Charter Hall Group
Annual Report 2009
Well Positioned
The Charter Hall Group is
well positioned as a specialist
property fund manager with
no debt on balance sheet
and a strong reputation in
managing wholesale and
retail investor capital.
Chairman’s Letter 3
Joint Managing Directors’ Report
About Charter Hall Group
Funds Under Management
Charter Hall Property Trust 9
Our Funds
Geographical Diversity of Assets
Board of Directors
Corporate Governance Statement
Directors’ Report
Financial Report
Core Plus Retail Fund Consolidation Note
Corporate Directory
4
6
7
10
11
13
16
20
41
100
IBC
Front cover: 275 George Street, Brisbane Qld (CPOF and CHOF4)
Performance Highlights
Successfully
refinanced major
debt facilities for both
CPOF and CPIF
Inclusion in the
S&P/ASX 200
AREIT Index
Lease up or
extension of over
75,000m2
across funds
$3.4 billion
assets under
management
$75 million
investment by the
Gandel Group
8.2 year WALE
above industry average
Annual Report 2009 1
Charter Hall has retained its brand
integrity in the retail investor space
throughout the GFC, continuing
to pay distributions and retaining
high occupancy.
333 George Street, Sydney NSW (CPOF)
2 Charter Hall Group
Chairman's Letter
Dear Investor,
on behalf of the Charter Hall Group Board, it is my
pleasure to present the 2009 Annual Report, for the
first time as an ASX200 listed group.
Strong focus on capital management
Despite challenging conditions, the
Group has worked hard to position
Charter Hall and its managed funds
to “weather the storm” of the Global
Financial Crisis (GFC) and to provide a
foundation for growth as the property
market recovers. The Group also
implemented a number of capital
management initiatives over the past
12 months.
Strategic investment from Gandel and
a successful capital raising
Earlier this year, Charter Hall
announced a capital raising that
eliminated debt from its own balance
sheet. As part of the capital raising,
the Gandel Group made a strategic
investment in Charter Hall, together
with an investment commitment to two
of our unlisted managed funds, being
the Core Plus Office Fund (CPOF) and
the Special Situations Office Fund
(the SSF Office Fund). We welcome
Gandel’s investment in Charter Hall and
its managed funds and look forward
to a long term strategic relationship
with this well established and highly
regarded Australian property group.
Maintaining brand integrity with wholesale
and retail investors
In addition to raising new equity
commitments for CPOF, Charter Hall
is currently raising equity for the SSF
Office Fund. This Fund has been
established to take advantage of
favourable pricing opportunities created
by the dislocation of domestic credit
markets and provides a platform for
investors to access the property skills
of Charter Hall in one of the best
buying markets we have experienced
over the last 15 years. In relation to our
retail investor products, the Diversified
Property Fund (DPF) and the Charter
Hall Umbrella Fund (CHUF) have
delivered a solid performance relative
to our peers in this space. Charter Hall
has retained its brand integrity in the
retail investor space throughout the
GFC, continuing to pay distributions
and retaining high occupancy.
Performance on a relative basis,
compared with peers, has been
sound and the Group looks forward
to raising new equity across its retail
funds management business to take
advantage of current market conditions
in the current financial year.
Well positioned
Charter Hall, as a wholesale and
retail property funds manager, is
well positioned for growth over the
coming years.
Early signs suggest that Australia
is emerging from the effects of the
economic downturn and is well placed
to recover more quickly than most
other regions. In addition, the property
fundamentals remain attractive in
Australia, with record low interest rates,
a slowdown in property supply due to
the economic downturn, a recovering
economy and capitalisation rates for
prime property that have expanded by
more than 100 basis points.
Compulsory superannuation
contributions in Australia currently
provides a net inflow of funds, some
of which will be invested in property
products managed by a select group
of highly regarded, specialist property
fund managers. We have positioned
Charter Hall to maintain and strengthen
its core capabilities as one of these
managers.
On behalf of all securityholders
and investors, it is my pleasure to
recognise and thank my fellow Board
members and the entire Charter Hall
team for their continued support and
efforts through what has been a very
challenging year.
Yours sincerely,
Kerry Roxburgh
Chairman
Annual Report 2009 3
Joint Managing Directors’ Report
Dear Investor,
After facing many challenges from the GFC, we are
very pleased to report that the Charter Hall Group has
strengthened its balance sheet and successfully implemented
capital management initiatives across its suite of managed
funds during FY09. These initiatives have positioned the
Group to participate in the recovery of the Australasian
property markets and the inevitable re-emergence of capital
flows in to unlisted real estate investment.
Charter Hall, as a specialist property
funds management, development
and property services group, has
continued to implement an active
asset management and development
approach, which has added value to
high quality annuity income streams.
The active asset and property
management skills within the
business has contained asset value
declines in each fund, despite the
continuation of challenging economic
and property market conditions. Our
highly professional and experienced
in‑house development and property
investment teams have responded
to the challenging market conditions
through a proactive and agile approach
to funding, project delivery, leasing and
asset management, ensuring that our
various fund portfolios remain healthy
in all respects.
Over FY09, we substantially de‑risked
the Group’s and managed funds’
balance sheets through a combination
of refinancing approximately $1.1 billion
of debt facilities, including extending
maturity dates; improving headroom
in debt covenants; eliminating
headstock debt through a strategic
capital raising; and achieving asset
sales of $228 million.
Assets under management reduced
by 12.8% to $3.4 billion. Despite an
accounting loss of $82 million due
mainly to writedowns in asset values,
the Group continued to deliver positive
underlying earnings of $34.8 million,
equating to underlying earnings per
security of 7.61 cents. Charter Hall
made a full year distribution of 4.96 cents
per security, which was in line with
guidance provided at the half year
results presentation in February this year.
A significant milestone during FY09
was the Group’s inclusion in the
S&P/ASX200 Index and AREIT 200 Index.
This followed our capital raising in June
that included a strategic investment by
the Gandel Group in the headstock,
together with an investment in two of
the Group’s unlisted managed funds,
being the Core Plus Office Fund and
our latest wholesale fund initiative, the
Special Situations Office Fund.
In total, the Gandel Group invested
or committed $75 million with
Charter Hall and its managed funds,
resulting in a 12.2% investment in the
Charter Hall Group. This investment
provided a strong endorsement of the
Group and its diversified property funds
management business model. We are
delighted to welcome Gandel’s CEO,
Peter Kahan, to the Charter Hall Board
and look forward to a long strategic
business relationship with the
Gandel Group.
In recognition of the need for restraint
from management given the market
conditions, a salary freeze for FY10
has been implemented and the
Remuneration Committee endorsed
the recommendation of Executive
Directors to waive their entitlement to
any FY09 bonus.
The Charter Hall Property Trust (CHPT)
continues to generate stable property
investment income through its co‑
investments in each of the unlisted
funds managed by Charter Hall.
Again this year, property rental income
was a significant contributor to the
Group’s earnings, generated from
a diverse portfolio of assets leased
predominantly to Government,
national and multi‑national tenants.
The portfolio has a weighted average
lease expiry (WALE) profile of 8.2 years,
which remains substantially above
industry averages.
The balance of the Group’s revenue,
derived through performance fees,
transaction fees and development
dividends from both its co‑investment
in Opportunity funds and from the
50% ownership of CIP, was abnormally
low over FY09 due to depressed
market conditions. However,
management believes that the Group
is well positioned for a recovery in these
revenue streams in future years.
4 Charter Hall Group
We look forward to further capitalising
on the Group’s strong financial position
and reputation with investors to grow
our funds management platform. We
appreciate the ongoing support of
both our listed and unlisted investors
and of our tenant customers and take
this opportunity to thank them for their
continuing support.
Charter Hall will continue to strive to
retain its position as one of Australasia’s
pre‑eminent specialist property fund
managers and service providers.
We look forward to
further capitalising
on the Group’s
strong financial
position and
reputation with
investors to
grow our funds
management
platform.
Although market conditions remain
challenging, Charter Hall has the
capacity to grow the size of its existing
funds and to expand its property funds
management platform. The Group
is well capitalised and has equity
capacity through its managed funds
to participate in attractive acquisition
opportunities. We believe Charter Hall’s
“brand quality” has remained strong
amongst wholesale and retail investors,
ensuring ongoing support for existing
funds and future fund initiatives as
equity flows re‑emerge and gather
momentum.
We are encouraged by the more
positive economic outlook in the Asia
Pacific Region and remain focused on
identifying and creating value in the
Australasian property markets with
offices and in‑house, highly skilled
property professionals in Sydney,
Melbourne, Brisbane, Adelaide, Perth
and Auckland.
Yours sincerely,
David Harrison
David Southon
Joint Managing Director
Joint Managing Director
Annual Report 2009 5
About Charter Hall Group
Charter Hall is one of Australia’s leading specialist property fund
managers, with $3.4 billion funds under management. The Group
skillfully manages a portfolio of over 60 diversified properties
across Australia and New Zealand.
Established in 1991, the Group has
achieved a strong track record in
property funds management and
development management with
$3.4 billion in funds under
management, invested across a
range of specialist unlisted property
funds. Charter Hall has offices located
in Sydney, Melbourne, Brisbane, Perth,
Adelaide and Auckland.
Charter Hall has established a
reputation for innovation and
performance in managing funds for
wholesale and retail clients. The funds
management division structures,
initiates and manages a series of
opportunity and core investment
funds on behalf of a range of
institutional and retail investors.
The Group’s Funds remain well
positioned in the current market
environment, withstanding challenges
created by the Global Financial Crisis,
largely due to astute asset selection
and a diversified portfolio construction
process. In addition, the Group’s Funds
remain well diversified, with a focus on
quality assets, quality tenant covenants
and long lease durations.
Charter Hall adds value for investors
through its:
funds management activities across
the risk/return spectrum;
significant co‑investments in all
of its unlisted property funds;
deal sourcing of investment
opportunities predominantly
off‑market;
historical strong track‑record of
performance;
focus on long‑lease assets;
strong corporate governance
principles evidenced by the Group’s
14 year history in managing pension
fund capital for many of Australia’s
leading Superannuation Funds; and
highly regarded property funds
management and in‑house
development team, which currently
manages the largest series of
Opportunistic and Core Plus
property funds in Australia.
Return
20%+
15‑17%
11‑14%
9‑17%
OPPORTUNISTIC
CHOF 4, 5 & 6
Core risk
with enhanced
returns
CORE PLUS
CPOF, CPIF, CPRF
ENHANCED
SSF ‑ OFFICE
CORE
CHUF, DPF, CHPT,
CHIF 2,4‑6
Low risk
High risk
CORE
INVESTMENTS
70% CORE
30% ENHANCED
ENHANCED
RETURNS
DEVELOPMENT
OPPORTUNITIES
INSTITUTIONAL
AND RETAIL
INVESTORS
WHOLESALE
INVESTORS
WHOLESALE
INVESTORS
WHOLESALE
INVESTORS
6 Charter Hall Group
Funds Under Management
The Group’s balance sheet strength continues to underpin its funds
management activities. In addition to listed capital, Charter Hall has
access to wholesale, high-net worth and retail investors through its
unlisted funds.
Funds Under Management (FUM) Charter Hall FUM $3,384 million
Wholesale Investor Funds $2,848 million
Retail Investor Funds $536 million
Opportunistic $781million
Core Plus $2,067 million
CHOF4
$423m
CHOF5
$358m
CPOF
$1,390m
CPIF
$374m
CPRF
$303m
DPF
$194m
CHUF
$195m
CHIFs
$147m
130 Stirling Street, Perth WA (CPOF)
Annual Report 2009 7
CHPT has a WALE of 8.2 years, well in
excess of the industry average, with
occupancy remaining extremely high
at over 98%.
Atrium, 60 Union Street, Pyrmont Sydney NSW (CPOF)
8 Charter Hall Group
Charter Hall Property Trust
The Charter Hall Property Trust’s (CHPT) strategy is to invest in a
diversified portfolio of properties through Charter Hall’s various
managed funds.
Charter Hall benefits from generating
fees from the management of the
property funds in which it invests,
enhancing its return on equity
significantly above that available from
the underlying property assets.
The majority of CHPT’s property holdings
are diversified across the Manager’s
Core Plus Office Fund (CPOF), Core
Plus Industrial Fund (CPIF) and Core
Plus Retail Fund (CPRF) with smaller
holdings in the Diversified Property Fund
(DPF) and the Charter Hall Umbrella
Fund (CHUF). The Group’s investments
in Charter Hall Opportunity Fund No.4
(CHOF4) and Charter Hall Opportunity
Fund No.5 (CHOF5), are held through
Charter Hall Limited.
CHPT has successfully implemented
its strategy of down‑weighting its
allocation to direct holdings, replaced
by investments across Charter Hall’s
stable of unlisted property funds.
Management is pleased to report
that throughout the GFC, the CHPT
portfolio withstood significant
economic headwinds. CHPT has a
WALE of 8.2 years, well in excess of
the industry average, with occupancy
remaining extremely high at over 98%.
Furthermore, short term lease expiry
risk in the next few years is minimal.
The portfolio benefits from weighted
fixed minimum rent increases in excess
of 3.5pc per annum, which has served
to increase underlying rental earnings in
a volatile environment.
Tenancy quality remains very high, with
the portfolio’s top 20 tenants dominated
by major listed Australian companies,
Federal and State Government,
national companies and international
conglomerates. Rent arrears remains
negligible, with Management in
discussions with many existing
tenants regarding lease renewal,
space expansion and new pre‑leased
development opportunities.
Charter Hall’s strong focus on tenant
relationships has further boosted
productivity of the overall portfolio and
will continue to deliver enhanced returns
for investors.
WA 19%
SA 1%
NZ 3%
Asset Diversification (by value)
Geographical Diversification (by value)
CHUF, $48m, 12%
DPF, $22m, 6%
CHUF, $48m, 12%
DPF, $22m, 6%
Vic 29%
CHUF, $48m, 12%
DPF, $22m, 6%
CPOF, $122m, 31%
NSW 22%
CPOF, $122m, 31%
Qld 26%
CPIF, $62m, 16%
CPIF, $62m, 16%
CPRF, $140m, 35%
CPRF, $140m, 35%
WA 19%
SA 1%
NZ 3%
Vic 29%
WA 19%
SA 1%
NZ 3%
CPOF, $122m, 31%
Vic 29%
CPIF, $62m, 16%
CPRF, $140m, 35%
NSW 22%
Qld 26%
NSW 22%
Qld 26%
Sector Diversification (by value)
Industrial 21%
Weighted Average Lease Expiry
(years, by net income)
Office 34%
Retail 45%
CPOF 6.7
CPOF 6.7
CPIF 9.8
CPRF 8.7
CPIF 9.8
CPRF 8.7
DPF 7.6
CHUF 8.2
CHPT 8.2
DPF 7.6
CHUF 8.2
CHPT 8.2
CPOF 6.7
CPIF 9.8
CPRF 8.7
Industrial 21%
DPF 7.6
CHUF 8.2
Office 34%
CHPT 8.2
Industrial 21%
Office 34%
Retail 45%
Retail 45%
Annual Report 2009 9
CHUF, $48m, 12%
DPF, $22m, 6%
CPOF, $122m, 31%
CPIF, $62m, 16%
CPRF, $140m, 35%
CPOF 6.7
CPIF 9.8
CPRF 8.7
DPF 7.6
CHUF 8.2
CHPT 8.2
WA 19%
SA 1%
NZ 3%
Vic 29%
NSW 22%
Qld 26%
Industrial 21%
Office 34%
Retail 45%
Our Funds
Charter Hall is one of the largest managers of Core Plus
and Opportunistic property funds in Australia.
Wholesale Funds
Charter Hall’s Core Plus funds include:
Retail Funds
Charter Hall’s wholesale funds have
delivered strong outperformance since
inception. Wholesale investors, with
an investment upwards of $5 million
(average $30 to $50 million), have the
opportunity to invest in a diversified
range of Core Plus and Opportunistic
investment strategies, including the
Core Plus Office, Industrial and Retail
Funds, in addition to Charter Hall
Opportunity Fund No.4 and Charter Hall
Opportunity Fund No.5.
Charter Hall’s Opportunistic funds
include:
Charter Hall Opportunity Fund
No.4 (CHOF4)
Charter Hall’s Opportunity Fund No.4
(CHOF4) was launched in 2005. The
Fund’s mandate is to identify, acquire
and deliver property development and
value‑add opportunities across various
sectors within the Manager’s existing
skill base, including commercial,
industrial, retail, bulky goods retail and
infill residential sectors across Australia.
Charter Hall Opportunity Fund
No.5 (CHOF5)
Charter Hall’s Opportunity Fund
No.5 (CHOF5) was launched in
early 2007. The Fund’s mandate
is to identify, acquire and deliver
property development and value‑add
opportunities across various sectors
within the Manager’s existing skill base,
including commercial, industrial, retail,
bulky goods retail and infill residential
sectors located primarily in capital
cities and metropolitan markets across
Australia and New Zealand.
Core Plus Office Fund
Charter Hall’s Core Plus Office Fund
(CPOF) is the largest of the Core
Plus series of wholesale funds with
approximately $1.4 billion of assets.
Launched in December 2005, the
Fund predominantly targets the office
property sector in the major capital
city and fringe markets of Australia.
The Fund owns 17 Assets with an
average value of $81.7 million.
Core Plus Industrial Fund
Charter Hall’s Core Plus Industrial Fund
(CPIF) was launched in April 2007
and has approximately $374 million of
assets. The Fund predominantly targets
industrial and logistics sectors in major
capital city markets of Australia and
sources a mix of core and enhanced
investment grade property assets.
The Fund owns 13 assets with an
average value of $27 million (including
land retained for the enhanced portion
of the portfolio).
Core Plus Retail Fund (CPRF)
Charter Hall’s Core Plus Retail Fund
(CPRF) is the third in a series of sector
specific core plus investment vehicles.
The Fund’s mandate is to actively
acquire retail properties throughout
Australia and New Zealand, targeting
both core and enhanced retail holdings.
The Fund owns 14 assets with an
average value of $27 million.
Retail investors, with a minimum
investment value of $5,000, have the
opportunity to invest in a diversified
range of property assets (office,
retail and industrial) located across
Australia and expertly managed by
the Charter Hall Group, via the
Charter Hall Diversified Property Fund
and Charter Hall Umbrella Fund.
These funds retain a portfolio of quality
tenants, including large national,
government and international tenants
and long weighted average lease
expiry profiles.
Charter Hall’s retail funds include:
Charter Hall Umbrella Fund
Launched in 2007, the Charter Hall
Umbrella Fund (CHUF), provides retail
investors with an opportunity to invest
across a suite of wholesale property
funds, across office, industrial and retail
markets. The portfolio of Charter Hall
funds that CHUF invests in comprises
of more than 60 assets with a secure
weighted average lease expiry profile.
Charter Hall’s nationwide tenant list
includes American Express, BHP
Billiton, Bunnings, Coles, St.George
Bank, Harvey Norman, Telstra,
Toll Holdings, Myer, Wesfarmers and
Woolworths, demonstrating the diversity
of the Fund’s underlying cash flow.
Diversified Property Fund
The Diversified Property Fund (DPF),
launched in November 2005, is an
unlisted open‑ended fund that invests
in quality assets across office, retail and
industrial sectors throughout Australia,
with properties generally in the range
of $5 million to $30 million in value.
The Fund’s investment objective is
to provide stable distribution returns
for investors with capital growth
over the medium term from a well
diversified portfolio of assets, with a
high proportion of tax advantaged
distributions.
10 Charter Hall Group
Geographical Diversity of Assets
4%
South Australia
4 properties
27%
Western Australia
10 properties
Charter Hall offices
Charter Hall properties
Top tenants include:
Wesfarmers
Telstra
Harvey Norman
St George Bank
Coles
American Express
Australian Government
Woolworths
Mercer Human
Resourcing Consultants
2%
South Australia
4 properties
18%
Victoria
18 properties
23%
Queensland
14 properties
29%
New South Wales
17 properties
16%
Victoria
19 properties
3%
New Zealand
4 properties
1%
New Zealand
3 properties
Annual Report 2009 11
Charter Hall Board of Directors are
committed to fostering a dynamic,
agile and successful business, with
a dedicated and motivated team,
focused on driving performance in
2010 and beyond.
225 St George Terrace, Perth WA (CPOF)
12 Charter Hall Group
Board of Directors
Cedric Fuchs
Executive Director
Cedric is a co‑founder of Charter
Hall with over 40 years of experience
in the fields of property investment,
development and financial services.
He is a member of the Investment
Committee for all of Charter Hall’s
wholesale and retail property funds.
Prior to co‑founding Charter Hall
in 1991, he worked with the Heine
Group’s property arm (now part of
ING) and Leighton Properties where
he was involved in the development
and investment activities of those
companies. Cedric holds a degree
in Business Management.
Kerry Roxburgh
Chairman
– Independent Non‑Executive Director
Roy Woodhouse
Deputy Chairman
– Independent Non‑Executive Director
Kerry is an SDIA Practitioner Member.
He holds positions on the boards of
several listed and unlisted companies.
He is the non‑executive Chairman of
Eircom Holdings and of Tasman Cargo
Airlines. He is also a non‑executive
director of Ramsay Health Care, Money
Switch Ltd., the LawCover Group, the
Medical Indemnity Protection Society
Group and Professional Insurance
Australia. Until it was acquired by the
ANZ in June 2007, he was Chairman
of E*TRADE Australia where he had
previously served as CEO until
July 2000.
In the past 10 years, Kerry’s prior public
company directorships were at Everest
Financial Group and Climax Mining.
Before joining E*TRADE he spent
10 years as an Executive Director of
the Hong Kong Bank of Australia
Group, including roles as Executive
Chairman at James Capel Australia and
five years as Managing Director of the
bank’s corporate finance subsidiary.
Roy has been the Deputy Chairman
of Charter Hall since July 2004 and is
a member of Transfield Holdings
Advisory Board.
Roy worked for the Baillieu family for
30 years in various senior executive
capacities including Director of
L.J. Hooker, Managing Director of
Knight Frank Australia and Chairman
of Knight Frank Australia. Roy co‑
founded KFPW, a joint venture with
PricewaterhouseCoopers specialising
in outsourcing.
Roy is Chairman of Stephenson
Mansell, an executive development and
leadership company and Chairman of
National Recycling Company, a waste
recycling company. Roy was a Fellow
of the Australian Institute of Valuers
and a Fellow of the Institute of
Company Directors.
Annual Report 2009 13
Board of Directors (Continued)
Glenn Fraser
Independent Non‑Executive Director
David Harrison
Joint Managing Director
David Southon
Joint Managing Director
A member of Transfield Holdings
Advisory Board, Glenn was instrumental
in Transfield Holdings’ acquisition
of its interest in Charter Hall and its
expansion and listing in 2005.
He specialises in infrastructure and
property projects and joined Transfield
Holdings in 1996. Glenn has previously
held positions of Chief Financial Officer
and was General Manager – Finance
Project Development, where he was
responsible for the financial elements
of Transfield Holdings’ infrastructure
and property projects. Preceding his
time with Transfield Holdings, Glenn
was a principal of a project finance
advisory business, Perry Development
Finance Pty Limited, which was sold to
Hambros Corporate Finance Limited
in 1995. Glenn holds a Bachelor
of Commerce, is a member of the
Institute of Chartered Accountants and
the Australian Institute of Company
Directors.
David heads the Funds Management
and Property Management Divisions
of Charter Hall. His role entails
responsibility for the strategic growth
of the funds management business
with particular focus on investment
sourcing, capital raisings and
structuring of transactions.
David has more than 20 years of
experience in the Australian commercial
property markets and prior to joining
Charter Hall in 2004, David was
Managing Director of Savills in Australia,
an international commercial real estate
agency business. David has transacted
approximately $10 billion of commercial,
retail and industrial property assets
across all capital cities of Australia over
the past 10 years for both Charter
Hall and Savills. David holds a Land
Economics degree from the University
of Western Sydney, and a graduate
Diploma in Applied Finance from the
Securities Institute of Australia, whilst
also being a Fellow of the Australian
Property Institute.
David is a co‑founder of Charter Hall.
As Joint Managing Director, David
heads the Development Division and is
on the Investment Committees of the
Group’s series of opportunity funds and
certain investment funds.
He has over 20 years of property
industry experience and is responsible
for overseeing project origination,
project strategy, development
management and resourcing of
projects. He is also involved in the
procurement and divestment of
investment properties. Prior to co‑
founding Charter Hall in 1991, David
was a Development Manager with the
Heine Group’s property arm (now part
of ING) and Leighton Properties. David
holds a Bachelor of Business Degree
(Land Economy) from the University
of Western Sydney and is a Fellow
Member of the Australian Property
Institute (FAPI).
14 Charter Hall Group
Board of Directors
Patrice Derrington
Independent Non‑Executive Director
Colin McGowan
Independent Non‑Executive Director
Colin was formerly CEO of the listed
AMP Diversified Property Trust,
Executive Vice President of Bankers
Trust (Australia), founding Fund
Manager of the BT Property Trust and
founding Fund Manager of Advance
Property Fund.
He is a qualified valuer, a Fellow of
the Australian Property Institute and a
Senior Fellow of the Financial Services
Institute of Australasia (formally SIA).
Colin was the honorary SIA National
Principal Lecturer and Task Force
Chairman for the Graduate Diploma’s
Property Investment Analysis course
– a position he held for 11 years until
2003. Colin is a member of the
Remuneration and Nomination
Committee and is chairman and
member of a number of Charter Hall
Group Investment Committees.
