding this assumption, investors should be aware that properties may be bought or sold. during the Forecast Period.

Kenedix is currently either undertaking due diligence on, or negotiating to acquire, a number of additional retail properties in which it may be appropriate for CKT to invest. If the Responsible Entity is satisfied that the quality of those properties is comparable to the Properties and that the acquisition of those properties is accretive to Unitholder distributions, the proceeds of the Second Instalment will be used to fund the acquisition of those properties. If the Responsible Entity is unable to secure the acquisition of any additional properties which meets these criteria it will waive its right to call for payment of the Second Instalment

The forecast assumes that the Second Instalment is not called and further properties are not acquired as the Responsible Entity does not believe that there is a reasonable basis to make forecasts in respect to future potential acquisitions.

Interest expense

Prior to listing, an estimated \$141.6 million of debt will be drawn down to partially fund the acquisition of the Properties (excluding Carino Chitosedai). It is assumed that 90% of this debt will be hedged at a fixed interest rate of 2.09% (inclusive of margin) for a period of five years. The assumed floating interest rate is 1.19% (inclusive of margin). The margin may vary during the Forecast Period depending on the amount drawn down under the facilities.

It is assumed that when Carino Chitosedai is acquired a further \$105.7 million of debt will be drawn down. It is assumed this debt will be funded at the same rates as described above.

Exchange rate assumptions and foreign currency hedges

Exchange rate assumptions

The Pro Forma Consolidated Balance Sheet assumes an exchange rate of ¥92.1 per \$1.00 at the time of Allotment.

CKT has implemented foreign currency hedging to protect the forecast Yen distributions from potential adverse movements in the Yen/Australian dollar exchange rate. Income has been translated at an average hedged rate of ¥92.0 per \$1.00 for the period ending 30 June 2007, ¥86.8 per \$1.00 for the period ending 30 June 2008 and ¥82.3 per \$1.00 for the period ending 30 June 2009.

Economic income hedge

CKT has implemented foreign exchange hedging as set out in Section 2.14 to protect forecast Yen distributions from potential adverse movements in the Yen/Australian dollar exchange rate. For the purpose of forecasting, forecast Yen distributions from the TK Business have been translated at the hedged rates.

Economic capital hedge

CKT has hedged approximately 40% of its equity investment in the Properties for Australian dollars, one third for a term of four years, one third for a term of five years and one third for a term of six years by entering into cross currency swaps.

The net receipts under the cross currency swaps will be brought to account in the Consolidated Financial Statements over the life of the contracts.

Economic hedge fair values

Under AIFRS, economic hedges will not qualify as cash flow hedges. As a result cross currency swaps which have not expired at balance dates will be required to be carried at fair value on the Consolidated Balance Sheet and changes in fair value will be recorded in the Consolidated Income Statement. The forecast does not include movements in the market value of derivatives as the directors of the Responsible Entity do not believe there is a reasonable basis to make forecasts in relation to market conditions on matters that are outside their control. While the application of AIFRS on this matter will introduce volatility into the forecast financial information this will not affect the operating cash flows and hence the distributions paid to Unitholders.

Management fees to the Responsible Entity. Japan Investment Manager and Japan Asset Manager

The Responsible Entity receives a Base Responsible Entity Fee. the Japan Investment Manager receives an Investment Management Fee, the Japan Asset Manager receives an Asset Management Fee and the Responsible Entity and the Japan Asset Manager receive Performance Fees as described in Section 5. The Financial Forecasts assume that no Performance Fee is payable in the Eprecast Period because there is no reasonable. basis to forecast the Performance Fee.

Other fees

The Financial Forecasts assume the payment of property management fees but no ongoing debt placement, acquisition, disposal, due diligence and development management fees.

Other expenses

CKT will incur operating expenses including annual listing fees, registry charges, legal, audit and tax fees, marketing costs, postage and printing costs and other miscellaneous expenses. These amounts have been forecast by taking into account factors likely to influence the level of these fees, charges and costs, including CKT's market capitalisation and gross assets. Other expenses incurred by CKT are assumed to grow at a rate of 0% in the Forecast Period.

Future capital raising

It has been assumed that no capital raisings will be undertaken during the Forecast Period. It has also been assumed the Second Instalment will not be called.

Issue costs

Issue costs associated with the Offer are estimated at \$16.0 million. This amount will be paid out of the proceeds of the Offer. These costs are recognised directly in Unitholders' funds as a reduction of the proceeds of Units.

Distribution reinvestment plan (DRP)

The Constitution makes provision for a DRP to be introduced. It has been assumed that the DRP is not operational during the Forecast Period.

Distributions

Distributions will be paid within two months of each half year end. The half year ends are 30 June and 31 December. The first distribution will relate to the period from Allotment to 30 June 2007.

Taxation

CKT is not liable to pay Australian income tax provided that the Unitholders are presently entitled to CKT's income each year.

Income tax on the net profit for the year comprises current and deferred tax and is recognised directly in the Consolidated Income Statement. Under AIFRS, a deferred tax liability is recognised along with a corresponding tax expense. These arise from the temporary differences between the carrying values of assets in the Consolidated Balance Sheet and their associated tax cost bases, principally due to property revaluations and tax depreciation. Whilst accounting for the deferred taxation due to tax depreciation and property valuations gives rise to a taxation expense in the Consolidated Income Statement, it will only impact the cash flows from operations and hence the cash distributions paid to Unitholders in the event that one of the properties is sold.

The Financial Forecasts assume no changes in Australian or Japanese taxation legislation, regulations or interpretations thereof. A report on the Australian and Japanese tax consequences is contained in Appendix C.

GST and consumption tax

It is assumed that any Australian GST or Japanese consumption tax liability that cannot be recouped will be included as part of the assumed expenses or Issue Costs of CKT.

General assumptions

Accounting standards

It has been assumed that there is no change in applicable Australian Accounting Standards being AIFRS and the Corporations Act during the Forecast Period.

Legislation

It is assumed that there are no changes in Australian or Japanese laws, regulations or policies that will have a material impact on the performance or position of CKT. It is assumed that there is no significant change to existing Australian or Japanese tax law.

Australian and Japanese economic and political environment

It is assumed that there will be no adverse changes in the prevailing economic and political conditions and the rate of economic growth in Australia or Japan.

War and terrorist attacks

War or terrorist attacks anywhere in the world could result in a decline in economic conditions worldwide or in a particular place which could result in material adverse effect on CKT.

10.6 Sensitivity analysis

Investors should be aware that income forecasts may not be met for a variety of reasons. To assist investors in understanding the significance of key assumptions on the forecast returns of CKT, the table below sets out the effect of a change in several assumptions.

Investors should note that the sensitivity analysis is intended to provide a quide only and variations in actual performance may exceed the ranges shown. Movement in other assumptions may offset or compound any one variable beyond the extent shown.

The table below details the impact on forecast distributions (cents per Unit) for changes in certain assumptions.

Change in forecast assumption	Period ending 30 June 2007 (cents)	Year ending 30 June 2008 (cents)	Year ending 30 June 2009 (cents)
Increase in \$/¥ by 5%1	0.00	0.OO	0.00
Decrease in \$/¥ by 5%1	0.00	0.00	0.00
Increase in interest rates by 0.25%	(0.03)	(0.34)	(0.35)
Decrease in interest rates by 0.25%	0.03	0.34	0.35
Delay in settlement of Carino Chitosedai by two months	0.00	(0.24)	0.00
Performance fee of \$1 million paid ²	0.00	(0.67)	(0.67)

To eliminate distribution volatility resulting from currency volatility, the Responsible Entity has hedged 100% of CKT's forecast distribution from the Properties for the first five years and 90% for years six and seven.

No performance fee payable for period to 30 June 2007. Assumes a fee of \$1 million is paid for years ending 30 June 2008 and 30 June 2009 with no offsetting increase in underlying CKT performance.

11. Material documents and additional information

11.1 Summary of material documents

The following is a summary of material contracts relating to CKT. The summaries are not intended to be exhaustive.

Contract	Parties	Subject matter	Section
Constituent Documents
Challenger Kenedix Japan Trust Constitution	The Responsible Entity and Unitholders	Rights and obligations of Unitholders and the Responsible Entity	11.1.1
Master TK Agreement	The Responsible Entity and the Master TK Operator	Establishment of the TK Business and the making of a TK investment by the Responsible Entity	11.1.2
Sub TK Agreement	The Master TK Operator and the Sub TK Operator	Establishment of the Sub TK Business and the making of a TK investment by the Master TK Operator	11.1.3
Japan HeadCo Shareholders Agreement Articles of Incorporation of Japan HeadCo	Kenedix and a wholly-owned subsidiary of Challenger	Rights and obligations of the parties in respect of Japan HeadCo	11.1.4
Management Agreements
Management Agreement	The Responsible Entity and the Manager	The responsibilities and rights of the Manager in relation to the operation of CKT	11.1.5
Japan Asset Management Agreement	The Sub TK Operator and the Japan Asset Manager	The responsibilities and rights of the Japan Asset Manager in relation to asset management services for the Sub TK Operator	11.1.6
Japan Investment Management Agreement	The Master TK Operator and the Japan Investment Manager	The responsibilities and rights of the Japan Investment Manager in relation to investment management advisory services for the Master TK Operator	11.1.7
Japan Property Management Agreements	Japan Property Manager, Japan Asset Manager, Sub TK Operator and the relevant Trust Banks	The responsibilities and rights of the Japan Property Manager in relation to property management services to the relevant Trust Banks and Sub TK Operator	11.1.8
Agreements relating to the Properties
Trust Beneficiary Interest Sale and Purchase Agreements	The Sub TK Operator and entities owned or controlled by Kenedix	The purchase from entities owned or controlled by Kenedix of the Trust Beneficiary Interests in the Properties by the Sub TK Operator	11.1.9
Agreements relating to the initial public offering
Subscription Agreement	The Responsible Entity and Challenger Life	Sets out the terms on which Challenger Life will subscribe for its Units in CKT	11.1.10
Underwriting Agreement	The Financial Adviser and Underwriter and the Responsible Entity	Sets out the conditions on which the Financial Adviser and Underwriter has agreed to underwrite the issue of Units under the Offer and the payment of the Second Instalment	11.1.11
Other Agreements
DRP rules	The Responsible Entity and Unitholders	Sets out rights of participants in the DRP and the rights and obligations of CKT in respect of the DRP	11.1.12
Debt arrangements	The Sub TK Operator and Sumitomo Mitsui Banking Corporation	Sets out the terms on which the debt funding for the Sub TK Business may be made available	11.1.13

11.1.1 Constitution of Challenger Kenedix Japan Trust

CKT is governed by a Constitution and has been registered as a managed investment scheme by ASIC under Chapter 5C of the Corporations Act.

CLIL is the trustee and the Responsible Entity of CKT. The respective rights and obligations of the Responsible Entity and the Unitholders of CKT are determined by the Constitution, the Corporations Act, the ASX Listing Rules and the general law. Neither the provisions of these laws and rules, nor their effect on the Constitution, have been summarised below.

The Constitution is a lengthy document and the following is only a summary of parts of that document. A copy of the Constitution can be viewed at ASIC or is available to investors free of charge.

Unitholders' rights and obligations

The beneficial interest in CKT is divided into Units. Each fully paid Unit confers an equal undivided beneficial interest in CKT. A partly paid Unit confers an interest of the same nature proportionate to the part of the Issue Price that has been paid. A Unit confers an interest in CKT's property as a whole, it does not confer an interest in any particular asset.

Transfers

Units may be transferred in any manner permitted by the operating rules of a clearing and settlement facility.

Income

A person registered as a Unitholder on the record date for a distribution is entitled to the distributable income of CKT for the period in proportion to their unit holding. A partly paid Unit is counted as a fraction of a Unit depending on the proportion paid up.

Distributions must be made to Unitholders within two months (or another period notified by the Responsible Entity) after the relevant distribution calculation date. It is intended that distributions will be made for periods ending 30 June and 31 December. The Responsible Entity may deduct from distributions amounts of tax payable by the Responsible Entity for the Unitholder, or any other amount required by law. The Responsible Entity may also permit Unitholders to reinvest some or all of any distribution to acquire Units.

Withdrawals and redemption of Units

While CKT is listed, Unitholders do not have a right to withdraw from CKT nor have their Units redeemed. Instead, a Unitholder may sell their Units on ASX.

Price for the Units

While the Units are Officially Quoted, the Responsible Entity may issue new securities at any price so long as the price is consistent. with the ASX Listing Rules and the Corporations Act, including for a rights issue, a distribution reinvestment, a Unit purchase plan, a placement, and the issue of Units on the exercise of an option, in any circumstances set out in applicable ASIC relief.

The Responsible Entity may issue Units in payment of fees to itself or to the Manager, at an application price equal to the greater of 'market price', or the net asset value of CKT divided by the number of Units on issue.

Market price is defined as the arithmetic average of the daily weighted average price per Unit for sales on ASX (excluding any special crossings) for the period of 10 trading days after the day the Unitholder becomes entitled to the distribution for the relevant Performance Fee period (whether or not a sale was recorded on any particular day).

Holder liability

The Constitution is designed to limit the liability of a Unitholder to the issue price of each Unit. While it is generally considered that such provisions will be effective, this has not been definitely determined by the courts. The Responsible Entity is entitled to be indemnified by a Unitholder (or former Unitholder) for tax or user pays fees incurred as a result of the Unitholder's action or inaction, or incurred as a result of an act or omission requested by the Unitholder. Joint Unitholders are jointly and severally liable in respect of all payments.

Responsible Entity liability and indemnity

The Responsible Entity is not liable to Unitholders for any loss suffered in any way relating to CKT, except if the Corporations Act imposes such liability. Subject to the Corporations Act, the liability of the Responsible Entity to any person other than a Unitholder in respect of CKT is limited to the Responsible Entity's ability to be indemnified out of the assets of CKT. In addition to any other indemnities allowed by law, the Responsible Entity is entitled to be indemnified out of the assets of CKT for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to CKT. This indemnity continues to apply after the Responsible Entity retires or is removed from office and is unaffected by the existence of an unrelated breach of trust.

