Annual
Report 2014
Charter Hall Group
Contents
Corporate Governance Statement
Financial Report
Corporate Directory
01
12
120
Cover:
No.1 Martin Place,
Sydney NSW
Annual General
Meeting
The 2014 Annual General
Meeting will be held at
Charter Hall’s Sydney office:
Level 20, No.1 Martin Place,
Sydney on Wednesday,
12 November 2014 at 2.30pm.
Corporate Governance Statement
Annual Report 2014 01
Our commitment to corporate governance
Charter Hall Group (comprising Charter Hall Limited and the
Charter Hall Property Trust, listed jointly on the ASX as a stapled
security) (the Group or Charter Hall) is committed to delivering
strong and sustainable returns (through property investment)
to securityholders and investors. The Board of Charter Hall
recognises the importance of good governance in achieving these
corporate objectives and in discharging its responsibilities to all
stakeholders of the Group.
Charter Hall’s governance framework, as summarised in this
Statement, has been designed to ensure that the Group is
effectively managed, that the statutory obligations are met, and
that Charter Hall’s culture of corporate integrity is reinforced.
Due consideration has been given to the Corporate Governance
Principles and Recommendations (2nd Edition) published
June 2010 by the ASX Corporate Governance Council, (ASX
Corporate Governance Principles), and any departure from
these Principles is noted below. The Board intends to fully adopt
the Corporate Governance Principles and Recommendations
(3rd Edition) (published July 2014) in 2015.
This Statement provides a summary of the key governance
practices in place and (unless stated otherwise) which were
followed throughout the financial year ended 30 June 2014.
Charter Hall’s key corporate policies can be found on its website
at www.charterhall.com.au
Corporate governance foundations
Roles of the Board and management
ASX Corporate Governance Principle 1.1 – Companies should
establish functions reserved to the board and those delegated
to senior executives and disclose those functions.
The Board of Charter Hall is committed to effectively representing
and promoting the Group, and thereby adding long-term value to
all securityholders. The Board is accountable to securityholders for
the management of Charter Hall’s business and affairs and as such
is responsible for the overall strategy, governance and performance
of the Group.
To clarify the roles and responsibilities of directors and
management, and to assist the Board in discharging its
responsibilities, Charter Hall has established a governance
framework which sets out the functions reserved to the Board and
provides for the delegation of functions to Board Committees and
management. Those functions and responsibilities reserved to the
Board are set out in the Board Charter, which is available to view
in the ‘Corporate Governance’ section of Charter Hall’s website.
The Board has delegated day-to-day management functions
to the Joint Managing Directors and senior executives, who are
required to work within authority limits and delegations set out in
a ‘Delegations of Authority’ document. This document is approved
by the Board, and is an internal working document.
Non-executive directors have been appointed under a formal letter
which sets out the key terms and conditions of that appointment.
Each Joint Managing Director has a formal job description and
letter of appointment which sets out his/her duties and obligations,
rights and responsibilities and entitlements.
02 Charter Hall Group
Corporate Governance Statement
continued
Governance framework
The diagram below summarises Charter Hall’s governance framework, including the functions reserved for the Board and those carried
out by the standing Board Committees.
Charter Hall Board
The Board formally delegates certain functions to Board Committees and to Management via formal Board and Committee charters.
The Board directly retains responsibility for a range of matters including:
• overseeing the Group’s strategic direction;
• monitoring the operational and financial
position and performance of the Group;
• overseeing the Group’s risk management
•
• monitoring the effectiveness of and
reporting to securityholders and the ASX;
of the Group; and
compliance with policies governing the
operation of the Group;
reviewing and approving the annual
operating budgets;
• overseeing and evaluating the performance
of the Joint Managing Directors and other
senior executives in the context of the
Group’s strategies and objectives.
• approving decisions concerning the capital
framework;
•
• setting the financial and informational
reporting requirements from management to
the Board;
• determining dividend policy and approving
dividends;
Nomination Committee
Key functions:
To review and make
recommendations on:
• Board size and composition;
• criteria for Board membership;
• appointment and re-election
of directors; and
• Board succession.
Investment Committee
The IC considers matters as
referred to it/delegated to it by
the Board which may include
from time to time the approval
of the following:
• acquisitions/disposals
of entities or assets
on behalf of the Group in
accordance with the relevant
delegated authority;
• capital raisings by the Group;
• underwriting of transactions
or capital raisings by Group
managed funds;
• smaller related party
transactions;
• due diligence reports
prepared by external
advisers; and
• disclosure documents for
capital raisings by funds
managed by the RE.
Audit, Risk and
Compliance Committee
Key functions:
To oversee and review:
• the internal control and
accountability systems;
• the financial reporting
process, including significant
accounting issues and
judgements;
• the appointment and
performance of the Auditor,
including the scope and
effectiveness of audits;
• the internal systems of risk
management and control
(ensuring that material
business risks are identified);
and
• compliance processes
to meet legislative and
regulatory requirements.
Remuneration and Human
Resources Committee
Key functions:
To review and make
recommendations on:
• the Group’s Human
Resources strategy;
• criteria for reviewing the
performance of the Joint
Managing Directors (JMDs);
• remuneration framework and
policy for senior executives;
• fixed annual remuneration
and incentive outcomes
for senior executives;
• incentive plans for all
employees;
• any other remuneration
matters that relate to
executives; and
• remuneration policies and
fees for Non-Executive
Directors (NEDs) and
Committee members.
Valuations Committee
The Committee:
•
assesses the proposed Directors valuations
and review independent valuations for each
asset within the Group’s managed funds,
together with supporting evidence such as
independent valuations and internally prepared
valuations supported by market evidence;
monitors the practices of the executives
in terms of valuation policy set by the
Committee, in particular rotation of valuers,
timing of Independent valuations and the
weighting towards 30 June valuations versus
other end dates; and
•
• prepares and inform the Audit, Risk and
Compliance Committee about the Valuation
Committee policies and procedures.
Joint Managing Directors
Chief Financial Officer
Other senior executives
Company Secretary
Risk management framework
Annual Report 2014 03
Board Committees
The Board has established three standing Board Committees to assist the Board in the execution of its responsibilities. Each Committee
operates under a specific charter, which can be found in the ‘Corporate Governance’ section of Charter Hall’s website.
In accordance with its respective charter, each Board Committee must have at least three non-executive members, be comprised of
a majority of ‘independent’ directors, and be chaired by an ‘independent’ non-executive director. Director independence is discussed
on page 5 of this statement.
During the reporting period, the membership of each Board Committee was as follows:
Board Committee
Membership
Audit, Risk and Compliance Committee
David Deverall (Chair), Anne Brennan, Kerry Roxburgh
Remuneration and Human Resources Committee
Anne Brennan (Chair), Colin McGowan, Peter Kahan, Phil Garling
Nomination Committee
Kerry Roxburgh (Chair), David Deverall, Peter Kahan
The membership of the Board Committees will change from time to time, depending on the needs of the Board and the directors’
rotation policy.
Following the appointment of David Clarke to the Board on 10 April 2014, the membership of each of the Board Committee was revised
to the following:
Board Committee
Membership
Audit, Risk and Compliance Committee
David Deverall (Chair), Anne Brennan, Kerry Roxburgh, David Clarke
Remuneration and Human Resources Committee
Anne Brennan (Chair), Colin McGowan, Peter Kahan, Phil Garling
Nomination Committee
Kerry Roxburgh (Chair), David Deverall, Peter Kahan
The number of Board and Board Committee meetings held during the reporting period and the number of meetings that were attended
by each of the directors is presented in the Directors’ Report on page 22 of this Annual Report.
Management
The Board has delegated the responsibility for day-to-day management of the Group to the Joint Managing Directors, who are assisted
by an executive management team. The diagrams below present the executives who report to the Joint Managing Directors.
David Harrison has specific responsibility for the investment management divisions of the Group and David Southon has specific
responsibility for the service divisions of the Group as outlined below, and both share responsibility for the CFO.
The Joint Managing Directors must consult with the Chairman on any matters which the Joint Managing Directors consider is of such
a sensitive, extraordinary or strategic nature as to warrant attention of the Board, regardless of value.
The authorisation thresholds for the control of expenditure and capital commitments have been established and are defined in the
Group’s internal ‘Delegations of Authority’ document.
David Harrison
Joint Managing Director
David Southon
Joint Managing Director
Chief Financial Officer
Paul Altschwager
Transactions
Avi Anger
CQR
Scott Dundas
Investor Relations
Nick Kelly
Direct
Richard Stacker
Wholesale
Adrian Taylor
O&I Property Services
Chris Chapple
Retail Property Services
Greg Chubb
(Commencing October 2014)
Chief Technology Officer
Aidan Coleman
People, Brand
& Community
Natalie Devlin
CoSec & Legal
Tracey Jordan
04 Charter Hall Group
Corporate Governance Statement
continued
Performance of senior executives
The Group defines its senior executives as the Joint Managing
Directors and its executive management team, some of whom
are also Key Management Personnel (KMPs) as defined in the
Remuneration Report, which forms part of the Directors’ Report.
A combination of financial and non-financial key performance
indicators (KPIs) are used to monitor senior executive performance.
Details of the KPIs used for the Joint Managing Directors in
FY14 are set out in the Remuneration Report on page 29 in this
Annual Report.
The individual performance of the Joint Managing Directors is
formally assessed on an annual basis by the Board. All KPIs are
carefully considered by the Remuneration and Human Resources
Committee, which evaluates each Joint Managing Director’s
performance and makes recommendations to the Board.
Executives reporting to the Joint Managing Directors are assessed
annually against financial and non-financial KPIs. This assessment
is undertaken by either or both of the Joint Managing Directors
depending on the reporting lines. Executive performance results
are reported to the Board.
This performance evaluation process was in place and was
followed for the reporting period.
Each senior executive has a formal job description and letter of
appointment which sets out his/her duties and obligations, rights
and responsibilities and entitlements.
Senior executives are provided with access to continuing
education to update and enhance their skills and knowledge.
An induction program exists for new senior executives to ensure
he/she gains an understanding of the Group’s financial position,
strategies, operations and risk management policies, as well as
the responsibilities and roles of the Board and management.
Board structure
ASX Corporate Governance Principle 2 – Structure the Board
to add value.
Charter Hall aims to maintain a Board that comprises directors with
a broad range of skills, expertise and experience who are able to
effectively understand and manage the issues arising in Charter
Hall’s business activities, review and challenge the performance
of management and optimise the Group’s performance.
Throughout the reporting period, the Board was comprised of
two executive directors and at least six non-executive directors.
Of those six non-executive directors, a majority were independent
directors. David Clarke was appointed to the Board as a
non-executive and independent director on 14 April 2014, and
at the conclusion of the 2014 AGM will be elected as successor
to the Chairman, Kerry Roxburgh, who has notified the Board
of his intention to retire.
Name
Position
Independent (Yes/No)
Appointed
Kerry Roxburgh
Chairman, Non-Executive Director
Anne Brennan
David Deverall
David Clarke
Non-Executive Director
Non-Executive Director
Non-Executive Director
David Harrison
Joint Managing Director, Executive Director
Peter Kahan
Non-Executive Director
Colin McGowan
Non-Executive Director
David Southon
Joint Managing Director, Executive Director
Phil Garling
Non-Executive Director
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
12 April 2005
6 October 2010
7 May 2012
10 April 2014
30 August 2006
1 October 2009
6 April 2005
30 August 2006
25 February 2013
Details of the background, particular qualifications, expertise and period of service of each director are set out in the Directors’ Report
on pages 18 to 21 of this Annual Report.
Annual Report 2014 05
The Chairman of the Board
The Chairman is responsible for leadership of the Board and for the
efficient organisation and conduct of the Board’s functioning. The
Chairman seeks effective contribution of all directors and promotes
constructive and respectful relations between directors, and
between the Board and management.
Director independence
ASX Recommendation 2.1 – A majority of the board should be
independent directors.
The Board considers that a director is independent if he/she is
independent of management and free of any business or other
relationship that could materially interfere with, or could reasonably
be perceived to interfere with, the exercise of unfettered and
independent judgement. The Board evaluates the materiality of any
interests or relationships that could be perceived to compromise
independence on a case by case basis, having regard to the
circumstances of each director.
Directors are expected to be meticulous in their disclosure of
any material personal or family contract or relationship. Directors
must also strictly adhere to constraints on their participation and
voting in relation to matters in which they may have an interest, in
accordance with the Corporations Act and the Group’s policies.
The Board regularly assesses whether directors are independent,
and each director is required to provide information relative to this
assessment. It is noted that David Harrison and David Southon,
due to their employment by the Group in an executive capacity,
are not independent. In addition, Peter Kahan is considered not
to be independent due to his role as executive deputy chairman
and director of The Gandel Group, a substantial securityholder of
Charter Hall.
Independent decision making
Directors are entitled to seek independent professional advice
at the expense of the Group as required in the furtherance of
their duties and in relation to their functions (including their Board
Committee functions), subject to the estimate of costs being first
approved by the Chairman as reasonable.
Non-executive directors of the Board meet regularly without
management present, in order to consider matters independently
of management.
Nomination Committee
ASX Recommendation 2.4 – The board should establish
a nomination committee.
The Nomination Committee reviews and, where appropriate,
makes recommendations to the Board on the size and
composition of the Board, including assessment of necessary
and desirable competencies of Board members. The Committee’s
Charter is available to view under the ‘Corporate Governance’
section of Charter Hall’s website.
The Committee has adopted composition and membership criteria
for the Board. A majority of the directors on the Board must be
‘independent’. Directors are to encompass an appropriate range
of qualifications and expertise. Directors nominated for election
require approval of the Board.
Also, guidelines have been adopted for director selection
and nomination to the Board. Foremost is integrity, particular
expertise (sector and functional) and the degree to which he/
she complements the skill set of the existing Board members,
his/her reputation and standing in the market and, in the case
of prospective independent directors, the actual and perceived
independence from Charter Hall.
Presently, the Board and the Nomination Committee have
developed a Board skills matrix. This matrix is used to identify
any gaps in the skills and experience of the directors on the
Board for the purposes of identifying the search and assessment
criteria for new directors.
The Committee’s current membership is set out on page 3 of this
statement and the independence of the members is provided on
page 4 of this statement. Details of the Committee’s meetings
for the reporting period, and the attendance by members, are
provided on page 22 of this Annual Report.
Board performance
ASX Recommendation 2.5 – Companies should disclose
the process for evaluating the performance of the board,
its committees and individual directors.
The following structures are in place to support the Group’s
Directors in performing their duties:
• an induction program for new directors on the Board;
• a formal annual performance self-assessment of the Board,
Board Committees, and individual directors; and
• access by directors to continuing education to ensure that their
skills and knowledge are updated and enhanced.
The procedure for evaluating Board performance requires
each independent director to complete an annual performance
evaluation. This is submitted to an independent party who collates
and provides summarised and anonymous results to the Chairman,
who then distributes the results to the full Board. During the
financial year ended 30 June 2014, an external consulting firm
was engaged for this process. Based on the results of the survey
and the Chairman’s feedback, the Board as a whole discusses
and analyses Board and Committee performance during the year,
including suggestions for change or improvement.
To ensure that directors are well placed to discharge their duties
effectively, they are provided Board reports in advance of Board
meetings which contain sufficient information to enable informed
discussion of all agenda items.
Access to information
The Joint Managing Directors, senior executives and the Company
Secretary supply the Board with regular reports and information
to enable the Board to discharge its duties. Directors are entitled
to request additional information where they consider such
information is necessary to make informed decisions.
Independent professional advice
Directors are entitled to obtain independent professional advice
at the cost of the Group.
06 Charter Hall Group
Corporate Governance Statement
continued
Company Secretary
The Company Secretary plays an important role in supporting the
effectiveness of the Board by monitoring that Board policy and
procedures are followed, and co-ordinating the timely completion
and dispatch of the Board agenda and briefing material.
The Policy provides guidance on the management of conflicts of
interest arising between Charter Hall-managed vehicles and their
related parties and requires that:
• related party transactions are identified and conducted on arm’s
length terms;
All directors have access to the Company Secretary.
The appointment and removal of the Company Secretary is
a matter for decision by the Board as a whole.
The Company Secretary is accountable to the Board, through
the Chairman, on all governance matters.
Ethical and responsible decision making
ASX Corporate Governance Principle 3 – Promote ethical and
responsible decision-making
ASX Recommendation 3.1 – Companies should establish a code
of conduct and disclose the code or a summary of the code as to:
the practices necessary to maintain confidence in the company’s
integrity; the practices necessary to take into account their legal
obligations and the reasonable expectations of their stakeholders;
and the responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
Charter Hall has adopted a Code of Conduct which is periodically
reviewed and endorsed by the Board. The Code of Conduct forms
the basis for ethical behaviour by staff and is the framework that
provides the foundation for maintaining and enhancing the Group’s
reputation. The objective of the Code is to ensure that directors,
other stakeholders and the broader community can be confident
that the Group conducts its affairs honestly and in accordance with
ethical values and practices.
The Code sets the standards for dealing ethically with employees,
investors, customers, regulatory bodies and the financial and wider
community. In addition to this, in order to deal specifically with
responsibility and accountability of individuals for reporting and
investigating reports of unethical behaviour, the Group has adopted
a Fraud Risk Management Policy.
Staff are trained regularly on matters pertaining to ethical behaviour
in the workplace. Topics covered during the year ended 30 June
2014 included key aspects of the Code of Conduct, as well as
Bullying and Harassment training, and WHS training tailored for our
Retail employees.
The Fraud Risk Management Policy and a summary of Charter
Halls’ Code of Conduct are available to view under the ‘Corporate
Governance’ section of Charter Hall’s website.
Managing conflicts
Charter Hall has implemented a governance framework to
safeguard the interests of investors in the investment vehicles,
which at times may conflict with those of Charter Hall as sponsor
of related vehicles. As part of this framework, the Group has
established a Related Party Transactions Policy and Conflicts
Protocol for identifying and managing conflicts.
• related party transactions are tested by reference to whether
they meet market standards; and
• decisions about transactions between Charter Hall-managed
vehicles and Charter Hall or its affiliates are made by
independent members of the Board or Investment Committees
(where they have been appointed).
The Group has also established protocols for the Board in
identifying and managing conflicts, including that:
• Board members declare their interests as required
under the Corporations Act, ASX Listing Rules and
other general law requirements;
• Board members with a material personal interest in a matter are
not to be present at a Board meeting during the consideration
of the matter and subsequent vote unless the Board
(excluding the relevant Board member) resolves otherwise; and
• Board members with a conflict not involving a material personal
interest may be required to absent themselves from the relevant
deliberations of the Board.
The Policy is available to view under the ‘Corporate Governance’
section of Charter Hall’s website.
The Group also has a conflicts protocol for dealing with competing
deals (e.g. acquisitions, leasing). Such deals may arise out of
the fact that Charter Hall is also the manager of other listed and
unlisted vehicles and the Group may transact with them from
time to time, or share staff or information with other Charter Hall
companies or managed vehicles.
Personal conflicts that might arise generally for directors and
staff are covered by the Code of Conduct referred to above.
Securities trading
The Group has adopted a Securities Trading Policy which regulates
the manner in which directors, senior executives and staff
involved in the management of the Group can deal in Charter Hall
securities. The Policy specifies the periods in which personal
trading is not permitted, the restrictions that apply to directors and
senior executives, and the procedures for obtaining prior clearance
for trading (when a blackout is not in effect).
Staff compliance with the Policy is monitored under Charter Hall’s
risk management framework. The Policy is subject to annual review
by the Board, and has been lodged with the ASX.
The Securities Trading Policy is available to view under the
‘Corporate Governance’ section of Charter Hall’s website.
Sustainability
Charter Hall is committed to playing a leading role in achieving
a sustainable future, and the Board has adopted a Sustainability
Policy which forms the basis for integrating environmental and
social governance issues into the Group’s activities. This Policy
is available to view under the ‘About Us’ section of Charter Hall’s
website. In addition, Charter Hall’s sustainability objectives are
outlined on page 16 of Charter Hall’s Securityholder Review.
Annual Report 2014 07
Diversity
ASX Recommendation 3.2 – Companies should establish a
policy concerning diversity and disclose the policy or a summary
of that policy. The policy should include requirements for the
board to establish measurable objectives for achieving gender
diversity for the board to assess annually both the objectives and
progress in achieving them.
ASX Recommendation 3.3 – Companies should disclose in each
annual report the measurable objectives for achieving gender
diversity set by the board in accordance with the diversity policy
and progress towards achieving them.
ASX Recommendation 3.4 – Companies should disclose in each
annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women
on the board.
The Board is committed to fostering a diverse and inclusive
workforce in pursuit of the achievement of Charter Hall’s corporate
goals. Charter Hall considers diversity in the workplace as
respecting and valuing differences based on a wide range of
personal characteristics including gender, age and ethnicity, as well
as diversity of thought and background.
Charter Hall believes that people with different experiences,
backgrounds and perspectives can provide unique viewpoints
and innovative solutions from which the business can benefit.
In particular, the promotion of greater gender diversity broadens
the pool for recruitment of high quality directors and employees, is
likely to support employee retention, encourage greater innovation,
and allows the Group to connect with its diverse client base,
provides it with a balanced perspective, and is a socially and
economically responsible governance practice.
The Board has adopted a Diversity and Inclusion Policy, which
is available to view under the ‘Corporate Governance’ section
of Charter Hall’s website. This Policy contains the overriding
objectives to increase the percentage of women in leadership
and business related roles and to promote a culture that values
diversity, inclusion and flexibility. To achieve these objectives,
Charter Hall has put in place a strategy based around four key
pillars. Achievements against the strategy in respect of the financial
year ended 30 June 2014 are summarised in the table below.
Management has established a diversity committee comprising
senior executives within the Group and chaired by the Head of
Direct Property. The aim of this committee is to implement the
diversity strategy and objectives of the Board.
FY14 Achievements:
Pillar
Objectives
Achievements
Flexible working – to
mainstream flexibility in
a way that directly links
business performance,
productivity and
sustainability with
workforce well-being
and sustainability.
• Design and implement
New Way of Working
(NWOW) promoting
flexibility, collaboration
and engagement
•
Implemented the NWOW as part of our move to Activity Based Working
in our Sydney head office, promoting flexibility and collaboration.
• Provided our head office people with the appropriate technology to
enable flexible working.
• Commenced rolling out the NWOW flexible working IT platform across
all offices Australia-wide.
• Develop and implement
• Launched flexible working guidelines across the Group.
flexible working guidelines
• Develop and implement a
suite of benefits focused
on enhancing flexibility
• Launched a ‘Supporting Working Families’ suite of benefits which
includes 14 weeks primary and one week secondary carers leave;
Work/Life Links services available to all our people; and the Parental
Transition Program which guides our people from ‘pre-parental leave’
to ‘whilst on leave’ through to ‘returning to work’.
• 92% of our people who went on carers’ parental leave returned to work.
• Promoted purchased leave benefit (one to two weeks per year) with
22 people taking up the option in FY14.
• Provided a family room with breast feeding and infant change facilities
for working parents in our new head office.
• Four people took up our career break initiative.
Inclusive culture –
create an environment
where people with diverse
backgrounds, skills and
perspectives feel trusted,
valued and respected
and that they are able
to contribute to the
organisation.
• Develop management
• NWOW change management program sessions included leading
capability to lead teams
engaged in flexible work
• Values are integrated into
people lifecycle activities
• Conduct refresher training
on appropriate workplace
behaviour
flexible teams.
• NWOW change management program focussed on three of our values
– passion, collaboration and accountability.
• Launched an employee rewards program which rewards our people for
living our values.
• Appropriate workplace behaviour training conducted with all
our managers.
• Unconscious bias training • Unconscious bias training delayed to FY15.
• Provided a room suitable for prayer and/or meditation as part of our
new head office facilities.
08 Charter Hall Group
Corporate Governance Statement
continued
Pillar
Objectives
Achievements
Gender balance
– to achieve gender
balance in all roles across
our business.
• Continue gender specific
development initiatives
• Through FY14 we had a total of 45 internal promotions with 30 being
male and 21 female.
• Revised recruitment processes to counter possible gender bias.
• A number of females attended targeted development courses for
Women in Leadership and participated in the Women in Property
Mentoring Program.
• Track and monitor progress
• Overall we have seen an increase in female representation across all
against our targets
External profile – to
develop our employment
brand so that Charter Hall
is perceived as a “great
place to work” by current
employees and key external
stakeholders (including
active and passive
candidates, tenants and
investors) with an initial
focus on gender.
• Sponsor community and
industry events around
diversity
• Represent CHC on the
Property Council of
Australia (PCA), Women
in Property Committee
• Participate in creating
initiatives that impact
gender balance across
the industry
levels of Charter Hall with females making up 49% of our workforce. The
Senior Management team compromises 18% females and the Charter
Hall Board 14%.
• Aspirational gender targets have been set from FY12 through to FY15
with targets through to FY18 currently under revision. Performance
against targets has been mixed with solid increases in business related
roles and management with more moderate, but encouraging increases
at the Senior Management level.
• Sponsored Commercial Office Forum and tables at various events
aimed at promoting Diversity in the workplace.
• Head of People, Brand and Community a member of the PCA’s
Women in Property Committee .
• Participated in the Property Council working group responsible for
developing the Women in Property Mentoring Program.
• Foundation sponsor Property Council’s Women in Property
Mentoring Program.
Charter Hall will measure its success in achieving its targets through:
• employee data such as workforce profile data; and learning and
development, talent and succession, flexible work practices
and recruitment data;
• annual external benchmarking of Charter Hall’s diversity
initiatives and targets against our competitors; and
• employee surveys to invite better understanding of the creation
of a diverse and inclusive workplace.
Charter Hall’s Diversity and Inclusion Policy is available to view under
the Corporate Governance section of the Charter Hall website.
Financial integrity
ASX Corporate Governance Principle 4 – Safeguard integrity
in financial reporting.
The Board has the responsibility for monitoring the integrity of
the Group’s financial reporting. To assist the Board in fulfilling this
responsibility, the processes below have been adopted.
Audit, Risk and Compliance Committee
ASX Recommendation 4.1 – The board should establish an
audit committee.
ASX Recommendation 4.2 – The audit committee should be
structured so that it: consists only of non-executive directors;
consists of a majority of independent directors; is chaired by
an independent chair, who is not chair of the board; and has
at least three members.
ASX Recommendation 4.3 – The audit committee should have
a formal charter.
The Board has established an ARCC to oversee the quality and
integrity of accounting, audit, financial and risk management
practices for the Group. The ARCC is comprised of only
independent directors, and is chaired by an independent director
who is not the Chairman of the Board.
The Board has developed a Charter which sets out the
Committee’s role, responsibilities, composition, structure and
membership requirements.
As stated in its Charter, the responsibilities of the ARCC in relation
to financial reporting are to:
• review the internal control and compliance systems
of the Group;
• monitor the integrity of the financial statements of the Group;
• consider significant financial reporting issues and judgements
made in connection with the Group’s financial statements;
• review and inform the Board on matters relating to the Auditor;
• monitor compliance by the Group with legal and
regulatory requirements;
• regularly monitor risk management reports provided by
management; and
• assess at regular intervals whether the Group’s compliance
plan, internal financial control systems, risk management
policies and risk management systems are adequate.
The Auditor is invited to ARCC meetings and also meets privately
with the ARCC at least twice a year.
The Committee’s current membership is set out on page 3 of this
Statement and the independence of the members is provided on
page 4 of this Statement. Details of the Committee’s meetings
for the reporting period, and the attendance by members, are
provided on page 22 of this Annual Report.
The Board regularly assesses and has determined that members
of the Audit, Risk and Compliance Committee, collectively have
an appropriate level of financial and property industry expertise to
discharge their responsibilities.
External Auditor
The Board has appointed PricewaterhouseCoopers (PwC) as the
Group’s Auditor. PwC is expected to carry out its responsibilities
in accordance with Australian law and audit firm policy in respect
of partner rotation.
The Auditor is invited to attend meetings of the Audit, Risk and
Compliance Committee, and also meets privately with Committee
members at least twice a year.
In order to ensure the independence of the Auditor, the Board has
adopted a Policy requiring that:
• the Auditor remain independent from Charter Hall;
• the Auditor monitor its independence and report to the Board
every six months on its continuing independence;
• non-audit assignments undertaken by the Auditor are in
accordance with the Policy; and
• all non-audit assignments are reported to the Audit, Risk and
Compliance Committee.
The Auditor attends the Group’s Annual General Meeting and is
available to answer securityholder questions on the conduct of
the audit, and the preparation and content of the Auditor’s Report.
The Charter Hall Group Auditor Independence Policy is
available to view under the ‘Corporate Governance’ section
of Charter Hall’s website.
Internal Audit
The Board places considerable importance on maintaining a
strong control environment through an organisation structure with
clearly drawn lines of accountability and authority. During FY14,
Charter Hall has implemented an internal audit function
outsourced to an external service provider which delivers regular
reporting to the ARCC and the Board as well as implementing
action plans with management.
Annual Report 2014 09
Disclosure
ASX Corporate Governance Principle 5 – Make timely and
balanced disclosure.
ASX 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.
Charter Hall strives to provide timely, open and accurate
information to all stakeholders, including securityholders, regulators
and the wider investment community. This includes presenting
a balanced approach to disclosure. The Board has adopted
a Continuous Disclosure and Communications Policy which
summarises the internal processes to ensure compliance with
ASX Listing Rules and Australian law in respect of continuous
disclosure. A Continuous Disclosure Committee has also been
established by management to review issues surrounding
continuous disclosure and to determine whether disclosure is
required, and make corresponding recommendations to the Board.
The Policy includes procedures for dealing with potentially
price-sensitive information, including referral to the Continuous
Disclosure Committee and the Board where necessary, for a
determination as to the appropriate disclosure required.
Charter Hall’s Company Secretary is the ASX liaison person.
The Continuous Disclosure and Communications Policy is
available to view under the ‘Corporate Governance’ section
of Charter Hall’s website.
Securityholder communication
ASX Corporate Governance Principle 6 – Respect the right
of shareholders.
ASX Recommendation 6.1 – Companies should design and
disclose 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.
Charter Hall has adopted a Continuous Disclosure and
Communications Policy. This Policy contains information on
the methods of providing timely and relevant information to
securityholders, including:
• the right for investors to receive an annual report and updates
which keep them informed of Charter Hall’s performance
and operations;
• placement under the ‘News’ section of Charter Hall’s website of
market-sensitive information in the form of ASX announcements
or webcasts; investors also have the ability under this section
of the website to register to receive email alerts on the Group’s
announcements to the ASX;
• placement under the ‘Investor’ section of Charter Hall’s
website of distribution and tax information, unit price
performance, financial results information including the
results webcast, investor presentations, past and current
reports to securityholders and past securityholder meeting
information; and
• presentations to investor roadshows that are required to
be lodged with the ASX are uploaded to the ‘News’ section
of Charter Hall’s website.
10 Charter Hall Group
Corporate Governance Statement
continued
A summary of the Group’s risk management framework is
available to view under the ‘Corporate Governance’ section
of Charter Hall’s website.
CEO and CFO assurance
ASX 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 in relation to financial
reporting risks.
The Board has received assurance from the Joint Managing
Directors and the Chief Financial Officer that the Group’s
consolidated financial statements are founded on a sound system
of risk management and internal control and that the system is
operating in all material respects in relation to financial reporting
risks. This assurance is supported by a review and sign-off process
from senior managers on the key items that make up the risk
management and control systems.
Remuneration
ASX Corporate Governance Principle 8 – Remunerate fairly
and responsibly.
ASX Recommendation 8.1 – The board should establish a
remuneration committee.
ASX Recommendation 8.2 – The remuneration committee
should be structured so that it: consists of a majority of
independent directors; is chaired by an independent chair;
and has at least three members.
The Board has established a Remuneration and Human Resources
Committee to assist the Board in implementing the Group’s human
resources strategies. The Committee operates under a Charter
approved by the Board, is comprised of only non-executive
directors, with a majority being ‘independent’, and is chaired by
an independent director.
Broadly, the Committee is responsible for reviewing and
making recommendations to the Board in respect of: executive
remuneration and incentive policies; equity based incentive
schemes; diversity and inclusion objectives; talent management
and succession planning; and recruitment, retention, performance
measurement and termination policies and procedures. The
Committee also reviews the remuneration of the non-executive
directors, all key appointments and terminations to the executive
management team (and other divisional heads), and the standard
contractual terms applicable to management. Stakeholder
engagement is also a focus, as well as the disclosure of
Charter Hall’s remuneration framework in public materials,
such as this Annual Report.
Charter Hall is required to hold an annual general meeting of
securityholders, typically held between October and November.
A full copy of the notice of meeting, including an explanatory
memorandum on the resolutions, is placed under the ‘Investor’
section of Charter Hall’s website as well as being sent to all
securityholders. For securityholders who are unable to attend
formal meetings to vote, proxies may be lodged online, by mail
or by facsimile. All meetings are also webcast.
Charter Hall’s Continuous Disclosure and Communications Policy
is available to view under the ‘Corporate Governance’ section
of Charter Hall’s website. Recent annual reports and financial
results are available to view under the ‘Investor’ section of
Charter Hall’s website. Recent ASX announcements and investor
webcasts are available to view under the ‘News’ section of
Charter Hall’s website.
Risk management
ASX Corporate Governance Principle 7 – Recognise and
manage risk.
ASX Recommendation 7.1 – Companies should establish
policies for the oversight and management of material business
risks and disclose a summary of those policies.
Management has implemented a risk management framework
under the oversight of the Audit, Risk and Compliance
Committee and the Board. The Committee is responsible for
reviewing, and reporting to the Board on, the internal control
and risk management systems of Charter Hall and assessing the
information presented by management. In addition, the Committee
regularly assesses whether Charter Hall’s compliance plan, internal
financial control systems, risk management policies and risk
management systems are adequate.
ASX 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.
Charter Hall’s Risk and Compliance Manager is responsible
for daily risk and compliance processes across the business
and monitors the efficiency of Charter Hall’s risk management
framework (including compliance systems) on an ongoing basis.
The aim is to ensure that appropriate procedures, staff education
and reporting arrangements are in place to support the risk
management framework.
Management conducts an annual Operational Risk Self-Assessment
(ORSA) where key risks and controls are considered and their
effectiveness assessed. The results of this assessment are reported
to the Audit, Risk and Compliance Committee and the Board.
During the reporting period, management has reported to the
Audit, Risk and Compliance Committee on the manner in which it
manages its material risks, the effectiveness of the framework and
the results of the annual ORSA.
The Board places considerable importance on maintaining a
strong control environment through an organisational structure with
clearly drawn lines of accountability and authority. In addition, the
Board has implemented an internal audit function during FY14.
Annual Report 2014 11
Financial
Report
From a policy perspective, the Committee assists the Board
in ensuring that:
for the year ended 30 June 2014
• an appropriate human resources strategy is implemented
to enable Charter Hall to deliver on its business strategy;
• remuneration policies and practices are in line with strategic
goals and enable Charter Hall to attract and retain high
calibre executives and directors who will create value
for securityholders;
• directors and executives are fairly and responsibly remunerated
having regard to the performance of Charter Hall, the
performance of the executives and the general remuneration
environment;
• Charter Hall has effective policies and procedures to attract,
motivate and retain talented individuals to meet its needs; and
• people policies and practices align with Charter Hall’s vision,
values and overall objectives and comply with the relevant
legislation, reflect current governance and mitigate against
operational, financial and reputational risk.
The Committee’s current membership is set out on page 3 of
this Statement and the independence of members is provided on
page 4 of this Statement. Details of meetings held and attendance
by each Committee member are contained on page 22 of
this Annual Report.