Patrice is a senior property executive with
recent roles including CEO of Penrith
Lakes Development Corporation Limited
and CEO of Campus Living; and she has
also been nominated to the Board of
ABC Learning.
She was previously the executive
responsible for the economics and
funding of the revitalisation effort led
by the Lower Manhattan Development
Corporation following the September
11, 2001 attacks on New York
City. Prior positions have included
Managing Director at the New York
fund management and advisory firm,
Spears, Benzak, Salomon and Farrell,
Vice President in the Real Estate Finance
Group at Chemical Bank (now JP
Morgan Chase) and in 1997 founded the
Victory Real Estate Investment Fund,
a portfolio of traded property securities.
Patrice has a Bachelor of Architecture
from University of Queensland; was a
recipient of the prestigious Harkness
Fellowship, studying at the University
of California, Berkeley for her Ph.D. in
architecture/civil engineering; and she
holds a MBA from Harvard University.
Annual Report 2009 15
Corporate Governance Statement
Name
Independent First
(Yes/No)
Appointed
Kerry Roxburgh
Chairman
Roy Woodhouse
Deputy Chairman
Cedric Fuchs
Executive Director
Patrice Derrington
Non‑Executive Director
Glenn Fraser
Non‑Executive Director
Colin McGowan
Non‑Executive Director
David Harrison
Joint Managing Director
David Southon
Joint Managing Director
Yes
Yes
No
Yes
Yes
Yes
No
No
12 April 2005
6 April 2005
6 April 2005
6 April 2005
6 April 2005
6 April 2005
30 August 2006
30 August 2006
Details of the Directors’ qualifications, experience, other
responsibilities, number of meetings attended and holdings of
Securities in the Group can be found in the Directors Report.
Recommendation 2.1: A majority of the Board should be
independent directors.
As shown in the table above, the Board comprises a majority
of independent directors. Five out of the eight members of
the Board independent directors in accordance with the
criteria set by Board in relation to determining directors’
independence. These principles are guided by the criteria set
by the ASX and are subject to specific materiality tests which
are determined on both quantitative and qualitative bases.
An amount exceeding 5% of annual turnover of the Group or
5% of a director’s net worth, is considered material for this
purpose. Furthermore, any transaction and all relationships
are deemed material if they impact a securityholder’s
understanding of a director’s performance.
Recommendation 2.2: The chair should be an
independent director.
Recommendation 2.3: The roles of chair and chief
executive officer should not be exercised by the same
individual.
Mr Kerry Roxburgh is the Chair of the Board. Mr Roxburgh
is a non‑executive, independent member of the Board
(in accordance with the criteria described above). The role
of CEO – or Managing Director – is carried out jointly by
Mr Harrison and Mr Southon, two executive directors of
the group.
This statement has been prepared in a manner
consistent with the revised Corporate Governance
Principles and Recommendations released by the
Australian Securities Exchange (ASX) Corporate
Governance Council on 2 August 2007.
The appropriate practice recommendations have been adopted
so as to reflect the Group’s commitment to the highest standards
of corporate governance practice. The Group reviews its
corporate governance framework on an ongoing basis and
has reviewed each Recommendation in detail in the lead up
to the preparation of this statement. Additional corporate
governance information may be found on the Group’s
website www.charterhall.com.au or by contacting the
Company Secretary.
Principle 1: Lay Solid Foundations for Management
and Oversight
Recommendation 1.1: Companies should establish the
functions reserved to the board and those delegated to
senior executives and disclose those functions.
The Board operates in accordance with a formal charter which
establishes its duties and responsibilities and the scope of the
functions and authority delegated to senior executives.
In summary, the Board’s charter states that the Board has
responsibility to provide strategic guidance to the Group, monitor
the operational and financial position of the Group, and ensure
appropriate risk management systems are in place, among other
duties. Senior Management is responsible for the day to day
management of the Group, which includes developing business
plans, budgets and strategies for consideration by the Board;
identifying and managing risks and, where those risks could have a
material impact on the Group’s businesses, formulating strategies
for managing these risks, among other responsibilities.
The Board Charter (which includes the full detail of matters
reserved by the Board and those delegated to Senior
Management) can be found on the Corporate Governance
section of the Group’s website.
Recommendation 1.2: Companies should disclose
the process for evaluating the performance of senior
management.
The performance of all levels of management is evaluated
annually in conjunction with remuneration reviews undertaken
by the Remuneration and Nomination Committees and Joint
Managing Directors.
The process for performing this evaluation consists of setting
Key Performance Indicators (agreed with the employee),
which encompass financial and non‑financial objectives, and
evaluating performance against those. The process is formally
recorded and tracked. During this financial year, senior
executives were evaluated in line with this process.
Principle 2: Structure the board to add value
Board of Directors
The Board is comprised of eight members appointed with a
view to providing appropriate skills and experience likely to
add value to the Group’s activities.
16 Charter Hall Group
The Group recognises the need to observe the highest standards
of corporate practice and business conduct. For this purpose,
the Group has established a formal Code of Conduct for its
Directors (Directors’ Code of Conduct), as well as a separate
Code of Conduct for employees (Charter Hall Code of Conduct),
which form the basis for ethical behaviour. The Codes form the
framework that provides the foundation for maintaining and
enhancing the Group’s integrity. The objective of the Codes is to
ensure that staff, directors and stakeholders can be confident
that the Group conducts its affairs honestly in accordance with
the law, ethical values and practices and that there is clearly
defined responsibility and accountability for maintaining these
standards. As part of Charter Hall’s corporate governance
strategy, the Charter Hall Code of Conduct has been reviewed
and updated, with a new version of the Code being adopted by
the Board in December 2008.
All Directors and employees of the Group are provided with
the Code of Conduct at induction and are required to comply
with both the spirit as well as the letter of the relevant laws
which govern the operations of the Group.
In addition to this, in order to deal specifically with the
responsibility and accountability of individuals for reporting
and investigating reports of fraudulent and unethical practices,
Charter Hall has adopted a Fraud Risk Management Policy which
addresses these matters. A full copy of this policy is posted on
the Corporate Governance section of the Group’s website.
A full copy of the Directors’ Code of Conduct and a summary
of the Charter Hall Code of Conduct can be obtained from the
Corporate Governance section of the Group’s website. A full
copy of the Charter Hall Code of Conduct is also available upon
request from the Company Secretary.
Recommendation 3.2: Companies should establish a
policy concerning trading in company securities by
directors, senior executives and employees, and disclose
the policy or a summary of that policy.
The Group has in place a formal Security Trading Policy which
regulates the manner in which Directors, senior executives and
employees can deal with Securities in the Group. It requires that
they conduct their personal investment activities in a manner that
is lawful and avoids conflicts between their own interests and
those of the Group.
The policy specifies trading blackouts as the periods during
which trading Securities cannot occur. Trading is always
prohibited if the relevant person is in procession of non‑public
price sensitive information regarding the Group.
The policy has been formally reviewed and updated by the
Board in April 2009. A copy of the current Security Trading
Policy is available on the Group’s website.
Recommendation 2.4: The board should establish a
nomination committee.
The Board has established a Nomination Committee which
consists of the Group Chairman Kerry Roxburgh (Committee
Chairman), Roy Woodhouse and Colin McGowan, who are all
independent, non executive directors. Details of the committee
members experience and the number of meetings held and
attended can be found in the Directors Report. A copy of the
Nomination Committee Charter which sets out the competencies
of the Committee is available on the Group’s website.
Recommendation 2.5: Companies should disclose the
process for evaluating the performance of the board,
its committees and individual directors.
Board and Committee members are subject to an annual
self‑assessment of their performance via completion of a
questionnaire prepared by the Chair. The process is run
on calendar year basis. The results of the appraisals are
aggregated and reviewed by the Board to assess Board
and Committees overall performance and issues that require
attention. This process is underway for the year ended
31 December 2008 and is to due to be completed by early
October 2009, to coincide with the review of Non‑executive
Directors’ fees and nominations for re‑election (as required),
which are undertaken prior to the Annual General Meeting.
The review was completed during the reporting period in
respect of the previous calendar year.
The process for the selection and re‑election of candidates for
directorship positions is outlined in the Nomination Committee
Charter (which can be viewed in the Corporate Governance
section of the Group’s website), and includes making
proposals to the Board based on its evaluation on whether
the Board’s composition is appropriate for the circumstances
and incorporates a variety of perspectives and skills.
The Nomination Committee has carriage for the selection
and appointment process of Directors.
Independent Advice
The terms of each Director’s letter of appointment permits him
or her to seek independent professional advice, including, but
not limited to, legal, accounting and financial advice, at the
Group’s expense or any matter connected with the discharge
of his or her responsibilities. The cost, nature and details of
such advice must first be approved by the Chairman.
Principle 3: Promote Ethical and Responsible
Decision Making
Recommendation 3.1: Companies should establish a code of
conduct and disclose the code or a summary of the code to
guide key executives as to:
•
•
•
The practices necessary to maintain the confidence in the
company’s integrity
The practices necessary to take into account their legal
obligations and the reasonable expectations of their
stakeholders
The responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
Annual Report 2009 17
Corporate Governance Statement (continued)
Principle 4: Safeguard integrity in financial reporting
Recommendation 4.1: The board should establish an
audit committee.
Recommendation 4.2: Structure the audit committee
so that it:
consists only of non-executive directors
It also describes the processes by which senior executives are
involved in ensuring the Policy is adhered to and sets out their
responsibilities and accountability. The Charter Hall Code
of Conduct and the Compliance Manual also deal with
Continuous Disclosure.
A copy of the Continuous Disclosure and Communications
Policy is available on the Group’s website.
consists of a majority of independent directors
Principle 6: Respect the rights of shareholders
•
•
• is chaired by an independent chair, who is not
chair of the board
• has at least three members.
The Audit, Risk and Compliance Committee assists the
Board in fulfilling its corporate governance and has oversight
responsibilities relating to financial accounting practices, risk
management and internal control systems, external reporting,
compliance and the external audit function.
The Committee is comprised of Patrice Derrington (Chair),
Kerry Roxburgh and Glenn Fraser, who are all non executive
independent Directors. The members have comprehensive
financial and property industry expertise. The Committee met
on six occasions during the year to 30 June 2009. Please refer
to the Directors Report for more information on members,
including attendance at committee meetings.
Recommendation 4.3: The audit committee should have a
formal charter
The Audit, Risk and Compliance Committee reports to the
Board and has adopted a formal Charter which sets out the
Committee’s role and responsibilities, composition, structure
and membership requirements. Responsibilities include the
assessment of the internal control and compliance systems,
monitoring the integrity of the financial statements, reviewing
the financial reporting processes and continuous disclosure,
selection and appointment of external auditors, and the rotation
of external audit engagement partners, as well as monitoring
their performance.
The Charter is reviewed regularly and was last updated in
April 2009. A copy of the Charter is available on the Corporate
Governance section on the Group’s website.
Principle 5: Make timely and balanced disclosure
Recommendation 5.1: Companies should establish written
policies designed to ensure compliance with ASX Listing
Rule disclosure requirements and to ensure accountability at
a senior management level for that compliance and disclose
those policies or a summary of those policies.
The Group has a Continuous Disclosure and Communications
Policy consistent with the continuous disclosure obligations
of the ASX Listing Rules and Corporations Act 2001. The
policy has been formally reviewed and up‑dated by the Board
in February 2009. The policy is designed to ensure that all
investors and stakeholders have equal and timely access to
information concerning the Group, and to ensure that price‑
sensitive information from any part of the Group is immediately
notified to the ASX in a complete, balanced and timely manner.
Recommendation 6.1: Companies should design
a communications policy for promoting effective
communication with shareholders and encouraging their
participation at general meetings and disclose their policy
or a summary of that policy.
The Group is committed to communicating with its investors
in an effective and timely manner so as to provide them with
ready access to information relating to the Group.
The Group’s communication’s strategy is outlined and
disclosed in the Continuous Disclosure and Communications
Policy, mentioned above, which encourages participation of
securityholders at the AGMs.
In addition to this, the Group maintains a website
(www.charterhall.com.au) providing access to information likely to
be of interest to securityholders, including a Corporate Governance
Section, Investor Centre, and News Centre. The Group
encourages securityholders to utilise its website, which is regularly
updated, as their primary tool to access information
and disclosures.
Principle 7: Recognise and manage risk
Recommendation 7.1: Companies should establish
policies for the oversight and management of material
business risks and disclose a summary of those policies.
The Board, through the Audit, Risk and Compliance Committee,
ensures that strategic, operational, legal, reputation and financial
risks are identified, effectively assessed, and efficiently managed
and monitored so as to achieve the Group’s objectives.
During this financial year, Charter Hall has conducted a thorough
review of its risk management framework and as a result a
revised Risk Management Policy has been put in place and
adopted by the Board to deal with the Group’s material business
risks. Internal processes and documents have also been updated
to make them more relevant to the Group’s operation and to
ensure material business risks are appropriately identified and
managed. The Risk Management Policy is available on the
Corporate Governance Section of Charter Hall’s website.
Recommendation 7.2: The board should require
management to design and implement the risk management
and internal control system to manage the company’s
material business risks and report to it on whether those
risks are being managed effectively. The board should
disclose that management has reported to it as to the
effectiveness of the company’s management of its material
business risks.
18 Charter Hall Group
Recommendation 8.2: Companies should clearly distinguish
the structure of non-executive directors’ remuneration from
that of executive directors and senior executives
Fees paid to Non‑Executive Directors are set by the Board in
consultation with remuneration experts, within an aggregate
limit approved by securityholders. The total remuneration paid
to Non‑Executive Directors to 30 June 2009 is set out in the
Remuneration Report.
Directors’ fees are reviewed annually and are benchmarked
against fees paid to Directors of similar organisations.
Non‑Executive Directors are not provided with retirement
benefits other than statutory superannuation and do not
participate in staff security plans, receive options or
bonus payments.
Executive Directors’, as well as senior executives’,
remuneration packages comprise salary, short term incentives
(i.e. bonus) and long term incentives. Further details on
Executive Directors’ packages are set out in the
Remuneration Report.
As requested by the Board, Management has put in place risk
management and internal control systems which have been
reviewed by Board. An external party was engaged to conduct a
full review of the Group’s risk management process and findings
and recommendations were reported to the Audit, Risk and
Compliance Committee in the first instance and further escalated
to the Board. The Audit, Risk and Compliance Committee has
been allocated the specific responsibility of providing guidance and
oversight to the Board on risk management activities, whilst the
ultimate responsibility for risk oversight and risk management rests
with the Board.
Management has reported to the Board on the effectiveness
of the company’s management of its material business risks.
Recommendation 7.3: The board should disclose whether it
has received assurance from the chief executive officer (or
equivalent) and the chief financial officer (or equivalent) that
the declaration provided in accordance with section 295A
of the Corporations Act is founded on a sound system of
risk management and internal control and that the system is
operating effectively in all material respects.
The Joint Managing Directors and the Chief Financial Officer
confirm in writing to the Board that the declaration provided
in accordance with section 295A of the Corporations Act is
founded on a sound system of risk management and internal
control and that the system is operating effectively in all
material respects.
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1: The Board should establish a
remuneration committee.
The Board has established a Remuneration Committee to
assist it in achieving fairness and transparency in relation to
remuneration issues and overseeing the remuneration and
human resource policies and practices of the Group. The
Remuneration Committee aims to ensure that the Group’s
remuneration policies and outcomes strike an appropriate
balance between the interests of investors and rewarding and
motivating the Group’s management.
The Remuneration Committee comprises three non‑executive,
independent directors being Roy Woodhouse (Chairman),
Colin McGowan and Kerry Roxburgh (please refer to the
Directors Report for information in regards to the members
and the number of meetings held and attended).
The Remuneration Committee obtain the advice of independent
experts to ensure the Group’s remuneration policies are
appropriate and follow best practice and address the
requirements of the Group’s stakeholders.
For further information in regards to the Group’s Remuneration
policies and framework please refer to the Remuneration
Report, including a detailed description of the structure of
non‑executive directors’ remuneration and executive directors’
and senior executives’ remuneration.
A copy of the Remuneration Committee Charter is available on
the Group’s website. The Security Trading Policy, also posted
on the website, deals with the Group’s policy on entering into
transactions in associated products which limit the economic
risk of participating in unvested entitlements under any equity‑
based remuneration scheme.
Annual Report 2009 19
Directors’ Report (Continued)
30 June 2009
Your directors present their report on the consolidated entity (referred to hereafter as the Group or Charter Hall Group) consisting
of Charter Hall Limited (Company or CHL) and the entities it controlled at the end of, or during, the year ended 30 June 2009.
Charter Hall group is a stapled group comprising CHL and its controlled entities and Charter Hall Property Trust (Trust or CHPT)
and its controlled entities.
The Group includes Charter Hall Funds Management Limited (CHFML) as the responsible entity of CHPT. CHL and CHFML have
identical Boards of Directors. The term Board hereafter should be read as references to both these Boards.
Directors
The following persons were directors of the Group during the whole of the year and up to the date of this report,
unless noted otherwise:
– Chairman - Independent Non-Executive Director
K Roxburgh
R Woodhouse – Deputy Chairman - Independent Non-Executive Director
– Independent Non Executive Director
P Derrington
– Independent Non Executive Director
G Fraser
– Executive Director
C Fuchs
– Joint Managing Director
D Harrison
– Independent Non Executive Director
C McGowan
– Joint Managing Director
D Southon
Principal activities
During the year the principal continuing activities of the Group consisted of:
(a) Property investment
(b) Funds management
(c) Development management
(d) Property management
No significant changes in the nature of the activities of the Group occurred during the year.
Distributions - Charter Hall Group
Distributions paid / declared to members during the year were as follows:
- Interim ordinary distribution for the 6 months ended 31 December 2008 of 3.96 cents
per security paid on 27 February 2009
- Final ordinary distribution for the 6 months ended 30 June 2009 of 1.00 cent
per security expected to be paid on 28 August 2009
- Interim ordinary distribution for the 6 months ended 31 December 2007 of 6.30 cents
per security paid on 29 February 2008
- Final ordinary distribution for the 6 months ended 30 June 2008 of 6.30 cents
per security paid on 29 August 2008
2009
$’000
2008
$’000
17,679
6,980
-
-
-
-
26,448
25,669
24,659
52,117
20 Charter Hall Group
Directors’ Report
30 June 2009
Results
The Group recorded a statutory loss for the financial year of $82.2 million compared to a profit of $67.5 million in 2008. The
result was adversely impacted by fair value adjustments, predominantly downward property revaluations within the Group’s
managed funds and impairment of the Group’s 50% investment in Commercial and Industrial Property Pty Ltd (CIP). After
adding back fair value adjustments, impairment and other non cash items such as the mark to market of derivatives, the Group
generated an Underlying Profit of $34.8 million compared to $52.7 million in 2008.
The reduction in Underlying Profit was due mainly to the following factors:
-
-
lower performance fees and transaction fees
lower contribution from the 50% owned CIP
Underlying Earnings per Security (EPS) of 7.61 cents fell from 12.74 cents in 2008 due to the reasons outlined above. As a
result the Distribution per Security (DPS) fell from 12.60 cents to 4.96 cents.
Net Tangible Assets per Security (NTA) has reduced from $1.19 at 30 June 2008 to $0.71 as a result of additional securities
issued as part of the recent capital raising and due to devaluations and impairment of investments.
Funds under Management (FUM) has fallen from $3.9 billion at 30 June 2008 to $3.4 billion as a result of valuation reductions
and asset sales.
Gearing has reduced significantly from 31.2% at 30 June 2008 to 2.4% at 30 June 2009 as a result of repayment of debt
utilising proceeds from the selldown of ownership in the Charter Hall Core Plus Retail Fund in July 2008 and the June 2009
capital raising.
The financial report includes separate financial statements for CHL as an individual entity and the consolidated entity consisting
of CHL and its subsidiaries and controlled entities including CHFML as responsible entity for CHPT.
The 30 June 2009 financial results with comparatives are summarised as follows:
2009
2008
Gross revenue ($m)
Net profit/(loss) after tax ($m)
Underlying profit
Distributions ($m)
Underlying EPS (UEPS) (cents)
Statutory earnings per stapled security (EPS) (cents)
Distribution per stapled security (cents)
Total assets ($m)
Total liabilities ($m)
Net assets ($m)
NTA per security ($)
Gearing – borrowings to total assets
Funds under management ($bn)
61
(82)
35
25
(i), (ii)
7.61
(17.98)
4.96
524
30
494
0.71
(ii)
(ii)
(iii)
91
67
53
52
12.74
16.31
12.60
802
310
492
1.19
2.4%
31.2%
3.4
3.9
(i) – Excludes AASB 140 fair value adjustments on investment property and financial assets, impairment of assets, gains on
sale of investments and non cash AIFRS charges such as share based payments expense, amortisation and tax benefit.
(ii) – Calculation excludes stapled securities issued under the Executive Loan Security Plan in accordance with AASB2 Share
Based Payments.
(iii) – Calculation is net of cash.
Distribution Re-investment Plan (DRP)
The DRP is currently activated.
Annual Report 2009 21
Directors’ Report (Continued)
30 June 2009
Review of operations
The Group has maintained focus on its strategy to de-risk both its managed funds and the listed balance-sheet, making
substantial progress over the last six months in this regard including:
• The capital raising and Gandel’s strategic investment;
• Strong progress with its asset sales program to reduce the leverage in the investment funds;
• Successfully refinanced the major debt facilities for both CPOF and CPIF; and
• The lease up or extension of leases on approximately 74,700m2 of space across the funds.
The Group is also pleased to advise that following the recent capital raising, the Group gained inclusion in the S&P/ASX 200
index, representing a significant milestone for the Group.
In accordance with the Group’s valuation policy, all asset valuations in the investment funds’ portfolios are reviewed quarterly. As a
result of this process, valuations on 54% of the assets in these portfolios (by value) have been written down since
31 December 2008, based on independent valuations or directors’ valuations. Including the 31 December 2008 valuations, 100%
of all investment funds’ portfolios have been revalued over the last six months. The reduction in the current portfolio carrying values
represent a movement in capitalisation rate, on a like-for-like basis, of 74 basis points (bps) since 30 June 2008. The Group’s
successful de-risking strategy has ensured that, despite the reduction in values across portfolios, the Group has not breached
covenants in any of the finance facilities across the funds, with headroom remaining in these facilities.
The Group’s on-balance sheet portfolio of equity stakes in its managed investment funds shows an occupancy level of 98%,
weighted average lease expiry (WALE) of eight years and a weighted average capitalisation rate of 7.66%.
The Group continues to pursue its announced asset sales program as part of a Group-wide initiative to reduce gearing in the
investment funds. The Group announced target asset sales of $430 million in May and has now exchanged contracts on sales
totalling $228 million, including the recently secured sale of Bunnings Penrith from the CPRF portfolio on 9 July for $21.8 million.
Over the previous half year, the Group has implemented a number of capital management initiatives, providing the Group
with strong financial flexibility. Gandel Group has made a strategic investment of $75 million in the Group. This comprises an
investment of $30 million in the Group, the commitment to acquire $30 million of CPOF units from the Group and a
$15 million equity commitment to the new Charter Hall Group managed Special Situations Fund.
Other initiatives over the period include the $49 million entitlement offer, as well as the significant progress made on the asset
sale program across managed funds. As previously announced, the Group also successfully refinanced the major portfolio
finance facilities for both Charter Hall Core Plus Office Fund and Charter Hall Core Plus Retail Fund, securing new three year
terms at market pricing. Both facilities continue to be non-recourse to all investors, including the Group.
Core Plus Office Fund (CPOF) - $1,452 million FUM, CHPT interest 23%
After a review of the entire CPOF portfolio in both the March and June quarters of this financial year, valuations on the portfolio
were written down, resulting in a current weighted average cap rate of 7.60%. Including the 31 December 2008 valuations,
100% of this portfolio has now been revalued over the last six months.
The CPOF portfolio has a high occupancy of 96.4% and one of the longest WALE’s in the office sector at seven years. CPOF’s
tenant mix remains of the highest quality, with 87% of the portfolio leased to government bodies and nationally or internationally
recognised tenants.
Core Plus Industrial Fund (CPIF) - $358 million FUM, CHPT interest 25%
CPIF has also undertaken March and June quarterly reviews of its entire portfolio, with valuations on 38% of the portfolio (by
value) being written down. Including the 31 December 2008 valuations, 100% of the portfolio has now been revalued over
the last six months. The current weighted average cap rate of the portfolio is 7.82%. Current CPIF occupancy is 96.5% with a
WALE of 9.4 years, underpinned by strong tenant covenants with, for example, 18 and 15 year leases to Coles and Smorgon
Steel respectively.
CPIF has demonstrated a solid performance in the current challenging market environment. CPIF continues to secure lease
renewals and extensions above forecast rental levels and is progressing the delivery of its enhanced activity.
22 Charter Hall Group
Directors’ Report
30 June 2009
Core Plus Retail Fund (CPRF) - $302 million FUM, CHPT interest 65%
Following the recently announced asset sales, the CPRF portfolio will consist of nine properties with a current weighted average
cap rate of 7.59%. After both March and June quarterly reviews of the entire CPRF portfolio, 57% of the current portfolio
(by value) was written down, bringing the percentage of the portfolio revalued in the last six months to 100%, including the
31 December 2008 valuations.
After completion of the announced asset sales, CPRF has an exposure of 69% to bulky goods and 31% to neighbourhood
shopping centres anchored by Woolworths and Coles.