Powers of the Responsible Entity

Subject to the Constitution, the Responsible Entity has all the powers in respect of CKT that is possible to confer on a trustee under the law, as though it was the absolute owner of the assets of CKT, acting in its personal capacity. This includes entering into contracts, incurring liabilities and authorising any person to act as its agent or delegate in respect of its powers as responsible entity.

The Responsible Entity also has broad investment powers. It may invest in, dispose of and otherwise deal with property and rights in its absolute discretion.

The Responsible Entity is specifically empowered to enter into the Management Agreement and the Master TK Agreement, and to do any other thing and enter into any other document or arrangement described in this PDS or which is necessary to give effect to the transactions described in this PDS or is collateral to any of the documents described in this PDS.

Rights of the Responsible Entity

The Responsible Entity and its associates may hold Units in any capacity. Subject to the Corporations Act, the Responsible Entity may:

deal with itself (in any capacity) and any associate or with any Unitholder:
be interested in any contract or transaction (including a disposal to CKT or an acquisition of an asset of CKT) with itself (in any capacity) or with any Unitholder or retain for its own benefit any profits or benefits derived from any such contract or transaction; and
act as responsible entity in relation to any other managed investment scheme.

Fees and expenses

Fees and expenses payable to the Responsible Entity are described in Section 5.

Retirement of the Responsible Entity

The Responsible Entity may voluntarily retire as responsible entity of CKT with Unitholder approval, and must retire when required by law. The Responsible Entity is released from all obligations in relation to CKT arising after the time it retires or is removed. The Responsible Entity is entitled to agree with the incoming responsible entity to be remunerated by, or to receive a benefit from, the incoming responsible entity in relation to its retirement as responsible entity, and is not required to account to Unitholders for such remuneration or benefit.

Amendment

The Corporations Act permits the Constitution to be amended by special resolution of the Unitholders or by deed executed by the Responsible Entity (where the Responsible Entity reasonably considers that the change will not adversely affect Unitholders' rights).

Duration of CKT

CKT continues indefinitely until terminated. Termination is on the earliest of certain events, which include Unitholders fixing a termination date by extraordinary resolution, or the Responsible Entity specifying a date in a notice given to Unitholders.

On winding up, the proceeds of sale (after deducting any liabilities or expenses of CKT) will be distributed to the Unitholders pro rata in accordance with the number of Units that they hold. The holder of a partly paid Unit must pay to CKT any unpaid amount immediately if CKT terminates or is wound up.

Partly paid Units

The Responsible Entity may issue partly paid Units. If a call has been validly made on partly paid Units but is unpaid, the Responsible Entity may dispose of (or restrict the rights of) those Units. The holder of partly paid Units remains personally liable to pay any outstanding balance, including interest and costs, if the Manager disposes of Units for an unpaid call.

Small holdings

While the Units are Officially Ouoted, the Responsible Entity may in its discretion sell or redeem any Units held by a Unitholder. which comprise less than a marketable parcel (as that term is defined in the ASX Listing Rules) without request by the Unitholder.

Stapling

The Units will not be 'stapled' to any other securities as part of this Offer. However, the Constitution contains provisions permitting the Units to be stapled in future to securities of another entity to form stapled securities. The Responsible Entity is given power to act as agent and attorney for each Unitholder to implement a proposal for stapling, for example, by applying for redemption of a Unit, applying for a security in another entity, consenting to be bound by the constitution of another entity, and selling and transferring a Unit of a Unitholder whose address is outside Australia.

11.1.2 Master TK Agreement

The Master TK Agreement provides that CKT will make a TK investment of 97% of the initial capital required by the Master TK Operator to operate its business under the Master TK Agreement. The Master TK Operator will utilise this capital, in addition to supplying 3% of the capital required for the TK Business from its own funds to invest in the business of the Sub TK Operator. The activities of the TK Business include obtaining profits by acquiring, managing and disposing of Sub TK Interests and to acquire, hold and dispose of interests in other special purpose companies, the business of which is similar to the TK Business.

CKT will be entitled to 97% of the profits and losses of the TK Business and 97% of any surplus of the TK Business upon. winding up. The Master TK Operator is entitled to the remaining 3% of the profits and losses of the TK Business and 3% of any surplus of the TK Business upon winding up.

The Master TK Operator must use all of the capital contributed by CKT solely in connection with the TK Business.

CKT will have no ownership rights or interests in the Sub TK Interests or other assets held by the Master TK Operator including the capital contributed by CKT in accordance with the Master TK Agreement.

CKT does not own any of the equity capital of the Master TK Operator and does not have any voting rights in relation to the Master TK Operator, Instead, CKT has a contractual monetary claim against the Master TK Operator. CKT will have no right to participate in the operation or management of the TK Business which, subject to the Master TK Agreement, will be conducted by the Master TK Operator in its sole discretion.

The Master TK Operator must conduct the TK Business in accordance with its investment policies and business plan as set out in the Master TK Agreement.

Management of the TK Business

The Master TK Operator shall conduct the TK Business with the due care of a good manager. The Master TK Operator does not have any authority to represent CKT, and CKT is not liable to third parties for any obligations or liabilities of the TK Business in excess of the amount it contributes under the Master TK Agreement.

The Master TK Operator will establish a committee of the Master TK Operator (Master TK Committee) to manage certain aspects of the TK Business. This will include considering, and making decisions with respect to, all material matters relating to the investment by the Master TK Operator in the business of the Sub-TK Operator.

The Master TK Committee will have two members and will meet at least on a monthly basis and will conduct its proceedings in accordance with the procedures adopted by the Master TK Operator from time to time.

The Master TK Operator has executed an agreement in relation to the management of the TK Business with the Japan Investment Manager (Japan Investment Management) Agreement), described in Section 11.1.7.

Additional cash contribution

CKT may make additional TK investments to the business of the Master TK Operator but only to the extent that the Master TK Operator requests such contributions and provides written details of the purpose of the required contribution:

CKT may determine in its sole discretion whether to make any additional contributions; it is not obliged to make any additional contribution:
the Master TK Operator may not solicit or accept capital from any other investor except CKT (unless CKT provides its written consent); and
in the absence of capital from CKT, the Master TK Operator $\bullet$ may only utilise interest bearing debt funding or existing cash facilities for acquisitions or redevelopments within stated parameters.

Additional acquisitions

The Master TK Operator may acquire additional interests in other Tokumei Kumiai arrangements or similar special purpose vehicles the business of which is similar to the Sub TK Operator, if such interests meet the investment policy and business plan of the Master TK Operator.

Financial and operational reporting

The Master TK Operator must provide to CKT a financial report of the TK Business for each half financial year and full financial year, including audited financial statements in respect of each full financial vear.

The Master TK Operator must also provide to CKT monthly operating statements for the business and copies of all statements for the business, reports and other information as requested by CKT that it reasonably requires to monitor the performance of its investment.

Distributions

The Master TK Operator will distribute to CKT an amount equal to the distributable assets for a six month calendar period multiplied by CKT's participation percentage each six month calendar period.

The distributable assets for each distribution period is all cash and other assets received by the TK Business less the fees and expenses incurred or required by the Master TK Operator in respect of the TK Business.

On the last day of each financial year, the Master TK Operator will calculate the profits and losses of the TK Business for the relevant financial year and allocate such profits and losses to CKT in accordance with its participation percentage.

Termination of Master TK Agreement

The Master TK Agreement is for an initial term of 20 years and will continue after that initial term unless terminated by either party in accordance with the Master TK Agreement. The Master TK Agreement terminates upon a number of events, including on the occurrence of the following:

. the sale, disposal, distribution or destruction of all or substantially all of the assets of the Master TK Operator which relate to the TK Business, making it impossible to operate the TK Business;
the full redemption of all the rights and interests of CKT. upon agreement between the Master TK Operator and CKT;
by written notice from either party if the other party fails to perform its material obligations under the Master TK Agreement and the failure is not cured within 30 days of receipt of notice to do so;
by written notice from CKT if the arrangement between CKT and the Master TK Operator under the Master TK Agreement does not or ceases to constitute a Tokumei Kumiai under the Commercial Code;
by agreement between the Master TK Operator and CKT;
the bankruptcy or insolvency of the Master TK Operator or CKT: or
after the expiry of the initial term, on three months' notice by either party to the other party.

In addition. CKT has a right to terminate the Master TK Agreement if the Master TK Operator, amongst other things:

. incurs, creates or assumes any liability in respect of the TK Business in any manner with respect to any debt which is not permitted in its investment policy or business plan;
grants a security interest in any of the assets of the TK Business:
· dissolves, terminates, liquidates, merges with or consolidates into another person or acquires substantially all of the assets of any person;
. makes any material change in the scope or nature of its business objectives, purposes or operations:
lends money to, or acquires an interest in, any other person, or acquires any stock, obligations or securities of any other person outside that permitted by its business plan; or
makes material modification of, waives or releases or breaches, any of the terms of the Master TK Agreement. the Sub TK Agreement or the Japan Investment Management Agreement.

Either party may terminate the agreement by notice in writing if the parties are unable to reach an agreement on how to deal with a change in tax law or tax policy or any action taken by a tax authority which results in or is substantially likely to result in a party being required to pay, or have withheld, a materially additional amount of tax or which would otherwise have a material adverse effect on the amount available for distribution in comparison to the amounts contemplated by the parties at the time they entered into the Master TK Agreement.

11.1.3 Sub TK Agreement

The Sub TK Agreement provides that the Master TK Operator make a TK investment of 100% of the initial capital required by the Sub TK Operator to operate its business under the Sub TK Agreement. The Master TK Operator will be entitled to 99.9% of the profits and losses of the Sub TK Business and 99.9% of any surplus of the Sub TK Business upon winding up. The Sub-TK Operator is entitled to the remaining 0.1% of the profits and losses of the Sub TK Business and 0.1% of any surplus of the Sub TK Business upon winding up. The business of the Sub TK Operator is primarily to acquire, manage and dispose of Trust Beneficiary Interests.

The rights and obligations of the parties to the Sub TK Agreement are substantially the same as those of the parties to the Master TK Agreement, except that the Sub TK Agreement relates to the Sub TK Business and includes certain special covenants as noted below. Other differences include that distributions to the Master TK Operator occur on a quarterly basis and the Sub TK Operator is not required to provide an audited financial statement to the Master TK Operator.

The Sub TK Operator has executed an agreement in relation to the management of the Sub TK Business with the Japan Asset Manager (Japan Asset Management Agreement), described in Section 11.1.6. If the Sub TK Operator makes a material modification of, or breaches, the Sub TK Agreement, the acquisition agreements to acquire the Trust Beneficiary Interests, the agreements relating to the entrustment of the Trust Beneficiary Interests, financing agreements, Japan Asset Management Agreement or property management agreements the Master TK Operator may terminate the Sub TK Agreement.

The Sub TK Agreement also contains the following additional clauses:

a) the Sub TK Operator may only take certain actions with the prior written consent of the Master TK Operator and the Master TK Operator may terminate the Sub TK Agreement if the Sub TK Operator breaches this requirement;
b) limited recourse provisions in respect of the Sub TK Operator designed to protect the bankruptcy remoteness of the Sub TK Operator and debt subordination provisions which provide that obligations owing to the Master TK Operator and the Japan Asset Manager are subordinated to obligations owed by the Sub TK Operator to other third parties.

11.1.4 Japan HeadCo Shareholders Agreement and Articles of Association

The Japan HeadCo Shareholders Agreement, between a whollyowned subsidiary of Challenger and Kenedix, together with the Articles of Incorporation, sets out how Japan HeadCo will be owned and operated.

Ownership of Japan HeadCo is held 51% by a Challenger subsidiary and 49% by Kenedix with provision that, for so long as the Challenger subsidiary and Kenedix are the only shareholders, shares in Japan HeadCo may only be issued in this ratio.

Objectives of Japan HeadCo

The business of Japan HeadCo is to own the Master TK Operator.

Directors

Japan HeadCo must have four Directors and the Challenger subsidiary and Kenedix must each appoint two Directors.

For so long as the Challenger subsidiary and Kenedix are the only shareholders, each may remove or replace any director appointed by it. If either shareholder no longer holds any shares in Japan HeadCo or no longer has the right to appoint a Director, that shareholder must immediately remove each Director appointed by it.

Decision making

The quorum required for a shareholders' meeting is two thirds of all shareholders who have voting rights. Resolutions shall be passed if two thirds or more of the votes of the shareholders present and entitled to vote affirm the resolution.

There must be at least one meeting of the Board of Directors each quarter. The quorum required for a meeting of Directors is a majority of the Directors in office provided that at least one director nominated by each shareholder is present. The Chairman of the Board meeting does not have a casting vote. Resolutions of the board of directors shall be passed if approved by a majority of directors presently in office entitled to participate in the resolution provided that at least one director. nominated by each shareholder votes in favour of the resolution.

Put/Call options

The Japan HeadCo Shareholders Agreement provides for:

a) a call option allowing the Challenger subsidiary the right to require Kenedix to sell to the Challenger subsidiary or its nominee all (but not part) of its shares: and
b) a put option allowing Kenedix the right to require the Challenger subsidiary (or its nominee) to purchase from Kenedix all (but not part) of its shares.

In these circumstances, the shares will be sold at an agreed price or if the parties are not able to agree, the fair market value of the shares as determined by an independent valuer.

The put and call option may be exercised in circumstances involving a deadlock or dispute between the shareholders, a default event or a change of control of Kenedix (in the case of the Challenger subsidiary) or of the Challenger subsidiary (in the case of Kenedix), as discussed below.

A deadlock occurs if the same resolution is not passed at two consecutive board meetings, or two consecutive shareholders' meetings because either the directors or shareholders. constituting the quorum did not attend at either of the twomeetings, or the vote for the resolution at both the meetings was not passed by the required majority. A deadlock also occurs if two adjourned board or shareholders' meetings are dissolved within three months. If a deadlock occurs, a shareholder may give a notice (Deadlock Notice) to the other shareholder stating that a deadlock has occurred.

If there is a dispute between the shareholders arising out of or in connection with the business of Japan HeadCo, any business in which Japan HeadCo has invested directly or indirectly or any agreement entered into in relation to any such business (other than a dispute in connection with a default event or a dispute which is also a deadlock), either shareholder may notify the other of the existence of a dispute (Dispute Notice).