From time to time, the Committee may commission the assistance
of external consultants to ensure the Group’s remuneration
policies remain appropriate, follow best practice and address the
requirements of the Group’s stakeholders.
Charter Hall distinguishes the structure of non-executive directors’
remuneration from that of executive directors and senior managers.
Further information is provided in the Remuneration Report on
pages 22 to 47 of this Annual Report.
The Remuneration and Human Resources Committee’s Charter
is available to view under the ‘Corporate Governance’ section of
Charter Hall’s website.
12
Financial
Report
for the year ended 30 June 2014
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statement of Changes in Equity
– Charter Hall Group
Consolidated Statement of Changes in Equity
– Charter Hall Property Trust Group
Consolidated Cash Flow Statements
Notes to the consolidated financial statements
1. Summary of significant accounting policies
2. Critical accounting estimates and judgements
3. Segment information
4. Revenue
5. Expenses
6. Fair value adjustments
7. Income tax expense
8. Distributions paid and payable
9. Earnings per security
10. Cash and cash equivalents
11. Trade and other receivables
12. Assets classified as held for sale
13. Investments in associates at fair value through
profit or loss
14. Inventories
15. Investments accounted for using the equity method
16. Investment properties
17. Intangible assets
18. Property, plant and equipment
19. Deferred tax assets
20. Trade and other payables
21. Provisions
22. Interest-bearing liabilities
23. Contributed equity
24. Reserves
25. Accumulated losses
26. Non-controlling interest
27. Remuneration of auditors
28. Reconciliation of profit after tax to net cash inflow
from operating activities
29. Capital and financial risk management
30. Fair value measurement
31. Related parties
32. Controlled entities
33. Investments in associates
34. Investments in joint ventures
35. Interests in unconsolidated structured entities
36. Commitments
37. Contingent liabilities
38. Security-based benefits expense
39. Parent entity financial information
40. Deed of cross guarantee
41. Events occurring after the reporting date
Directors’ Declaration to Unitholders
Independent Auditor’s Report
Securityholder Analysis
Contact Details
Corporate Directory
13
50
51
53
54
55
56
57
68
68
72
72
73
73
74
75
76
76
77
78
78
78
79
79
81
81
82
82
83
85
86
87
87
88
88
89
94
96
98
100
106
107
108
108
108
111
112
114
115
116
118
120
120
Directors’ Report
For the year ended 30 June 2014
Annual Report 2014 13
The Directors of Charter Hall Limited and the Directors of Charter
Hall Funds Management Limited, the Responsible Entity (RE) of
Charter Hall Property Trust, present their report together with the
consolidated financial report of the Charter Hall Group (Group
or CHC) and the consolidated financial report of the Charter Hall
Property Trust Group (Charter Hall Property Trust Group or CHPT)
for the year ended 30 June 2014, and the independent auditor’s
report thereon. The financial report of the Group comprises
Charter Hall Limited (Company or CHL) and its controlled entities,
which include Charter Hall Funds Management Limited as the
RE of Charter Hall Property Trust (Trust). The financial report of
the Charter Hall Property Trust Group comprises the Trust and its
controlled entities.
Charter Hall Limited and Charter Hall Funds Management Limited
have identical boards of directors. The term Board hereafter should
be read as a reference to both these Boards.
The units in the Trust are ‘stapled’ to the shares in the Company.
A stapled security comprises one Company share and one
Trust unit. The stapled securities cannot be traded or dealt
with separately.
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:
• Kerry Roxburgh – Chairman and Non-Executive
Independent Director
• Anne Brennan – Non-Executive Independent Director
• David Clarke – Non-Executive Independent Director (Appointed
10 April 2014)
• David Deverall – Non-Executive Independent Director
• Phil Garling – Non-Executive Independent Director
• David Harrison – Joint Managing Director
• Peter Kahan – Non-Executive Director
• Colin McGowan – Non-Executive Independent Director
• David Southon – Joint Managing Director.
Principal activities
During the year, the principal activities of the Group consisted of:
(a) Investment in property funds;
(b) Property funds 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:
Final ordinary distribution for the six months
ended 30 June 2014 of 11.3 cents per
security paid on 29 August 2014
Interim ordinary distribution for the six
months ended 31 December 2013
of 11.0 cents per security paid on
25 February 2014
Final ordinary distribution for the six months
ended 30 June 2013 of 10.4 cents per
security paid on 28 August 2013
Interim ordinary distribution for the six
months ended 31 December 2012
of 9.8 cents per security paid on
28 February 2013
2014
$’000
2013
$’000
39,323
34,003
–
–
–
31,435
–
29,276
Total distributions paid and payable
73,326
60,711
Distribution Re-investment Plan (DRP)
The Group has a Distribution Reinvestment Plan (DRP) under which
securityholders may elect to have all or part of their distribution
entitlements satisfied by the issue of new securities rather than
being paid in cash. The DRP was in operation for the entire year.
The DRP issue price is determined at a discount of 1% to the
volume weighted average market prices of stapled securities
traded on the ASX over the 15 business days following each
balance date. The Group raised $6.3 million from the DRP for
the 31 December 2013 distribution ($3.6665 issue price) and
raised $6.2 million from the DRP for the 30 June 2014 distribution
($4.1621 issue price).
Review and results of operations
The Group recorded a statutory profit after tax attributable to
stapled securityholders for the financial year of $82.1 million
compared to a profit of $54.8 million in FY13.
Operating earnings amounted to $81.2 million for the financial year
compared to $68.8 million in FY13, an increase of 18.0% over the
prior period.
The operating earnings information included in the table below has
not been subject to any specific audit procedures by our auditor
but has been extracted from Note 3: Segment information of the
accompanying financial report.
14 Charter Hall Group
Review and results of operations continued
Operating earnings
Fair value adjustments on derivatives 1
Fair value adjustments on investment and property 1
Amortisation of management rights
Transfer from reserves of cumulative FX losses on disposal of foreign investments 1
Loss on disposal of investments, property and derivatives 1
Income taxes
Other 1
Statutory profit after tax attributable to stapled securityholders
1
Includes the Group’s proportionate share of non-operating items of equity accounted investments on a look through basis.
Basic weighted average number of securities per Note 9 (‘000s)
Basic earnings per stapled security per Note 9 (cents)
Operating earnings per stapled security (OEPS) per Note 3 (cents)
The 30 June 2014 financial results with comparatives are summarised as follows:
2014
$’000
81,163
(909)
14,404
(8,489)
(488)
(3,363)
1,007
(1,209)
82,116
2013
$’000
68,750
1,472
(3,615)
(7,838)
(484)
(953)
(1,738)
(752)
54,842
2014
2013
320,615
25.61
25.31
299,805
18.29
22.93
Revenue including non-controlling interests ($ million) 1
Statutory profit after tax – stapled securityholders ($ million)
Statutory earnings per stapled security (EPS) (cents)
Operating earnings for stapled securityholders ($ million) 2
Operating earnings per stapled security (cents) 2
Distributions to stapled securityholders ($ million)
Distribution per stapled security (cents)
Total assets ($ million)
Total liabilities ($ million)
Net assets attributable to stapled securityholders ($ million)
Securities on issue (million)
Net assets per security ($)
Net tangible assets (NTA) attributable to stapled securityholders ($ million)
NTA per stapled security ($)
Gearing – borrowings to total assets 3
Funds under management ($ billion)
Domestic funds under management ($ billion)
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
122.7
82.1
25.61
81.2
25.31
73.3
22.3
986.1
69.0
917.1
348.0
2.64
829.5
2.38
0.00%
11.5
11.5
2013
114.8
54.8
18.29
68.8
22.93
60.7
20.2
818.8
78.5
740.3
302.3
2.45
644.2
2.13
1.88%
10.3
9.9
2014
26.4
70.6
22.01
N/A
N/A
73.3
22.3
889.2
41.5
847.7
348.0
2.44
847.7
2.44
0.00%
N/A
N/A
2013
36.8
54.4
18.13
N/A
N/A
60.7
20.2
771.4
60.2
704.1
302.3
2.33
704.1
2.33
3.28%
N/A
N/A
1 Gross revenue does not include share of net profits of associates and joint ventures of $60.8 million (2013: $42.5 million).
2 Excludes fair value adjustments on investment property, financial assets and financial instruments, gains on sale of investments, non-operating movements
in equity accounted investments, non-cash items such as amortisation and non-operating income tax expense/(benefit).
3 Gearing is calculated by using debt net of cash divided by total assets net of cash.
Distribution per stapled security (DPS) has increased 10.4% from 20.2 cents in FY13 to 22.3 cents in FY14.
Net Tangible Assets per stapled security (NTA) increased from $2.13 at 30 June 2013 to $2.38 at 30 June 2014.
Funds under management (FUM) increased from $10.3 billion at 30 June 2013 to $11.5 billion at 30 June 2014 due to the establishment
of four new retail funds and principally property acquisitions in Charter Hall Core Plus Office Fund, Charter Hall Core Plus Industrial Fund,
Core Logistics Partnership and Charter Hall Retail REIT.
Gearing has decreased from 1.88% at 30 June 2013 to 0.00% at 30 June 2014.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 15
The Group generated $81.2 million of operating earnings compared to $68.8 million in 2013. Operating earnings comprises property
investments of $49.7 million (2013: $44.5 million), and property funds management of $34.6 million (2013: $27.3 million) less non-cash
security based benefit expense of $3.1 million (2013: $3.0 million) which is not allocated to the reportable segments.
Property Investments
The Group’s Property Investments are classified into the following categories, reflecting different sources of external equity managed
across the Group:
• co-investment in a listed fund;
• co-investments in wholesale unlisted funds and partnerships; and
• co-investments in retail investor funds.
The following table summarises the key metrics for the property investments of the Group.
Ownership
stake
(%)
Charter Hall
investment
($m)
FY14
Charter Hall
investment
income
($m)
WALE
(in years)
Market
cap rate
(%)
Discount
rate
(%)
Minimum
rental
reviews
(%)
FY14
Charter Hall
investment
yield
(%)
listed Fund
Charter Hall Retail REIT (CQR)
Wholesale
Charter Hall Office Trust (CHOT)
Core Plus Office Fund (CPOF)
Core Logistics Partnership
(CLP)
Core Plus Industrial Fund (CPIF)
BP Fund 2 (BP2)
Keperra Square Fund (KS)
Retail Partnership No. 2 –
Bateau Bay (RP2)
BP Fund 1 (BP1)
Retail Investor Funds
Charter Hall Direct Property
Fund (CHDPF)
PFA Diversified Property Trust
(PFA)
Direct Industrial Fund (DIF)
Direct Industrial Fund No. 2
(DIF2)
Charter Hall Direct CDC Trust
(CHDCDC)
Funds being realised
Diversified Property Fund (DPF)
Charter Hall Umbrella Fund
(CHUF)
Total
10.2
14.3
9.9
19.1
11.7
100.0
35.1
20.0
16.8
4.2
0.1
0.2
0.3
129.2
129.2
555.4
172.9
116.9
84.8
72.2
48.4
22.2
20.7
17.3
32.7
11.0
0.2
0.2
0.3
24.0
21.0
19.6
24.2
2.5
1.8
0.7
719.8
10.4
10.4
34.9
13.2
7.9
4.1
4.6
0.2
2.0
1.6
1.3
1.0
0.8
–
–
–
0.2
1.4
0.2
1.2
47.7 1
7.4
7.4
6.9
5.8
6.4
10.9
8.4
12.0
4.0
3.7
10.3
6.1
4.3
3.2
11.3
12.3
12.7
7.6
5.5
8.0
7.6
1 Charter Hall Group co-investment income per Segment Note 3(a) of the financial report.
7.7
7.5
7.5
7.7
7.9
7.3
7.5
7.5
7.1
8.1
9.4
7.7
7.7
7.5
9.2
9.0
8.9
9.3
9.6
9.1
9.3
9.0
8.8
9.0
9.6
9.6
9.5
8.8
10.0
10.1
8.2
7.6
9.7
9.1
4.2
4.0
3.9
3.1
3.1
3.0
4.0
4.6
3.0
3.7
3.3
3.3
3.0
2.8
1.7
2.9
3.7
9.1
7.6
6.9
6.9
7.6
7.8
9.1
8.8
8.4
7.9
9.9
8.2
8.0
7.9
6.2
5.6
7.7
16 Charter Hall Group
Review and results of operations continued
Property Investments continued
A summary of the activities of each of the Group’s property
investments is provided below.
i. Listed fund
Charter Hall Retail REIT (CQR)
CQR’s strategy is to invest in neighbourhood and sub-regional
shopping centres anchored by Coles and Woolworths supermarkets
located in demographically diverse catchments across Australia.
CQR’s Australian supermarket-anchored portfolio comprises
77 properties.
CQR reported operating earnings per security of 29.6 cpu for the
year, representing growth of 3.0% on the prior year.
During the year, CQR completed the exit from its European
asset portfolio (including Germany, which was contracted in
July 2014) and raised a further $116.5 million of new equity from
an institutional placement in November 2013 and the Distribution
Reinvestment Plan. CQR redeployed the capital into four property
acquisitions totalling $252 million at an average yield of 7.6%, and
completed $83.6 million of redevelopments at Singleton Square,
South Hedland and Orange at a stabilised yield of 9.6%.
ii. Wholesale unlisted funds and partnerships
Charter Hall Office Trust (CHOT)
CHOT is an unlisted wholesale partnership which owns interests
in 18 high grade office assets located in major business districts in
Australia including the completed project at 171 Collins Street in
Melbourne and No.1 Martin Place, Sydney, which CHOT acquired
the residual 50% interest from third party investors in August 2013.
Charter Hall Group moved its Sydney head office into No.1 Martin
Place in March 2014.
Charter Hall Core Plus Office Fund (CPOF)
CPOF is an unlisted wholesale office fund which owns interests
in 16 high grade office assets located across the major Australian
CBD office markets.
CPOF currently has three development projects underway at
333 George Street, Sydney, 570 Bourke Street, Melbourne
and a 50% interest in the new Bank of Queensland building at
100 Skyring Terrace in Brisbane (in partnership with an institutional
partner). Total development capital expenditure commitments for
333 George Street and 570 Bourke Street are $142 million.
Core Logistics Partnership (CLP)
CLP is a wholesale industrial partnership which owns 13 assets
and is 98.0% occupied (excluding development land). The
partnership targets institutional grade properties with strong lease
covenants and a target portfolio WALE of greater than eight years.
CLP purchased $272 million of new assets in the year to 30 June
2014. This included Somerton Logistics Centre, AWH Tottenham,
Ancon Mt Druitt, Australia Post Chullora, Peters Mulgrave,
Manheim Smithfield and Woolworths Laverton.
Charter Hall Core Plus Industrial Fund (CPIF)
CPIF is an unlisted wholesale industrial fund which owns 32 assets
across Australia.
During the year, CPIF completed a $150.0 million equity raising and
acquired $199.0 million of properties.
BP Fund 1 (BP1)
BP1 is a wholesale investment trust which owns six freestanding
Bunnings Warehouse properties. The Group’s principal partner in
the fund is an Australian superannuation fund.
BP1 sold a portfolio of four assets in March 2014 for $67.6 million
to a new Charter Hall-managed syndicate.
BP Fund 2 (BP2)
BP2, a newly established fund, purchased a portfolio of Bunnings
properties in June 2014. The portfolio consists of one completed
investment property in Armadale, Perth and four investment
properties under development. All properties are leased to
Bunnings on new 12 year leases providing for average 3% per
annum increases.
On 18 August 2014 (post balance date), the Group brought a new
equity partner into BP2, reducing the Group’s equity interest to
50.1%. The Group received a $20 million return of capital.
Charter Hall Retail Partnership No.2 (RP2)
RP2 is an unlisted wholesale fund which owns the Bateau Bay
Square shopping centre on the Central Coast of New South Wales.
The Group’s principal external investor in the fund is a global
institutional partner.
Keperra Square Fund (KS)
The Keperra Square Fund is an unlisted wholesale fund which
owns the Keperra Square shopping centre in Brisbane. The
Group’s principal external investor in the fund is an Australian
superannuation fund.
Other wholesale unlisted funds, mandates and partnerships
The Group originates and manages segregated mandates for
direct property investments either in joint venture with funds
such as CPOF or CQR or as 100% owned assets by our clients.
The total property value of third party mandates is $1.3 billion.
iii. Retail investor funds
The Group manages equity raised from retail investors via advisers,
high net worth individuals and through direct distribution channels.
The Group in total has a $35.2 million investment in a range of
unlisted retail funds. The total FUM of these retail funds and single
asset syndicates is $1.7 billion.
Charter Hall Direct Retail Fund (DRF)
During the year, DRF sold its last two remaining investments,
a 50% interest in Home HQ, Nunawading, Victoria and a
direct interest in the Menai Central Shopping Centre in Menai,
New South Wales.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 17
Property Funds Management
The Property Funds Management business provides investment
management, asset management, property management,
development management, leasing and transaction services
to the Group’s $11.5 billion managed portfolio. The use of
an integrated property services model which earns fees from
providing these services to the managed portfolio enhances the
Group’s returns from capital invested. The Group also provides
services to segregated mandates looking to capitalise on its
property and funds management expertise. The Property Funds
Management business contributed $34.6 million in operating
earnings to the Group.
During the period, total funds under management increased
$1.2 billion to $11.5 billion. The Group’s managed funds have
acquired approximately $1.8 billion of property and divested
approximately $1.3 billion.
This segment also includes the activities of the Group’s 50%
interest in Commercial and Industrial Property Pty Limited (CIP),
an industrial development business. CIP contributed $3.75 million
to the Group’s earnings for the year.
Interests in development funds and
development properties
The Group has residual interests in development funds and
development properties. Investments in development funds and
development properties do not form part of the operating result
of the Group. These include:
• Charter Hall Opportunity Fund 4 (CHOF4). The fund’s eight
projects have been completed and capital returned to investors
(including $0.9 million received by the Group).
• Charter Hall Opportunity Fund 5 (CHOF5) has substantially
exited its remaining investments. The WorkZone development
reached practical completion in September 2013, and the
WorkZone West Tower was sold to a Charter Hall-managed
syndicate (the Charter Hall Direct WorkZone Trust). WorkZone
East is scheduled to be marketed for sale once the building
is substantially leased (currently at 50%). CHOF5 sold its
economic interest and shareholding in the Little Bay Cove
project and the project company, CHOF5 Little Bay Pty Limited,
to a wholly owned entity of the Development Alliance Partner,
TA Global. A portion of CHOF5’s proceeds are held in escrow
until the Plan of Subdivision is registered.
• A conditional contract for the sale of the development site at
685 La Trobe Street, Melbourne was exchanged in July 2014.
The Group has a 50% interest in this asset.
Significant changes in the state of affairs
Significant matters of the Group during the year, in addition to the
review of operations above, were:
• The Group established one new wholly owned wholesale fund,
BP2, and invested $50 million into it by 30 June 2014.
• The Group increased its investment in CLP by $71 million.
Matters subsequent to the end of the period
Since 30 June 2014, the Group has completed the following:
• The Group exchanged a conditional contract of sale for
685 La Trobe St.
• The Group introduced an equity partner into the BP Fund 2
on 18 August 2014. This reduced the Group’s equity interest in
this fund to $30 million (50.1%) and resulted in a loss of control
of the fund. No material gain or loss occurred as a result of
this transaction.
• On 8 September 2014, the Long WALE Investment Partnership
(LWIP), a newly established fund in which the Group has a
50% interest, exchanged a contract to purchase a $603 million
portfolio of properties from ALH Group Pty Ltd. The ALH
portfolio comprises 54 high quality hospitality assets, 46 of
which also include a Dan Murphy’s and/or a BWS retail tenancy.
LWIP has committed equity of $302 million which, together
with a $340 million non recourse debt facility from a syndicate
of two Australian banks, will fund the $603 million acquisition
due to complete at the start of October 2014. Charter Hall and
HOSTPlUS Pty Limited have each committed to an initial 50%
or $151 million equity investment to LWIP.
Except for the matters discussed above, no other matter or
circumstance has arisen since 30 June 2014 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
Business strategy and prospects
Charter Hall’s strategy is to use its specialist property expertise to
access, deploy and manage equity invested in Australian retail,
office and industrial portfolios. Charter Hall invests alongside our
partners to create value and provide superior returns for our clients
and Charter Hall securityholders.
Charter Hall manages $11.5 billion of Australian real estate and
derives approximately 61% of its operating earnings from its
$700 million property investment portfolio, with the remainder
being earned from property funds management services.
Charter Hall is well positioned to benefit from projected growth of
capital inflows from investors seeking property investments driven
by the attractive spreads between property yields and long-term
interest rates. During the last 12 months, Charter Hall has seen
positive equity flows across all sectors from listed, wholesale and
retail investors.
Property investment portfolio
The investment portfolio composition is primarily driven by
co-investment requirements where typically between 10 and 20%
of the equity in a fund is contributed by Charter Hall. In addition to
these co-investments, the Group may invest a higher proportion
in certain funds to reweight its investment portfolio and is currently
reviewing opportunities to increase the proportion of retail and
industrial investments and extend the overall WALE of its property
investment portfolio.
18 Charter Hall Group
likely developments and expected
results of operations continued
Property investment portfolio continued
The Group regularly reviews the performance of its investment
portfolio and relevant economic drivers and actively manages
performance at an asset level in each fund through its property
management services and at an investment portfolio level by
refinancing portfolios and recycling Charter Hall’s capital and
reinvesting into better performing investments.
The material business risks faced by the property investment
portfolio that may have an effect on financial performance include
interest rate risk, refinancing risk, lease defaults or extended
vacancies, portfolio concentration risks and changes in economic
or industry factors impacting tenants.
Property funds management platform
The Group manages investments on behalf of listed, wholesale
and direct investors and has strict policies in place to ensure that
appropriate governance procedures are in place to meet fiduciary
responsibilities and manage any conflicts of interest. Charter Hall
provides a suite of services including investment management,
asset management, property management, transaction services,
development services, treasury, finance, legal and custodian
services based on each fund’s individual requirements.
The Group regularly reviews investor requirements and preferences
for an investment partner in the Australian core real estate sectors
and transaction structures that would meet their requirements.
The material business risks faced by the property funds
management platform that may have an effect on the financial
performance of the Group include not delivering on investor
expectations leading to loss of FUM, loss of key personnel
impacting service delivery, economic factors impacting
non-annuity fee streams and portfolio and economic factors
impacting property valuations.
Information on Directors
Kerry Roxburgh
Chairman/Independent Non-Executive Director
Experience and expertise
Kerry joined the Board of the Charter Hall Group on 12 August 2005
and became Chairman in October 2005.
Kerry is a Practitioner Member of the Stockbroker Association
of Australia and holds positions on the boards of several listed
and unlisted companies. Currently, Kerry is the lead independent
non-executive director of Ramsay Health Care Ltd, a
non-executive director of the Medical Indemnity Protection Society
and of MIPS Insurance Ltd. He is Chairman of Tyro Payments Ltd
and of Tasman Cargo Airlines Ltd. He is also the Deputy Chairman
of Marshall Investments Pty Ltd. Kerry is also a member of the
Advisory Board of AON Insurance.
In 2000, Kerry completed a three year term as CEO of E*TRADE
Australia (a business that he co-founded in 1997), becoming its
Chairman until June 2007, when it was acquired by the ANZ Bank.
Prior to this, he was an executive director of HongKong Bank of
Australia Group, where for 10 years from 1986, he held various
positions including Head of Corporate Finance and Executive
Chairman of the group’s stockbroker, James Capel Australia.
Until 1986, Mr Roxburgh was in practice for more than 20 years
as a Chartered Accountant.
Kerry holds a Bachelor of Commerce degree, and an MBA.
Other current listed company directorships
Ramsay Health Care Ltd (since 1997)
Former listed company directorships in last three years
Nil
Special responsibilities
Chair of the Nomination Committee
Member of the Audit, Risk and Compliance Committee
Interests in securities
31,250 securities in Charter Hall Group
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 19
Anne Brennan
Independent Non-Executive Director
David Clarke
Independent Non-Executive Director
Experience and expertise
Anne joined the Board of Charter Hall Group on 6 October 2010,
and she is on the board of a number of other companies.
Anne is an experienced executive and has held senior
management roles in both large corporates and professional
services firms.
During Anne’s executive career, she was the CFO at CSR and the
Finance Director of the Coates Group. Prior to her executive roles,
Anne was a partner in three professional services firms: KPMG,
Arthur Andersen and Ernst & Young. She has more than 25 years’
experience in audit, corporate finance and transaction services.
Anne was also a member of the national executive team and a
board member of Ernst & Young.
Anne holds a Bachelor of Commerce (Honours) degree, is a Fellow
of the Institute of Chartered Accountants in Australia and a Fellow
of the Australian Institute of Company Directors.
Experience and expertise
David joined the Board of Charter Hall Group on 10 April 2014.
David has 35 years’ experience in investment banking, funds
management, property finance and retail banking. David was
Chief Executive Officer of Investec Bank (Australia) Limited from
June 2009 to July 2013. He was also a member of the Global
Operating Forum for the Investec Group (Investec Plc and Investec
Ltd) and a director of a number of Investec operating companies.
Prior to joining Investec Bank, David was the CEO of Allco
Finance Group and a director of AMP Limited, following five
years at Westpac Banking Corporation, where he held a
number of senior roles including Chief Executive of the Wealth
Management Business, BT Financial Group. David also was
previously an executive director at Lend Lease Corporation
Limited, and Chief Executive of MLC Limited, and prior to this
was Chief Executive Officer of Lloyd’s Merchant Bank in London.
Other current listed company directorships
Argo Investments Limited
Echo Entertainment Group Limited
Myer Holdings Limited
Nufarm Limited
Former listed company directorships in last three years
Nil
Special responsibilities
Member of Audit, Risk and Compliance Committee
(Acting Chair from 15 August to 7 November 2012)
Chair of Remuneration and Human Resources Committee
Interests in securities
30,000 securities in Charter Hall Group via direct and
indirect interests
David holds a Bachelor of Laws degree.
Other current listed company directorships
Austbrokers Holdings Limited
Former listed company directorships in last three years
Nil
Special responsibilities
Nil
Interests in securities
Nil
20 Charter Hall Group
Information on Directors continued
David Deverall
Independent Non-Executive Director
Experience and expertise
David joined the Board of the Charter Hall Group on 7 May 2012.
David is currently CEO of Hunter Hall International Limited, Australia’s
leading ethical funds management company. Prior to this, David
was the Managing Director and CEO of Perpetual Limited for eight
years and during this time he was also chairman of the peak wealth
management industry body, The Financial Services Council.
David has extensive experience in financial services, funds
management and strategy, having also been Group Head of Funds
Management and Head of Strategy at Macquarie Group.
David holds an MBA from Stanford University and a Bachelor
of Engineering (Mechanical) from the University of Sydney, and
is a member of the Australian Institute of Company Directors.
Other current listed company directorships
Hunter Hall International Limited
Former listed company directorships in last three years
Nil
Special responsibilities
Chair of the Audit, Risk and Compliance Committee
Member of the Nomination Committee
Interests in securities
33,720 securities in Charter Hall Group
Philip Garling
Independent Non-Executive Director
Experience and expertise
Philip joined the Board of the Charter Hall Group on
25 February 2013.
Philip has over 35 years’ experience in property and infrastructure,
development, operations and asset and investment management. His
executive career included nine years as Global Head of Infrastructure
at AMP Capital Investors and 22 years at Lend Lease Corporation
including five years as CEO of Lend Lease Capital Services.
Philip holds a Bachelor of Building from the University of NSW,
and has completed the Advanced Management Program at the
Australian Institute of Management, and the Advanced Diploma at
the Australian Institute of Company Directors. He is a Fellow of the
Australian Institute of Company Directors, the Australian Institute
of Building and the Institute of Engineers, Australia.
Other current listed company directorships
Downer EDI Limited
Former listed company directorships in last three years
Australian Renewable Fuels Limited (Chair)
DUET Group
Special responsibilities
Member of the Remuneration and Human Resources Committee
Member of the Valuations Committee
Interests in securities
6,297 securities in Charter Hall Group
David Harrison
Joint Managing Director/Executive Director
Experience and expertise
David joined Charter Hall in 2004 and has 27 years of property
market experience across office, retail and industrial sectors.
As Charter Hall Group’s Joint Managing Director, he is responsible
for all aspects of the Charter Hall business, with specific focus
on investment management, strategy, corporate transactions
and property investment activities. David is directly responsible
for overseeing the operation of the investment management
divisions, including the listed REITs, wholesale unlisted and
retail unlisted divisions, together with investor relations and
transactions. He shares responsibility with David Southon for the
Chief Financial Officer in relation to group finance, treasury and
capital management.
In the last eight years, David has overseen the growth of the
Charter Hall Group from $500 million to $11 billion of funds
under management. He has been principally responsible for
transactions exceeding $15 billion of commercial, retail and
industrial property assets across all the Group’s property sectors
over the past 23 years.
David also sits as an Executive Member on all Fund Boards and
Investment Committees and is a Fellow Member of the Australian
Property Institute (FAPI).
David holds a Bachelor of Business Degree (Land Economy) from
the University of Western Sydney and a Graduate Diploma in
Applied Finance from the Securities Institute of Australia.
Other current listed company directorships
Charter Hall Retail REIT (ASX: CQR)
Former listed company directorships in last three years
Charter Hall Office Management Limited for the Charter Hall Office
REIT (ASX: CQO) (CQO delisted on 1 May 2012)
Special responsibilities
Member of the Valuations Committee
Interests in securities
1,441,773 securities in Charter Hall Group via indirect interests.
1,443,071 performance rights, 59,649 service rights and 849,868
options in the Charter Hall Performance Rights and Options Plan;
performance rights, service rights and options also vest after
performance and service criteria are met.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 21
Peter Kahan
Non-Executive Director
Experience and expertise
Peter joined the Charter Hall Board in October 2009, following
an investment in Charter Hall by Gandel Group. He is a member
of the Remuneration and Human Resources Committee and the
Nomination Committee.
Peter is currently the Executive Deputy Chairman of Gandel Group
and has approximately 20 years of property and funds management
experience. He joined Gandel Group in 1994, became the Group’s
Finance Director in 2001 and was CEO from 2007 to 2012. Prior to
his time at Gandel Group, Peter worked as a Chartered Accountant
and held a range of senior financial roles in industry.
Peter was appointed a Non-Executive Director of CFS Retail
Property Trust (CFX) in April 2014. He is a member of CFX’s Audit
Committee and the Remuneration and Organisation Committee.
He is a member of the Institute of Chartered Accountants Australia
and the Australian Institute of Company Directors. He holds
Bachelor of Commerce and Bachelor of Accountancy degrees from
the University of The Witwatersrand Johannesburg, South Africa.
Other current listed company directorships
CFS Retail Property Trust
Former listed company directorships in last three years
Nil
Special responsibilities
Member of the Remuneration and Human Resources Committee
Interests in securities
Nil
Colin McGowan
Independent Non-Executive Director
Experience and expertise
Colin joined the Board of the Charter Hall Group on 6 April 2005.
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
(formerly SIA). He 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.
Other current listed company directorships
Nil
Former listed company directorships in last three years
Nil
Special responsibilities
Chair of the Valuations Committee
Member of the Remuneration and Human Resources Committee
Member of the Nomination Committee
Interests in securities
Nil
David Southon
Joint Managing Director/Executive Director
Experience and expertise
David is a co-founder of the Charter Hall Group and has over
27 years of property industry experience across the office,
industrial and retail sectors. As Charter Hall Group’s Joint
Managing Director, he is responsible for all aspects of the
Charter Hall business, with direct responsibility for overseeing the
operation of the property and support services divisions including
office, industrial and retail property services; people, brand and
community; legal/company secretariat; and technology, as well as
strategic involvement in project origination and direction. He shares
responsibility with David Harrison for the Chief Financial Officer in
relation to group finance, treasury and capital management.
David is an Executive Director on the Charter Hall Group Board,
the Board of the Responsible Entity for Charter Hall Retail REIT,
as well as the Responsible Entity Board of the Charter Hall Direct
Funds. He is also a Non-Executive Director on the Board of
Commercial Industrial Property (CIP), a member of the Charter Hall
Diversity Committee, and a member of the investment committee
of Charter Hall Opportunity Fund No.5, as well as the Valuation
Sub Committee.
David is a member of the Board of Advisors NSW for the Property
Industry Foundation (PIF) and is a Fellow of the Australian Property
Institute (FAPI).
David holds a Bachelor of Business Degree (Land Economy).
Other current listed company directorships
Charter Hall Retail REIT (ASX: CQR)
Former listed company directorships in last three years
Charter Hall Office Management Limited for the Charter Hall Office
REIT (ASX: CQO) (CQO delisted on 1 May 2012)
Special responsibilities
Alternate Member of the Valuations Committee
Interests in securities
1,880,612 securities in Charter Hall Group via direct interests.
1,212,584 performance rights, 58,511 service rights and
1,175,122 options in the Charter Hall Performance Rights and
Options Plan; performance rights, service rights and options also
vest after performance and service conditions are met.
Tracey Jordan
Company Secretary
Tracey Jordan was appointed Company Secretary of the
Charter Hall Group on 19 November 2012. Tracey has more
than 24 years’ experience in real estate and funds management,
with extensive knowledge of real estate transactions, structuring,
funds management, compliance and corporate governance.
Prior to joining Charter Hall, Tracey was National Manager,
Unlisted Property Funds, and Senior Legal Counsel at Stockland.
Tracey was also a Senior Associate for King & Wood Mallesons
in their Canberra office in the Property and Projects division from
1999 to October 2005.
Tracey is a Solicitor of the Supreme Court of NSW, and has been
admitted to the Supreme Court of the Australian Capital Territory
and the High Court of Australia. She holds a Bachelor of Arts and
a Bachelor of Laws degree from the University of Sydney.
22 Charter Hall Group
Meetings of Directors
The numbers of meetings of the Group’s Board of Directors and of each Committee of the Board held during the year ended 30 June 2014,
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
AND HR
COMMITTEE
VAlUATION
COMMITTEE
A
12
12
3
12
12
12
12
12
12
B
12
12
3
12
12
12
12
12
12
A
6
6
*
5
*
*
*
*
*
B
6
6
*
6
*
*
*
*
*
A
8
*
*
8
*
*
8
*
*
B
8
*
*
8
*
*
8
*
*
A
*
6
*
*
6
*
6
6
*
B
*
6
*
*
6
*
6
6
*
A
*
*
*
*
2
2
*
2
2
B
*
*
*
*
2
2
*
2
2
K Roxburgh
A Brennan
D Clarke
D Deverall
P Garling
D Harrison
P Kahan
C McGowan
D Southon
A = Number of meetings attended.
B = Number of meetings held during the time the Director held office or was a member of the stated Committee during the year.
* = Not a member of the stated Committee.
letter from the Remuneration and Human Resources Committee Chair
Dear Securityholder
Charter Hall Group is pleased to present its Remuneration Report for the year ended 30 June 2014.
Charter Hall has had another active year executing its strategy of accessing, deploying, managing and investing equity into Australian
real estate to deliver a 10.4% increase in operating earnings per security to 25.3cpc or $81.2 million and a 15% increase in funds under
management to $11.5 billion.
The Group achieved budgeted OEPS of 25.2 consistent with the results achieved for the year. Senior executives were rewarded under the
Short Term Incentive Plan. Senior executives were also rewarded under the 2011 Performance Rights and Options Plan, the Group’s long
term incentive plan, which vested on 1 July 2013 based on the achievement of absolute and relative total securityholder return hurdles.
