AMP NZ Office Trust – adoption of NZ IFRS

October 18 2006

On 1 July 2006, AMP NZ Office Trust (ANZO) adopted the new New Zealand International Financial Reporting Standards (NZ IFRS) which has resulted in a number of accounting policy changes.

Entities complying with NZ IFRS for the first time are required to restate their comparative financial statements to reflect the adoption of NZ IFRS for the comparative period. Most adjustments required on transition to NZ IFRS have been made against opening retained earnings as at 1 July 2005 (referred to in this document as “transition date”).

The most significant differences in accounting policies that have impacted ANZO following adoption of NZ IFRS include:

1. Investment and Development Properties

Under the previous reporting standards Investment Properties were measured at net current value being market value less an allowance for disposal costs. Under NZ IFRS Investment Properties are to be measured at fair value with no allowance for disposal costs.

On initial adoption of NZ IFRS, the value of investment properties increased to reflect the addback of disposal costs previously deducted from independent valuations. The change in carrying value of investment properties has been restated through retained earnings.

On an ongoing basis the adoption of NZ IFRS will result in no recognition of disposal costs in future Investment Property valuations.

2. Deferred Tax

Under the previous accounting standards income tax was accounted for on a partial basis. Under NZ IFRS ANZO is required to account for income tax on a comprehensive basis. Under this basis ANZO is recognising all taxable temporary differences. Significant differences are noted below.

2.1 Depreciation

Under the previous accounting standards ANZO did not recognise deferred tax in respect of tax depreciation claimed on investment properties as it is not intended that the investment properties will be sold.

Under NZ IFRS, depreciation claimed for tax purposes is considered a temporary difference resulting in a deferred tax liability.

On initial adoption of NZ IFRS, a deferred tax liability was established representing the tax effect (33%) of the accumulated tax depreciation claimed on existing properties in prior years. Opening Retained Earnings was adjusted to recognise this liability at transition date (1 July 2005). Each subsequent year, a deferred tax expense, and a corresponding liability, will be recognised in respect of tax depreciation claimed each year. The deferred tax expense in the income statement will not affect the distributable profit as it is a non cash item.

3.2 Investment Property Revaluations

Under the previous accounting standards ANZO did not recognise a deferred tax liability in respect of investment property revaluations (excluding the land component) in excess of cost, as gains on investment properties are not subject to tax for income tax purposes. Under NZ IFRS ANZO is required to recognise a deferred tax liability on such gains.

On initial adoption of NZ IFRS, a deferred tax liability was established representing the value of deferred tax on past revaluations. Opening retained earnings was adjusted to recognise this liability at transition date (1 July 2005). Each subsequent year, a deferred tax expense, and a corresponding liability, will be recognised in the year of revaluation.

The deferred tax liability will not crystallise in the ordinary course of business. On disposal of a property, the deferred tax liability will be reversed back to the Income Statement. The deferred tax expense in the income statement will not affect the distributable profit as it is a non cash item.

3.3 Tax Losses

Under the previous accounting standards ANZO did not recognise a deferred tax asset in relation to tax losses available to carry forward to future years as there was no “virtual certainty” of realisation as defined under these standards. Under NZ IFRS ANZO is recognising such losses as it is “probable” that future taxable profit will be available against which losses can be utilised.

On initial adoption of NZ IFRS, a deferred tax asset was established representing the value of deferred tax on tax losses carried forward. Opening retained earnings was adjusted to recognise this asset at transition date (1 July 2005). Each subsequent year, a deferred tax expense/income, and a corresponding liability/asset, will be recognised in the year. The deferred tax expense/income in the income statement will not affect the distributable profit as it is a non cash item.

4. Financial Instruments

Under the previous accounting standards, any gains and losses on derivative instruments (such as interest rate swaps) that are designated as hedges of specific items were accounted for on the same basis as the underlying hedged item. The net differential paid or received, in respect of that derivative, was recognised as a component of Interest in the Income Statement. The fair value of derivative instruments was disclosed in the Notes to the Financial Statements. Under NZ IFRS there is a requirement to recognise the fair value of all derivative instruments in the Balance Sheet. ANZO has elected to not adopt hedge accounting under NZ IFRS resulting in any mark to market movements recognised in the Income Statement.

On initial adoption of NZ IFRS, a financial liability was established representing the fair value. Opening retained earnings was adjusted to recognise this financial liability at transition date (1 July 2005). Each subsequent year, an unrealised gain/loss, and a corresponding asset/liability, will be recognised in the year.

Under NZ IFRS a deferred tax will also be recognised on the mark to market movements.

The unrealised gain/loss and associated deferred tax expense/income in the income statement will not affect the distributable profit as it is a non cash item.

5. Distributable Net Profit

In July 2006, ANZO’s definition of net profit for distribution purposes was amended to ensure that the calculation of distributions to unit-holders is consistent with the past following the adoption of NZ IFRS. The new definition of net profit for distribution purposes is:

“Net profit after tax before revaluations on investment properties, revaluations of derivative financial instruments, amortisation of landlord-owned incentives, fixed rental smoothing, deferred tax and other non-cash NZ IFRS adjustments”

This definition excludes the introduction of non-cash items arising from NZ IFRS in the Income Statement, so that the calculation of the distributable profit for ANZO remains consistent with its pre-NZ IFRS levels.

6. Net Tangible Assets (NTA)

The requirement under NZ IFRS to recognise the new assets and liabilities identified above impacts the calculation of ANZO’s stated Net Tangible Assets (NTA) per unit.

The table below details the changes to ANZO’s balance sheet due to the transition from previous NZ Generally Accepted Accounting Practice (NZ GAAP) to the new NZ IFRS as at 30 June 2006.

AMP NZ Office Trust - NZ IFRS Balance Sheet 30 June 2006 (000's)

As noted in the table above, the NZ IFRS NTA as at 30 June 2006 is $1.08 per unit which includes  the deferred tax liability on property revaluations. Under current New Zealand income tax rules, the deferred tax liability on property revaluations will reverse on disposal.

ANZO’s assessment of the fair value of the NZ IFRS NTA excludes the deferred tax liability on  property revaluations on the basis it will never crystallise under the current tax rules. Therefore, the adjusted NZ IFRS NTA as at 30 June 2006 is $1.13.