In the case of a deadlock or dispute, the Chief Executive Officers of each shareholder must meet and consult in good faith to resolve the deadlock or dispute. If the deadlock or dispute is not resolved within 28 days of the Deadlock Notice or Dispute Notice (as applicable), Kenedix may exercise its put option or the Challenger subsidiary may exercise its call option.

If a shareholder fails to pay any amount that is due and payable under the Japan HeadCo Shareholders Agreement, fails to comply with any of its material obligations under the Japan HeadCo Shareholders Agreement, is fraudulent or in wilful default in respect of its obligations under the Japan HeadCo Shareholders Agreement or an insolvency event occurs in respect of the shareholder, the other shareholder may give the defaulting shareholder a default notice and notify the defaulting shareholder to remedy the default (if the default is capable of being remedied). If the default is not remedied within the time required, or it cannot be remedied, the non-defaulting shareholder may exercise its option.

A change of control is deemed to have occurred on:

a) a change in the ability to control the composition of the board of directors or equivalent managing body of a corporation;
b) a change in control of more than half the voting rights of the members of the corporation or of more than half the issued shares or other equity interests of a corporation;
c) where a holding company of a corporation ceases to be its holding company;
d) in the case of a publicly traded corporation that has no controlling shareholder, a person acquires control of that corporation; or
e) where the corporation was not previously wholly-owned by another entity (or by that entity and its related bodies corporate), the corporation becomes wholly-owned by another entity, or by that entity and its related bodies corporate.

Disposal of shares

A shareholder must not dispose of any of its shares without the consent of the other shareholder (except in accordance with the put option or call option or as described below). Transfer of shares is permitted if both shareholders transfer all their shares. if one shareholder transfers all their shares to the other shareholder or if the shareholder transfers all its shares to certain related bodies corporate. Except in certain limited circumstances, transfers of shares must be approved by the board of Japan HeadCo.

Termination

The Japan HeadCo Shareholders Agreement terminates if the number of shareholders reduces to one, if Japan HeadCo is wound up or liquidated or if the shareholders otherwise agree to terminate. Upon termination (for example, after the exercise of the put or call option), the Japan Investment Management, Japan Asset Management or Japan Property Management Agreements may also terminate.

Termination payment

If the Japan HeadCo Shareholders Agreement terminates as a result of the exercise of the call option or put option on the ground of unresolved deadlock or dispute (other than an unresolved deadlock or dispute relating to termination of any of the Japan Asset Management Agreement, the Japan Investment Management Agreement or the Japan Property Management Agreements), the shareholders of Japan HeadCo will negotiate in good faith to agree an amount and source of payment to Kenedix in compensation for the loss of opportunity suffered by Kenedix or any of its related bodies corporate (including the Japan Managers) in relation to Kenedix ceasing to be a shareholder. This payment would include any loss of opportunity in relation to the services supplied by the Japan Managers under the Japan Asset Management Agreement, the Japan Investment Management Agreement and the Japan Property Management Agreements.

If an agreement as to the amount of the termination payment is not reached within 30 Business Days of termination, the parties will engage an independent expert chosen at that time by the parties in good faith to determine the termination payment.

11.1.5 Management Agreement

Under the Management Agreement, the Manager will be the exclusive provider of certain management services to the Responsible Entity. The Management Agreement provides that the Responsible Entity may authorise the Manager to act as its delegate from time to time.

Management services

The responsibilities of the Manager in relation to CKT include the following:

. managing CKT's investments on behalf of the Responsible Entity, including currency hedging and assessing and implementing proposals to increase or decrease investments in assets:

providing support services for investor relations and communications:
accounting, treasury, legal and tax management services;
arranging the initial acquisition of the assets of CKT:
providing support services for the issue of Units; and
any additional services requested by the Responsible Entity and agreed to by the Manager.

Fees and expenses

The fees and expenses payable to the Manager are described in Section 5.

Term

The Management Agreement has an initial term of 10 years. The Manager may require the Responsible Entity to put resolutions to Unitholders to approve two extensions of up to 10 years each.

If not so extended, the Management Agreement continues until terminated and Unitholders may terminate it by passing an ordinary resolution taking effect one month or more after the date of the resolution

The Responsible Entity may terminate the Management Agreement immediately:

where the Manager is in material breach of the Management Agreement and has not remedied that breach for 90 days after written notice given within one month of the breach requiring that the breach be remedied. A breach incapable of remedy is taken to have been remedied if the Manager is ready, willing and able to provide the services under the Management Agreement;
where the Manager is insolvent; or
where Challenger or its subsidiaries cease to hold at least 50% of the Manager's issued share capital.

The Manager may terminate the Management Agreement at any time:

upon giving one year's written notice to the Responsible Entity;
immediately where the Responsible Entity is insolvent; and
immediately where the Responsible Entity does not remedy a material breach of the Management Agreement within 30 days of a notice requiring remedy of the breach. The notice need not particularise the breach.

Indemnity

The Manager, its employees and its associates are not liable for any claim, liability or loss arising in connection with the provision of the services except to the extent that such claim, liability or loss is caused by or contributed to by a breach of the Management Agreement or by the negligence, misconduct or bad faith of the Manager, its employees or associates.

The Responsible Entity will indemnify the Manager, its employees and its associates against all costs, expenses and liabilities arising in connection with provision of the services except to the extent that such costs, expenses or liabilities are caused by or contributed to by a breach of the Management Agreement or by the negligence, misconduct or bad faith of the Manager, its employees or associates. The indemnity does not cover overheads or in-house administration costs of the Manager.

11.1.6 Japan Asset Management Agreement

The following is a summary of the key terms of the asset management agreement (Japan Asset Management Agreement) between Godo Kaisha Sub TK One (Sub TK Operator) and the Japan Asset Manager.

The general obligations of the Japan Asset Manager will be to:

. manage the assets owned by the Sub TK Operator and the interests in any property or other entity of the Sub TK Operator;
prepare and once agreed with the Sub TK Operator, implement a comprehensive portfolio management plan, capital budget and annual budgets and monitor conditions impacting viability of the budgets:
provide monthly, quarterly and annual management reports about the properties and interests in any property or other entity of the Sub TK Operator as reasonably requested by the Sub TK Operator:
recommend to the Sub TK Operator measures and courses of ٠ action that the Japan Asset Manager believes will provide the best value for the Sub TK Operator's properties and interests in any property or other entity;
facilitate the establishment of compliance quidelines in relation to legal, tax and accounting requirements in all relevant jurisdictions and to revise and supplement these quídelines as necessary;
· perform risk management duties;
assist in the acquisition and disposal of assets by the Sub TK Operator, as approved by the Sub TK Operator;
assist in the management and collection of payments and other charges by the Sub TK Operator: and
maintain the Sub TK Operator's books and records in respect of the Sub TK Operator (including each Property) and the preparation of financial and operating statements in respect of the Sub TK Operator (including each Property).

Other activities where the Japan Asset Manager will assist the Sub TK Operator will include:

· identifying and evaluating investment opportunities in real estate consistent with the Sub TK Operator's investment policy:
providing due diligence services to the Sub TK Operator in connection with the Sub TK Operator's investment in new properties and property interests and the acquisition and disposition of properties and property interests of the Sub TK Operator from time to time;
with the approval of the Sub TK Operator, implementing and executing the acquisition and disposition of properties and property interests of the Sub TK Operator from time to time;
establishing and maintaining bank accounts in the name of the Sub TK Operator; and
obtaining property insurance coverage in connection with the properties of the Sub TK Operator.

The Japan Asset Manager is not authorised to take any action or make any decision on behalf of the Sub TK Operator in respect of certain material matters unless the matter is first approved in writing by the Sub TK Operator. The material matters are identified in the Japan Asset Management Agreement and include all acquisitions and disposals of properties, refinancing or changes in debt levels, payments outside the annual budget in excess of ¥10,000,000 for any property or ¥50,000,000 for all Properties, entering into new leases for a property where the present value of the lease is greater than ¥100,000,000, any major changes to the business plan of the Sub TK Operator or any material change to the services to be provided by the Japan Asset Manager under the Japan Asset Management Agreement.

As the Japan Asset Manager also acts as manager for a number of other funds, the Japan Asset Management Agreement includes an opportunities allocation policy to ensure the opportunities are allocated in accordance with an agreed approach.

Fees

In consideration for the performance of services under the Japan Asset Management Agreement, the Japan Asset Manager will be entitled to the fees and commissions described in Section 5. The Japan Asset Manager is not entitled to be reimbursed for any expenses, costs or charges which are outside the scope of the annual budget of the Sub TK Operator. However, the Japan Asset Manager is entitled to be reimbursed for reasonable travel expenses relating to marketing trips.

Term of the Japan Asset Management Agreement

The term of the Japan Asset Management Agreement will be 10 years from the date on which the Sub TK Operator first acquires an interest in a Property. The parties may agree to extend the Japan Asset Management Agreement for an additional 10 years or such other term up to 10 years that is agreed (Additional Term) provided that the Sub TK Operator obtains all regulatory and other approvals requested for the extension. At the end of any Additional Term, the parties may agree to extend the Japan Asset Management Agreement for a further 10 years or such other term up to 10 years that is agreed, again provided that the Sub TK Operator obtains all necessary regulatory and other approvals for the extension. As part of obtaining the necessary approvals to the initial term and the Additional Term (if applicable), the Responsible Entity will seek the approval of the Unitholders and will only agree to extend the term of the Japan Asset Management Agreement if the Unitholders consent to the extension. Even if the Japan-Asset Management Agreement is not extended for an additional fixed period beyond the initial term or the Additional Term (if applicable), the Japan Asset Management Agreement will continue beyond the initial term and the Additional Term unless terminated.

Termination of the Japan Asset Management Agreement

If any of the following events occurs in relation to a party to the Japan Asset Management Agreement (Defaulting Party), the other party may immediately terminate the agreement by notice to the Defaulting Party:

. the Defaulting Party commits a material breach of its obligations under the Japan Asset Management Agreement and such breach has not been remedied within 30 Business Days after receipt of notice;
. the Defaulting Party is fraudulent or in wilful default with respect to its obligations under the Japan Asset Management Agreement;
the occurrence of certain events involving the bankruptcy or insolvency of the Defaulting Party.

In addition, the Sub TK Operator may immediately terminate the Japan Asset Management Agreement by notice to the Japan Asset Manager if there is an indirect or direct change of control of the Japan Asset Manager.

If the Japan Asset Management Agreement has not been extended for an additional fixed period beyond the initial 10 year term or the Additional Term (if applicable), either Party may terminate the Japan Asset Management Agreement on one month's written notice to the other party.

The Japan Asset Management Agreement will terminate automatically if the Japan Investment Management Agreement is terminated

11.1.7 Japan Investment Management Agreement

The following is a summary of the key terms of the investment management agreement (Japan Investment Management Agreement) between the Master TK Operator and the Japan Investment Manager.

The Japan Investment Manager provides non-discretionary services to the Master TK Operator. The general obligations of the Japan Investment Manager will be to:

. advise the Master TK Operator on the management of the portfolio of the Master TK Operator;
prepare and once agreed, advise and report to the Master TK Operator on the implementation of a comprehensive portfolio management plan and annual budgets and monitor conditions impacting the viability of the budgets;
provide monthly, quarterly and annual management reports about the portfolio of the Master TK Operator as reasonably requested by the Master TK Operator;
recommend to the Master TK Operator measures and courses of action that the Japan Investment Manager believes will provide the best value for the Master TK Operator's portfolio:
advise the Master TK Operator on compliance guidelines in relation to legal, tax and accounting requirements in all relevant jurisdictions outside Japan and to revise and supplement that advice as necessary;
. maintain the Master TK Operator's books and records in respect of the Maser TK Operator (including the portfolio of the Master TK Operator);
advise the Master TK Operator on risk management; and

• advise the Master TK Operator on the compliance procedures required under the terms of all loan documents and legal requirements affecting the Master TK Operator, or its subsidiaries

Other activities where Japan Investment Manager will assist the Master TK Operator will include:

· providing general administrative services:
* advising the Master TK Operator in relation to acquisition, development and disposal opportunities consistent with the Master TK Operator's investment policy; and
accounting and reporting services.

Fees

In consideration for the performance of services under the Japan-Investment Management Agreement, the Japan Investment Manager will be entitled to the fees and commissions described in Section 5. The Japan Investment Manager is not entitled to be reimbursed for any expenses, costs or charges which are outside the scope of the annual budget of the Master TK Operator.

Term of the Japan Investment Management Agreement

The term of the Japan Investment Management Agreement will be 10 years from the date on which the Master TK Operator first invests in the business of the Sub TK Operator. The parties may agree to extend the Japan Investment Management Agreement for an additional 10 years or such other term up to 10 years that is agreed (Additional Term), provided that the Master TK Operator obtains all necessary regulatory and other approvals required for the extension. At the end of any Additional Term, the parties may agree to extend the Japan Investment Management Agreement for a further 10 years or such other term up to 10 years that is agreed, provided that the Master TK Operator obtains all necessary regulatory and other approvals for the extension. As part of obtaining the necessary approvals to the initial term and the Additional Term (if applicable), the Responsible Entity will seek the approval of the Unitholders and will only agree to extend the term of the Japan Investment Management Agreement if the Unitholders consent to the extension. Even if the Japan Investment Management Agreement is not extended for an additional fixed period. beyond the initial term or the Additional Term (if applicable), the Japan Investment Management Agreement will continue beyond the initial term unless terminated

Termination of the Japan Investment Management Agreement

If any of the following events occur in relation to a party to the Japan Investment Management Agreement (Defaulting Party), the other party may immediately terminate the agreement by notice to the Defaulting Party:

. the Defaulting Party commits a material breach of its obligations under the Japan Investment Management Agreement and such breach has not been remedied within 30 Business Days after receipt of notice from the other party;
. the Defaulting Party is fraudulent or in wilful default with respect to its obligations under the Japan Investment Management Agreement;
the occurrence of certain events involving the bankruptcy or insolvency of the Defaulting Party.

In addition, the Master TK Operator may immediately terminate the Japan Investment Management Agreement by notice to the Japan Investment Manager if there is an indirect or direct change of control of the Japan Investment Manager.