We were pleased to have renegotiated the Joint Managing Directors’ contracts during the year following approval from securityholders at
the 2013 Annual General Meeting. As part of these renewals, and in line with the Group’s growth strategy, the Joint Managing Directors
were awarded a one off special LTI grant (details outlined in the Report), and David Harrison’s remuneration mix was adjusted, increasing
the ‘at-risk’ component of his remuneration package.
Securityholder support for the Remuneration Report has been strong in recent years and we believe this year’s Report again
demonstrates the alignment between performance, remuneration and securityholder interests.
On behalf of the Board, I invite you to review the full Report and thank you for your continued interest and support.
Yours sincerely
Anne Brennan
Chair, Remuneration and Human Resources Committee
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 23
Actual remuneration received in Fy14 – unaudited
The actual remuneration presented in the following table provides the remuneration that Reported Executives received during the financial
year ended 30 June 2014. This voluntary disclosure, provided to increase transparency, includes:
• Fixed pay and other benefits for FY14
• 2013 cash STI paid during FY14; and
• The value of any LTI award that vested during FY14.
The actual remuneration presented is distinct from the disclosed remuneration in the Remuneration Report on page 34, which is
calculated in accordance with statutory obligations and accounting standards and therefore includes accounting values for current and
prior years’ LTI grants which have not been (and may or may not be) received as they are dependent on performance hurdles and service
conditions being met.
2014
SHORT-TERM BENEFITS
POST-
EMPlOyMENT
BENEFITS
SHARE-BASED
BENEFIT
OTHER
Salary
and fees
$
Short-term
incentive
$
Super-
annuation
$
Value of
securities
vested 1
$
Non-
monetary
benefits 2
$
% of
remuneration
consisting of
rights
%
Total
$
Name
Executive Directors
D Harrison
D Southon
1,062,225
1,062,225
392,486
385,000
17,775
17,775
1,330,889
1,330,889
40,098
30,498
2,843,473
2,826,387
Other Reported Executives
P Altschwager 3
S Dundas
R Stacker 4
A Taylor
Former Reported Executives
N Devlin 5
T Jordan 5
N Kelly 5
A Glass 6
682,683
466,225
466,225
612,202
295,523
282,095
443,812
324,352
210,000
122,222
122,222
173,333
76,389
46,400
117,000
106,167
17,775
17,775
17,775
17,775
17,775
17,775
17,775
13,331
478,473
197,432
627,329
493,216
72,466
–
278,020
324,352
–
–
–
–
–
–
–
–
1,388,931
803,654
1,233,551
1,296,526
462,153
346,270
856,607
768,202
Totals
5,697,567
1,751,219
173,306
5,133,066
70,596
12,825,754
46.8
47.1
34.4
24.6
50.9
38.0
15.7
–
32.5
42.2
40.0
1 Values relate to value at vesting date for the 2011 LTI allocation which vested on 1 July 2013.
2 Non-monetary benefits include motor vehicle costs and car parking benefit.
3 P Altschwager was awarded a sign-on incentive of 260,054 service rights to the value of $485,000 when he joined the Group in February 2012. The rights
4
vested 50% (130,027) on 31 December 2012 to the value of $425,188, with the remainder vesting on 31 December 2013 to the value of $478,473.
In December 2012 R Stacker was awarded 270,000 service rights vesting in three equal tranches. 90,000 rights vested on 31 December 2013 to the value of
$331,182, with the remainder vesting on 31 December 2014 and 31 December 2015.
5 Employees ceased as Key Management Personnel (KMP) effective 10 February 2014, but remain employed by Charter Hall. Remuneration shown is for the
full financial year.
6 Ceased employment with Charter Hall and ceased as a KMP on 13 February 2014. Remuneration is pro-rated for the period 1 July 2013 to 13 February 2014.
As required by Section 308(C) of the Corporations Act (2001) (the Act), the full audited remuneration report from page 24 of this
Annual Financial Report provides more detail on Charter Hall’s remuneration strategy, components and outcomes.
24 Charter Hall Group
Remuneration Report – audited
This Remuneration Report outlines Charter Hall’s remuneration policies and practices together with the details and outcomes of the
specific remuneration arrangements that apply to Charter Hall’s Key Management Personnel (KMP) for the year ended 30 June 2014.
The Report has been prepared in accordance with Section 300A of the Act and the information provided has been audited, as required
by section 308(3C) of the Act.
1. Executive remuneration governance and structure
1.1 Governance
The Remuneration and Human Resources Committee (Committee) provides advice and recommendations to the Board on:
• the Group’s Human Resources strategy;
• criteria for reviewing the performance of the Joint Managing Directors (JMDs);
• remuneration framework and policy for senior executives;
• fixed annual remuneration and incentive outcomes for senior executives;
•
• any other remuneration matters that relate to executives; and
• remuneration policies and fees for Non Executive Directors (NEDs) and Committee members.
incentive plans for all employees;
The Committee is appointed by the Board and is comprised solely of Non-Executive Directors, as follows:
• Anne Brennan (Chair of the Committee);
• Colin McGowan;
• Peter Kahan; and
• Philip Garling.
Other Directors, the JMDs and the Head of People, Brand and Community attend Committee meetings by invitation. Specialist external
consultants attend as required. A minimum of two Committee members are required for a quorum. The member’s attendance is set out
at page 22. The Committee’s Charter is available on the Group website at www.charterhall.com.au.
1.2 External advisers and remuneration consultants
Where necessary, the Committee seeks advice from independent experts and advisers. Remuneration consultants provide advice on
executive remuneration structure and consistency with comparable roles in the market. Other external advisers (including legal practitioners)
assist with the administration of the Group’s remuneration plans and ensure that the appropriate legal parameters are applied.
The Committee follows a protocol governing the appointment of remuneration consultants and the manner in which any
recommendations are made by those consultants to ensure there is no undue influence by management.
The advice and recommendations of external advisers are used as a guide only and do not serve as a substitute for thorough consideration
of the issues by the Committee. The Committee takes a number of factors including market practice and Group strategic objectives into
account when providing advice and recommendations to the Board. The Board has ultimate decision making authority over matters of
remuneration structure and outcomes for the Group.
During the period, the Committee consulted with the following external advisers – Ernst & Young, Deloitte and Herbert Smith Freehills.
These advisers did not provide any remuneration recommendations to Charter Hall as defined by the Act.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 25
1.3 Key Management Personnel
Key Management Personnel (KMP) has been revised to reflect the management group responsible for driving group investment strategy,
effective 10 February 2014. Following this revision, Natalie Devlin (Head of People, Brand and Community), Tracey Jordan (Group General
Counsel and Company Secretary) and Nick Kelly (Head of Investor Relations) cease to be considered KMP. Executive Directors and
Executives listed in the table below are referred to in this Remuneration Report as ‘Reported Executives’.
Movement during 2014
Appointed 10 April 2014
Name
Non-Executive Directors
Kerry Roxburgh
Anne Brennan
David Clarke
David Deverall
Philip Garling
Peter Kahan
Colin McGowan
Executive Directors
David Harrison
David Southon
Reported Executives
Paul Altschwager
Scott Dundas
Richard Stacker
Adrian Taylor
Role
Chairman
Director
Director
Director
Director
Director
Director
Joint Managing Director
Joint Managing Director
Group Chief Financial Officer
Fund Manager, Charter Hall Retail REIT (CQR)
Head of Direct Property
Head of Wholesale
Former Reported Executives
Andrew Glass
Head of Wholesale Pooled Funds
Natalie Devlin 1
Tracey Jordan 1
Nick Kelly 1
Head of People, Brand and Community
Group General Counsel and Company Secretary
Head of Investor Relations
1 No longer KMP as of 10 February 2014.
Ceased employment with Charter Hall
on 13 February 2014
1.4 Decisions and actions taken during 2014
1.4.1 Remuneration framework changes for 2014
The Committee ensures that remuneration policies balance Charter Hall’s performance objectives and stakeholder expectations. Whilst
stability in the remuneration structure is important, where modifications can be made to optimise stakeholder alignment and incentivise
performance, the Committee actively considers such changes.
The following changes were implemented in 2014:
Component
Change
Short Term Incentive (STI)
•
• Reweighted key performance indicators (KPIs) from 67% financial and 33% non-financial to
50% financial and 50% non-financial to increase focus on strategic business matters and in
recognition of 95% financial gateway.
Increased the STI pool available for Group outperformance such that, at 120% of budgeted
operating earnings per share (OEPS), 150% of the STI pool is available (increased from 125%)
to be market competitive.
Increased the amount available for individual outperformance at stretch (cap increased from
125% to 150% of target STI).
•
• S Dundas, CQR Fund Manager, received the deferred portion of his STI in CQR units rather
than CHC securities.
26 Charter Hall Group
Remuneration Report – audited continued
1. Executive remuneration governance and structure continued
1.4.2 Remuneration outcomes in 2014
The following decisions were taken on remuneration outcomes in 2014:
Action
JMD contracts
Explanation
• The JMDs’ contracts were renewed in November 2013. The new contracts increased the
length of their notice periods and introduced new restraint provisions.
• A one off award of performance rights under a special LTI arrangement was made in
consideration for these changes. David Harrison was awarded 300,000 rights and
David Southon 100,000. The performance rights are due to vest on 4 October 2016,
subject to both service and performance conditions, including normal LTI vesting hurdles.
JMD fixed remuneration
• Fixed remuneration for the JMDs increased by 3.0% for 2014. This was the first increase
since 2011.
Executive fixed remuneration
• Fixed remuneration for Reported Executives and other Senior Executives increased by
STI awarded to the JMDs
an average of 4.0%. There were no increases in fixed remuneration in 2013.
•
In 2014, the Group achieved 100% of budgeted OEPS, exceeding the required gateway for
STI of 95% of budgeted OEPS. Based on their individual KPI achievement, David Harrison
received 115% of his on-target STI and David Southon received 115% of his on-target STI.
STI awarded to Reported Executives •
In 2014, Group achieved 100% of budgeted OEPS, exceeding the required gateway
for STI of 95% of budgeted OEPS. Reported Executives were awarded STI based on
their KPI achievement. The average STI awarded to Reported Executives was 114%
(excluding the JMDs).
STI deferral
• One third of STI awarded to the JMDs and Reported Executives, together with any award
above 100% of target, is converted into service rights vesting equally over two years.
$1,319,909 of the total $3.3 million FY14 STI awarded was deferred with vesting dates
of 31 August 2015 and 31 August 2016.
LTI vesting
• The Absolute TSR Hurdles (12% compound average growth rate over three years) and the
General Employee Securities Plan
•
Relative TSR (1.1 times A-REIT Index) for the 2011 PROP grant were achieved on 1 July 2013
having achieved a compound average growth rate of 34%.
In 2014, a second grant offer under the General Employee Securities Plan (GESP) was made
to encourage greater employee ownership in Charter Hall. Under Employee Share Scheme
legislation (Division 83A (ITAA 97)), this plan offers an annual gifting of up to $1,000 of CHC
securities each to permanent employees who have completed their probationary period and
are not current participants of another equity plan. The aggregate value of the 2014 GESP
was $256,383, booked in operating earnings.
Directors’ fees
• Non-Executive Director (NED) base and committee fees increased by 3.0%. This was the first
increase since 2011.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 27
1.5 2014 Remuneration philosophy and guiding principles
Charter Hall’s remuneration philosophy is aimed at rewarding outperformance. This is achieved by attracting and retaining talented
people who are motivated to achieve challenging performance targets aligned with both the business strategy and the long-term
interests of securityholders.
The following illustrates the link between business strategy and remuneration outcomes:
CHARTER HAll BUSINESS STRATEGy
To access, deploy, manage and co-invest equity to create value and provide superior income and capital returns for our clients and
securityholders through:
• delivering top quartile returns vs A-REIT 200;
• recycling equity into higher yielding investments;
• growing sustainable earnings;
• developing scalable and efficient platform;
• recruiting, retaining and motivating a high performance team; and
• maintaining a through the cycle OEPS growth range of 5-7%.
CHARTER HAll REMUNERATION STRATEGy
Create sustainable securityholder value by:
• assessing performance and STI outcomes against
financial and non-financial KPIs linked to strategy;
• deferring a portion of STI into equity for the JMDs and
Senior Executives;
• aligning LTI performance hurdles with securityholders’
expected returns; and
• ensuring a significant ‘at-risk’ component of
total remuneration.
CHARTER HAll REMUNERATION COMPONENTS
Attract, retain and motivate talent by:
• rewarding superior performance;
• offering competitive total remuneration;
• creating retention mechanisms; and
• ensuring remuneration strategy is simple,
transparent and consistent.
Fixed
STI
lTI
• Comprises cash salary, superannuation
and packaged benefits.
• Gateway of 95% of budgeted OEPS for
STI for JMDs and Senior Executives.
• Reflects responsibilities, performance,
qualifications and experience.
Is reviewed annually.
•
• Size of the STI pool is linked to the
achievement of budgeted OEPS.
• Each Executive has an STI target, and
the opportunity to earn up to 150%
of target for individual outperformance.
Individual STI outcomes are linked
to KPIs which include performance
targets of the Group, Division
and individual.
•
• Deferral of one-third of any STI
awarded and any amount over 100%
into service rights over two years.
• Clawback on unvested deferred STI
for material misstatement; financial
misrepresentation and Board discretion
on performance.
• LTI targets have direct links to
securityholder value creation.
• Performance measures based on
Relative and Absolute TSR performance.
• Delivered as performance rights
with a three year performance
measurement period.
• Capped at 10% of fully diluted
securities on issues.
• Clawbacks on unvested LTI for material
misstatement, financial misrepresentation
and Board discretion on performance.
28 Charter Hall Group
Remuneration Report – audited continued
2. Executive remuneration components and outcomes
Executive remuneration is structured as a mixture of fixed and variable ‘at-risk’ STI and LTI components. While fixed remuneration is
designed to provide a base level of remuneration, the STI and LTI components reward executives when challenging measures are met
or exceeded.
The components of the JMDs’ remuneration are substantially the same as those of the other executives. However, there are differences in
the quantum, delivery and timing for the JMDs due to the particulars of their responsibilities and the central role they play in implementing
the strategic direction of the Group. Where the JMDs’ remuneration approach differs from that of other Reported Executives
remuneration, it is noted below.
2.1 Remuneration mix
The table below represents the on target remuneration mix for Reported Executives in 2014.
On target Remuneration Mix
2014
David Harrison, JMD
David Southon, JMD
Paul Altschwager, CFO
Other Reported Executives
NOT ‘AT-RISK’
‘AT-RISK’
Fixed
remuneration
STI
LTI 1
41.0%
45.0%
50.0%
60.0%
29.5%
27.5%
25.0%
25.0%
29.5%
27.5%
25.0%
15.0%
1 Remuneration mix shown excludes the one-off LTI awards made to the JMDs as part of their contract renewal and the service rights awarded to
Richard Stacker in 2012.
2.2 Fixed remuneration
Composition
Review process
JMDs
Other Reported Executives
Fixed remuneration comprises cash base salary, statutory superannuation contributions
and other nominated benefits (such as car parking, novated leases and additional
superannuation contributions).
Fixed remuneration is targeted at the median of the market and is reviewed annually,
effective 1 July, benchmarked against equivalent roles in the market, recognising:
•
• the competitive market environment for each individual’s skills and capabilities.
individual performance; and
Given the unique nature of the JMD roles, the Board references the average remuneration paid
to the comparator group CEOs and the ‘next highest paid senior executive’ (excluding the CFO)
when setting their remuneration.
The following comparator groups are used when determining JMD remuneration:
•
industry related companies: based on entities in the S&P/ASX 200 Australian Real Estate
and Investment Trust (A-REIT) industry group; and
• market capitalisation group: based on S&P/ASX 200 companies within 50% to 200%
of Charter Hall’s market capitalisation.
The JMDs’ fixed remuneration increased by 3.0% in 2014.
The following comparator groups are used when determining Executive remuneration:
•
industry remuneration surveys (AonHewitt Property Industry and Financial Institutions
Remuneration Group).
Fixed remuneration for other Reported Executives increased by an average of 4.0% in 2014.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 29
2.3 Short Term Incentives (STI)
Purpose
The STI is an ‘at-risk’ incentive awarded annually and is designed to reward executives subject to performance
against agreed financial and non-financial Key Performance Indicators (KPIs).
Gateway for JMDs
and other Reported
Executives
Determining the
STI pool
A Group financial gateway of 95% of budgeted OEPS exists before any STI entitlement is available to the JMDs
and other Reported Executives, with the Board retaining overall discretion on performance achievement.
The size of the pool is determined by the Board, upon advice from the Remuneration and Human Resources
Committee, based on achieving a budgeted OEPS number. The Board retains discretion to increase or decrease
the overall STI pool available, based on its assessment of the overall performance throughout the year. In 2014,
the available Group STI pool of $10.8 million was fully awarded.
Performance
targets
The STI measures are set to ensure appropriate focus on achievement of Group, Divisional and individual
performance targets that are aligned with implementation of Charter Hall’s overall strategy.
KPIs are split 50% financial and 50% non-financial, based on a Balanced Scorecard approach which encourages
executives to take a holistic approach to enhancing and protecting securityholder value.
Delivery
For JMDs and Reported and Senior Executives STI is delivered in the form of cash (67%) and service rights (33%),
with any Award over 100% target also deferred into service rights.
Short term
performance
2014 STI
assessment –
JMDs
Service rights are deferred over two years, with 50% deferred for one year and 50% for two years. The number of
rights granted to an executive is determined based on an independent fair value calculation by Deloitte using the
Black Scholes valuation method. If an Executive’s employment terminates prior to expiry of the relevant 12 month
period, the equity rights will be forfeited.
The value of FY14 STI deferred into service rights for JMDs and Senior Executives was $1,319,909
($908,695 in 2013).
In 2014, Charter Hall’s operating earnings per security (OEPS) was 25.3 cents, which was a 10.4% increase from
the 2013 OEPS and exceeded budgeted OEPS.
In consultation with the Committee, the Board assesses the Group’s financial performance and the performance
of the JMDs against agreed KPIs. The Board retains the discretion to increase or decrease the overall STI
awarded, based on its assessment of the overall performance throughout the year. In 2014, the Group exceeded
the budgeted OEPS target and the financial gateway of 95% of budget OEPS. The JMDs’ KPI achievement for
2014 is summarised below:
David Harrison
MEASURE
KPI
Financial
50%
Including OEPS at the Group level, domestic fund growth, operating
earnings before interest, tax, depreciation and amortisation; margin
for funds management.
Non-financial
50%
Partner measures (20%) – including partner/stakeholder relationships,
and improving the investor satisfaction score.
People measures (20%) – including embedding new executive structure,
employee engagement initiatives and effective joint leadership.
Operational excellence measures (10%) – including reporting
improvements and investment management succession plan.
David Southon
MEASURE
KPI
Financial
50%
Including OEPS at the Group level, operating earnings before interest,
tax, depreciation and amortisation; margins across property service
divisions and service improvements.
Non-financial
50%
Partner measures (10%) – including improved investor satisfaction and
stakeholder relationship plans.
People measures (20%) – including embedding new executive structure,
employee engagement initiatives and effective joint leadership.
Operational excellence measures (20%) – including sponsorship
of organisation change targets and driving operational efficiencies.
STATUS
Exceeded
Exceeded
Mainly achieved
Achieved
STATUS
Exceeded
Achieved
Mainly achieved
Exceeded
30 Charter Hall Group
Remuneration Report – audited continued
2. Executive remuneration components and outcomes continued
2.3 Short Term Incentives (STI) continued
2014 STI
assessment –
other Reported
Executives
KPIs for Senior Executives, which are summarised below, are broadly similar to those of the JMDs and are
focused on individual areas of accountability:
MEASURE
KPI
Group Financial 25%
Including Group OEPS.
Divisional Financial 25%
Including investment earnings, fund growth; operating earnings before interest,
tax, depreciation and amortisation and funds management margin.
Non-financial 50%
Partner measures (20%) – including improved investor satisfaction and client
relationship initiatives.
People measures (20%) – including Group engagement initiatives, contribution
to Executive Team, turnover reduction and professional growth of team.
Operational excellence measures (10%) – including achievement of organisation
change targets, embedding new operating model and Divisional initiatives.
Table 2.3 Reported Executive STI outcomes for 2014 (statutory accounting)
Name
Executive directors
D Harrison
D Southon
Other key management personnel
P Altschwager
S Dundas
R Stacker
A Taylor
Former key management personnel
N Devlin 1
T Jordan 1
N Kelly 1
A Glass 2
STI
earned
$
Paid in
cash
$
Deferred into
performance
rights
$
Target
STI % of
fixed pay
%
STI earned
compared
to Target
%
Forfeited
STI
%
885,500
759,000
515,900
442,200
369,600
316,800
350,229
226,875
262,166
301,664
158,990
125,000
198,958
113,688
234,653
135,116
135,116
179,646
88,769
83,750
133,302
113,688
115,576
91,758
127,050
121,998
70,221
41,250
65,656
–
71%
61%
50%
42%
42%
42%
42%
42%
42%
42%
115%
115%
100%
113%
130%
113%
120%
100%
100%
80%
0%
0%
0%
0%
0%
0%
0%
0%
0%
20%
1 Ceased as KMP effective 10 February 2014, however, STI shown represents the full financial year to 30 June 2014 in order to accurately represent the full
deferred component for the year.
2 Ceased employment with Charter Hall and ceased as a KMP on 13 February 2014. Amount paid is 80% of target for the period 1 July 2013 to 13 February 2014.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 31
2.4 Long Term Incentives (LTI)
Purpose
The LTI aligns key employee rewards with sustainable growth in securityholder value over time.
It also plays an important role in employee retention.
Participants
Reported Executives, Senior Executives, Fund Managers and selected other managers.
Type of equity awarded
Valuation
Performance hurdles
(equally weighted) and
vesting schedule
Rationale for performance
conditions
The LTI is governed by the Performance Rights and Options Plan (PROP), under which either
rights or options to securities are granted to participants. From 2012, all grants under the PROP
comprised Performance Rights only (i.e. no Options). Each Performance Right entitles the
participant to one stapled security in the Charter Hall Group for nil consideration at the time of
vesting subject to meeting the performance hurdles outlined below.
Details of specific grants made to Reported Executives for 2014 are provided in Section 5
of the Report.
The number of rights granted to an executive is determined based on an independent fair value
calculation by Deloitte using the Black Scholes valuation method.
For the 2014 LTI allocation, the two performance hurdles that apply to the Performance Rights for
vesting over a three year period commencing 1 July 2013 were:
• Absolute TSR (50%) – vesting occurs on a linear basis if the compound total return is
between 10% and 13% per annum, with 50% vesting at the lower end of the range and 100%
vesting at the higher end of the range.
• Relative TSR (50%) – vesting occurs on a linear basis if the total compounded return is between
the S&P/ASX 200 A-REIT Accumulation Index (XPJAI) and 1.10 times that number. Vesting starts
at 50% at the lower end of the range and 100% will vest at the higher end of the range.
Any Performance Rights that fail to meet these performance hurdles by 1 July 2016 will lapse.
Charter Hall’s approach to linking individual executive performance and Group performance to
the vesting of equity rights is in line with market practice. The conditions are aimed at linking the
retention and remuneration of the executive directly to securityholder returns.
TSR measures the overall returns that a company has provided for its securityholders, reflecting
share price movements and reinvestment of dividends over a specified period.
Absolute TSR provides the strongest link to Charter Hall’s business strategy of co-investing in
managed funds with absolute and total return hurdles.
Relative TSR is the most widely used LTI hurdle adopted in Australia and ensures that value is
only delivered to participants if the investment return actually received by CHC securityholders
is sufficiently high relative to the return they could have received by investing in a portfolio of
alternative A-REIT sector stocks over the same period.
Cessation of employment
provisions
For the 2014 LTI allocation, the following provisions apply in the case of cessation of a
participant’s employment:
• misconduct: all unvested Performance Rights are forfeited unless the Board
determines otherwise;
• resignation or where a participant breaches a post-termination restriction in their
employment contract: all unvested Performance Rights are forfeited unless the Board
determines otherwise; and
• all other leavers: all unvested Performance Rights lapse with effect from the date of cessation
of employment, unless the Board allows part or all to vest early or remain on foot subject to the
original terms of grant.
There are no change of control provisions for grants prior to 2013. From the 2013 grant onwards
the Board, in its absolute discretion, may determine that all or a specified number of a participant’s
unvested Performance Rights vest. In doing so, the Board has regard to whether the performance
is in line with the Performance Conditions over the period from the date of the grant of the
Performance Right to the date of the relevant event.
Participants who hold Performance Rights/Options are not entitled to receive any distributions or
dividends declared by the Group until the Performance Rights/options are exercised and held as
stapled securities.
Change of control provisions
Treatment of dividends on
unvested securities
Hedging and margin lending
prohibitions
In accordance with the Corporations Act 2001, all key management personnel are prohibited from
hedging or otherwise protecting the value of unvested securities.
32 Charter Hall Group
Remuneration Report – audited continued
2. Executive remuneration components and outcomes continued
2.4 Long Term Incentives (LTI) continued
Additional once only special
lTI grant for JMDs
Following securityholder approval, as part of their contract renewal effective 4 November 2013,
the JMDs received a one off allocation of three year performance rights. D Harrison received
300,000 performance rights and D Southon 100,000 performance rights.
The vesting of these performance rights is subject to both service and performance conditions
over the three year period:
• Absolute TSR Performance – measured over a performance period from 1 July 2013
to 30 June 2016;
• Relative TSR Performance – measured over a performance period from 1 July 2013
to 30 June 2016; and
• Annual Milestones – set annually and measured over a performance period from 4 October
2013 to 4 October 2016.
long-term performance
outcomes
The following graph demonstrates how the Company’s TSR (including share price movements and
dividends) has performed relative to the ASX A-REIT Accumulation Index since June 2010:
CHC
A-REIT Accumulation Index
250%
200%
150%
100%
50%
0%
Three year performance in respect of Performance Rights and Options Plan (PROP)
Jun
10
Jun
11
Jun
12
Jun
13
Jun
14
Relative performance
Absolute performance
For the three years to June 2014, Charter Hall has outperformed its peers in the S&P/ASX 200
A-REIT Accumulation Index by 16% per annum, with Charter Hall returning a compound average
growth rate of 34% per annum, compared to the index performance of 18% per annum.
For the three years to June 2014, Charter Hall has achieved a compound average growth rate of
34%. This is based on a weighted average security price (VWAP) of $2.15 for the month of July
2011, a 30 June 2014 closing security price of $4.26 and cumulative distributions over the three
years of 61 cents. This performance is in excess of the absolute TSR outperformance hurdle of
12% and ahead of the performance of the S&P/ASX 200 A-REIT Accumulation Index of 16% over
the same period.
lTI outcomes
The LTI vesting conditions for the Reported Executives provide a clear link to long term total
securityholder returns of Charter Hall.
The following LTI outcomes occurred in 2014:
• 2011 PROP – The first tranche of the 2011 PROP had a vesting date on 1 July 2012, by which
date Charter Hall had not met the target performance hurdles. Under the plan rules, any rights
or options that did not vest on the first vesting date were retested with the second tranche on
its vesting date of 1 July 2013. Both tranches vested on the retest date. Re-testing does not
apply from the 2012 PROP.
Further details of LTI grants under the PROP are set out in Section 5 of this Report.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 33
2.5 Group performance and Total Remuneration Outcomes
The tables below provide information on Charter Hall’s performance against key metrics over the last five years and the relationship to
Reported Executive Total Remuneration, both fixed and ‘at-risk’. Charter Hall’s STI is weighted towards growth in operating earnings per
security (OEPS) and the LTI provides an important link between remuneration and TSR.
Table 2.5.a. Charter Hall five year performance
Key Performance Metrics
Statutory Earnings per Security (cps)
Statutory Net Profit after Tax ($’000s)
OEPS before specific items 1
Growth/(Decline) in OEPS before specific items
on prior year (%)
Operating Profit before specific items ($’000s)
Total Distribution per Security (cps)
Security price at 30 June
S&P/ASX 200 A-REIT Accumulation Index (XPJAI) (%)
Total Securityholder Return/(Loss) – Jul-Jun (%)
2010
3.22
6,840
16.83
(44.70)
35,781
12.8
2.40
20.41
26.40
2011
17.85
52,338
20.60
22.40
60,422
16.5
2.15
5.84
(3.50)
2012
5.64
16,678
21.51
4.40
63,586
18.2
2.27
11.71
14.00
2013
18.29
54,842
22.93
6.60
68,750
20.2
3.87
24.31
80.60
2014
25.61
82,116
25.31
10.38
81,163
22.3
4.26
11.06
16.30
1 A key performance metric for the Group, operating earnings per security (OEPS), before specific items, was 25.31 cents, which represented an increase of
10.4% on the prior corresponding period. There were no specific items in either 2013 or 2014.
Table 2.5.b. Reported Executives’ total remuneration
Remuneration Summary
Fixed payments ($)
STI accounting expense ($)
LTI accounting expense ($) 1
Earned remuneration ($) 2
On target total remuneration ($) 3
2010
2011
2012
2013
2014
3,991,129
3,194,100
794,115
7,979,344
7,268,548
6,236,089
1,640,944
1,866,842
9,743,875
11,238,415
5,513,308
354,2944
1,680,857
7,548,459
9,350,464
5,978,392
2,659,913
2,369,843
11,008,148
11,216,962
6,122,898
3,381,549
2,169,193
11,674,140
11,984,905
Earned remuneration relative to target remuneration
– Over/(Under) (%)
10%
(13%)
(21%)
(2%)
(3%)
1 The LTI expense attributed to the Reported Executives reflects the statutory accounting expense under AASB 2.
2 Earned remuneration for the Reported Executives is the sum of their Fixed Payments, the STI accounting expense and the LTI accounting expense.
3 On-target remuneration for 2014 reflects full year on-target remuneration for all currently employed Reported Executives and pro-rated on-target
remuneration for A Glass, whose employment terminated on 13 February 2014. The 2013 and 2014 figures include special LTI for R Stacker and the 2014
figure includes special one-off grant of LTI to D Harrison and D Southon.
In 2012, the Board exercised restraint in relation to STI pool available to employees based on Group financial performance.
4
34 Charter Hall Group
Remuneration Report – audited continued
3. Executive remuneration in detail
3.1 Total remuneration of Executives
Details of the 2014 remuneration of the Reported Executives are provided in the following tables.
Table 3.1.a. Executives of the Group and Company 2014 (statutory accounting)
2014
SHORT-TERM BENEFITS
POST-
EMPlOy-
MENT
BENEFITS
SHARE
BASED
PAyMENT
OTHER
lONG-TERM
BENEFITS
Salary
and
fees
$
Cash
short-term
incentive
$
Share
based
short-term
incentive
$
Annual
leave
$
Non-
monetary
benefits 1
$
Super-
annuation
$
Name
Securities,
options
and
perform-
ance
rights
$
Long
service
leave
$
% of total
remun-
eration
consisting
of rights
%
Total
$
Executive Directors
D Harrison
D Southon
1,062,225
1,062,225
515,900
369,600
46,291
40,098
17,775
617,980
25,920 2,695,789
442,200
316,800
(27,391)
30,498
17,775
529,792
25,414 2,397,313
682,683
Other Reported Executives
P Altschwager
S Dundas
R Stacker
A Taylor
612,202
466,225
466,225
234,653
135,116
135,116
179,646
295,523
Former Reported Executives
N Devlin 2
T Jordan 2
N Kelly 2
A Glass 3
282,095
443,812
324,352
88,769
83,750
133,302
113,688
115,576
49,047
91,758
(2,936)
127,050
(29,276)
121,998
14,445
70,221
41,250
65,656
–
1,341
(1,735)
6,143
–
–
–
–
–
–
–
–
–
17,775
237,231
– 1,336,965
17,775
88,987
23,963
820,888
17,775
355,974
18,446 1,091,310
17,775
146,196
20,411 1,112,673
17,775
17,775
17,775
13,331
65,411
34,906
95,385
(2,669)
–
–
539,040
458,041
11,346
773,419
–
448,702
Total
5,697,567 2,062,140 1,319,909
55,929
70,596
173,306 2,169,193
125,500 11,674,140
37
35
26
22
44
24
25
17
21
(1)
30
1 Non-monetary benefits include motor vehicle costs and car parking benefit.
2 Employees ceased as KMP effective 10 February 2014 but remain employed by the Group. Remuneration shown is for the full financial year to provide a
comparative view with 2013.
3 Ceased employment with Charter Hall and ceased as a KMP on 13 February 2014.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 35
2013
SHORT-TERM BENEFITS
POST-
EMPlOy-
MENT
BENEFITS
SHARE
BASED
PAyMENT
OTHER
lONG-TERM
BENEFITS
Salary
and
fees
$
Cash
short-term
incentive
$
Share
based
short-term
incentive
$
Annual
leave
$
Non-
monetary
benefits 1
$
Super-
annuation
$
Name
Securities,
options
and
perform-
ance
rights
$
Long
service
leave
$
% of total
remun-
eration
consisting
of rights
%
Total
$
Executive Directors
D Harrison
D Southon
1,009,530
1,019,130
392,486
385,000
196,243
192,500
33,980
6,128
38,894
29,294
16,470
16,470
489,446
489,446
22,554 2,199,603
22,189 2,160,157
Other Reported Executives
P Altschwager 2 683,529
423,530
S Dundas
R Stacker 3
423,530
607,530
A Taylor
210,000
122,222
122,222
173,333
105,000
66,611
70,278
86,667
14,163
8,992
7,198
(692)
Former Reported Executives
N Devlin
T Jordan
N Kelly
A Glass
258,530
162,902
451,529
529,530
76,389
46,400
117,000
106,167
49,653
30,160
58,500
53,083
(2,196)
4,490
(3,586)
8,749
–
–
–
–
–
–
–
–
16,470
16,470
16,470
16,470
16,470
16,470
16,470
16,470
396,621
88,280
448,940
165,581
58,716
24,096
96,354
112,413
30,921
– 1,425,783
757,026
5,961 1,094,599
14,348 1,063,237
–
–
8,466
–
457,561
279,035
744,733
826,412
Total
5,569,270 1,751,219
908,695
77,226
68,188
159,267 2,369,843
104,439 11,008,146
31
32
35
20
47
24
24
19
21
20
30
1 Non-monetary benefits include motor vehicle costs and associated fringe benefits tax.
2 P Altschwager was awarded 260,054 service rights as a sign-on arrangement when he commenced employment on 27 February 2012. 130,072 service
rights vested on 31 December 2012, with the balance vesting on 31 December 2013.
3 R Stacker was awarded 270,000 service rights in his retention arrangement. 90,000 service rights vested on 31 December 2013, with the balance due to vest
equally at 31 December 2014 and 2015, subject to meeting the service condition.
3.2 JMD loan arrangements
As disclosed in previous remuneration reports, each of the JMDs entered into a loan agreement with Charter Hall Limited in 2005 in
relation to the purchase of 2,500,000 (now 625,000 following the 1 for 4 security consolidation in 2011) listed securities in Charter Hall
Group. The securities purchased using the loans are not reflected in the LTI amounts for the JMDs. These securities were not issued
as part of any remuneration arrangements.
3.3 JMD contracts
In November 2013, the Joint Managing Directors’ employment contracts were renewed following securityholder approval at the
2013 Annual General Meeting. The new employment contracts included an increase in the length of their notice periods and new restraint
provisions as follows.
• the three month notice period was extended to 12 months where Charter Hall gives such notice and six months where notice is given
by a Joint Managing Director; and
• a non-solicitation/non-compete period of 12 months from the date of termination was included.
In consideration for entering into these new contracts the JMDs were awarded a one off grant of special Performance Rights under
the PROP scheme (see page 31 for more detail).
