DEXUS
Annual Report 2009

Plain-text annual report

2009 DEXUS Property Group AnnuAl REPORT DEXUS DivErSifiED TrUST (ARSn 089 324 541) LETTEr frOM THE CHAir BOArD Of DirECTOrS COrPOrATE GOvErNANCE STATEMENT fiNANCiAL rEPOrTS DiREcTORS’ REPORT AuDiTOR’S inDEPEnDEncE DEclARATiOn incOmE STATEmEnTS BAlAncE ShEETS STATEmEnTS Of chAngES in EquiTy cASh flOw STATEmEnTS nOTES TO ThE finAnciAl STATEmEnTS DiREcTORS’ DEclARATiOn inDEPEnDEnT AuDiTOR’S REPORT ADDiTiONAL iNfOrMATiON DirECTOrY 1 2 4 10 10 28 29 30 31 32 33 96 97 99 This year we are reporting to our investors and other stakeholders in a more concise format. This report, the DEXuS Property group 2009 Annual Report contains the group’s consolidated financial Statements, corporate governance statement and information about DEXuS’s Board of Directors. To read more on the group’s operations for the year, please refer to the DEXuS Property group 2009 Security holder Review. The DEXuS Property group 2009 combined financial Statements provide separate financial statements of DEXuS industrial Trust, DEXuS Office Trust and DEXuS Operations Trust. The corporate Responsibility and Sustainability (cR&S) section contained in the Security holder Review is an extract from the full cR&S Report which will be available online or as a printed report from October 2009. These reports may be viewed or downloaded online at www.dexus.com All amounts are A$ unless otherwise specified. DEXuS Property group (DXS) (ASX code: DXS), consists of DEXuS Diversified Trust (DDf), DEXuS industrial Trust (DiT), DEXuS Office Trust (DOT), and DEXuS Operations Trust (DXO), (the Trusts). under Australian equivalents to international financial Reporting Standards (AifRS), DDf has been deemed the parent entity for accounting purposes. Therefore the DDf consolidated financial Statements include all entities forming part of DXS. All press releases, financial reports and other information are available on our website: www.dexus.com front cover: Australia Square complex, 264-278 george Street, Sydney, nSw LETTEr frOM THE CHAir In April 2009, Charles Leitner III resigned from the Board, consequently his alternate Andrew Fay also left the Board. I would like to take this opportunity to thank Chuck and Andy for their contribution. Following these changes, the Board now comprises eight Directors, seven of whom are independent Directors. In May 2009, the Board Committees were reviewed and memberships refreshed, with Committee Chairs being rotated in August 2009. The Board and Board Committee Terms of Reference and the Corporate Governance Statement are revised at least annually and are located on our website at www.dexus. com/Corporate-Governance Looking ahead, the outlook for the market is for continued challenging times. We expect, however, that the quality of our portfolio and a continued focus on managing the property fundamentals will see DEXUS continue to be strongly positioned within each of our key markets. On behalf of the Board, I would like to thank you for your support over the past 12 months. I look forward to reporting to you next year. Yours sincerely, christopher T Beare Chair 30 September 2009 Highlights for the year include: n n n n n Strengthening the balance sheet, with significant new equity and new and replacement debt facilities Revising our distribution policy to pay out 70% of Funds From Operations (FFO), retaining 30% to fund operating and leasing capital expenditure Commencing a selected property sales program, to achieve our strategic objectives and our capital management plans Completing the internalisation of our property management model within our office portfolio and commencing implementation in the Australian industrial portfolio Continuing to build on our market leadership position in sustainability, with external recognition achieved at Davos, Switzerland and more recently with our listing on the Dow Jones Sustainability World Index As a result of all these initiatives, DEXUS continues to maintain one of the strongest balance sheets of any Australian listed REIT. Getting the best from both our property portfolio and our balance sheet is only possible with a very capable and committed team. For the third year running we have conducted an employee opinion survey which pleasingly shows continued strong results in areas such as engagement, communications and leadership. This year we benchmarked our results against Australian and global indices so we can continue to improve our performance in line with best practice standards. In April 2009, we expanded the Board with two new directors, John Conde AO and Peter St George. John and Peter bring a wealth of knowledge and experience, which will further strengthen the expertise of the Board. Dear investor I am pleased to present this my fifth annual report for DEXUS Property Group. As reported last year, the economic downturn continues to impact the Group’s performance and during the year we have seen declining property values worldwide and reducing tenant demand. Despite these challenging conditions, the quality of our portfolio, together with the underlying stability of operating earnings, derived principally from rental income, and our proactive and prudent approach to managing our balance sheet continues to deliver strong financial results. The financial performance of the Group for the year was solid with operating earnings up 5.7% to $526.3 million. The Australian portfolio delivered a relatively strong result, while the North American and European portfolios declined in line with their weaker economies. The impact of the economic downturn was largely felt in unrealised property devaluations and impairments, which totalled $1.6 billion and contributed to a net loss of $1.5 billion. In volatile economic conditions, it is more important than ever to concentrate on the fundamentals and DEXUS has remained focused on our strategy to be Australia’s leading owner, manager and developer of superior quality office and industrial properties in select markets. We remain the No.1 owner of office and No.3 owner of industrial properties in Australia. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 1 BOArD Of DirECTOrS christopher T Beare Elizabeth A Alexander Am Barry R Brownjohn John c conde AO BSc, BE (hons), mBA, PhD, fAicD Bcomm, fcA, fAicD, cPA Bcomm BSc, BE (hons), mBA Chair and independent Director Age 59 independent Director Age 66 independent Director Age 58 independent Director Age 61 Elizabeth Alexander is an Independent Director of DEXUS Funds Management Limited (appointed 1 January 2005), a member of the Board Audit and Board Risk Committees and a Director of DEXUS Wholesale Property Limited. Elizabeth brings to the Board extensive experience in accounting, finance, corporate governance and risk management and was formerly a partner with PricewaterhouseCoopers. Elizabeth’s previous appointments include National Chair of the Australian Institute of Company Directors, National President of the Australian Society of Certified Practising Accountants and Deputy Chairman of the Financial Reporting Council. Elizabeth was also on the Boards of Boral Limited and AMCOR Limited. Elizabeth is currently Chair of CSL Limited and a director of Medibank Private. Chris Beare is both the Chair and an Independent Director of DEXUS Funds Management Limited (appointed 4 August 2004). He is also a member of the Board Nomination and Remuneration Committee and the Board Finance Committee. Chris has significant experience in international business, technology, strategy, finance and management. Previously Chris was Executive Director of the Melbourne based Advent Management venture capital firm prior to joining investment bank Hambros Australia in 1991. Chris became Head of Corporate Finance in 1994 and joint Chief Executive in 1995, until Hambros was acquired by Société Générale in 1998. Chris remained a Director of SG Australia until 2002. From 1998 onwards, Chris formed Radiata – a technology start-up in Sydney and Silicon Valley – where, as Chair and Chief Executive Officer, Chris steered it to a successful sale to Cisco Systems in 2001 and continued for four years as Director Business Development for Cisco. Chris has previously been a director of a number of companies in the finance, infrastructure and technology sectors. John Conde is an Independent Director of DEXUS Funds Management Limited (appointed 29 April 2009), is the Chair of the Board Nomination and Remuneration Committee and a member of the Board Compliance Committee. John brings to the Board extensive experience across diverse sectors including commerce, industry and government. John was previously a Director of BHP Billiton and Excel Coal Limited, Managing Director of Broadcast Investment Holdings Pty Limited, Director of Lumley Corporation and President of the National Heart Foundation of Australia. John is Chairman of Energy Australia, Bupa Australia Group and Whitehaven Coal Limited. John is the President of the Commonwealth Remuneration Tribunal and Chairman of the Sydney Symphony, the Australian Olympic Committee (NSW) Fundraising Committee, Homebush Motor Racing Authority Advisory Board and a member of the Bond University Board of Trustees. Barry Brownjohn is an Independent Director of DEXUS Funds Management Limited (appointed 1 January 2005) and is Chair of the Board Audit and Board Risk Committees and a member of the Board Finance Committee. Barry has over 20 years experience in Australia, Asia and North America in international banking and previously held numerous positions with the Bank of America including heading global risk management for the capital markets business, the Asia capital markets business and was the Australasian CEO between 1991 and 1996. Following his career with Bank of America, Barry has been active in advising companies in Australia and overseas on strategic expansion, venture capital, M&A and capital raising strategies, with particular emphasis on the financial services industry. Barry has also held numerous industry positions including Chairing the International Banks and Securities Association in Australia and the Asia Pacific Managed Futures Association. Barry is an Independent Director of Citigroup Pty Limited, an Advisory Board Member of the South Australian Financing Authority, a Director of Bakers Delight Holdings Pty Limited and a member of the Board of Governors of the Heart Research Institute. 2 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Stewart f Ewen OAm Victor P hoog Antink Brian E Scullin Peter B St george Bcomm, mBA, fcA, fAPi, fRicS, mAicD BEc cA(SA), mBA independent Director Age 60 Chief Executive Officer and Executive Director Age 56 independent Director Age 58 independent Director Age 63 Stewart Ewen is an Independent Director of DEXUS Funds Management Limited (appointed 4 August 2004) and a member of the Board Nomination and Remuneration Committee. Stewart has extensive property sector experience and started his property career with the Hooker Corporation in 1966. In 1983, Stewart established Byvan Limited which, by 2000, managed $8 billion in shopping centres in Australia, Asia and North America. In 2000, Stewart sold his interest in Byvan to the Savills Group in London and remained Chair until 2001. In 1990 he started NavyB Pty Ltd, which has completed several major residential and commercial property projects in Australia and New Zealand. Stewart was previously Managing Director of Enacon Ltd, a Director of the Abigroup and Chairman of Tuscan Pty Ltd, which developed and operated the Sydney University Village. Stewart was also a Director of CapitaCommercial Trust Management Limited from 2004 to 2008. Stewart was previously President of the Property Council of NSW, member of the NSW Heritage Council and Chair of the Cure Cancer Australia Foundation. Victor Hoog Antink is CEO and an Executive Director of DEXUS Funds Management Limited (appointed 1 October 2004). Victor has over 25 years of experience in property and finance. Prior to joining DEXUS in November 2003, Victor held executive positions at Westfield Holdings where he was the Director of Funds Management, responsible for both the Westfield Trust and the Westfield America Trust. Prior to joining Westfield in 1995, Victor held executive management positions in a number of property companies in Australia. Victor has an MBA from the Harvard Business School, is a fellow of the Institute of Chartered Accountants in Australia, a fellow of the Australian Property Institute, a fellow of the Royal Institute of Chartered Surveyors, a licensed Real Estate Agent and a member of the Australian Institute of Company Directors. Victor is the immediate Past President and a current Board Member of the Property Council of Australia. He is also a Director of the Property Industry Foundation. Brian Scullin is an Independent Director of DEXUS Funds Management Limited (appointed 1 January 2005), Chair of the Board Compliance Committee and Chair of DEXUS Wholesale Property Limited. Brian brings to the Board extensive domestic and international funds management knowledge as well as finance, corporate governance and risk management experience. Following a career in government and politics in Canberra, Brian was appointed the inaugural Executive Director of the Association of Superannuation Funds of Australia (ASFA) in 1987. He joined Bankers Trust in Australia in 1993 and held a number of senior positions, becoming President of Japan Bankers Trust in 1997. In 1999 Brian was appointed Chief Executive Officer, Asia/Pacific for Deutsche Asset Management and retired from this position in 2002. Brian was appointed Chair of BT Investment Management Limited in 2007 and is currently the acting CEO. Peter St George is an Independent Director of DEXUS Funds Management Limited (appointed 29 April 2009), is Chair of the Board Finance Committee and is a member of the Board Audit and Board Risk Committees. Peter has more than 20 years experience in senior corporate advisory and finance roles within NatWest Markets and Hill Samuel & Co in London. Peter acted as Chief Executive/Co-Chief Executive Officer of Salomon Smith Barney Australia/NatWest Markets Australia from 1995 to 2001. Peter was previously a Director of Spark Infrastructure Group and Chedha Holdings (Powercor and Citipower, Victoria). Peter was also Chairman of Walter Turnbull Chartered Accountants and a Director of SFE Corporation Limited. Peter is currently a Director of First Quantum Minerals Limited (listed on the London and Toronto Stock Exchanges) and Boart Longyear Limited. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 3 The Board is directly responsible for appointing and removing the Chief Executive Officer (CEO), and Company Secretary, ratifying the appointment of the Chief Financial Officer (CFO) and monitoring the performance of the Executive team. The Board meets regularly throughout the year and, when required, Directors also meet to consider specific business. At each regular Board meeting the Independent Directors meet without the CEO. Each year the Directors also meet with Senior Management to specifically consider strategy. In addition to meeting these requirements, DXFM is committed to maintaining, through both the Executive Committee and the Board, a balance of skills, experience and independence appropriate to the nature and extent of its operations. composition The composition of the Board reflects its role and the duties and responsibilities it discharges. It reflects the need for the Board to work together as a team with each Director making their own contribution to the Board’s decision making process. General qualifications for Board membership include the ability and competence to make appropriate business recommendations and decisions, an entrepreneurial talent for contributing to the creation of investor value, relevant experience in the industry sector, high ethical standards, exposure to emerging issues, sound practical sense and a total commitment to the fiduciary and statutory obligations to further the interests of all investors and achieve the Group’s objectives. At 30 June 2009, the Board comprises eight members, seven of whom are independent and the eighth member is the DEXUS CEO. Six Directors held office for the full financial year. On 29 April 2009, Peter St George and John Conde AO were appointed Independent Directors. Charles B Leitner III and Andrew Fay (Alternate Director) resigned from the Board in April 2009. Specific skills the incumbent Directors bring to the Board include strategy, property management, funds management, capital markets and financial management. Independent Directors are independent of management and free of any business or other relationship that could materially interfere with the exercise of their unfettered and independent judgement. Independent Directors are active in areas which enable them to relate to the strategies of DEXUS and to make a meaningful contribution to the Board’s deliberations. COrPOrATE GOvErNANCE STATEMENT DEXUS Funds Management Limited (DXFM) is the Responsible Entity of each of the four Trusts that comprise DEXUS Property Group (DEXUS). DXFM is also responsible for the management of a number of third party funds and mandates. This corporate governance framework applies to all DXFM funds and mandates, and is designed to support the strategic objectives of the Group by defining accountability and creating control systems to mitigate the risks inherent in its day to day operations. To achieve this objective, DXFM has implemented a corporate governance framework that meets the requirements of ASX Corporate Governance Principles and Recommendations (2nd edition) and addresses additional aspects of governance that the Board considers appropriate. A reconciliation of the ASX Principles against DXFM’s governance framework can be found on the web page www.dexus.com/Corporate-Governance The Board Roles and responsibilities As DEXUS comprises four real estate investment trusts, its corporate governance practices satisfy the requirements relevant to unit trusts. However, as the Group conducts itself as if it were a public company, the Board has determined that its governance framework will also satisfy the highest standards of a publicly listed company. These additional governance aspects include the conduct of an annual general meeting, the appointment of Directors by DEXUS security holders and additional disclosure, such as the remuneration report. The governance framework enables the Board to provide strategic guidance, while exercising effective oversight of management. The framework also defines the roles and responsibilities of the Board and executive management in order to clearly communicate accountability and ensure a balance of authority. The Board is responsible for reviewing and approving DEXUS’s business objectives and ensuring strategies for their achievement are in place and monitored. Objectives are reviewed periodically to ensure that they remain consistent with the Group’s priorities and the changing nature of its business. These objectives become the performance targets for the CEO and Executive Committee. Performance against these objectives is reviewed annually by the Board Nomination and Remuneration Committee and is taken into account in the remuneration review of Executive Committee members. The Board carries ultimate responsibility for the approval and monitoring of annual business plans, the approval of acquisitions, divestments and major developments. The Board also ensures that the fiduciary and statutory obligations DEXUS owes to its security holders, third party clients and investors are met. 4 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Governance The Board has established a number of committees to assist it in the fulfilment of its responsibilities. Following the appointment of two new Directors, Board Committees were reviewed and memberships refreshed in May 2009. Committee Chairs were also rotated in August 2009. The Board and Board Committee Terms of Reference are revised at least annually. Board nomination and Remuneration committee A Board Nomination and Remuneration Committee has been established to oversee all aspects of Director and Executive remuneration, Board renewal, Director, CEO and management succession planning, Board and Committee performance evaluation, training and Director nominations. It comprises three Independent Directors. The members of the Board Nomination and Remuneration Committee are: n John C Conde AO, Independent Director (appointed a member on 1 May 2009 and Chair on 1 September 2009) n Christopher T Beare, Independent Director n Stewart F Ewen OAM, Independent Director Reporting to the Board Nomination and Remuneration Committee and the Executive Committee, the Compensation Committee oversees the development and implementation of human resource management systems and advises the Board Nomination and Remuneration Committee. The Board Nomination and Remuneration Committee also has the power to engage external consultants independently of management. Remuneration and incentive payments for employees are considered by the Compensation Committee following guidance from the Board Nomination and Remuneration Committee. Recommendations to the Board Nomination and Remuneration Committee are based on the achievement of approved performance objectives and market comparable data. Details of the Group’s remuneration framework for Executive, Non-Executive Directors and employees are set out in the Remuneration Report that forms part of the Directors’ Report contained in this Annual Report. In 2009 there were no base salary increases for DEXUS senior management and no fee increases for Directors. There are no schemes for retirement benefits (other than superannuation) for Non-Executive Directors. The Board regularly assesses the independence of its Directors, in light of interests disclosed to it. Directors of the Responsible Entity are not technically subject to the approval of security holders. However, the Board has determined that all Directors other than the CEO, will stand for election by DEXUS stapled security holders. If a nominated Director fails to receive a majority vote that Director will not be appointed to the Board of DXFM. DXFM Directors, other than the CEO, will hold office for three years, following their first appointment (or, if appointed by the Board between DEXUS Property Group Annual General Meetings, from the date of the Annual General Meeting immediately succeeding this appointment). It is not generally expected that an Independent Director would hold office for more than ten years, or be nominated for more than three consecutive terms, whichever is the longer. The Chair is an Independent Director, and is responsible for the leadership of the Board, for the efficient organisation and conduct of the Board’s functions, and for the briefing of Directors in relation to issues arising pertinent to the Board. The Board has clearly defined the responsibilities and performance of the CEO. The performance of the CEO is monitored by the Chair. CVs outlining the skills and experience of each Director are set out in this Annual Report. Please refer to www.dexus.com/Corporate-Governance for a description of the procedure followed to select and appoint new Directors to the Board of DXFM, which includes specific criteria applied to determine Director independence. Performance To ensure that new Directors are able to meet their responsibilities effectively, Directors receive an information pack and induction briefing, which addresses the corporate governance framework, committee structures and their terms of reference, governing documents and background reports. New Directors also attend specific briefings by DEXUS management on business strategy and operations. In addition, Directors undertake training, through regular presentations by management and external advisers on sector, fund and industry specific trends and conditions throughout the year. Directors are also encouraged to: n take independent professional advice, at the Group’s expense and independent of management; n seek additional information from management; and n directly access the Company Secretary, General Counsel, Head of Risk and Compliance and other DEXUS executives as required. The Board Nomination and Remuneration Committee oversees the Board performance evaluation program which extends over a two year period. The process is designed to identify opportunities for performance improvement. In 2008, the evaluation process looked at the performance of the whole Board and its Committees. In 2009, individual Director performance will be evaluated later than scheduled, to enable new Directors to become familiar with the strategy and structures that guide the Group. In each alternate year the Board also reviews the progress of findings of the previous year’s evaluation. The evaluation is undertaken through the use of questionnaires and face to face interviews on a broad range of issues. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 5 COrPOrATE GOvErNANCE STATEMENT CONTiNUED Governance (continued) Board Audit committee To ensure the factual presentation of each Trust’s financial position, DXFM has put in place a structure of review and authorisation for each of the Trust’s financial records and reports. This structure includes: n n the establishment of a Board Audit Committee to review the Financial Statements of each entity and review the independence and competence of the external auditor; and semi-annual management representations to the Board Audit Committee, affirming the veracity of each entity’s Financial Statements. The Board Audit Committee’s Terms of Reference require that all members have specific financial expertise and have an understanding of the industry in which the Group operates. The Board Audit Committee currently comprises three Independent Directors. The Board Audit Committee operates under formal Terms of Reference, has access to management, and internal and external auditors without management present, and has the right and opportunity to seek explanations and additional information as it sees fit. Audit Committee members have unrestricted access to external auditors. In addition, the external auditor is invited to attend all Board Audit Committee meetings. The Committee may also obtain independent professional advice in the satisfaction of its duties at the cost of the Group and independent of management. The Committee meets as frequently as required to undertake its role effectively and not less than four times per annum. The members of the Board Audit Committee are: n Barry R Brownjohn, Independent Director (appointed Chair on 1 September 2009) n Elizabeth A Alexander AM, Independent Director n Peter B St George, Independent Director (appointed a member on 1 May 2009) In order to ensure the independence of the external auditor, the Board Audit Committee has responsibility for approving the engagement of the auditor for any non-audit service of greater than $100,000. Both the Chief Financial Officer and the Chief Executive Officer, on a semi annual basis, make representations to the Board Audit Committee regarding the veracity of the financial statements and the financial risk management systems. The Chief Executive Officer makes a representation in relation to risk management at least quarterly to the Head of Risk and Compliance, regarding conformance with compliance policies and procedures. Any significant exceptions are reported by Compliance to the Board Compliance Committee. Furthermore, on a quarterly basis, the Chief Financial Officer provides certification to the Board Compliance Committee as to the continued adequacy of financial risk management systems. During 2009 the Board Audit Committee approved an Auditor Independence Charter which imposes limits on the Auditor undertaking engagements of non-audit services. DEXUS has subsequently appointed a leading accounting firm to provide non-audit services and a specialist independent firm to provide Australian taxation services. Board compliance committee The Corporations Act 2001 does not require DXFM to maintain a Compliance Committee while more than half its Directors are external Directors. However, the Board of DXFM has determined that the Board Compliance Committee provides additional control, oversight and independence of the compliance function and therefore will be continued. The Board Compliance Committee reviews compliance matters and monitors DXFM conformance with the requirements of the Corporations Act 2001 as it relates to Managed Investment Schemes. The Committee includes only members who are familiar with the requirements of Managed Investments Schemes and have extensive risk and compliance experience. The Committee is also encouraged to obtain independent professional advice in the satisfaction of its duties at the cost of the Group and independent of management. As at 30 June 2009, the Committee comprised five members, three of whom are external members (i.e. members who satisfy the requirements of Section 601JB(2) of the Corporations Act 2001), and two of whom are executives of the Group. The scope of the Committee includes all Trusts, including the Group’s investment mandates. The Committee reports to the Board of the Responsible Entity breaches of the Corporations Act 2001 or breaches of the provisions contained in any Trust’s Constitution or Compliance Plan, and further reports to ASIC in accordance with legislative requirements. DEXUS employees also have access to Board Compliance Committee members to raise concerns about unethical business practices. The members of the Board Compliance Committee are: n Brian E Scullin (Chair), Independent Member n John C Conde AO, Independent Member (appointed a member on 1 May 2009) n Andrew P Esteban, Independent Member n Tanya L Cox, Executive Member n John C Easy, Executive Member The skills, experience and qualifications of Mr Scullin, Mr Conde AO, Ms Cox and Mr Easy are contained in this Annual Report. Mr Esteban holds a Bachelor of Business majoring in Accounting. He is an Associate of the Australian Society of CPAs and a member of the Australian Institute of Company Directors. He has 30 years experience in the financial services industry, 21 years of which were with Perpetual Trustees. In December 1999 he established FP Esteban and Associates, a private company specialising in implementing and monitoring risk management and compliance frameworks in the financial services industry. Andrew has provided compliance consulting services to organisations including UBS Global Asset Management in Australia, Hong Kong, Singapore, Taiwan and China. He currently sits as an independent member of compliance committees or risk and audit committees for a range of managed investment schemes, superannuation, insurance and infrastructure products (retail and wholesale) including Macquarie Airports, Credit Suisse Asset Management, Suncorp, IAG, Schroders Investment Management, Deutsche Asset Management, Aberdeen Funds Management and SPARK Infrastructure. 6 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 The management of both risk and compliance are important aspects of the Group’s activities. Consequently the Group has created a segregated risk and compliance function reporting to the Chief Operating Officer on a day to day basis, as well as an Internal Compliance Committee, and an Internal Risk Committee, all of whom have independent reporting lines to corresponding Board Committees. The Risk and Compliance team’s responsibility is to promote an effective risk and compliance culture including the provision of advice, the drafting and updating of relevant risk and compliance policies and procedures, conducting training, monitoring and reporting adherence to key policies and procedures. Frameworks have been developed and implemented in accordance with Australian Standards AS 4360:2004 (Risk Management) and AS 3806:2006 (Compliance Programs). The Group has developed and implemented a range of policies supporting our risk and compliance framework including: n Anti-money Laundering and Counter Terrorism Financing n Workplace safety – OHS&L n Environmental Management n Fraud Control and Awareness Further information is available at www.dexus.com/Corporate-Governance While Internal Audit is resourced internally, DEXUS has recently adopted a co-sourcing arrangement. The appointment of an external firm as co-source service provider has the advantage of ensuring DXFM is informed of broader industry trends and experience. The internal audit program has a three year cycle. The results of all audits are reported to the Internal Audit Committee and the Board Risk Committee on a quarterly basis, and the internal audit function has a dual reporting line to the Internal Audit Committee and the Board Risk Committee. The Board Risk Committee is free to engage consultants, advisers or other experts independently of management. To enable the Board Compliance Committee to effectively fulfil its obligations, an Internal Compliance Committee has been established to monitor the effectiveness of the Group’s internal compliance and control systems. Board Risk committee To oversee risk management at DEXUS, the Board has established a Board Risk Committee responsible for reviewing the Group’s operational risk management, environmental management, and internal audit practices and to review any incidents of fraud. The Committee oversees the effectiveness of the Group’s Risk Management Framework and issues relating to Occupational Health & Safety. During 2009, to ensure continued focus on the Corporate Responsibility and Sustainability initiatives of the Group, the Board Risk Committee also assumed oversight of these initiatives. The Board Risk Committee and Board Audit Committee share common membership to ensure that a comprehensive understanding of control systems is maintained by both Committees. The members of the Board Risk Committee are: n Barry R Brownjohn, Independent Director (appointed Chair on 1 September 2009) n Elizabeth A Alexander AM, Independent Director n Peter B St George, Independent Director (appointed a member on 1 May 2009) The Group is subject to those risks inherent in the business of property funds management. These risks include: n Investment Risk – risks relating to the determination of price supporting the acquisition or divestment of property. n Construction Risk – risks relating to the construction and development of properties within the portfolio. n n Operational Risk – risks relating to the ongoing operations of the organisation and each property including human resources, ethical conduct, disaster recovery and business continuity. Environmental Risk – the risk of damage to the environment emanating from a property owned by the Group or caused by a tenant of the Group. n Safety Risk – the risk of accidents or injury of employees or visitors at properties owned or managed by the Group. n Compliance Risk – risks relating to the failure to comply with applicable laws and regulations. n Market Risk – risks relating to the adverse affect of changing economic conditions. n Finance Risk – risks relating to the availability of funds for the operation of the business in both a timely manner and at an appropriate cost. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 7 COrPOrATE GOvErNANCE STATEMENT CONTiNUED Governance (continued) Board finance committee The Group experiences significant financial risk, including interest rate and foreign exchange exposures. To assist in the effective management of these exposures the Board has established a committee to specifically manage these financial risks. This committee is the Board Finance Committee and its role is to review and recommend for approval to the Board, financial risk management policies and hedging and funding strategies, and to review forward looking financial management processes and recommend periodic market guidance. Supporting this Committee, management has established a Capital Markets Committee. Members of the Board Finance Committee are: n Peter B St George, Independent Director (appointed a member on 1 May 2009 and Chair on 1 September 2009) n Barry R Brownjohn, Independent Director n Christopher T Beare, Independent Director management The day to day management of each of the Trusts rests in the hands of the management team. To assist this team in the direction, implementation and monitoring of its plans and strategies, a number of management committees have been established and responsibilities delegated. The management committees in place in 2009 are: n Executive Committee n Investment Committee n Trust Planning Committee n Internal Risk Committee n Internal Audit Committee n Internal Compliance Committee n Capital Markets Committee n Corporate Responsibility and Sustainability Committee n Project Steering Committee n Compensation Committee n Continuous Disclosure Committee A summary of the responsibilities of these management committees is available at www.dexus.com/Corporate-Governance Ethical behaviour code of conduct To ensure the satisfaction of statutory and fiduciary obligations to each of its investor groups and to maintain confidence in its integrity, the Board has implemented a series of clearly articulated compliance policies and procedures by which it requires all employees to abide. In addition, the Board considers it important that its employees meet the highest ethical and professional standards and consequently has established both an Employee Code of Conduct, for all employees, and a Directors’ Code of Conduct. Please refer to www.dexus.com/Corporate-Governance for a copy of the Group’s Codes of Conduct. 8 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 The Group is committed to and strongly supports disclosure being made of corrupt conduct, illegality or substantial waste of company assets. The Group aims to provide protection to employees who make such disclosures from any detrimental action or reprisal. Management has adopted a policy of not contributing donations to any political party. Please refer to www.dexus.com/Corporate-Governance for a copy of the whistle-blowing policy. insider trading and trading in DEXuS securities The Group has implemented a trading policy that sets out the guidelines that apply to Directors and employees who wish to invest in any of the Group’s financial products for their personal account or on behalf of an associate. The policy requires any Director or employee who wishes to trade in any security issued or managed by DXFM to obtain written approval before entering into a trade. Generally, approval will not be granted during defined blackout periods. These periods commence at the end of the financial half-year and full-year reporting periods and end on the day DEXUS Group results are released. In addition, if Compliance or the Chief Executive Officer considers that there is the potential that inside information may be held or that a significant conflict of interest may arise, additional blackout periods will be imposed. The Board has determined that Directors will not trade in any security managed by the Group, and the Senior Executive team has similarly determined that they will not trade in any security managed by the Group. Directors have made this decision because the Board of DXFM has responsibility for the performance of DEXUS as well as the third party business. Directors are obliged to act in the best interests of each group of investors independently of each other. Therefore, to minimise the appearance of conflict that may arise by being a Director of multiple funds, the Board has determined that it will not invest in any fund managed by the Group, including DEXUS. This position is periodically reviewed by the Board. With regard to aligning Senior Executives’ interests with the interests of DEXUS’s investors, the Board has put in place a long-term incentive scheme that it considers ensures an alignment of Senior Executives’ interests with all investors. A description of the Senior Executives’ long-term incentive scheme is contained in the Remuneration Report on page 16. All employees are required to provide a quarterly declaration confirming their understanding and compliance with the Employee Trading Policy. Risk and Compliance undertakes regular monitoring of the share register. Please refer to www.dexus.com/Corporate-Governance for a copy of the Employee Trading Policy. Training Newly appointed members of the Senior Executive team undertake induction training soon after commencing employment. Induction training in relation to the operations of DEXUS takes the form of a half day, interactive training session presented by the heads of various business units. The Head of Risk and Compliance conducts a one-to-one Compliance Induction session with each newly appointed Senior Executive outlining DEXUS’s approach to risk management and compliance. Annual general meeting DEXUS respects the rights of security holders and to facilitate the effective exercise of those rights, the Board has committed to the conduct of an Annual General Meeting for DEXUS Property Group. Each annual general meeting is designed to: n supplement effective communication with security holders; n provide security holders ready access to balanced and understandable information about their fund; n increase the opportunities for security holder participation; and n facilitate security holders’ rights to appoint Non-Executive Directors to the Board of DXFM. The Group has adopted a policy which requires Directors to attend its AGM. In October 2008 all Directors, other than Mr Leitner who resides in the US, attended the AGM. The external auditor of the Trust also attends each Annual General Meeting and is available to answer investor questions about the conduct of the audits of both the Trusts’ financial records and their Compliance Plans and the preparation and content of the Auditor’s Report. In addition to conducting an Annual General Meeting, the Group has a communications and investor relations strategy that promotes an informed market and encourages participation with its investors. This strategy includes the use of the Group’s website to enable ready access to DEXUS announcements, annual and half-year reports, presentations and analyst support material. The website also has available significant historical information on announcements, distributions and other related information on its website at www.dexus.com/Investor-Centre/DXS DEXUS Property Group engages Link Market Services to independently conduct any vote undertaken at the Annual General Meeting of security holders. conflicts of interest and related party dealings The Group has implemented policies covering the management of conflicts of interest including: n Employee trading n Receipt and provision of gifts, benefits and entertainment n Allocating property transactions n Tenant conflicts n Related party dealings Where a conflict of interest has been identified, Compliance liaises with the party concerned to ensure the effective and timely management of the conflict. Where a related party dealing has been identified, the following process is adopted: n at management level, the interests of both parties are represented by dedicated teams, each headed by a DEXUS executive; n when required, at Board level the interests of both parties are represented by dedicated Board members; Note: In the event of a related party transaction involving a Director, only disinterested Directors may preside over and approve the transaction. n information barriers are established with dedicated team members operating on either side of the “wall”; n team members are briefed by Compliance regarding their obligations and responsibilities while working on the transaction; n a clean desk policy applies while the transaction is in progress; n documentation resulting from the transaction is maintained on a restricted access database; and n ongoing training is conducted for dedicated employees in relation to management of conflicts of interest during the life of the transaction. On a monthly basis, the General Counsel reports to the Board on related party transactions that have been managed in the previous period. On a quarterly basis, the Head of Risk and Compliance reports related party transactions to the Board Compliance Committee. During the last financial year, related party transactions have included: n the sale of an additional 1.5% interest in the Bligh Street Trust to the DEXUS Wholesale Property Fund; and n the execution of a property management agreement between DEXUS and the DEXUS Wholesale Property Fund. continuous disclosure DXFM has established a Committee to ensure timely and balanced continuous disclosure for all material matters that impact the Group. The Committee meets regularly to consider the activities of the Group and whether any disclosure obligation is likely to arise as a result of those activities. This Committee was established to ensure that: n all investors continue to have equal and timely access to material information, including the financial status, performance, ownership and governance of the Trusts; and n all announcements are factual and presented in a clear and balanced way. Please refer to www.dexus.com/Corporate-Governance for a copy of the Continuous Disclosure and Analyst Briefings Policy. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 9 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 The Directors of DEXUS Funds Management Limited (DXFM) as Responsible Entity of DEXUS Diversified Trust (the Trust) and its consolidated entities, DEXUS Property Group (DXS), present their Directors’ Report together with the Consolidated Financial Statements for the year ended 30 June 2009. The Trust together with DEXUS Industrial Trust, DEXUS Office Trust and DEXUS Operations Trust form the DEXUS Property Group stapled security. 1. Directors and Secretaries 1.1 Directors The following persons were Directors or Alternate Directors of DXFM at any time during or since the end of the year to the date of this Directors’ report, unless otherwise stated: Directors Appointed resigned Christopher T Beare 4 August 2004 Elizabeth A Alexander AM 1 January 2005 Barry R Brownjohn 1 January 2005 John C Conde AO 29 April 2009 Stewart F Ewen OAM 4 August 2004 Victor P Hoog Antink 1 October 2004 Charles B Leitner III 10 March 2005 29 April 2009 Brian E Scullin 1 January 2005 Peter B St George 29 April 2009 Alternate Director Andrew J Fay for Charles B Leitner III 30 January 2006 29 April 2009 Particulars of the qualifications, experience and special responsibilities of current Directors at the date of this Directors’ Report are set out in the Directors section of the Annual Report and form part of this Directors’ Report. 1.2 company Secretaries The names and details of the Company Secretaries of DXFM as at 30 June 2009 are as follows: Tanya L Cox MBA MAiCD fCiS (Company Secretary) Appointed: 1 October 2004 Tanya is the Chief Operating Officer and Company Secretary of DXFM and is responsible for the delivery of company secretarial, operational, information technology, communications and administration services, as well as operational risk management systems and practices across the group. Prior to joining DEXUS in July 2003, Tanya held various general management positions over the past 15 years, including Director and Chief Operating Officer of NM Rothschild & Sons (Australia) Ltd and General Manager – Finance, Operations and IT for Bank of New Zealand (Australia). Tanya is Chair of the Property Council of Australia National Risk Committee and the Australian Athletes with a Disability. Tanya is a director of the Music and Opera Singers Trust and the AGSM Alumni Advisory Board. Tanya is a member of the Australian Institute of Company Directors and is a fellow of the Institute of Chartered Secretaries and Administrators (ICSA) and Chartered Secretaries Australia (CSA). Tanya has an MBA from the Australian Graduate School of Management and a Diploma in Applied Corporate Governance. Tanya is Chief Operating Officer and Company Secretary of DXFM, DEXUS Holdings Pty Limited (DXH) and DEXUS Wholesale Property Limited (DWPL) and is a member of the Board Compliance Committee. John C Easy B Comm LLB ACiS (Company Secretary) Appointed: 1 July 2005 John is the General Counsel and joint company secretary of DXFM. During his time with the group he has been involved in the establishment and public listing of the Deutsche Office Trust, the acquisition of the Paladin and AXA property portfolios, and subsequent stapling and creation of the DEXUS Property Group. Prior to joining DEXUS in November 1997, John was employed as a senior associate in the commercial property/funds management practices of law firms Allens Arthur Robinson and Gilbert & Tobin. John graduated from the University of New South Wales with Bachelor of Laws and Bachelor of Commerce (Major in Economics) degrees. He is a member of Chartered Secretaries Australia and holds a Graduate Diploma in Applied Corporate Governance. John is General Counsel and Company Secretary for DXFM, DXH and DWPL and is a member of the Board Compliance Committee. 10 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 2. Attendance of Directors at Board meetings and Board Committee meetings The number of Directors’ meetings held during the year and each Director’s attendance at those meetings is set out in the table below. The Directors met 18 times during the year. Nine Board meetings were main meetings and nine meetings were held to consider specific business. While the Board continuously considers strategy, in March 2009 it met with the executive and senior management over two days to consider DXS’s strategic plans. Board Meetings Directors Christopher T Beare Elizabeth A Alexander AM Barry R Brownjohn John C Conde AO1 Stewart F Ewen OAM Victor P Hoog Antink Charles B Leitner III3 Brian E Scullin Peter B St George1 Main meeting held Main meetings attended2 Specific meetings held Specific meetings attended2 9 9 9 2 9 9 8 9 2 9 9 9 2 8 9 8 9 2 9 9 9 – 9 9 9 9 – 8 9 7 – 9 9 9 9 – 1 Appointed 29 April 2009. 2 Indicates where a Director attended either personally or an Alternate was in attendance. 3 Based in New York, USA and resigned 29 April 2009. Special meetings are held at a time to enable the maximum number of Directors to attend and are generally held to consider specific items that cannot be held over to the next scheduled main meeting. During the year the Board reviewed its Board Committee structure and following the appointment of Messrs Conde and St George in April 2009 amended its Committee membership effective 1 May 2009. The table below sets out the number of Board Committee meetings held during the year for the Committees in place at the end of the year and each Directors’ attendance at those meetings. Board Audit Committee Board risk Committee Board Compliance Committee Board Nomination and remuneration Committee Board finance Committee held attended held attended held attended held attended held attended – 7 7 – – – – 6 1 – 7 6 – – – – 6 1 – 4 4 – – – – 3 1 – 4 4 – – – – 3 1 – 3 – 1 – – – 4 – – 3 – 1 – – – 4 – 9 – – 1 9 – – 9 – 9 – – 1 9 – – 9 – 4 3 4 – – – – – 1 4 3 4 – – – – – 1 Christopher T Beare Elizabeth A Alexander AM Barry R Brownjohn John C Conde AO1 Stewart F Ewen OAM Victor P Hoog Antink Charles B Leitner III2 Brian E Scullin Peter B St George1 1 Appointed 29 April 2009. 2 Resigned 29 April 2009. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 11 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 3. remuneration report 1. introduction This Remuneration Report has been prepared in accordance with AASB 124 Related Party Disclosures and section 300A of the Corporations Act 2001 for the year ended 30 June 2009. The information provided in this Report has been audited in accordance with the provisions of section 308 (3C) of the Corporations Act 2001. Key management personnel In this report, Key Management Personnel (“KMP”) are those people having the authority and responsibility for planning, directing and controlling the activities of DEXUS either directly or indirectly. They comprise Non-Executive Directors, the CEO and other members of the Executive Committee. Within this report the term ‘Executive’ encompasses the CEO and other members of the Executive Committee. KMP (including the five highest paid Executives) of DEXUS for the year ended 30 June 2009 are set out below: Name Non-Executive Directors Christopher T Beare Elizabeth A Alexander AM Barry R Brownjohn John C Conde AO Stewart F Ewen OAM Charles B Leitner III1 Brian E Scullin Peter B St George Title Date of qualification as a KMP Non-Executive Chair Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Appointed 4 August 2004 Appointed 1 January 2005 Appointed 1 January 2005 Appointed 29 April 2009 Appointed 4 August 2004 Resigned 29 April 2009 Appointed 1 January 2005 Appointed 29 April 2009 1 Mr Leitner was appointed on 10 March 2005. Simultaneous with Mr Leitner’s resignation, Mr Fay resigned as Mr Leitner’s alternate. Name Executives Victor P Hoog Antink Tanya L Cox Patricia A Daniels John C Easy Jane Lloyd Louise J Martin Craig D Mitchell Paul G Say Mark F Turner Title Date of qualification as a KMP Chief Executive Officer Chief Operating Officer Appointed 1 October 2004 Appointed 1 October 2004 Head of Human Resources Appointed 14 January 2008 General Counsel Head of Retail Head of Office Appointed 1 October 2004 Appointed 14 July 2008 Appointed 27 March 2008 Chief Financial Officer Appointed 17 September 2007 Head of Corporate Development Appointed 19 March 2007 Head of Funds Management Appointed 1 October 2004 Andrew P Whiteside Head of Industrial Appointed 28 April 2008 12 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 2. Board oversight of remuneration The Board Nomination and Remuneration Committee (“Committee”) oversees the remuneration of Directors and Executives. The Committee is responsible for reviewing, and recommending to the Board, Executive remuneration policies and structures. The Committee assesses the appropriateness of the structure and quantum of Director and Executive remuneration on an annual basis by reference to relevant regulatory and market conditions, and engages external consultants as required to provide independent advice. The role and membership of the Committee is set out in the Corporate Governance Statement, which may be found at www.dexus.com/Corporate-Governance During the reporting period Nomination and Remuneration Committee members were Messrs Beare (Chair), Ewen, Scullin and Conde (commencing 1 May 2009). Further to his appointment to the Board in April 2009 the Board resolved that Mr Conde be appointed Chair of the Nomination and Remuneration Committee effective 31 August 2009. 