If the Japan Investment Management Agreement has not been extended for an additional fixed period beyond the initial 10 year term or the Additional Term (if applicable), either party may terminate the Japan Investment Management Agreement on one month's written notice to the other party.

The Japan Investment Management Agreement will terminate automatically:

with immediate effect if the Japan Asset Management Agreement is terminated for a reason not attributable to the fault of the Master TK Operator, or
with effect after 30 Business Days (Notification Period) if there is a direct or indirect change of control of the Master TK Operator (except in certain specified circumstances).

11.1.8 Japan Property Management Agreements

The Japan Property Management Agreements are to be entered into in respect of some or all of the Properties, with the relevant Trust Bank, the Sub TK Operator, the Japan Asset Manager and the Japan Property Manager in respect of property maintenance, management and building and land operation services, including lease management and building management services.

The term of each Property Management Agreement is the same as the term of the relevant Trust Agreement which applies to the Property. The Property Management Agreement terminates if the Trust Agreement terminates or if the Japan Asset Management Agreement terminates.

The Japan Property Manager will be paid fees for services performed under each Japan Property Management Agreement. Remuneration includes a lease management fee of 2% of operating revenue for single tenant properties or 2.5% of operating revenue for multi-tenant sites, with a minimum fee of ¥3 million (\$32,573) per month.

There is also a fee for supervising works performed at the property of nil for works costing less than ¥3 million, 3% of the cost of work items of more than ¥3 million and less than ¥10 million, ¥300,000 (\$3.257) plus 2% of work costs exceeding ¥10 million for work items of more than ¥10 million and less than ¥100 million, and an amount determined by separate negotiation for work items of more than ¥100 million. The fees are exclusive of consumption taxes.

11.1.9 Trust Beneficiary Interest Sale and Purchase Agreement

The Sub TK Operator will purchase the Trust Beneficiary Interests in the Properties from various entities controlled or owned by Kenedix pursuant to Trust Beneficiary Interest Sale and Purchase Agreements (Purchase Agreements). The key provisions of the Purchase Agreements are summarised below.

Conditions

Completion of the Purchase Agreements is conditional upon certain conditions being satisfied, including that the Units have been allotted and that all conditions in each of the other Purchase Agreements relating to the other Properties (other than Carino Chitosedai to be acquired in June 2007) have been satisfied.

In addition to the common conditions, additional Property specific conditions have been included, the material ones being as follows:

Property Additional conditions

Carino Chitosedai

The leases are executed, valid and binding and in the required form:
full rent payments under the leases have commenced:
all rights under the construction contract have been assigned to the trustee and necessary consents have been obtained; and
the probable maximum loss for the Property for seismic risk is less than 15%.

Carino Tokiwadai	The prior approval of Sumitomo ٠ Mitsui Banking Corporation to the transfer has been obtained; and the seller has provided satisfactory ٠ evidence that the Pre engagement Agreement for Creation of Revolving Mortgage has been terminated.	Sunny Noma	The consent of Sunny Co., Ltd to the ٠ entrustment of the building to the trustee, the assignment of the Trust Beneficiary Interest by Sumitomo Corporation to the seller and the assignment of the Trust Beneficiary Interest by the seller has been
Kansai Super Saígo	The prior written approval of ٠ Sumitomo Mitsui Banking Corporation to the transfer has been obtained.		obtained; the leases are executed, valid and ٠ binding and in the required form;
Osada Nagasaki	The seller has provided satisfactory ٠ evidence that the advertisement tower constructed by the lessee belongs to the lessee and not the trust bank; and the seller has submitted evidence ٠ that the revolving pledge has been discharged.		rent payments under the leases have commenced; all conditions precedent under the Purchase Agreement between Sumitomo Corporation and Kenedix or the seller have been satisfied; and the probable maximum loss for the Property for seismic risk is less than
Life Higashinakano	A no-objection letter from Life ٠ Corporation has been obtained; the seller has provided satisfactory ٠ evidence that the Pre engagement Agreement for Creation of Revolving Mortgage has been terminated; and JPMorgan Trust Bank Limited has ٠ given its prior written approval to the transfer of Trust Beneficiary Interest by YK Atlas Investment to the seller.	Unicus Ina	15%. The seller has provided satisfactory evidence that the Agreement for Creation of Mortgage has been terminated; and The Musashino Bank, Ltd has given its prior written approval to the transfer of Trust Beneficiary Interest by the seller.
Life Asakusa	A no-objection letter from Life ٠ Corporation has been obtained; the seller has provided satisfactory ۰ evidence that the Pre engagement Agreement for Creation of Revolving Mortgage has been terminated; and JPMorgan Trust Bank Limited has ٠ given its prior written approval to the transfer of Trust Beneficiary Interest from YK Atlas Investment to the seller.	Yaoko Sakado Chiyoda	The seller has submitted satisfactory evidence that the Agreement for Creation of Mortgage has been terminated; and The Musashino Bank, Ltd has given its prior written approval to the transfer of Trust Beneficiary Interest by the seller.
Kojima Nishiarai	The seller has provided satisfactory ٠ evidence clarifying which portion of the building is owned by the tenant and which portion has been entrusted to the trust bank; the prior written approval of Tokyo ٠ Star Bank, Limited to the transfer by the seller has been obtained; and the seller has assigned its status as ٠ lessor under the sublease agreement.

Izumiya Hakubaicho

The seller has provided satisfactory evidence that the Agreement for Creation of Mortgage has been terminated: and
Sumitomo Mitsui Banking Corporation and the Chuo Mitsui Trust and Banking Co., Ltd have each given prior written approval to the transfer of the Trust Beneficiary Interest by the seller.

Key warranties

Under the Purchase Agreements, each seller gives a number of warranties in respect of the respective Properties, as well as to title to the Properties, status of the seller, authority to enter into the agreements, and the absence of any condition which would frustrate the sale. The key warranties are the same for all the Purchase Agreements.

Limits on the seller's ability for breach of warranty

The seller is liable for all damages as a result of any breach of warranty which occurs within two years after the assignment (assignment date), or which may exist prior to the assignment date.

If any warranty given by the seller is found to be untrue or inaccurate, the seller must immediately give written notice to the purchaser. The seller is only liable to the purchaser if the purchaser sends a written notice of its potential claim within a period of two years after the assignment date.

11.1.10 Subscription Agreement

Challenger Life has agreed to subscribe for 7.5 million Units (the Subscription Securities), representing approximately 5% of the Units on issue immediately after completion of the Offer. The subscription price is \$2.00 per Unit payable in two instalments of \$1.50 and \$0.50. The Responsible Entity provided customary warranties to Challenger Life as to its power and capacity to issue the Units.

11.1.11 Underwriting Agreement

Under this Agreement the Financial Adviser and Underwriter has agreed to underwrite the issue of the Units under the Offer and the payment of the Second Instalment, for payment, by the Responsible Entity, of the fees and expenses set out in Section 5.

The Financial Adviser and Underwriter may terminate its obligations under the Underwriting Agreement if:

1. before the Allotment Date:
a) the S&P/ASX 200 Index and the S&P/ASX 200 Property Index fall to a level that is 10% or below the level it was at close of trading on the Business Day prior to signing of the Underwriting Agreement and remains at or below that level for three consecutive Business Days (or until the day prior to the settlement date, whichever period is shorter);
b) ASIC makes or applies for certain orders, commences certain proceedings or investigates certain matters, or intends to do any of these actions in relation to this PDS or the Responsible Entity or its officers;
c) requisite approval by ASX is refused or not granted, or is granted on conditions that would have a material adverse effect on the success of the Offer, or the approval is withdrawn:
d) a person withdraws their consent to the issue of this PDS:
e) the closing certificate is not given by the Responsible Entity or is materially untrue, incorrect or misleading;
the Responsible Entity withdraws the Offer; £.
g) there is a material adverse change in the financial position, results, operations or prospects of the Responsible Entity, the Manager or CKT;
h) a supplementary PDS is or should be lodged with ASIC;
i). a material contract is terminated, rescinded or materially amended, is void or voidable, or if unexecuted at the date of this PDS, is signed in a materially different form to that described in this PDS or in a form that is likely to materially adversely effect CKT or the success of the Offer, or any conditions precedent to the material contracts are not satisfied or waived;
an insolvency event occurs in respect of the Responsible $\mathfrak{d}$ Entity, CKT or the Manager:
k) the Responsible Entity breaches the agreement or any representation or warranty;
I) the timetable for the Offer is delayed for more than four Business Days;

m) there is:

a. a material adverse change or disruption to political or economic conditions or financial markets;
b. a suspension of trading in all securities on major stock exchanges;
c. a general moratorium on commercial banking declared or there is a material disruption in commercial banking or security settlement or clearance services:
d. commencement of hostilities or escalation of existing hostilities involving nominated countries, or a significant terrorist act is perpetrated anywhere in the world:
n) the Responsible Entity alters its share capital or constitution or the Constitution:
o) the Responsible Entity contravenes its constitution, the Constitution, the Corporations Act, a requirement of the ASX or any other applicable law:
p) a director of the Responsible Entity is charged with an indictable offence relating to financial or corporate matters, or is subject to public action by a regulatory body, or is disqualified from managing a corporation;
q) a new law or policy is introduced by any Australian federal, State or Territorian governments or by the government of Japan;
r) the price of a security in Challenger falls at any time to 15% or more below the level it was on the Business Day prior to signing of the Underwriting Agreement and remains below that level for three consecutive Business Days (or until the day prior to the settlement date, whichever period is shorter), that entity is removed from the official list of ASX or trading in the securities of that entity on ASX is suspended, or an insolvency event occurs in respect of that entity; and
s) this PDS omits requisite information, contains a statement which is misleading or deceptive or does not comply with the Corporations Act or Listing Rules of the ASX.
1. before the sale of any Units to be sold by the Responsible Entity under the forfeiture provisions of the Constitution:
a) trading in the Units is suspended for a consecutive period. of five Business Days or on the Second Instalment Payment Date, or CKT is removed from the official list of the ASX:
b) an insolvency event occurs in respect of the Responsible Entity, CKT or the Manager:
c) the Responsible Entity or any of its directors is fraudulent;
d) the Responsible Entity or any of its directors convenes a provision of the Constitution, the Corporations Act, the Listing Rules of ASX, any requirement of ASIX or ASX or any other applicable law or agreement:
e) the Responsible Entity breaches the agreement or any representation or warranty.

An event listed in paragraphs $1(k)$ to $1(s)$ , $2(c)$ to $2(e)$ permits termination of the Underwriting Agreement only if the Financial Adviser and Underwriter reasonably determines that the event is likely to have a material adverse effect on the financial condition, position or prospects of CKT, the success of the Offer or the market price of the Units, or is likely to result in the Financial Adviser and Underwriter contravening, or become subject to a liability under, the Corporations Act or other applicable law.

11.1.12 Distribution Reinvestment Plan

The Responsible Entity has established a distribution reinvestment plan (DRP) to provide Unitholders with a choice of reinvesting some or all of their distributions at a discount of up to 20% of the prevailing market price rather than receiving those distributions in cash. The Responsible Entity may decide for which distributions, if any, the DRP will be available.

It is currently intended that the DRP will not be operational for distributions payable in the Forecast Period. However, the Responsible Entity reserves the right to commence the DRP in its absolute discretion.

Some of the principal features of the DRP are:

. Unitholders may elect to participate in the DRP for all or some of their Units. A Unitholder may join, vary participation in, or withdraw from, the DRP as provided under the rules of the DRP;
Unitholders whose registered addresses are outside Australia may not participate in the DRP where the Responsible Entity determines that the making of the offer or the issue of Units to them under the DRP would be unreasonable;
the Responsible Entity will determine whether Units to be allocated under the DRP will be newly issued Units or Units acquired on market for transfer to Unitholders under the DRP:
· all Units allocated under the DRP will rank equally in all respects with all other issued Units;
once Units are allocated under the DRP to DRP participants and quoted on ASX, they may be sold by the Unitholder to whom they are allocated;
· participating Unitholders will be sent a statement after each allocation under the DRP giving details of their participation in the DRP: and
Unitholders participating in the DRP pay no brokerage. commission or other transaction costs on Units allocated under the DRP. The Responsible Entity has the discretion to have any issue or transfer of Units under the DRP underwritten or sub-underwritten, either by an unrelated or related party of the Responsible Entity.

11.1.13 Debt arrangements

The Sub TK Operator has obtained a letter of intent from Sumitomo Mítsui Banking Corporation (SMBC) for an interest only variable rate term loan facility (Facility) of up to 60% of the valuation of the Properties to acquire the Trust Beneficiary Interests and to meet capital expenses and other funding needs.

The Facility may be provided by SMBC or by a syndicate of financial institutions lead by SMBC acting as arranger and agent. The Facility is secured by cross-collateral senior positions over the Trust Beneficiary Interests in the Properties and first-priority pledge on the equity interest of the Sub TK Operator.

The Facility is for a five year term. The Sub TK Operator will enter into interest rate hedging arrangements.

In addition to representations and warranties that are usual for debt arrangements of this type, the key commercial undertakings by the Sub TK Operator include:

. written permission of the lending syndicate to a sale of a Trust Beneficial Interest in a Property;
annual property valuation;
written permission of the lending syndicate for the dismissal of the Japan Asset Manager, along with repayment of loan if agreement on a replacement manager cannot be reached within six months;
no further drawdowns permitted if the loan to value ratio exceeds 60%;
. maintenance of reserves for interest, tenant deposits and certain operating costs such as taxes and insurance; and

accelerated repayment on the occurrence of arrears in repayment, breach of warranty or other non-performance by the Sub TK Operator or related contractual default, insufficient deposits or inability to repay tenant deposits, change of directors of the Sub TK Operator without consent of the lending syndicate or non-performance by the Japan Asset Manager.

Conditions to draw down include, among others that evidence of the allotment of units in CKT has been provided in a form acceptable to the lender, completion of related transaction documents and of TK contributions into the Sub TK Business.

11.2 ASX waivers

ASX has indicated that on application by CKT, subject to satisfying certain prescribed conditions, it is likely to grant the following waivers from the ASX Listing Rules and provide the following confirmations:

Listing confirmations: standard listing confirmations including that CKT's structure and operations are appropriate.