36 Charter Hall Group
Remuneration Report – audited continued
3. Executive remuneration in detail continued
3.4 Key terms of employment
The remuneration and other terms of employment for Reported Executives are formalised in employment contracts. Each of these
contracts provides for participation in the Group’s STI and LTI programs (as described above) and payment of other benefits
(including car allowances).
The terms and conditions of employment of each executive reflect market conditions at the time of their contract. All Reported
Executives’ contracts are ongoing in duration. The material terms of the employment agreements for the JMDs and Senior Executives
are summarised below:
Name
Executive Directors
D Harrison
D Southon
Other Reported Executives
P Altschwager
S Dundas
R Stacker 2
A Taylor 3
Former Reported Executives
N Devlin 4
T Jordan 4
N Kelly 4
A Glass 5
Position
Joint Managing Director
Joint Managing Director
Group Chief Financial Officer
Fund Manager – Charter Hall Retail REIT
Head of Direct Property
Head of Wholesale
Head of People, Brand & Community
Group General Counsel & Company Secretary
Head of Investor Relations
Head of Wholesale Pooled Funds
MINIMUM NOTICE PERIOD 1
Employee
Charter Hall
6 months
6 months
12 months
12 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
6 months
6 months
3 months
3 months
3 months
3 months
3 months
3 months
1 No notice period is required for termination by the Company for serious or wilful misconduct by the employee.
2 Termination payments under Richard Stacker’s contract equals six months base salary plus one month per year of service to a maximum of 12 months base
salary.
3 Termination payments under Adrian Taylor’s contract equals nine months base salary plus one month per year of service to a maximum of 12 months base
salary.
4 Ceased as KMP effective 10 February 2014.
5 Ceased employment with Charter Hall and ceased as KMP effective 13 February 2014.
Other than as described above, the Executives’ contracts do not provide for any termination benefits aside from payment in lieu of notice
(where applicable). Treatment of unvested incentives is dealt with in accordance with the terms of grant (refer to STI and LTI discussion
in the section above).
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 37
4. Non-Executive Director (NED) remuneration
4.1 Policy
The Committee makes recommendations to the Board on the total level of remuneration of the Chairman and NEDs; including any
additional fees payable to directors for membership of Board committees.
industry practice and best principles of corporate governance;
Fees are set by reference to the following considerations:
•
• responsibilities and risks attaching to the role of NED;
• the time commitment expected of NEDs on Group matters; and
• reference to fees paid to NEDs of other comparable companies.
The Board, via the Committee, periodically reviews its approach to NED remuneration to ensure it remains in line with general industry
practice and reflects proper compensation for duties undertaken. External independent advice is sought in these circumstances.
4.2 Fee framework
NED fees, including committee fees, are set by the Board within the aggregate amount approved by securityholders. Currently, the
aggregate amount is $1,000,000 per annum, which was approved by securityholders at the 2011 Annual General Meeting.
Under the current framework, NEDs receive Board base fees and committee fees including superannuation.
NEDs are also entitled to be reimbursed for all business related expenses, including travel on Charter Hall business, as may be incurred
in the discharge of their duties in accordance with Charter Hall’s Constitution.
In accordance with principles of good corporate governance, NEDs do not receive any benefits upon retirement under any retirement
benefits schemes (other than statutory superannuation) and NEDs are not eligible to participate in any of Charter Hall Group’s employee
incentive schemes.
NED base and committee fees were increased by 3.0% in 2014, the first increase since 2011. During the year an additional NED, David
Clarke was appointed on 10 April 2014. The NED fees for 2014 were $991,142, representing 99% of the current pool.
Table 4.2. Summary of fee framework
Board
Chair
Non Chair
Audit, Risk and Compliance Committee
Chair
Non Chair
Remuneration and Human Resources Committee
Chair
Non Chair
Nomination Committee
Chair
Non Chair
Valuation Committee
Investment Committee of related party 1
2013
$
2014
$
200,000
100,000
206,000
103,000
20,210
13,475
20,210
13,475
2,000
2,000
8,800
20,816
13,879
20,816
13,879
2,060
2,060
9,064
10,000
60,000
1 Related Party Investment Committee fees were paid to C. McGowan for responsibilities relating to CHOF4 and CHOF5. Payment of fees related to these
Committees ceased as of April 2014 for CHOF4 and 31 May 2014 for CHOF5.
38 Charter Hall Group
Remuneration Report – audited continued
4. Non-Executive Director remuneration continued
4.3 Total remuneration details
Table 4.3.a. Non-Executive Director remuneration 2014 (statutory accounting)
2014
Name
Non-Executive Directors
K Roxburgh – Chairman
A Brennan
D Clarke 1
D Deverall
P Garling
P Kahan
C McGowan 2
TOTAl
Salary
and fees
$
221,939
137,695
22,436
125,876
125,943
128,810
228,443
991,142
1 Appointed 10 April 2014.
2 Fees paid in relation to the Charter Hall Board and ordinary Committee participation total $125,943. The additional $102,500 relates to payments for CHOF4
and CHOF5 Investment Committees.
Table 4.3.b. Non-Executive Director remuneration 2013 (statutory accounting)
2013
Name
Non-Executive Directors
K Roxburgh – Chairman
A Brennan
D Deverall
P Garling 1
P Kahan
C McGowan
TOTAl
1 Appointed 25 February 2013.
Salary
and fees
$
215,475
135,376
113,591
40,928
109,871
134,276
833,803
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 39
5. Appendix – Further detail on long Term Incentives
5.1 Security Holdings
Table 5.1. Key Management Personnel Security Holdings
Name
Directors of Charter Hall limited
Ordinary securities
K Roxburgh
A Brennan
D Clarke 1
D Deverall
P Garling
P Kahan
C McGowan
D Harrison
D Southon
Other Reported Executives of the Group
P Altschwager
S Dundas
R Stacker
A Taylor
Former Reported Executives of the Group
N Devlin 2
T Jordan 2
N Kelly 2
A Glass 3
1 Appointed 10 April 2014.
2 Ceased as KMP effective 10 February 2014.
3 Ceased employment with Charter Hall and ceased as a KMP on 13 February 2014.
Opening
balance at
30 June 2013
LTI Securities
vesting during
the year
Sold during
the year
Closing
balance at
30 June 2014
31,250
30,000
–
33,720
6,297
–
–
1,841,773
1,880,612
130,027
–
–
–
–
–
133
–
–
–
–
–
–
–
–
201,924
201,924
130,027
125,004
277,504
312,504
38,140
–
151,448
50,484
–
–
–
–
–
–
–
(601,924)
(201,924)
(129,900)
(125,004)
(187,504)
(312,504)
(38,140)
–
(151,448)
(50,484)
31,250
30,000
–
33,720
6,297
–
–
1,441,773
1,880,612
–
130,154
–
90,000
–
–
–
–
133
–
40 Charter Hall Group
Remuneration Report – audited continued
5. Appendix – Further detail on long Term Incentives continued
5.2 Performance Rights and Options Plan details
Table 5.2.a. Performance rights, options and service rights issued and outstanding under the PROP
PERFORMANCE RIGHTS
Year of issue
2012
2013
2014
Total Performance Rights Issued
OPTIONS
Year of issue
2010
2010
2011
Total Options Issued
SERVICE RIGHTS
Year of issue
2013
2014
2014
Total Service Rights Issued
Exercise
price
Nil
Nil
Nil
Exercise
price
$1.94
$2.80
$2.44
Exercise
price
Nil
Nil
Nil
Securities
3,242,634
1,689,319
1,362,446
6,294,399
Securities
1,060,062
44,628
1,045,676
2,150,366
Securities
180,000
40,000
343,582
563,582
Vesting conditions
Absolute and relative performance criteria
Absolute and relative performance criteria
Absolute and relative performance criteria
Vesting conditions
Absolute and relative performance criteria
Absolute and relative performance criteria
Absolute and relative performance criteria
Vesting conditions
Service conditions
Service conditions
Service conditions – deferred STI
Valuation Model Inputs
The Black-Scholes or Monte Carlo method, as applicable, is utilised for valuation and accounting purposes. Prior to 2013, the number
of rights granted to an executive was determined based on an independent fair value calculation using the Monte Carlo simulation
valuation method, which is consistent with the accounting fair value standard AASB 2. From 2013, the allocation methodology was
revised. LTI awards are now valued using the Black-Scholes methodology and will continue to be valued for accounting purposes
using a Monte Carlo simulation valuation in accordance with AASB 2.
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 41
The model inputs for the PROP performance rights and options plan and service rights issued during 2010 to 2014 to assess the fair
value are as follows:
PERFORMANCE RIGHTS
Grant date
Security price at grant date
Fair value of right
Expected price volatility
Risk-free interest rate
OPTIONS
Grant date
Security price at grant date 1
Fair value of option 1
Exercise price per security 1
Expiry of loan
Expected price volatility
Risk-free interest rate
SERVICE RIGHTS
Grant date
Security price at grant date
Fair value of right
Expected price volatility
Risk-free interest rate
17/01/2012
23/11/2012
20/11/2013
20/11/2013
$2.10
$0.94
39.00%
3.90%
$3.11
$1.91
26.00%
3.00%
$3.68
$1.42
30.40%
2.90%
$3.68
$1.11
30.40%
3.00%
13/11/2009
18/06/2010
6/09/2010
11/11/2010
$2.40
$0.39
$1.94
4/11/2014
40.00%
$2.80
$0.56
$2.80
18/06/2015
40.00%
$2.44
$0.51
$2.44
6/09/2015
40.00%
$2.44
$0.51
$2.44
6/09/2015
40.00%
5.50%
5.50%
5.50%
5.50%
23/11/2012
20/11/2013
20/11/2013
$3.11
$2.73
25.00%
2.90%
$3.68
$3.45
27.40%
2.60%
$3.68
$3.42
27.40%
2.60%
1 Security prices for prior years have been restated for the security consolidation during 2011.
Table 5.2.b. Number of performance rights and options issued and outstanding to Reported Executives
PERFORMANCE RIGHTS
OPTIONS
SERVICE RIGHTS
2012
2013
2014
Total
2010
2011
Total
2013
2014
Total
346,847
346,847
531,707 1,443,071 345,060
301,220 1,212,584 670,314
849,868
504,808
504,808 1,175,122
–
–
59,649
58,511
59,649
58,511
Executive Directors
D Harrison
D Southon
564,517
564,517
Other Reported Executives
P Altschwager
S Dundas
R Stacker
A Taylor
–
107,527
157,549
223,433
189,190
59,460
59,460
84,325
106,708
36,891
36,891
47,561
295,898
203,878
253,900
355,319
Former Reported Executives
N Devlin
A Glass
T Jordan
97,581
141,130
–
N Kelly
120,968
37,163
–
37,838
63,244
23,629
–
22,866
158,373
141,130
60,704
36,395
220,607
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180,000
–
31,916
20,372
21,362
26,344
31,916
20,372
201,362
26,344
–
–
–
–
15,094
16,136
9,168
17,782
15,094
16,136
9,168
17,782
42 Charter Hall Group
Remuneration Report – audited continued
5. Appendix – Further detail on long Term Incentives continued
5.2 Performance Rights and Options Plan details continued
Table 5.2.c. Reported Executives Performance Rights and Options – details by plan
Executive Directors
D Harrison
D Southon
Type of Equity
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
Rights
previously
granted
Rights
granted during
the year
Rights held at
30 June 2014
100,962
100,962
564,517
346,847
–
–
9,903
335,157
252,404
252,404
–
–
100,962
100,962
564,517
346,847
–
–
335,157
335,157
252,404
252,404
–
–
–
–
–
–
231,707
300,000
–
–
–
–
29,825
29,824
–
–
–
–
201,220
100,000
–
–
–
–
29,256
29,255
–
–
564,517
346,847
231,707
300,000
9,903
335,157
252,404
252,404
29,825
29,824
–
–
564,517
346,847
201,220
100,000
335,157
335,157
252,404
252,404
29,256
29,255
Grant date
19-Nov-10
19-Nov-10
17-Jan-12
23-Nov-12
20-Nov-13
20-Nov-13
13-Nov-09
13-Nov-09
11-Nov-10
11-Nov-10
20-Nov-13
20-Nov-13
19-Nov-10
19-Nov-10
17-Jan-12
23-Nov-12
20-Nov-13
20-Nov-13
13-Nov-09
13-Nov-09
11-Nov-10
11-Nov-10
20-Nov-13
20-Nov-13
1 The maximum value of the grants yet to vest is the amount at the grant date fair value yet to be reflected in the Group’s consolidated income statement.
The minimum future value is $nil as the future performance and service conditions may not be met.
Fair value
per right
at grant date
Option
exercise
price
No. vested
and exercised
during the year
No. forfeited
during the year
Vesting date
Option
expiry
date
Maximum value
to be realised in
future years 1
$1.37
$1.29
$0.94
$1.91
$1.42
$1.11
$0.39
$0.39
$0.51
$0.51
$3.42
$3.42
$1.37
$1.29
$0.94
$1.91
$1.42
$1.11
$0.39
$0.39
$0.51
$0.51
$3.42
$3.42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$1.94
$1.94
$2.44
$2.44
$1.94
$1.94
$2.44
$2.44
100,962
100,962
100,962
100,962
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
4-Oct-16
1-Jul-12
1-Jul-12
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
4-Oct-16
1-Jul-12
1-Jul-12
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13-Nov-14
13-Nov-14
6-Sep-15
6-Sep-15
13-Nov-14
13-Nov-14
6-Sep-15
6-Sep-15
$221,028
$219,650
$222,304
$221,028
$190,749
$74,101
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 43
Remuneration Report – audited continued
5. Appendix – Further detail on long Term Incentives continued
5.2 Performance Rights and Options Plan details continued
Table 5.2.c. Reported Executives Performance Rights and Options – details by plan
Executive Directors
D Harrison
D Southon
Type of Equity
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
100,962
100,962
564,517
346,847
9,903
335,157
252,404
252,404
100,962
100,962
564,517
346,847
335,157
335,157
252,404
252,404
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
231,707
300,000
29,825
29,824
201,220
100,000
29,256
29,255
Grant date
19-Nov-10
19-Nov-10
17-Jan-12
23-Nov-12
20-Nov-13
20-Nov-13
13-Nov-09
13-Nov-09
11-Nov-10
11-Nov-10
20-Nov-13
20-Nov-13
19-Nov-10
19-Nov-10
17-Jan-12
23-Nov-12
20-Nov-13
20-Nov-13
13-Nov-09
13-Nov-09
11-Nov-10
11-Nov-10
20-Nov-13
20-Nov-13
564,517
346,847
231,707
300,000
9,903
335,157
252,404
252,404
29,825
29,824
–
–
–
–
564,517
346,847
201,220
100,000
335,157
335,157
252,404
252,404
29,256
29,255
1 The maximum value of the grants yet to vest is the amount at the grant date fair value yet to be reflected in the Group’s consolidated income statement.
The minimum future value is $nil as the future performance and service conditions may not be met.
Rights
previously
granted
Rights
granted during
the year
Rights held at
30 June 2014
Fair value
per right
at grant date
Option
exercise
price
No. vested
and exercised
during the year
No. forfeited
during the year
Vesting date
Option
expiry
date
Maximum value
to be realised in
future years 1
$1.37
$1.29
$0.94
$1.91
$1.42
$1.11
$0.39
$0.39
$0.51
$0.51
$3.42
$3.42
$1.37
$1.29
$0.94
$1.91
$1.42
$1.11
$0.39
$0.39
$0.51
$0.51
$3.42
$3.42
–
–
–
–
–
–
$1.94
$1.94
$2.44
$2.44
–
–
–
–
–
–
–
–
$1.94
$1.94
$2.44
$2.44
–
–
100,962
100,962
–
–
–
–
–
–
–
–
–
–
100,962
100,962
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
4-Oct-16
1-Jul-12
1-Jul-12
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
4-Oct-16
1-Jul-12
1-Jul-12
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
–
–
–
–
–
–
13-Nov-14
13-Nov-14
6-Sep-15
6-Sep-15
–
–
–
–
–
–
–
–
13-Nov-14
13-Nov-14
6-Sep-15
6-Sep-15
–
–
–
–
–
$221,028
$219,650
$222,304
–
–
–
–
–
–
–
–
–
$221,028
$190,749
$74,101
–
–
–
–
–
–
44 Charter Hall Group
Remuneration Report – audited continued
5. Appendix – Further detail on long Term Incentives continued
5.2 Performance Rights and Options Plan details continued
Table 5.2.c. Reported Executives Performance Rights and Options – details by plan continued
Type of Equity
Rights
previously
granted
Rights
granted during
the year
Rights held at
30 June 2014
Key Management Personnel
P Altschwager
LTI Performance Rights
LTI Performance Rights
LTI Service Rights
LTI Deferred STI Rights
LTI Deferred STI Rights
N Devlin
S Dundas
A Glass
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
189,190
–
130,027
–
–
5,449
5,448
97,581
37,163
–
13,622
13,621
–
–
17,876
17,876
107,527
59,460
–
44,626
44,626
–
–
25,242
25,241
141,130
73,784
–
63,102
63,102
–
–
–
106,708
–
15,958
15,958
–
–
–
–
23,629
–
–
7,547
7,547
–
–
–
–
36,891
–
–
10,186
10,186
–
–
–
–
41,616
–
–
8,068
8,068
189,190
106,708
–
15,958
15,958
–
–
97,581
37,163
23,629
–
–
7,547
7,547
–
–
107,527
59,460
36,891
–
–
10,186
10,186
–
–
141,130
–
41,616
–
–
8,068
8,068
Grant date
23-Nov-12
20-Nov-13
22-May-12
20-Nov-13
20-Nov-13
6-Sep-10
6-Sep-10
17-Jan-12
23-Nov-12
20-Nov-13
11-Jan-11
11-Jan-11
20-Nov-13
20-Nov-13
18-Jun-10
18-Jun-10
17-Jan-12
23-Nov-12
20-Nov-13
18-Jun-10
18-Jun-10
20-Nov-13
20-Nov-13
6-Sep-10
6-Sep-10
17-Jan-12
23-Nov-12
20-Nov-13
6-Sep-10
6-Sep-10
20-Nov-13
20-Nov-13
1 The maximum value of the grants yet to vest is the amount at the grant date fair value yet to be reflected in the Group’s consolidated income statement.
The minimum future value is $nil as the future performance and service conditions may not be met.
Fair value
per right
at grant date
Option
exercise
price
No. vested
and exercised
during the year
No. forfeited
during the year
Vesting date
Option
expiry
date
Maximum value
to be realised in
future years 1
$2.35
$2.35
13,622
13,621
6-Sep-15
6-Sep-15
$1.91
$1.42
$1.87
$3.42
$3.42
$1.37
$1.28
$0.94
$1.91
$1.42
$0.49
$0.49
$3.42
$3.42
$1.58
$1.46
$0.94
$1.91
$1.42
$0.56
$0.56
$3.59
$3.59
$1.37
$1.27
$0.94
$1.91
$1.42
$0.51
$0.51
$3.42
$3.42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
130,027
5,449
5,448
17,876
17,876
25,242
25,241
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
73,784
41,616
$2.44
$2.44
63,102
63,102
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1-Sep-15
1-Sep-16
31-Dec-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
30-Jun-13
30-Jun-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
30-Jun-13
30-Jun-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
$2.80
$2.80
44,626
44,626
18-Jun-15
18-Jun-15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$120,561
$101,155
$23,682
$22,399
$37,891
$34,971
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 45
Rights
previously
granted
Rights
granted during
the year
Rights held at
30 June 2014
Fair value
per right
at grant date
Option
exercise
price
No. vested
and exercised
during the year
No. forfeited
during the year
Vesting date
Option
expiry
date
Maximum value
to be realised in
future years 1
$1.91
$1.42
$1.87
$3.42
$3.42
$1.37
$1.28
$0.94
$1.91
$1.42
$0.49
$0.49
$3.42
$3.42
$1.58
$1.46
$0.94
$1.91
$1.42
$0.56
$0.56
$3.59
$3.59
$1.37
$1.27
$0.94
$1.91
$1.42
$0.51
$0.51
$3.42
$3.42
–
–
–
–
–
–
–
–
–
–
$2.35
$2.35
–
–
–
–
–
–
–
$2.80
$2.80
–
–
–
–
–
–
–
$2.44
$2.44
–
–
–
–
130,027
–
–
5,449
5,448
–
–
–
13,622
13,621
–
–
17,876
17,876
–
–
–
44,626
44,626
–
–
25,242
25,241
–
–
–
63,102
63,102
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
73,784
41,616
–
–
–
–
1-Sep-15
1-Sep-16
31-Dec-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
30-Jun-13
30-Jun-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
30-Jun-13
30-Jun-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
–
–
–
–
–
–
–
–
–
–
6-Sep-15
6-Sep-15
–
–
–
–
–
–
–
18-Jun-15
18-Jun-15
–
–
–
–
–
–
–
–
–
–
–
$120,561
$101,155
–
–
–
–
–
–
$23,682
$22,399
–
–
–
–
–
–
–
$37,891
$34,971
–
–
–
–
–
–
–
–
–
–
–
–
–
Remuneration Report – audited continued
5. Appendix – Further detail on long Term Incentives continued
5.2 Performance Rights and Options Plan details continued
Table 5.2.c. Reported Executives Performance Rights and Options – details by plan continued
Type of Equity
Key Management Personnel
P Altschwager
LTI Performance Rights
N Devlin
S Dundas
A Glass
LTI Performance Rights
LTI Service Rights
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
189,190
130,027
–
–
–
–
–
–
–
–
–
–
–
–
5,449
5,448
97,581
37,163
13,622
13,621
17,876
17,876
107,527
59,460
44,626
44,626
25,242
25,241
141,130
73,784
63,102
63,102
106,708
15,958
15,958
23,629
7,547
7,547
36,891
10,186
10,186
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
189,190
106,708
15,958
15,958
97,581
37,163
23,629
7,547
7,547
107,527
59,460
36,891
10,186
10,186
141,130
–
–
–
–
–
–
–
–
–
–
–
–
–
–
41,616
41,616
8,068
8,068
8,068
8,068
Grant date
23-Nov-12
20-Nov-13
22-May-12
20-Nov-13
20-Nov-13
6-Sep-10
6-Sep-10
17-Jan-12
23-Nov-12
20-Nov-13
11-Jan-11
11-Jan-11
20-Nov-13
20-Nov-13
18-Jun-10
18-Jun-10
17-Jan-12
23-Nov-12
20-Nov-13
18-Jun-10
18-Jun-10
20-Nov-13
20-Nov-13
6-Sep-10
6-Sep-10
17-Jan-12
23-Nov-12
20-Nov-13
6-Sep-10
6-Sep-10
20-Nov-13
20-Nov-13
1 The maximum value of the grants yet to vest is the amount at the grant date fair value yet to be reflected in the Group’s consolidated income statement.
The minimum future value is $nil as the future performance and service conditions may not be met.
46 Charter Hall Group
Remuneration Report – audited continued
5. Appendix – Further detail on long Term Incentives continued
5.2 Performance Rights and Options Plan details continued
Table 5.2.c. Reported Executives Performance Rights and Options – details by plan continued
Type of Equity
Key Management Personnel continued
T Jordan
LTI Performance Rights
LTI Performance Rights
LTI Deferred STI Rights
LTI Deferred STI Rights
N Kelly
R Stacker
A Taylor
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Service Rights
LTI Service Rights
LTI Service Rights
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
Rights
previously
granted
Rights
granted during
the year
Rights held at
30 June 2014
37,838
–
–
–
21,636
21,636
120,968
63,244
–
54,088
54,088
–
–
26,814
26,814
157,549
59,460
–
66,938
66,938
90,000
90,000
90,000
–
–
44,626
44,626
223,433
84,325
–
111,626
111,626
–
–
–
22,866
4,584
4,584
–
–
–
–
36,395
–
–
8,891
8,891
–
–
–
–
36,891
–
–
–
–
–
10,681
10,681
–
–
–
–
47,561
–
–
13,172
13,172
37,838
22,866
4,584
4,584
–
–
120,968
63,244
36,395
–
–
8,891
8,891
–
–
157,549
59,460
36,891
–
–
–
90,000
90,000
10,681
10,681
–
–
223,433
84,325
47,561
–
–
13,172
13,172
Grant date
23-Nov-12
20-Nov-13
20-Nov-13
20-Nov-13
6-Sep-10
6-Sep-10
17-Jan-12
23-Nov-12
20-Nov-13
6-Sep-10
6-Sep-10
20-Nov-13
20-Nov-13
18-Jun-10
18-Jun-10
17-Jan-12
23-Nov-12
20-Nov-13
18-Jun-10
18-Jun-10
23-Nov-12
23-Nov-12
23-Nov-12
20-Nov-13
20-Nov-13
18-Jun-10
18-Jun-10
17-Jan-12
23-Nov-12
20-Nov-13
18-Jun-10
18-Jun-10
20-Nov-13
20-Nov-13
1 The maximum value of the grants yet to vest is the amount at the grant date fair value yet to be reflected in the Group’s consolidated income statement.
The minimum future value is $nil as the future performance and service conditions may not be met.
Fair value
per right
at grant date
Option
exercise
price
No. vested
and exercised
during the year
No. forfeited
during the year
Vesting date
Option
expiry
date
Maximum value
to be realised in
future years 1
$2.44
$2.44
54,088
54,088
6-Sep-15
6-Sep-15
$1.91
$1.42
$3.42
$3.42
$1.37
$1.28
$0.94
$1.91
$1.42
$0.51
$0.51
$3.42
$3.42
$1.58
$1.46
$0.94
$1.91
$1.42
$0.56
$0.56
$2.90
$2.72
$2.56
$3.42
$3.42
$1.58
$1.46
$0.94
$1.91
$1.42
$0.56
$0.56
$3.42
$3.42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,636
21,636
26,814
26,814
66,938
66,938
90,000
44,626
44,626
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1-Sep-15
1-Sep-16
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
1-Jul-13
1-Jul-13
31-Dec-13
31-Dec-14
31-Dec-15
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-15
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$24,112
$21,676
$40,302
$34,501
$37,891
$34,971
–
–
–
–
–
–
–
–
–
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$2.80
$2.80
111,626
111,626
$53,736
$45,086
13-Nov-14
13-Nov-14
$2.80
$2.80
13-Nov-14
13-Nov-14
Directors’ Report continuedfor the year ended 30 June 2014 Annual Report 2014 47
Rights
previously
granted
Rights
granted during
the year
Rights held at
30 June 2014
Fair value
per right
at grant date
Option
exercise
price
No. vested
and exercised
during the year
No. forfeited
during the year
Vesting date
Option
expiry
date
Maximum value
to be realised in
future years 1
$1.91
$1.42
$3.42
$3.42
$1.37
$1.28
$0.94
$1.91
$1.42
$0.51
$0.51
$3.42
$3.42
$1.58
$1.46
$0.94
$1.91
$1.42
$0.56
$0.56
$2.90
$2.72
$2.56
$3.42
$3.42
$1.58
$1.46
$0.94
$1.91
$1.42
$0.56
$0.56
$3.42
$3.42
–
–
–
–
–
–
–
–
–
$2.44
$2.44
–
–
–
–
–
–
–
$2.80
$2.80
–
–
–
–
–
–
–
–
–
–
$2.80
$2.80
–
–
–
–
–
–
21,636
21,636
–
–
–
54,088
54,088
–
–
26,814
26,814
–
–
–
66,938
66,938
90,000
–
–
–
–
44,626
44,626
–
–
–
111,626
111,626
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1-Sep-15
1-Sep-16
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-16
1-Jul-13
1-Jul-13
31-Dec-13
31-Dec-14
31-Dec-15
31-Aug-14
31-Aug-15
1-Jul-13
1-Jul-13
1-Jul-14
1-Sep-15
1-Sep-15
1-Jul-13
1-Jul-13
31-Aug-14
31-Aug-15
–
–
–
–
–
–
–
–
–
6-Sep-15
6-Sep-15
–
–
–
–
–
–
–
13-Nov-14
13-Nov-14
–
–
–
–
–
–
–
–
–
–
13-Nov-14
13-Nov-14
–
–
$24,112
$21,676
–
–
–
–
–
$40,302
$34,501
–
–
–
–
-
-
-
$37,891
$34,971
-
-
-
-
-
-
-
-
-
-
$53,736
$45,086
-
-
-
-
Remuneration Report – audited continued
5. Appendix – Further detail on long Term Incentives continued
5.2 Performance Rights and Options Plan details continued
Table 5.2.c. Reported Executives Performance Rights and Options – details by plan continued
Type of Equity
Key Management Personnel continued
T Jordan
N Kelly
R Stacker
A Taylor
LTI Performance Rights
LTI Performance Rights
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Service Rights
LTI Service Rights
LTI Service Rights
LTI Deferred STI Rights
LTI Deferred STI Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Performance Rights
LTI Options
LTI Options
LTI Deferred STI Rights
LTI Deferred STI Rights
Grant date
23-Nov-12
20-Nov-13
20-Nov-13
20-Nov-13
6-Sep-10
6-Sep-10
17-Jan-12
23-Nov-12
20-Nov-13
6-Sep-10
6-Sep-10
20-Nov-13
20-Nov-13
18-Jun-10
18-Jun-10
17-Jan-12
23-Nov-12
20-Nov-13
18-Jun-10
18-Jun-10
23-Nov-12
23-Nov-12
23-Nov-12
20-Nov-13
20-Nov-13
18-Jun-10
18-Jun-10
17-Jan-12
23-Nov-12
20-Nov-13
18-Jun-10
18-Jun-10
20-Nov-13
20-Nov-13
37,838
22,866
4,584
4,584
120,968
63,244
36,395
8,891
8,891
157,549
59,460
36,891
90,000
90,000
10,681
10,681
223,433
84,325
47,561
13,172
13,172
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,866
4,584
4,584
36,395
8,891
8,891
36,891
10,681
10,681
47,561
13,172
13,172
37,838
–
–
–
–
–
–
–
–
–
–
–
–
21,636
21,636
120,968
63,244
54,088
54,088
26,814
26,814
157,549
59,460
66,938
66,938
90,000
90,000
90,000
44,626
44,626
223,433
84,325
111,626
111,626
1 The maximum value of the grants yet to vest is the amount at the grant date fair value yet to be reflected in the Group’s consolidated income statement.
The minimum future value is $nil as the future performance and service conditions may not be met.
48 Charter Hall Group
Indemnification and insurance of directors, officers and auditor
During the year, Charter Hall Group contributed to the premium for a contract insuring all directors, secretaries, executive officers and
officers of the Charter Hall Group and of each related body corporate of the Group, with the balance of the premium paid by funds
managed by members of the Charter Hall Group. The insurance does not provide any cover for the independent auditor of the Charter
Hall Group or of a related party of the Charter Hall Group. In accordance with usual commercial practice, the insurance contract prohibits
disclosure of details of the nature of the liabilities covered by the insurance, the limit of indemnity and the amount of the premium paid
under the contract.
So long as the officers of the Responsible Entity act in accordance with the Charter Hall Property Trust’s Constitution and the
Corporations Act 2001, the officers are indemnified out of the assets of the Charter Hall Property Trust against losses incurred while
acting on behalf of the Charter Hall Property Trust. The Charter Hall Group indemnifies the auditor (PricewaterhouseCoopers Australia)
against any liability (including legal costs) for third party claims arising from a breach by Charter Hall Group of the auditor’s engagement
terms, except where prohibited by the Corporations Act 2001.
Non-audit services
The Company may decide to employ the auditor on assignments additional to its statutory audit duties where the auditor’s expertise and
experience with 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; and
• None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
During the year, the following fees were paid or payable for non-audit services provided by the auditor of the Charter Hall Group and
Charter Hall Property Trust Group, its related practices and non-related audit firms:
Taxation services
PricewaterhouseCoopers Australian firm
Tax compliance services, including review
of company income tax returns
Total remuneration for taxation services
Total remuneration for non-audit services
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$
2013
$
2014
$
2013
$
48,817
48,817
48,817
50,341
50,341
50,341
–
–
–
–
–
–
Directors’ Report continuedfor the year ended 30 June 2014
Annual Report 2014 49
environmental regulation
The Group ensures compliance with applicable environmental standards and regulations and reports its greenhouse gas emissions and
energy use on an annual basis under the National Greenhouse and Energy Reporting Act 2007. In October 2014, the Group will report
to the Clean Energy Regulator emissions for the measurement period 1 July 2013 to 30 June 2014. The Group continues to implement
resource efficiency measures to mitigate against energy price increases associated with the carbon price.
To the best of the Directors’ knowledge, the operations of the Group have been undertaken in compliance with the applicable
environmental regulations that apply to the Group’s activities.
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.
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 50.
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 the Directors.