A long dated WALE of 8.8 years backs the current occupancy of 100% (including rental guarantees) and provides income
stability into the future, with no significant lease expiries until 2013.
Diversified Property Fund (DPF) - $194 million FUM, CHPT interest 26%
After a review of the entire DPF portfolio in both the March and June quarters of this financial year, 27% of the portfolio was
written down resulting in a current weighted average cap rate of 7.95%. Including the 31 December 2008 valuations,
100% of this portfolio has now been de-valued over the last six months.
During the June quarter, DPF management was able to renew five leases that were nearing their lease expiry, extending the
WALE of the portfolio to 7.5 years. The DPF portfolio currently has an occupancy rate of 98%.
Charter Hall Umbrella Fund (CHUF) - $195 million FUM, CHPT interest 25%
CHUF is a fund with investments predominately in Charter Hall Group managed funds. CHUF has effectively had 50% of
its portfolio written down over the March and June quarters of this financial year, and 100% of the portfolio including the
31 December 2008 valuations. CHUF continues to outperform its peers, principally as a result of its overweight position in the
unlisted property sector, which has provided exposure to high quality assets with a WALE of 8.2 years and a current occupancy
of 98%.
Opportunity Funds Update
The market remains challenging for development and re-positioning projects due to the tight credit markets, reduction in asset
values and a decline in demand for space due to the economic downturn.
Charter Hall Opportunity Fund 4 (CHOF4) - $415 million FUM, CHL interest 3%
Construction of 275 George Street, the Group’s landmark office tower in Brisbane, reached Practical Completion on
6 April 2009, approximately three months ahead of schedule. This project was undertaken as 50/50 Joint Venture between
CHOF4 and CPOF. 275 George Street comprises 40,000m2 of prime office space, which is now 98% leased on 10 year lease
terms to Telstra and Queensland Gas Corporation (a subsidiary of British Gas), with the retail area now 47% leased.
The Gepps Cross Centre, a 32,000m2 bulky retail project in Adelaide, reached Practical Completion as scheduled on 5 June
2009. This project was undertaken as a 50/50 Joint Venture between CHOF4 and Axiom. The Centre currently has leases
executed and terms agreed over 75% of the space, and is now open and trading strongly.
Construction works are continuing on Home HQ North Shore, an integrated 22,000m2 bulky goods centre in Artarmon, with
completion expected in November this year. Lease documentation has been executed with key anchor tenants including The
Good Guys, JB Hi Fi and Barbeques Galore. Heads of Agreement have also been signed with a number of major tenants
including Freedom, Bay Leather Republic and Snooze. As these and other tenants are finalised, the Centre will be 55% leased,
with the balance of the centre under negotiation.
Construction of the Perth CBD A-grade office tower, ‘Alluvion’, 58 Mounts Bay Road, is progressing well with completion
remaining on schedule for April 2010. This project was undertaken as a 50/50 Joint Venture between the Group and Cape
Bouvard Investments. Agreements for Lease have been signed on approximately 95% of the 22,400m2 of prime office space.
Charter Hall Opportunity Fund 5 (CHOF5) - $335 million FUM, CHL interest 15%
The refurbishment works at 40 Creek Street, a 12,444m2 office tower in Brisbane, reached Practical Completion on
29 June 2009. To date, two tenants have executed Agreements for Lease for levels 16 and 17 respectively, with terms agreed
for a large portion of the retail space. The focus remains on leasing the balance of the available space in this well located
property in the heart of Brisbane’s CBD.
The Little Bay development, an 11.4 hectare master-planned residential project in Sydney’s east, recently lodged its Stage 1 Master
Plan Application with Randwick City Council. This application establishes the design controls for the site and once approved will
enable the remediation and infrastructure works to proceed, creating 10 development super-lots across the site.
CHOF5’s Home HQ Hastings project includes an approval for an 18,000m2 bulky goods centre in New Zealand. Terms have
now been agreed with Whakatu Coldstores for a new five year lease over their current premises, situated on a portion of the
site. It is anticipated that this section of the site will be offered to the market during the next quarter, with negotiations continuing
with anchor tenants for the remaining bulky good centre.
Annual Report 2009 23
Directors’ Report (Continued)
30 June 2009
Environmental regulation
The principal activities of the group are property investment, funds management and development management.
Funds management involves minimal environmental impact. The group ensures compliance with applicable environmental
standards and regulations in its property investment and development management activities.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Group during the year, in addition to the review of operations above,
were as follows:
•
As previously mentioned the Group raised $76 million via an entitlement offer and Placement to Gandel Group in
June 2009 through the issue of 229.9 million securities at 33 cents per security. As part of this raising Gandel Group has
invested $30 million in Charter Hall Group equating to a 12.2% interest.
• CHPT sold down 38% of its holding in CPRF in July 2008 and repurchased 3% from CHUF in June 2009.
• The sale of 372 Whitehorse Rd, Nunawading VIC and 25 Nepean Hwy, Mentone VIC to CPRF for $93.6 million in July 2008.
•
•
With the proceeds from the selldown of its CPRF interest CHPT repaid debt and reduced its debt facility limit to $100 million
with an expiry of July 2011.
CHPT invested $50 million in CHUF in August 2008 equating to an interest of 22%. Further purchases under the liquidity
facility have brought the ownership to 25%.
Matters subsequent to the end of the period
Since 30 June 2009 CHPT has completed the following transactions:
•
Received commitments from existing CPOF unitholders to purchase 39 million CPOF units from CHPT for $30 million on
31 August 2009. Once this transaction is completed CHPT’s ownership interest in CPOF will fall from 23% to 17%.
Except for the matters discussed above, no other matter or circumstance has arisen since 30 June 2009 that has significantly
affected, or may significantly affect:
(a) the Group’s operations in future financial years, or
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
Likely developments and expected results of operations
Further information on likely developments in the operations of the Group and the expected results of operations have not
been included in this annual financial report because the directors believe it would be likely to result in unreasonable prejudice
to the Group.
24 Charter Hall Group
Directors’ Report
30 June 2009
InFORMaTIOn On DIReCTORS
K ROxbURgH Chairman – Independent Non-Executive Director
Experience and expertise
Independent non-executive director and Chairman appointed 12 April 2005. One
of the founders of E*TRADE in Australia, Board Member for 11 years to 2007,
Chief Executive Officer from 1998 to 2000 then Chairman until its takeover by
the ANZ Bank in 2007. For 10 years from 1986 to 1995, he was an Executive
Director at the Hong Kong Bank of Australia Group, Chairman of their stockbroker,
James Capel Australia and Managing Director of their corporate finance subsidiary.
Between 1964 to 1986 practiced as a Chartered Accountant for 4 years at Arthur
Andersen followed by 18 years as a partner at Mann Judd in Sydney. Experienced
in the financial markets and the financial management of the insurance, healthcare,
technology, property and resource sectors. Bachelor of Commerce, MBA and
Practitioner Member of the Securities & Derivatives Institute of Australia.
Interests in securities
64,285 securities in Charter Hall Group.
R WOODHOUSe Deputy Chairman – Independent Non-Executive Director
Experience and expertise
Appointed non-executive director and deputy Chairman of the Group on
6 April 2005. Worked for the Ballieu family for 30 years in senior executive
capacities from 1975 including Director L.J. Hooker, Managing Director Knight
Frank Australia and Chairman Knight Frank Australia. Fellow of the Institute of
Company Directors.
Interests in securities
85,713 securities in Charter Hall Group.
C MCgOWan – Independent Non-Executive Director
Experience and expertise
Independent non-executive director since 6 April 2005. Formerly CEO of the
listed AMP Diversified Property Trust, Executive Vice President of Bankers Trust
(Australia), founding Fund Manager of the BT Property Trust and founding Fund
Manager of the Advance Property Fund. Fellow of the Australian Property Institute
and Senior Fellow of the Financial Services Institute of Australasia.
Interests in securities
Nil securities in Charter Hall Group.
P DeRRIngTOn – Independent Non-Executive Director
Experience and expertise
Independent non-executive director since 6 April 2005. Formerly the CEO of
Penrith Lakes Development Corporation Limited and Managing Director of the US
asset management firm Spears, Benzak, Salomon and Farrell, Patrice was also
formerly the Vice President in the Real Estate Finance Group at Chemical Bank
(now J.P. Morgan Chase) and in 1997 founded the Victory Real Estate Investment
Fund. Holds an MBA from Harvard University and a Ph. D from U.C. Berkeley.
Interests in securities
Nil securities in Charter Hall Group.
Other current listed company
directorships
Non-executive Chairman of Eircom
Holdings Limited (since 2006)
Non-executive director of Ramsay
Health Care Ltd (since 1997)
Former listed company
directorships in last 3 years
E*TRADE Australia (Retired in June
2007)
Everest Finance Group
(from 2005 - 2009)
Special responsibilities
Chairman of the Board
Chairman of Nomination Committee
Member of Remuneration
Committee
Member of Audit, Risk and
Compliance Committee
Other current listed company
directorships
Nil
Former listed company
directorships in last 3 years
Nil
Special responsibilities
Deputy Chairman of the Board
Member of Nomination Committee
Chairman of Remuneration
Committee
Other current listed company
directorships
Nil
Former listed company
directorships in last 3 years
Nil
Special responsibilities
Member of Remuneration Committee
Member of Nomination Committee
Member of the Valuation Committee
Other current listed company
directorships
Nil
Former listed company
directorships in last 3 years
Nil
Special responsibilities
Chair of Audit, Risk and Compliance
Committee
Annual Report 2009 25
Directors’ Report (Continued)
30 June 2009
g FRaSeR – Independent Non-Executive Director
Experience and expertise
Non-executive director of the Group since 6 April 2005. Joined Transfield Holdings
in 1996 where he was formerly the CFO and General Manager – Finance, Project
Development and is currently a member of its Advisory Board. Previously was the
principal of a finance advisory business Perry Development Finance Pty Limited.
Member of the Institute of Chartered Accountants in Australia and the Institute of
Company Directors.
Other current listed company
directorships
Nil
Former listed company
directorships in last 3 years
Nil
Special responsibilities
Member of Audit, Risk and
Compliance Committee
Interests in securities
823,792 securities in Charter Hall Group.
C FUCHS – Executive Director
Experience and expertise
Co-founder of Charter Hall in 1991. Executive director of the Group since
6 April 2005. Has over 40 years experience in property investment and financial
services. Is involved in the Group’s funds management business and is a member
of the Investment Committee for various Charter Hall managed funds. Previously
worked at the Heine Group’s property arm and Leighton Properties.
Interests in securities
8,105,997 securities in Charter Hall Group via direct and indirect interests including
2,671,404 securities in the Charter Hall Executive Loan Security Plan. In addition
Mr Fuchs holds 50,481 performance rights in the Charter Hall Performance
Rights and Options Plan. Securities in the Plans may vest upon the satisfaction of
performance and service criteria.
D HaRRISOn – Joint Managing Director
Experience and expertise
Joint Managing Director and head of the Funds Management Division and Property
Management Division. Has more than 20 years of experience in the Australian
commercial property markets. Prior to joining Charter Hall in 2004, was the
Managing Director of Savills in Australia. Holds a Land Economics degree from
the University of Western Sydney, a graduate Diploma in Applied Finance and is a
Fellow of the Australian Property Institute.
Interests in securities
20,070,203 securities in Charter Hall Group via direct and indirect interests
including 12,276,884 securities in the Charter Hall Executive Loan Securities
Plan. In addition Mr Harrison holds 403,846 performance rights in the Charter Hall
Performance Rights and Options Plan. Securities in the Plans may vest upon the
satisfaction of performance and service criteria.
Other current listed company
directorships
Nil
Former listed company
directorships in last 3 years
Nil
Special responsibilities
Member of the Valuation Committee
Other current listed company
directorships
Nil
Former listed company
directorships in last 3 years
Nil
Special responsibilities
Member of the Valuation Committee
26 Charter Hall Group
Directors’ Report
30 June 2009
D SOUTHOn – Joint Managing Director
Experience and expertise
David is a founding member of Charter Hall. He is Joint Managing Director and
head of the Development Division and has over 20 years of property industry
experience. Prior to co-founding Charter Hall in 1991 worked at the Heine Group’s
property arm (now part of ING) and Leighton Properties. Holds a Land Economics
degree from the University of Western Sydney.
Interests in securities
20,427,012 securities in Charter Hall Group via direct interests including 12,233,577
securities in the Charter Hall Executive Loan Security Plan. In addition Mr Southon
holds 403,846 performance rights in the Charter Hall Performance Rights and
Options Plan. Securities in the Plans may vest upon the satisfaction of performance
and service criteria.
Company Secretary
Other current listed company
directorships
Nil
Former listed company
directorships in last 3 years
Nil
Special responsibilities
Member of the Valuation Committee
The company secretary is Mr N Francis, a member of the Institute of Chartered Accountants in Australia and Chartered
Secretaries Australia. Before joining Charter Hall Group he was the Finance and Asset Manager at Quantum Property Group
and prior to that gained seven years experience with PricewaterhouseCoopers in audit and transactions services. He also
holds a Bachelor of Business degree from the University of Technology, Sydney.
Meetings of directors
The numbers of meetings of the Group’s board of directors and of each board committee held during the year ended
30 June 2009, and the numbers of meetings attended by each director were:
Full meetings of the
board of Directors
audit, Risk and
Compliance Committee
nomination
Committee
Remuneration
Committee
K Roxburgh
R Woodhouse
P Derrington
G Fraser
C Fuchs
C McGowan
D Harrison
D Southon
a
12
12
12
11
11
12
12
12
b
12
12
12
12
12
12
12
12
a
b
6
*
6
5
*
*
*
*
6
*
6
6
*
*
*
*
a
1
1
*
*
*
1
*
*
b
1
1
*
*
*
1
*
*
a
3
3
*
*
*
3
*
*
b
3
3
*
*
*
3
*
*
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee during the year
* = Not a member of the relevant committee
Remuneration report
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Security based compensation
E Additional information.
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
Annual Report 2009 27
Directors’ Report (Continued)
30 June 2009
a Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for
the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value
for securityholders, and conforms with market best practice for delivery of reward. The Board ensures that executive reward
satisfies the following key criteria for good reward governance practices:
• competitiveness and reasonableness
• acceptability to securityholders
• performance linkage / alignment of executive compensation
•
• capital management.
transparency
In consultation with external remuneration consultants, the Group has structured an executive remuneration framework that is
market competitive and complimentary to the reward strategy of the organisation.
Alignment to securityholders’ interests:
• has economic profit as a core component of plan design
•
focuses on sustained growth in securityholder wealth, consisting of distributions and dividends and growth in security price,
and delivering constant return on assets as well as focusing the executive on key non financial drivers of value
• attracts and retains high calibre executives.
Alignment to program participants’ interests:
rewards capability and experience
reflects competitive reward for contribution to growth in securityholder wealth
•
•
• provides a clear structure for earning rewards
• provides recognition for contribution.
The framework provides a mix of fixed and variable pay, and a blend of short and long term incentives. As executives gain
seniority with the Group, the balance of this mix shifts to a higher proportion of “at risk’’ rewards.
The Board has established a Remuneration Committee which provides advice on remuneration and incentive policies
and practices and specific recommendations on remuneration packages and other terms of employment. The Corporate
Governance Statement provides further information on the role of this committee.
Non-executive directors
Fees and payments to non executive directors reflect the demands which are made on, and the responsibilities of, the directors.
Non executive directors’ fees and payments are reviewed annually by the Remuneration Committee. The Remuneration
Committee has also reviewed independent remuneration research to ensure non executive directors’ fees and payments are
appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non executive directors
based on comparative roles in the external market. Non executive directors are not a part of the Charter Hall Limited Executive
Loan Security Plan or the Charter Hall Performance Rights and Option Plan.
Directors’ fees
The current base remuneration was last reviewed with effect from 1 July 2008. The base remuneration will be reviewed early in
the year ending 30 June 2010 to determine its appropriateness.
Retirement allowances for directors
There are no retirement allowances for non executive directors.
Executive pay
The executive pay and reward framework has four components:
• base pay and other benefits
• short term performance incentives (STI)
•
long term incentives (LTI) through participation in the Charter Hall Limited Executive Loan Security Plan and the Performance
Rights and Options plan, and
• other remuneration such as superannuation.
The combination of these comprises the executive’s total remuneration.
28 Charter Hall Group
Directors’ Report
30 June 2009
Base pay
Executives are offered a market based pay where reference is made to latest salary trends and salary surveys to ensure base
pay is set to reflect the market for a comparable role. Other benefits include provision of car parking spaces at the office
location.
Given the underperformance of the property sector over the past 12 months and the continued challenging economic
environment expected for FY10, there is a salary freeze for the 2010 financial year.
There are no guaranteed base pay increases included in any senior executives’ contracts.
Short term incentives (STI)
Cash incentives (bonuses) are generally payable in July depending on Group and individual performance for the year to 30 June.
Executives have an STI opportunity depending on the accountabilities of the role and impact on the organisation.
Each year, the Remuneration Committee and Joint Managing Directors will consider the appropriate targets and key
performance indicators (KPI’s) to link the STI plan and the level of payout if targets are met. This includes setting any maximum
payout under the STI plan, and minimum levels of performance to trigger payment of STI.
For the year ended 30 June 2009, the KPI’s linked to STI plans were based on group and personal objectives. The KPI’s
required performance in achieving specific targets.
The Joint Managing Directors and Remuneration Committee are responsible for assessing whether the KPI’s are met.
To help make this assessment, the committee receives reports on performance from management.
The short term bonus payments may be adjusted up or down in line with under or over achievement against the target
performance levels. This is at the discretion of the remuneration committee.
The STI target annual payment is reviewed annually.
STI - executive Directors
As from 1 July 2008 the Joint Managing Directors bonus was subject to individual KPI’s and Group Performance targets.
The Executive Directors bonus for the 12 months to 30 June 2009 is nil as not all of the individual and Group targets
were met.
The Executive Directors FY08 short term incentive was linked to a percentage of distribution growth above the Board approved
budget distribution. The Remuneration Committee approved a year ending 30 June 2008 bonus for the Executive Directors of
15% in aggregate (6% David Harrison, 6% David Southon, 3% Cedric Fuchs) of the amount that the distribution for the
12 months to 30 June 2008 exceeded the distribution forecast in the Board approved budget.
In order to bring the Joint Managing Directors in line with market levels and to acknowledge the earnings outperformance of
the Group in 2008 the Remuneration Committee approved an additional payment of $275,000 each for David Harrison and
David Southon.
Charter Hall Limited Executive Loan Security Plan
Information on the Charter Hall Limited Executive Loan Security Plan is set out in note 39 to the financial statements.
B Details of remuneration
Amounts of remuneration
Details of the remuneration of the directors and the key management personnel (as defined in AASB 124 Related Party
Disclosures) of Charter Hall Group are set out in the following tables.
The key management personnel of Charter Hall Group includes the directors as per pages 25 to 27 and the following executive
officers, who with the executive directors include the 5 highest paid executives of the Group:
• J Bakker
– Chief Financial Officer
• R Champion – Fund Manager and Retail Director
• N Kelly
– Wholesale Funds Director
• M Winnem
– Fund Manager and Development Director
The cash bonuses are dependent on the satisfaction of performance conditions as set out in the section headed Short-term
incentives above.
Annual Report 2009 29
Directors’ Report (Continued)
30 June 2009
Key management personnel of the Group
2009
Name
Short-term
benefits
Post-
employment
benefits
Security-
based
payment
Long-term
benefits
Cash
bonus
Superannuation
Securities
Cash
salary and
fees
$
Non-executive directors
K Roxburgh – Chairman
144,008
R Woodhouse – Deputy Chairman
76,516
P Derrington
G Fraser
C McGowan
77,953
72,993
79,269
Sub total non-executive directors
450,739
Executive directors
C Fuchs
D Harrison
D Southon
Other key management personnel
249,847
699,651
735,557
$
-
-
-
-
-
-
-
-
-
Long
service
leave
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
156,870
83,402
84,969
79,562
86,403
491,206
372,148
799,555
797,348
460,382
351,867
437,831
$
-
-
-
-
-
-
22,301
49,904
48,046
(2,137)
-
10,407
$
12,862
6,886
7,016
6,569
7,134
40,467
100,000
50,000
13,745
13,745
5,727
25,745
13,745
J Bakker^
R Champion*
N Kelly
M Winnem
Totals
408,774
40,000
346,140
-
366,679
35,000
386,255
30,000
3,643,642 105,000
263,174
137,247
1,860 4,150,923
8,726
1,860
440,586
* R Champion ceased to be an employee of Charter Hall Group on 14/11/08 and was paid an eligible termination payment of $171,356 which is included in
cash salary and fees above.
^ J Bakker has a negative security-based payment amount as the performance vesting conditions make the amount of the benefit received less than
previously forecast.
30 Charter Hall Group
Directors’ Report
30 June 2009
Short-term
benefits
Post-
employment
benefits
Security-
based
payment
Long-term
benefits
Cash
bonus
Superannuation
Securities
$
11,281
6,759
7,091
6,626
60,000
2,148
93,905
98,580
13,129
13,129
13,129
13,129
12,886
$
-
-
-
-
-
-
-
136,208
700,811
697,997
59,324
89,222
62,814
Long
service
leave
$
Total
$
-
-
-
-
-
-
-
136,625
81,861
85,875
80,250
84,861
26,015
495,487
-
517,208
- 1,675,624
- 1,674,997
-
-
12,325
507,415
549,222
463,357
Key management personnel of the Group
2008
Name
Non-executive directors
K Roxburgh – Chairman
R Woodhouse – Deputy Chairman
P Derrington
G Fraser
C McGowan
A Biet (to 25/10/07)
Cash
salary and
fees
$
125,344
75,102
78,784
73,624
24,861
23,867
Sub total non executive directors 401,582
Executive directors
C Fuchs
D Harrison
D Southon
Other key management personnel
J Bakker
R Champion
M Winnem
181,420
484,684
486,871
101,000
477,000
477,000
334,962
386,871
295,332
100,000
60,000
80,000
$
-
-
-
-
-
-
-
Totals
2,571,722 1,295,000
257,887
1,746,376
12,325 5,883,310
The bonus for the year ended 30 June 2007 paid to the executive directors (being $102,000 for each of the Joint Managing
Director’s and $51,000 for C Fuchs) was not accrued in 2007 and was consequently included in the 30 June 2008 year
together with the 2008 bonus. Bonuses relating to the 30 June 2008 year were $375,000 for each of the Joint Managing
Director’s and $50,000 for C Fuchs
C Service agreements
The Joint Managing Directors, David Harrison and David Southon signed 3 year agreements which expired on 18 October
2007 and 1 July 2007, respectively which related to the purchase of 50% of Charter Hall Holdings Pty Limited by Transfield
(CHG) Limited on 1 July 2004. Updated agreements have not been pursued because the un-vested component of the
Charter Hall Limited Executive Loan Security Plan and Performance Rights and Options Plan provides a strong incentive for
continuity of employment. Base salary for all KMPs is reviewed annually by the Remuneration Committee.
D employee security scheme
The Charter Hall Limited Loan Security Plan (LSP) and Performance Rights and Options Plan (PROP) are designed to
develop a clear line of sight between business objectives and reward. They are incentive plans aimed at creating a strong
link between executive performance and reward and increasing securityholder value by enabling plan participants to have a
greater involvement with, and share in the future growth and profitability of the Group.
LSP participants are offered non-recourse loans to acquire securities under the plan with interest charged at the Charter Hall
Group distribution yield. If the performance and service conditions are satisfied, the securities become available to the plan
participants after repayment of any loan obligations outstanding. PROP participants are granted rights/options which may be
exercised depending upon performance and service conditions being satisfied.
Non-executive directors do not participate in the LSP or the PROP.
Annual Report 2009 31
Directors’ Report (Continued)
30 June 2009
The following table shows securities issued under the LSP since inception of the plan. The issue prices range from $1.00 to
$2.94 compared to the security price at 30 June 2009 of $0.52.
Key management personnel of the group
Year of issue (calendar year)
Securities
Issue Price
Vesting conditions
2005
2006
2007
2008
6,200,000
$1.00 to $1.07
7,534,230
$1.27 to $2.00
10,729,304
$2.47 to $2.94
31,712,129
$1.04 to $1.67
Meet the PDS forecast DPS of 6.56
in FY06 and 5% growth in FY07 and FY08
UEPS must increase by 5% in each year
from FY06 or have achieved 5%
compound annual growth on FY06
UEPS must increase by 5% in each
year from FY07 or have achieved 5%
compound annual growth on FY07
UEPS must increase by 5% in each
year from FY08 or have achieved 5%
compound annual growth on FY08
2009*
Total LSP issued
Transferred, sold, forfeited **
nil
n/a
56,175,663
(5,832,068)
Total LSP securities on issue^
50,343,595
* 1 January 2009 to date of this report.
** Securities can be sold direct from the plan or transferred to members once securities vest. Unvested securities are forfeited when an employee
ceases employment.
^ Whilst the securities are legally issued and are quoted securities they are not recognised for accounting (EPS/DPS/NTA) purposes until they are
exercised (per AASB 2 Share Based Payments). Options are exercised when executives pay the exercise price of the option (i.e. repay the loan
that is recognised for tax and legal purposes). This is consistent with the fact that unvested and vested shares continue to be held by the employee
share trust until the employee loan is repaid.