3. non-Executive Directors’ remuneration framework The objectives of the Non-Executive Directors’ remuneration framework are to ensure Non-Executive Directors’ fees reflect the responsibilities of Non-Executive Directors and are market competitive. Non-Executive Directors’ fees are reviewed annually. Non-Executive Directors, other than the Chair, receive a base fee plus additional fees for membership of Board Committees. The table below outlines the fee structure for the reporting period. Committee Non-Executive Director Board Audit and Risk Board Finance Board Compliance Board Nomination & Remuneration Chair $ 300,000 30,000 30,000 15,000 – Member $ 130,000 15,000 15,000 7,500 7,500 Mr Leitner was an employee of RREEF America Inc., a Deutsche Bank group company, during the year ended 30 June 2009, and was not paid fees or any other remuneration by DEXUS. Mr Fay, the Alternate Director to Mr Leitner, received a consulting fee equivalent to the base fee earned by Non-Executive Directors. During the year the Board considered the establishment of a Committee to oversee property acquisitions, disposals and developments. However, whilst the Board concluded that a formal Committee was not appropriate, it determined that Mr Ewen be paid a fixed fee of $30,000 per annum for assuming additional responsibilities involved in attending meetings and reviewing property investment proposals on its behalf. Recognising the greater responsibility and time commitment required, the Chair receives a higher fee than other Non-Executive Directors, which is benchmarked to the market median of comparably sized ASX listed entities. The Chair receives no Board Committee fees, nor is the Chair present during any discussion relating to the determination of the Chair’s fees. Non-Executive Directors are not eligible to receive performance based remuneration or accrue separate retirement benefits beyond statutory superannuation entitlements. Fees paid to Non-Executive Directors are paid from a remuneration pool of $1,750,000 per annum, which was approved by DEXUS security holders at its Annual General Meeting held in October 2008. Non-Executive Directors’ fees were last adjusted in July 2007. Non-Executive Directors have received no increase in fees since that time. The next review of fees will be in respect of the year commencing 1 July 2010. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 13 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 3. remuneration report (continued) 4. Approach to Executive remuneration Philosophy underlying Executive remuneration The Directors expect that superior execution and delivery of the DEXUS business model will create superior security holder value, through the delivery of consistent returns, generated with relatively moderate risk. The Directors consider that an appropriately skilled and qualified Executive team is essential to achieve this objective. DEXUS’s approach to the structure and quantum of Executive remuneration is therefore designed to attract, motivate and retain such an Executive team. In setting the remuneration structure, the Directors are conscious that the business of DEXUS involves longer term property investments and customer relationships. In addition, property market returns have tended to be cyclical, particularly when coupled with financial structures that act to enhance returns. Taking these considerations into account, the Executive remuneration structure and quantum is based on the following criteria: (a) market competitiveness and reasonableness; (b) alignment of Executive performance payments with achievement of the Group’s objectives within its risk framework, and reinforcement of DEXUS’s values-based culture; and (c) an appropriate target mix of remuneration, including performance payments linked to security holder returns over the longer term, and the avoidance of incentives that encourage short-term decision taking. DEXUS’s Executive remuneration structure may be summarised as follows: n fixed remuneration, targeted at the median of fixed remuneration of entities in the comparison group, with reference to each Executive’s skills and depth of experience; n total remuneration, targeted at the market median, and awarded on a variable scale for each Executive which could result in a total remuneration range from lower quartile to upper quartile, reflecting differing levels of experience, role structure and individual contribution; and n a single pool of funds available to meet performance payments, which is divided between short-term and long-term elements. (a) Market competitiveness and reasonableness DEXUS has determined a comparison group, for remuneration benchmarking purposes, from: 1. constituents of the S&P/ASX 100 index; 2. constituents of the listed Australian Real Estate Investment Trust (“A-REIT”) sector; and 3. other property industry entities. As noted above, a single pool of funds is made available to meet all performance payments. The pool of funds available is sufficient to ensure that DEXUS can achieve its total remuneration positioning target, relative to the market. The Board exercises its discretion to vary the size of the available pool by reference to such factors as: n three year absolute total security holder return; n management costs and revenue of DEXUS Holdings; and n performance against budgeted earnings per security and distribution per security, recognising capital adjustments. 14 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 (b) Alignment of Executive performance payments with achievement of the Group’s objectives The key performance measures that determine performance payments are typically a combination of financial and non-financial objectives which reflect each Executive’s role, responsibility, accountability and delivery. These objectives can include: n financial performance objectives – earnings per security – distributions per security (in line with its Distribution Policy) – third party funds performance – total security holder return, relative to peers n property performance objectives – operating earnings – percentage of vacant space per property – expenses against budget n non-financial performance objectives – tenant satisfaction – employee engagement – executive succession and talent management – delivery of strategic projects to meet time and budget requirements n behaviour that reinforces DEXUS’s cultural values These objectives have been selected as the Directors consider them to be the key drivers to achieve superior security holder returns over time. The Committee reviews and approves CEO and other Executive key performance indicators (KPIs) against Group objectives at the start of each financial year and reviews achievement against KPIs at the end of each year. (c) Target mix of remuneration The target remuneration mix for Executives, expressed as a percentage of total remuneration, is provided in the table below. Remuneration component Total fixed Short-Term Performance Payment (STPP) Long-Term Performance Payment (LTPP) 2009 CEO CfO 2008 Other Executives CEO Property Executives Other Executives 35% 30% 35% 40% 30% 30% 50% 25% 25% 40% 30% 30% 45% 30% 25% 50% 25% 25% The Directors consider that allocating performance payments evenly between immediate short-term payments and deferred long-term payments is appropriate for Executives other than the CEO, whose performance payment is weighted to the longer term to provide relatively greater alignment with long-term returns to security holders. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 15 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 3. remuneration report (continued) 4. Approach to Executive remuneration (continued) Executive remuneration structure The table below outlines the structure of DEXUS’s Executive remuneration. Component remuneration framework Total fixed remuneration (Tfr) Salary n consists of cash salary and salary sacrificed fringe benefits, such as motor vehicles. n reviewed annually by the Board. Draws on relevant external and internal comparative remuneration information and advice on market practice as required. Superannuation n prescribed and salary sacrifice superannuation contributions, including insurance premiums (if required). Performance payments – STPP & LTPP n the aim of performance payments is to link the achievement of the Group’s objectives with the remuneration received by the Executives responsible for meeting those objectives. n the objectives consist of financial and non-financial measures of performance at the Group, business unit and individual level. n the objectives represent the key drivers for the success of the business and for delivering long-term value to security holders. n performance payments made to each Executive depend on the extent to which specific KPIs, set at the beginning of the financial year, are met. Payments are only made for performance at or above required performance levels. n performance payments are delivered in cash. The ratio of STPP to LTPP is set out in the target remuneration mix table above. n delivery of LTPP is deferred for three years, as described below. Performance payments Annual performance payments have two elements, being immediate short-term and deferred long-term cash payments. As noted above, an award of a performance payment is dependent on the extent of achievement of objectives reflected in specific KPIs. Should an Executive be awarded a performance payment, the payment is split between STPP and LTPP using the ratio set out in the target remuneration mix table above. Short-Term Performance Payment (STPP) The STPP is delivered in cash in September each year, following the end of the financial year. Long-Term Performance Payment (LTPP) The LTPP is delivered in cash in accordance with the vesting schedule as set out in the Long-Term Incentive Plan rules. The actual cash payment is based upon the subsequent three year returns of a combination of the returns received by DEXUS security holders and the returns received by its unlisted funds and mandates. Returns exceeding the benchmark are recognised by a greater long-term performance payment. 16 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 The Long-Term Incentive Plan operates as follows: n following allocation into the plan, payments are subject to a three year vesting period from allocation date; n n the LTPP allocation value is notionally invested during the vesting period in DEXUS securities (50% of LTPP value) and its unlisted funds and mandates (50% of LTPP value); during the vesting period, LTPP allocation values fluctuate in line with changes in the “Composite Total Return” (simulating the notional investment exposure), comprising 50% of the total return of DEXUS securities and 50% of the combined asset weighted total return of its unlisted funds and mandates; and n at the conclusion of the three year vesting period, if the Composite Total Return meets or exceeds 100% of the Composite Performance Benchmark, the Board may approve the application of a performance factor to the final LTPP allocation value: – the “Composite Performance Benchmark” is 50% of the S&P/ASX 200 Property Accumulation Index and 50% of the Mercer Unlisted Property Fund Index over the three year vesting period; – for performance up to 100% of the Composite Performance Benchmark, executives receive an LTPP allocation reflecting the Composite Total Return of the preceding three year vesting period; and – for performance between 100% and 130% of the Composite Performance Benchmark a performance factor may be applied, ranging from 1.1 to a maximum of 1.5 times. 