K Roxburgh
Chairman
Sydney
16 September 2014
Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14 50 Charter Hall Group
Auditor’s Independence Declaration
Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14 Consolidated Statements of Comprehensive Income
for the year ended 30 June 2014
Annual Report 2014 51
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
Note
2014
$’000
Restated
2013
$’000
2014
$’000
Restated
2013
$’000
4
122,652
114,841
26,394
36,773
33,34
6
6
6
5
5
6
6
5,17
5
5
7
60,843
183
–
–
–
42,541
–
1,123
121
112
183,678
158,738
(161)
(1,375)
(1,303)
(3,424)
–
(1,778)
–
(14)
(8,489)
–
(72,466)
(13,559)
(2,304)
(1,186)
(3,323)
(2,285)
(8,419)
(1,596)
(368)
–
(7,838)
–
(62,731)
(12,559)
(102,569)
(102,609)
81,109
1,007
82,116
56,129
(1,738)
54,391
51,351
183
–
–
–
77,928
(161)
–
(1,793)
(2,682)
–
(1,773)
–
–
–
(854)
–
(144)
(7,407)
70,521
–
70,521
37,633
–
–
121
–
74,527
(2,304)
–
(4,125)
(2,299)
(8,419)
(1,691)
(368)
(1)
–
(1,836)
–
(407)
(21,450)
53,077
–
53,077
11,553
488
–
–
70,563
54,354
70,563
54,354
82,116
–
82,116
54,842
(451)
54,391
70,563
(42)
70,521
54,354
(1,277)
53,077
Income
Revenue
Share of net profit of investments accounted for using the
equity method
Net fair value adjustment on investment properties
Fair value adjustment on contingent consideration
Net unrealised gain from derivative financial instruments
Foreign exchange gains
Total income
Expenses
Investment property expenses
Depreciation
Finance costs
Net loss on sale of investment properties, derivatives and
other investments
Net fair value adjustments on investment properties
Net loss on investment in associates at fair value
Net loss on remeasurement of equity interests
Foreign exchange losses
Amortisation of management rights
Asset management fees
Employee costs
Administration and other expenses
Total expenses
Profit before tax
Income tax benefit/(expense)
Profit for the year
Profit for the year as attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Profit attributable to stapled securityholders of
Charter Hall Group
Net loss attributable to other non-controlling interests
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Transfer of cumulative foreign exchange losses
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
82,684
55,741
71,028
24
80
488
568
1,141
209
1,350
19
488
507
986
209
1,195
54,272
52 Charter Hall Group
Consolidated Statements of Comprehensive Income
continued
for the year ended 30 June 2014
Total comprehensive income for the year is
attributable to:
Equity holders of Charter Hall Limited
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Total comprehensive income attributable to stapled
securityholders of Charter Hall Group
Total comprehensive income attributable to other
non-controlling interests
Total comprehensive income for the year
Basic and diluted earnings per stapled security
Basic earnings per stapled security (cents) attributable
to securityholders
Diluted earnings per stapled security (cents) attributable
to securityholders
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
Note
2014
$’000
Restated
2013
$’000
2014
$’000
Restated
2013
$’000
11,614
643
–
–
71,070
55,549
71,070
55,549
82,684
56,192
71,070
55,549
–
(451)
(42)
82,684
55,741
71,028
(1,277)
54,272
9(a)
9(b)
25.61
18.29
22.01
18.13
24.92
17.67
21.41
17.52
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
Consolidated Balance Sheets
for the year ended 30 June 2014
Annual Report 2014 53
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Assets classified as held for sale
Total current assets
Non-current assets
Trade and other receivables
Investment in associates at fair value through profit or loss
Inventories
Investments accounted for using the equity method
Investment properties
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Total non-current assets
Total assets
liabilities
Current liabilities
Trade and other payables
Provisions
Interest-bearing liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity holders of Charter Hall Limited
Contributed equity
Reserves
Accumulated losses
Parent entity interest
Equity holders of Charter Hall Property Trust
Contributed equity
Reserves
Accumulated losses
Equity holders of Charter Hall Property Trust
(non-controlling interest)
Interest attributable to stapled securityholders of
Charter Hall Group
Non-controlling interest in DRF
Total equity
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
Note
2014
$’000
Restated
2013
$’000
2014
$’000
Restated
2013
$’000
10
11
12
11
13
14
15
16
17
18
19
22
20
21
22
20
21
50,184
66,983
11,592
12,236
63,550
55,225
128,759
131,011
6,500
14,234
–
682,901
48,386
87,577
9,374
8,002
319
857,293
986,052
60,661
1,579
–
62,240
5,670
1,054
6,724
2,400
49,229
10,848
520,147
–
96,066
2,743
6,389
–
687,822
818,833
48,821
1,101
27,455
77,377
–
1,162
1,162
577
52,474
–
53,051
181,292
14,234
–
591,869
48,386
–
–
–
319
836,100
889,151
41,450
–
–
41,450
–
–
–
2,229
32,432
55,225
89,886
197,240
49,229
–
435,084
–
–
–
–
–
681,553
771,439
32,740
–
27,455
60,195
–
–
–
68,964
78,539
41,450
60,195
917,088
740,294
847,701
711,244
23(a)
24
25
23(a)
24
25
232,101
(44,386)
(118,328)
211,335
(54,147)
(121,066)
69,387
36,122
–
–
–
–
–
–
–
–
945,333
296
(97,928)
799,548
(1,410)
(93,966)
945,333
296
(97,928)
799,548
(1,410)
(93,966)
847,701
704,172
847,701
704,172
917,088
740,294
847,701
704,172
26
–
–
–
7,072
917,088
740,294
847,701
711,244
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
54 Charter Hall Group
Consolidated Statement of Changes in Equity –
Charter Hall Group
for the year ended 30 June 2014
Restated balance at 1 July 2012
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income/(loss)
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of issue costs
Performance rights and options exercised
Distribution provided for or paid
Non-cash security-based benefit expense
Transactions with non-controlling interest
Transfer to accumulated losses
ATTRIBUTABlE TO THE OWNERS OF THE CHARTER HAll GROUP
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Note
Non-
controlling
interest
$’000
Total
$’000
Total
equity
$’000
994,663
(50,470)
(215,285)
728,908
27,448
756,356
–
–
–
–
1,350
1,350
54,842
–
54,842
1,350
54,842
56,192
(451)
–
(451)
54,391
1,350
55,741
23
8
10,568
5,652
–
–
–
–
16,220
–
(2,038)
–
3,035
(1,312)
(6,122)
–
–
(60,711)
–
–
6,122
10,568
3,614
(60,711)
3,035
(1,312)
–
–
–
(10,870)
–
(16,127)
–
10,568
3,614
(71,581)
3,035
(17,439)
–
(6,437)
(54,589)
(44,806)
(26,997)
(71,803)
Restated balance at 1 July 2013
1,010,883
(55,557)
(215,032)
740,294
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of issue costs
Performance rights and options exercised
Transfer due to deferred compensation payable
in performance rights
Distribution provided for or paid
Non-cash security-based benefit expense
Transfer to accumulated losses
Balance at 30 June 2014
–
–
–
–
568
568
82,116
–
82,116
568
82,116
82,684
23
158,198
8,353
–
(3,400)
–
–
158,198
4,953
8
–
–
–
–
1,196
–
3,089
10,014
–
(73,326)
–
(10,014)
1,196
(73,326)
3,089
–
166,551
10,899
(83,340)
94,110
1,177,434
(44,090)
(216,256)
917,088
–
–
–
–
–
–
–
–
–
–
–
–
740,294
82,116
568
82,684
158,198
4,953
1,196
(73,326)
3,089
–
94,110
917,088
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Annual Report 2014 55
Consolidated Statement of Changes in Equity –
Charter Hall Property Trust Group
for the year ended 30 June 2014
Restated balance at 1 July 2012
Restated profit/(loss) for the year
Other comprehensive income
Restated total comprehensive income/(loss)
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of issue costs
Performance rights and options exercised
Distribution provided for or paid
Transactions with non-controlling interest
ATTRIBUTABlE TO THE OWNERS OF THE
CHARTER HAll PROPERTy TRUST GROUP
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Note
Non-
controlling
interest
$’000
Total
$’000
Total
equity
$’000
785,113
(1,415)
(87,609)
696,089
40,558
736,647
–
–
–
–
1,195
1,195
54,354
–
54,354
1,195
(1,277)
–
53,077
1,195
54,354
55,549
(1,277)
54,272
23
8
9,395
5,040
–
–
–
–
–
(1,190)
–
–
(60,711)
–
9,395
5,040
(60,711)
(1,190)
–
–
(16,060)
(16,149)
9,395
5,040
(76,771)
(17,339)
14,435
(1,190)
(60,711)
(47,466)
(32,209)
(79,675)
Restated balance at 1 July 2013
799,548
(1,410)
(93,966)
704,172
7,072
711,244
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income/(loss)
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of issue costs
Performance rights and options exercised
Distribution provided for or paid
Transfer to accumulated losses
Balance at 30 June 2014
–
–
–
–
507
507
70,563
–
70,563
507
70,563
71,070
(42)
–
(42)
70,521
507
71,028
23
8
138,424
7,361
–
–
145,785
945,333
–
–
–
1,199
–
–
(73,326)
(1,199)
138,424
7,361
(73,326)
–
–
–
(7,030)
–
138,424
7,361
(80,356)
–
1,199
(74,525)
72,459
(7,030)
65,429
296
(97,928)
847,701
–
847,701
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
56 Charter Hall Group
Consolidated Cash Flow Statements
for the year ended 30 June 2014
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
Note
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Clawback of performance fees (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Distributions and dividends from investments
Net cash inflow from operating activities
28
Cash flows from investing activities
Payments for PP&E (net of lease incentive received)
Proceeds on disposal of investment property
Payments for inventory
Payments for investment properties
Investments in associates and joint ventures
Proceeds on disposal and return of capital from
investments in associates
Payments for other intangibles
Loans to associates, joint ventures and related parties
Repayments from associates, joint ventures and
related parties
Repayments from key management personnel
Transactions with non-controlling interests
127,846
–
(88,592)
39,254
4,576
(1,058)
44,561
87,333
(2,343)
53,656
(742)
(49,800)
(154,397)
30,141
(1,857)
(1,500)
5,500
2,200
–
117,672
(15,663)
(84,715)
17,294
1,967
(2,708)
36,417
52,970
(1,233)
72,668
(1,329)
(5,580)
(52,853)
35,546
(12,902)
(22,280)
1,650
800
(16,566)
1,658
–
(1,183)
475
1,565
(1,548)
37,535
38,027
–
53,656
–
(49,800)
(154,397)
32,236
–
(70,937)
104,267
–
–
Net cash (outflow)/inflow from investing activities
(119,142)
(2,079)
(84,975)
Cash flow from financing activities
Proceeds from issues of securities and other
equity securities
Payment on settlement of derivative financial instruments
Proceeds from borrowings
Repayment of borrowings
Distributions paid to securityholders
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and
cash equivalents
163,153
–
47,000
(75,024)
(65,437)
69,692
37,883
12,236
3,585
(547)
40,950
(64,950)
(57,143)
(78,105)
(27,214)
39,315
65
135
Cash and cash equivalents at the end of the year
10
50,184
12,236
The above consolidated cash flow statements should be read in conjunction with the accompanying notes.
145,785
–
47,000
(75,023)
(72,466)
45,296
(1,652)
2,229
–
577
12,999
–
(12,509)
490
540
(3,681)
19,191
16,540
–
72,668
–
(5,580)
(52,853)
34,993
–
(60,051)
73,575
–
(16,566)
46,186
5,013
(547)
40,950
(64,950)
(62,637)
(82,171)
(19,445)
21,674
–
2,229
Notes to the Consolidated Financial Statements
for the year ended 30 June 2014
Annual Report 2014 57
1. Summary of significant accounting policies
The significant policies which have been adopted in the preparation
of these financial statements for the year ended 30 June 2014 are
set out below. These policies have been consistently applied to the
years presented, unless otherwise stated.
(a) Basis of preparation
The Charter Hall Group (Group, CHC or Charter Hall) is a ‘stapled’
entity comprising Charter Hall Limited (Company or CHL) and its
controlled entities, and Charter Hall Property Trust (Trust or CHPT)
and its controlled entities (Charter Hall Property Trust Group).
The shares in the Company are stapled to the units in the Trust.
The stapled securities cannot be traded or dealt with separately.
The stapled securities of the Group are listed on the Australian
Securities Exchange. CHL has been identified as the parent entity
in relation to the stapling.
The two Charter Hall entities comprising the stapled group remain
separate legal entities in accordance with the Corporations
Act 2001, and are each required to comply with the reporting
and disclosure requirements of Accounting Standards and the
Corporations Act 2001.
As permitted by Class Order 05/642, issued by the Australian
Securities and Investments Commission, this financial report is a
combined financial report that presents the financial statements
and accompanying notes of both the Charter Hall Group and the
Charter Hall Property Trust Group.
The financial report of the Charter Hall Group comprises CHL and
its controlled entities including Charter Hall Funds Management
Limited (Responsible Entity) as responsible entity for CHPT. The
results and equity, not directly owned by CHL, of CHPT have
been treated and disclosed as a non-controlling interest. Whilst
the results and equity of CHPT are disclosed as a non-controlling
interest, the stapled securityholders of CHL are the same as the
stapled securityholders of CHPT.
The financial report of the Charter Hall Property Trust Group
comprises the Trust and its controlled entities.
The results and equity of the Charter Hall Direct Retail Fund
(DRF) not directly owned by the Group and/or the Trust have
been treated and disclosed as non-controlling interests. Effective
20 April 2013, the Charter Hall Group owns 100% of DRF and the
non-controlling interest disclosed by Charter Hall Property Trust
Group solely represents the 16% interest held by Charter Hall
Holdings Pty Ltd (CHH), a subsidiary of CHL. Refer to Note 26 for
further details regarding non-controlling interests.
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards
Board and the Corporations Act 2001. The Charter Hall Group and
the Charter Hall Property Trust Group are for-profit entities for the
purpose of preparing the financial statements.
On 6 June 2005, CHL acquired 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 the
Group 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.
Restatement of 2013 comparative financial information
The Charter Hall Property Trust Group comparative financial
statements have been restated to include a previously
unrecognised inter-staple loan and related interest receivable
from Charter Hall Limited which related to the Group’s previous
employee loan share plan. The financial effect of the restatement
is to increase the loan receivable from Charter Hall Limited at
30 June 2013 by $51.3 million, increase contributed equity by
$45.9 million and increase interest revenue for the year ended
30 June 2013 by $5.4 million (representing an increase of 1.81 and
1.75 cents in basic and diluted earnings per security respectively).
The impact on the opening comparative balance sheet of the
Charter Hall Property Trust Group at 30 June 2012 was to increase
both the loan receivable from Charter Hall Limited and contributed
equity by $45.9 million.
Consequently, the 30 June 2013 Charter Hall Group financial
statements have been restated to reflect an increase in
accumulated losses attributable to the parent entity of $51.3 million
offset by an increase in equity attributable to the equity holders of
Charter Hall Property Trust (comprising an increase in contributed
equity of $45.9 million and a decrease in accumulated losses of
$5.4 million). An amount of $5.4 million has also been reallocated
from profit attributable to equity holders of Charter Hall Limited to
profit attributable to equity holders of Charter Hall Property Trust in
the Charter Hall Group Consolidated Statement of Comprehensive
Income for the year ended 30 June 2013. Corresponding
adjustments have been made to the 2013 comparative parent
entity financial information disclosed in Note 39.
The adjustments have no impact on Charter Hall Group net
assets, total equity, statutory profit or operating earnings per
the segment note.
Compliance with IFRS
The financial statements of the Group also comply with
International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
Historical cost convention
The financial statements have been prepared on a historical cost
basis, except for the following:
•
• financial assets and liabilities held at fair value through profit
investment properties – measured at fair value;
or loss (including derivative instruments); and
• assets held for sale – measured at the lower of carrying amount
and fair value less cost of disposal.
58 Charter Hall Group
1. Summary of significant accounting policies
continued
(a) Basis of preparation continued
New and amended standards adopted
The Group has applied the following standards and amendments
for the first time for the annual reporting period commencing
1 July 2013:
• AASB 10 Consolidated Financial Statements, AASB 11
Joint Arrangements, AASB 12 Disclosure of Interests in
Other Entities, AASB 128 Investments in Associates and
Joint Ventures, AASB 127 Separate Financial Statements,
AASB 2011-7 Amendments to Australian Accounting Standards
arising from the Consolidation and Joint Arrangements
Standards and AASB 2012-10 Amendments to Australian
Accounting Standards – Transition Guidance and Other
Amendments;
• AASB 13 Fair Value Measurement and AASB 2011-8
Amendments to Australian Accounting Standards arising from
AASB 13; and
• AASB 119R Employee Benefits and AASB 2011-4 Amendments
to Australian Accounting Standards to Remove Individual Key
Management Personnel Disclosure Requirements.
The Group has reviewed its investments in other entities to assess
whether the conclusion to consolidate is different under AASB 10
than under AASB 127. No material differences were found and
therefore no adjustments to any carrying amounts in the financial
statements are required as a result of the adoption of AASB 10.
Under AASB 11 Joint Arrangements, investments in joint
arrangements are classified as either joint operations or joint
ventures depending on the contractual rights and obligations of
each investor. The Group’s accounting for its interests in joint
ventures was not affected by the adoption of the new standard
since the Group had already applied the equity method in
accounting for these interests.
AASB 12 requires entities to disclose significant judgements and
assumptions made in determining whether the entity controls,
jointly controls, significantly influences or has some other interests
in other entities. Entities are also required to provide more
disclosures around certain ‘structured entities’. Adoption of the
standard has impacted the Group’s level of disclosure in certain of
the above noted areas, but has not impacted the Group’s financial
position or results of operations.
AASB 13 Fair Value Measurement aims to improve consistency
and reduce complexity by providing a precise definition of
fair value and a single source of fair value measurement and
disclosure requirements for use across Australian Accounting
Standards. The standard does not extend the use of fair value
accounting but provides guidance on how it should be applied
where its use is already required or permitted by other Australian
Accounting Standards.
Previously, the fair value of financial liabilities (including derivatives)
was measured on the basis that the financial liability would be
settled or extinguished with the counterparty. The adoption of
AASB 13 has clarified that fair value is an exit price notion, and
as such, the fair value of financial liabilities should be determined
based on a transfer value to a third party market participant.
In July 2011, the AASB decided to remove the individual key
management personnel (KMP) disclosure requirements from
AASB 124 Related Party Disclosures, to achieve consistency with
the international equivalent standard and remove a duplication
of the requirements with the Corporations Act 2001. While this
reduces the disclosures that are currently required in the notes
to the financial statements, it does not affect any of the amounts
recognised in the financial statements. The amendments applied
from 1 July 2013.
(b) Principles of consolidation
(i) Controlled entities
The consolidated financial statements of the Charter Hall Group
and the Charter Hall Property Trust Group incorporate the assets
and liabilities of all controlled entities as at 30 June 2014 and their
results for the year then ended.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power to direct the
activities of the entity. Controlled entities are fully consolidated from
the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
controlled entities have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of controlled
entities are shown separately in the consolidated statement
of comprehensive income, consolidated balance sheet and
consolidated statement of changes in equity respectively.
(ii) Investments in associates
Associates are entities over which the Group has significant
influence but not control. Investments in associates are accounted
for in the consolidated balance sheet at either fair value through
profit or loss or by using the equity method. Within CHPT, the
classification of investments at fair value through profit or loss
occurs when investments are acquired having an interest of less
than 5%. However, two investments in sell-down are accounted for
at fair value through profit or loss. Investments greater than 5% are
classified as equity accounted investments. Investments held by
CHL or its subsidiaries will be equity accounted regardless of the
percentage interest acquired.
Under the equity accounted method, the Group’s share of the
associates’ post acquisition net profits after income tax expense
is recognised in the consolidated statement of comprehensive
income. The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment. Distributions
and dividends received from associates are recognised in the
consolidated financial report as a reduction of the carrying amount
of the investment.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 59
(c) Segment reporting
Segment information is reported in a manner that is consistent with
internal reporting provided to the chief operating decision maker.
The chief operating decision maker is responsible for allocating
resources and assessing performance of the operating segments.
(d) Foreign currency translation
(i) Functional and presentation currencies
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency).
The financial statements are presented in Australian dollars, which
is the Group’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the consolidated statement
of comprehensive income, except when they are deferred in equity
as qualifying cash flow hedges and qualifying net investment
hedges or are attributable to part of the net investment in a
foreign operation.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the fair
value gain or loss.
(iii) Foreign operations
The results and financial position of foreign operations 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;
income and expenses for each income statement and
statement of comprehensive income are translated at average
exchange rates; and
• all resulting exchange differences are recognised in other
comprehensive income.
(iii) Joint arrangements
Under AASB 11 Joint Arrangements, investments in joint
arrangements are classified as either joint operations or joint
ventures. The classification depends on the contractual rights
and obligations of each investor, rather than the legal structure of
the joint arrangement. The Group has both joint operations and
joint ventures.
Joint operations
The Group recognises its direct right to the assets, liabilities,
revenues and expenses of joint operations and its share of any
jointly held or incurred assets, liabilities, revenues and expenses.
These are incorporated in the financial statements under the
appropriate headings.
Joint ventures
Interests in joint ventures are accounted for using the equity
method, with investments initially recognised at cost and adjusted
thereafter to recognise the Group’s share of post-acquisition profits
or losses of the investee in profit or loss, and the Group’s share of
movements in other comprehensive income of the investee in other
comprehensive income. Dividends received or receivable from
associates and joint ventures are recognised as a reduction in the
carrying amount of the investment.
When the Group’s share of losses in an equity-accounted
investment equals or exceeds its interest in the entity, 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 other entity.
Unrealised gains on transactions between the Group and its joint
venture entities are eliminated to the extent of the Group’s interest
in these entities. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees
have been changed where necessary to ensure consistency with
the policies adopted by the Group.
(iv) Changes of ownership interests
When the Group ceases to have control or joint control, any
retained interest in the entity is remeasured to its fair value with
the change in carrying amount recognised in profit or loss. This
fair value becomes the initial carrying amount for the purposes of
subsequently accounting for the retained interest as a joint venture
entity or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that
entity are accounted for as if the Group had directly disposed
of the related assets or liabilities. This may mean that amounts
previously recognised in other comprehensive income are
reclassified to profit or loss.
If the ownership interest in a joint venture entity is reduced
but joint control is retained, only a proportionate share of the
amounts previously recognised in other comprehensive income is
reclassified to profit or loss where appropriate.
60 Charter Hall Group
1. Summary of significant accounting policies
continued
(d) Foreign currency translation continued
(iv) Foreign currency translation
On consolidation, exchange differences arising from the translation
of any net investment in foreign entities, and of borrowings
and other financial instruments designated as hedges of such
investments, are recognised in other comprehensive income.
On disposal of interest in foreign controlled entities, the cumulative
foreign exchange gains/losses relating to these investments
are transferred to the consolidated statement of comprehensive
income in accordance with the requirements of AASB 121
The Effect of Changes in Foreign Exchange Rates.
At the balance date, the spot and average rates used were:
Spot rate
US Dollar
NZ Dollar
Euro
British Pound
Average rate
US Dollar
NZ Dollar
Euro
British Pound
30 Jun
2014
0.9395
1.0749
0.6883
0.5515
0.9267
1.1280
0.6954
0.5761
30 Jun
2013
0.9138
1.1811
0.7025
0.6007
1.0214
1.2456
0.7889
0.6541
(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:
(i) Rental income
Rental income from operating leases represents income earned
from the rental of properties (inclusive of outgoings recovered
from tenants) and 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 properties. The portion of operating lease income in
a reporting period relating to fixed increases in operating lease
rentals in future years is recognised as a separate component
of investment properties.
(ii) Management fees
Management fees are brought to account on an accruals basis
and, if not received at the reporting date, are reflected in the
balance sheet as a receivable.
Where management fees are derived in respect of an acquisition or
disposal of property, the fees are recognised where services have
been performed and the fee can be reliably estimated.
(iii) Performance and transaction fees
Performance fees are only recognised when the outcome can be
reliably estimated. Transaction fees are recognised where services
have been performed and the fee can be reliably estimated.
Detailed calculations are completed and the risks associated with
the fee are assessed when deciding when it is appropriate to
recognise revenue. Further information is provided in the critical
accounting estimates in Note 2.
(iv) Interest income
Interest income is recognised on a time proportion basis using
the effective interest method. 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.
(v) Dividends/distributions
Dividends/distributions are recognised as revenue when the right
to receive payment is established.
(f) Business combinations
The acquisition method of accounting is used to account for
all business combinations, including business combinations
involving entities or businesses under common control, regardless
of whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of a subsidiary
comprises the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by Charter Hall. The
consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any
pre-existing equity interest in the subsidiary. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their
fair values at the acquisition date. On an acquisition-by-acquisition
basis, Charter Hall recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair
value of Charter Hall’s share of the net identifiable assets acquired
is recorded as goodwill. If those amounts are less than the fair
value of the net identifiable assets of the subsidiary acquired and
the measurement of all amounts has been reviewed, the difference
is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity’s incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.
Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in
profit or loss.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 61
(g) Income tax
The year’s income tax expense or benefit is the tax payable on
the current year’s taxable income based on the applicable income
tax rate for each jurisdiction 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.
The current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the end of the reporting
period in the countries where the Group’s controlled entities and
associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provision where appropriate on the
basis of amounts expected to be paid to the tax authorities.
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 is recognised in profit or loss, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
(h) Impairment of assets
Assets are reviewed for impairment whenever 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. For the purposes of 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 that suffered
impairment in prior years are reviewed for possible reversal of the
impairment at each reporting date.
(i) Cash and cash equivalents
For the purpose of presentation in the cash flow statement, 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
in the balance sheet.
(j) Trade and other receivables
Trade and other 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.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written off
in the year in which they are identified. A provision for doubtful
debts is raised where there is objective evidence that the Group
will not collect all amounts due. The amount of the provision
is the difference between the carrying amount and estimated
future cash flows. Cash flows relating to current receivables are
not discounted.
(k) Investments and other financial assets
Classification
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 1(ab).
62 Charter Hall Group
1. Summary of significant accounting policies
continued
(k) Investments and other financial assets continued
(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 reporting date.
(iii) Held to maturity investments
Held to maturity investments are non-derivative financial assets
with fixed or determinable payments and fixed maturities that
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 reporting date.
Recognition and derecognition
Regular purchases and sales of investments are recognised at
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 have expired or
have been transferred and the Group has transferred substantially
all the risks and rewards of ownership.
Subsequent measurement
Available-for-sale financial assets and financial assets at fair value
through profit or 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 financial assets at fair value
through profit or loss, excluding interest and dividend income, are
presented in the statement of comprehensive income in the year in
which they arise.
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. Further details on how the
fair value of financial instruments is determined are disclosed in
Note 1(l) and Note 30.
Impairment
The Group assesses at each reporting 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 the statement of comprehensive
income – is removed from equity and recognised in the statement
of comprehensive income. Impairment losses recognised in
the statement of comprehensive income on equity instruments
classified as available-for-sale are not reversed through the
statement of comprehensive income.
(l) Derivative financial instruments
Derivative financial instruments held as financial assets or financial
liabilities designated at fair value through profit or loss 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
balance date. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. From
time to time, the Group may designate certain derivatives as either
hedges of net investments in foreign operations (net investment
hedges) or hedges of exposures to variability in cash flows
associated with future interest payments on variable rate debt
(cash flow hedges).
To qualify as effective hedging, 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 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.
None of the financial derivative contracts held by the Group
qualify for hedge accounting, and accordingly, changes in the
fair value of these contracts are recorded in the statement
of comprehensive income.
The Group does not hold any financial derivative contracts
as at 30 June 2014.
(m) Inventories
Inventories are stated at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
(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 plant and equipment.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 63
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
statement of comprehensive income during the financial year in
which they are incurred.
Depreciation on other assets is calculated using the straightline
method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives, as follows:
• Furniture, fittings and equipment
• Fixtures
• Software
3 to 10 years
5 to 10 years
3 to 5 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting 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
statement of comprehensive income.
(o) lease incentives
Prospective lessees may be offered incentives as an inducement
to enter into non-cancellable operating leases. These incentives
may take various forms including rent-free periods, upfront cash
payments, or a contribution to certain lessee costs such as a fitout
contribution. Incentives are capitalised in the consolidated balance
sheet as a component of investment properties and amortised over
the term of the lease as an adjustment to net rental income.
The benefits of incentives received as lessee are recognised
as a reduction of rental expense over the lease term on a
straight-line basis.
(p) 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 36). Payments made under operating leases
are charged to the statement of comprehensive income on
a straight-line basis. Lease income from operating leases is
recognised in income on a straight-line basis over the lease time.
(q) Investment properties
Investment properties comprise investment interests in land and
buildings (including integral plant and equipment) held for the
purpose of producing rental income, including properties that are
under construction for future use as investment properties.
Initially, investment properties are measured at cost including
transaction costs. Subsequent to initial recognition, the investment
properties are then stated at fair value. Fair value of investment
property is the price at which the property could be exchanged
between knowledgeable, willing parties in an arm’s length
transaction. A ‘willing seller’ is neither a forced seller nor one
prepared to sell at a price not considered reasonable in the current
market. The best evidence of fair value is given by current prices
in an active market for similar property in the same location and
condition. Gains and losses arising from changes in the fair values
of investment properties are included in the consolidated statement
of comprehensive income in the year in which they arise.
At each balance date, the fair values of the investment properties
are assessed by the Directors with reference to independent
valuation reports or through appropriate valuation techniques
adopted by the Directors. Fair value is determined using a
long-term investment period. Specific circumstances of the owner
are not taken into account.
The fair value measurement of investment property takes into
account the Group’s ability to generate economic benefits by using
the asset in its highest and best use.
The use of independent external valuers is on a progressive basis
over a three year period, or earlier, where the Directors deem
it appropriate or believe there may be a material change in the
carrying value of the property.
Where an independent valuation is not obtained, the factors taken
into account, where appropriate, by the Directors in determining
fair value may include:
• assume a willing buyer and willing seller, without duress and an
appropriate time to market the property to maximise price;
information obtained from valuers, sales and leasing agents,
market research reports, vendors and potential purchasers;
• capitalisation rates used to value the asset, market rental levels
•
and lease expiries;
• changes in interest rates;
• asset replacement values;
• discounted cash flow models;
• available sales evidence;
• comparisons to valuation professionals performing valuation
assignments across the market; and
• contractual obligations to purchase, construct or develop
investment property or for repairs, maintenance or enhancements.
The carrying amount of investment properties recorded in the
balance sheet takes into consideration components relating
to lease incentives, leasing costs and assets relating to fixed
increases in operating lease rentals in future years.
Where the Group disposes of a property at fair value in an arm’s
length transaction, the carrying value immediately prior to the sale
is adjusted to the transaction price, and the adjustment is recorded
in the income statement within net gain from fair value adjustment
on investment property.
Investment property under construction is measured at fair value
if the fair valued is considered reliably determinable. Investment
property under construction for which the fair value cannot be
determined reliably, but for which the Group expects that the fair
value of the investment property will be reliably determinable when
construction is completed, are measured at cost less impairment
until the fair value becomes reliably determinable or construction is
completed – whichever is earlier. Investment property that is being
redeveloped for continuing use as investment property or for which
the market has become less active continues to be measured at
fair value.
It may sometimes be difficult to determine reliably the fair value of
the investment property under construction. In order to evaluate
whether the fair value of an investment property under construction
can be determined reliably, management considers, among others,
the stage of completion, the level of reliability of cash inflows after
completion, the development risk specific to property and the past
experience with similar constructions.
64 Charter Hall Group
1. Summary of significant accounting policies
continued
(r) Non-current assets classified as held for sale and
discontinued operations
Non-current assets are classified as held for sale and carried as
current assets if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use
and a sale is considered highly probable. They are measured at
the lower of their carrying amount and fair value less costs to sell,
except for assets such as deferred tax assets and investment
property that are carried at fair value.
(s) Intangibles
(i) Management rights – indefinite life assets
Management rights in relation to entities with no fixed life are
not amortised as they have an indefinite life. Management rights
with an indefinite life are tested for impairment annually, or more
frequently if events or changes in circumstances indicate that
they might be impaired, and are carried at cost less accumulated
impairment losses. Management rights are allocated to
cash-generating units for the purpose of impairment testing.
(ii) Management rights – finite life assets
Management rights in relation to entities with a fixed life are
amortised using the straight-line method over their useful life.
Management rights of Charter Hall Office Trust (CHOT) are
amortised over six years.
(t) Trade and other payables
Liabilities are recognised for amounts to be paid in the future for
goods and services received, whether or not billed to the Group.
The amounts are unsecured and are usually paid within 30 days
of recognition. Trade and other payables are presented as current
liabilities unless payment is not due within 12 months after the
reporting period. They are recognised initially at their fair value
and subsequently measured at amortised cost using the effective
interest method.
(u) 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 statement of comprehensive income over the period of the
borrowing using the effective interest rate method. Fees paid on
the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of
the facility will be drawn down. In this case, the fee is deferred until
the drawdown occurs. To the extent that it is probable that some
or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of
the facility to which it relates.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss as
other income or finance costs.
Where the terms of a financial liability are renegotiated and the
entity issues equity instruments to a creditor to extinguish all
or part of the liability (debt for equity swap), a gain or loss is
recognised in profit or loss, which is measured as the difference
between the carrying amount of the financial liability and the fair
value of the equity instruments issued.
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 reporting period.
(v) Borrowing costs
Borrowing costs associated with the acquisition or construction
of a qualifying asset, including interest expense, are capitalised as
part of the cost of that asset during the period that is required to
complete and prepare the asset for its intended use. Borrowing
costs not associated with qualifying assets are expensed.
(w) Provisions
Provisions 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 can be reliably estimated. Provisions are not
recognised for future operating losses.
(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 flows.
(y) 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 reporting
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.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 65
(aa) Distributions paid and payable
A liability is recognised for the amount of any distribution declared
by the Group on or before the end of the reporting period but not
distributed at balance date. A liability has been recognised in the
financial statements at 30 June 2014 as the final distribution had
been declared at the balance date.
(ab) Fair value estimation
The fair value of financial assets and financial liabilities
must be estimated for recognition and measurement
or for disclosure purposes.
A fair value measurement of a non-financial asset takes into
account the Group’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it
to another market participant that would use the asset in its
highest and best use.
The fair value of financial instruments traded in active markets is
determined using quoted market prices at the balance 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. 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 foreign exchange contracts is determined
using forward foreign exchange market rates at the balance date.
Unlisted property securities have been designated on initial
recognition to be treated at fair value through profit or loss.
Movements in fair value during the period have been recognised
in the statement of comprehensive income. These assets have
been acquired with the intention of being long-term investments.
Where the assets in this category are expected to be sold within
12 months, they are classified as current assets; otherwise they
are classified as non-current.
The nominal value less estimated credit adjustments of trade
receivables and payables 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.
(iii) Retirement benefit obligations
Contributions to employee defined contribution superannuation
funds are recognised as an expense as they become payable.
(iv) Security-based benefits
Security-based compensation benefits are provided to employees
via the Charter Hall Performance Rights and Options Plan (PROP)
and the General Employee Security Plan (GESP). Information
relating to these schemes is set out in Note 38. For PROP, the fair
value at grant date is independently valued using a Monte Carlo
simulation pricing model that takes into account the exercise price,
the term of the option, impact of dilution, security price at grant
date, expected price volatility of the underlying security, expected
dividend yield and the risk-free interest rate for the term of the
option and 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 reporting date, the entity revises its estimate of
the number of securities that are expected to vest. The employee
benefits expense recognised each year takes into account the
most recent estimate.
Upon the vesting of stapled securities, the balance of the stapled
security-based benefits reserve relating to those stapled securities is
transferred to equity, net of any directly attributable transaction costs.
For GESP, eligible employees are entitled to receive up to $1,000 in
stapled securities based on the stapled security price on the grant
date. The cost of the stapled securities bought on market to settle
the award liability is included in employee benefits expense. The
stapled securities are held in trust on behalf of eligible employees until
the earlier of the completion of three years’ service or termination.
(v) Bonus plans
Charter Hall recognises a liability and an expense for amounts
payable to employees. Charter Hall 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
by the Group before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits at the earlier
of the following dates:
(a) when the Group can no longer withdraw the offer of those
benefits; and
(b) when the entity recognises costs for a restructuring that is
within the scope of AASB 137 and involves the payment of
termination benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits are measured
based on the number of employees expected to accept the
offer. Benefits falling due more than 12 months after the end
of the reporting period are discounted to present value.
(z) Contributed equity
Ordinary stapled securities are classified as equity. Incremental
costs directly attributable to the issue of new stapled securities
or options are shown in equity as a deduction, net of tax, from
the proceeds.
66 Charter Hall Group
1. Summary of significant accounting policies
continued
(ac) Earnings per unit
Basic earnings per stapled security from continuing operations
is determined by dividing profit from continuing operations
attributable to the stapled securityholders by the weighted average
number of ordinary stapled securities on issue during the year.
Basic earnings per stapled security from discontinued operations
is determined by dividing profit/(loss) from discontinued operations
attributable to the stapled securityholders by the weighted average
number of ordinary stapled securities on issue during the year.
Basic earnings per stapled security is determined by dividing
the profit by the weighted average number of ordinary stapled
securities on issue during the year.
Diluted earnings per stapled security from continuing operations
is determined by dividing profit from continuing operations
attributable to the stapled securityholders by the weighted average
number of ordinary stapled securities and dilutive potential ordinary
stapled securities on issue during the year.
Diluted earnings per stapled security from discontinued operations
is determined by dividing profit/(loss) from discontinued operations
attributable to the stapled securityholders by the weighted average
number of ordinary stapled securities and dilutive potential ordinary
stapled securities on issue during the year.
Diluted earnings per stapled security is determined by dividing
the profit by the weighted average number of ordinary stapled
securities and dilutive potential ordinary stapled securities on issue
during the year.
(ad) Parent entity financial information
The financial information for the parent entity of the Charter Hall
Group, Charter Hall Limited, and for the parent entity of the Charter
Hall Property Trust Group, Charter Hall Property Trust, disclosed
in Note 39, has been prepared on the same basis as the Group’s
financial statements except as set out below:
(i) Investments in controlled entities
Investments in controlled entities, associates and joint ventures
are accounted for at cost in the financial statements of the
parent entity. Such investments include both investments in
equity securities issued by the controlled entity and other parent
entity interests that in substance form part of the parent entity’s
investment in the controlled entity. These include investments in
the form of interest-free loans which have no fixed contractual
term and which have been provided to the controlled entity as an
additional source of long-term capital.