Underlying EPS since the inception of the Charter Hall Group are shown below:
Key management personnel of the group
FY06
(cps)
UEPS
6.47
UEPS growth on previous year
FY07
(cps)
9.51
47%
FY08
(cps)
12.74
34%
FY09
(cps)
7.61
(40%)
As noted above there has been a significant reduction in earnings in FY09 equating to an underlying EPS of 7.61 cps
compared to 12.74 cps in FY08.
Under AASB 2 there is a requirement to “true up” at each reporting date to determine the appropriate share based payment
expense based on the number of unvested securities which are estimated to vest. The Group has re-assessed the likelihood
of vesting in light of the earnings reductions and hence the share based payments expense has fallen significantly compared
to 2008. This is reflected in the remuneration disclosures overleaf where there has been a significant reduction of LTI based
remuneration of key management employees compared to 30 June 2008.
Of the 50 million LTI securities on issue approximately 11 million are vested securities, with the balance of 39 million
securities being unvested securities.
The performance condition under the LSP is set at 5% growth per annum in Underlying EPS. The performance condition
was amended at the 2008 AGM as the previous DPS measure was not considered appropriate. For the 2008 LSP offer the
base year for the Underlying EPS measure is 30 June 2008 resulting in a base Underlying EPS of 12.74cps.
32 Charter Hall Group
Directors’ Report
30 June 2009
Performance Rights and Options Plan
Since the initial public offering in June 2005, Charter Hall Group has operated the LSP as the long term incentive component
of an executive’s remuneration arrangements to align reward with long term performance. The LSP is described above.
In early 2008, the Board engaged external advisers to gain a market perspective on LTI arrangements. In particular, the key
issues explored and conclusions reached by the Board are outlined below:
•
•
Alignment of reward and performance. Introducing a performance rights plan to replace a proportion of the ELSP for
future years, would provide a better balance between risk and reward;
Market prevalence of various LTI instruments. It was found that among Australian listed companies and direct peers,
Performance Rights plans were regularly used, particularly in conjunction with other instruments;
• Financial and potential dilution impact on Charter Hall Group. A Performance Rights plan would potentially result in
less dilution to existing Securityholders, compared to other forms of equity (for example, options);
• External stakeholder perspectives. It was found that external stakeholders look favourably upon Performance
Rights plans.
The Board, in consultation with independent remuneration consultants, resolved that LTI for the 2009 year would be
delivered through a combination of the existing LSP and the new PROP.
The Board has introduced the PROP as a key component of the Group’s broader strategy for rewarding and retaining key
talent. The PROP is a long term incentive plan aimed at creating a stronger link between executive performance and reward
and increasing securityholder value by enabling plan participants to have a greater involvement with, and share in, the future
growth and profitability of the Group.
The Performance Rights are unquoted securities and conversion of Performance Rights to stapled securities, and vesting to
executives, is subject to the same service and performance conditions as the LSP.
The performance condition is based on the achievement of a 5% compound annual growth rate, over a 3 year period,
above FY08 Underlying EPS of 12.74 cents per security.
The total number of Performance Rights granted was 1,628,789 (no options have been granted under the PROP).
Of this total 858,173 Performance Rights were granted to the Executive Directors following securityholder approval at the
November 2008 Annual General Meeting. The balance of Performance Rights relates to grants to senior executives of the Group.
The executive directors of Charter Hall Group and other key management personnel of the Group received the following
vested securities during the year from the company’s LSP:
Key management personnel of the group
LSP
LSP
Securities Securities
Issued in
Issued in
2007
2006
LSP
Securities
Issued in
2008
LSP
Securities
Forfeited in
2008
LSP
Securities
Issued in
2009
LSP
Securities
Forfeited in
2009
Total LSP
Securities
that can
vest
$1.00
$1.27
$2.76
$1.04
Issue price
executive
Directors
C Fuchs
D Harrison
D Southon
1,050,000
1,475,000
1,475,000
393,700
1,161,417
1,118,110
362,319
2,717,391
2,717,391
Key management personnel
J Bakker^
R Champion
N Kelly^
M Winnem
-
-
-
-
621,118
551,181
186,335
236,220
362,319
326,087
289,855
289,855
None of the above securities were exercised during FY08 or FY09.
-
-
-
-
-
-
-
865,385
6,923,076
6,923,076
-
-
-
2,671,404
12,276,884
12,233,577
865,384
721,153
865,384
865,384
-
(1,122,271)
-
-
1,848,821
476,150
1,341,574
1,391,459
Annual Report 2009 33
Directors’ Report (Continued)
30 June 2009
Key management personnel of the group
Securities that
can vest
Total LSP LSP Securities LSP Securities
vested
in 2008#
vested
in 2007#
executive Directors
C Fuchs
D Harrison
D Southon
Key management personnel
J Bakker^
R Champion
N Kelly^
M Winnem
2,671,404
12,276,884
12,233,577
1,848,821
476,150
1,341,574
1,391,459
(350,000)
(491,667)
(491,667)
-
-
-
-
(481,233)
(878,806)
(864,370)
(207,039)
(183,727)
(62,112)
(78,740)
(602,007)
(1,784,602)
(1,770,167)
(327,813)
(292,423)
(158,730)
(175,358)
^ J Bakker and Nick Kelly’s 2007 securities were issued at a price of $1.61.
# Securities that have vested but have not been exercised by repayment of the loan and removal from the LTI plan.
LSP Securities LSP unvested
securities
vested
in 2009#
30/6/09
1,238,164
9,121,809
9,107,373
1,313,969
-
1,120,732
1,137,361
The executive directors of Charter Hall Group and other key management personnel of the Group received the following
rights during the year from the company’s PROP:
Total PROP rights
executive Directors
C Fuchs
D Harrison
D Southon
Key management personnel
J Bakker
R Champion
N Kelly
M Winnem
50,481
403,846
403,846
50,480
-
50,480
50,480
The model inputs for the Black-Scholes method for assessing the fair value at loan date for the LSP securities and PROP
rights issued during the year ended 30 June 2009 include the following:
grant date
Security price at grant date
Loan value per security
Expiry of loan
Expected price volatility
Expected distribution yield
Risk-free interest rate
7/8/08
$0.865
$1.04
6/8/13
23.68%
9.47%
5.85%
10/10/08
$0.66
$1.04
9/8/13
22.75%
9.47%
4.28%
19/11/08
$0.41
$1.04
18/11/13
58.06%
9.47%
3.72%
22/12/08
$0.30
$1.04
21/12/13
59.49%
9.47%
3.19%
34 Charter Hall Group
Directors’ Report
30 June 2009
e additional information
Details of the short term incentives and the vesting of the securities are shown above. The table below shows the
percentage of securities forfeited for not satisfying the service and performance criteria that make up the vesting conditions.
No options will vest if the conditions are not satisfied. The maximum value of the options yet to vest has been determined as
the amount of the grant date fair value of the options that is yet to be expensed.
name
Key management personnel of the group
Financial
year
granted
Vested %
Forfeited % Minimum total Maximum total
value of grant
yet to vest $
value of grant
yet to vest $
C Fuchs
D Harrison
D Southon
J Bakker
N Kelly
M Winnem
2009
2008
2007
2006
2009
2008
2007
2006
2009
2008
2007
2006
2009
2008
2007
2009
2008
2007
2009
2008
2007
-
33%
66%
100%
-
33%
66%
100%
-
33%
66%
100%
-
33%
66%
-
33%
66%
-
33%
66%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
2,354
4,543
1,246
-
18,823
34,066
6,125
-
18,823
34,066
5,896
-
2,152
2,726
4,684
2,152
2,181
1,045
2,152
2,181
1,246
Further details relating to the LSP securities issued during the year ended 30 June 2009 are set out below:
Name
C Fuchs
D Harrison
D Southon
J Bakker
R Champion
N Kelly
M Winnem
Remuneration
consisting of LSP
Value at grant
date $
Value at
30 June 2009 $
6.0%
6.2%
6.0%
0.0%
0.0%
2.4%
2.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The value of securities at grant date is nil as the grant value is equivalent to the loan provided. The securities were issued at
grant date at $1.04 with the value at 30 June 2009 being $0.52.
Annual Report 2009 35
Directors’ Report (Continued)
30 June 2009
Loans to directors and executives
Information on loans to directors and executives, including amounts, interest rates and repayment terms are set out in
note 29 to the financial statements.
Insurance of officers
During the year, Charter Hall Group paid a premium of $103,953 (2008: $72,300) to insure the directors and secretary of the
company and its Australian based controlled entities.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities
incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct
involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to
gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the
premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility
on behalf of the company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of
the Corporations Act 2001.
non audit services
The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the company and/or the Group are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non audit services provided
during the year are set out below.
The board of directors has considered the position and, in accordance with the advice received from the Audit, Risk and
Compliance Committee, is satisfied that the provision of the non audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non audit
services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations
Act 2001 for the following reasons:
•
•
all non audit services have been reviewed by the Audit, Risk and Compliance Committee to ensure they do not impact
the impartiality and objectivity of the auditor.
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants.
36 Charter Hall Group
Directors’ Report
30 June 2009
During the year the following fees were paid or payable for services provided by the auditor of the Group and other non related
audit firms:
Consolidated
Parent entity
2009
$
2008
$
2009
$
2008
$
(a) assurance services
Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial reports and other audit
work under the Corporations Act 2001
Non PricewaterhouseCoopers audit firms for the audit or
review of financial reports of any entity in the Group
W F White & Co
Ernst & Young
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australian firm
Investigating Accountants Reports – equity raising
Total remuneration for other assurance services
Total remuneration for assurance services
(b) Taxation services
PricewaterhouseCoopers Australian firm Tax compliance services, including
review of company income tax returns
Non-PricewaterhouseCoopers firms for taxation services (Ernst & Young)
Total remuneration for taxation services
(c) advisory services
236,092
206,901
- -
4,770
-
51,942
4,475
240,862
263,318
70,000
219,000
70,000
219,000
310,862
482,318
- -
- -
- -
- -
- -
- -
13,920
141,075
21,090
-
- -
20,600
154,995
21,090
20,600
PricewaterhouseCoopers Australian firm Long term incentive plan structure
21,538
Non-PricewaterhouseCoopers firms for advisory services
Ernst & Young
KMPG
Total remuneration for advisory services
69,806
15,300
106,644
-
-
-
-
- -
- -
15,300
15,300
-
-
-
-
Annual Report 2009 37
Directors’ Report (Continued)
30 June 2009
auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 39.
Rounding of amounts
The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to the ‘’rounding off’’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
K Roxburgh
Chairman
Sydney
24 August 2009
38 Charter Hall Group
Auditor’s Independence Declaration
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
auditor’s Independence Declaration
As lead auditor for the audit of Charter Hall Limited for the year ended 30 June 2009, I declare that, to the best of my
knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Charter Hall Limited and the entities it controlled during the year, including Charter Hall
Property Trust.
B K Hunter
Partner
PricewaterhouseCoopers
Sydney
24 August 2009
Liability limited by a scheme approved under Professional Standards Legislation
Annual Report 2009 39
Financial Report
30 June 2009
Income Statements
Balance Sheets
Statements of Changes in Equity
Cash Flow Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Securityholder Information
41
42
43
44
45
96
97
99
40 Charter Hall Group
Income Statements
For the year ended 30 June 2009
Consolidated
2009
$’000
61,249
1,339
(3,168)
(16,663)
(285)
(4,733)
(7,403)
-
2008
$’000
91,060
838
(8,275)
(17,412)
(252)
(5,052)
(20,111)
922
Parent entity
2009
$’000
2008
$’000
25,098
- -
- -
-
- -
(20)
(21,890)
- -
16,398
(66)
(2)
(27,548)
Notes
6
8
8
(2,154)
7,534
- -
28,182
49,252
3,188
(11,218)
Revenue
Gain on sale of investments
Investment property expenses
Employee benefits expense
Depreciation
Other expenses
Finance costs
Foreign exchange gain
Share of net profit/(loss) of associates accounted for using
the equity method
Impairment of investment accounted for using the equity method
Fair value adjustments
(17,644)
(93,982)
-
15,287
(15,530) -
- -
7
Profit/(loss) before income tax
Income tax benefit
(83,444)
64,539
(12,342)
(11,218)
9
1,222
2,959
4,993
7,834
net profit/(loss) after income tax attributable to stapled
security holders of Charter Hall group
(82,222)
67,498
(7,349)
(3,384)
Attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust (minority interest)
Profit/(loss) attributable to stapled securityholders of
Charter Hall Group
(32,848)
(49,374)
(3,888)
71,386
(7,349)
- -
(3,384)
(82,222)
67,498
(7,349)
(3,384)
Group earnings per stapled security
Basic earnings per security
Diluted earnings per security
Cents
Cents
38
38
(17.98)
(15.85)
16.31
16.14
The above income statements should be read in conjunction with the accompanying notes.
Annual Report 2009 41
Balance Sheets
as at 30 June 2009
aSSeTS
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Consolidated
Parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Notes
11
12
1,923
17,082
16,183
32,344
741
1,751
19,005
48,527
2,492
328
64
392
Non-current assets
Trade and other receivables
Investments accounted for using the equity method
Financial assets at fair value through the profit and loss
Other financial assets
Property, plant and equipment
Investment properties
Derivative financial instruments
Deferred tax assets
Other assets
15
16
13
17
18
19
14
20
5,307
43,258
433,621
-
2,304
15,770
-
3,946
295
18,691
-
-
5,082
50,340
227,283
13,763
-
-
18,182 102,301 100,693
-
-
-
10,105
295
-
-
-
10,265
295
1,577
439,645
5,880
5,110
295
Total non-current assets
504,501
753,394 131,552 124,856
Total assets
523,506
801,921 134,044 125,248
LIabILITIeS
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Financial liabilities
Provisions
21
22
14,221
222
42,491
109
14,443
42,600
-
-
-
58
-
58
23
24
19
25
14,220
852
-
25
260,981 144,355 129,008
555
-
-
3,408
2,462
150
243
-
-
Total non-current liabilities
15,097
267,001 144,598 129,563
Total liabilities
29,540
309,601 144,598 129,621
Net assets/(liabilities)
493,966
492,320
(10,554)
(4,373)
eQUITY
Equity holders of Charter Hall Limited
Contributed equity
Reserves
Accumulated losses
Parent entity interest
26
27(a)
27(b)
6,383
(45,997)
(36,530)
5,272
(46,679)
(3,683)
6,383
1,717
(18,654)
5,272
1,660
(11,305)
(76,144)
(45,090)
(10,554)
(4,373)
Equity holders of Charter Hall Property Trust (minority interest)
28
570,110
537,410
-
-
Total equity
493,966
492,320
(10,554)
(4,373)
The above balance sheets should be read in conjunction with the accompanying notes.
42 Charter Hall Group
Statements of Changes in Equity
For the year ended 30 June 2009
Consolidated
2009
$’000
2008
$’000
Parent entity
2009
$’000
2008
$’000
Notes
Total equity at the beginning of the year
492,320
461,011
(4,373)
(2,790)
Changes in the fair value of cash flow hedges, net of tax
Foreign currency reserve movement
14,27
27
(763)
1,188
(379)
(1,257)
-
57
-
(57)
net loss recognised directly in equity
Profit / (loss) for the year
425
(82,222)
(1,636)
67,498
57
(7,349)
(57)
(3,384)
Total recognised income and expense for the year
(81,797)
65,862
(7,292)
(3,441)
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of transaction costs*
Distributions provided for or paid*
Other
Security based payments reserve
26
10
27
107,486
(24,659)
-
616
13,225
(52,117)
(47)
4,386
1,111
-
-
-
141
-
-
1,717
83,443
(34,553)
1,111
1,858
Total equity at the end of the year
493,966
492,320
(10,554)
(4,373)
Total recognised income and expense for the year
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust (minority interest)
(32,782)
(49,015)
(4,001)
69,863
(7,292)
-
(3,441)
-
(81,797)
65,862
(7,292)
(3,441)
* The equity and distributions for Charter Hall Limited and Charter Hall Property Trust are combined as the two entities are stapled together and have
the same investors. As outlined in note 1, for accounting purposes, equity attributable to Charter Hall Property Trust is considered attributable to
minority interest. Refer to note 28 for a breakdown of the minority interest in equity.
The above statements of changes in equity should be read in conjunction with the accompanying notes.
Annual Report 2009 43
Cash Flow Statements
For the year ended 30 June 2009
Consolidated
2009
$’000
2008
$’000
Parent entity
2009
$’000
2008
$’000
Notes
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest paid
Distributions and dividends from investments
Interest received
50,455
(30,025)
80,456
(37,933)
20,430
42,523
61
(71)
(10)
53
(16)
37
(12,746)
28,367
5,089
(17,323)
13,990
6,092
(21,890)
24,499
369
(27,498)
15,642
1,166
net cash inflow / (outflow) from operating activities
37
41,140
45,282
2,968
(10,653)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for investment property
Proceeds on disposal of investment property
Payments for other financial assets
Loans to employees
Investment in associates
Proceeds on disposal of investments in associates
Investment in joint venture
Repayments from / (loans to) associates
Receipts from sale of subsidiary net of cash
(1,016)
-
23,270
-
-
(129,114)
-
-
(1,985)
55,800
(377)
(102,829)
98,943
(18,182)
(3,894)
(113,715)
41,700
(25,510)
9,115
-
-
-
-
-
(17,080)
-
-
(1,897)
-
-
-
-
-
(3,945)
(5,944)
-
(25,510)
-
-
net cash outflow from investing activities
(53,045)
(114,749)
(18,977)
(35,399)
Cash flows from financing activities
Proceeds from issues of securities and other equity securities
Proceeds from forfeited LTI securities
Proceeds from borrowings
Repayment of borrowings
Payout of hedge derivatives
Security issue and transaction costs
Distributions paid to securityholders
93,085
-
181,876
(246,999)
(3,353)
(2,219)
(24,745)
4,337
-
209,187
(106,921)
-
(380)
(47,080)
1,074
-
15,348
-
-
-
-
189
1,717
44,306
-
-
-
-
net cash inflow / (outflow) from financing activities
(2,355)
59,143
16,422
46,212
net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(14,260)
16,183
(10,324)
26,507
Cash and cash equivalents at the end of the year
11
1,923
16,183
413
328
741
160
168
328
The above cash flow statements should be read in conjunction with the accompanying notes.
44 Charter Hall Group
Notes to the Financial Statements
Contents
Income tax expense
Fair value adjustments
Financial risk management
1 Summary of significant accounting policies
2
3 Critical accounting estimates and judgements
4 Underlying earnings per security
5 Segment information
6 Revenue
7
8 Expenses
9
10 Distributions
11 Current assets – Cash and cash equivalents
12 Current assets – Trade and other receivables
13 Non-current assets – Financial assets at fair value through profit or loss
14 Derivative financial instruments
15 Non-current assets – Trade and other receivables
16 Non-current assets – Investments accounted for using the equity method
17 Non-current assets – Other financial assets
18 Non-current assets – Property, plant and equipment
19 Non-current assets – Investment properties
20 Non-current assets – Deferred tax assets
21 Current liabilities – Trade and other payables
22 Current liabilities – Provisions
23 Non-current liabilities – Borrowings
24 Non-current liabilities – Deferred tax liabilities
25 Non-current liabilities – Provisions
26 Contributed equity
27 Reserves and retained profits
28 Minority interest
29 Key management personnel disclosures
30 Remuneration of auditors
31 Commitments
32 Related parties
33 Subsidiaries
34 Investments in associates
35 Investment in joint venture
36 Events occurring after the balance sheet date
37 Reconciliation of profit after income tax to net cash inflow from operating activities
38 Earnings per security
39 Security-based payments
46
54
56
57
58
60
60
60
61
62
62
63
64
64
67
68
68
69
69
71
71
71
72
75
76
77
78
80
80
83
84
84
86
87
90
92
92
92
94
Annual Report 2009 45
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS
The principal accounting policies adopted in the preparation of the financial report are set out below. The financial report includes
separate financial statements for Charter Hall Limited (CHL) as an individual entity and the consolidated entity consisting of CHL and its
subsidiaries and controlled entities including Charter Hall Funds Management Limited as Responsible Entity for Charter Hall Property
Trust (CHPT). For the purposes of AASB Interpretation 1002 Post date of transition stapling arrangements (AASB I – 1002), CHL has
been identified as the parent entity in relation to the stapling that occurred on 6 June 2005, which is the date of the initial public offering
(IPO). In accordance with AASB Interpretation 1002 the results and equity, not directly owned by CHL, of CHPT have been treated and
disclosed as a minority interest. Whilst the results and equity of CHPT are disclosed as minority interest, the stapled securityholders of
CHL are the same as the stapled securityholders of CHPT.
On 6 June 2005, CHL acquired Charter Hall Holdings Pty Ltd (CHH). Under the terms of AASB 3 Business Combinations CHH
was deemed to be the accounting acquirer in this business combination. This transaction has therefore been accounted for
as a reverse acquisition under AASB 3. Accordingly the consolidated financial statements of CHG have been prepared as a
continuation of the consolidated financial statements of CHH. CHH as the deemed acquirer, has acquisition accounted for CHL
as at 6 June 2005.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
Compliance with IFRSs
The financial report of Charter Hall Group also complies with International Financial Reporting Standards (IFRSs) as issued by
the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment
property, financial assets and liabilities (including derivative financial instruments) at fair value through profit or loss.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant
to the financial statements, are disclosed in note 3.
Correction of error in recording investment in subsidiary
In error the purchase price paid by Charter Hall Limited for Charter Hall Holdings Pty Limited has been shown in the parent entity
as a business combination reserve rather than as an other financial asset. This error has had the effect of understating CHL’s
(the parent entity) other financial assets by $52 million and overstating CHL’s (the parent entity) business combination reserve by
$52 million as at 30 June 2008.
The error has been corrected by restating each of the affected financial statement line items for the prior year, as described above.
There was no impact on the consolidated entity’s financial statements.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Charter Hall Limited (“company’’ or
“parent entity’’) including CHPT, as at 30 June 2009 and the results of all subsidiaries for the year then ended. Charter Hall Limited
and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de consolidated from the
date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 1(g))
Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases
from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of
the carrying value of identifiable net assets of the subsidiary.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction involves impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
46 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS (COnTInUeD)
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and
balance sheet respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Charter Hall Limited.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding
of between 20% and 50% of the voting rights. Investments in associates are accounted for in the parent entity financial
statements using the cost method and in the consolidated financial statements using the equity method of accounting except
as noted below in relation to CHPT investments, after initially being recognised at cost.
The Group’s share of its associates’ post acquisition profits or losses is recognised in the income statement, and its share of
post acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted
against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity’s income
statement, while in the consolidated financial statements they reduce the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
long term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in
the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Investments in associates held by CHPT are accounted for as financial assets at fair value through profit or loss. Investments
are initially and in subsequent periods carried at fair value. Gain or losses arising from changes in the fair value of the “financial
assets at fair value through profit or loss” category are presented in the income statement within fair value gains / (losses) in
the period in which they arise. Distribution income from financial assets accounted at fair value through the profit or loss is
recognised in the income statement as part of revenue.
(iii) Joint ventures
The interest in a joint venture is accounted for in the consolidated financial statements using the equity method and is carried at
cost by the parent entity. Under the equity method, the share of the profits or losses is recognised in the income statement, and
the share of movements in reserves is recognised in the reserves in the balance sheet. Details relating to the joint venture are set
out in note 35.
(c) Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks
and returns that are different to those of other business segments. A geographical segment is engaged in providing products or
services within a particular economic environment and is subject to risks and returns that are different from those of segments
operating in other economic environments.
(d) Foreign currency translation
(i) Functional and presentation currency
The financial statements are presented in Australian Dollars which is Charter Hall Limited’s functional and presentation currency.
(ii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are translated into the presentation currency as follows:
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
(NZ$1 for A$0.8046 for 30 June 2009)
•
income and expenses for each income statement are translated at average exchange rates (NZ$1 for A$0.816); and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings
are taken to a separate component of equity.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for the major business
activities as follows:
Annual Report 2009 47
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS (COnTInUeD)
(i) Rental income
Rental income from operating leases is recognised on a straight-line basis over the lease term. Rental income relating to straight
lining is included as a component of the net gain from fair value adjustments on investment property. An asset is recognised to
represent the portion of operating lease income in a reporting period relating to fixed increases in operating lease rentals in future
periods. Such assets are recognised as a component of the carrying amount of investment properties in the balance sheet.
(ii) Management fees
Management fees are brought to account on an accruals basis and, if not received at the balance sheet date are reflected in the
Balance sheet as a receivable. Performance fees are only recognised when realised.
Where management fees are derived in respect of an acquisition or disposal of property the fees are recognised where it is
probable that criteria for entitlement will be met.
(iii) Interest income
Interest income is recognised on a time proportion basis using the effective interest method, see note 1(k). When a receivable is
impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at
the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on
impaired loans is recognised using the original effective interest rate.
(iv) Dividends / Distributions
Dividends / distributions are recognised as revenue when the right to receive payment is established.
(f) Income tax
The period’s income tax expense or revenue is the tax payable on the current period’s taxable income based on the national
income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the
deferred tax asset or liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose
in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or
taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation legislation
On 22 August 2005, Charter Hall Limited and its wholly owned Australian controlled entities implemented the tax consolidation
legislation.
The head entity, Charter Hall Limited, and the controlled entities in the tax consolidated group continue to account for their own
current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to
be a stand alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Charter Hall Limited also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the group. Details about the tax funding agreement are disclosed in note 9.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.