Quarterly cash reports: a waiver from Listing Rule 4.7B, and from the requirement that CKT provide quarterly cash reports for the eight quarters after CKT's admission to the official list of ASX.

Announcement of rate and amount of distributions: a

waiver from Listing Rule 6.24 and clause 1 of appendix 6A so that the Responsible Entity need not announce the rate and amount of a distribution when announcing a distribution and record date on the condition that an estimated distribution is advised to ASX and the actual rate is advised to ASX as soon as it becomes known.

Issue of Units in lieu of fees: waivers from ASX Listing Rules 7.1 and 10.11 to allow CKT to issue Units (without approval by Unitholders) to the Responsible Entity and its associates. including the Manager, in respect of the Base Responsible Entity Fee and Performance Fee subject to their disclosure in this PDS, issue of the Units in accordance with the Constitution, disclosure of the issue of these Units in the annual reports of CKT and by lodgement of an Appendix 3B and approval by Unitholders every third year of the Responsible Entity and its associates' right to receive those fees in Units.

Issue of Units to certain related parties: confirmations that ASX Listing Rules 7.1 and 10.11 allow CKT to issue Units (without approval of Unitholders) to certain related parties under the Offer including the Responsible Entity, Challenger Life and their related entities and their respective directors and officers.

DRP underwriting: a waiver from ASX Listing Rules 7.1 and 10.11 to allow a related party to underwrite or sub-underwrite the DRP as long as the DRP does not contain a limit on unitholder participation, the underwritten securities are issued within 15 Business Days after the distribution payment, they sell any Units issued under the underwriting agreement within three months to an unrelated party, a related party does not exercise any votes on Units acquired by the Underwriter and no discount is offered to the underwriter in respect of those units. This waiver only applies for 18 months after listing.

Second Instalment: a waiver from Listing Rule 7.24.2 to allow the Responsible Entity not to call for the Second Instalment (if it chooses to do so).

11.3 Information from CKT

The Issuer will provide a copy of any of the following documents free of charge to any person who requests a copy during the Offer Period in relation to this PDS:

Challenger Kenedix Japan Trust Constitution (including schedules); and
the Compliance Plan.

Copies of the above documents may be obtained in person or in writing from the Issuer at the address set out in the Directory section at the end of this PDS.

11.4 Consents to be named in this PDS

Each of the parties (referred to as Consenting Parties), who are named in the table below:

1. has not made any statement in this PDS or any statement on which a statement made in this PDS is based, other than as specified in this Section 11.4 below;
1. to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any statements or omissions from this PDS, other than the reference to its name and/or statement or report included in this PDS, with the consent of that Consenting Party;
1. has given and has not, before the lodgement of this PDS with ASIC, withdrawn its written consent to be named in this PDS in the form and context in which it is named.

Role

Financial Adviser and Underwriter	UBS AG, Australia Branch
Investigating Accountant	PricewaterhouseCoopers Securities Ltd
Tax Adviser	PricewaterhouseCoopers
Australian Legal Adviser	Blake Dawson Waldron
Japanese Legal Adviser	Mori Hamada & Matsumoto
Independent Valuers	HIRO & REAS and CBRE
Registry	Link Market Services Limited
Co-Managers	UBS Wealth Management Australia Limited and Bell Potter Securities Limited
Manager	Challenger Management Services Limited

Consenting Parties

Kenedix and Kendix Advisors, Inc. Japan Managers

HIRO & REAS has given, and has not, before the lodgement of this PDS with ASIC, withdrawn its consent to the inclusion of its valuation reports in Appendix A of this PDS in the form and context in which those reports are included (and to the references to those reports in this PDS).

CBRE has given, and has not, before the lodgement of this PDS with ASIC, withdrawn its consent to the inclusion of its valuation reports in Appendix A of this PDS in the form and context in which those reports are included (and to the references to those reports in this PDS).

PricewaterhouseCoopers has given, and not withdrawn prior to the lodgement of this PDS with ASIC, its written consent to the inclusion of its Taxation Letter in the form and context in which they appear in Appendix C.

PricewaterhouseCoopers Securities Ltd has given, and has not, before the lodgement of this PDS with ASIC, withdrawn its consent to be named as Investigating Accountant in connection with the Offer and to the inclusion of its Investigating Accountant's Report in Appendix B.

11.5 Fees of report providers

CBRE is entitled to receive professional fees of approximately \$0.1 million (excluding GST) incurred in connection with the preparation of its valuation reports, a summary of which is contained in Appendix A of this PDS.

HIRO & REAS is entitled to receive professional fees of approximately \$0.2 million (excluding GST) incurred in connection with the preparation of its valuation reports, a summary of which is contained in Appendix A of this PDS.

PricewaterhouseCoopers is entitled to receive professional fees of approximately \$0.5 million (excluding GST) in connection with the preparation of the Taxation Letter contained in Appendix C of this PDS.

CBRE, HIRO & REAS and PricewaterhouseCoopers are not operating under an Australian Financial Services Licence in providing their reports.

Each confirms that:

. they and their associates do not have any other direct or indirect pecuniary or other interests; and
they and their associates do not have any other associations or relationships with the Responsible Entity,

which might reasonably be expected to be or have been capable of influencing them in providing their reports.

PricewaterhouseCoopers Securities Ltd is entitled to receive professional fees of approximately \$0.4 million (excluding GST) in connection with the preparation of the Investigating Accountant's Report contained in Appendix B of this PDS.

11.6 Directors' interests

Other than set out in the table below, no director of the Issuer holds any interests in the formation or promotion of CKT, the Offer of Units or the PDS and no director has received any payment or other benefit to induce them to become, or to qualify as a director of the Responsible Entity.

Name	Interest
Russell Hooper	\$15,000 for serving on the due diligence committee in connection with the Offer.
Geoff McWilliam	\$15,000 for serving on the due diligence committee in connection with the Offer.

11.7 Accessing information about your investment

The Responsible Entity will provide regular communication to Unitholders, including publication of:

CKT's half vearly update which provides an update on the investments held, operation of CKT and performance for the period;
CKT's annual report including audited financial statements for each financial year ending 30 June;
half yearly distribution statements:
· annual taxation statements; and
* any continuous disclosure notices given by CKT.

CKT will also have a website that will provide up to date information on CKT including current Unit prices, access to half year and annual reports and distribution information.

The Responsible Entity, as a disclosing entity, will be subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC in relation to CKT may be obtained from, or inspected at, an ASIC office.

You also have the right to obtain a copy of each annual report, half yearly report, and any continuous disclosure notice from CKT free of charge.

As at the date of this PDS, CKT has not lodged with ASIC any annual report or half year report and has not given any continuous disclosure notices to ASX.

11.8 Complaints handling procedures

Customer service representatives are available between 8.30am and 5.30pm (Sydney time), from Monday to Friday, by calling the Registry on 1800 754 866. For investment advice, please see vour financial adviser. If you have a concern, please write to CKT at the address set out below or call the Complaints Manager to register your complaint by telephone on 02 9994 7000. The Complaints Manager will acknowledge your concern, investigate it and report back to you.

The Complaints Manager Challenger Kenedix Japan Trust C/o Challenger Listed Investments Limited GPO Box 3698 Sydney NSW 2001

If you are dissatisfied with the response, you may raise the matter directly with the Financial Industry Complaints Service (FICS). Its contact details are:

Financial Industry Complaints Service PO Box 579 Collins Street West Melbourne VIC 8007 Telephone 1300 780 808

11.9 Privacy and your personal information

The Application Form requires you to provide information that may be personal information for the purposes of the Privacy Act 1988 (Cth) (as amended). The Responsible Entity (and the Registry on its behalf) collects, holds and uses that personal information in order to assess your Application, service your needs as an investor, provide facilities and services that you request and to administer CKT.

The information may also be used from time to time to inform you about other Challenger products or services, which the Responsible Entity considers may be of interest to you.

Access to information may also be provided to other Challenger Group companies and to the Responsible Entity's agents and service providers on the basis that they deal with such information in accordance with Challenger's privacy policy.

If you do not provide the information requested of you in the Application Form, the Registry may not be able to process your application for Units or administer your holding of Units appropriately.

Under the Privacy Act 1988 (Cth) (as amended), you may request access to your personal information held by (or on behalf of) the Responsible Entity. You can request access to your personal information by telephoning or writing to the Registry as follows:

Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Telephone: 1800 754 866

The Responsible Entity has adopted the Challenger Group privacy policy. A summary of the policy can be obtained by visiting the Challenger website at www.challenger.com.au.

11 10 Directors' statement

Board of directors of the Responsible Entity

Each director has consented to the lodgement of this PDS with ASIC.

Rege wear

Stephen Gerlach

Chairman Challenger Listed Investments Limited

12. Glossary

The following is a glossary of the terms used in this PDS.

\$	Australian dollars
AIFRS	Australian equivalents to International Financial Reporting Standards
Allotment	The allocation and allotment of Units following acceptance of an Application
Allotment Date	The date upon which the Units are allotted being 24 April 2007 unless otherwise determined by the Responsible Entity
Annualised Distribution Yield	The rate of return derived by dividing the Distribution per Unit by the First Instalment expressed on an annual basis
Applicants	Persons who submit valid Application Forms pursuant to this PDS
Application(s)	An application to subscribe for Units under the PDS
Application Form(s)	The Application Form accompanying or attached to this PDS
Application Monies	Monies received from Applicants in respect of their Applications
ASIC.	Australian Securities and Investments Commission
Asset Management Fee	As detailed in Section 5.4
Asset Performance Fee	As detailed in Section 5.6
ASX	ASX Limited or Australian Securities Exchange being the market operated by it as the context requires
ASX Listing Rules	The official Listing Rules of ASX
Australian Sponsor's Fee	As detailed in Section 5.5
Base Responsible Entity Fee	The fee payable to the Responsible Entity pursuant to the Constitution for the management and operation of CKT as detailed in Section 5
Board	The board of directors of the Responsible Entity
Broker Firm Applicant	Any Applicant that has received a Broker Firm Offer
Broker Firm Fee	As detailed in Section 5.5
Broker Firm Offer	The invitation under this PDS to Australian resident retail investors who have received a firm allocation of Units from their broker, details of which are contained on page 3
Business Day(s)	A day other than a Saturday or Sunday on which trading banks are open for general banking business in Sydney and Melbourne and ASX is conducting trading in Sydney and Melbourne
CAM	Common Area Maintenance fees as described in Section 6.5
CBRE	CB Richard Ellis K.K.
Challenger	Challenger Financial Services Group Limited (ABN 94 055 293 644)
Challenger Group	Challenger Financial Services Group Limited and its subsidiaries
Challenger Life	Challenger Life No. 2 Limited, or its subsidiary companies, or subsidiary trusts through which it will hold Units
CHESS	Clearing House Electronic Sub-register System

3 - 11 - 11 - 11 - 11 - 11 - 11 - 11 -

CKT Challenger Kenedix Japan Trust $CUL$ The Responsible Entity CMSL The Manager Constitution The Constitution of the Challenger Kenedix Japan Trust as amended Corporations Act Corporations Act 2001 (Cth) as amended from time to time Debt to Total Assets Ratio Effective interest in debt as a percentage of effective interest in gross assets Distribution Yield The rate of return derived by dividing the distribution per Unit by the First Instalment DRP Distribution Reinvestment Plan Exposure Period The seven day period after the date that this PDS is lodged with ASIC Financial Adviser and Underwriter UBS AG, Australia Branch (ABN 47 088 129 613) Financial Forecasts The Pro Forma Consolidated Balance Sheet and the Forecast Consolidated Income Statement for CKT for the Forecast Period First Instalment The first instalment of \$1.50 per Unit under the Offer Fixed Term Lease As detailed in Section 6.5 The period between the Allotment Date and 30 June 2009 Forecast Period Fund Management Fee The fee payable to the Manager under the Management Agreement and summarised in Section 5 GST Goods and Services Tax HIRO & REAS HIRO & REAS networks, Inc. Institutional Investor An investor to whom offers or invitations of financial products can be made without the need for a lodged product disclosure statement Institutional Offer The offer of Units to Institutional Investors in Australia and certain overseas jurisdictions pursuant to this PDS The property criteria that must be satisfied before properties will be acquired Investment Policy by CKT as set out in Section 2.7 Initial Public Offering of Units pursuant to this PDS dated 19 March 2007 IPO Issue The issue of Units pursuant to this PDS Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) Issuer Issue Costs Costs of the Issue. See Section 5 for a description of Fees and Expenses of the Offer Issue Price \$2.00 per Unit The agreement between the Sub TK Operator and the Japan Asset Manager Japan Asset Management Agreement relating to the provision of asset management services Japan Asset Manager Kenedix Japan HeadCo A kabushiki kaisha, a Japanese limited liability company, owned 51% by a wholly-owned subsidiary of Challenger and 49% by Kenedix Japan HeadCo Shareholders Agreement The agreement between the shareholders of Japan HeadCo in respect of their shareholding in Japan HeadCo

Japan Investment Management Agreement	The agreement between the Master TK Operator and the Japan Investment Manager relating to the provision of investment management advisory services
Japan Investment Manager	Kenedix
Japan Managers	Japan Asset Manager, Japan Investment Manager and Japan Property Manager
Japan Property Manager	Kenedix Advisors, Inc., a wholly-owned subsidiary of Kenedix
Japan Property Management Agreements	The agreements between the Sub TK Operator, the relevant Trust Banks, the Japan Asset Manager and the Japan Property Manager relating to the provision of property management services
Japan Sponsor's Fee	As described in Section 5.5
Kenedix	Kenedix, Inc.
LPT	Listed Property Trust
Management Agreement	The agreement between the Responsible Entity and the Manager relating to fund management services provided to the Responsible Entity
Manager	Challenger Management Services Limited (ABN 29 092 382 842), a wholly- owned subsidiary of Challenger
Master TK Agreement	The agreement between the Responsible Entity and the Master TK Operator in relation to the TK Business, details of which are contained in Section 11.1.2
Master TK Operator	The operator of the TK Business, Godo Kaisha Kenedix Master TK
NLA	Net Lettable Area
NPL	Net Property Income
NTA	Net Tangible Assets
Offer	The offer of Units pursuant to this PDS
Offer Closing Date	The last day on which Application Forms will be accepted being 5.00pm (Sydney time) on 20 April 2007 (subject to variation)
Officially Quoted	Quoted for trading on the Official List of ASX
PDS	Product Disclosure Statement
Performance Fee	The fee payable to the Responsible Entity and Japan Asset Manager upon CKT satisfying certain asset or equity outperformance conditions and summarised in Sections 5.4 and 5.6
PML	Probable Maximum Loss as detailed in Section 6.5
Product Disclosure Statement	This document dated 19 March 2007
Properties	The proposed portfolio of 12 retail properties listed in Section 7, each a Property
Purchase Price	Property acquisition price
Registry	Link Market Services Limited (ABN 54 083 214 537)
Responsible Entity	Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887), a wholly-owned subsidiary of Challenger
S&P	Standard & Poor's
S&P/ASX 200 Property Trusts Accumulation Index	A Standard & Poor's accumulation index developed to track the stock performance of property trusts in the S&P/ASX 200 index
Second Instalment	The second instalment of \$0.50 per Unit
Second Instalment Payment Date	4 February 2008, unless deferred or cancelled by the Responsible Entity

Glossary

www.