Dividends and distributions received from controlled entities,
associates and joint ventures are recognised in the parent entity’s
statement of comprehensive income, rather than deducted from
the carrying amount of these investments.
(ii) Receivables and payables
Trade amounts receivable from controlled entities in the normal
course of business and other amounts advanced on commercial
terms and conditions are included in receivables. Similarly,
amounts payable to controlled entities are included in payables.
(iii) Recoverable amount of assets
The carrying amounts of investments in controlled entities,
associates and joint ventures valued on the cost basis are reviewed
to determine whether they are in excess of their recoverable
amount at balance date. If the carrying value exceeds their
recoverable amount, the assets are written down to the lower
value. The writedown is expensed in the year in which it occurs.
(iv) 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 standalone 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 7.
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.
(ae) Impact of new standards and interpretations issued
but not yet adopted by the Group
Certain new accounting standards and interpretations have been
published that are not mandatory for the 30 June 2014 reporting
period. The impact of these new standards (to the extent relevant
to the Group) and interpretations is set out below:
(i) AASB 9 Financial Instruments
AASB 9 Financial Instruments addresses the classification,
measurement and derecognition of financial assets and liabilities.
Since December 2013, it also sets out new rules for hedge
accounting. The standard is not applicable until 1 January 2018
but is available for early adoption. AASB 9 only permits the
recognition of fair value gains and losses in other comprehensive
income if they relate to equity investments that are not held for
trading. Fair value gains and losses on available-for-sale debt
investments, for example, would therefore have to be recognised
directly in the statement of comprehensive income. The Group
has not yet decided when to adopt AASB 9 and management is
currently assessing the impact of the new standard.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 67
(ii) AASB 2013-3 Amendments to Australian Accounting
Standard 136 – Recoverable Amount Disclosures for
Non-Financial Assets
The AASB has made amendments to the disclosures required by
AASB 136 Impairment of Assets which remove the requirement
to disclose the recoverable amount of all cash-generating units
(CGU) that contain goodwill or identifiable assets with indefinite lives
if there has been no impairment; this disclosure was introduced
with AASB 13 and became applicable from 1 January 2013. It
also requires disclosure of the recoverable amount of an asset or
CGU when an impairment loss has been recognised or reversed
and detailed disclosure of how the fair value less costs of disposal
has been measured when an impairment loss has been recognised
or reversed. The amendments apply from 1 January 2014 and
management is currently assessing the impact of the new standard.
(iii) AASB 2013-4 Amendments to Australian Accounting
Standards – Novation of Derivatives and Continuation of
Hedge Accounting
The AASB has made a limited scope amendment to
AASB 139 Financial Instruments: Recognition and Measurement.
AASB 139 requires an entity to stop hedge accounting when
a novation (replacement of one party of the derivative contract
with a new party) occurs, because the original hedging
instrument envisaged in the hedge documentation has changed.
The amendment allows the continuation of hedge accounting
provided specific conditions are met. Given the Group does not
apply hedge accounting, this is not expected to have a significant
impact to the Group.
(af) Rounding of amounts
The Group is an entity of a kind referred to in Class Order 98/0100
(as amended) issued by the Australian Securities & Investments
Commission relating to the ‘rounding off’ of amounts in the
financial statements. Amounts in the financial statements have
been rounded to the nearest thousand dollars in accordance with
that Class Order, unless otherwise indicated.
68 Charter Hall Group
2. Critical accounting estimates
and judgements
The Charter Hall Group and Charter Hall Property Trust Group
make estimates and assumptions concerning the future. 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. 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:
(iii) Tax losses
The Charter Hall Group has recognised a deferred tax asset relating
to tax losses as it is considered probable that future taxable income
will be available to utilise the losses in the short to medium term.
Refer to Note 7(d) Income tax expense for further details.
(iv) Impairment testing of management rights
Critical judgements are made by the Charter Hall Group in
assessing the recoverable amount of management rights acquired,
where the funds to which those management rights relate have
an indefinite life. Management rights are considered to have an
indefinite useful life if there is no foreseeable limit to the period over
which the asset is expected to generate net cash inflows for the
entity. Refer to Note 17 for further details.
3. Segment information
(a) Description of segments
Charter Hall Group
Management has determined the operating segments based on
the reports reviewed by the Board that are used to make strategic
decisions. The Board is responsible for allocating resources and
assessing performance of the operating segments.
The Board has identified the following two reportable segments,
the performance of which it monitors separately.
Property Investments
This segment comprises investments in property funds.
Property Funds Management
This segment comprises funds management services, property
management services and other property services.
Change in composition of reportable segments
Strategic initiatives implemented in the period, including a
restructure of the responsibilities within the executive committee,
have resulted in a change to reporting of operating segments to
the Board. Two of the segments that were previously reported
to the Board, Property Funds Investments and Property Direct
Investments, are now reported together as the Property
Investments segment. The current and prior year segment
disclosures below reflect this restructure.
Change in composition of segment income
Effective 1 July 2013 operating earnings is inclusive of non-cash
security-based benefit expense to reflect its nature of employee
compensation. Non-cash security-based benefit expense is not
allocated to the reportable segments.
Charter Hall Property Trust Group
The Board allocates resources and assesses the performance
of operating segments for the entire Charter Hall Group. Results
are not separately identified and reported according to the legal
structure of the Charter Hall Group.
(i) Classification and carrying value of investments
AASB 10 was issued in August 2011 and replaces the guidance on
control and consolidation in AASB 127 Consolidated and Separate
Financial Statements and in Interpretation 112 Consolidation –
Special Purpose Entities. Under the new principles, the Group
controls an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The Group has reviewed its investments in other entities to assess
whether the consolidation conclusion in relation to these entities
is different under AASB 10 than under AASB 127. No material
differences were found and therefore no adjustments to any of
the carrying amounts in the financial statements are required as a
result of the adoption of AASB 10.
Critical judgements are made in assessing whether an investee
entity is controlled or subject to significant influence or joint control.
These judgements include an assessment of the nature, extent
and financial effects of the Group’s interest in joint arrangements
and associates, including the nature and effects of its contractual
relationship with the entity or with other investors.
Generally, investments in unlisted retail funds (typically representing
less than 5% interests with the exception of two legacy funds,
Charter Hall Umbrella Fund and Charter Hall Diversified Property
Fund) are designated at fair value through profit or loss on
acquisition and investments in listed and wholesale funds/
partnerships where Charter Hall has significant influence
(typically representing between 5% and 49% interests with the
exception of one legacy fund, Charter Hall Opportunity Fund No. 4)
are accounted for using the equity method.
Management regularly reviews equity accounted investments
for impairment and remeasures investments carried at fair value
through profit or loss by reference to changes in circumstances or
contractual arrangements, external independent property valuations
and market conditions, using generally accepted market practices.
The reported fair values of assets classified as held for sale reflect
market conditions at the end of the reporting period. While this
represents best estimates as at the reporting date, actual sales
prices may be higher or lower than the most recent valuations. This
is particularly relevant in periods of market illiquidity or uncertainty.
(ii) Estimated performance fees
Critical judgements are made by the Charter Hall Group in respect
of recognising performance fee revenue. Performance fees are
only recognised when services have been performed and they can
be reliably estimated. Detailed calculations are completed and the
risks associated with the fee are assessed when deciding when it
is appropriate to recognise revenue.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 69
Charter Hall Group
The operating segments provided to the Board for the reportable segments for the year ended 30 June 2014 are as follows:
30 June 2014
Net property income
Co-investment Income
Total rental and property income
Total property funds management income
Total income
Operating expenses
Less: recovery of expenses
Net operating expenses
Operating earnings before interest, tax, depreciation and amortisation
Non-cash security-based benefits expense
Depreciation
Operating earnings before interest and tax
Interest income
Interest expense
Operating earnings attributable to stapled securityholders
Weighted average number of securities (‘000)
Operating earnings per security (OEPS)
Number of securities for distribution per security
DPS
Property
Investments
$’000
Property
Funds
Management
$’000
Combined
Group
$’000
1,018
47,684
48,702
–
48,702
(206)
–
(206)
48,496
–
–
48,496
2,495
(1,303)
49,688
–
–
–
99,145
99,145
(82,729)
19,523
(63,206)
35,939
–
(1,375)
34,564
–
–
34,564
1,018
47,684
48,702
99,145
147,847
(82,935)
19,523
(63,412)
84,435
(3,089)
(1,375)
79,971
2,495
(1,303)
81,163
320,615
25.31 cps
347,989
22.30 cps
Geographical segments are immaterial as the vast majority of the Group’s income is from Australian sources.
Assets and liabilities have not been reported on a segmented basis as the Board is provided with consolidated information.
70 Charter Hall Group
3. Segment information continued
(a) Description of segments continued
Charter Hall Group continued
The reportable segments for the year ended 30 June 2013 are as follows:
30 June 2013
Net property income
Co-investment Income
Total rental and property income
Total property funds management income
Total income
Operating expenses
Less: recovery of expenses
Net operating expenses
Operating earnings before interest, tax, depreciation and amortisation
Non-cash security-based benefits expense
Depreciation
Operating earnings before interest and tax
Interest income
Interest expense
Operating earnings (including non-controlling interests)
Non-controlling interest
Operating earnings attributable to stapled securityholders
Weighted average number of securities (‘000)
Operating earnings per security (OEPS)
Number of securities for distribution per security
DPS
The reconciliation of total segment income stated above to the statement of comprehensive income is as follows:
Total income per segment note
Add: recovery of expenses
Add: investment property expenses
Add: interest income
Add: straight-lining of income
Less: coupon income
Less: amortisation of lease incentives
Less: equity accounted profit in Property Investments segment
Less: equity accounted profit in Property Funds Management segment
Revenue per statement of comprehensive income
2014
$’000
147,847
19,523
167,370
161
4,407
21
(135)
–
(45,422)
(3,750)
122,652
Property
Investments
$’000
Property
Funds
Management
$’000
Combined
Group
$’000
9,101
38,468
47,569
–
47,569
(675)
–
(675)
46,894
–
–
46,894
2,348
(3,152)
46,090
(1,612)
44,478
–
–
–
83,505
83,505
(71,585)
16,573
(55,012)
28,493
–
(1,186)
27,307
–
–
27,307
–
27,307
9,101
38,468
47,569
83,505
131,074
(72,260)
16,573
(55,687)
75,387
(3,035)
(1,186)
71,166
2,348
(3,152)
70,362
(1,612)
68,750
299,805
22.93 cps
302,262
20.20 cps
2013
$’000
131,074
16,573
147,647
2,304
2,348
–
–
(453)
(35,221)
(1,784)
114,841
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 71
The reconciliation of net interest expense per the segment notes for 2014 and 2013 to the statement of comprehensive income is below:
Net operating interest per segment note
Less: unwind of discount on contingent consideration
Add: interest reclassified to investment income
Net interest expense
Interest income
Finance costs
Net interest expense
2014
$’000
1,192
–
1,912
3,104
4,407
(1,303)
3,104
2013
$’000
(804)
(171)
113
(862)
2,461
(3,323)
(862)
Operating earnings is a financial measure which represents statutory profit/(loss) adjusted for proportionally consolidated fair value
adjustments, gains or losses on sale of investments and non-cash items such as amortisation. The inclusion of operating earnings as
a measure of the Group’s profitability provides investors with the same basis that is used internally for evaluating operating segment
performance. Operating earnings is used by the Board to make strategic decisions and as a guide to assessing an appropriate
distribution to declare.
The calculation of operating earnings to statutory profit after tax attributable to stapled securityholders is shown below:
Operating earnings
Fair value adjustments on derivatives 1
Fair value adjustments on investment and property 1
Amortisation of management rights
Transfer from reserves of cumulative FX losses on disposal of foreign investments 1
Loss on disposal of investments, property and derivatives 1
Income taxes
Other 1
Statutory profit after tax attributable to stapled securityholders of Charter Hall Group
2014
$’000
81,163
(909)
14,404
(8,489)
(488)
(3,363)
1,007
(1,209)
82,116
2013
$’000
68,750
1,472
(3,615)
(7,838)
(484)
(953)
(1,738)
(752)
54,842
1 Includes the Group’s proportionate share of non-operating items of equity accounted investments on a look through basis.
Basic weighted average number of securities per Note 9
Operating earnings per stapled security (OEPS) (excluding non-controlling interest)
Refer to Note 9 for statutory earnings per stapled security figures.
2014
2013
320,614,668 299,804,805
25.31 cents
22.93 cents
72 Charter Hall Group
4. Revenue
Sales revenue
Gross rental income
Management, transaction and performance fees
Other revenue
Interest
Distributions/dividends 1
Total revenue
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
1,066
114,918
115,984
10,443
98,295
108,738
4,407
2,261
6,668
2,461
3,642
6,103
122,652
114,841
1,066
207
1,273
22,859
2,262
25,121
26,394
Restated
2013
$’000
10,443
–
10,443
22,688
3,642
26,330
36,773
1 Represents the distribution of income from investments in associates accounted for at fair value by the Group and Trust Group. Revenue excludes share of
net profits of equity accounted associates and joint ventures. Refer to Notes 33 and 34 for further details.
5. Expenses
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Profit before income tax includes the following specific expenses:
Depreciation
Plant and equipment
1,375
1,186
Amortisation
Leasing and other incentives
Management rights
Finance costs
Interest and finance charges paid/payable
Finance costs due to unwinding of discount on contingent consideration
Employee costs
Employee benefits expense
Restructuring costs
Non-cash security-based benefits expense
Payroll tax
Administration and other expenses
Legal and consulting costs
Rent expense – minimum lease payments on operating leases
Other occupancy costs
Communication and IT expenses
Other expenses
–
8,489
8,489
1,303
–
1,303
64,645
1,336
3,089
3,396
72,466
1,112
2,031
828
3,606
5,982
453
7,838
8,291
3,152
171
3,323
55,757
1,192
3,035
2,747
62,731
1,613
1,623
729
2,513
6,081
13,559
12,559
–
–
–
–
1,793
–
1,793
–
–
–
–
–
42
–
–
–
102
144
–
453
–
453
4,125
–
4,125
–
–
–
–
–
88
–
–
–
319
407
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 73
6. Fair value adjustments
Included in total income:
Investment properties
Contingent consideration payable
Derivative financial instruments
Included in total expenses:
Investment properties
Investments in associates at fair value through profit or loss
7. Income tax expense
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
183
–
–
183
Restated
2013
$’000
–
1,123
121
1,244
2014
$’000
183
–
–
183
Restated
2013
$’000
–
–
121
121
–
(1,778)
(1,778)
(8,419)
(1,596)
(10,015)
–
(1,773)
(1,773)
(8,419)
(1,691)
(10,110)
Note
16
13,33
(a) Income tax (benefit)/expense
Current tax expense
Deferred income tax (benefit)/expense
Over provided in prior years
Deferred income tax expense
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
(b) Numerical reconciliation of income tax expense to
prima facie tax payable
Profit before income tax expense
Prima facie tax expense at the Australian tax rate of 30%
Tax effect of amounts which are not deductible/(taxable) in calculating
taxable income:
Charter Hall Property Trust income
Non-allowable expenses
Share-based payments expense
Utilisation of losses not previously recognised
Sundry items
Tax expenses on foreign subsidiaries
Derecognition of deferred tax asset on unrealised capital losses
Recognition of deferred tax asset on prior year income tax losses
Non-taxable dividends, net of equity accounted profit
Adjustments in respect of prior years
Difference in overseas tax rates
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
606
(1,613)
–
(1,007)
(2,830)
1,217
(1,613)
Restated
2013
$’000
2014
$’000
Restated
2013
$’000
–
1,933
(195)
1,738
1,935
(2)
1,933
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81,109
24,333
56,129
16,839
70,521
21,156
53,077
15,923
(21,437)
2,459
(1,633)
(2,531)
186
606
4,308
(5,892)
(1,138)
(262)
(6)
(1,007)
(15,997)
2,231
(33)
(1,233)
–
–
–
–
(535)
480
(14)
1,738
(21,437)
–
–
–
281
–
–
–
–
–
–
–
(15,997)
–
–
–
74
–
–
–
–
–
–
–
74 Charter Hall Group
7. Income tax expense continued
(c) Tax consolidation legislation
Charter Hall Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation with effect
from 1 July 2003. The accounting policy in relation to this legislation is set out in Note 1(g).
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.
(d) Tax losses – Charter Hall Group
As it is considered probable that there will be future taxable profits, a deferred tax asset for unutilised tax losses carried forward has been
recognised in the current year.
Unused tax losses for which a deferred tax asset has been recognised
Unused tax losses for which no deferred tax asset has been recognised
Tax benefit @ 30%
2014
$’000
19,640
–
5,892
2013
$’000
–
7,726
2,318
Based upon the completion of the June 2013 income tax return, the actual carried forward tax losses (unbooked) was calculated to be
$17,666,000. This was an increase of $9,940,000 on the previously estimated carried forward losses (unbooked) in the prior year financial
statements of $7,726,000.
8. Distributions paid and payable
(a) Ordinary securities
Final ordinary distribution for the six months ended 30 June 2014 of
11.3 cents per security paid on 29 August 2014
Interim ordinary distribution for the six months ended 31 December 2013
of 11.0 cents per security paid on 25 February 2014
Final ordinary distribution for the six months ended 30 June 2013 of
10.4 cents per security paid on 28 August 2013
Interim ordinary distribution for the six months ended 31 December 2012
of 9.8 cents per security paid on 28 February 2013
Total distributions paid and payable
Paid or payable in cash
Satisfied by issue of securities 1
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
39,323
34,003
–
–
73,326
60,761
12,565
–
–
31,435
29,276
60,711
35,924
24,787
39,323
34,003
–
–
73,326
60,761
12,565
–
–
31,435
29,276
60,711
35,924
24,787
1
Inclusive of securities issued on 29 August 2014 under the Distribution Re-investment Plan.
Franking credits available in the parent entity (Charter Hall Limited) for subsequent financial years based on a tax rate of 30% (2013: 30%)
are $3,336,951 (2013: $3,336,951).
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 75
9. Earnings per security
(a) Basic earnings per security
Basic earnings attributable to the stapled securityholders
(b) Diluted earnings per security
Diluted earnings attributable to the stapled securityholders
(c) Reconciliations of earnings used in calculating
earnings per security
Profit attributable to the ordinary equity holders of the Group used
in calculating diluted earnings per security
(d) 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:
Performance rights
Service rights
Options
Securities issued under the Charter Hall Limited
Executive Loan Security Plan
Weighted average number of ordinary securities and potential
ordinary securities used as the denominator in calculating
diluted earnings per security
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
Cents
2013
Cents
2014
Cents
Restated
2013
Cents
25.61
18.29
22.01
18.13
24.92
17.67
21.41
17.52
2014
$’000
2013
$’000
2014
$’000
Restated
2013
$’000
82,116
54,842
70,563
54,354
2014
Number
2013
Number
2014
Number
2013
Number
320,614,668 299,804,805 320,614,668 299,804,805
6,098,199
263,193
2,532,125
5,614,052
460,846
4,364,646
6,098,199
263,193
2,532,125
5,614,052
460,846
4,364,646
–
63,161
–
63,161
329,508,185 310,307,510 329,508,185 310,307,510
(e) Information concerning the classification of securities
(i) Performance rights, service rights and options issued under the Charter Hall Performance Rights and Options Plan
The performance rights and options are unquoted securities. Conversion to stapled securities and vesting to executives is subject to
service and performance conditions.
(ii) Securities issued under the General Employee Share Plan (GESP)
Securities issued under the GESP are purchased on market on behalf of eligible employees but held in trust until the earlier of the
completion of three years’ service or termination. No adjustment to diluted earnings per security is required in relation to these securities.
(iii) Securities issued under the Charter Hall Limited Executive Loan Security Plan (ELSP)
Securities issued under the ELSP were issued in trust and corresponding loans were granted to employees. Under AASB 2 Share-based
Payment, the loan, interest received on the loan, securities and the distribution paid and payable were not recognised in the preparation
of the financial statements but included in the calculation of diluted earnings per security. All securities issued under this plan were
cancelled prior to 30 June 2013. Refer to Note 38(a) for further details.
76 Charter Hall Group
10. Cash and cash equivalents
Cash at bank and on hand
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
50,184
12,236
2014
$’000
577
2013
$’000
2,229
These amounts earn floating interest rates of between nil and 3.0% (2013: nil and 3.1%).
11. Trade and other receivables
Current
Trade receivables
Loans to key management personnel
Loans to joint ventures
Loans to associates
Distributions receivable
Capital distributions receivable
Other receivables
Prepayments
Non-current
Loans to key management personnel
Loans to joint ventures
Loan receivable from Charter Hall Limited
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
Note
2014
$’000
2013
$’000
2014
$’000
31(e)
31(e)
31(e)
11,694
1,200
21,250
–
14,399
11,910
6,207
323
66,983
–
6,500
–
6,500
15,423
1,122
26,250
6,044
12,558
–
1,595
558
63,550
2,400
–
–
2,400
139
–
21,250
–
13,605
11,910
5,570
–
52,474
–
–
181,292
181,292
Restated
2013
$’000
283
–
21,250
–
10,557
–
117
225
32,432
–
–
197,240
197,240
(a) Bad and doubtful trade receivables
During the year, the Charter Hall Group and Charter Hall Property Trust Group incurred $nil expense (2013: $nil) in respect of provisioning
for bad and doubtful trade receivables.
(b) Fair values
Receivables are carried at amounts that approximate their fair value.
(c) Credit risk
There is a limited concentration of credit risk as the majority of current and non-current receivables are due from related parties of
Charter Hall Group and Charter Hall Property Trust Group. Refer to Note 29 for more information on the risk management policy of
the Charter Hall Group and Charter Hall Property Trust Group.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 77
The ageing of trade receivables at the reporting date was as follows:
Current
1 to 3 months
3 to 6 months
More than 6 months
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
11,032
662
–
–
11,694
2013
$’000
14,120
258
84
961
15,423
2014
$’000
139
–
–
–
139
2013
$’000
283
–
–
–
283
As at 30 June 2014, Charter Hall Group had trade receivables of $662,000 (2013: $1,303,000) past due but not impaired. Charter Hall
Property Trust had $nil receivables past due (2013: $nil).
12. Assets classified as held for sale
685 La Trobe St
Menai Central, Menai
Home HQ, Nunawading
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
11,592
–
–
11,592
2013
$’000
–
31,500
23,725
55,225
2014
$’000
–
–
–
–
2013
$’000
–
31,500
23,725
55,225
685 La Trobe St was reclassified as held for sale from non-current inventories during the year. A conditional contract of sale in excess
of the carrying value was exchanged in July 2014. All assets classified as held for sale as at 30 June 2013 were investment properties.
These assets were sold during the year.
A reconciliation of the movements in assets held for sale during the year is set out below:
Opening balance
Assets reclassified to held for sale
Additions
Amortisation of lease incentives
Fair value adjustments
Disposals
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
55,225
11,592
–
7
–
(55,232)
11,592
2013
$’000
136,390
–
768
(319)
(8,419)
(73,195)
55,225
2014
$’000
55,225
–
–
7
–
(55,232)
2013
$’000
136,390
–
768
(319)
(8,419)
(73,195)
–
55,225
(a) Amounts recognised in the statement of comprehensive income for investment properties
Property income
Direct operating expenses from property that generated rental income
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
922
(156)
766
2013
$’000
10,443
(2,304)
8,139
2014
$’000
922
(156)
766
2013
$’000
10,443
(2,304)
8,139
This table includes the total income of all investment properties disposed of or classified as held for sale. The income is up to the earlier of
date of sale or 30 June of the relevant year.
78 Charter Hall Group
12. Assets classified as held for sale continued
(b) Valuation basis
Assets held for sale are carried at the lower of book value and fair value less costs to sell, representing the amount at which the assets
could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction at the date
of valuation.
13. Investments in associates at fair value through profit or loss
Investments in associates
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
Note
33
2014
$’000
2013
$’000
2014
$’000
2013
$’000
14,234
49,229
14,234
49,229
Changes in fair values of investments in associates at fair value through profit or loss are recorded in fair value adjustments in the
statement of comprehensive income.
These investments comprise units in certain unlisted Charter Hall managed funds which have been designated at fair value through profit
or loss.
Information about the Charter Hall Group and Charter Hall Property Trust Group’s material exposure to share and unit price risk is
provided in Note 29.
14. Inventories
Non-current assets
685 La Trobe St
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
–
–
10,848
10,848
–
–
–
–
685 La Trobe St was reclassified to assets classified as held for sale during the year. Refer to Note 12.
15. Investments accounted for using the equity method
Investments in associates
Investments in joint venture entities
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
Note
33
34
2014
$’000
583,414
99,487
682,901
2013
$’000
459,908
60,239
520,147
2014
$’000
520,627
71,242
591,869
2013
$’000
401,966
33,118
435,084
Investments in associates represent units in listed and unlisted Charter Hall managed funds which are accounted for using the equity
method. Refer to Note 33(a) for carrying value assessments of investments in associates. Investments in joint venture entities represent
joint venture interests in Australian and overseas joint ventures which are accounted for using the equity method. Refer to Note 34(a) for
carrying value assessments of investments in joint venture entities.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 79
16. Investment properties
During the year, the Group established a new controlled entity investment fund, BP Fund 2, to facilitate the purchase of a portfolio
of investment properties. A reconciliation of the carrying amount of investment properties at the beginning and end of the year is set
out below:
Opening balance
Additions
Acquisition costs incurred
Revaluation increment
Straightlining of rental income
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
–
46,215
1,966
183
22
48,386
2013
$’000
–
–
–
–
–
–
2014
$’000
–
46,215
1,966
183
22
48,386
2013
$’000
–
–
–
–
–
–
The Group introduced an equity partner into BP Fund 2 on 18 August 2014, reducing the Group’s equity interest in the fund
to $30 million (50.1%).
Key valuation assumptions used in the determination of the investment properties’ fair value and the Group’s valuation policy are
disclosed in Note 30.
leasing arrangements
The investment properties, excluding development properties, are leased to tenants under long-term operating leases with rentals
payable monthly. Minimum lease payments under non-cancellable operating leases of investment properties not recognised in the
financial statements are receivable as follows:
Due within one year
Due between one and five years
Over five years
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
1,643
7,080
14,595
23,318
2013
$’000
–
–
–
–
2014
$’000
1,643
7,080
14,595
23,318
2013
$’000
–
–
–
–
17. Intangible assets
In March 2010, the Charter Hall Group completed a transaction to acquire the majority of Macquarie Group’s core real estate
management platform. This transaction was structured to secure the management rights (i.e. future management fee revenue) of
Macquarie Office Trust (renamed Charter Hall Office REIT), Macquarie CountryWide Trust (renamed Charter Hall Retail REIT) and
Macquarie Direct Property Fund (renamed Charter Hall Direct Property Fund). The excess of consideration paid over net tangible assets
acquired represents the value of these management rights.
With the exception of management rights held over the Charter Hall Office Trust (CHOT), management considers that the management
rights have an indefinite life as there are no finite terms in the underlying agreements and the Charter Hall Group has no intention to
cease managing these Funds and the Funds do not have a finite life. The carrying value of management rights with an indefinite life
(i.e. excluding CHOT) is $54.9 million.
On 1 May 2012, Charter Hall Office REIT (CQO) was privatised and renamed CHOT. With implementation of the privatisation, CQO
changed from a listed REIT to a wholesale unit trust with liquidity reviews every five years. It is expected that the net fee revenue that the
Group will earn from managing CHOT will be generally consistent with the net revenue earned previously from managing the Australian
assets of CQO. The Group is amortising the management rights over a six year period from 1 May 2012 (includes an additional year to
source liquidity were the trust to be wound up in five years as a result of the liquidity review). Only the management rights held over the
Charter Hall Office Trust are finite life.
80 Charter Hall Group
17. Intangible assets continued
On 15 August 2012, a subsidiary of the Group paid $5.2 million to the previous manager of PFA Diversified Property Trust (PFA) to
facilitate the appointment of a Group subsidiary as the responsible entity of PFA. As PFA is an open ended fund with no termination date
or review event contemplated in its constitution, these facilitation payments have been treated as management rights and are considered
to have an indefinite useful life. There is currently no headroom in the valuation of the PFA management rights at balance date. Any
adverse change to the assumptions used in the valuation will result in an impairment.
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Indefinite life management rights
Charter Hall Retail REIT
Opening and closing balance
Charter Hall Direct Property Fund
Opening balance
Transfers to finite life management rights 1
Closing balance
PFA Diversified Property Trust
Opening balance
Additions
Closing balance
42,288
42,288
10,672
(3,249)
7,423
5,217
–
5,217
10,672
–
10,672
–
5,217
5,217
Total indefinite life management rights
54,928
58,177
Finite life management rights
Charter Hall Office Trust
Opening balance
Transfers from indefinite life management rights 1
Amortisation charge
Total finite life management rights
Total intangible assets
37,889
3,249
(8,489)
32,649
87,577
45,727
–
(7,838)
37,889
96,066
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 During the year, CHOT purchased the remaining 50% of No. 1 Martin Place Trust. As a result the management rights associated with this trust form part of
the CHOT CGU and have been reclassified to finite life intangibles.
All management rights recognised on the balance sheet (excluding PFA) were independently valued as at 30 April 2012 by KPMG
Corporate Finance. The valuation supports the carrying values and the methodology applied was an assessment of fair value (less costs
to sell) based on discounted cash flows. Management’s internal valuations for indefinite-life management rights as at 30 June 2014 have
been prepared on a consistent basis in the current year.
Key assumptions used for the indefinite life intangibles valuation calculations are as follows:
• cash flow projections based on financial budgets approved by management covering a five year period. Cash flows beyond the five
year period are extrapolated using estimated growth rates appropriate for the business;
• discount rate range of 14% – 17% (2013: 14% – 17%) which is in excess of the Charter Hall Group’s weighted average cost of capital
as a result of the management platform carrying more risk than the return on property investment cash flows;
• growth over the next five years of 3% (2013: 3%) per annum; and
• terminal value multiple of 4.9 to 7.0 times earnings (2013: 4.9 to 7.0 times).
Impairment is tested at the cash-generating unit (CGU) level for each CGU. Each individual CGU is considered to be a fund which
generates management fee income.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 81
18. Property, plant and equipment
Opening net book amount
Additions 1
Disposals
Depreciation charge
Closing net book amount
At balance date
Cost
Accumulated depreciation
Net book amount
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2,743
9,153
(1,147)
(1,375)
9,374
12,725
(3,351)
9,374
2013
$’000
3,026
1,233
(330)
(1,186)
2,743
4,777
(2,034)
2,743
2014
$’000
2013
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Additions of $9.2 million include $6.6 million in relation to the fitout of Charter Hall’s new office in No. 1 Martin Place. A lease incentive of $6.6 million was
received to offset the cost of the fitout. A liability for the value of the incentive is being amortised over the life of the lease. Refer to Note 20.
19. Deferred tax assets
Deferred tax assets comprises temporary differences attributable to:
Tax losses carried forward
Employee benefits
Investments in associates
Other
Deferred tax liabilities comprises temporary differences attributable to:
Investment in associates
Other
Net deferred tax assets
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
5,892
5,130
–
380
11,402
(3,218)
(182)
(3,400)
8,002
2013
$’000
–
4,217
4,308
47
8,572
(2,042)
(141)
(2,183)
6,389
2014
$’000
2013
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Deferred tax liabilities have been set-off against deferred tax assets pursuant to set-off provisions.
A reconciliation of the carrying amount of deferred tax assets at the beginning and end of the current and previous years is set out below:
Opening balance
Charged to income statement
Closing balance
Net deferred tax assets expected to reverse within
12 months
Net deferred tax (liabilities)/assets expected to reverse after
more than 12 months
Note
7
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
6,389
1,613
8,002
2013
$’000
8,322
(1,933)
6,389
9,935
3,538
(1,933)
8,002
2,851
6,389
2014
$’000
2013
$’000
–
–
–
–
–
–
–
–
–
–
–
–
82 Charter Hall Group
20. Trade and other payables
Current
Trade payables
Accruals
Distribution payable
GST payable
Annual leave payable
Contingent consideration payable
Employee benefits payable
Other payables
Lease incentive liability
Non-current
Lease incentive liability
All current liabilities are expected to be settled within 12 months.
21. Provisions
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
17
3,550
39,323
1,683
2,770
–
11,762
1,057
499
60,661
5
2,933
31,435
–
2,129
1,856
9,693
770
–
48,821
–
1,996
39,323
(20)
–
–
–
151
–
41,450
2
1,193
31,435
–
–
–
–
110
–
32,740
5,670
–
–
–
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Current
Employee benefits – long service leave
1,579
1,101
Non-current
Employee benefits – long service leave
1,054
1,162
Movement in employee benefits provisions are set out below:
long service leave
Opening balance
Amount utilised
Additional provisions recognised
Closing balance
Current
Non-current
Total
2,263
(273)
643
2,633
1,579
1,054
2,633
2,084
–
179
2,263
1,101
1,162
2,263
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 83
22. Interest-bearing liabilities
Secured
Bank loans drawn:
Charter Hall Property Trust loan
DRF loan
Unamortised borrowing costs
Total interest-bearing liabilities
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
–
–
–
–
14,000
13,750
(295)
27,455
–
–
–
–
14,000
13,750
(295)
27,455
Charter Hall Property Trust loan
In August 2013, the expiry date of the loan facility was extended to 24 August 2015. In June 2014, the facility limit was increased from
$75.0 million to $100.0 million.
At 30 June 2014, no cash (2013: $14.0 million) and bank guarantees of $9.3 million (2013: $8.1 million) had been drawn under
this facility.
Amounts drawn under this facility are potentially repayable if the Trust defaults on payments of interest or principal or allows:
• the ratio of debt to total tangible assets to exceed 35%;
• the ratio of debt to EBITDA to exceed 2.0 times (2013: 4.0 times); or
• the ratio of ‘net cash inflow’ to gross interest to fall below a minimum of 4.25 times; or
• the drawn debt (including bank guarantees) to exceed the market value of CHC’s investment in CQR.
Security
The Charter Hall Property Trust loan is secured over the Trust’s investment in listed and unlisted funds.
84 Charter Hall Group
22. Interest-bearing liabilities continued
Borrowing costs
$274,000 additional borrowing costs were incurred during 2014 in relation to the extension to the term and facility limit of the CHPT loan.
As no debt was drawn on the CHPT facility as at 30 June 2014, the unamortised borrowing costs of $319,470 are disclosed on the
balance sheet as Other Assets.
The carrying amounts of assets pledged as security for borrowings are:
Current
First mortgage
Investment property classified as held for sale
Total current assets pledged as security
Non-current
First mortgage
Investment in associates
Total non-current assets pledged as security
Total assets pledged as security
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
–
–
23,725
23,725
–
–
23,725
23,725
606,103
606,103
606,103
484,313
484,313
508,038
606,103
606,103
606,103
484,313
484,313
508,038
(a) Financial arrangements
The Charter Hall Group and Charter Hall Property Trust Group had unrestricted access at reporting date to the following lines of credit:
Total facilities
Used at reporting date
Unused at reporting date
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
100,000
(9,330)
90,670
2013
$’000
88,750
(35,850)
52,900
2014
$’000
100,000
(9,330)
90,670
2013
$’000
88,750
(35,850)
52,900
The facility utilised includes bank guarantees of $9.3 million (2013: $8.1 million), which under the terms of the agreement reduce the
available facility. No liability is recognised for bank guarantees.