48 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS (COnTInUeD)
(g) Business combinations
The purchase method of accounting is used to account for all business combinations, regardless of whether equity instruments
or other assets are acquired. Cost is measured as the fair value of the assets given, securities issued or liabilities incurred or
assumed at the date of exchange plus costs directly attributable to the acquisition. Transaction costs arising on the issue of
equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition
over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is
less than the Group’s share of the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised
directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.
(h) Impairment of assets
Assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash generating units). Non financial assets other than
goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
(i) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
(j) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful
debts. Trade receivables are due for settlement no more than 30 days from the date of recognition.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.
A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash
flows relating to short term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision
is recognised in the income statement.
(k) Investments and other financial assets
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held to maturity investments, and available for sale financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the classification of its investments at initial recognition and, in
the case of assets classified as held to maturity, re evaluates this designation at each reporting date.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for long term investment. Their treatment is discussed
at Note 1b(ii). Derivatives are also categorised as held for trading unless they are designated as hedges.
(ii) Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the
receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet
date which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet (notes
12 and 15).
(iii) Held to maturity investments
Held to maturity investments are non derivative financial assets with fixed or determinable payments and fixed maturities that the
Group’s management has the positive intention and ability to hold to maturity.
(iv) Available for sale financial assets
Available for sale financial assets, comprising principally marketable equity securities, are non derivatives that are either
designated in this category or not classified in any of the other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months of the balance sheet date.
Annual Report 2009 49
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS (COnTInUeD)
Regular purchases and sales of investments are recognised on trade date – the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair
value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and
transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks
and rewards of ownership.
Available for sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value.
Loans and receivables and held to maturity investments are carried at amortised cost using the effective interest method. Gains
or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category, excluding
interest and dividend income, are presented in the income statement within other income or other expenses in the period in
which they arise.
When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity
are included in the income statement as gains and losses from investment securities.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for
unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length
transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing
models making maximum use of market inputs and relying as little as possible on entity specific inputs.
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets
is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a
security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available for
sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value,
less any impairment loss on that financial asset previously recognised in profit and loss – is removed from equity and recognised
in the income statement. Impairment losses recognised in the income statement on equity instruments classified as available for
sale are not reversed through the income statement.
(l) Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives
as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of
the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 14. Movements in the
hedging reserve in securityholders’ equity are shown in note 27.
(i) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised
in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income
statement within other income or other expense.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or
loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in
the income statement within ‘finance costs’. However, when the forecast transaction that is hedged results in the recognition
of a non financial asset (for example, inventory) or a non financial liability, the gains and losses previously deferred in equity are
transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain
or loss that was reported in equity is immediately transferred to the income statement.
(ii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments
that do not qualify for hedge accounting are recognised immediately in the income statement and are included in fair value
adjustment gains / (losses). The fair value previously recognised for hedges which are no longer effective is amortised over the
remaining period of the hedge.
50 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS (COnTInUeD)
(m) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The
quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for
financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The
Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date.
Quoted market prices or dealer quotes for similar instruments are used for long term debt instruments held. Other techniques,
such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value
of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange
contracts is determined using forward exchange market rates at the balance sheet date.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows
at the current market interest rate that is available to the Group for similar financial instruments.
(n) Plant and equipment
Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable
to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are
incurred.
Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives, as follows:
- Furniture, fittings and equipment: 3-8 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount (note 1(h)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income
statement.
(o) Investment property
Investment properties comprise investment interests in land and buildings held for long term rental yields and not occupied by
the Group. Investment property is carried at fair value, which is based on active market prices, adjusted, if necessary, for any
differences in the nature, location and condition of the specific asset. The Group aims to have properties valued externally on a
regular basis.
The carrying amount of investment properties recorded in the balance sheet includes components relating to lease incentives
and assets relating to fixed increases in operating lease rentals in future periods. Changes in fair values are recorded in the
income statement as part of fair value adjustments.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of period which are unpaid.
The amounts are unsecured and are usually paid within 30 days of recognition.
(q) borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of
loan facilities, which are not incremental cost relating to the actual draw down of the facility, are recognised as prepayments and
amortised on a straight line basis over the term of the facility.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Annual Report 2009 51
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS (COnTInUeD)
(r) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to
complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(s) Provisions
Provisions for legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.
(t) employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non monetary benefits and annual leave expected to be settled within 12 months of
the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured
at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
Liabilities for other employee entitlements which are not expected to be paid or settled within 12 months of balance date
are accrued in respect of all employees at present values of future amounts expected to be paid, based on a projected
weighted average increase in wage and salary rates. Expected future payments are discounted using interest rates on national
government securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.
(iii) Retirement benefit obligations
Contributions to employee defined contribution superannuation funds are recognised as an expense as they become payable.
(iv) Security based payments
Security based compensation benefits are provided to employees via the Charter Hall Limited Executive Loan Security Plan and
the Charter Hall Performance Rights and Options Plan. Information relating to these schemes is set out in note 39.
The fair value at grant date is independently determined using a Black Scholes option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the security price at grant date and expected price volatility of the
underlying security, the expected dividend yield and the risk free interest rate for the term of the option.
The fair value of the securities granted is adjusted to reflect market vesting conditions, but excludes the impact of any non
market vesting conditions (for example, profitability and sales growth targets). Non market vesting conditions are included in
assumptions about the number of securities that are expected to vest. At each balance sheet date, the entity revises its estimate
of the number of securities that are expected to vest. The employee benefit expense recognised each period takes into account
the most recent estimate.
Upon the vesting of securities and repayment of the loan, the balance of the security based payments reserve relating to
those securities is transferred to equity and the proceeds received, net of any directly attributable transaction costs, are
credited to equity.
(v) Bonus plans
The Group recognises a liability and an expense. The Group recognises a provision where contractually obliged or where there is
a past practice that has created a constructive obligation.
(vi) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without
possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy.
Benefits falling due more than 12 months after the reporting date are discounted to present value.
(u) Contributed equity
Ordinary stapled securities are classified as equity. Incremental costs directly attributable to the issue of new securities or
options are shown in equity as a deduction, net of tax, from the proceeds.
(v) Distributions
Provision is made for the amount of any distribution or dividend declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the period but not distributed at balance date.
52 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
1. SUMMaRY OF SIgnIFICanT aCCOUnTIng POLICIeS (COnTInUeD)
(w) earnings per security
(i) Basic earnings per security
Basic earnings per security is calculated by dividing the profit attributable to equity holders of CHG, excluding any costs of
servicing equity other than ordinary stapled securities, by the weighted average number of ordinary securities outstanding during
the period, adjusted for bonus elements in ordinary stapled securities issued during the year.
(ii) Diluted earnings per security
Diluted earnings per security adjusts the figures used in the determination of basic earnings per stapled security to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary securities
and the weighted average number of stapled securities assumed to have been issued in relation to dilutive potential stapled
securities.
(x) goods and Services Tax (gST)
Revenues, expenses and assets (with the exception of receivables) are recognised net of the amount of associated GST, unless
the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of
the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
(y) Rounding of amounts
The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to the ‘’rounding off’’ of amounts in the financial report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(z) new accounting standards and UIg interpretations
Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2009
reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below.
(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising
from AASB 8
AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result
in a significant change in the approach to segment reporting, as it requires adoption of a “management approach” to reporting
on the financial performance. The information being reported will be based on what the key decision-makers use internally for
evaluating segment performance and deciding how to allocate resources to operating segments. The Group will adopt AASB
8 from 1 July 2009. Application of AASB 8 is not expected to result in different segments, segment results and different type of
information being reported in the segment note of the financial report.
(ii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting
Standards arising from AASB 101
A revised AASB 101 was issued in September 2007 and is applicable to annual reporting periods beginning on or after
1 January 2009. It ensures the presentation of a statement of comprehensive income and makes changes to the statement of
changes in equity, but will not affect any of the amounts recognised in the financial statements. The Group intends to apply the
revised standard from 1 July 2009.
(aa) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases (note 31). Payments made under operating leases are charged to the income statement on a straight-line basis.
Lease income from operating leases is recognised in income on a straight-line basis over the lease term.
(ab) Going concern
Although the parent entity shows net liabilities there is no reason to believe that it will not be able to pay its liabilities as and when
they fall due. CHL has a loan facility provided by CHPT which has significant net assets.
Annual Report 2009 53
Notes to the Financial Statements
For the year ended 30 June 2009
2. FInanCIaL RISK ManageMenT
The Group’s activities expose it to a variety of financial risks; market risk (fair value interest rate risk and price risk), credit risk,
liquidity risk and cash flow interest rate risk. The Group’s overall risk management program focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses
derivative financial instruments such as interest rate swaps to hedge certain risk exposures.
Risk management is carried out by the Joint Managing Directors in discussion with the Board of Directors. The Managing
Directors identify, evaluate and hedge financial risks in close co-operation with the finance department. The Board provides
guidance for overall risk management, as well as covering specific areas, such as mitigating interest rate, price and credit
risks, use of derivative financial instruments and investing excess liquidity.
(a) Market risk
(i) Unlisted units price risk
The Group is exposed to unlisted units price risk. This arises from an investment in unlisted property funds managed by
the Group. These funds invest in direct property. Charter Hall manage all the funds that the Group invests in and its staff
have an excellent understanding of the underlying property values and trends that give rise to price risk. The carrying value
of the financial assets at fair value through the profit and loss is determined with reference to the fund’s unit price which is
determined in accordance with the fund’s constitution. The key determinant of the unit price is the underlying property values
which are approved by the Board and the Valuation Sub-Committee of the Board.
The table below illustrates the potential impact a change in unlisted unit prices by +/-10% would have on the Group’s profit and
equity. The movement in the price variable has been determined based on management’s best estimate, having regard to a
number of factors, including historical levels of price movement, historical correlation of the Group’s investments with the relevant
benchmark and market volatility. However, actual movements in the price may be greater or less than anticipated due to a
number of factors. As a result, historic price variations are not a definitive indicator of future price variations.
2009
Assets
Unlisted units
Total increase/(decrease)
2008
Assets
Unlisted units
Total increase/(decrease)
-10%
+10%
Carrying
amount Profit
$’000
Profit
$’000
433,621
(43,362)
(43,362)
equity
$’000
(43,362)
(43,362)
Profit
$’000
43,362
43,362
equity
43,362
43,362
-10%
+10%
Carrying
amount Profit
$’000
Profit
$’000
equity
$’000
225,279
(22,528)
(22,528)
(22,528)
(22,528)
Profit
$’000
22,528
22,528
equity
22,528
22,528
(ii) Cash flow and fair value interest rate risk
As the Group has no significant long term interest bearing assets, the Group’s income and operating cash receipts are not
materially exposed to changes in market interest rates.
The Group’s interest rate risk arises from long term borrowings of $14,220,000 (2008: $260,981,000). Borrowings issued at
variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value
interest rate risk. Group policy is to fix the rates for up to 100% of its long term borrowings (when appropriate). At year end
0% (2008: 75%) of debt had fixed interest rates through the use of derivatives. After the selldown of $30 million of units in
CPOF in August 2009 Charter Hall Group will have no debt. As at 30 June 2009, no derivatives were in place.
The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps have the
economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long term borrowings at
floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly.
Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (mainly quarterly), the
difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal
amounts. Refer to note 15(c) for interest rate sensitivity analysis on assets and note 23(d) for sensitivity analysis for liabilities.
54 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
2. FInanCIaL RISK ManagMenT (COnTInUeD)
(iii) Foreign exchange risk
The foreign exchange risk that the Group is exposed to is not material.
(b) Credit risk
The Group has policies in place to ensure that sales of services are made to customers with an appropriate credit history.
The vast majority of transactions are with related parties and the Trust’s exposure is limited to two tenants. Refer to note
15(d) for more information on credit risk.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Group has policies
that limit the amount of credit exposure to any one financial institution.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount
of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying
businesses, Treasury aims at maintaining flexibility in funding by keeping committed credit lines available.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at
the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted
cash flows, except for interest rate swaps:
Maturities of financial liabilities
2009 Consolidated
Non-interest bearing
Bank and other loans
2008 Consolidated
Non-interest bearing
Bank and other loans
Interest rate swaps
2009 Parent
Carrying Less than
1 year
Amount
$’000
$’000
Between Between
2 and 5
years
$’000
1 and 2
years
$’000
14,221
14,220
14,221
558
28,441
14,779
-
558
558
-
14,547
14,547
Carrying Less than
1 year
Amount
$’000
$’000
Between Between
2 and 5
years
$’000
1 and 2
years
$’000
Over
5 years
$’000
-
-
-
Over
5 years
$’000
Total
cash
flow
$’000
14,221
15,663
29,884
Total
cash
flow
$’000
42,491
260,981
(5,880)
42,491
22,430
(2,901)
-
283,411
(2,868)
297,592
62,020
280,543
-
-
-
-
-
-
-
-
42,491
305,841
(5,769)
342,563
Carrying Less than
1 year
Amount
$’000
$’000
Between Between
2 and 5
years
$’000
1 and 2
years
$’000
Over
5 years
$’000
Total
cash
flow
$’000
Bank and other loans
144,355
12,947
12,947
38,841 220,428
285,163
144,355
12,947
12,947
38,841 220,428
285,163
2008 Parent
Non-interest bearing
Bank and other loans
Carrying Less than
1 year
Amount
$’000
$’000
Between Between
2 and 5
years
$’000
1 and 2
years
$’000
Over
5 years
$’000
Total
cash
flow
$’000
58
129,008
58
30,014
-
30,014
-
-
90,042 228,299
58
378,369
129,066
30,072
30,014
90,042 228,299
378,427
Annual Report 2009 55
Notes to the Financial Statements
For the year ended 30 June 2009
3. CRITICaL aCCOUnTIng eSTIMaTeS anD JUDgeMenTS
Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of
future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates or assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
(i) Estimated value of investments
Critical judgements are made by the Group in respect of the fair value of investments in associates (note 34) and investment
properties (note 19). These investments are reviewed regularly for impairment by reference to external independent property
valuations and market conditions, using generally accepted market practices. KPMG have been engaged to provide an
independent indicative estimate of the investment in Commercial and Industrial Property Pty Ltd as discussed in note 35.
(ii) Estimated performance fees
Critical judgements are made by the Group in respect of recognising performance fee revenue. Performance fees are only
recognised when a fee is received.
(iii) De-consolidation of investment in Charter Hall Core Plus Retail Fund (CPRF)
In accordance with note 1(b)(i) subsidiaries are de-consolidated from the date that control ceases. CHPT sold down its
investment in Charter Hall Core Plus Retail Fund (CPRF) and its sub-trusts and appointed the Investment Committee (IC) on
30 July 2008 when equity was raised. Whilst CHPT still owns a 65% direct interest and a 5% indirect interest in CPRF (CHPT
has a 25% investment in CHUF and CHUF holds a 21% investment in CPRF) it does not have the power to govern the financial
and operating policies of CPRF and therefore CHPT does not control the Fund. For this reason the financial accounts of CPRF
are not consolidated into CHPT’s financial accounts.
The financial and operating policies of CPRF are determined by its IC. The IC comprises 2 Charter Hall representatives and two
independent members. All decisions of the IC require the unanimous approval of all IC members and thus Charter Hall cannot
dominate decision making. The IC, amongst other duties monitor and manage the investment activities of CPRF and approve
asset opportunities and disposal of assets.
56 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
4. UnDeRLYIng eaRnIngS PeR SeCURITY
The Responsible Entity does not consider it appropriate to use profit under certain Australian Accounting Standards to
determine distributions to securityholders. The table below outlines the Responsible Entity’s adjustments to profit under
Australian Accounting Standards to determine the amount the Responsible Entity believes should be available for distribution
for the current year. The Responsible Entity uses this amount as guidance for determination.
Underlying earnings is a financial measure which is not prescribed by Australian Accounting Standards and represents the
profit under Australian Accounting Standards adjusted for certain unrealised and non-cash items. Per the Trust Constitution,
the adjustments, and therefore the amount distributed to securityholders are at the discretion of the Responsible Entity.
The Responsible Entity will use the underlying earnings calculated as a guide to assessing an appropriate distribution
to declare.
The adjustments made to profit under Australian Accounting Standards in order to solely determine underlying earnings may
change from time to time depending on future changes to accounting standards and the Responsible Entity’s assessment as to
whether non-recurring or infrequent items (such as realised gains on the sale of properties) will be distributed to securityholders.
Earning per security per note 38 (cents)
Underlying earning per security (cents)
Earnings used in the calculation of underlying earnings per security (‘000s)
Weighted average number of ordinary securities used in the calculation of
underlying earnings per security (‘000s) (note 38)
Net profit attributable to stapled securityholders of the Group
Fair value adjustments
Impairment of assets
Foreign exchange gain
Inventory write downs in CHOF4 and CHOF5 (equity accounted investments)
Gains on sale of investments
Tax benefit on unrealised gains or losses
Non cash long term incentive plan expense
Amortisation of fees paid for raising of wholesale equity
Amortisation of lease incentives
Performance fee accrual reversal
Underlying earnings
Distribution paid/payable
Distribution paid/payable per security (cents)
Consolidated
2009
2008
(17.98)
7.61
34,828
16.31
12.74
52,742
457,410
413,905
$’000
$’000
(82,222)
93,982
17,644
-
3,625
(1,339)
(1,222)
616
744
-
3,000
67,498
(15,287)
-
(922)
-
(838)
(1,552)
2,669
755
419
-
34,828
52,742
24,659
52,117
4.96
12.60
Annual Report 2009 57
Notes to the Financial Statements
For the year ended 30 June 2009
5. SegMenT InFORMaTIOn
(a) Description of segments
Business segments
The consolidated entity is organised into the following divisions:
Property investment
Has interests in investment properties and unlisted property funds.
Funds management and corporate
Property funds management, development management and property management.
Funds
Property management
Investment and corporate
$’000
$’000
Inter-segment
eliminations/
unallocated
$’000
Consolidated
$’000
55,922
-
55,922
1,358
-
57,280
50,624
(7,335)
43,289
-
(92,663)
(49,374)
-
(49,374)
599,141
29,031
433,621
-
-
-
27,217
3,525
30,742
(19)
(2,154)
28,569
6,849
(21,958)
(15,107)
(17,644)
(1,319)
(34,070)
1,222
(32,848)
68,720
144,864
43,258
1,012
285
616
(21,890)
(3,525)
(25,415)
-
-
(25,415)
(21,890)
21,890
-
-
-
-
-
-
(144,355)
(144,355)
-
-
-
-
61,249
-
61,249
1,339
(2,154)
60,434
35,583
(7,403)
28,180
(17,644)
(93,982
(83,444)
1,222
(82,222)
523,506
29,540
476,879
1,012
285
616
2009
Revenue
Inter-segment sales (note (ii))
Total sales revenue
Gain on sale of Investments
Share of net profit of associates and joint
ventures (note (iii))
Total segment revenue/income
Segment result before interest expense
Interest expense
Segment result after interest expense
Impairment of equity accounted investments
Fair value adjustments
Profit before income tax
Income tax benefit
Loss for the year
Segment assets
Segment liabilities (note (ii))
Investments in associates and joint ventures (note (iii))
Acquisitions of plant and equipment and other non
current segment assets
Depreciation and amortisation expense
Long Term Incentive expenses
58 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
5. SegMenT InFORMaTIOn (COnTInUeD)
2008
Funds
Property management
Investment and corporate
$’000
$’000
Inter-segment
eliminations/
unallocated
$’000
Consolidated
$’000
Revenue
Inter-segment sales (note (ii))
Total sales revenue
Gain on sale of Investments
Share of net profit of associates and
joint ventures (note (iii))
Total segment revenue/income
Segment result before interest expense
Interest expense
Segment result after interest expense
Fair value adjustments
Profit before income tax
Income tax expense
Profit/(loss) for the year
78,394
-
78,394
838
-
79,232
70,566
(20,109)
50,457
21,132
71,589
(203)
71,386
Segment assets
Segment liabilities (note (ii))
Investments in associates and joint ventures (note (iii))
Acquisitions of plant and equipment and other
non-current segment assets
Depreciation and amortisation expense
Long term incentive expenses
842,817
299,758
225,279
8,944
-
-
(b) notes to and forming part of the segment information
40,214
745
40,959
-
7,534
48,493
26,345
(27,550)
(1,205)
(5,845)
(7,050)
3,162
(3,888)
93,762
144,501
52,344
474
(252)
(2,669)
(27,548)
(745)
(28,293)
-
-
(28,293)
(27,548)
27,548
-
-
-
-
-
(134,658)
(134,658)
-
-
-
-
91,060
-
91,060
838
7,534
99,432
69,363
(20,111)
49,252
15,287
64,539
2,959
67,498
801,921
309,601
277,623
9,418
(252)
(2,669)
(i) Accounting policies
Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 1 and
accounting standard AASB 114 Segment Reporting.
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant
portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment
and consist primarily of operating cash, receivables, investment properties, property, plant and equipment net of related
provisions. While most of these assets can be directly attributable to individual segments, the carrying amounts of certain
assets used jointly by segments are allocated based on reasonable estimates of usage. Segment liabilities consist primarily
of trade and other creditors, employee benefits and provisions. Segment assets and liabilities include income taxes.
(ii) Inter-segment transfers
Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an ‘’arm’s
length’’ basis and are eliminated on consolidation.
(iii) Investments in associates
The Group owns 26% of the Charter Hall Diversified Property Fund, 23% of Charter Hall Core Plus Office Fund, 25% of Charter
Hall Core Plus Industrial Fund, 65% of the Charter Hall Core Plus Retail Fund and 25% of the Charter Hall Umbrella Fund which
are all accounted for at fair value and are allocated to the property investment segment (refer note 35). Investments of 3% in
the Charter Hall Opportunity Fund No 4, 15% in Charter Hall Opportunity Fund No 5 and 50% of Commercial and Industrial
Property Pty Ltd are equity accounted and allocated to the funds management and corporate segment.
Annual Report 2009 59
Notes to the Financial Statements
For the year ended 30 June 2009
6. ReVenUe
Sales revenue
Gross rental income
Management and performance fees
Other revenue
Interest
Distributions / dividends
Total revenue
7. FaIR VaLUe aDJUSTMenTS
Investment properties
Financial assets at fair value through profit and loss
Derivative financial instruments
8. ExPENSES
Consolidated
2009
$’000
2008
$’000
Parent entity
2009
$’000
2008
$’000
5,187
26,594
36,548
39,570
31,781
76,118
-
5
5
49
49
5,089
24,379
5,401
9,541
594
24,499
707
15,642
29,468
14,942
25,093
16,349
61,249
91,060
25,098
16,398
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
(2,085)
(82,663)
(9,234)
4,156
10,218
913
(93,982)
15,287
- -
- -
- -
- -
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
Profit before income tax includes the following specific expenses:
Depreciation
Plant and equipment
285
252
- -
Finance costs
Interest and finance charges paid/payable
7,403
20,111
21,890
27,548
Defined contribution superannuation expense
1,223
1,046
Rent expense relating to operating leases
Minimum lease payments
630
444
- -
- -
Impairment losses – Financial assets (refer to note 35)
17,644
-
15,530 -
Doubtful debts
Trade receivables
(300)
300
- -
60 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
9. InCOMe Tax exPenSe
(a) Income tax benefit
Current tax
Deferred tax
Under provided in prior years
Consolidated
2009
$’000
2008
$’000
Parent entity
2009
$’000
2008
$’000
(591)
(1,392)
761
(165)
(2,981)
187
(5,172)
(472)
651
(3,623)
(4,231)
20
(1,222)
(2,959)
(4,993)
(7,834)
Deferred income tax expense / (revenue) included in income tax benefit comprises:
Decrease/(increase) in deferred tax assets (note 20)
Increase/(decrease) in deferred tax liabilities (note 24)
1,164
(2,556)
(3,827)
846
(160)
(312)
(4,418)
187
(1,392)
(2,981)
(472)
(4,231)
(b) numerical reconciliation of income tax benefit to prima facie
tax payable Profit before income tax expense
(83,444)
64,539
(12,342)
(11,218)
Tax at the Australian tax rate of 30%
(25,034)
19,362
(3,702)
(3,365)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Charter Hall Property Trust income
Entertainment
Share based payments expense
Non taxable dividends
Tax on LTI interest
Adjustments to current tax of prior periods
Impairment loss
Loss on sale of financial asset at fair value through profit or loss
Sundry items
14,812
11
185
646
749
761
5,293
1,303
52
(21,321)
16
801
(2,167)
-
187
-
-
163
- -
- -
- -
(7,350)
749 -
651
4,659 -
- -
-
(4,599)
20
110
(1,222)
(2,959)
(4,993)
(7,834)
(c) Tax consolidation legislation
Charter Hall Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation of
1 July 2003. The accounting policy in relation to this legislation is set out in note 1(f).
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing
agreement which, in the opinion of the directors, limits the joint and several liability of the wholly owned entities in the case of
a default by the head entity, Charter Hall Limited.
The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate
Charter Hall Limited for any current tax payable assumed and are compensated by Charter Hall Limited for any current tax
receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Charter Hall
Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised
in the wholly owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head
entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment
of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as
current intercompany receivables or payables (see note 32).