Section	Refers to a section in this PDS
Sqm	Square metres
Standard Lease	As detailed in Section 6.5
Sub TK Agreement	The TK agreement between the Master TK Operator and the Sub TK Operator
Sub TK Business	The business of the Sub TK Operator
Sub TK Interests	The interests of the Master TK Operator under the Sub TK Agreement or under other similar agreements
Sub TK Operator	The operator of the Sub TK Business, Godo Kaisha Sub TK One
Tax Deferred Component	The amount by which the Unitholder's cash distribution from Challenger Kenedix Japan Trust exceeds the Unitholder's share of the net taxable income of CKT (see Section 10)
The Trust	Challenger Kenedix Japan Trust
TK Agreements	The Master TK Agreement and the Sub TK Agreement
TK Business	The business of the Master TK Operator described in Sections 9 and 11
Tokumei Kumiai or TK	A contractual relationship between an investor and a TK operator under the Commercial Code of Japan
Trust Beneficiary Interests	Beneficial interest in a Property evidenced by a trust beneficiary certificate issued by a trust bank licensed in Japan, which holds the legal title to the Property
Trust Performance Fee	As detailed in Section 5.6
Tsubo	A unit of measurement used in Japan for floor areas (1 tsubo = 3.306 square metres)
Underwriting Agreement	The agreement between the Responsible Entity and the Financial Adviser and Underwriter dated 16 March 2007 under which the Financial Adviser and Underwriter has agreed to underwrite the Issue and the payment of the Second Instalment
Unit	One unit in Challenger Kenedix Japan Trust
Unitholder(s)	The holder of a Unit
*VWAP*	Volume weighted average price
Yen or ¥	Japanese Yen

Appendices

Appendix A - Independent Valuers' Reports Appendix B - Investigating Accountant's Report Appendix C - Taxation Letter

KO 51 en
Gro i.

Appendix A Independent Valuers' Reports

Shuwa Daiichi Hamamatsucho Bld. 2-2-12, Hamamatsucho Minato-Ku, Tokvo 105-0013 Japan Tel:03-5470-8585 Fax: 03-5470-8580

March 19, 2007

The Directors Challenger Listed Investments Limited as the Responsible Entity for the Challenger Kenedix Japan Trust. Level 15, 255 Pitt Street Sydney NSW 2000 Australia

Re: Summary of Appraisal Reports Challenger Kenedix Japan Trust Portfolio 4 Properties Located in Japan

Dear Sir/Madam.

1. Introduction

At your request, CB Richard Ellis (CBRE) has prepared this letter summarizing the valuation results from our completed, self-contained appraisal reports (individually a "Report" and collectively the "Reports"). The purpose of our Reports was to render our opinion of market value of each property as at December 31, 2006.

The Reports have been prepared in accordance with our interpretation of the Japanese Real Estate Appraisal Standards set forth by the Ministry of Land, Infrastructure and Transport and the International Valuation Standards. In our complete appraisals, CBRE considered all applicable approaches to value. The value conclusions are subject to the assumptions and limiting conditions contained in each report and reflect all information known by the valuers at CBRE who worked on the reports for the subject properties and the market conditions within the general area of each property.

Our reports are based upon the most current information available at the time that each valuation was prepared. CBRE accepts no responsibility for subsequent changes in information as to income, expenses or market conditions. Any subsequent change in lease terms will also have a corresponding change to the value. Our valuations have been prepared subject to certain particulars of lease terms and conditions.

2. Reliance on this Letter

We have prepared this letter to be included in the Product Disclosure Statement ("PDS"), which summarizes our Reports and outlines key factors that have been considered in arriving at our opinion of value. This letter does not contain all the necessary data and support, which is included in our Reports. For further information, we recommend the reader review the content of the complete Reports.

3. Brief Description of the Properties

The four subject properties are summarized in the table below and are located Tokyo and Aichi prefectures in Japan:

	No.	Property Name	Gereral Location	Property Type	Net Rentable Area* (sam)	Location Details
Properties Retail		Carino Chitosedaí	Tokyo - Setagaya Ward. Chitosedai	Retail Building (Multi-tenant)	9.925	Located approximately 1,200 metres (a 15-minute walk) from Chitosedal Station of the Odakyu line.
	2	lCarino Tokiwadaí.	Tokvo - Itabashi Ward. Maenocho	Retail Building (Multi-tenant)	7.699	Located approximately 600 metres (a 8- mínute walk) from Tokiwadaí station of the Tobu Toio line.
	5	Vator Toda	Aichí - Nagoya City Nakagawa Ward. Toda	Retail Building (Single-tenant)	14.921	Located approximately 960 meters (12- minute walk) from Haruta Station of the JR líne.
	12	Kojima Nishiarai	Tokyo - Adachi Ward. Níshiaraí	Retail Building (Single-tenant)	3.755	Located approximately 580 metres (a 7- minute walk) from Daishimae Station of lthe Tobu Daishi line.

* No. 1.2.5 exclude car gark area

4. Valuation Rationale

In arriving at our opinions of market value for the properties, we have placed primary emphasis on the Income Capitalization Approach and either the Direct Capitalization Approach or the Discounted Cash Flow Method. An explanation of the application of the Discounted Cash Flow and Direct Capitalization methodologies is provided below:

a) Direct Capitalization Method

Direct capitalization is the method used to convert a single year's estimates of stabilized net operating income and net cash flow into a value indication. In direct capitalization, a precise allocation between return on and return of capital is not made because investor assumptions or forecasts concerning the holding period, pattern of income, or changes in value of the original investment are not simulated in the method. Direct capitalization is the most appropriate method to use when analyzing a stable income stream and in estimating the reversion at the end of a holding period. Using this method, the following sets forth the process we undertook:

$(i)$ Estimate the potential gross income from all sources that a competent owner should be able to generate from a property based upon the existing leases in place for the occupied space. If vacant space exists, a market rental rate is assigned to this space
$(ii)$ Deduct an estimate of vacancy and collection loss
$(iii)$ Deduct estimated operating expenses with the result being an estimate of the stabilized net operating income

. . . . . . . . . . . . . . . . . . .

$(iv)$ Add interest on refundable deposits and deduct estimated capital expenditure as well as leasing commission, with the result being an estimate of the net cash flow
Estimate an overall capitalization rate applicable for net cash flow $(v)$
Divide the net cash flow by the overall capitalization rate, resulting in a value estimate $(v)$

The overall capitalization rates chosen were primarily based on comparable sales transactions, but consideration was also given to CBRE's Investor Survey held in the Autumn, 2006. The overall capitalization rates used on the Challenger Kenedix Japan Trust portfolio properties generally ranged from 4.60% to 5.60%, depending upon the specific income, location and physical characteristics of the subject properties.

b) Discounted Cash Flow Method

The discounted cash flow (DCF) method is a detailed analysis used when the future income is expected to be varied, usually as a result of numerous lease obligations and/or anticipated changes in market conditions or income and expenses. The DCF method specifies the quantity, variability, timing, and duration of net operating income and cash flow. Estimating the proper internal rate of return or yield rate (discount rate) is essential. We considered the target yield sought by investors, after conducting the survey and holding interviews with investors, as well as vields derived from comparable sales and/or market information.

The methodology is as follows:

${i}$ Estimate the net cash flows for each period of a projected holding period in the same manner with that estimated in the Direct Capitalization Method
Estimate a discount rate and a terminal capitalization rate $(ii)$
Estimate a selling price known as the reversion for the end of the projected holding $(iii)$ period
$(iv)$ The cash flows and the reversion are then discounted to a value estimate

We have generally utilized a 10-year holding period with the reversion calculated based upon capitalizing year 11's net operating income. In projecting cash flow, actual lease terms as well as market terms were taken into account, considering the Japanese leasing market.

The estimated growth rate for market rent and expenses are flat under the current circumstances in Japan. Where rents are above or below market, we have gradually brought them to market level, but we do not estimate future inflation or deflation. The rates used are consistent with those being utilized by investors when buying similar estate throughout Japan. This assumption is consistent with long-term average annual growth rates.

5. Summary of Values

Individual property values concluded by CBRE are summarized in the following table. For full details of the valuations, please refer to the complete, self-contained appraisal reports prepared separately for each property:

					Direct Cap	DCF
	No.	Property Name	Concluded Value (yen)	Net Cash Flow (yen)	Overall Cap Rate	Discount Rate	Terminal Cap Rate
	1	Carino Chitosedai	10.000.000.000	477,537,400	4.70%	4.60%	4.80%
	2	Carino Tokiwadai	6,540,000,000	305,373,370	4.60%	4.50%	4.70%
Retail Properties	5	Valor Toda	3,700,000,000	187,607,353	5.10%	4.60%	5.30%
	12	Kojima Nishiarai	971,400,000	54,800,997	5.60%	5.30%	5.60%
		Total	21,211,400,000

6. Liability Disclaimer

CBRE has prepared this letter, which appears in this PDS and specifically disclaims liability to any person in the event of any omission from or misleading statements included in the PDS, other than with respect to this letter. CBRE does not make any warranty or representation as to the accuracy of the information in any other part of the PDS other than was expressly made or given by CBRE in this letter.

CBRE has relied upon property data supplied by or on behalf of Challenger Listed Investments Limited, which we assumed to be true and accurate. CBRE takes no responsibility for inaccurate client supplied data and any conclusions related to the data. However, CBRE has no reason to believe that any data supplied to us or that our conclusions based on that data are inaccurate.

7. Certification of Appraisal

Certification of Appraisal will be included in respective Report.

自池由美子

Yumiko Kikuchi

Executive Officer Valuation & Advisory Services Department

HIRO&REASastwork.Inc.

HIRO & REAS network, Inc. 5F Ringo Bldg., 2-13 Goban-cho, Chivoda-ku, Tokvo 102-0076 Japan

March 19, 2007

The Directors Challenger Listed Investments Limited as the Responsible Entity for the Challenger Kenedix Japan Trust

Level 15, 225 Pitt Street. Sydney, NSW 2000, Australia

Re: Summary of Property Valuation Reports Challenger Kenedix Japan Trust Portfolio 8 Properties Located in Japan

Dear Sir/Madam.

Introduction

At your request, HIRO & REAS network, Inc. (H&R) has prepared this letter summarising the valuation results from our completed, self-contained valuation reports (individually a "Report" and collectively the "Reports"). The purpose of our Reports was to render our opinion of Specific Value (Investment Value) of each property as of the respective date of value (six properties as of December 31, 2006, one as of February 9, 2007, and one as of March 11, 2007).

The Reports has been prepared in accordance with our interpretation of the Japanese Real Estate Appraisal Standards set forth by the Ministry of Land, Infrastructure and Transport and the International Valuation Standards. In our complete valuation processes, H&R considered all applicable approaches to value. The value conclusions are subject to the "Condition of Appraisal", or, "Condition of Report" contained in each Report and reflect all information known by the valuers at H&R who worked on the reports for the subject properties and the market conditions within the general area of each property.

Our Reports are based upon the most current information available at the time that each valuation was prepared. H&R accepts no responsibility for subsequent changes in information as to income, expenses or market conditions. Any subsequent changes in lease terms will also have a corresponding

change to the value. Our valuations have been prepared subject to certain particulars of lease terms and conditions.

2. Reliance on This Letter

We have prepared this letter to be included in the Product Disclosure Statement ("PDS"), which summarises our Reports and outlines key factors that have been considered in arriving at our conclusion of value. This letter does not contain all necessary data and support, which is included in our Report. For further information, we recommend the reader review the content of the complete Reports.

3. Brief Description of the Properties

The eight subject properties are summarised in the table below and are located throughout Tokyo, Saitama, Kyoto, Osaka, Fukuoka, and Nagasaki prefectures in Japan:

				Кссийде Анга	Contrated Area?
No.	Property Name	General Location Property Type-		anplace in the Report (N409).	(Sam)	Category of Right	Location Details
						Ownership of Tenam-	Adjacent so Kitano-Hakubaicho
3	Izamiya Hakubaicho	Kyato City	Retail Buikling			Occupied Building and	Sta, of the Keifuka Kitano Line.
		Kysto Pref.	(single-tenam)	17.037.12	16.525	Its Site
4	Unicus Ina	Kitaadachi County	Retail Buikling			Ownership of Tenant- Occupied Building and	Located apprx, 520m from Hanuki Sta, of the Saitama New
		Saitama Prof.	(single-tenam)	16.656.85	13.044	Its Site.	Transportation Ina Line.
						Ownership of Tenant-	Located apprx. 120m from
6	Life Higashinakano	Nakano City	Retail Buikline			Occupied Building and	Higashi-Nakano Sta, of the Toel
		Tokyo	(single-tenam)	6,544.24	5,104	Its Site	Oedo Line.
						Ownership of Tenant-	Located apprx, 200m from
7	Life Asakusa	Taito City	Retail Buikling			Occupied Building and	Asakusa Sta, of the Tsukuba
		Tokyo	(single-tenam)	3,752.98	3.753	Its Site	Express Line.
		Nishisonogi				Ownership of Tenant-	Adjacent to Hinami Stop of the
8	Osada Nagasaki	County Nagasaki Pref.	Retail Buikling (single-senam)	10.656.43	10.330	Occupied Building and Its Site.	Nagasaki Bus.
						Ownership of Tenant-
Q.	Yaoko Sakado Chivoda	Sakado City	Retail Buikling			Occupied Building and	Located apprx. 1,200m from Wakaba Sta, of the Tobu Tojo-
		Saitama Pref.	(single-tenam)	5,803.59	5,492	Its Site	Line.
						Ownership of Tenant-	Located apprx. 800m from
10	Sanny Noma	Fukuoka City	Retail Buikling			Occupied Building and	Takamiya Sta, of the Nishitetsu
		Fukuoka Pref.	(single-tenam)	2.989.57	2.887	Its Site	Teniin Line.
						Ownership of Tenant-	Located apprs. 1,100m from
11	Kansai Super Saigo	Moriguehi Cisy	Retail Buikling			Occupied Building and	Moriguelai-shi Sta, of the
		Osaka Pref.	(single-tenam)	2,641.26	2,642	Its Site	Keihan Mainline.