(b) 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 ratio of the Charter Hall Group at 30 June 2014 was nil % (2013: 1.88%), and of the Charter Hall Property Trust Group nil %
(2013: 3.51%). Debt covenants are monitored regularly to ensure compliance and reported to the debt provider on a six monthly basis.
The Group Treasurer is responsible for negotiating new debt facilities and monitoring compliance with covenants.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 85
23. Contributed equity
(a) Security capital
Charter Hall Limited
Charter Hall Property Trust
2014
Securities
2013
Securities
2014
$’000
232,101
945,333
Restated
2013
$’000
211,335
799,548
Ordinary securities – stapled units, fully paid
347,989,262 302,262,312
1,177,434
1,010,883
(b) Movements in ordinary security capital
Details
Restated opening balance
Performance rights and options exercised 2
Issuance under DRP 3
Restated balance at 30 June 2013
Less: transaction costs on security issues
Restated balance per accounts at 30 June 2013
Performance rights and options exercised 4
Issuance under DRP 5
Issued under institutional placement
Balance at 30 June 2014
Less: transaction costs on security issues
Number of
securities 1
Issue price
Charter Hall
Limited
$’000
Charter Hall
Property
Trust
$’000
296,168,170
2,835,759
3,258,383
302,262,312
302,262,312
3,467,703
5,417,141
36,842,106
347,989,262
$1.94
$3.25
$2.55
$3.79
$3.80
209,550
612
1,175
211,337
(2)
211,335
992
2,422
17,640
232,389
(288)
785,113
5,040
9,411
799,564
(16)
799,548
7,361
18,104
122,360
947,373
(2,040)
Total
$’000
994,663
5,652
10,586
1,010,901
(18)
1,010,883
8,353
20,526
140,000
1,179,762
(2,328)
Balance per accounts at 30 June 2014
347,989,262
232,101
945,333
1,177,434
1 This includes shares of Charter Hall Limited and units in Charter Hall Property Trust, which are stapled. Refer to Note 1 for details of the accounting for this
stapling arrangement.
Includes 1,772,116 options with a strike price of $1.94 and 72,117 with a strike price of $2.44.
2
3 The DRP was only in place for the second distribution paid in the year. The issue price reported above is for securities issued in February 2013.
4
5
Includes 602,636 options with a strike price of $2.80, 27,243 with a strike price of $2.35 and 1,312,080 with a strike price of $2.44.
Includes 3,691,877 issued in August 2013 with an issue price of $3.85 and 1,725,254 issued in February 2014 with an issue price of $3.67.
(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.
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.
(d) Distribution Re-investment Plan
The Group has established a Distribution Re-investment 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 in effect for the entire year.
86 Charter Hall Group
24. Reserves
Business combination reserve
Security-based benefits reserve
Transactions with non-controlling interests
Foreign currency reserve
Charter Hall Limited
Charter Hall Property Trust
Movements:
Business combination reserve
Opening and closing balance
Security-based benefits reserve
Opening balance
Non-cash security-based benefits expense
Transfer due to deferred compensation payable in performance rights
Transferred to equity on options and performance rights exercised
Transferred to accumulated losses for ELSP lapse
Closing balance
Transactions with non-controlling interests
Opening balance
DRF acquisition premium
Transfer to accumulated losses
Closing balance
Foreign currency reserve
Opening balance
Exchange differences on translation of foreign operations
Transfer of cumulative FX losses to profit or loss
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
(52,000)
8,365
–
(455)
(44,090)
(44,386)
296
(44,090)
2013
$’000
(52,000)
7,480
(10,014)
(1,023)
(55,557)
(54,147)
(1,410)
(55,557)
(52,000)
(52,000)
7,480
3,089
1,196
(3,400)
–
8,365
(10,014)
–
10,014
12,605
3,035
–
(2,038)
(6,122)
7,480
(8,702)
(1,312)
–
–
(10,014)
(1,023)
80
488
(455)
(2,373)
1,141
209
(1,023)
2014
$’000
–
–
–
296
296
–
296
296
–
–
–
–
–
–
–
(1,199)
–
1,199
–
(211)
19
488
296
2013
$’000
–
–
(1,199)
(211)
(1,410)
–
(1,410)
(1,410)
–
–
–
–
–
–
–
(9)
(1,190)
–
(1,199)
–
(1,406)
986
209
(211)
(i) Business combination reserve
This reserve relates to the reverse acquisition at the initial public offering (IPO) in 2005. 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.
(ii) Security-based benefits reserve
The security-based benefits reserve is used to recognise the fair value of rights and options issued under the PROP.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 87
(iii) Transactions with non-controlling interests
Transactions with non-controlling interests that do not result in loss of control are treated as transactions with equity owners of the
Charter Hall Group and Charter Hall Property Trust Group.
A change in ownership interest results in an adjustment between the carrying amounts of controlling and non-controlling interests to
reflect their relative interests in the controlled entity. Any difference between the amount of the adjustment to non-controlling interests
and any consideration paid or received is recognised within this reserve.
Charter Hall Direct Retail Fund has now liquidated all its assets and distributed total net proceeds to its unitholders. As a result there
are no longer any non-controlling interests so the balance of the reserve created on transactions with non-controlling interests has been
transferred to accumulated losses.
(iv) Foreign currency reserve
Exchange differences arising on translation of foreign controlled entities and the Charter Hall Group’s and Charter Hall Property Trust
Group’s share of foreign exchange differences arising from the equity accounted investments are recognised in other comprehensive
income as described in Note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit
or loss when the net investment is disposed of.
25. Accumulated losses
Opening balance
Profit for the year
Distributions
Transfer from security-based benefits reserve
Transfer from non-controlling interest reserve
Closing balance
Charter Hall Limited
Charter Hall Property Trust
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
(215,032)
82,116
(73,326)
–
(10,014)
(216,256)
(118,328)
(97,928)
(216,256)
Restated
2013
$’000
(215,285)
54,842
(60,711)
6,122
–
(215,032)
(121,066)
(93,966)
(215,032)
2014
$’000
(93,966)
70,563
(73,326)
–
(1,199)
(97,928)
–
(97,928)
(97,928)
Restated
2013
$’000
(87,609)
54,354
(60,711)
–
–
(93,966)
–
(93,966)
(93,966)
26. Non-controlling interest
The Charter Hall Group owns 100% of DRF and the non-controlling interest (NCI) disclosed by Charter Hall Property Trust Group
solely represents the 16% interest held by Charter Hall Holdings Pty Ltd, a subsidiary of Charter Hall Limited. DRF has disposed of its
investments and distributed its residual balances, reducing its net assets to nil.
Interest in:
Contributed equity
Accumulated losses
Other non-controlling interest in DRF
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
0%
NCI
–
–
–
2013
$’000
0%
NCI
2014
$’000
16%
NCI
2013
$’000
16%
NCI
–
–
–
32,145
(32,145)
–
32,145
(25,073)
7,072
88 Charter Hall Group
27. Remuneration of auditors
During the year, the following fees were paid or payable for services provided by the auditors of the Charter Hall Group and Charter Hall
Property Trust Group, their related practices and non-related audit firms:
(a) Audit services
PricewaterhouseCoopers – Australian Firm
Audit and review of financial reports
Total remuneration for audit services
(b) Taxation services
PricewaterhouseCoopers – Australian Firm
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$
2013
$
2014
$
2013
$
367,048
367,048
383,279
383,279
5,000
5,000
33,150
33,150
Tax compliance services, including review of the company
income tax returns
Total remuneration for taxation services
48,817
48,817
50,341
50,341
–
–
–
–
Total fees paid to PricewaterhouseCoopers by the Charter Hall Group, together with funds managed by the Group, for audit and
audit-related services amounted to $1,496,385 (2013: $1,699,691).
The Charter Hall Group and Charter Hall Property Trust Group’s policy is to employ PricewaterhouseCoopers (PwC) on assignments
additional to statutory audit duties where PwC’s expertise and experience with the Charter Hall Group and Charter Hall Property
Trust Group are important. These assignments are principally tax and accounting advice or where PwC is awarded assignments on a
competitive basis. It is the Charter Hall Group and Charter Hall Property Trust Group’s policy to seek competitive tenders for all major
consulting projects.
28. Reconciliation of profit after tax to net cash inflow from operating activities
Profit after tax for the year
Non-cash items
Amortisation of management rights
Depreciation and amortisation
Non-cash employee benefits expense – security-based benefits
Net loss/(gain) on sale of investments, property and derivatives
Net loss on remeasurement of equity interests
Fair value adjustments
Change in assets and liabilities, net of effects from purchase
of controlled entity
(Increase)/decrease in trade debtors and other receivables
Increase/(decrease) in trade creditors and accruals
Net income receivable from investment in associates and
joint venture entities
Decrease in provisions
(Increase)/decrease for net deferred income tax
Net cash inflow from operating activities
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
Restated
2013
$’000
82,116
54,391
70,521
53,077
8,489
1,631
3,089
2,528
–
1,596
3,447
4,590
(18,544)
–
(1,609)
87,333
7,838
2,845
3,035
(376)
368
8,495
(7,836)
4,019
(7,503)
(14,239)
1,933
52,970
–
256
–
1,787
–
1,590
(20,380)
332
(16,079)
–
–
38,027
–
1,020
–
(249)
368
10,110
(23,592)
(2,110)
(22,084)
–
–
16,540
Dividend and interest income received on investments has been classified as cash flow from operating activities.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014
Annual Report 2014 89
29. Capital and financial risk management
(a) Capital risk management
The key capital risk management objective of the Charter Hall Group and Charter Hall Property Trust Group is to optimise returns through
the mix of available capital sources whilst complying with statutory and constitutional capital requirements, and complying with the
covenant requirements of the finance facility. The capital management approach is regularly reviewed by management and the Board
as part of the overall strategy. The capital mix can be altered by issuing new units, electing to have the DRP underwritten, adjusting the
amount of distributions paid, activating a unit buyback program or selling assets.
(b) Financial risk management
The Charter Hall Group and Charter Hall Property Trust Group activities expose them to a variety of financial risks: market risk (price risk,
interest rate risk and foreign exchange risk), credit risk and liquidity 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. From time
to time, the Group uses derivative financial instruments such as interest rate swaps and option contracts to hedge certain risk exposures.
Risk management is carried out by the Group Treasurer, the Chief Financial Officer and the Joint Managing Directors in consultation
with senior management, the Audit, Risk and Compliance Committee and the Board of Directors. The Group Treasurer identifies,
evaluates and hedges financial risks in close co-operation with the Chief Financial Officer. The Board provides guidance for overall risk
management, as well as covering specific areas, such as mitigating price, interest rate and credit risks, the use of derivative financial
instruments and investing excess liquidity.
(i) Market risk
Unlisted unit price risk
The Group is exposed to unlisted unit price risk. This arises from investments in unlisted property funds managed by the Group. These
funds invest in direct property. Charter Hall manages all the funds that the Group invests in and its staff have a sound understanding
of the underlying property values and trends that give rise to price risk. The carrying value of investments in associates at fair value
through profit or loss is measured with reference to the funds’ unit prices which are determined in accordance with the funds’ respective
constitutions. 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 Charter Hall Group and
Charter Hall Property Trust 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 either 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.
2014
Assets – Charter Hall Group
Investments in associates at fair value through
profit or loss
Assets – Charter Hall Property Trust Group
Investments in associates at fair value through
profit or loss
2013
Assets – Charter Hall Group
-10%
+10%
Carrying
amount
$’000
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
14,234
(1,423)
(1,423)
1,423
1,423
14,234
(1,423)
(1,423)
1,423
1,423
-10%
+10%
Carrying
amount
$’000
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
Investments in associates at fair value through profit or loss
49,229
(4,923)
(4,923)
4,923
4,923
Assets – Charter Hall Property Trust Group
Investments in associates at fair value through profit or loss
49,229
(4,923)
(4,923)
4,923
4,923
90 Charter Hall Group
29. Capital and financial risk management continued
(b) Financial risk management continued
(i) Market risk continued
Cash flow and fair value interest rate risk
As both the Charter Hall Group and Charter Hall Property Trust Group have no long-term interest-bearing assets, both Groups’ income
and operating cash receipts are not materially exposed to changes in market interest rates.
The Charter Hall Group’s and Charter Hall Property Trust Group’s interest rate risk arises from the $100 million loan facility. At
30 June 2014 no borrowings were drawn on this facility (2013: $27,750,000). Borrowings drawn at variable rates expose both Groups
to cash flow interest rate risk. Borrowings drawn at fixed rates expose both Groups to fair value interest rate risk. The Charter Hall Group
and Charter Hall Property Trust Group’s policy is to fix rates between 50-100% of core borrowings for the anticipated debt term. Core
borrowings are defined as being the level of borrowings that are expected to be held for a period of more than two years. The Group did
not hold any derivatives as at 30 June 2014.
The Charter Hall Group and Charter Hall Property Trust Group both manage their cash flow interest rate risk by using floating-to-fixed
interest rate swaps and option contracts that provide a similar hedge under certain interest rate outcomes. Such interest rate swaps have
the economic effect of converting borrowings from floating rates to fixed rates. 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.
(ii) Interest rate risk exposure
As the Group has no drawn debt, interest rate risk exposure is minimal. The following tables set out the exposure to interest rate risk,
including the contractual repricing dates and the effective weighted average interest rate by maturity period for financial liabilities.
Exposures arise predominantly from liabilities bearing variable interest rates as the Charter Hall Group and Charter Hall Property Trust
Group intend to hold fixed rate liabilities to maturity.
Charter Hall Group
2014
Trade and other payables
Weighted average interest rate
Floating
interest rate
$’000
–
0.0%
FIxED INTEREST MATURING IN:
1 year
or less
$’000
–
Over 1 to
2 years
$’000
Over 5
years
$’000
Non-interest
bearing
$’000
Total
$’000
–
–
60,661
60,661
Charter Hall Group
2013
Trade and other payables
Contingent consideration payable
Interest-bearing liabilities
Weighted average interest rate
Charter Hall Property Trust Group
2014
Trade and other payables
Weighted average interest rate
Charter Hall Property Trust Group
2013
Trade and other payables
Interest-bearing liabilities
–
–
27,750
27,750
5.7%
Floating
interest rate
$’000
–
0.0%
FIxED INTEREST MATURING IN:
Floating
interest rate
$’000
1 year
or less
$’000
Over 1 to
2 years
$’000
Over 5
years
$’000
Non-interest
bearing
$’000
–
–
–
–
–
–
–
–
–
–
–
–
46,965
1,856
–
48,821
Total
$’000
46,965
1,856
27,750
76,571
FIxED INTEREST MATURING IN:
1 year
or less
$’000
–
Over 1 to
2 years
$’000
Over 5
years
$’000
Non-interest
bearing
$’000
Total
$’000
–
–
41,450
41,450
FIxED INTEREST MATURING IN:
Floating
interest rate
$’000
1 year
or less
$’000
Over 1 to
2 years
$’000
Over 5
years
$’000
Non-interest
bearing
$’000
–
27,750
27,750
–
–
–
–
–
–
–
–
–
32,740
–
32,740
Total
$’000
32,740
27,750
60,490
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 91
Charter Hall Property Trust Group
2013
Weighted average interest rate
Floating
interest rate
$’000
5.7%
FIxED INTEREST MATURING IN:
1 year
or less
$’000
Over 1 to
2 years
$’000
Over 5
years
$’000
Non-interest
bearing
$’000
Total
$’000
Interest rate sensitivity analysis
The following tables illustrate the potential impact a change in interest rates of +/-1% would have on the Charter Hall Group and Charter
Hall Property Trust Group’s profit and equity.
Charter Hall Group
2014
Financial assets
Cash and cash equivalents
Total increase/(decrease)
Charter Hall Group
2013
Financial assets
Cash and cash equivalents
Financial liabilities
Interest-bearing liabilities
Total increase/(decrease)
Fair value
$’000
Carrying
amount
$’000
50,184
50,184
-1%
+1%
Profit
$’000
(502)
(502)
Equity
$’000
(502)
(502)
Profit
$’000
Equity
$’000
502
502
502
502
-1%
+1%
Fair value
$’000
Carrying
amount
$’000
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
12,236
12,236
(122)
(122)
122
122
27,750
27,455
278
156
278
156
(278)
(156)
(278)
(156)
Charter Hall Property Trust Group
2014
Financial assets
Cash and cash equivalents
Loan receivable from Charter Hall Ltd
Total increase/(decrease)
Fair value
$’000
Carrying
amount
$’000
577
181,292
577
181,292
-1%
+1%
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
(6)
(1,813)
(1,819)
(6)
(1,813)
(1,819)
6
1,813
1,819
6
1,813
1,819
-1%
+1%
Charter Hall Property Trust Group
2013
Financial assets
Cash and cash equivalents
Restated loan receivable from
Charter Hall Ltd
Financial liabilities
Interest-bearing liabilities
Restated total increase/(decrease)
Fair value
$’000
Carrying
amount
$’000
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
2,229
2,229
(22)
(22)
22
22
197,240
197,240
(1,972)
(1,972)
1,972
1,972
27,750
27,455
278
(1,694)
278
(1,694)
(278)
1,694
(278)
1,694
The fair value of interest-bearing liabilities is inclusive of costs which would be incurred on settlement of a liability, and 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.
92 Charter Hall Group
29. Capital and financial risk management continued
(b) Financial risk management continued
(iii) Foreign exchange risk
The Charter Hall Group’s principal exposure to foreign exchange risk arises from its investments in foreign subsidiaries. The major asset
held by foreign subsidiaries is cash in foreign denominated bank accounts. The Charter Hall Property Trust Group does not have any
exposure of this type. Additionally, both Groups were exposed to foreign exchange risk arising from their equity accounted investment in
the Charter Hall Retail REIT (CQR). Following CQR’s disposal program of its offshore assets, the impact of foreign exchange risk on net
assets is immaterial and no longer considered a significant risk at 30 June 2014.
The tables below illustrate the potential impact a change in foreign exchange rates of +/-10% would have on the Charter Hall Group’s
and Charter Hall Property Trust Group’s profit and equity:
Charter Hall Group
US dollars +10%
US dollars -10%
Euros +10%
Euros -10%
NZ dollars +10%
NZ dollars -10%
Charter Hall Property Trust Group
US dollars +10%
US dollars -10%
Euros +10%
Euros -10%
NZ dollars +10%
NZ dollars -10%
2014
2013
Profit
$’000
Equity
$’000
(78)
95
(13)
16
(2)
3
(5)
7
(87)
107
(83)
84
Profit
$’000
(72)
81
270
(335)
6
(7)
2014
2013
Profit
$’000
Equity
$’000
–
–
–
–
–
–
–
–
–
–
(82)
82
Profit
$’000
9
(18)
267
(331)
–
–
Equity
$’000
105
(127)
(526)
647
(115)
146
Equity
$’000
(120)
147
(432)
534
(55)
74
(c) Credit risk
The Charter Hall Group and Charter Hall Property Trust Group have policies in place to ensure that sales of services are made to
customers with appropriate credit histories.
62% of the Charter Hall Group’s income is derived from management fees, transaction and other fees from related parties. 34% of
the Charter Hall Group’s income is derived from equity accounted investments in property funds, and distributions from investments in
property funds held at fair value through the profit and loss. The balance relates to interest income and property rental income.
66% of the Charter Hall Property Trust Group’s income is derived from investments in related party property funds. All tenants in the
underlying property funds are assessed for creditworthiness, taking into account their financial position, past experience and other
factors. Refer to Note 11(c) for more information on credit risk.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Charter Hall Group and Charter
Hall Property Trust Group have policies that limit the amount of credit exposure to any one financial institution.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 93
(d) 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, the Charter Hall
Group and Charter Hall Property Trust Group aim at maintaining flexibility in funding by keeping committed credit lines available.
Maturities of financial liabilities
The following table provides the contractual maturity of Charter Hall Group’s and Charter Hall Property Trust Group’s financial liabilities and
derivatives. The amounts presented represent the future contractual undiscounted principal and interest cash flows and therefore do not
equate to the value shown in the balance sheet. Repayments which are subject to notice are treated as if notice were given immediately.
Charter Hall Group
2014
Trade and other payables
Charter Hall Group
2013
Trade and other payables
Contingent consideration payable
Interest-bearing liabilities
Charter Hall Property Trust Group
2014
Trade and other payables
Charter Hall Property Trust Group
2013
Trade and other payables
Interest-bearing liabilities
Carrying
amount
$’000
60,661
60,661
Carrying
amount
$’000
46,965
1,856
27,455
76,276
Carrying
amount
$’000
41,450
41,450
Carrying
amount
$’000
32,740
27,455
60,195
Less than
1 year
$’000
Between 1
and 2 years
$’000
Over
2 years
$’000
Total cash
flows
$’000
60,661
60,661
–
–
–
–
60,661
60,661
Less than
1 year
$’000
Between 1
and 2 years
$’000
Over
2 years
$’000
Total cash
flows
$’000
46,965
1,856
27,815
76,636
–
–
–
–
–
–
–
–
46,965
1,856
27,815
76,636
Less than
1 year
$’000
Between 1
and 2 years
$’000
Over
2 years
$’000
Total cash
flows
$’000
41,450
41,450
–
–
–
–
41,450
41,450
Less than
1 year
$’000
Between 1
and 2 years
$’000
Over
2 years
$’000
Total cash
flows
$’000
32,740
27,815
60,555
–
–
–
–
–
–
32,740
27,815
60,555
94 Charter Hall Group
30. Fair value measurement
(a) Recognised fair value measurement
The Charter Hall Group and the Charter Hall Property Trust Group measure and recognise the following assets and liabilities at fair value
on a recurring basis:
•
•
• Contingent consideration payable (nil balance at 30 June 2014) (refer to Note 20).
Investments in associates at fair value through profit and loss (refer to Note 33).
Investment properties (refer to Note 16).
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(i) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
(ii) Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices); and
(iii) Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table presents the Charter Hall Group and Charter Hall Property Trust Group’s assets and liabilities measured and
recognised at fair value:
Charter Hall Group
2014
Investments in associates at fair value through profit and loss
Investment properties
Total assets
Charter Hall Group
2013
Investments in associates at fair value through profit and loss
Total assets
Contingent consideration payable
Total liabilities
Charter Hall Property Trust Group
2014
Investments in associates at fair value through profit and loss
Investment properties
Total assets
Charter Hall Property Trust Group
2013
Investments in associates at fair value through profit and loss
Total assets
Level 1
$’000
Level 2
$’000
–
–
–
–
–
–
Level 1
$’000
Level 2
$’000
–
–
–
–
–
–
–
–
Level 1
$’000
Level 2
$’000
–
–
–
–
–
–
Level 1
$’000
Level 2
$’000
–
–
–
–
Level 3
$’000
14,234
48,386
62,620
Level 3
$’000
49,229
49,229
1,856
1,856
Level 3
$’000
14,234
48,386
62,620
Level 3
$’000
49,229
49,229
Total
$’000
14,234
48,386
62,620
Total
$’000
49,229
49,229
1,856
1,856
Total
$’000
14,234
48,386
62,620
Total
$’000
49,229
49,229
(b) Disclosed fair values
The carrying amounts of current trade receivables and payables approximate their fair values due to their short-term nature. 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 Charter Hall Group and Charter Hall Property Trust Group for similar financial instruments. The fair value of
current borrowings approximates the carrying amount, as the impact of discounting is not significant. There were no financial liabilities at
30 June 2014. Refer to Note 22.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 95
(c) Valuation techniques used to derive level 3 fair values
The fair value of associates held at fair value through profit and loss, which are investments in unlisted securities, approximates book
value and is determined giving consideration to the unit prices and net assets of the underlying funds. The unit prices and net asset
values are largely driven by the fair values of investment properties and derivatives held by the funds. Recent arm’s length transactions,
if any, are also taken into consideration.
In determining fair value of investment properties, management has considered the nature, characteristics and risks of the
investment properties:
Fair value as at
30 June 2014 (’000)
48,569
Valuation technique
Significant unobservable inputs
used to measure fair value
Range of
unobservable inputs
DCF and capitalisation method Gross market rent (per annum per square metre) $156 – $202
7.0% – 7.5%
7.25% – 7.75%
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
9.0% – 9.25%
Term
Definition
Discounted cash flow
method (DCF)
Income capitalisation
method
Gross market rent
Capitalisation rate
Terminal yield
A method in which a discount rate is applied to future expected income streams to estimate the present value.
A valuation approach that provides an indication of value by converting future cash flows to a single current
capital value.
The estimated amount for which an interest in a real property should be leased on the valuation date between
a willing lessor and a willing lessee on appropriate terms in an arm’s length transaction after proper marketing
and where the parties had each acted knowledgeably, prudently and without compulsion.
The return represented by the income produced by an investment, expressed as a percentage.
A percentage return applied to the expected net income following a hypothetical sale at the end of the
cash flow period.
Discount rate
A rate of return used to convert a future monetary sum or cash flow into present value.
(d) Valuation process
The Board conducts investment property valuation process on a half yearly basis. All valuations are performed either by independent
professionally qualified external valuers or by Charter Hall’s internal valuation team and then are reviewed and approved by the Valuations
Sub-Committee, for recommendation to the ARCC and subsequent approval by the Board.
All investment properties held must be independently valued on an ‘as is’ basis at least once every 12 months. Where an internal
valuation differs from the most recent independent valuation by +/- 5%, a new independent valuation is obtained.
In determining the valuation of all investment properties measured at recurring fair value, consideration has been given to the highest
and best use of those properties.
Development properties
The total cost of a development property is generally capitalised to its carrying value until the development is complete. At the
commencement of a development project an estimated valuation on an ‘as if complete’ basis is obtained and the capitalised costs during
the project are monitored against this initial valuation.
At each reporting date, the carrying value of development properties is reviewed to determine whether they are in excess of their fair
value. Where appropriate, a writedown is made to reflect fair value. On completion, the property is externally valued.
(e) Sensitivity analysis
Asset class
Investments in associates at fair
value through profit and loss
Investment properties
Significant input
Price per security
Gross market rent (per annum
per square metre)
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Fair value measurement
sensitivity to significant
increase in input
Fair value measurement
sensitivity to significant
decrease in input
Increase
Increase
Decrease
Increase
Decrease
Decrease
Decrease
Increase
Decrease
Increase
96 Charter Hall Group
31. Related parties
(a) Parent entity
The parent entity of the Charter Hall Group is Charter Hall Limited. The parent entity of the Charter Hall Property Trust Group is the
Charter Hall Property Trust.
(b) Controlled entities
Interests in controlled entities are set out in Note 32.
(c) Key management personnel
The following persons were considered key management personnel during the year:
Executive directors
D Harrison
D Southon
Other key management personnel
P Altschwager
S Dundas
R Stacker
A Taylor
Former key management personnel
N Devlin 1
T Jordan 1
N Kelly 1
A Glass 2
1 As a result of an internal restructure these employees ceased to qualify as key management personnel on 10 February 2014.
2 Ceased employment with Charter Hall and ceased to qualify as a key management personnel on 13 February 2014.
Below are the aggregate amounts paid to key management personnel:
Salary and fees
Short-term incentives
Superannuation
Value of securities vested
Non-monetary benefits
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$
2013
$
2014
$
2013
$
5,697,567
3,125,310
173,306
4,808,714
68,188
5,569,272
354,300
159,267
1,864,174
68,188
13,873,085
8,015,201
–
–
–
–
–
–
–
–
–
–
–
–
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 97
(d) Transactions with related parties
The following income was earned from related parties during the year:
Accounting cost recoveries
Marketing cost recoveries
Management and performance fees
Transaction and development fees
Commitment fees
Property management fees and cost recoveries
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$
2013
$
2014
$
2013
$
7,160,374
1,291,013
46,537,099
19,622,404
67,500
6,392,807
1,632,511
39,651,732
15,675,243
135,000
37,712,834
32,953,495
–
–
–
–
–
–
–
–
–
–
–
–
The following balances arising through the normal course of business were due from/to related parties at balance date:
Management fee receivables
Other receivables
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$
2013
$
6,908,532
5,690,632
4,785,346
9,203,342
2014
$
–
–
2013
$
–
–
Transactions with associates and joint ventures are disclosed in Notes 33 and 34 respectively.
(e) loans to/from related parties
Loans to joint ventures and associates
Opening balances
Loans advanced
Loan repayments received
Interest charged
Interest received/receivable
Closing balance
Loans to Charter Hall Limited
Opening balance
Loans advanced
Loan repayments received
Interest charged
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$
2013
$
2014
$
32,293,898
1,500,000
(5,500,000)
2,942,972
(3,486,870)
11,120,000
22,280,000
(1,650,000)
1,184,114
(640,216)
21,250,000
–
–
1,911,723
(1,911,723)
Restated
2013
$
–
1,650,000
21,250,000
(1,650,000)
–
–
27,750,000
32,293,898
21,250,000
21,250,000
–
–
–
–
–
– 197,240,144 209,479,256
36,358,156
– 215,691,599
(70,750,253)
– (252,477,771)
22,152,985
–
20,838,097
– 181,292,069 197,240,144
No provisions for doubtful debts have been raised in relation to any outstanding balances.
The loan to CHL comprises an unsecured stapled loan maturing on 30 June 2021. Interest is charged on an arm’s length basis which,
at 30 June 2014, amounted to a weighted average rate of 10.66% (June 2013: 11.26%).
CHPT issued $21,250,000 in convertible preference notes to Keperra Square Fund on 28 June 2013. The notes incur interest based
on a yield formula and will mature on 31 December 2014. On conversion, CHPT is entitled to receive units in a related fund where the
number of units is equal to the principal value of the notes divided by the fund’s net tangible assets on the date of conversion.
(f) Fees paid to the Responsible Entity or its associates
Fees paid to the Responsible Entity of the Charter Hall Property Trust, and its associates, by the Charter Hall Property Trust Group
amounted to $853,636 (2013: $1,835,855). At 30 June 2014, related fees payable amounted to $207,876 (2013: $237,656).
98 Charter Hall Group
32. Controlled entities
The consolidated financial statements of the Charter Hall Group incorporate the assets, liabilities and results of the following controlled
entities in accordance with the accounting policy described in Note 1(b):
(a) Details of controlled entities of the Charter Hall Group
Country of
incorporation
Principal activity
Class of
securities
2014
%
2013
%
Name of entity
Controlled entities of Charter Hall limited
Charter Hall Holdings Pty Limited
CHTOM Pty Limited 1
Charter Hall Mordialloc Pty Limited 1
Charter Hall La Trobe Pty Limited 1
CH La Trobe Trust
Controlled entities of Charter Hall Holdings Pty ltd
Bieson Pty Limited
Bowvilla Pty Limited
CH Nominees Pty Limited
Charter Hall Asset Services Pty Limited
Charter Hall Asset Services Europe Sp z.o.o
Charter Hall Direct Property Management Limited
Charter Hall Escrow Agent Pty Limited
Charter Hall Funds Management Limited
Charter Hall Holdings Investment Trust
Charter Hall Holdings Real Estate Pty Limited
Charter Hall International Office Pty Limited
Charter Hall Investment Management Limited
Charter Hall (NZ) Pty Limited
Charter Hall Office Collins Street Pty Limited
Charter Hall Office Investments Pty Limited
Charter Hall Office Management Limited
Charter Hall Real Estate Inc
CHREI US Office LLC
CHREI US Retail LLC
Charter Hall Real Estate Europe Limited
Charter Hall Real Estate Management Services Pty Limited
Charter Hall Real Estate Management Services (ACT) Pty Limited
Charter Hall Real Estate Management Services (NSW) Pty Limited
Charter Hall Real Estate Management Services (QLD) Pty Limited
Charter Hall Real Estate Management Services (SA) Pty Limited
Charter Hall Real Estate Management Services (TAS) Pty Limited
Charter Hall Real Estate Management Services (VIC) Pty Limited
Charter Hall Real Estate Management Services (WA) Pty Limited
Charter Hall Retail Management Pty Limited
Frolish Pty Limited
Real Estate Capital Investments Limited
Stelridge Pty Limited
Visokoi Pty Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Poland
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
USA
USA
UK
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Property management
Holding company
Holding company
Holding company
Property investment
Trustee company
Trustee company
Trustee company
Property management
Property management
Responsible entity
Holding company
Responsible entity
Holding company
Holding company
Holding company
Responsible entity
Property management
Holding company
Holding company
Responsible entity
Property management
Property management
Property management
Property management
Property management
Property management
Property management
Property management
Property management
Property management
Property management
Property management
Responsible entity
Trustee company
Holding company
Trustee company
Trustee company
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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
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
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Charter Hall Development Services Pty Ltd
Australia
Property management
1 Terminated during the year.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014
Annual Report 2014 99
Name of entity
Controlled entities of Charter Hall Property Trust
BP Fund 21
Charter Hall Direct Retail Fund
Charter Hall Co-Investment Trust 2
Charter Hall Special Situations Office Fund
CHC CDC Holding Trust 1
CHC CDC Trust 1
CHPT RP2 Trust
Country of
incorporation
Principal activity
Class of
securities
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
–
100
100
100
–
–
100
1 Trusts established during the year. CHC CDC Holding Trust and CHC CDC Trust were established to purchase the Group’s 24% interest in Charter Hall Direct
CDC Trust. BP Fund 2 was established to hold the Group’s investment in the portfolio of investment properties disclosed in Note 16. On 18 August 2014, the
Group sold down its interest in BP Fund 2 to 50.1%. Refer Note 41.
2 Charter Hall Co-Investment Trust is an entity which was set up by Charter Hall Property Trust to hold its investments in Charter Hall Retail REIT (CQR),
Charter Hall Office Trust (CHOT), BP Fund (BP), BP Fund 2 (BP2), Core Logistics Partnership (CLP), Keperra Square Fund (Keperra Square), Charter Hall
Direct Property Fund (CHDPF) and Charter Hall Direct CDC Trust (CDC).
Name of entity
Controlled entities of Charter Hall Direct Retail Fund
Core Plus Retail Fund New Zealand
Stafford Retail Warehouse Trust 1
Stafford Wiley Trust 1
Ipswich Retail Property Trust 1
Mentone Property Trust
Charter Hall MMN Property Trust
CPRF Gepps X Trust
CPRF Gepps 109 Trust
CPRF MSN Property Trust
1 Trusts terminated during the year as part of the wind up of DRF.
Country of
incorporation
Principal activity
Class of
securities
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(b) Details of controlled entities of the Charter Hall Property Trust Group
Name of entity
Controlled entities of Charter Hall Property Trust
BP Fund 21
Charter Hall Direct Retail Fund 2
Charter Hall Co-Investment Trust 3
Charter Hall Special Situations Office Fund
CHC CDC Holding Trust 1
CHC CDC Trust 1
CHPT RP2 Trust
Country of
incorporation
Principal activity
Class of
securities
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
84
100
100
100
100
100
–
84
100
100
–
–
100
1 Trusts established during the year. CHC CDC Holding Trust and CHC CDC Trust were established to purchase the Group’s 24% interest in
Charter Hall Direct CDC Trust. BP Fund 2 was established to hold the Group’s investment in the portfolio of investment properties disclosed in Note 16.
On 18 August 2014, the Group sold down its interest in BP Fund 2 to 50.1%. Refer Note 41.
2 Refer to Note 32(a) for the controlled entities of Charter Hall Direct Retail Fund.
3 Charter Hall Co-Investment Trust is an entity which was set up by Charter Hall Property Trust to hold its investments in Charter Hall Retail REIT (CQR),
Charter Hall Office Trust (CHOT), BP Fund (BP), BP Fund 2 (BP2), Core Logistics Partnership (CLP), Keperra Square Fund (Keperra Square), Charter Hall
Direct Property Fund (CHDPF) and Charter Hall Direct CDC Trust (CDC).