Annual Report 2009 61
Notes to the Financial Statements
For the year ended 30 June 2009
10. DISTRIbUTIOnS
(a) Ordinary securities
-
Interim ordinary distribution for the 6 months ended 31 December 2008 of
3.96 cents per security paid on 27 February 2009
- Final ordinary distribution for the 6 months ended 30 June 2009 of 1.00 cent per
-
security expected to be paid on 28 August 2009
Interim ordinary distribution for the 6 months ended 31 December 2008 of
6.30 cents per security paid on 29 February 2008
- Final ordinary distribution for the 6 months ended 30 June 2008 of 6.30 cents per
security paid on 29 August 2008
Total distributions provided for or paid
Less: distributions paid to holders of LTI securities
Distributions paid in cash or satisfied by the issue of securities under the distribution
reinvestment plan for the year ended 30 June were as follows:
Paid in cash
Satisfied by issue of securities
Consolidated entity
2009
$’000
2008
$’000
19,672 -
7,484 -
-
-
27,512
27,562
27,156
(2,497)
55,074
(2,957)
24,659
52,117
19,858
7,298
27,512
27,562
27,156
55,074
Franking credits available in the parent entity for subsequent financial years based on a tax rate of 30% (2008: 30%)
are $2,765,000 (2008 $1,766,000).
11. CURRenT aSSeTS - CaSH anD CaSH eQUIVaLenTS
Consolidated
2008
2009
$’000
$’000
1,923
-
16,153
30
1,923
16,183
Parent entity
2009
$’000
2008
$’000
741
- -
741
328
328
Cash at bank and in hand
Deposits at call
(a) Cash at bank and on hand
These amounts earn between 2.5% and 2.9% (2008: 6.8% and 7.2%).
(b) Deposits at call
The deposits earned floating interest rates of 7.3% and 7.4% in 2008.
These deposits had an average maturity of 28 days in 2008.
62 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
12. CURRenT aSSeTS – TRaDe anD OTHeR ReCeIVabLeS
Trade receivables
Provision for doubtful debts
Loans to joint ventures
Loans to associates
Other receivables
Prepayments
Consolidated
2008
2009
$’000
$’000
6,381
-
19,529
(300)
6,381
19,229
Parent entity
2009
$’000
2008
$’000
1 -
- -
1 -
1,750
24
6,191
2,736
-
-
9,936
3,179
1,750 -
- -
-
- -
17,082
32,344
1,751
64
64
Further information relating to loans to associates is set out in note 32.
(a) bad and doubtful trade receivables
The Group has recognised a gain of $300,000 (2008: loss of $300,000) in respect of reversing a provision for bad and
doubtful trade receivables during the period ended 30 June 2009. The gain has been included in ‘other expenses’ in the
income statement.
Movements in the provision for impairments of receivables are as follows:
Opening balance
Provision for impairment recognised during the year
Receivables written off during the year
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
(300)
300
-
-
(290)
(300)
290
(300)
- -
- -
- -
- -
(b) effective interest rates and credit risk
Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in the
non-current receivables note (note 15).
Annual Report 2009 63
Notes to the Financial Statements
For the year ended 30 June 2009
13. nOn-CURRenT aSSeTS – FInanCIaL aSSeTS aT FaIR VaLUe THROUgH PROFIT OR LOSS
Opening balance
Additions
Revaluation / (devaluation)
Disposals
Closing balance
Share and units in associates (note 34)
Shares in listed securities
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
227,283 149,945
289,686 102,862
12,120
(82,663)
(37,644)
(685)
433,621 227,283
433,621 225,279
2,004
-
433,621 227,283
- -
- -
- -
- -
- -
- -
- -
- -
Changes in fair values of financial assets at fair value through profit or loss are recorded in fair value adjustments in the
income statement.
These investments have been designated at fair value through profit or loss.
Information about the Group’s and parent entity’s material exposure to security price risk is provided in note 2(a)(i)
Shares in listed securities (16.7 million shares held in Axiom Properties Limited) were sold on 3 March 2009 for $668,000.
14. DeRIVaTIVe FInanCIaL InSTRUMenTS
Non-current assets
Interest rate swap contracts
Total non-current derivative financial instrument assets
(a) Instruments used by the group
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
-
-
5,880
5,880
- -
- -
The Group was party to derivative financial instruments in the normal course of business in order to hedge exposure to
fluctuations in interest rates in accordance with the Group’s financial risk management policies (refer to note 2).
Interest rate swap contracts
It is policy to protect up to 100% of bank loans from exposure to increasing interest rates. Accordingly, the Group had
entered into interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at
fixed rates. At the point of deconsolidation of CPRF, 3 hedges ($40 million, $40 million and NZ$45 million) were novated to
CPRF. With debt further reducing following the CPRF selldown and the recent capital raising the remaining 2 swaps
($47 million and $33 million) were closed out.
Swaps currently in place cover 0% (2008: 75%) of the loan principal outstanding. The fixed interest rates in 2008 ranged between
6.55% and 7.74% for $AUD swaps (including margin and line fees). There was one $NZ swap in 2008 which had a rate of 8.56%.
At 30 June 2009, the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:
1 - 2 years
3 - 4 years
6 - 7 years
9 - 10 years
11 - 12 years
64 Charter Hall Group
2009
$’000 $
2008
’000
-
-
-
-
-
-
47,000
33,000
40,000
40,000
35,598
195,598
Notes to the Financial Statements
For the year ended 30 June 2009
14. DeRIVaTIVe FInanCIaL InSTRUMenTS (COnTInUeD)
The contracts required settlement of net interest receivable or payable each 90 days. The settlement dates coincided with the
dates on which interest is payable on the underlying debt. The contracts were settled on a net basis.
The gain or loss from remeasuring the hedging instruments at fair value was previously deferred in equity in the hedging reserve.
With the hedge no longer tested for effectiveness $1,331,000 was recorded in equity at 31 December 2006 and was being
amortised to fair value adjustments over the period of the hedge remaining. With the hedge now repaid the remaining amount of
$763,000 (2008: $379,000) has been amortised in the year ended 30 June 2009. The amount of fair value adjustments on hedges
recorded directly in the profit and loss statement was a loss of $9,234,000 (2008: profit of $913,000).
(b) Credit risk exposures
Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity.
This arises with amounts receivable from unrealised gains on derivative financial instruments.
The Group undertakes 100% of its transactions in interest rate contracts with financial institutions.
(c) Interest rate risk exposures
Refer to note 23(c) for the Group’s exposure to interest rate risk on interest rate swaps.
15. nOn-CURRenT aSSeTS – TRaDe anD OTHeR ReCeIVabLeS
Loans to key management personnel
Loans to subsidiaries
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000 $
2008
’000
5,307
-
5,082
-
5,307
13,384
5,082
8,681
5,307
5,082
18,691
13,763
Further information relating to loans to key management personnel is set out in note 29.
(a) Fair values
The fair values and carrying values of non-current receivables of the Group and Parent entity are as follows:
2009
2008
Carrying
amount Fair value
$’000
$’000
Carrying
amount Fair value
$’000
$’000
Loans to key management personnel
Loans to subsidiaries
(b) Interest rate risk
5,307
13,384
5,307
13,384
5,082
8,681
5,082
8,681
18,691
18,691
13,763
13,763
The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in the
following tables.
Consolidated 2009
Fixed interest maturing in:
Floating
interest
rate
$’000
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
or less
$’000
3 years
$’000
4 years
$’000
5 years
$’000
2 years
$’000
non-
interest
years bearing
$’000
$’000
Cash
Trade receivables
Loans to key
management personnel
Loans to joint ventures
Loans to associates
Other receivables
1,923
-
-
-
-
-
-
-
-
1,750
-
-
-
-
5,307
-
-
-
1,923
1,750
5,307
Weighted average
interest rate
2.5%
12.00%
4.96%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
1,923
6,381
5,307
1,750
24
6,191
-
6,381
-
-
24
6,191
12,596
21,576
-
Annual Report 2009 65
Notes to the Financial Statements
For the year ended 30 June 2009
15. nOn-CURRenT aSSeTS – TRaDe anD OTHeR ReCeIVabLeS (COnTInUeD)
Consolidated 2008
Fixed interest maturing in:
Floating
interest
rate
$’000
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
or less
$’000
3 years
$’000
4 years
$’000
5 years
$’000
2 years
$’000
non-
interest
years bearing
$’000
$’000
Total
$’000
16,183
-
Cash
Trade receivables
Loans to key
management personnel
Other receivables
-
-
Weighted average
interest rate
Parent 2009
16,183
7.15%
Floating
interest
rate
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
5,082
-
5,082
-
12.60%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,229
16,183
19,229
-
9,936
5,082
9,936
29,165
50,430
-
Fixed interest maturing in:
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
or less
$’000
3 years
$’000
4 years
$’000
5 years
$’000
2 years
$’000
non-
interest
years bearing
$’000
$’000
Cash
Trade receivables
Loans to key
management personnel
Loans to subsidiaries
Loans to joint ventures
741
-
-
-
-
741
-
-
-
-
1,750
1,750
-
-
5,307
-
-
5,307
Weighted average
interest rate
2.5%
12.00%
4.96%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,384
-
13,384
1%
-
1
-
-
-
1
-
Parent 2008
Fixed interest maturing in:
Floating
interest
rate
$’000
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
or less
$’000
3 years
$’000
4 years
$’000
5 years
$’000
2 years
$’000
non-
interest
years bearing
$’000
$’000
Cash
Loans to key
management personnel
Loans to subsidiaries
Other receivables
328
-
-
-
Weighted average
interest rate
328
7.15%
-
-
-
-
-
-
-
-
-
-
-
-
-
5,082
-
-
5,082
12.60%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,681
-
8,681
1%
-
-
-
64
64
-
66 Charter Hall Group
Total
$’000
741
1
5,307
13,384
1,750
21,183
Total
$’000
328
5,082
8,681
64
14,155
Notes to the Financial Statements
For the year ended 30 June 2009
15. nOn-CURRenT aSSeTS – TRaDe anD OTHeR ReCeIVabLeS (COnTInUeD)
(c) Interest rate sensitivity analysis
The following table illustrates the potential impact a change in interest rates by +/-1% would have on the Group’s profit after
tax and equity.
Consolidated 2009
Assets
Cash and cash equivalents
Total increase/(decrease)
Consolidated 2008
Assets
Cash and cash equivalents
Derivative financial instruments
Total increase/(decrease)
Parent 2009
Assets
Cash and cash equivalents
Total increase/(decrease)
Parent 2008
Assets
Cash and cash equivalents
Total increase/(decrease)
(d) Credit risk
Carrying
amount
$’000
1,923
Carrying
amount
$’000
16,183
5,880
Carrying
amount
$’000
741
Carrying
amount
$’000
328
-1%
+1%
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
(19)
(19)
(19)
(19)
19
19
19
19
-1%
+1%
Profit
$’000
equity
$’000
(162)
(9,579)
(9,741)
(162)
(9,579)
(9,741)
Profit
$’000
162
9,006
9,168
equity
$’000
162
9,006
9,168
-1%
+1%
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
(5)
(5)
(5)
(5)
5
5
5
5
-1%
+1%
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
(2)
(2)
(2)
(2)
2
2
2
2
There is a limited concentration of credit risk with respect to current and non-current receivables, as the Group has a large
number of customers. Refer to note 2 for more information on the risk management policy of the Group.
The ageing of trade receivables at the reporting date was as follows:
1 to 3 months
3 to 6 months
Consolidated
2008
2009
$’000
$’000
5,400
981
19,133
96
6,381
19,229
Parent entity
2009
$’000
2008
$’000
1 -
- -
1 -
The receivables that are aged 1 to 6 months are considered past due but not impaired while the receivables aged more than
6 months are considered to be impaired and are provided for in addition to other provisions required.
The carrying value approximates fair value.
Annual Report 2009 67
Notes to the Financial Statements
For the year ended 30 June 2009
16. nOn-CURRenT aSSeTS – InVeSTMenTS aCCOUnTeD FOR USIng THe eQUITY MeTHOD
Units in associates (note 34)
Shares in joint venture entity (note 35)
(a) Units in associates
Consolidated
2008
$’000
2009
$’000
18,279
24,979
6,502
43,838
43,258
50,340
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting
and are carried at cost by the parent entity.
(b) Shares in joint venture entity
The interest in Commercial and Industrial Property Pty Ltd is accounted for in the consolidated financial statements using
the equity method of accounting and is carried at cost (adjusted for impairment) by the parent entity using a 30 June 2009
valuation prepared by KPMG.
17. nOn-CURRenT aSSeTS – OTHeR FInanCIaL aSSeTS
Shares and units in subsidiaries (note 33)
Shares and units in associates (note 34)
Shares in joint venture (note 35)
Units to be issued for equity contributed
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
-
-
-
-
-
-
-
-
18,182
53,600
23,722
24,979
- -
53,600
6,584
40,509
18,182 102,301 100,693
These financial assets are carried at cost.
$18,182,000 was invested by CHPT into CPOF on 27 June 2008 with units not being issued until 1 July 2008
Movements in other financial assets
Opening balance
Additions / (units issued)
Impairment
Closing balance
18,182
(18,182)
-
- 100,693
17,138
(15,530) -
18,182
-
54,360
46,333
-
18,182 102,301 100,693
68 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
18. nOn-CURRenT aSSeTS – PROPeRTY, PLanT anD eQUIPMenT
Consolidated
Year ended 30 June 2008
Opening net book amount
Additions
Depreciation charge
Closing net book amount
at 30 June 2008
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2009
Opening net book amount
Additions
Depreciation charge
Closing net book amount
at 30 June 2009
Cost
Accumulated depreciation
Net book amount
Furniture, fittings
and equipment
$’000
Fixtures
$’000
Software
$’000
407
472
(217)
662
1,207
(545)
662
662
246
(203)
705
1,458
(753)
705
948
2
(35)
915
1,073
(158)
915
915
-
(82)
833
1,073
(240)
833
-
-
-
-
-
-
-
-
-
766
-
766
766
-
766
Total
$’000
1,355
474
(252)
1,577
2,280
(703)
1,577
1,577
1,012
(285)
2,304
3,297
(993)
2,304
19. nOn-CURRenT aSSeTS – InVeSTMenT PROPeRTIeS
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
At fair value
Opening balance
Acquisitions and additions
Lease incentives paid
Lease incentives amortised
Asset deconsolidated
Disposals
Net gain / (loss) from fair value adjustment
Closing balance at 30 June
439,645 430,701
39 103,563
761
(419)
-
(99,117)
4,156
-
-
(301,404)
(120,425)
(2,085)
15,770 439,645
(a) Amounts recognised in profit and loss for investment property
Rental income
5,187
36,548
Direct operating expenses from property that generated rental income
(3,168)
(8,275)
2,019
28,273
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
Annual Report 2009 69
Notes to the Financial Statements
For the year ended 30 June 2009
19. nOn-CURRenT aSSeTS – InVeSTMenT PROPeRTIeS (COnTInUeD)
Property
Type
% Owned
Date
acquired
Cost incl
additions
$’000
Independent
valuation
$’000
Independent
valuation
Valuer book value Book value
$’000
2009
$’000
Residential
50
15/6/05
27,399
31/12/07
27,595
Savills
770
27,595
Industrial
100
21/6/05
18,589
30/4/09
15,000
Savills
15,000
17,150
61 Nepean Hwy,
Mentone^^
56 Anzac St,
Chullora
372 Whitehorse Rd,
Nunawading^
25 Nepean Hwy,
Mentone^
Bulky retail
Bulky retail
CPRF properties1
Bunnings,
Kalgoorlie
Bulky retail
Bunnings, Bendigo Bulky retail
Harvey Norman,
Dunedin, NZ
Bulky retail
Bunnings, Box Hill Bulky retail
Bunnings, Nerang Bulky retail
Bunnings, Nowra Bulky retail
Bunnings, Penrith Bulky retail
Bulky retail
Bunnings, Stafford Bulky retail
Bunnings,
Belconnen
Foodtown,
Auckland, NZ(c)
Home HQ, Ipswich
Home HQ,
Rothwell
Menai Central,
Menai @
Bluewater Square,
Redcliffe
Retail
Retail
Retail
Retail
Bulky Retail
100
31/10/06
72,922
30/6/08^
69,000^
Savills
100
21/7/06
23,059
30/6/08^
24,600^
Savills
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
20/12/06
20/12/06
6,571
9,213
30/6/08*
30/6/08*
6,600*
9,100*
CBRE
CBRE
2/2/07
20/6/07
20/6/07
20/6/07
20/6/07
14,253
27,722
20,058
14,588
28,020
30/6/08*
30/6/08*
30/6/08*
30/6/08*
30/6/08*
14,239*
25,400*
18,750*
13,800*
25,600*
CBRE
Colliers
Colliers
Colliers
Colliers
20/6/07
21,669
30/6/08*
21,250*
Colliers
N/A
27/6/07
25,475
30/6/08*
23,500*
Colliers
N/A
N/A
6/7/07
14/8/07
24,643
12,547
30/6/08*
30/6/08*
22,150*
12,547* Knight Frank
Colliers
N/A
28/9/07
17,923
30/6/08*
17,300*
Savills
N/A
4/7/05
224
30/6/08*
39,000*
CBRE
N/A
9/11/07
53,217
30/6/08*
53,217*
CBRE
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
69,000
24,600
6,600
9,100
14,239
25,400
18,750
13,800
25,600
21,250
23,500
24,613
11,047
17,300
39,000
51,101
418,092
15,770
439,645
@ Menai Central was purchased by CHPT on 4 July 2005. A lease transferred ownership to Charter Hall MMN Trust a subsidiary of CPRF on
22 February 2008.
1 CHPT sold 38% of its units in CPRF on 30 July 2008 and no longer consolidates the CPRF properties in its accounts as it does not control CPRF.
^ Ownership of 372 Whitehorse Rd, Nunawading and 25 Nepean Hwy Mentone was transferred to MSN Property Trust a subsidiary of CPRF on
4 July 2008. The valuation information is included for comparative only as new valuations have been obtained.
^^ The carrying value of 61 Nepean Hwy Mentone previously included 3 adjacent residential properties. With the sale of 61 Nepean Hwy to CPRF the
residential properties have been retained.
* Valuation information is included for comparative only as these properties were deconsolidated from 30/7/08.
(b) Valuation basis
The basis of the valuation of investment properties is fair value being based on a discounted cash flow calculation or
capitalisation approach. The 2008 revaluations were based on a combination of directors’ valuations and independent
valuations. The 2009 valuations were based on director’s valuations with the key assumptions for Chullora being a
capitalisation rate of 9.25%, a vacancy rate of 0% and a weighted average rent review of 3.63%.
(c) Foodtown financial liability
The independent valuation reflects the net property value after deducting the Foodtown ground rent lease value $2,462,000
from the valuation of total income to be received. This asset is owned by CPRF and was deconsolidated on 30 July 2008.
Foodtown financial liability
70 Charter Hall Group
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
-
2,462
- -
Notes to the Financial Statements
For the year ended 30 June 2009
20. nOn-CURRenT aSSeTS – DeFeRReD Tax aSSeTS
The balance comprises temporary differences attributable to:
Employee benefits
Other provisions
Financial assets at fair value through profit or loss
Tax losses
Movements:
Opening balance
Charged to the income statement (note 9)
Closing balance at 30 June
Deferred tax assets to be recovered after more than 12 months
Deferred tax assets to be recovered within 12 months
21. CURRenT LIabILITIeS – TRaDe anD OTHeR PaYabLeS
Trade payables
Accruals
Distribution payable
GST payables
Annual leave payable
Other payables
All current liabilities are expected to be settled within 12 months.
22. CURRenT LIabILITIeS – PROVISIOnS
Employee benefits – long service leave
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
232
3
-
3,711
256
26
902
3,926
- -
- -
- -
10,265
10,105
3,946
5,110
10,265
10,105
5,110
(1,164)
1,283
3,827
10,105
160
5,687
4,418
3,946
5,110
10,265
10,105
3,946
-
5,110
-
10,265
- -
10,105
3,946
5,110
10,265
10,105
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
4,283
73
6,980
695
525
1,665
1,002
11,705
25,670
2,083
595
1,436
14,221
42,491
-
- -
- -
- 5
- -
- -
-
53
58
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
222
222
109
109
- -
- -
(a) Movements in provisions
Refer to note 25 for the movement in provisions and split between current and non-current.
Annual Report 2009 71
Notes to the Financial Statements
For the year ended 30 June 2009
23. nOn-CURRenT LIabILITIeS – bORROWIngS
Unsecured
Bank loans
Loan – Charter Hall Property Trust
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
14,220 260,981
- -
- 144,355 129,008
-
Total unsecured non-current borrowings
14,220 260,981 144,355 129,008
(a) Total unsecured liabilities
The total unsecured liabilities (current and non-current) are as follows:
Bank loans
Loan – Charter Hall Property Trust
Total unsecured liabilities
(b) Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Total facilities
Used at balance date
Unused at balance date
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
14,220 260,981
- -
- 144,355 129,008
-
14,220 260,981 144,355 129,008
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
100,000 304,079 150,000 150,000
14,220 260,981 144,355 129,008
85,780
43,098
5,645
20,992
In July 2008 following the selldown of its interest in CPRF from 100% to 62% CHPT obtained a new $100 million NAB debt
facility that expires in July 2011.
The Parent entity has a debt facility provided by CHPT.
(c) Interest rate risk exposures
The following table sets out the Group’s exposure to interest rate risk, including the effective weighted average interest rate
by maturity periods.
Exposures arise predominantly from liabilities bearing variable interest rates as the Group intends to hold fixed rate liabilities
to maturity.
72 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
23. nOn-CURRenT LIabILITIeS – bORROWIngS (COnTInUeD)
Consolidated 2009
Bank and other loans
Floating
interest
$’000
14,220
14,220
Weighted average interest rate
6.04%
Consolidated 2008
Bank and other loans
Interest rate swaps
Floating
interest
$’000
260,981
(195,598)
65,383
Weighted average interest rate
8.46%
Parent 2009
Bank and other loans
Floating
interest
$’000
144,355
144,355
Weighted average interest rate
11.05%
Parent 2008
Bank and other loans
Floating
interest
$’000
129,008
129,008
Weighted average interest rate
17.32%
Fixed interest maturing in:
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
years
or less
$’000
$’000
5 years
$’000
3 years
$’000
4 years
$’000
2 years
$’000
Total
rate
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 14,220
- 14,220
-
-
-
Fixed interest maturing in:
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
years
or less
$’000
$’000
5 years
$’000
3 years
$’000
4 years
$’000
2 years
$’000
Total
rate
$’000
-
-
-
-
-
47,000
-
33,000
47,000
33,000
6.55%
7.44%
-
-
-
-
-
- 115,598
- 260,981
-
- 115,598 260,981
-
7.99%
Fixed interest maturing in:
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
years
or less
$’000
$’000
5 years
$’000
2 years
$’000
4 years
$’000
3 years
$’000
Total
rate
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 144,335
- 144,335
-
-
Fixed interest maturing in:
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5
years
or less
$’000
$’000
3 years
$’000
2 years
$’000
4 years
$’000
5 years
$’000
Total
rate
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 129,008
- 129,008
-
-
Annual Report 2009 73
Notes to the Financial Statements
For the year ended 30 June 2009
23. nOn-CURRenT LIabILITIeS – bORROWIngS (COnTInUeD)
(d) Interest rate sensitivity analysis
The following table illustrates the potential impact a change in interest rates by +/-1% would have on the Group’s profit after
tax and equity.
Carrying
amount
$’000
14,221
14,220
Carrying
amount
$’000
42,491
2,462
260,981
Carrying
amount
$’000
144,355
Carrying
amount
$’000
58
129,008
-1%
+1%
Profit
$’000
equity
$’000
-
142
142
-
142
142
Profit
$’000
-
(142)
(142)
equity
$’000
-
(142)
(142)
-1%
+1%
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
-
-
654
654
Profit
$’000
1,452
1,452
Profit
$’000
-
1,178
1,178
-
-
654
654
-
-
(654)
(654)
-1%
+1%
equity
$’000
1,452
1,452
Profit
$’000
(1,452)
(1,452)
-1%
+1%
equity
$’000
-
1,178
1,178
Profit
$’000
-
(1,178)
(1,178)
-
-
(654)
(654)
equity
$’000
(1,452)
(1,452)
equity
$’000
-
(1,178)
(1,178)
Consolidated 2009
Liabilities
Trade and other payables
Borrowings
Total increase/(decrease)
Consolidated 2008
Liabilities
Trade and other payables
Financial liabilities
Borrowings
Total increase/(decrease)
Parent 2009
Liabilities
Borrowings
Total increase/(decrease)
Parent 2008
Liabilities
Trade and other payables
Borrowings
Total increase/(decrease)
74 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
23. nOn-CURRenT LIabILITIeS – bORROWIngS (COnTInUeD)
(e) Fair value
The carrying amounts and fair values of borrowings at balance date are:
On balance sheet
Non traded financial liabilities
Bank loans
Other loans
2009 Consolidated
Fair
Carrying
value
amount
$’000
$’000
2009 Parent
Carrying
amount
$’000
Fair
value
$’000
14,220
14,220
-
-
-
-
144,355 144,355
Fair value is inclusive of costs which would be incurred on settlement of a liability.
(i) On balance sheet
The fair value of borrowings is based upon market prices where a market exists or by discounting the expected future cash
flows by the current interest rates for liabilities with similar risk profiles.
(ii) Off balance sheet
There are no off-balance sheet liabilities
(f) Capital risk management
Gearing is a measure used to monitor levels of debt capital used by the business to fund its operations. This ratio is
calculated as interest bearing debt divided by tangible assets with both net of cash and cash equivalents.