* Rentable Area applied in each of our Report is basically equivalent to "Total Floor Area" of each property including any subject components such as parking space, mechanical space and backyards as well as outlet zone because all above properties are single-tenanted as a whole of each property. "Total Floor Area" is derived from those shown in the Building Permit, or, Inspection Certificate at completion, or, drawing of the building, depending on availability of sources.

**Contracted Area here is those shown in the leasing contract of each property, rounded to the whole number.

4. Valuation Rationale

In arriving at our opinions of Specific Value (Investment Value) for the properties, we have placed primary emphasis on the Income Capitalisation Approach by means of either the Discounted Cash Flow (DCF) Method or the Direct Capitalisation (Direct Cap) Method. An explanation of the application of the DCF and Direct Cap methodologies is provided below:

a) Discounted Cash Flow Method

The DCF Method is a method used to convert future benefits into an estimate of value by projecting the income or cash flow expected for each year of a typical investment-holding period, including any value at reversion. It has been commonly used in the appraisal of income-earning properties in the Western countries, and here in Japan it was publicly introduced by the Ministry of Land, Infrastructure and Transport in 2002, followed by applying officially to Japan's "Real Estate Valuation Standard" revised in January of 2003. In this revised Valuation Standard, it was announced that the application of the DCF Method is required when determining value for the purpose of evaluating investment performance for investors in accordance with the "Special Purpose Company Law" and the "Law for Investment Trusts and Investment Companies".

DCF method is based on the actual cash flow stream from the real estate so that it is basically the most basic methods of Income Approach in the appraisal.

The methodology is as follows:

$(i)$ Estimate the net cash flows (NCF) for each period of a projected holding period
$(ii)$ Estimate a discount rate and a terminal capitalisation rate
$(iii)$ Estimate a selling price known as reversion for the end of the projected holding period
The cash flows and the reversion are then discounted to a value estimate $(iv)$

We have generally utilised a 10-year holding period with the reversion calculated based upon capitalising 11th year's NCF. In projecting cash flow, actual lease term as well as market terms were taken into account, considering the Japanese leasing market.

The discount rates used on the Challenger Kenedix Japan Trust portfolio properties generally ranged from 4.7% to 5.9%, and so as the terminal cap rates from $5.0\%$ to 6.3% depending upon the specific income, location and physical characteristics of the subject properties. The rates are determined with a thorough consideration with the uniqueness of real estate investment relative to yield on other financial assets. The uniqueness of real estate investment here basically means 1) the risk as an investment target, 2) liquidity, 3) management difficulty and 4) asset security risk, and those elements consist of "premiums" to the yield commonly accepted in the financial market. Applied rates are additionally verified with the market cap comparables in each Report.

HRO&REAS network. Inc.

b) Direct Capitalization Method

Direct Cap Method is a valuation method based on an estimated single year's income expectancy (the first years income or standardized year's income are alternatively applicable) which is converted into an indication of value through division by an appropriate capitalisation rate. In this method, the single year's income is assumed to be perpetual, so that the uncertainty of the market that possibly come from the property's deterioration and/or instability of the market, is hardly interweaved to the indicated value. Therefore, we place less emphasis on the indicated values derived from Direct Cap Method.

5. Summary of Values

Individual property values concluded by H&R are summarized in the following table. For full details of the valuations, please refer to the complete, self-contained Reports prepared separately for each property:

			Concluded	Net Cash Flow	Direct Cap	DCF
No.	Property Name	Date of Value	Value* (vcn)	(from the 2nd птотестной чеде! vena	Cap Rate		Discount Rate Terminal Cap Rate
3	Izumiya Hakubaicho	9-Feb-07	5,720,000,000	287,422,348	5.00%	5.00%	5.20%
4	Unicus Ina	31-Dec-06	4,780,000,000	234,873,354	4.70%	4.70%	5.00%
6	Life Higashinakano	31-Dec-06	2,720,000,000	133,001,800	4.80%	4.80%	5.00%
7	Life Asakusa	31-Dec-06	2,310,000,000	116,603,322	4.80%	4.80%	5.00%
8	Osada Nagasaki	$31 - Dec -06$	1,750,000,000	111.029,848	5.90%	5.90%	6.30%
9	Yaoko Sakado Chiyoda	31-Dec-06	1,530,000,000	75,577.998	4.90%	4.90%	5.20%
10	Sunny Noma	$11-Mar-07$	1,440,000,000	79,913,987	5.00%	5.00%	6.00%
11	Kansai Super Saigo	$31 - Dec-06$	1,110,000,000	62,331.908	5.10%	5.10%	5.40%
	TOTAL:		21,360,000,000

* The concluded values shown above are from those "Appraised Value" for the property #4, 6, 7, 8, 9, and 11 in each issued "Appraisal Report" whereas those "Opinion Value" for the property #3 and 10 in each issued "Letter of Opinion".

6. Liability Disclaimer

H&R has prepared this letter, which appears in this PDS and specifically disclaims liability to any person in the event of any omission from or misleading statements included in the PDS, other than with respect to this letter. H&R does not make any warranty or representation as to the accuracy of the information in any other part of the PDS other than was expressly made or given by H&R in this letter.

H&R has relied upon property data supplied by or on behalf of Challenger Listed Investments Limited, which we assumed true and accurate. H&R takes no responsibility for inaccurate client supplied data and any conclusions related to the data. However, H&R has no reason to believe that any data supplied to us or that our conclusions based on that data are inaccurate.

Certification of Valuation

Certification of Valuation will be included in respective reports.

Hiroyuki Isobe, President Certified Real Estate Appraiser (Japan) CRE (USA) FRICS (UK)

A Surgeon

Kiyoshi Sasagawa Certified Real Estate Appraiser (Japan)

Appendix B Investigating Accountant's Report

PRICEWATERHOUSE COPERS ®

The Board of Directors Challenger Listed Investments Limited Level 15 255 Pitt Street SYDNEY NSW 2000

PricewaterhouseCoopers Securities Ltd ACN 003 311 617 ABN 54 003 311 617 Holder of Australian Financial Services Licence No 244572

Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia www.pwc.com/au Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999 Direct Phone +61 2 8266 2933 Direct Fax +61 2 8286 2933

Dear Sirs

19 March 2007

Investigating Accountant's Report on Forecast Financial Information and Financial Services Guide

We have prepared this report on the consolidated forecast financial information of the Challenger Kenedix Japan Trust (the 'Trust') for inclusion in a Product Disclosure Statement, dated on or about 19 March 2007 (the 'PDS') relating to the public issue of units in the Trust.

Expressions defined in the PDS have the same meaning in this report.

The nature of this Report is such that it should be given by an entity which holds an Australian Financial Services licence under the Corporations Act 2001 (Cwith). PricewaterhouseCoopers Securities Ltd is a controlled entity of PricewaterhouseCoopers and holds the appropriate Australian Financial Services licence.

Scope

You have requested PricewaterhouseCoopers Securities Ltd to prepare an Investigating Accountant's Report (the 'Report') covering the following information:

the forecast Consolidated Income Statements of the Trust for the period ending 30 $(a)$ June 2007 and the years ending 30 June 2008 and 30 June 2009
$(b)$ the pro forma Consolidated Balance Sheets as at the completion of the transactions disclosed in Section 10.5 of the PDS, (collectively, the Forecasts).

This Report has been prepared for inclusion in the PDS. We disclaim any assumption of responsibility for any reliance on this Report or on the Forecasts to which it relates for any purposes other than for which it was prepared.

Scope of review of Forecast Financial Information

The Directors of Challenger Listed Investments Limited (the 'RE') are responsible for the preparation and presentation of the Forecasts, including the best estimate assumptions, which include the pro forma transactions, on which they are based.

PRICEWATERHOUSE COPERS

The Board of Directors 19 March 2007

Our review of the best estimate assumptions which includes the pro forma transactions underlying the Forecasts was conducted in accordance with Australian Auditing Standard AUS 902 'Review of Financial Reports'. Our procedures consisted primarily of enquiry and comparison and other such analytical review procedures we considered necessary so as to adequately evaluate whether the best estimate assumptions provide a reasonable basis for the Forecasts. These procedures included discussion with the Directors and management of the RE and have been undertaken to form an opinion whether anything has come to our attention which causes us to believe that the best estimate assumptions do not provide a reasonable basis for the preparation of the Forecasts and whether, in all material respects, the Forecasts are properly prepared on the basis of the assumptions and are presented fairly in accordance with the recognition and measurement principles prescribed in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies of the Trust disclosed in Section 10.4 of the PDS and the constitution of the Trust (the 'Constitution') so as to present a view of the Trust which is consistent with our understanding of the Trust's future operations.

The Forecasts have been prepared by the Directors to provide investors with a guide to the Trust's potential future financial performance based upon the achievement of certain economic, operating, development and trading assumptions about future events and actions that have not yet occurred and may not necessarily occur. There is a considerable degree of subjective judgement involved in the preparation of Forecasts. Actual results may vary materially from the Forecasts and the variation may be materially positive or negative. Accordingly, investors should have regard to the investment risks set out in Section 4 of the PDS.

Our review of the Forecasts that are based on best estimate assumptions is substantially less in scope than an audit examination conducted in accordance with Australian Auditing and Assurance Standards. A review of this nature provides less assurance than an audit. We have not performed an audit and we do not express an audit opinion on the Forecasts included in the PDS.

Review statement on the Forecasts

Based on our review of the Forecasts, which is not an audit, and based on an investigation of the reasonableness of the best estimate assumptions giving rise to the Forecasts, nothing has come to our attention which causes us to believe that:

$(a)$ the best estimate assumptions set out in Section 10.5 of the PDS do not provide a reasonable basis for the preparation of the Forecasts, and
$(b)$ the Forecasts are not properly prepared on the basis of the best estimate assumptions and presented fairly in accordance with the recognition and measurement principles prescribed in Australian Accounting Standards under the Australian equivalent of the International Financial Reporting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Trust disclosed in Section 10.4 of the PDS and the requirements of the Constitution

PRICEWATERHOUSE COPERS

The Board of Directors 19 March 2007

$(c)$ the Forecasts are not based on reasonable grounds
the pro forma consolidated balance sheets have not been properly prepared on the $(d)$ basis of the pro forma transactions
$(e)$ the pro forma transactions do not form a reasonable basis for the pro forma Consolidated Balance Sheets

The underlying assumptions are subject to significant uncertainties and contingencies often outside the control of the Trust. If events do not occur as assumed, actual results and distributions achieved by the Trust may vary significantly from the Forecasts. Accordingly, we do not confirm or quarantee the achievement of the Forecasts, as future events, by their very nature, are not capable of independent substantiation.

Independence or Disclosure of Interest

PricewaterhouseCoopers Securities Ltd does not have any interest in the outcome of this issue other than the preparation of this Report and participation in due diligence procedures for which normal professional fees will be received.

Financial Services Guide

We have included our Financial Services Guide as Appendix A to our Report. The Financial Services Guide is designed to assist retail clients in their use of any general financial product advice in our Report.

Yours faithfully

James Dunning Authorised Representative of PricewaterhouseCoopers Securities Ltd

an an Aonaichte
Chaidh a bhaile an t-

Richard D Savage Authorised Representative of PricewaterhouseCoopers Securities Ltd

estigating Accountant's Report

Pricewaterhouse copers @

PRICEWATERHOUSECOOPERS SECURITIES LTD FINANCIAL SERVICES GUIDE This Financial Services Guide is dated 19 March 2007

About us 1

PricewaterhouseCoopers Securities Ltd (ABN 54 003 311 617, Australian Financial Services Licence no 244572) ("PwC Securities") has been engaged by Challenger Listed Investments Limited to provide a report in the form of an Investigating Accountant's Report in relation to the pro formal forecast financial information (the "Report") for inclusion in the PDS dated on or about 19 March 2007.

You have not engaged us directly but have been provided with a copy of the Report as a retail client because of your connection to the matters set out in the Report.

$\overline{2}$ This Financial Services Guide This Financial Services Guide ("FSG") is designed to assist retail clients in their use of any general financial product advice contained in the Report. This FSG contains information about PwC Securities generally, the financial services we are ficensed to provide, the remuneration we may receive in connection with the preparation of the Report, and how complaints against us will be dealt with.
Financial services we are licensed to provide $\mathbf{3}$ Our Australian financial services licence allows us to provide a broad range of services, including providing financial product advice in relation to .
various financial products such as securities, interests in managed investment schemes, derivatives, superarmuation products, foreign exchange contracts, insurance products, life products, managed investment schemes, government debentures, stocks or bonds, and deposit products

$\boldsymbol{A}$ General financial product advice

The Report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. -----
You should consider your own objectives, financial

situation and needs when assessing the suitability of the Report to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment.

Fees, commissions and other benefits we may 5 receive

PwC Securities charges fees to produce reports, including this Report. These fees are negotiated and agreed with the entity who engages PwC Securities to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. In the preparation of this Report our fees approximate \$350,000 (exc. GST).