100 Charter Hall Group
33. Investments in associates
(a) Carrying amounts
Information relating to associates is set out below. All associates are incorporated and operate in Australia.
Charter Hall Group
Name of entity
Principal activity
2014
%
2013
%
2014
$’000
2013
$’000
OWNERSHIP INTEREST
Accounted for at fair value through profit or loss:
Unlisted
Charter Hall Direct Property Fund
Charter Hall Diversified Property Fund
Charter Hall Umbrella Fund
Charter Hall Direct Industrial Fund 2
Charter Hall Direct Industrial Fund
PFA Diversified Property Trust
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
4.2
19.6
24.2
0.3
0.2
0.1
14.3
9.9
19.1
11.7
15.0
3.0
4.0
19.6
24.2
–
0.2
0.1
14.5
12.3
5.3
13.2
15.0
3.0
11,026
1,763
699
339
248
159
14,234
10,665
8,085
30,080
–
234
165
49,229
172,938
116,871
84,777
72,241
7,326
35
158,971
114,722
10,808
56,661
14,891
800
Property investment
Property investment
Property investment
Property investment
Property development
Property development
Property investment
10.2
9.2
129,226
103,055
583,414
459,908
597,648
509,137
Equity accounted
Unlisted
Charter Hall Office Trust 1
Charter Hall Core Plus Office Fund
Core Logistics Partnership
Charter Hall Core Plus Industrial Fund
Charter Hall Opportunity Fund 5
Charter Hall Opportunity Fund 4
Listed
Charter Hall Retail REIT 2
Total investments in associates
1 The entity has a 31 December balance date.
2 Fair value at the ASX quoted price as at 30 June 2014 was $146,309,000 (2013: $118,241,000).
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 101
Charter Hall Property Trust Group
Name of entity
Principal activity
2014
%
2013
%
2014
$’000
2013
$’000
OWNERSHIP INTEREST
Accounted for at fair value through profit or loss:
Unlisted
Charter Hall Direct Property Fund
Charter Hall Diversified Property Fund
Charter Hall Umbrella Fund
Charter Hall Direct Industrial Fund 2
Charter Hall Direct Industrial Fund
PFA Diversified Property Trust
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Equity accounted
Unlisted
Charter Hall Office Trust 1
Charter Hall Core Plus Office Fund
Core Logistics Partnership
Charter Hall Core Plus Industrial Fund
Listed
Charter Hall Retail REIT 2
Total investments in associates
Property investment
Property investment
Property investment
Property investment
Property investment
4.2
19.6
24.2
0.3
0.2
0.1
14.3
9.0
19.1
4.4
10.2
4.0
19.6
24.2
–
0.2
0.1
11,026
1,763
699
339
248
159
14,234
10,665
8,085
30,080
–
234
165
49,229
14.5
11.2
5.3
5.7
172,938
106,239
84,777
27,447
158,971
104,287
10,808
24,845
9.2
129,226
103,055
520,627
401,966
534,861
451,195
1 The entity has a 31 December balance date.
2 Fair value at the ASX quoted price as at 30 June 2014 was $146,309,000 (2013: $118,241,000).
All investments accounted for at fair value through profit or loss (Note 13) are held by Charter Hall Property Trust (CHPT).
(b) Summarised movements in carrying amounts of equity accounted associates
Opening balance
Investment
Share of profit after income tax
Distributions received/receivable
Share of movement in reserves
Returns of capital
Disposal of units
Gain/(loss) on equity remeasurement
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
459,908
121,940
47,849
(38,361)
489
(8,411)
–
–
583,414
2013
$’000
444,515
22,201
40,374
(48,182)
1,217
–
–
(217)
459,908
2014
$’000
401,966
121,941
42,107
(35,169)
507
–
(10,725)
–
520,627
2013
$’000
373,578
22,201
37,295
(32,087)
1,196
–
–
(217)
401,966
102 Charter Hall Group
33. Investments in associates continued
(c) Summarised financial information for material associates
The tables below provide summarised financial information for the associates that are material to CHC and CHPT. Materiality is assessed
on the investments’ contribution to Group income and net assets. The information presented reflects the amounts in the financial
statements of the associates, not the Group’s proportionate share.
2014
Summarised balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Core Plus
Office Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Core Plus
Industrial Fund
$’000
219,958
2,126,986
46,704
1,093,011
160,422
1,904,635
192,117
617,839
20,533
1,818,850
41,866
609,941
1,207,229
1,255,101
1,187,576
14,399
549,935
12,705
114,523
437,106
27,374
34,942
–
–
34,942
62,726
740,530
17,824
162,329
623,103
58,920
76,204
–
–
76,204
Summarised statement of comprehensive income:
Revenue
Profit for the year from continuing operations
Loss from discontinued operations 1
Other comprehensive income
169,159
77,567
–
300
184,516
133,381
(48,194)
32,200
Total comprehensive income
77,867
117,387
152,062
88,962
–
–
88,962
2013
Summarised balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Summarised statement of comprehensive income:
Revenue
Profit for the year from continuing operations
Loss from discontinued operations
Other comprehensive income
Total comprehensive income
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Core Plus
Office Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Core Plus
Industrial Fund
$’000
42,145
2,058,483
32,517
975,455
347,780
1,709,331
305,589
630,407
14,657
1,643,160
32,007
691,283
1,092,656
1,121,115
934,527
260,357
147,535
–
84
147,619
162,631
70,625
(18,037)
15,344
67,932
148,924
65,845
–
–
65,845
12,176
200,626
9,535
–
203,267
4,603
(1,971)
–
–
(1,971)
40,006
515,344
79,897
41,861
433,592
61,808
32,957
–
–
32,957
1 CQR has discontinued its foreign operations. The loss is comprised of revaluation decrements on foreign investment properties held for sale and transfers of
cumulative foreign currency translation reserve to profit and loss on disposal of foreign investment properties.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 103
(d) Reconciliation of net assets of associates to carrying amounts of equity accounted investments
Charter Hall Group
2014
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method 1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Share of profit after income tax
Other comprehensive income
Distributions received/receivable
Closing balance
Charter Hall Group
2013
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method 1
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Core Plus
Office Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Core Plus
Industrial Fund
$’000
1,207,229
14.3
172,634
1,255,101
10.2
128,020
1,187,576
9.9
117,570
304
1,206
(699)
172,938
129,226
116,871
158,971
14,712
11,143
20
(11,908)
103,055
24,317
11,187
488
(9,821)
114,722
–
10,043
–
(7,894)
172,938
129,226
116,871
437,106
19.1
83,487
1,290
84,777
10,808
71,813
6,307
–
(4,151)
84,777
623,103
11.7
72,903
(662)
72,241
56,661
11,100
9,038
–
(4,558)
72,241
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Core Plus
Office Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Core Plus
Industrial Fund
$’000
1,092,656
14.5
158,435
1,121,115
9.2
103,143
934,527
12.3
114,947
203,267
5.3
10,773
433,592
13.2
57,234
536
(88)
(225)
35
(573)
Carrying amount
158,971
103,055
114,722
10,808
56,661
Movements in carrying amounts:
Opening balance
Investment
Share of profit/(loss) after income tax
Other comprehensive income
Distributions received/receivable
Remeasurement of equity interest
Closing balance
145,720
7,114
22,140
122
(14,852)
(1,273)
101,338
3,985
5,245
1,074
(8,175)
(412)
112,951
–
9,021
–
(7,708)
458
158,971
103,055
114,722
–
11,102
(609)
–
(363)
678
10,808
54,885
–
5,329
–
(3,885)
332
56,661
1 Other movements are primarily due to the funds issuing new units to external investors at a price above or below the underlying net assets of the fund.
104 Charter Hall Group
33. Investments in associates continued
(d) Reconciliation of net assets of associates to carrying amounts of equity accounted investments continued
Charter Hall Property Trust Group
2014
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method 1
Carrying amount
Movements in carrying amounts:
Opening balance
Investment
Share of profit after income tax
Other comprehensive income
Distributions received/receivable
Disposal
Closing balance
Charter Hall Property Trust Group
2013
Net assets of associate
Group’s share in %
Group’s share in $
Other movements not accounted for under
the equity method 1
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Core Plus
Office Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Core Plus
Industrial Fund
$’000
1,207,229
14.3
172,634
1,255,101
10.2
128,020
1,187,576
9.0
106,882
304
1,206
(643)
172,938
129,266
106,239
158,971
14,712
11,143
20
(11,908)
–
103,055
24,317
11,187
488
(9,821)
–
104,287
–
9,125
–
(7,173)
–
172,938
129,226
106,239
437,106
19.1
83,487
1,290
84,777
10,808
71,813
6,307
–
(4,151)
–
84,777
623,103
4.4
27,417
30
27,447
24,845
11,100
4,345
–
(2,117)
(10,726)
27,447
Charter Hall
Office Trust
$’000
Charter Hall
Retail REIT
$’000
Charter Hall
Core Plus
Office Fund
$’000
Core
Logistics
Partnership
$’000
Charter Hall
Core Plus
Industrial Fund
$’000
1,092,656
14.5
158,435
1,121,115
9.2
103,143
934,527
11.2
104,667
203,267
5.3
10,773
433,592
5.7
24,715
536
(88)
(380)
35
130
Carrying amount
158,971
103,055
104,287
10,808
24,845
Movements in carrying amounts:
Opening balance
Investment
Share of profit after income tax
Other comprehensive income
Distributions received/receivable
Remeasurement of equity interest
Closing balance
145,720
7,114
22,140
122
(14,852)
(1,273)
101,338
3,985
5,245
1,074
(8,175)
(412)
102,635
–
8,197
–
(7,003)
458
158,971
103,055
104,287
–
11,102
(609)
–
(363)
678
10,808
23,885
2,322
–
(1,694)
332
24,845
1 Other movements are primarily due to the funds issuing new units to external investors at a price above or below the underlying net assets of the fund.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 105
(e) Summarised financial information and movement in carrying amounts of other equity accounted associates
The following table shows the Group’s share of the summarised profit and loss of equity accounted associates that are not material to the
Group, and a reconciliation of the movement in the aggregated carrying amount of these investments.
Aggregate amount of the Group’s share of:
Profit/(loss) from continuing operations
Other comprehensive income
Total comprehensive income
Movements in aggregate carrying amount:
Opening balance
Share of profit after income tax
Distributions received/receivable
Return of capital
Share of movement in reserves
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
131
(20)
111
15,691
131
(30)
(8,411)
(20)
7,361
(752)
21
(731)
29,621
(752)
(13,199)
–
21
15,691
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(f) Commitments and contingent liabilities of associates
Charter Hall Retail REIT (CQR) has entered into contracts for the construction and development of properties in Australia. The
commitments of CQR total $29.2 million (2013: $48.2 million). In addition, as at 30 June 2014, CQR was a party to a Put and Call
Option deed to acquire Coomera City Centre in Queensland for $59.2 million. These commitments have not been reflected in the
consolidated financial statements of CQR.
CQR has issued a guarantee to MCW Alt-Chemnitz Grundbesitz GmbH & Co KG, a German subsidiary of CQR, to ensure that
there is sufficient cash to fund planned development expenditure at its Alt-Chemnitz property. This guarantee was initially capped at
€4.0 million ($6.2 million) and was reducing progressively as the German structure retained sufficient cash to fund the redevelopment.
At 30 June 2014, the guarantee has reduced to €nil ($nil) (2013: €1.0 million, $1.4 million) and was terminated by the lender.
Charter Hall Core Plus Office Fund’s significant capital expenditure contracted for at the reporting date but not recognised as liabilities
was $157.5 million relating to investment properties. These commitments include capital expenditure commitments of $68.8 million
relating to the development of the 333 George Street, Sydney property and $72.9 million relating to the development of the 570 Bourke
Street, Melbourne property. In addition, the Charter Hall Core Plus Office Fund’s share of significant capital expenditure contracted for at
the reporting date but not recognised as liabilities through joint venture entities was $2.1 million relating to investment properties for the
development of the 100 Skyring Terrace, Newstead property.
Charter Hall Office Trust’s significant capital expenditure contracted for at the reporting date but not recognised as liabilities was
$34.3 million relating to investment properties for certain expenditure and fitout contributions. In addition, the Charter Hall Office Trust’s
share of significant capital expenditure contracted for at the reporting date but not recognised as liabilities through joint venture entities
was $11.3 million relating to investment properties for certain expenditure and fitout contributions.
Charter Hall Direct Industrial Fund 2 had capital expenditure contracted for at the reporting date but not recognised as liabilities
of $2.8 million in relation to the Rockhampton property.
Charter Hall Core Logistics Partnership has capital expenditure contracted for at the reporting date but not recognised as liabilities
of $68.4 million in relation to developments and capital expenditure on investment properties.
106 Charter Hall Group
34. Investments in joint ventures
(a) Carrying amounts
Information relating to joint ventures is set out below. All joint ventures are incorporated and operate in Australia.
Charter Hall Group
Name of entity
Principal activity
2014
%
2013
%
2014
$’000
2013
$’000
OWNERSHIP INTEREST
Unlisted
Commercial and Industrial Property Pty Ltd
Charter Hall Direct CDC Trust
Retail Partnership No. 2 Trust 1
BP Fund
Retail Partnership No. 4 Trust
Keperra Square Fund
1 The entity has a 31 December balance date.
Property development
Property investment
Property investment
Property investment
Property investment
Property investment
50.0
24.0
20.0
16.8
50.0
10.0
50.0
–
20.0
13.0
–
10.0
28,245
21,025
20,749
17,190
11,372
906
99,487
27,121
–
17,688
14,319
–
1,111
60,239
Charter Hall Property Trust Group
Name of entity
Principal activity
2014
%
2013
%
2014
$’000
2013
$’000
OWNERSHIP INTEREST
Unlisted
Charter Hall Direct CDC Trust
Retail Partnership No. 2 Trust 1
BP Fund
Retail Partnership No. 4 Trust
Keperra Square Fund
Property investment
Property investment
Property investment
Property investment
Property investment
24.0
20.0
16.8
50.0
10.0
–
20.0
13.0
–
10.0
21,025
20,749
17,190
11,372
906
71,242
–
17,688
14,319
–
1,111
33,118
1 The entity has a 31 December balance date.
(b) Summarised financial information and movements in carrying amounts
Aggregate amount of the Group’s share of:
Profit/(loss) from continuing operations
Other comprehensive income
Total comprehensive income
Movements in aggregate carrying amount:
Opening balance
Investment
Share of profit after income tax
Distributions received/receivable
Disposal of units
Loss on equity remeasurement
Closing balance
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
12,994
–
12,994
60,239
32,032
12,994
(5,778)
–
–
99,487
2013
$’000
1,811
–
1,811
27,644
35,341
1,589
(4,170)
(14)
(151)
60,239
2014
$’000
9,244
–
9,244
33,118
32,032
9,244
(3,152)
–
–
71,242
2013
$’000
(240)
–
(240)
–
35,341
(240)
(1,837)
–
(146)
33,118
(c) Commitments and contingent liabilities of joint ventures
The Group has no exposure to any commitments or contingent liabilities in relation to its investment in joint ventures.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 107
35. Interests in unconsolidated structured entities
The Charter Hall Group considers its investments in associates and joint ventures to be unconsolidated structured entities.
An unconsolidated structured entity is an entity where the Group’s voting rights are not the sole factor in determining whether control over
an entity exists. Where the Group determines that control over an entity does not exist, the entity is recognised as an associate or joint
venture of the Group for reporting purposes.
The activity and objective of the unconsolidated structured entities of the Group include property investment for annuity income
and medium to long-term capital growth and/or development profit.
The aggregate of all the Group’s interests and maximum exposure to loss in unconsolidated structured entities, being the Group’s
interests in associates and joint ventures, are included in the table below:
Current assets
Trade receivables
Distributions receivable
Loans to joint ventures
Loans to associates
Total current assets
Non-current assets
Investments in associates at fair value through profit or loss
Investments accounted for using the equity method
Total non-current assets
Total carrying amount of interests in unconsolidated structured entities
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
2013
$’000
2014
$’000
2013
$’000
3,729
26,309
21,250
–
51,288
14,234
682,901
703,635
754,923
3,518
12,558
26,250
6,044
48,370
49,229
520,147
569,376
617,746
–
25,515
21,250
–
46,765
14,234
591,869
606,103
652,868
–
10,557
21,250
–
31,807
49,229
435,084
484,313
516,120
Total funds under management in unconsolidated structured entities
9,754,731
8,888,328
9,662,731
8,540,583
There are no additional arrangements that would expose the Charter Hall Group or Charter Hall Property Trust Group to losses beyond
the carrying amounts.
During the year, the Charter Hall Group earned fees from structured entities in its capacity as investment manager. Refer to Note 31 for
further information.
No financial support has been provided to the funds beyond the loans disclosed in the above table.
108 Charter Hall Group
36. Commitments
(a) lease commitments: Group as lessee
Commitments payable in relation to leases contracted for at the reporting date but not recognised as liabilities:
Due within one year
Due between one and five years
Over five years
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
3,061
10,397
11,615
25,073
2013
$’000
2,071
5,715
–
7,786
2014
$’000
2013
$’000
–
–
–
–
–
–
–
–
(b) Capital commitments
Charter Hall Group
The Group had no contracted capital commitments as at 30 June 2014 (2013: $nil).
Charter Hall Property Trust Group
The Group had no capital commitments as at 30 June 2014 (2013: $nil).
37. Contingent liabilities
The Group did not have any contingent liabilities as at 30 June 2014.
38. Security-based benefits expense
(a) Charter Hall – Executive loan Security Plan (ElSP) (legacy plan)
The ELSP was suspended on 1 July 2009 and was wound up in July 2012.
Set out below are summaries of securities cancelled:
Charter Hall Group and Charter Hall Property Trust Group
Opening balance
Cancellation of forfeited LTI securities off market
2014
Number
–
–
–
2013
Number
678,076
(678,076)
–
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 109
(b) Charter Hall – Performance Rights and Options Plan (PROP)
The performance rights and options are unquoted securities and conversion to stapled securities, and vesting to executives, is subject to
service and performance conditions which are discussed in the Remuneration Report.
Charter Hall Group and Charter Hall Property Trust
Group
2010
Number
2011
Number
2012
Number
2013
Number
2014
Number
Total
Number
Performance rights
Rights issued on 13/11/09
Rights issued on 18/6/10
Rights issued on 6/9/10
Rights issued on 11/11/10
Rights issued on 17/1/12
Rights issued on 23/11/12
Rights issued on 22/11/13
1,562,250
644,625
–
–
–
–
–
–
–
863,345
465,388
–
–
–
–
–
–
–
3,905,231
–
–
–
–
–
–
–
1,796,076
–
–
–
–
–
–
–
1,422,660
1,562,250
644,625
863,345
465,388
3,905,231
1,796,076
1,422,660
Performance rights issued
2,206,875
1,328,733
3,905,231
1,796,076
1,422,660 10,659,575
Number rights forfeited/lapsed in prior years
Number rights forfeited/lapsed in current year
Number rights vested in prior years
Number rights vested in current year
(660,611)
–
(1,287,252)
(259,012)
(346,168)
–
(28,848)
(953,717)
(662,597)
–
–
–
–
(106,757)
–
–
(60,214)
– (1,669,376)
(166,971)
– (1,316,100)
– (1,212,729)
Closing balance
Service rights
Rights issued on 6/9/10
Rights issued on 22/5/12
Rights issued on 23/11/12
Rights issued on 22/11/13
Service rights issued
Number rights forfeited/lapsed in prior years
Number rights forfeited/lapsed in current year
Number rights vested in prior year
Number rights vested in current year
Closing balance
Options
Options issued on 4/11/09 at $1.94
Options issued on 13/11/09 at $1.94
Options issued on 18/6/10 at $2.80
Options issued on 6/9/10 at $2.44
Options issued on 11/11/10 at $2.44
Options issued on 19/1/11 at $2.35
Options issued
–
–
–
–
–
–
–
–
–
–
–
(164,540)
–
(78,849)
(72,988)
–
4,088,078
1,497,036
1,611,656
–
–
–
–
–
–
2,035,649
1,163,464
123,397
7,196,770
3,322,510
Number options forfeited/lapsed in prior years
Number options forfeited/lapsed in current year
Number options vested and exercised in prior year
Number options vested and exercised in current year
(2,009,985)
–
(3,479,459)
(602,636)
(865,394)
–
(72,117)
(1,339,323)
Closing balance
1,104,690
1,045,676
–
3,242,634
1,689,319
1,362,446
6,294,399
316,377
–
–
–
–
431,516
–
–
–
–
270,000
–
–
–
–
403,582
316,377
431,516
270,000
403,582
316,377
431,516
270,000
403,582
1,421,475
–
–
(301,489)
(130,027)
–
–
–
(90,000)
–
–
–
(20,000)
(164,540)
–
(380,338)
(313,015)
–
–
–
–
–
–
–
–
–
–
–
–
–
180,000
383,582
563,582
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,088,078
1,497,036
1,611,656
2,035,649
1,163,464
123,397
– 10,519,280
– (2,875,379)
–
–
– (3,551,576)
– (1,941,959)
–
2,150,366
110 Charter Hall Group
38. Security-based benefits expense continued
(c) PROP expense
Total expenses related to the PROP recognised during the year as part of employee benefit expense were as follows:
Performance rights and option plan
CHARTER HAll GROUP
CHARTER HAll PROPERTy
TRUST GROUP
2014
$’000
3,089
2013
$’000
3,035
2014
$’000
–
2013
$’000
–
(d) Option inputs
The Black-Scholes or Monte Carlo method, as applicable, is utilised for valuation and accounting purposes. The model inputs for the
PROP performance rights and options plan issued during FY10 through FY14 and outstanding as at 30 June 2014 to assess the fair
value are as follows:
Performance rights
Grant date
Security price at grant date
Fair value of right
Expected price volatility
Risk-free interest rate
Options
Grant date
Security price at grant date 1
Fair value of option 1
Exercise price per security 1
Expiry of loan
Expected price volatility
Risk-free interest rate
Service rights
Grant date
Security price at grant date
Fair value of right
Expected price volatility
Risk-free interest rate
17/01/2012
23/11/2012
20/11/2013
20/11/2013
$2.10
$0.94
39.0%
3.9%
$3.11
$1.91
26.0%
3.0%
$3.68
$1.42
30.4%
2.9%
$3.68
$1.11
30.4%
3.0%
13/11/2009
18/06/2010
6/09/2010
11/11/2010
$2.40
$0.39
$1.94
04/11/14
40.0%
5.5%
$2.80
$0.56
$2.80
18/06/15
40.0%
5.5%
$2.44
$0.51
$2.44
06/09/15
40.0%
5.5%
$2.44
$0.51
$2.44
06/09/15
40.0%
5.5%
23/11/2012
20/11/2013
20/11/2013
$3.11
$2.73
25.0%
2.9%
$3.68
$3.45
27.4%
2.6%
$3.68
$3.42
27.4%
2.6%
1 Security prices for prior years have been restated for the unit consolidation during FY11.
(e) Charter Hall General Employee Security Plan (GESP)
During the year, eligible employees received up to $1,000 (2013: $1,000) in securities which vested immediately on issue but are held in
trust until the earlier of the completion of three years’ service or termination. An expense of $256,383 (2013: $211,878) was recognised
in relation to this plan during the year.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 111
39. Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity of the Charter Hall Group, being Charter Hall Limited, and the Charter Hall
Property Trust Group, being the Charter Hall Property Trust, show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Accumulated losses
Net equity
Profit/(loss) for the year
Total comprehensive profit/(loss) for the year
CHARTER HAll lIMITED
CHARTER HAll
PROPERTy TRUST
2014
$’000
Restated
2013
$’000
2014
$’000
Restated
2013
$’000
14,073
25,786
16,176
4,077
270,919
272,283
869,413
759,045
30
17
183,652
197,256
41,245
41,245
46,032
46,032
232,101
(144,875)
87,267
(8,527)
(8,527)
211,335
(136,308)
75,027
(44,075)
(44,075)
945,333
(117,165)
828,168
42,695
42,695
799,548
(86,535)
713,013
33,724
33,724
(b) Contingent liabilities of the parent entity
Charter Hall Limited and Charter Hall Property Trust had no contingent liabilities (2013: $nil).
(c) Contractual commitments
As at 30 June 2014, Charter Hall Limited and Charter Hall Property Trust had no contractual commitments (2013: $nil).
112 Charter Hall Group
40. Deed of cross guarantee
Charter Hall Group
Charter Hall Limited and its wholly-owned subsidiary, Charter Hall Holdings Pty Ltd (CHH), are parties to a deed of cross guarantee
under which each company guarantees the debts of the other. By entering into the deed, CHH has been relieved from the requirement
to prepare financial statements and a directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and
Investments Commission.
(a) Consolidated statement of comprehensive income and summary of movements in consolidated
accumulated losses
The above companies represent a ‘closed group’ for the purposes of the Class Order and, as there are no other parties to the deed of
cross guarantee that are controlled by Charter Hall Limited, they also represent the ‘extended closed group’.
Set out below is a consolidated statement of comprehensive income and a summary of movements in consolidated accumulated losses
for the year of the closed group consisting of Charter Hall Limited and Charter Hall Holdings Limited.
Statement of comprehensive income
Revenue
Fair value adjustment on contingent consideration
Depreciation
Finance costs
Foreign exchange (loss)/gain
Share of net loss of associates accounted for using the equity method
Loss on sale of investments, property and other assets
Fair value adjustments
Amortisation of management rights
Other expenses
Profit/(loss) before income tax
Income tax benefit
Profit/(loss) for the year
Other comprehensive income for the year:
Exchange differences on translation of foreign operations
Total comprehensive profit/(loss) for the year
Summary of movements in consolidated accumulated losses
Accumulated losses at the beginning of the financial year
Transferred to accumulated losses for ELSP lapse
Profit/(loss) for the year
Accumulated losses at the end of the financial year
2014
$’000
Restated
2013
$’000
122,190
–
(1,375)
(20,857)
(79)
3,882
(967)
(205)
(8,489)
(85,090)
9,010
6,081
15,091
93,940
1,123
(1,207)
(22,327)
349
1,032
–
(1,165)
(7,838)
(72,984)
(9,077)
3,096
(5,981)
(20)
20
15,071
(5,961)
(139,347)
–
15,091
(139,488)
6,122
(5,981)
(124,256)
(139,347)
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 113
(b) Balance sheet
Set out below is a consolidated balance sheet of the closed group consisting of Charter Hall Limited and Charter Hall Holdings Pty Limited.
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Trade and other receivables
Investments accounted for using the equity method
Investment in associates at fair value through profit or loss
Investments in controlled entities
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
liabilities
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Loans from Charter Hall Property Trust
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
2014
$’000
Restated
2013
$’000
40,291
23,248
63,539
9,639
35,605
7,750
44,462
9,374
87,577
11,379
2,180
40,286
42,466
5,077
42,811
7,233
85,284
2,744
96,066
8,572
205,786
269,325
247,787
290,253
15,519
1,579
17,098
5,670
181,292
1,054
188,016
205,114
64,211
63,262
1,101
64,363
–
197,240
1,162
198,402
262,765
27,488
232,101
(43,634)
(124,256)
211,335
(44,500)
(139,347)
64,211
27,488
114 Charter Hall Group
41. Events occurring after the reporting date
The following events have occurred subsequent to 30 June 2014:
• the Group exchanged a conditional contract of sale for 685 La Trobe St;
• the Group introduced an equity partner into the BP Fund 2 on 18 August 2014. This reduced the Group’s equity interest in this fund
to $30 million (50.1%) and resulted in a loss of control of the fund. No material gain or loss occurred as a result of this transaction; and
• on 8 September 2014, the Long WALE Investment Partnership (LWIP), a newly established fund in which the Group has a 50%
interest, exchanged a contract to purchase a $603 million portfolio of properties from ALH Group Pty Ltd. The ALH portfolio comprises
54 high quality hospitality assets, 46 of which also include a Dan Murphy’s and/or a BWS retail tenancy. LWIP has committed equity
of $302 million, which together with a $340 million non-recourse debt facility from a syndicate of two Australian banks, will fund the
$603 million acquisition due to complete at the start of October 2014. Charter Hall and HOSTPlUS Pty Limited have each committed
to an initial 50% or $151 million equity investment to LWIP.
Except for the matters discussed above, no other matter or circumstance has arisen since 30 June 2014 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.
Notes to the Consolidated Financial Statementscontinuedfor the year ended 30 June 2014 Annual Report 2014 115
Directors’ Declaration to Unitholders
for the year ended 30 June 2014
In the opinion of the Directors of Charter Hall Limited (Company), and the Directors of the Responsible Entity of Charter Hall Property
Trust (Trust), Charter Hall Funds Management Limited (collectively referred to as the Directors):
(a) the financial statements and notes of Charter Hall Limited and its controlled entities including Charter Hall Property Trust and its
controlled entities (Charter Hall Group) and Charter Hall Property Trust and its controlled entities (Charter Hall Property Trust Group)
set out on pages 51 to 114 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of Charter Hall Group’s and Charter Hall Property Trust Group’s financial position as at 30 June 2014
and of their performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that both Charter Hall Limited and the Charter Hall Property Trust will be able to pay their
debts as and when they become due and payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified
in Note 40 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in Note 40.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
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
16 September 2014
116 Charter Hall Group
Independent Auditor’s Report
Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14 Annual Report 2014 117
Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14Pre-Press ProofVersion:1Approved:Client:Charter HallJob Name:14075 ComplianceDate:19/9/14 118 Charter Hall Group
Securityholder Analysis
A. Distribution of equity securities as at 29 August 2014
Number of securities held by securityholders
No. of holders
Ordinary
securities held
% of issued
securities
100,001 and over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
56
41
286
338
819
655
2,195
335,969,301
2,960,758
5,610,672
2,418,452
2,338,138
189,427
349,486,748
96.13
0.85
1.61
0.69
0.67
0.05
100.00
The total number of securityholders with less than a marketable parcel of 117 securities is 261 and they hold 3,559 securities.
B. Top 20 registered equity securityholders as at 29 August 2014
Ordinary
securities held
% of issued
securities
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
BESGAN NO. 2 PTY LTD
BESGAN NO. 4 PTY LTD
BESGAN NO. 1 PTY LTD
BESGAN NO. 3 PTY LTD
BUTTONWOOD NOMINEES PTY LTD
AMP LIFE LIMITED
CITICORP NOMINEES PTY LIMITED
CHAPELGREEN PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MR DAVID JOHN SOUTHON
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
PORTMIST PTY LIMITED
BOND STREET CUSTODIANS LIMITED
Total units held by top 20
Total units on issue
72,024,585
60,583,426
43,153,185
25,792,970
16,691,401
16,022,726
16,022,726
16,022,726
16,022,726
14,490,000
7,468,452
6,322,027
5,146,000
2,093,472
1,880,612
1,787,059
1,447,763
1,444,593
1,441,773
799,030
20.61
17.33
12.35
7.38
4.78
4.58
4.58
4.58
4.58
4.15
2.14
1.81
1.47
0.60
0.54
0.51
0.41
0.41
0.41
0.23
326,657,252
349,486,748
93.47
100.00
Annual Report 2014 119
C. Substantial securityholder notices as at 29 August 2014*
Ordinary securities
The Gandel Group
FIL Limited
Commonwealth Bank of Australia
AMP Limited
BT Investment Management
Macquarie Group
Date of change
Securities held
% securities held
14/05/2014
14/05/2014
28/03/2014
17/07/2014
22/01/2014
10/07/2014
69,236,901
31,084,800
29,925,888
17,614,053
15,484,168
17,402,761
19.90
8.93
8.60
5.06
5.01
5.00
*
Information in this table has been collated from the most recent relevant substantial holder notices lodged with ASX, as at 29 August 2014.
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
(a) Ordinary securities
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 security shall
have one vote.
120 Charter Hall Group
Contact Details
Registry
To access information on your holding or update/change your
details including name, address, tax file number, payment
instructions and document requests, contact:
Corporate Directory
Directors
Kerry Roxburgh, David Clarke, Anne Brennan, David Deverall,
Philip Garling, David Harrison, Peter Kahan, Colin McGowan and
David Southon
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Tel: 1300 303 063 (within Australia)
+61 2 8280 7134 (outside Australia)
Fax: +61 2 9287 0303
charterhall.reits@linkmarketservices.com.au
www.linkmarketservices.com.au
Investor relations
All other enquiries related to Charter Hall Group can be
directed to Investor Relations:
Charter Hall Group
GPO Box 2704
Sydney NSW 2001
Tel:
1300 365 585 (local call cost)
+ 61 2 8651 9000 (outside Australia)
Fax: +61 2 9221 4655
reits@charterhall.com.au
www.charterhall.com.au
Company Secretary
Tracey Jordan
ASx Code
Charter Hall Group stapled securities are listed on the Australian
Securities Exchange (code CHC).
Principal registered office in Australia
Level 20, No.1 Martin Place
Sydney NSW 2000
Tel: +61 2 8651 9000
Auditor
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
Sydney NSW 1171
Annual Report 2014
Information regarding US Investors/US Persons:
Each person that holds Charter Hall Group securities that is in the
United States (US) or is a US 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 the confirmation letter or 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 US Person
(e.g. no prearranged trades (‘special crossing’) with US Persons or
other off-market transactions). To the maximum extent permitted
by law, the Charter Hall Group reserves the right to (i) request any
person that they deem to be in the United States or a US 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
US 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.
Complaints handling
A formal complaints handling procedure is in place for the Group.
CHFML is a member of the Financial Ombudsman Service (FOS).
Complaints should in the first instance be directed to CHFML.
If you have any enquiries or complaints, please contact the
Compliance Manager on +61 2 8651 9000.
Important Notice
This Annual Report has been prepared and issued by Charter
Hall Limited (ABN 57 113 531 150) and Charter Hall Funds
Management Limited (ABN 31 082 991 786 AFSL 262861)
(CHFML) as Responsible Entity of the Charter Hall Property Trust
(together, the Charter Hall Group or the 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.
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 does not take into account the personal
objectives, financial situation or needs of any investor. Before
investing in Charter Hall Group securities, you should consider
your own objectives, financial situation and needs and seek
independent financial, legal and/or taxation advice. Historical
performance is not a reliable indicator of future performance. Due
care and attention has been exercised in the preparation of forward
looking statements. However, any forward looking statements
contained in this report are not guarantees or predictions of future
performance and, by their very nature, are subject to uncertainties
and contingencies, many of which are outside the control of the
Group. Actual results may vary materially from any forward looking
statements contained in this report. Readers are cautioned not to
place undue reliance on any forward looking statements. Except
as required by applicable law, the Group does not undertake
any obligation to publicly update or review any forward looking
statements, whether as a result of new information or future events.
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 nor any of their related bodies corporate,
directors or employees to any such person. 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 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 report, is accurate or complete.
CHFML does not receive fees in respect of the general financial
product advice it may provide; however, entities within the Charter
Hall Group receive fees for operating the Charter Hall Property
Trust in accordance with its constitution. Entities within the Group
may also receive fees for managing the assets of, and providing
resources to the Charter Hall Property Trust. All information
herein is current as at 30 June 2014 unless otherwise stated.
All references to dollars ($) or A$ are Australian Dollars unless
otherwise stated.
This report is printed on Envi Recycled. Envi Recycled is 50% recycled and manufactured elemental chlorine free.
It is a PEFC Certified product, and is Australian made. Envi Recycled is certified carbon neutral by the Department
of Environment’s National Carbon Offset Standard (NCOS).
www.charterhall.com.au