5. Executive remuneration arrangements for the year ended 30 June 2009 This section outlines how the remuneration approach described above has been implemented in the 2008/09 financial year. Changes made during the year ended 30 June 2009 remuneration structure As part of the Committee’s annual review of the Executive remuneration structure, a number of changes were made during the year ended 30 June 2009. These included: (a) evaluation and revision of the target remuneration mix for Executives; (b) allocation of performance payments between STPP and LTPP in accordance with the target remuneration mix; (c) increased focus on the review of appropriate and challenging KPIs for CEO and other Executives by the Committee; (d) additional entities incorporated in the comparison group used to benchmark Executive remuneration. Long-Term incentive Plan review The DEXUS Long-Term Incentive Plan was reviewed, incorporating advice from external consultants. The Committee confirmed key objectives to: n achieve alignment with the long-term interest of security holders; n ensure Executives are exposed to equity; Provisions regarding the vesting of LTPP in the event of termination of service agreements are outlined in section 7. n assist in creating a competitive total remuneration package that encourages the attraction and retention of executives; Equity options scheme n have performance criteria consistent with DEXUS’s long-term focus; DEXUS does not operate an equity option scheme as part of its Executive remuneration structure. The Committee has considered the introduction of such a scheme, but has determined that it would not be, at the present time, an appropriate component of the remuneration structure in light of DEXUS’s business model. n be simple and transparent; n be flexible and long-term in nature; n be valued and understood by Executives; and n be cognisant of contemporary market practice. Equity and loan schemes DEXUS does not operate a security participation plan or a loan plan for Executives or Directors. The long-term element of DEXUS’s performance payment is designed to simulate an equity plan, but does not provide Executives with direct equity exposure. Hedging policy DEXUS does not permit Executives to hedge their LTPP allocation during the vesting period. The Committee reaffirmed that the design of the plan, including that LTPP allocations are notionally invested in both DEXUS securities and the securities of its unlisted funds, was consistent with the DEXUS business model and long-term strategy, although a number of operational enhancements were implemented as follows: n eligibility restricted to Executives and senior management team; n accelerated vesting on termination was discontinued; and n automatic application of the performance multiplier was removed. Termination provisions During the year the Committee also reviewed Executive termination arrangements. The Group’s previous practice provided for uncapped termination benefits for Executives, related to years of service. The Board has now approved amended arrangements for Executives. These termination arrangements are outlined in section 7. The Committee anticipates that potential regulatory changes, including the recommendations of the Productivity Commission’s review of executive remuneration, could necessitate further changes in the coming year. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 17 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 3. remuneration report (continued) 5. Executive remuneration arrangements for the year ended 30 June 2009 (continued) Total fixed remuneration Executives are given the opportunity to receive their TFR as cash, superannuation or salary sacrificed fringe benefits, such as motor vehicles. There are no guaranteed TFR increases in Executives’ contracts of employment. In the 2010 financial year, there will be no TFR increases for Executives. Performance payments As outlined under the Executive remuneration structure above, STPP and LTPP allocations are drawn from a single performance pool, with the size of the pool determined according to reasonableness and market competitiveness. All Executive performance payments were dependent on the achievement of performance against agreed objectives, including performance of their business unit and the overall performance of DEXUS. The Board exercised its discretion regarding the final determination of performance payments and, reflecting DEXUS’s performance in 2008/09, performance payments to Executives were scaled down. As outlined above, a portion of the performance payment for each Executive is delivered as a cash-based payment in September 2009, for performance to 30 June 2009. The remaining portion of the performance payment is allocated to the Long-Term Incentive Plan, to be delivered as a cash-based payment in September 2012, for performance to 30 June 2009. 6. group performance and the link to remuneration Total return analysis The table below sets out the DEXUS total security holder return since inception, relative to the S&P/ASX 200 Property Accumulation Index. It also sets out DEXUS’s Composite Total Return since inception, relative to the Composite Performance Benchmark. The DEXUS Composite Total Return is 50% of the total return of DEXUS securities, plus 50% of the combined asset weighted total return of its unlisted funds and mandates and the Composite Performance Benchmark is 50% of the S&P/ASX 200 Property Accumulation Index and 50% of Mercers’ Unlisted Property Fund Index. Period to 30 June 2009 DEXUS Property Group S&P/ASX 200 Property Accumulation Index DEXUS Composite Total Return Composite Performance Benchmark 1 DEXUS’s inception date is 1 October 2004. 1 year 2 years 3 years (% per annum) (% per annum) (% per annum) Since 1 October 20041 (% per annum) –37.3% –42.3% –24.2% –27.3% –31.1% –39.4% –16.1% –19.6% –12.1% –22.7% –4.0% –8.2% –2.5% –10.3% 3.4% 0.3% During the year DEXUS did not buy back or cancel any of its securities. Total return of DEXUS securities The graph below illustrates DEXUS’s total security holder return relative to the S&P/ASX 200 Property Accumulation Index. 6/10/2004 = 100 160 140 120 100 ) $ ( e c i r P 80 Oct 04 S&P/ASX 200 Property Accumulation Index DXS Source: IRESS/DEXUS Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 * 6 October 2004 to 30 June 2009 18 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 DEXUS has outperformed the S&P/ASX 200 Property Accumulation Index in the most recent year and in each period since inception in October 2004. In addition, the DEXUS Composite Total Return has likewise outperformed the Composite Performance Benchmark in the most recent year and in each period since inception in October 2004. While the Directors recognise that improvement is always possible, they consider that DEXUS’s business model, which aims to deliver consistent returns with relatively moderate risk, has been central to DEXUS’s relative out-performance, and that the approach to Executive remuneration, with a focus on consistent out-performance of objectives, is aligned with and supports the superior execution of the DEXUS business model. 7. Service agreements The employment arrangements for the CEO and other Executives are set out below. CEO – victor P Hoog Antink The current employment contract commenced on 1 October 2004. The principal terms of the employment contract are as follows: n the CEO is employed under a rolling contract. n the CEO receives fixed remuneration of $1,300,000 per annum. n the CEO may resign from his position and thus terminate this contract by giving six months written notice. On resignation any unvested LTPP will be forfeited subject to the discretion of the Board. n the Group may terminate the CEO’s employment agreement by providing six months written notice or payment in lieu of the notice period (based on the fixed component of CEO’s remuneration). Additionally, the Group may provide a performance payment for the period of the last review date (being 1 July) until the last day of the notice period. n in the event that the Group initiates termination for reasons outside the control of the CEO, a severance payment equal to 100% of fixed remuneration is payable. n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board. n the Group may terminate the contract of the CEO at any time without notice if serious misconduct has occurred. In the event of termination for cause the CEO is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited. Executives (other than the CEO) The principal terms of Executive employment contracts are as follows: n all Executives have rolling contracts. n the Group may terminate an Executive’s employment agreement by providing three months written notice or providing payment in lieu of the notice period (based on the fixed component of the Executive’s remuneration). In the event that the Group initiates the termination for reasons outside the control of the Executive, a severance payment equal to a maximum of 75% of fixed remuneration will be made. n on termination by the Group, any LTPP awards will vest in accordance with the vesting schedule of the Long-Term Incentive Plan, subject to the discretion of the Board. n the Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination for cause occurs the Executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination for cause any unvested LTPP awards will immediately be forfeited. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 19 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 3. remuneration report (continued) 8. Remuneration of key management personnel Details of the structure and quantum of each component of remuneration for DEXUS Executives for the years ended 30 June 2008 and 30 June 2009 are set out in the following table. This table includes details of the five highest paid Directors or Executives. Short-term employee benefits Post employment benefits Other long-term benefits Total Cash salary and fees Short-term performance payments Other short-term benefits Pension and super benefits Long-term performance payment allocations6 $ $ $ $ $ Movement in prior year long-term performance payment allocation values7 $ Name victor P Hoog Antink 2009 2008 Tanya L Cox 2009 2008 Patricia A Daniels1 2009 2008 John C Easy 2009 2008 Ben J Lehmann2 2009 2008 Jane Lloyd3 2009 2008 1,200,000 785,000 1,100,000 900,000 352,086 150,000 339,059 200,000 247,589 103,470 90,000 60,000 343,255 163,000 297,871 150,000 – 346,344 – – 361,255 113,000 – – – – – – – – – – – – – – 100,000 915,000 (416,600) 100,000 900,000 (106,947) 47,914 150,000 (80,773) 10,941 175,000 (16,495) 13,745 90,000 (24,250) 5,471 100,000 – 31,745 162,000 (57,688) 37,129 120,000 (13,250) – 9,847 – – 13,745 112,000 – – – – – – Other long-term benefits $ – – – – – – – – – $ 2,583,400 2,893,053 619,227 708,505 417,084 268,941 642,312 591,750 – 1,105,0008 1,461,191 – – 600,000 – 20 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Short-term employee benefits Post employment benefits Other long-term benefits Total Cash salary and fees Short-term performance payments Other short-term benefits Pension and super benefits Long-term performance payment allocations6 Movement in prior year long-term performance payment allocation values7 $ $ $ $ $ 405,000 175,000 116,607 225,000 500,000 325,000 $ – – – 95,000 175,000 (60,625) 1,250 250,000 – 50,000 325,000 (60,625) 273,768 250,000 162,592 42,899 250,000 – 486,255 200,000 466,871 225,000 400,015 135,000 377,172 200,000 461,255 135,000 61,228 200,000 4,756,710 2,271,000 – – – – – – – 13,745 200,000 (60,625) 13,129 250,000 – 49,985 135,000 (103,635) 42,828 200,000 (22,669) 13,745 135,000 (24,250) 3,282 100,000 – 429,624 2,399,000 (889,071) Other long-term benefits $ $ – – – – – – – – – – – 789,375 592,857 1,139,375 979,259 839,375 955,000 616,365 797,331 720,750 364,510 8,967,263 Name Louise J Martin4 2009 2008 Craig D Mitchell 2009 2008 Paul G Say 2009 2008 Mark f Turner 2009 2008 Andrew P Whiteside5 2009 2008 Total 2009 2008 3,482,390 2,410,000 162,592 266,776 2,345,000 (159,362) 1,105,000 9,612,396 1 Patricia A Daniels qualified as a KMP on 14 January 2008. Actual remuneration received is for a four day week. 2 Ben J Lehmann ceased to qualify as a KMP on 27 March 2008. 3 Jane Lloyd qualified as a KMP on 14 July 2008. 4 Louise J Martin qualified as a KMP on 27 March 2008. 5 Andrew P Whiteside qualified as a KMP on 28 April 2008. 6 This is the LTPP allocation for the current year which is deferred for three years as described on pages 16 to 17. 7 This is the notional change in value of all unvested LTPP allocations from prior year. 8 Termination payment. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 21 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 3. remuneration report (continued) 8. Remuneration of key management personnel (continued) Long-Term Performance Payments The table below sets out details of previous LTPP allocations and current valuations. Year of grant LTPP allocation value Movement in LTPP allocation value (since grant date) Closing LTPP allocation value as at 30 June 2009 vested LTPP as at 30 June 2009 Year that LTPP will vest Movement in LTPP allocation value at vesting date (due to performance multiplier) $ – – – $ – $ – (218,250) (177,580) 681,750 472,420 $ – – – (23,750) 226,250 113,125 339,375 – (42,438) (30,052) (5,700) – 132,563 79,948 54,300 – – (24,250) 75,750 – (29,100) (20,490) (4,750) – – – 90,900 54,510 45,250 – – (60,625) 189,375 – – (60,625) 189,375 – – (60,625) 189,375 – (48,500) (49,176) (6,650) – 151,500 130,824 63,350 – – – – – – 27,150 81,450 – – – – – – – – – – 22,625 67,875 – – – – – – – – – – – – – – – – – – – – 31,675 95,025 – – (24,250) 75,750 – – – – $ 2012 2011 2010 2009 2012 2011 2010 2009 2012 2011 2012 2011 2010 2009 2012 2012 2011 2012 2011 2012 2011 2012 2011 2010 2009 2012 2011 Name victor P Hoog Antink Tanya L Cox Patricia A Daniels1 John C Easy Jane Lloyd2 Louise J Martin3 Craig D Mitchell Paul G Say Mark f Turner Andrew P Whiteside4 $ $ 2009 2008 2007 2006 2009 2008 2007 2006 2009 2008 2009 2008 2007 2006 2009 2009 2008 2009 2008 2009 2008 2009 2008 2007 2006 2009 2008 915,000 900,000 650,000 250,000 150,000 175,000 110,000 60,000 90,000 100,000 162,000 120,000 75,000 50,000 112,000 175,000 250,000 325,000 250,000 200,000 250,000 135,000 200,000 180,000 70,000 135,000 100,000 1 Patricia A Daniels qualified as a KMP on 14 January 2008. 