Directors or employees of PwC Securities, PricewaterhouseCoopers, or other associated entities, may receive partnership distributions, salary or wages from PricewaterhouseCoopers.

Associations with issuers of financial products ß PwC Securities and its authorised representatives. employees and associates may from time to time have relationships with the issuers of financial products. For example, PricewaterhouseCoopers may be the auditor of, or provide financial services to, the issuer of a financial product and PwC Securities may provide financial services to the issuer of a financial product in the ordinary course of its business.

÷, Complaints

If you have a complaint, please raise it with us first,
using the contact details listed below. We will endeavour to satisfactorily resolve your complaint in a timely manner. In addition, a copy of our internal complaints handling procedure is available upon request.

If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are entitled to have your matter referred to the Financial Industry Complaints Service ("FICS"), an external complaints resolution service. You will not be charged for using the FICS service.

8 Contact Details

PwC Securities can be contacted by sending a letter to the following address:

James Dunning PricewaterhouseCoopers Darling Park Tower 2 201 Sussex Street GPO Box 2650 SYDNEY NSW 1171

Appendix A

Appendix C Taxation Letter

PRICEWATERHOUSE COPERS

The Directors Challenger Listed Investments Limited As Responsible Entity for Challenger Kenedix Property Trust Level 15 255 Pitt Street Sydney NSW 2000

PricewaterhouseCoopers ABN 52 780 433 757

Darling Park Tower 2 201 Sussex Street GPO BOX 2650 SYDNEY NSW 1171 DX 77 Sydney Australia

www.pwc.com/au Telephone +61 2 8266 0000 Facsimile +61 2 8266 9999

19 March 2007

Dear Directors

Challenger Kenedix Property Trust (CKT) Independent Taxation Report

This letter has been prepared for inclusion in a Product Disclosure Statement (PDS) dated on or about 19 March 2007. Defined terms used in this letter have the same meaning as they do in the PDS. References to "Australian and Japanese tax" mean:

Australian income tax and Goods and Services Tax (GST); and
Japanese income tax on TK profit distributions.

The purpose of this letter is to provide a broad summary of the Australian and Japanese tax implications that would arise for Australian resident Unitholders that are individuals and hold their units in CKT on capital account. This letter does not cover the taxation implications for nonresident Unitholders or Unitholders who hold their investments on revenue account or as trading stock.

This letter is based on existing Australian and Japanese tax law and established interpretations as at the date of this letter.

The taxation of interests in a unit trust, such as CKT, can be complex and may change over time. Accordingly, Unitholders are recommended to seek professional taxation advice in relation to their own position.

The information contained in this letter does not constitute "financial product advice" within the meaning of the Corporations Act 2001 (Cth) (Corporations Act). PricewaterhouseCoopers which is

PRICEWATERHOUSE COPERS ®

providing this letter is not licensed to provide financial product advice under the Corporations Act. To the extent that this letter contains any information about a "financial product" within the meaning of the Corporations Act, taxation is only one of the matters that must be considered when making a decision about the relevant financial product. This letter has been prepared for general circulation and does not take into account the objectives, financial situation or needs of any recipient. Accordingly, any recipient should, before acting on this material, consider taking independent financial advice from a person who is licensed to provide financial product advice under the Corporations Act.

It should be noted that although PricewaterhouseCoopers has given its consent to the inclusion of this report in the PDS, we give no assurance or guarantee in respect of the successful operation or performance of CKT and that consent should not be taken as an endorsement or recommendation.

Taxation in Japan

This summary has been prepared on the assumption that CKT (including for this section CKT and its Unitholders) has no permanent establishment in Japan for Japanese tax purposes and will be treated as a silent investor in the TK.

TK profit distributions (which include capital gains) to CKT are subject to Japanese withholding tax at a rate of 20%. This withholding tax is a final tax, and no Japanese tax return or other filing should be required. Distributions other than profit distributions (that is, returns of TK investment) are generally not subject to withholding.

If CKT has a permanent establishment in Japan for Japanese tax purposes or is not treated as a silent investor in the TK such that, for example, the TK arrangement is characterised as a Nin-i Kumiai, then CKT may be subject to Japanese tax on its income from Japan sources at the applicable statutory rates, including local tax, plus penalties and interest.

Under Japanese domestic tax law, capital gains from the sale of more than 2% of the shares in an unlisted Japanese real estate holding company (that is, one whose assets consist, 50% or more, of real estate assets in Japan) are subject to Japanese tax even if the shareholder does not have a permanent establishment in Japan. Under current law, a TK interest is not considered a shareholding for this purpose.

Taxation of CKT in Australia

Overview

Based on current Australian tax legislation, CKT should generally not be liable for income tax as it is intended that Unitholders will be presently entitled to all of the income of CKT.

CKT may however, be liable for Australian income tax in any year where the requirements to be classified as either a public trading trust or a corporate unit trust are satisfied for that year. Based on the information in this PDS and the intentions of the Responsible Entity as expressed to us, we do not believe that CKT will meet either of these requirements and so it should not be taxable in its

PRICEWATERHOUSE COPERS ®

own right. We note the requirements are ongoing so that the tax position of CKT in any year will depend upon actual operations in that year.

TK profit distributions will be included in the net income of CKT, grossed up for Japanese withholding tax suffered.

Where a tax loss or capital loss is made by CKT, the loss cannot be transferred to Unitholders. Instead, the tax losses must be carried forward by CKT for off-set against future assessable income of the trust, subject to satisfying the tests for utilisation of tax losses. Net capital losses must be carried forward to be off-set only against future capital gains.

Taxation of Unitholders

Taxation of Distributions

Unitholders are liable to pay tax on their share of the net income of CKT in the year in which they are presently entitled to that income. A Unitholder's share of the net income of CKT for the year ended 30 June must therefore be included in the Unitholder's assessable income for the financial year ended on that date. This applies irrespective of whether the actual distribution of the income from CKT is paid in a subsequent year.

Distributions from CKT may include various components, the taxation treatment of which may differ. It is expected that distributions from CKT could include both foreign sourced income and Australian sourced income. Distributions from CKT to a Unitholder may also include a tax deferred component, a capital gains tax (CGT) concession component, as well as capital gains.

Tax deferred distributions are generally attributable to returns of capital, building allowances, depreciation allowances and other tax timing differences. It is the practice of the Commissioner of Taxation to treat tax deferred amounts as not assessable when received unless and until the total tax deferred amounts received by a Unitholder exceed the Unitholder's cost base of the Units. For CGT purposes, amounts of tax deferred distributions received reduce the Unitholder's cost base of the Units and therefore affect the Unitholder's capital gain/loss on disposal of the Units.

CKT should be deemed to hold a fractional interest in the assets of the TK. Accordingly, upon disposal of one or more assets within the Portfolio. CKT will be deemed to have disposed of its fractional interest in the relevant assets. This will result in a capital gain or loss for Australian tax purposes. Similarly, the termination of the TK or disposal of an interest in the TK will also result in a capital gain or loss for Australian tax purposes.

Where an asset that is owned by CKT for at least 12 months is disposed of, CKT may claim a 50% CGT discount on the capital gain realised upon disposal of that asset. The CGT concession component of a distribution by CKT will represent the CGT discount claimed by the trust in respect of asset disposals. The CGT concession component is not assessable when received by Unitholders. To the extent a trust distribution includes a CGT concession component, there will be no reduction to the cost base of the Units held by a Unitholder.

The capital gain component of a trust distribution must be included in the Unitholder's calculation of

PRICEWATERHOUSE COPERS

their net capital gain for the relevant year of income. Where the distributed capital gain includes a discount capital gain component, the Unitholder is required to "gross up" that component by the discount applied by the Trust (i.e. 50%). The nominal capital gain (i.e. the whole amount of the gain prior to discounting) is then included in the calculation of the Unitholder's net capital gain. For example, in calculating the Unitholder's net capital gain, the Unitholder itself may be able to off-set their capital losses against the nominal capital gain. Once the Unitholder has calculated their net capital gain, the Unitholder may be entitled, in their own right, to a CGT discount if the Unitholder is an individual, a trust or a complying superannuation entity. Companies do not receive a CGT discount on capital gains.

Foreign tax credits

Japanese withholding tax will be imposed on profit distributions from the TK. Such distributions (grossed up for withholding tax deducted) will be foreign sourced income of CKT and Unitholders, when received.

Unitholders may be able to claim foreign tax credits for this Japanese withholding tax against the Australian tax payable on foreign sourced income of the same class as the income from CKT. Foreign income is divided into four classes for foreign tax credit purposes. Income of CKT from the TK is expected to fall primarily within the passive income class which also includes other types of foreign sourced investment income. The amount of the foreign tax credit available to a Unitholder will generally be equal to the lesser of:

(a) the Australian tax payable by the Unitholder on foreign sourced income of the passive class; or

(b) the Unitholder's share of the Japanese withholding tax imposed on distributions from the TK.

If foreign tax credits are available to a Unitholder but cannot be used by a Unitholder in the year they arise, the credits may be able to be carried forward by the Unitholder for up to five years and be used as a credit against future Australian tax payable on foreign sourced income of the passive income class.

The Federal Government in its 2005 Budget announced a proposal to repeal the foreign tax credit guarantining rules. Specifically, the reguirement for CKT and Unitholders to quarantine foreign tax credits into separate classes may be removed. The Budget announcement indicated the new rules will apply to income years commencing on or after the date the amending legislation receives Royal Assent. These new rules will be beneficial to Unitholders in CKT as they will make available foreign tax credits easier to be utilise and will reduce some aspects of record keeping for foreign income. As at the date of this letter no amending legislation has been published.

Disposing of Units

Unitholders will pay the Issue Price in two instalments. The first upon application and the second on 4 February 2008. The Units will be treated for capital gains tax purposes as having been acquired on issue of the Units but the second amount payable will only be added to the cost base of the Units when paid.

PRICEWATERHOUSE COPERS

A disposal of Units in CKT will have Australian CGT implications. Broadly, Unitholders must include any realised capital gain or loss in the calculation of their net capital gain or loss for the year. A net capital gain will be included in a Unitholder's assessable income. A net capital loss is not deductible for the year but may be carried forward until the Unitholder has realised capital gains against which the net capital loss can be off-set.

The net capital gain to Unitholders is generally determined as follows:

The capital gain or loss is the excess or shortfall of disposal proceeds over the cost base of the Units.
If Units have been held for less than 12 months this is the amount of gain or loss included in the net capital gain calculation.
If Units have been held for 12 months or more and there is a loss, similarly this loss is included in the net capital gain calculation.
If Units have been held for 12 months or more and there is a gain, a discounting factor may be available to certain Unitholders. The discounting factor for individuals and trusts is 50% (including non-complying superannuation trusts), whilst a discount factor of 33 1/3% applies to complying superannuation entities. Companies are not entitled to a discount.

Tax File Numbers, Australian Business Numbers and Exemptions

If a Tax File Number (TFN) is not quoted by a Unitholder, and no appropriate TFN exemption information is provided, Pay As You Go (PAYG) withholding tax is required to be deducted from any income distribution entitlement at the highest marginal tax rate plus Medicare levy (currently 46.5%). A Unitholder may quote a valid Australian Business Number (ABN) in place of a TFN, where holding the Units is part of the carrying on of an enterprise by the Unitholder.

The collection of TFNs is authorised and their use and disclosure is strictly regulated by the tax laws and the Privacy Act.

GST

The purchase and disposal of Units by Unitholders is not subject to GST.

Yours faithfully

Christian Holle Tax Partner PricewaterhouseCoopers

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AI assistant

CHALLENGER LIMITED — Capital/Financing Update 2007

64641_rns_2007-03-18_1cd430b3-eb12-4d05-b00e-7ed67a07f7af.pdf

CHALLENGER LODGES PDS FOR CHALLENGER KENEDIX JAPAN TRUST

Details of the Offer

FNDS

Challenger Kenedix Japan Trust Initial Public Offering 19 March 2007

Important Notice

If you have any questions relating to the Offer please call the Challenger Kenedix Japan Trust Unit Offer Information Line on 1800 754 866 or visit Challenger's website at www.challenger.com.au.

Responsible Entity

Product Disclosure Statement

This is not investment advice. You should seek your own financial advice.

No representations other than this PDS

Electronic PDS

Exposure Period

PDS availability

Offering restrictions apply

Future performance

Financial amounts and times

Updating the PDS

Dear investor

Key details of the Offer

The Offer and use of proceeds

Summary of Financial Forecasts

Important dates1

Structure of the Offer

How to apply for Units

Broker Firm Applicants

Broker Firm Fee

Institutional Investors

All Applications

ASX listing

Risks

Table of contents

Overview of Challenger challenger

Overview of Kenedix

Key benefits

Management structure aligns interests

Leading and experienced Japanese asset manager

Experienced management in Australia

Attractive Distribution Yield

Growth opportunities

Improving Japanese economy and real estate sector

Discount to valuation

Attractive property portfolio characteristics

Asset and tenant diversification

Key risks

Use of debt

Concentration of revenue

Investing in property under Japanese law

Replacement of the Japan Managers

Acquisition of Properties

Foreign exchange risk

Earthquake risk

Disincentives to change of Responsible Entity

Investment opportunities and strategy

Other risks

1. Challenger Kenedix Japan Trust answers to key questions

2. Offer summary

2.1 Issuer details

2.2 The Offer

2.3 Use of proceeds

2.4 The Properties

2.5 Property summary1

Kanto area

Kansai area

Chubu area

Kyushu area

2.6 Trust strategy

2.7 Investment Policy

2.8 Summary of Financial Forecasts1

2.9 Key financial information

2.10 Sources and uses of funds

2.11 Payment of Second Instalment

2.12 Distribution policy

2.13 Debt policy

2.14 Foreign exchange hedging policy

2.15 Net Tangible Asset backing and valuation policy

216 Investment risks

3. Investment highlights

CHALLENGER LIMITED Capital/Financing Update 2007

Important dates¹

2.5 Property summary¹

2.8 Summary of Financial Forecasts¹

Forecast Distribution Yield¹

Forecast Distribution Yield (assuming maximum utilisation of foreign tax credits)¹

Gross Domestic Product (annualised rate of change from previous quarter)¹

Geographic diversification⁴