The gearing ratios at 30 June 2009 and 30 June 2008 were 2.4% and 31.2% respectively. Debt covenants are monitored
regularly to ensure compliance and reported to the debt provider on a 6 monthly basis. The Group has appointed a
Treasurer who is responsible for negotiating new debt facilities and compliance with covenants.
24. nOn-CURRenT LIabILITIeS – DeFeRReD Tax LIabILITIeS
The balance comprises temporary differences attributable to:
Prepayments
Fund establishment costs
Accrued revenue
Depreciation on New Zealand property plant and equipment
Other
Movements:
Opening balance
Charged/(credited) to the income statement (note 9)
Closing balance at 30 June
Deferred tax liabilities to be settled after more than 12 months
Deferred tax liabilities to be settled within 12 months
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
-
516
243
-
93
852
11
739
2,370
288
- -
- -
243
- -
555
3,408
243
555
3,408
(2,556)
2,562
846
852
3,408
852
-
852
3,408
-
3,408
555
(312)
243
243
- -
243
368
187
555
555
555
Annual Report 2009 75
Notes to the Financial Statements
For the year ended 30 June 2009
25. nOn-CURRenT LIabILITIeS – PROVISIOnS
Employee benefits – long service leave
(a) Movements in provisions
Movements in employee benefits provisions are set out below:
Long service leave
Opening balance
Additional provisions recognised/(utilised)
Carrying amount at end of period
Current
Non-current
Total
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
25
150
-
-
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
259
(12)
190
69
247
259
222
25
109
150
247
259
- -
- -
- -
- -
- -
- -
76 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
26. COnTRIbUTeD eQUITY
(a) Security capital*
Ordinary securities
Fully paid
Notes
(b),(c)
2009
$’000
Parent
2008
$’000
Parent
2009
$’000
2008
$’000
698,040,044 413,983,609
634,308 526,822
698,040,044 413,983,609
634,308 526,822
(b) Movements in ordinary security capital:
Details
Notes
(e)
(h)
(i)
(j)
(e)
(e)
(d)
(e)
(d)
(g)
(f)
(k)
Opening balance
Addback LTI securities reversed last year
Employee security scheme issue
Issue for purchase of CIP
Employee gift issue
Security purchase plan
Employee security scheme issue
Balance at 30 June 2008
Less: Transaction costs on security issues
Less: LTI securities reversed
Balance per accounts at 30 June 2008
Addback LTI securities reversed last year
Employee security scheme issue
Distribution reinvestment plan issue August 2008
Employee security scheme issue
Distribution reinvestment plan issue February 2009
Placement
Entitlement offer
Gandel underwriting
Balance at 30 June 2009
Less: Transaction costs on security issues
Less: LTI securities reversed
Balance per accounts at 30 June 2009
Charter Hall Limited
Charter Hall Property Trust
Number of
securities
409,120,620
11,844,991
10,041,015
5,599,098
23,320
68,976
793,701
437,491,721
-
(23,508,112)
413,983,609
23,508,112
15,321,360
32,459,346
11,508,812
21,723,725
81,735,340
138,532,553
9,610,782
748,383,639
-
(50,343,595)
698,040,044
Issue price
$’000
$2.76
$2.68
$2.83
$3.00
$1.51
$1.04
$0.8489
$1.04
$0.2879
$0.33
$0.33
$0.33
513,597
14,598
27,713
15,000
66
207
1,198
572,379
(246)
(45,311)
526,822
45,311
15,934
27,555
11,969
6,254
26,973
45,716
3,172
709,706
(2,219)
(73,179)
634,308
6,383
627,925
* This includes security capital of Charter Hall Limited and Charter Hall Property Trust which are stapled. Refer to note 1 for details of the accounting
for this stapling arrangement.
In 2008 the issued capital of $526,822,000 was divided between Charter Hall Limited $5,272,000 and Charter Hall
Property Trust $521,550,000.
(c) Ordinary securities
Ordinary securities entitle the holder to participate in distributions/dividends and the proceeds on winding up of the trust/
company in proportion to the number of and amounts paid on the securities held. The securities issued under the placement
are fully paid with no entitlement to the distribution for 30 June 2009.
On a show of hands every holder of ordinary securities present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each security is entitled to one vote.
Annual Report 2009 77
Notes to the Financial Statements
For the year ended 30 June 2009
26. COnTRIbUTeD eQUITY (COnTInUeD)
(d) Distribution reinvestment plan
The company has established a distribution reinvestment plan (DRP) under which holders of ordinary securities may elect
to have all or part of their distribution satisfied by the issue of new ordinary securities rather than by being paid in cash.
Securities are issued under the plan at a discount to the market price. The DRP was activated for the 31 December 2008
and 30 June 2009 distributions.
(e) employee security scheme
Information on the employee security scheme, including details of securities issued under the scheme, is set out in note 39.
(f) Entitlement offer
On 27 May 2009 the company invited securityholders to subscribe to a entitlement offer of 148.1 million ordinary securities
at an issue price of $0.33 per security on the basis of 2 securities for every 7 fully paid ordinary securities held, such
securities to be issued on 12 June 2009 or 29 June 2009 and be entitled to distributions/dividends from 30 June 2009.
(g) Placement
On 11 June 2009 72,847,275 securities were issued at $0.33 to Gandel Group. The securities are entitled to the distribution
for the six months ended 30 June 2009. An additional 8,888,065 securities were issued to Gandel Group as part of a top up
placement also at $0.33.
(h) Issue for purchase of CIP
On 20 July 2007 5,599,098 securities were issued at $2.68 as part payment for the purchase of a 50% interest in
Commercial and Industrial Property Pty Limited.
(i) gift to employees
On 23 July 2007 23,320 securities were issued at $2.83 to employees of the Group to mark the market capitalisation of
CHG reaching $1 billion. 530 securities per employee were granted to 44 employees and are subject to escrow conditions
governing the sale of the securities.
(j) Security purchase plan
As a part of the 2007 placement all securityholders were given the opportunity to purchase securities in the Group at $3.00.
As a result on 23 July 2007 68,976 securities were issued at $3.00 per security.
(k) gandel underwriting
The retail security offer was underwritten by Gandel Group with 9,610,782 securities not taken up by retail securityholders
issued at $0.33.
27. ReSeRVeS anD ReTaIneD PROFITS
(a) Reserves
Hedging reserve - cash flow hedges
Business combination reserve
Security based payments reserve
Foreign currency reserve
Charter Hall Limited and controlled entities
Charter Hall Property Trust
78 Charter Hall Group
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
-
(52,000)
6,050
(47)
763
(52,000)
5,434
(1,235)
- -
- -
1,717
-
1,717
(57)
(45,997)
(47,038)
1,717
1,660
(45,997)
-
(46,679)
(359)
(45,997)
(47,038)
Notes to the Financial Statements
For the year ended 30 June 2009
27. ReSeRVeS anD ReTaIneD PROFITS (COnTInUeD)
Movements:
Hedging reserve - cash flow hedges
Opening balance
Amortisation (in full as swap paid out) (note 14)
Closing balance
Security based payments reserve
Opening balance
Expense relating to LTI scheme
Closing balance 30 June
Business combination reserve
Opening and closing balance
Foreign currency reserve
Opening balance
Translation
Closing balance
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
763
(763)
1,142
(379)
-
763
- -
- -
- -
5,434
616
1,048
4,386
1,717 -
-
1,717
6,050
5,434
1,717
1,717
(52,000)
(52,000)
- -
(1,235)
1,188
22
(1,257)
(47)
(1,235)
(57) -
57
-
(57)
(57)
(i) Hedging reserve - cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised
directly in equity, as described in note 1(l).
(ii) Security based payments reserve
The security based payments reserve is used to recognise the fair value of securities issued to the LSP but not issued to
employees and rights issued under the PROP.
(iii) Business combination reserve
This reserve relates to the reverse acquisition at IPO. This is the amount that relates to the investment in CHH that is not
eliminated by paid in capital. No goodwill is recognised as this transaction is the result of a reverse acquisition.
(iv) Foreign currency reserve
This relates to a loan between Charter Hall Holdings Pty Limited and Charter Hall Holdings (NZ) Pty Limited.
(b) Retained profits / (accumulated losses)
Movements in retained profits were as follows:
Opening balance
Net profit / (loss) for the year
Distributions / dividends
Other
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
12,536
(82,222)
(24,659)
-
(2,798)
67,498
(52,117)
(47)
(11,305)
(7,349)
- -
- -
(7,921)
(3,384)
Balance 30 June
(94,345)
12,536
(18,654)
(11,305)
Charter Hall Limited and controlled entities
Charter Hall Property Trust
(36,530)
(57,815)
(3,683)
16,219
(94,345)
12,536
Annual Report 2009 79
Notes to the Financial Statements
For the year ended 30 June 2009
28. MInORITY InTeReST
The financial report includes separate financial statements for CHL as an individual entity and the consolidated entity
consisting of Charter Hall Limited and its subsidiaries and controlled entities including Charter Hall Property Trust (CHPT).
For the purposes of AASB Interpretation 1002 Post date of transition stapling arrangements (AASB I - 1002), Charter Hall
Limited has been identified as the Parent Entity in relation to the stapling. In accordance with AASB I - 1002 the results
and equity, not directly owned by CHL, of CHPT have been treated and disclosed as minority interest. Whilst the results
and equity of CHPT are disclosed as minority interest, the stapled securityholders of CHL are the same as the stapled
securityholders of CHPT.
Interest in:
Contributed equity
Reserves
Retained profits
Consolidated
Parent entity
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
26(b)
27(a)
27(a)
627,925 521,550
(359)
16,219
-
(57,815)
570,110 537,410
-
-
-
-
-
-
-
-
29. KeY ManageMenT PeRSOnneL DISCLOSUReS
(a) Directors
The following persons were directors of Charter Hall Limited during the year:
(i) Chairman – non executive
K Roxburgh
(ii) Executive directors
C Fuchs
D Harrison (Joint Managing Director)
D Southon (Joint Managing Director)
(iii) Non executive directors
R Woodhouse (Deputy Chairman)
P Derrington
G Fraser
C McGowan
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group,
directly or indirectly, during the year:
Name
J Bakker
R Champion
N Kelly
M Winnem
Position
Chief Financial Officer
Fund Manager and Retail Director
Wholesale Funds Director
Fund Manager and Development Director
Employer
Charter Hall Holdings Pty Ltd
Charter Hall Holdings Pty Ltd
Charter Hall Holdings Pty Ltd
Charter Hall Holdings Pty Ltd
(c) Key management personnel compensation
Short term employee benefits
Post employment benefits
Security-based payment
Consolidated
2009
$’000
2008
$’000
Parent entity
2009
$’000
2008
$’000
3,748,642
263,174
137,247
3,866,722 -
257,887 -
1,746,376 -
4,149,063
5,870,985 -
-
-
-
-
Detailed remuneration disclosures are provided in sections A-C of the remuneration report on pages 27 to 31.
80 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
29. KeY ManageMenT PeRSOnneL DISCLOSUReS (COnTInUeD)
(d) equity instrument disclosures relating to key management personnel
(i) Security holdings
The numbers of securities in the company held during the year by each director of CHL and other key management
personnel of the Group, including their personally related parties, are set out below.
2009
Name
Directors of Charter Hall Limited
Ordinary securities
P Derrington
G Fraser
C Fuchs
D Harrison
C McGowan
K Roxburgh
D Southon
R Woodhouse
Opening
balance
Purchased /
(sold) during the
period
LTI securities vesting/
(forfeited) during the
period
Closing
balance#
-
350,000
5,887,828
7,897,420
-
50,000
-
473,792
377,999
1,291,371
-
14,285
-
-
-
823,792
602,006
6,867,833
1,784,603
10,973,394
-
-
-
64,285
8,129,240
1,420,232
1,770,167
11,319,639
66,666
19,047
-
85,713
Other key management personnel of
the Group Ordinary securities
J Bakker
R Champion^
N Kelly
M Winnem
222,235
184,259
62,642
357,932
(2,241)
-
-
76,445
327,812
(183,729)
158,730
175,358
547,806
530
221,372
609,735
# This total includes securities that have vested but have not been exercised by repayment of the loan and removal from the LTI plan. Unvested
securities are excluded from the balance. The vested securities were issued with loans varying from $1.00 to $2.76 per security which are
significantly higher than the security price at 30 June 2009 of $0.52.
^ The balance for Richard Champion when he ceased employment was 530 securities. After this time his holding has not been monitored.
2008
Name
Directors of Charter Hall Limited
Ordinary securities
Opening
balance
Purchased /
(sold) during the
period
LTI securities vesting
during the period
Closing
balance
A Biet (resigned 24/10/07)*
5,559,724
(350,000)
-
225,000
5,486,595
8,666,809
-
50,000
-
125,000
(80,000)
(1,648,195)
-
-
-
-
-
481,233
878,806
-
-
5,209,724
-
350,000
5,887,828
7,897,420
-
50,000
8,754,870
(1,490,000)
864,370
8,129,240
366,666
(300,000)
-
66,666
Other key management personnel of
the group Ordinary securities
J Bakker
M Winnem
R Champion
14,666
-
530
530
1,654,548
(1,349,109)
207,039
183,727
52,493
222,235
184,257
357,932
* The balance for Andre Biet when he resigned as a director was 5,209,724 securities. After this time his holding was not monitored.
Annual Report 2009 81
P Derrington
G Fraser
C Fuchs
D Harrison
C McGowan
K Roxburgh
D Southon
R Woodhouse
Notes to the Financial Statements
For the year ended 30 June 2009
29. KeY ManageMenT PeRSOnneL DISCLOSUReS (COnTInUeD)
(e) Loans to key management personnel
Details of loans made to directors of Charter Hall Limited and other key management personnel of the Group, including their
personally related parties, are set out below.
(i) Aggregates for key management personnel
Balance at the start
of the period
$
9,928,333
7,062,280
Group
2009
2008
Interest paid and
payable for the
period
$
248,000
1,134,126
balance at the end
of the period
$
5,306,500
9,928,333
Number in Group
at the end of the
period
$
2
6
(ii) Individuals with loans above $100,000 during the period
2009
Name
Balance at the start
of the period
$
D Harrison
D Southon
2,657,500
2,657,500
Interest paid and
payable for the
period
$
balance at the end
of the period
$
124,000
124,000
2,781,500
2,525,000
2009
Name
Balance at the start
of the period
$
Interest paid and
payable for the
period
$
balance at the end
of the period
$
D Harrison
D Southon
C Fuchs
A Biet resigned
25/10/07)
3,161,295
3,161,295
369,845
369,845
315,000
315,000
-
-
2,541,064
2,541,064
-
-
Number in Group
at the end of the
period
$
2,781,500
2,756,500
Number in Group
at the end of the
period
$
2,657,500
2,657,500
-
Loans to key management personnel are for periods of five years at interest rates equivalent to the distribution, and are
secured by mortgages over the securities that have been purchased with the loan.
As predicated in the Product Disclosure Statement dated 11 May 2005, on 6 June 2005 the Joint Managing Directors,
David Harrison and David Southon entered into loan agreements, which are full recourse, with CHL. Loans of $2.5 million
each were provided to acquire Charter Hall Group securities. The interest on the loans is equivalent to the Charter Hall
Group distribution paid in respect of the securities purchased using the loan proceeds. The provision of the loans further
aligns the Joint Managing Directors interests with those of the Group and Securityholders. The loans, which were for
a period of three years, were extended in 2008 for a further three years until 6 June 2011, under the same terms and
conditions, by resolution of the Board.
82 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
30. ReMUneRaTIOn OF aUDITORS
During the period the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non related audit firms:
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
(a) assurance services
Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial reports and other audit work under
the Corporations Act 2001
Non PricewaterhouseCoopers audit firms for the audit or review
of financial reports of any entity in the Group
W F White & Co
Ernst & Young
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australian firm
Investigating Accountants Reports – equity raising
Total remuneration for other assurance services
236,092 206,901
4,770
-
51,942
4,475
240,862 263,318
70,000 219,000
70,000 219,000
Total remuneration for assurance services
310,862 482,318
- -
- -
- -
- -
- -
- -
- -
(b) Taxation services
PricewaterhouseCoopers Australian firm
Tax compliance services, including review of company
income tax returns
Non-PricewaterhouseCoopers firms for taxation
services (Ernst & Young)
Total remuneration for taxation services
(c) advisory services
PricewaterhouseCoopers Australian firm
Long term incentive plan structure
Non-PricewaterhouseCoopers firms for advisory services
Ernst & Young
KMPG
Total remuneration for advisory services
13,920
21,090
- -
141,075
-
20,600
154,995
21,090
20,600
21,538
69,806
15,300
106,644
-
-
-
-
- -
- -
15,300
15,300
-
-
-
-
The Group’s policy is to employ PricewaterhouseCoopers (PwC) on assignments additional to their statutory audit duties
where PwC’s expertise and experience with the Group are important. These assignments are principally tax advice and
Investigating Accountants Reports reporting on acquisitions, or where PwC is awarded assignments on a competitive basis.
It is the Group’s policy to seek competitive tenders for all major consulting projects.
Annual Report 2009 83
Notes to the Financial Statements
For the year ended 30 June 2009
31. COMMITMenTS
(a) Capital Commitments
Expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Investment property
Payable:
Within one year
Later than one year but not later than five years
Later than five years
(b) Lease commitments: group as lessee
Consolidated
2008
2009
$’000
$’000
Parent entity
2009
$’000
2008
$’000
-
-
-
-
6,054
-
-
6,054
- -
- -
- -
- -
Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:
Consolidated
2008
2009
$’000
$’000
617
2,815
-
124
2,210
153
3,432
2,487
Parent entity
2009
$’000
2008
$’000
- -
- -
- -
- -
Within one year
Later than one year but not later than five years
Later than five years
32. ReLaTeD PaRTIeS
(a) Parent entity
The parent entity within the Group is Charter Hall Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 33.
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 29.
(d) Transactions with related parties
The following transactions occurred with related parties:
Sales of services
Management and performance fees from associates
Acquisition fees from associates
Commitment fees from associates
Property management fees from associates
Tax consolidation legislation
Current tax payable assumed from wholly owned
tax consolidated entities
Dividend revenue
Subsidiaries
Consolidated Parent entity
2008
$’000
2009
$’000
2009
$’000
2008
$’000
24,077,334 29,135,241
6,513,024
359,173
180,225
180,225
-
755,674
- -
- -
- -
- -
-
-
- 4,566,089
3,612,254
- 20,078,304
11,354,988
Sales of investment properties to related parties are disclosed in note 19.
Transactions with associates and joint ventures are disclosed in note 34 and note 35 respectively.
84 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
32. ReLaTeD PaRTIeS (COnTInUeD)
(e) Loans to/from related parties
Loans to associates
Beginning of the period
Loans advanced
Loan repayments received
Interest charged
Interest received
End of period
Loans to subsidiaries
Beginning of the period
Loans advanced
Loan repayments received
Interest charged
End of period
Loans to joint ventures
Beginning of the period
Loans advanced
Loan repayments received
Interest charged
Interest received
End of period
Loans from subsidiaries
Beginning of the period
Loans received
Loan repayments paid
Interest charged
Interest paid
End of period
Consolidated
Parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
-
-
-
-
-
-
-
-
-
-
-
-
1,750,000
-
177,205
(177,205)
1,750,000
9,283,306
-
(9,283,306)
144,670
(144,670)
-
-
-
-
-
-
-
-
-
-
-
-
- -
- -
- -
- -
- -
- -
8,681,489
5,317,790
5,018,510
3,612,254
(668,000) -
52,839
50,725
13,384,118
8,681,489
- -
1,750,000 -
- -
177,205 -
(177,205) -
1,750,000 -
-
-
-
-
-
-
- 129,007,038 75,350,694
20,272,587 42,297,921
-
(4,924,803) -
-
21,890,455 27,548,475
-
(21,890,455) (16,190,052)
-
- 144,354,822 129,007,038
No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been
recognised in respect of bad or doubtful debts due from related parties.
Annual Report 2009 85
Notes to the Financial Statements
For the year ended 30 June 2009
33. SUbSIDIaRIeS
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(b):
name of entity
Country of
incorporation
Controlled entities of Charter Hall Limited
Charter Hall Holdings Pty Limited
Charter Hall CUB Pty Ltd
Controlled entities of Charter Hall Holdings Pty Ltd
Charter Hall (NZ) Pty Limited
CH Management Australia Pty Limited
Charter Hall Funds Management Limited
Bowvilla Pty Limited
Charter Hall Holdings Real Estate Pty Limited
Frolish Pty Limited
Stelridge Pty Limited
Visokoi Pty Limited
Bieson Pty Limited
Sandkilt (No 2) Pty Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Controlled entities of Charter Hall Holdings Real Estate Pty Ltd
Charter Hall Holdings Real Estate (Vic) Pty Limited Australia
Controlled entities of Charter Hall Property Trust
Charter Hall Investment Fund No. 15
Charter Hall Core Plus Retail Fund*
Australia
Australia
Controlled entities of Charter Hall Core Plus Retail Fund
Core Plus Retail Fund New Zealand
Redcliffe Retail Property Trust
Belconnen Retail Warehouse Trust
Box Hill Retail Warehouse Trust
Nerang Retail Warehouse Trust
Nowra Retail Warehouse Trust
Penrith Retail Warehouse Trust
Stafford Retail Warehouse Trust
Ipswich Retail Property Trust
Rothwell Retail Property Trust
Mentone Property Trust
Charter Hall MMN Property Trust
CPRF Gepps X Trust
CPRF Gepps 109 Trust
CPRF MSN Property Trust
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Class of equity holding
securities
2009
%
2008
%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
* CHPT sold down its interest in CPRF in July 2008 from 100% to 62% (current interest is 65%). As outlined on the cover page of this report CHPT
does not control the fund and therefore does not consolidate CPRF into its financial statements.
The CPRF Investment Committee (IC), consisting of two independent members and two executive directors of Charter Hall,
controls CPRF as it has the power to govern the financial and operating policies of CPRF. All decisions of the IC require the
unanimous approval of all IC members. The IC, amongst other duties monitor and manage the investment activities of CPRF
and approve asset opportunities and disposal of assets.
86 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
34. InVeSTMenT In aSSOCIaTeS
(a) Carrying amounts
Information relating to associates is set out below.
name of company
Principal
activity
Ownership
Interest
Consolidated
Parent entity
2009
%
2008
%
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Unlisted
Charter Hall Diversified Property Fund
Charter Hall Core Plus Office Fund
Charter Hall Core Plus Industrial Fund
Charter Hall Core Plus Retail Fund
Charter Hall Umbrella Fund
Property
Investment
Property
Investment
Property
Investment
Property
Investment
Property
Investment
25.7%
23.3%
22,319
24,332
23.4%
20.0%
161,376 143,178
25.0%
25.0%
61,989
57,698
65.3%
N/A
139,888
24.9%
<1.0%
48,049
-
71
433,621 225,279
- -
- -
- -
- -
- -
- -
Charter Hall Opportunity Fund 4
Property Development 3.0%
3.0%
2,951
Charter Hall Opportunity Fund 5
Property Development 15.0%
15.0%
15,328
3,214
3,288
3,643 3,115
20,079 3,469
18,279
6,502
23,722 6,584
The above associates are incorporated in Australia. The investments in Charter Hall Opportunity Fund. 4 and 5 held by
Charter Hall Limited are equity accounted in the consolidated financial statements and are other financial assets in the
parent financial statements (note 16 and 17).
The investments in Charter Hall Diversified Property Fund, Charter Hall Core Plus Office Fund, Charter Hall Core Plus
Industrial Fund, Charter hall Core Plus Retail Fund and Charter Hall Umbrella Fund are held by Charter Hall Property Trust
and as such are accounted for at fair value through the profit or loss (note 13).
The investment in Charter Hall Diversified Property Fund consists of units which consist of a 19.7% interest but also an
additional investment in the form of bridging equity of $9 million.