2 Jane Lloyd qualified as a KMP on 14 July 2008. 3 Louise J Martin qualified as a KMP on 27 March 2008. 4 Andrew P Whiteside qualified as a KMP on 28 April 2008. 22 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Non-Executive Director board and committee fees Board and Committee fees paid to Non-Executive Directors for the years ended 30 June 2008 and 30 June 2009 are set out in the table below. Directors fees Committee fees Board Chair DWPL Board Audit Board risk Board Compliance Total cash salary and fees Board Nom & rem $ Board Treasury Policy $ Board finance $ $ Name Christopher T Beare 2009 2008 Elizabeth A Alexander1 2009 2008 Barry r Brownjohn2 2009 2008 John C Conde3 2009 2008 Stewart f Ewen 2009 2008 Charles B Leitner iii4 2009 2008 Brian E Scullin 2009 2008 Peter B St George5 2009 2008 Total 2009 2008 $ $ 300,000 300,000 130,000 130,000 130,000 130,000 22,652 – 130,000 130,000 – – – – – – – – – – – – – – $ – – $ – – $ – – 15,000 15,000 6,250 15,000 15,000 8,125 7,500 7,500 7,500 7,500 – – – – – – – – – – – – – – – – – – – – 1,250 1,250 – – – – – – 7,500 7,500 – – 130,000 30,000 6,250 6,250 15,000 7,500 130,000 30,000 7,500 7,500 16,250 7,500 22,652 – – – 1,250 1,250 – – – – – – 865,304 30,000 30,000 30,000 22,500 16,250 820,000 30,000 30,000 30,000 24,375 15,000 – – – – – – – – – – – – – – – – – – – – 300,000 300,000 6,250 172,500 5,625 173,750 15,000 160,000 15,000 160,000 – – 25,152 – – 137,500 137,500 – – – – – – 195,000 198,750 1,250 26,402 – – 22,500 1,016,554 20,625 970,000 1 Elizabeth A Alexander ceased to be a member of the Board Compliance Committee and a member of the Board Finance Committee on 30 April 2009. 2 Barry R Brownjohn ceased to be the chair of the Board Finance Committee on 30 April 2009 and became chair of the Board Compliance Committee on 1 May 2009. 3 John C Conde became a Non-Executive Director on 29 April 2009. He was appointed to the Board Compliance Committee and the Board Nomination and Remuneration Committee on 1 May 2009. 4 As an employee of the Deutsche Bank group, Mr Leitner waived his right to receive Director’s fees. Accordingly, Mr Leitner’s Alternate Director, Mr Fay did not receive Director’s fees when acting as his alternate. Mr Leitner ceased to be a Non-Executive Director on 29 April 2009. Accordingly, Mr Fay ceased to be Mr Leitner’s Alternate Director on 29 April 2009. 5 Peter B St George became a Non-Executive Director on 29 April 2009. He was appointed to the Board Audit and Risk Committee and the Board Finance Committee on 1 May 2009. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 23 fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 3. remuneration report (continued) 8. Remuneration of key management personnel (continued) All Non-Executive and Alternate Directors also receive reimbursement for reasonable travel, accommodation and other expenses incurred whilst undertaking DEXUS business. During the year ended 30 June 2009, Charles B Leitner, Non-Executive Director, was an employee of RREEF America Inc., a Deutsche Bank group company, and was not paid fees or any other remuneration by DEXUS or any of its subsidiaries. The Chief Executive Officer, Victor P Hoog Antink, does not receive fees in respect of his role as a Director, but does receive remuneration as a Senior Executive of DXFM. Commencing 1 April 2009 Mr Ewen earned a fee equivalent to a Committee Chair fee, in addition to his Director’s fee, as compensation for the added responsibilities assumed in attending meetings and reviewing property investment proposals on behalf of the Board. During the year, Mr Fay received a consulting fee of $108,300 from 1 July 2008 to 29 April 2009. Non-Executive Director remuneration Details of the structure and quantum of each component of remuneration for each Non-Executive Director for the years ended 30 June 2008 and 30 June 2009 are set out in the following table. Short-term employee benefits $ Post employment benefits1 $ Other long-term benefits $ Total $ Name Christopher T Beare 2009 2008 Elizabeth A Alexander AM 2009 2008 Barry r Brownjohn 2009 2008 John C Conde AO 2009 2008 Stewart f Ewen OAM 2009 2008 Brian E Scullin 2009 2008 Peter B St George 2009 2008 Total 2009 2008 286,255 286,871 157,844 160,621 146,789 123,379 23,075 – 63,073 126,147 181,255 139,605 24,222 – 882,513 836,623 13,745 13,129 14,656 13,129 13,211 36,621 2,077 – 74,427 11,353 13,745 59,145 2,180 – 134,041 133,377 – – – – – – – – – – – – – – – – 300,000 300,000 172,500 173,750 160,000 160,000 25,152 – 137,500 137,500 195,000 198,750 26,402 – 1,016,554 970,000 1 Post-employment benefits represent compulsory and salary sacrificed superannuation benefits. 24 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 4. Directors’ interests The Board’s policy on insider trading and trading in DXS securities or securities in any of the funds managed by DEXUS by any Director or employee is outlined in the Corporate Governance Statement. While the trading policy described in the Corporate Governance Statement applies to Directors and Senior Executives, the Board has determined that Directors will not trade in any security managed by DEXUS. Directors have made this decision because the Board of DXFM has responsibility for the DEXUS Property Group itself as well as the third party business. Directors are obliged to act in the best interests of each group of investor’s independently of each other. Therefore, to minimise the appearance of conflict that may arise by being a Director of multiple funds, the Directors have determined that they will not invest in any fund managed by DEXUS including DXS. This position is periodically reviewed by the Board. As a direct result of DEXUS’s policy regarding Directors holding DXS securities, or securities in any of the funds managed by DEXUS, as at the date of this Directors’ Report no Director or Alternate Director directly or indirectly held: n DXS securities; or n options over, or any other contractual interest in, DXS securities; or n an interest in any other fund managed by DXFM or any other entity that forms part of DEXUS Property Group. 5. Directors’ directorships in other listed entities The following table sets out directorships of other listed entities, not including DXFM, held by the Directors at any time in the three years immediately prior to the end of the year, and the period for which each directorship was held: Directors Company Elizabeth A Alexander AM CSL Limited Date appointed 12 July 1991 Date resigned or ceased being a Director of a listed security Boral Limited 15 December 1999 24 October 2008 John C Conde AO Whitehaven Coal Limited 3 May 2007 Brian E Scullin Deutsche Asset Management (Australia) Limited1 24 October 2000 17 October 2006 IYS Instalment Receipt Limited1 24 October 2000 17 October 2006 SPARK Infrastructure RE Limited2 1 November 2005 24 August 2007 BT Investment Management Limited 17 September 2007 Peter B St George Boart Longyear Limited 21 February 2007 SPARK Infrastructure RE Limited2 8 November 2005 31 December 2008 First Quantum Minerals Limited3 20 October 2003 Alternate Director Andrew J Fay (alternate to Charles B Leitner III) Deutsche Asset Management (Australia) Limited1 20 October 2004 17 October 2006 IYS Instalment Receipt Limited1 20 October 2004 17 October 2006 SPARK Infrastructure RE Limited2 7 December 2006 12 December 2007 1 IYS Instalment Receipt Limited had until 29 November 2006 issued ASX listed instalment receipts over units in the Deutsche Retail Infrastructure Trust, a managed investment scheme that was until 17 October 2006 listed but not quoted on the ASX and whose responsible entity was Deutsche Asset Management (Australia) Limited. Deutsche Asset Management (Australia) Limited ceased to be the Responsible Entity of IYS Instalment Receipt Limited on 17 October 2006. 2 SPARK Infrastructure RE Limited has issued ASX listed stapled securities trading as SPARK Infrastructure Group (ASX: SKI). 3 Listed for trading on the Toronto Stock Exchange in Canada and the London Stock Exchange in the United Kingdom. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 25 12. Distributions Distributions paid or payable by the DEXUS Property Group for the year ended 30 June 2009 were 7.3 cents per security (2008: 11.9 cents per security) as outlined in note 29 of the Notes to the Financial Statements. 13. DXfM’s fees and associate interests Details of fees paid or payable by the DEXUS Property Group to DXFM for the year ended 30 June 2009 are outlined in note 33 of the Notes to the Financial Statements and form part of this Directors’ Report. The number of interests in the DEXUS Property Group held by DXFM or its associates as at the end of the financial year are nil (2008: nil). 14. interests in DXS securities The movement in securities on issue in the DEXUS Property Group during the year and the number of securities on issue as at 30 June 2009 are detailed in note 26 of the Notes to the Financial Statements and form part of this Directors’ Report. The DEXUS Property Group did not have any options on issue as at 30 June 2009 (2008: nil). 15. Environmental regulation DEXUS Property Group senior management, through its Board Risk Committee, oversee the policies, procedures and systems that have been implemented to ensure the adequacy of its environmental risk management practices. It is the opinion of this Committee that adequate systems are in place for the management of its environmental responsibilities and compliance with its various licence requirements and regulations. Further, the Committee is not aware of any breaches of these requirements and to the best of its knowledge all activities have been undertaken in compliance with environmental requirements. 16. indemnification and insurance The insurance premium for a policy of insurance indemnifying Directors, officers and others (as defined in the relevant policy of insurance) is paid by DXH. The auditors are in no way indemnified out of the assets of DXS. fiNANCiAL rEPOrTS DirECTOrS’ rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 6. Principal activities During the year the principal activity of DEXUS Property Group was to own and manage high quality real estate assets and manage real estate funds on behalf of third party investors. There were no significant changes in the nature of DEXUS Property Group’s activities during the year. The number of employees of DXS at the end of the reporting period being 30 June 2009 was 284 (2008: 270). 7. Total value of trust assets The total value of the assets of the DEXUS Property Group as at 30 June 2009 was $8,351.1 million (2008: $9,349.0 million). Details of the basis of this valuation are outlined in note 1 of the Notes to the Financial Statements and form part of this Directors’ Report. 8. review and results of operations A review of the results, financial position, operations including business strategies and the expected results of operations of the DEXUS Property Group, are set out in the Chief Executive Officer’s Report of the DEXUS Property Group 2009 Security Holder Review and forms part of this Directors’ Report. 9. Likely developments and expected results of operations In the opinion of the Directors, disclosure of any further information regarding business strategies and the future developments or results of the DEXUS Property Group, other than the information already outlined in this Directors’ Report or the Financial Statements accompanying this Directors’ Report would be unreasonably prejudicial to the DEXUS Property Group. 10. Significant changes in the state of affairs The Directors are not aware of any matter or circumstance, not otherwise dealt with in this Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the DEXUS Property Group, the results of those operations, or the state of the DEXUS Property Group’s affairs in future financial years. 11. Matters subsequent to the end of the financial year Since the end of the year the Directors of DXFM are not aware of any matter or circumstance not otherwise dealt with in this Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the DEXUS Property Group, the results of those operations, or the state of DXS’s affairs in future financial years. 26 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 17. Audit 17.1 Auditor PricewaterhouseCoopers (PwC or the Auditor) continues in office in accordance with section 327 of the Corporations Act 2001. 