Annual Report 2009 87
Notes to the Financial Statements
For the year ended 30 June 2009
34. InVeSTMenT In aSSOCIaTeS (COnTInUeD)
Consolidated
2009
$’000
2008
$’000
(b) Movements in carrying amounts
Charter Hall Diversified Property Fund
Opening balance
Investment
Fair value adjustment
Closing balance
Charter Hall Core Plus Office Fund
Opening balance
Investment
Fair value adjustment
Disposal of units
Closing balance
Charter Hall Core Plus Industrial Fund
Opening balance
Investment
Fair value adjustment
Disposal of units
Closing balance
Charter Hall Core Plus Retail Fund
Investment
Fair value adjustment
Closing balance
Charter Hall Umbrella Fund
Opening balance
Investment
Disposal of units
Fair value adjustment
Closing balance
Charter Hall Opportunity Fund 4
Opening balance
Investment
Share of profit/(loss) after income tax
Distributions received/receivable
Reserves
Closing balance
Charter Hall Opportunity Fund 5
Opening balance
Investment
Share of loss after income tax
Distributions received/receivable
Reserves
Closing Balance
88 Charter Hall Group
24,332
2,835
(4,848)
22,319
5,179
18,184
969
24,332
143,178
50,000
(31,802)
-
80,058
67,002
12,516
(16,398)
161,376
143,178
57,698
12,503
(8,212)
-
61,989
45,986
18,754
3,404
(10,446)
57,698
163,635 -
(23,747) -
139,888 -
71
58,563
-
(10,585)
48,049
3,214
522
(538)
(252)
5 -
2,951
3,288
16,558
(3,733)
(837)
52
15,328
10,873
11,030
(21,828)
(4)
71
662
2,458
454
(360)
3,214
98
3,486
(142)
(38)
(116)
3,288
Notes to the Financial Statements
For the year ended 30 June 2009
34. InVeSTMenT In aSSOCIaTeS (COnTInUeD)
(c) Fair value of unlisted investments in associates
Charter Hall Diversified Property Fund
Charter Hall Core Plus Office Fund
Charter Hall Core Plus Industrial Fund
Charter Hall Core Plus Retail Fund
Charter Hall Umbrella Fund
Carrying value of equity accounted associates
Charter Hall Opportunity Fund 4
Charter Hall Opportunity Fund 5
(d) Share of associates’ profits or losses
Profit before income tax
Income tax expense
Profit after income tax
(e) Summarised financial information of associates
2009
Charter Hall Diversified Property Fund
Charter Hall Core Plus Office Fund
Charter Hall Core Plus Industrial Fund
Charter Hall Core Plus Retail Fund
Charter Hall Umbrella Fund
Charter Hall Opportunity Fund 4
Charter Hall Opportunity Fund 5
22,319
161,376
61,989
139,888 -
48,049
24,332
143,178
57,698
74
2,951
15,328
3,214
3,288
(87,926)
1,540 -
312
(86,386)
312
Group’s share of:
assets Liabilities Revenues
$’000
$’000
$’000
35,362
329,296
106,106
248,963
44,143
9,884
41,535
21,194
182,585
44,674
124,308
841
6,898
26,240
3,504
24,591
9,415
20,151
3,345
60
573
Profit/
(loss)
$’000
(4,788)
(33,887)
(9,550)
(25,951)
(7,941)
(536)
(3,733)
(f) Charter Hall Core Plus Retail Fund’s revenue, expenses and results
The summary income statement and balance sheet of CPRF are shown below. Whilst CHPT still owns a 65% direct interest
and a 5% indirect interest in CPRF (CHPT has a 25% investment in CHUF and CHUF holds a 21% investment in CPRF) it
does not have the power to govern the financial and operating policies of CPRF and therefore CHPT does not control the
Fund. Therefore the financial accounts of CPRF are not consolidated into CHPT’s financial accounts.
The CPRF Investment Committee (IC), comprises two Charter Hall representatives and two independent members. All decisions
of the IC require the unanimous approval of all IC members and thus Charter Hall cannot dominate decision making. The IC,
amongst other duties monitor and manage the investment activities of CPRF and approve asset opportunities and disposal of
assets.
Of CPRF’s $103.6 million current assets shown below $91.5m relates to assets held for sale (exchanged contracts).
As at the date of this report CPRF has settled $75.2 million of these assets which has reduced CPRF’s bank debt from
$168 million to $105 million. Following settlement of another asset CPRF’s debt will fall to approximately $90 million,
reducing gearing from 43% to 31%.
Revenues
Expenses
Profit before adjustments and tax
Income tax expense
Fair value adjustments/losses on sale
Profit after income tax
Consolidated
2009
$’000
2008
$’000
30,845
(19,064)
16,831
(14,909)
11,781
1,922
(179)
(51,249)
(203)
(2,029)
(39,647)
(310)
Annual Report 2009 89
Notes to the Financial Statements
For the year ended 30 June 2009
34. InVeSTMenT In aSSOCIaTeS (COnTInUeD)
(g) Charter Hall Core Plus Retail Fund’s assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
103,645
277,654
3,717
305,067
381,299
308,784
7,614
182,800
2,484
226,202
190,414
228,686
190,885
80,098
35. InVeSTMenT In JOInT VenTURe
(a) Carrying amounts
Information relating to joint ventures is set out below and at note 17.
name of company
Principal
activity
Ownership
Interest
Consolidated
Parent entity
2009
%
2008
%
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Unlisted
Commercial and Industrial Property
Pty Ltd
Property
Development
50%
50%
24,979
43,838
24,979 40,509
Consolidated
2009
$’000
2008
$’000
43,838 -
-
2,116
(3,331)
(17,644) -
40,510
7,222
(3,894)
24,979
43,838
Consolidated
2009
$’000
2008
$’000
24,979
43,838
(b) Movements in carrying amounts
Commercial and Industrial Property Pty Limited
Opening balance
Investment
Share of profit after income tax
Dividends received/receivable
Impairment of investment
Closing balance
(c) Fair value of joint venture entity
Commercial and Industrial Property Pty Ltd
90 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
35. InVeSTMenT In JOInT VenTURe (COnTInUeD)
KPMG were engaged to provide an indicative estimate of Charter Hall Limited’s 50% equity investment in Commercial and
Industrial Property Pty Ltd as at 30 June 2009. The valuation methodology used was Value In Use (VIU) (in accordance with
the requirements of AASB 136) and three different scenarios in relation to growth prospects were considered. Management
adopted the base case scenario which had a value in use of $24,979,044.
Consideration was given to the fair value less cost to sell (FVLCTS) method but management believe VIU gives the most
accurate recoverable amount. In accordance with our accounting policy (note 1(h)) consideration was given to FVLCS,
however VIU resulted in a higher recoverable amount which is required to be taken up in accordance with AASB 136.
The base case scenario includes a decrease in gross profit of 47% in FY10 and then subsequently reflecting growth in gross
profit to FY13 and maintaining real growth in gross profit of 4% beyond FY13 up to the end of the forecast period in FY19.
A weighted average cost of capital of 11.6% was used to reflect the current market assessments of the time value of money
and the risks specific to the investment and the net debt position was calculated as $6,630,000 being the forecast debt of
$8,490,000 and forecast cash of $1,960,000 as at 30 June 2009.
(d) Share of joint venture’s revenue, expenses and results
Revenues
Expenses
Profit before income tax
(e) Share of joint venture’s assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Consolidated
2009
$’000
2008
$’000
28,871
(25,842)
19,129
(8,829)
3,029
10,300
10,507
2,511
6,017
4,166
13,018
10,183
5,843
2,591
1,862
2,492
8,434
4,354
4,584
5,829
Annual Report 2009 91
Notes to the Financial Statements
For the year ended 30 June 2009
36. eVenTS OCCURRIng aFTeR THe baLanCe SHeeT DaTe
Since 30 June 2009 CHPT has completed the following transactions:
•
Received commitments from existing CPOF unitholders to purchase 39M CPOF units from CHPT for $30 million on
31 August 2009. Once this transaction is completed CHPT’s ownership interest in CPOF will fall from 23% to 17%.
37. ReCOnCILIaTIOn OF PROFIT aFTeR InCOMe Tax TO neT CaSH FLOW InFLOW FROM OPeRaTIng aCTIVITIeS
Consolidated
Profit / (loss) for the year
Depreciation and amortisation
Non cash employee benefits expense security based payments
Gain on sale of investments
Fair value adjustments
Impairment of investment accounted for using the equity method
2009
$’000
(82,222)
285
616
(1,339)
93,982
17,644
Change in operating assets and liabilities, net of effects from purchase of controlled entity
Decrease / (increase) in trade debtors
Decrease / (increase) in accrued revenue
Decrease / (increase) in other operating assets
Increase / (decrease) in trade creditors
Increase / (decrease) in accrued expenses
Increase / (decrease) in other operating liabilities
Decrease in provision for deferred income tax
10,569
627
6,460
(632)
(3,656)
28
(1,222)
2008
$’000
67,498
252
2,669
(838)
(15,287)
-
(11,683)
(5,548)
(142)
1,988
9,167
165
(2,959)
Parent entity
2009
$’000
2008
$’000
(7,349)
- -
- -
- -
- -
15,530 -
63
(225) -
- -
- -
- -
(58)
(4,993)
(3,384)
515
50
(7,834)
Net cash inflow / (outflow) from operating activities
41,140
45,282
2,968 (10,653)
Dividend and interest income received on investments has been classified as cash flow from operating activities.
38. eaRnIngS PeR SeCURITY
Consolidated
2009
$’000
2008
$’000
6.43
(24.41)
12.61
3.70
(17.98)
16.31
6.34
(22.19)
12.64
3.50
(15.85)
16.14
(a) Basic earnings per security
Profit before fair value adjustments and impairment
Fair value adjustments and impairment
Profit / (loss) attributable to the ordinary equity holders of the Group
(b) Diluted earnings per security
Profit before fair value adjustments and impairment
Fair value adjustments and impairment
Profit / (loss) attributable to the ordinary equity holders of the Group
(c) Underlying earnings per security
Refer to note 4 for further details.
92 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
38. eaRnIngS PeR SeCURITY (COnTInUeD)
(d) Reconciliations of earnings used in calculating earnings per security
Basic earnings per security
Profit before fair value adjustments and impairment
Fair value adjustments and impairment
Consolidated
2009
$’000
2008
$’000
29,404
(111,626)
52,211
15,287
Profit attributable to the ordinary equity holders of the consolidated entity
used in calculating basic earnings per security
(82,222)
67,498
Diluted earnings per security
Profit
Interest received from LTI securities
Profit attributable to the ordinary equity holders of the consolidated
entity used in calculating diluted earnings per security
Fair value adjustments and impairment
(82,222)
2,497
67,498
2,957
(79,725)
70,455
111,626
(15,287)
Profit attributable to the ordinary equity holders of the consolidated entity used in
calculating diluted earnings per security before fair value adjustments and impairment
31,901
55,168
(e) Weighted average number of securities used as the denominator
Weighted average number of ordinary securities used as the denominator in
calculating basic earnings per security
Adjustments for calculation of diluted earnings per security:
Consolidated
2009
Number
2008
Number
457,410,018 413,905,265
Performance rights
Securities issued to the Charter Hall Limited Executive Loan Security Plan
1,214,696 -
44,265,783
22,711,623
Weighted average number of ordinary securities and potential ordinary securities
used as the denominator in calculating diluted earnings per security
502,890,497 436,616,888
(f) Information concerning the classification of securities
(i) Securities issued under the Charter Hall Limited Executive Loan Security Plan
Securities issued under the Charter Hall Limited Executive Loan Security Plan have been issued in trust and have a
corresponding loan given to the employee. Under AIFRS, the loan, securities, interest received on the loan and the
distribution paid and payable are derecognised for the preparation of the financial report but recognised for the calculation of
diluted earnings per security.
(i) Performance rights issued under the Charter Hall Performance Rights and Options Plan
The Performance Rights are unquoted securities and conversion of Performance Rights to stapled securities, and vesting to
executives, is subject to the same service and performance conditions as the LSP.
Annual Report 2009 93
Notes to the Financial Statements
For the year ended 30 June 2009
39. SeCURITY-baSeD PaYMenTS
(a) employee Security Plan
The establishment of the Charter Hall Limited Executive Loan Security Plan (LSP) was approved by the Board in the process
of the initial public offering. Staff who are eligible to participate in the plan are determined by the Joint Managing Directors in
discussion with the Board. Please refer to the Remuneration Report for details relating to vesting conditions.
Securities are granted under the plan at market value and are purchased with a loan to the employee. Recourse on the loan
is limited to the value of the securities. The securities are intended to vest over a three year period in equal portions subject
to performance and service conditions. The amount of interest due on the loan is equivalent to the amount of the distribution
receivable on the underlying securities.
Distributions on the loan securities are paid to Charter Hall Limited as interest receivable on the loan provided to employees.
As LSP members do not hold securities in their own name the plan manager seeks instructions from plan members on their
voting intentions. The plan manager distributed a voting instruction form to collate responses and completes the LSP’s proxy
form for lodgement with the share registry.
Set out below are summaries of securities granted under the plan:
Consolidated
Parent entity
2009
$’000
2008
$’000
2009
$’000
Opening balance (number of securities)
Number of securities issued on 02/07/07 at $2.76
Number of securities purchased on market on 06/08/07 at $2.84
Number of securities purchased on market on 30/08/07 at $2.80
Number of securities purchased on market on 05/02/08 at $1.67
Number of securities purchased on market on 11/02/08 at $1.49
Number of securities purchased on market on 19/02/08 at $1.53
Number of securities issued on 19/02/08 at $1.51
Number of securities issued on 07/08/08 at $1.04
Number of securities issued on 19/11/08 at $1.04
Other
Number of securities forfeited or transferred out during the year
23,508,112 13,931,343
- 10,041,016
70,534
-
35,714
-
54,970
-
100,376
-
197,180
-
793,701
-
15,321,360
-
11,508,812 -
5,311
-
-
(1,716,722)
23,508,112
-
-
-
-
-
-
-
15,321,360 -
11,508,812 -
5,311 -
-
2008
$’000
13,931,343
10,041,016
70,534
35,714
54,970
100,376
197,180
793,701
(1,716,722)
50,343,595 23,508,112
50,343,595
23,508,112
Charter Hall Performance Rights and Options Plan (PROP)
In early 2008, the Board engaged external advisers to gain a market perspective on LTI arrangements. The Board,
in consultation with the independent remuneration consultants, resolved that LTI for the 2009 year would be delivered
through a combination of the existing LSP and the new PROP.
The Performance Rights are unquoted securities and conversion of Performance Rights to stapled securities, and vesting
to executives, is subject to the same service and performance conditions as the LSP which are discussed in the
Remuneration Report.
Consolidated
Parent entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Number of rights issued on 22/12/08 at $1.04
1,628,789
1,628,789
-
-
1,628,789 -
1,628,789 -
94 Charter Hall Group
Notes to the Financial Statements
For the year ended 30 June 2009
39. SeCURITY-baSeD PaYMenTS (COnTInUeD)
(c) expenses arising from security-based payment transactions
Total expenses arising from security based payment transactions recognised during the period as part of employee benefit
expense were as follows:
Securities issued under employee security plan
Consolidated
Parent entity
2009
$’000
616
2008
$’000
2,669
2009
$’000
- -
2008
$’000
The model inputs for the Black-Scholes method for assessing the fair value at loan date for the LSP securities and PROP
rights issued during the year ended 30 June 2009 include the following:
grant date
Security price at grant date
Loan value per security
Expiry of loan
Expected price volatility
Expected distribution yield
Risk-free interest rate
7/8/08
$0.865
$1.04
6/8/13
23.68%
9.47%
5.85%
10/10/08
19/11/08
22/12/08
$0.66
$1.04
9/8/13
22.75%
9.47%
4.28%
$0.41
$1.04
18/11/13
58.06%
9.47%
3.72%
$0.30
$1.04
21/12/13
59.49%
9.47%
3.19%
Annual Report 2009 95
Directors’ Declaration
30 June 2009
In the directors’ opinion:
(a) the financial statements and notes set out on pages 41 to 95 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of
their performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations by the Joint Managing Directors and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
K Roxburgh
Chairman
Sydney
24 August 2009
96 Charter Hall Group
Independent Auditor’s Report
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
Independent auditor’s report to the members of Charter Hall Limited
Report on the financial report
We have audited the accompanying financial report of Charter Hall Limited (the company), which comprises the balance sheet
as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on
that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both Charter
Hall Limited and the Charter Hall Group (the consolidated entity). The consolidated entity comprises the company and the
entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance
with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.
This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of
the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also
state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the
Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial
statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating
to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement
of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Annual Report 2009 97
Independent Auditor’s Report
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
auditor’s opinion
In our opinion:
(a) the financial report of Charter Hall Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of their
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 27 to 37 of the directors’ report for the year ended 30 June 2009.
The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based
on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the Remuneration Report of Charter Hall Limited for the year ended 30 June 2009, complies with section 300A of
the Corporations Act 2001.
PricewaterhouseCoopers
B K Hunter
Partner
Sydney
24 August 2009
98 Charter Hall Group
Charter Hall Group
Securityholder Information
as at 30 June 2009
The shareholder information set out below was applicable as at 30 June 2009.
a. Distribution of equity securities
Analysis of numbers of equity securityholders by size of holding:
1 - 1000
1,001- 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
b. equity securityholders
Twenty largest quoted equity securityholders
The names of the twenty largest holders of quoted equity securities are listed below:
name
National Nominees Limited
Alphabridge Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
CHL Executive Loan Security Plan Managers Pty Ltd
Wyllie Group Pty Ltd
Citicorp Nominees Pty Limited
Transfield (CHG) Pty Ltd
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
Cogent Nominees Pty Limited
AMP Life Limited
Portmist Pty Limited
Cedayu Pty Ltd
Citicorp Nominees Pty Limited
Queensland Investment Corporation
Citicorp Nominees Pty Limited
Santilli Nominees Pty Ltd
ANZ Nominees Limited
C. Substantial holders
Substantial holders in the group are set out below:
Ordinary securities
Alphabridge Pty Ltd
Commonwealth Bank of Australia and its subsidiaries
UBS Nominees Pty Ltd and its related bodies corporate
Quest Asset Partners Pty Ltd
D. Voting rights
Ordinary Securities
76,902
1,209,496
3,323,450
39,589,946
704,183,845
Ordinary securities
number held
Percentage of
issued securities
165,565,163
91,346,122
85,164,036
57,824,472
50,343,595
23,000,000
20,206,180
17,571,577
12,192,899
12,022,726
8,140,070
6,349,546
6,222,139
5,784,973
5,533,734
5,142,857
5,003,504
4,543,885
3,599,420
3,363,219
22.12%
12.21%
11.38%
7.73%
6.72%
3.07%
2.70%
2.35%
1.63%
1.61%
1.09%
0.85%
0.83%
0.77%
0.74%
0.69%
0.67%
0.61%
0.48%
0.45%
number held
Percentage
91,346,122
71,948,162
52,701,457
41,944,763
12.21%
9.61%
7.04%
5.60%
The voting rights attaching to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Annual Report 2009 99
Core Plus Retail Fund Consolidation Note1
Charter Hall Property Trust (CHPT) currently holds a 65% interest in the Core Plus Retail Fund (CPRF).
In preparing Charter Hall’s Financial Report, Charter Hall formed the view that it was appropriate for CPRF to not be
consolidated in the CHPT accounts, given CHPT does not control CPRF (see notes 3 and 34 (f) in the Financial Report).
Charter Hall received advice from PriceWaterhouseCoopers (PwC) confirming the treatment of CPRF by CHPT was
appropriate. Charter Hall’s Financial Report was prepared and signed off by PwC as auditors on this basis.
Charter Hall received a letter from ASIC, dated 6 October 2009, in which ASIC states that it has some preliminary concerns
with the non-consolidation of CPRF in the accounts of CHPT.
ASIC is still making enquiries of CHPT and has not expressed a definitive view at this stage as to whether Charter Hall’s Financial
Report, as lodged with the ASX on 25 August 2009 and included in this annual report, complies with the accounting standards
regarding consolidation.
Although Charter Hall is of the view it is not appropriate to consolidate CPRF in the CHPT accounts, given ASIC’s concerns
expressed to Charter Hall, we have prepared the below table with the key financials for the Group with CPRF consolidated
in the CHPT accounts.
Key Financials – 30 June 2009
AIFRS Loss after tax
Underlying Earnings
Underlying EPS (cents per security)
DPS (cents per security)
Total Assets
Total Debt
Total Liabilities
Net Assets
NTA per security
Gearing
Look through gearing
as reported in the audited
Financial Report
With CPRF consolidated in
CHPT accounts2
Note
($82.2m)
$34.8m
7.61c
4.96c
$524m
$14m
$30m
$494m
$0.71
2%
42.8%
($94.7m)
$30.7m
6.72c
4.96c
$760m
$182m
$215m
$478m
$0.69
23%
42.8%
3
4
5
6
7
8
9
Notes:
1. This Consolidation Note does not form part of the audited 30 June 2009 statutory financial report as lodged with ASX on 25 August 2009 and contained
within this annual report.
2. The net assets and profit/loss on a consolidated basis exclude the minority interest (35%) in net assets and profit/loss.
3. The consolidated AIFRS loss has increased partly due to the fact that CPRF incurred an AIFRS loss of $14.1 million in relation to mark to market of
derivatives.
4. Excludes AASB 140 fair value adjustments on investment property and financial assets, impairment of assets, gains on sale of investments and non cash
AIFRS charges such as share based payments expense, amortisation and tax benefit. Underlying Earnings is $4.1 million lower if CPRF is consolidated in
CHPT’s accounts mainly because of de-recognition of interest income recognised by CHPT at de-consolidation of CPRF. In addition certain management
fees charged by CHPT to CPRF are eliminated.
5. Calculation excludes stapled securities issued under the Executive Loan Security Plan in accordance with AASB2 Share Based Payments.
6. The increase in total debt of $168 million if CPRF is consolidated in CHPT’s accounts relates to the debt balance of CPRF as at 30 June 2009.
Note that this debt is secured by the assets in CPRF and there is no recourse to the investors in CPRF, including CHPT. Consolidation of CPRF
by CHPT would have no impact on the compliance of either entity with debt facility covenants.
7. Charter Hall’s net asset balance is $16 million lower if CPRF is consolidated. This difference is mainly due to the fact that under consolidation,
CHPT accounts for 65% of the net assets of CPRF rather than recognising a 65% investment at the 30 June 2009 CPRF unit price.
8. Gearing is calculated as total debt net of cash to total assets net of cash.
9. Look through gearing is calculated taking into account Charter Hall’s investment in each of the funds and the level of gearing in those funds.
As such consolidating CPRF in CHPT’s accounts has no impact on the look through gearing for the Group. Note that look through gearing on
a proforma basis (adjusted for the sale of 56 Anzac Street, Chullora and the sale of $30 million of CPOF units) reduces to 32.8%.
100 Charter Hall Group
Corporate Directory
Directors
Kerry Roxburgh
Chairman – Independent Non-Executive Director
Roy Woodhouse
Deputy Chairman – Independent Non-Executive Director
Cedric Fuchs
Executive Director
Glenn Fraser
Independent Non-Executive Director
David Harrison
Joint Managing Director
David Southon
Joint Managing Director
Patrice Derrington
Independent Non-Executive Director
Colin McGowan
Independent Non-Executive Director
Jelte Bakker
Chief Financial Officer
Nathan Francis
Deputy Chief Financial Officer and Company Secretary
Notice of Annual General Meeting
The Annual General Meeting of Charter Hall Group
will be held at:
Location Westin Hotel, 1 Martin Place, Sydney
Time
Date
2.30pm
11 November 2009
Principal registered office in Australia
Level 11, 333 George Street
Sydney NSW 2000
+61 2 8908 4000
Registry
Link Market Services
Level 8, 580 George Street
Sydney NSW 2000
1300 664 498
Auditor
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
Sydney NSW 1171
Solicitors
Allens Arthur Robinson
Level 28, Deutsche Bank Place
Cnr of Hunter & Phillip Streets
Sydney NSW 2000
Bankers
National Australia Bank
Level 24, NAB House,
255 George Street
Sydney NSW 2000
Stock Exchange listings
Charter Hall Group stapled securities are listed
on the Australian Securities
Exchange (code CHC).
Website address
www.charterhall.com.au
DISCLAIMER:
This Annual Report has been prepared and issued by Charter Hall Limited and Charter Hall Funds Management Limited as Responsible Entity of
the Charter Hall Property Trust (together, the Charter Hall Group or Group). The information contained in this report has been compiled to comply
with legal and regulatory requirements and to assist the recipient in assessing the performance of the Group independently and does not relate
to, and is not relevant for, any other purpose.
An investment in the Group involves a degree of risk. Each recipient is considered to have satisfied itself fully as to the acceptability or otherwise
of the risks involved in investing in the Group.
This report is not intended to be and does not constitute an offer or a recommendation to acquire any securities in the Charter Hall Group.
This report, the information in it, and any information, representation supplied or made in connection with the Charter Hall Group will not form the
basis of any contract.
The receipt of this report by any person and any information contained herein or subsequently communicated to any person in connection with the
Charter Hall Group is not to be taken as constituting the giving of investment, legal, or tax advice by the Charter Hall Group, their related bodies
corporate, their directors or employees to any such person. Each recipient should consult their own counsel, accountant, and other advisers as to
legal, tax, business, financial and other considerations in relation to the Charter Hall Group.
Neither the Charter Hall Group, their related bodies corporate, directors, employees nor any other person who may be taken to have been involved
in the preparation of this annual report represents or warrants that the information contained in this report, provided either orally or in writing to a
recipient in the course of its evaluation of the Charter Hall Group or the matters contained in this annual report, is accurate or complete. Historical
performance is not a reliable indicator of future performance.
INFORMATION REGARDING U.S. INVESTORS / U.S. PERSONS:
Each person that holds Charter Hall Group securities that is in the United States (U.S.) or is a U.S. person is required to be a Qualified Institutional
Buyer / Qualified Purchaser (QIB/QP) at the time of the acquisition of any Charter Hall Group securities, and is required to make the representations
in a subscription agreement as of the time it acquired the applicable securities.
The securities can only be resold or transferred in a regular brokered transaction on the ASX in accordance with Rule 903 or 904 of Regulation S,
where neither it nor any person acting on its behalf knows or has reason to know, that the sale has been prearranged with, or that the purchaser is,
in the United States or a U.S. person (e.g. no prearranged trades (‘special crossing’) with U.S. Persons or other off-market transactions).
To the maximum extent permitted by law, the Charter Hall Group reserve the right to (i) request any person that they deem to be in the United States
or a U.S. Person, who was not at the time of acquisition of the securities a QIB/QP, to sell its securities, (ii) refuse to record any subsequent sale
or transfer of securities to a person in the United States or a U.S. Person, and (iii) take such other action as they deem necessary or appropriate to
enable the Charter Hall Group to maintain the exception from registration under Section 3(c)(7) of the Investment Company Act.
If you are not the beneficial owner of securities in the Charter Hall Group, you must pass this information to the beneficial owner of the securities.
charterhall.com.au
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