17.2 non-audit services The Trusts may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditors expertise and experience with the Trusts and/or DEXUS Property Group are important. Details of the amounts paid or payable to the Auditor, for audit and non-audit services provided during the year are set out in note 6 of the Notes to the Financial Statements. The Board Audit Committee is satisfied that the provision of non-audit services provided during the year by the Auditor (or by another person or firm on the Auditor’s behalf) is compatible with the standard of independence for auditors imposed by the Corporations Act 2001. The reasons for the Directors being satisfied are: n Board Audit Committee has determined that the Auditor will not provide services that have the potential to impair the independence of its audit role, including: – participating in activities that are normally undertaken by management; and – being remunerated on a “success fee” basis. 18. Corporate governance DXFM’s Corporate Governance Statement is set out in a separate section of this Annual Report. 19. rounding of amounts and currency The DEXUS Property Group is a registered scheme of the kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the “rounding off” of amounts in this Directors’ Report and the Financial Statements. Amounts in this Directors’ Report and Financial Statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, unless otherwise indicated. All figures in this Directors’ Report and the Financial Statements, except where otherwise stated, are expressed in Australian dollars. 20. Management representation The Chief Executive Officer and Chief Financial Officer have reviewed the Trust’s Financial Reporting processes, policies and procedures together with its risk management, internal control and compliance policies and procedures. Following that review it is their opinion that the Trust’s financial records for the financial year have been properly maintained in accordance with the Corporations Act 2001 and the Financial Statements and their notes comply with the accounting standards and give a true and fair view. n Board Audit Committee has determined that the Auditor will not provide services where the Auditor may be required to review or audit its own work, including: – the preparation of accounting records; – the design and implementation of information technology systems; 21. Directors’ authorisation The Directors’ Report is made in accordance with a resolution of the Directors. The Financial Report was authorised for issue by the Directors on 17 August 2009. The Directors have the power to amend and reissue the Financial Report. – conducting valuation, actuarial or legal services; – promoting, dealing in or underwriting securities; or – providing internal audit services. n Board Audit Committee regularly reviews the performance and independence of the Auditor and whether the independence of this function has been maintained having regard to the provision of non-audit services. The Auditor has provided a written declaration to the Board regarding its independence at each reporting period and Board Audit Committee approval is required before the engagement of the Auditor to perform any non-audit service for a fee in excess of $100,000. The above Directors’ statements are in accordance with the advice received from the Board Audit Committee. 17.3 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 in the Financial Statements and forms part of this Directors’ Report. christopher T Beare Chair 17 August 2009 Victor P hoog Antink Chief Executive Officer 17 August 2009 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 27 fiNANCiAL rEPOrTS AUDiTOr’S iNDEPENDENCE DECLArATiON fOr THE YEAr ENDED 30 JUNE 2009 28 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 fiNANCiAL rEPOrTS iNCOME STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 Consolidated Parent entity Notes 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2 708,506 664,831 139,506 – 3,225 63,663 – 8,134 26,760 24,636 3,431 – 142,190 36,810 715 – 775,394 699,725 167,573 179,715 31 2,179 335 2,467 3,442 1,253 – (153,701) 112 – 48,314 478 777,939 706,887 13,984 228,507 33 3 (174,485) (159,565) – (21,869) (384, 241) (213,233) (32,678) (6,358) 14,022 (1,517,564) 184,444 (164,539) (1,880) (534) – (21,209) (4,742) (168,169) (59,282) (21,485) 2,297 – – (3,503) (3,002) (61) (23,340) (15,892) (1,330) – (176,712) (5,753) – – – (34,803) (9,397) (23,560) 30,733 (5,743) – (96,517) (2,203) – – – 5 4 (a) 4 (c) (1,622) (1,213) (2,353,591) (253,724) (374,970) (142,703) (1,575,652) 453,163 (360,986) 85,804 (12,537) 132,773 120,236 1,542 (9,444) (7,902) – – – – – – (1,455,416) 445,261 (360,986) 85,804 (300,486) (1,158,625) 83,470 354,807 (360,986) 85,804 – – (1,459,111) 438,277 (360,986) 85,804 Share of net profits of associates accounted for using the equity method 16 Net foreign exchange gain/(loss) revenue from ordinary activities Property revenue Distribution revenue Interest revenue Management fee revenue Total revenue from ordinary activities Other income Total income Expenses Property expenses Responsible Entity fees Finance costs Net fair value (loss)/gain of investment properties Net (loss)/gain on sale of investment properties Net loss on sale of investment Net fair value loss of investments Net fair value loss of derivatives Depreciation and amortisation Impairment Employee benefits expense Other expenses Total expenses (Loss)/profit before tax Tax benefit/(expense) Income tax (expense)/benefit Withholding tax benefit/(expense) Total tax benefit/(expense) (Loss)/profit after tax (Loss)/profit attributable to: Equity holders of the parent entity Equity holders of other stapled entities (minority interest) Stapled security holders Net profit attributable to other minority interests 3,695 6,984 – – Net (loss)/profit Earnings per unit Basic earnings per unit on (loss)/profit attributable to equity holders of the parent entity Diluted earnings per unit on (loss)/profit attributable to equity holders of the parent entity (1,455,416) 445,261 (360,986) 85,804 Cents Cents Cents Cents 39 39 (8.11) (8.11) 2.64 2.64 (9.74) (9.74) 2.72 2.72 The above Income Statements should be read in conjunction with the accompanying notes. Earnings per stapled security Basic earnings per unit on (loss)/profit attributable to stapled security holders Diluted earnings per unit on (loss)/profit attributable to stapled security holders 39 39 (39.38) 13.88 (39.38) 13.88 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 29 fiNANCiAL rEPOrTS BALANCE SHEETS AS AT 30 JUNE 2009 Current assets Cash and cash equivalents Receivables Non-current assets classified as held for sale Derivative financial instruments Current tax assets Other Total current assets Non-current assets Investment properties Property, plant and equipment Investments accounted for using the equity method Investments in associates Loans with related parties Deferred tax assets Intangible assets Other Total non-current assets Total assets Current liabilities Payables Interest bearing liabilities Loans with related parties Current tax liabilities Provisions Derivative financial instruments Other Total current liabilities Non-current liabilities Interest bearing liabilities Deferred tax liabilities Provisions Other Total non-current liabilities Total liabilities Net assets Equity Equity attributable to equity holders of the parent entity Contributed equity Reserves Undistributed income Parent entity security holders’ interest Equity attributable to equity holders of other stapled entities (minority interest) Contributed equity Reserves Undistributed income 26 27 27 Other stapled security holders’ interest Stapled security holders’ interest Other minority interest Total equity 28 The above Balance Sheets should be read in conjunction with the accompanying notes. 30 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Consolidated Parent entity Notes 2009 $’000 2008 $’000 2009 $’000 7 8 9 11 12 13 14 16 16 10 17 18 19 20 21 10 22 11 23 21 24 22 25 26 27 27 2008 $’000 31,004 8,419 – 70,059 – 1,307 84,845 35,816 98,054 205,491 1,423 13,618 99,214 36,457 – 191,162 124 9,372 27,268 17,752 20,800 97,805 – 2,731 439,247 336,329 166,356 110,789 7,120,710 438,620 84,165 – – 49,136 213,267 5,965 7,911,863 8,351,110 98,410 381,673 – 1,051 177,618 386,224 281 1,045,257 2,127,339 9,975 13,533 8,789 2,159,636 3,204,893 5,146,217 8,182,295 443,633 111,946 – – 14,882 255,113 4,789 9,012,658 9,348,987 118,396 577,780 – 1,019 194,314 97,078 1,799 990,386 2,429,139 76,543 9,818 8,048 2,523,548 3,513,934 5,835,053 1,397,596 129,718 – 138,276 408,583 – – 895 2,075,068 2,241,424 19,503 – 34,332 – 90,389 149,545 – 293,769 – – – 877 877 294,646 1,946,778 1,589,089 62,644 – 314,989 119,533 – – 566 2,086,821 2,197,610 13,968 – 34,332 – 102,300 43,429 – 194,029 – – – 959 959 194,988 2,002,622 1,741,211 (59,252) 264,819 1,297,831 1,248 705,510 1,741,211 – 205,567 1,297,831 – 704,791 1,946,778 2,004,589 1,946,778 2,002,622 2,966,643 35,820 (9,796) 2,992,667 4,939,445 206,772 2,280,052 49,689 1,294,725 3,624,466 5,629,055 205,998 – – – – – – – 1,946,778 – – 2,002,622 – 5,146,217 5,835,053 1,946,778 2,002,622 fiNANCiAL rEPOrTS STATEMENTS Of CHANGES iN EQUiTY fOr THE YEAr ENDED 30 JUNE 2009 Total equity at the beginning of the year 5,835,053 5,704,943 2,002,622 1,989,688 Consolidated Parent entity Notes 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Exchange differences on translation of foreign operations Revaluation (decrement)/increment on investment Net (expense)/income recognised directly in equity Net (loss)/profit for the year Total recognised income and expense for the year Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs Distributions provided for or paid Acquisition of investment Transactions with other minority interest: 27 27 26 29 (53,814) (14,486) – 63,294 (53,814) 48,808 – – – – – – (1,455,416) 445,261 (360,986) 85,804 (1,509,230) 494,069 (360,986) 85,804 1,129,971 243,524 443,380 146,305 (296,648) (355,380) (138,238) (219,175) – 402 Contributions of equity, net of transaction costs 484 1,899 – – – – – – – – – – 29 (13,749) (17,536) – (265,989) 336 29,121 820,394 (363,959) 305,142 (72,870) 5,146,217 5,835,053 1,946,778 2,002,622 Distributions provided for or paid Disposal of minority interest Foreign currency translation reserve Total transactions with equity holders Total equity at the end of the year Total recognised income and expense for the year is attributable to: Equity holders of the parent entity – DDF unitholders (421,486) 85,643 (360,986) 85,804 Equity holders of other stapled entities (minority interest) (1,091,439) 401,442 – – Security holders of DEXUS Diversified Trust (1,512,925) 487,085 (360,986) 85,804 Other minority interest 3,695 6,984 – – Total recognised income and expense for the year (1,509,230) 494,069 (360,986) 85,804 The above Statements of Changes in Equity should be read in conjunction with the accompanying notes. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 31 fiNANCiAL rEPOrTS CASH fLOW STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 Consolidated Parent entity Notes 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Cash flows from operating activities Receipts in the course of operations (inclusive of GST) 912,632 783,742 157,263 179,091 Payments in the course of operations (inclusive of GST) (345,517) (252,212) (54,403) (74,314) Interest received 3,021 10,149 Finance costs (paid to)/received from financial institutions (200,156) (174,204) Distributions received Dividends received Income and withholding taxes paid – – (10,403) 9,862 3,250 (6,142) 3,432 18,592 24,636 – – 606 8,189 36,810 – – Net cash inflow from operating activities 37 (a) 359,577 374,445 149,520 150,382 Cash flows from investing activities Proceeds from sale of investment properties 19,833 793,200 7,540 446,799 Payments for capital expenditure on investment properties 37 (b) (105,433) (167,642) (14,365) (58,198) Payments for investment properties Proceeds from sale of investments Payments for acquisition of investments net of cash – (321,327) 60,178 215,200 – (321,191) Payments for investments accounted for using the equity method (25,995) (18,630) Wind up of investment Payments for property, plant and equipment – 67 (27,165) (80,661) – – – – – – (2,800) 503,601 (96) (141,178) – – Payments for capital expenditure on property, plant and equipment (133,877) (87,951) (50,741) (15,605) Net cash inflow/(outflow) from investing activities (212,459) 11,065 (57,566) 732,523 Cash flows from financing activities Issue of units Establishment expenses and unit issue cost Increase in other minority interest Borrowings provided to entities within DXS Borrowings provided by entities within DXS Proceeds from borrowings Repayment of borrowings Repayment of loan notes Distributions paid to security holders Dividends paid to related parties Distributions paid to other minority interests Net cash outflow from financing activities Net (decrease)/increase 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 1,062,228 – 406,497 (32,677) 484 – – (154) 1,651 – – – – – (11,029) – (841,743) (606,896) 525,511 104,348 2,600,334 2,487,200 (72,689) 264,620 (3,570,336) (2,662,111) – (51,936) – – (584,032) – (214,087) (94,306) (102,237) (39,037) – (5,974) (16,136) (16,884) – – – – (170,190) (342,514) (95,690) (860,997) (23,072) 42,996 99,214 8,703 59,603 (3,385) (3,736) 31,004 – 21,908 9,096 – Cash and cash equivalents at the end of the year 7 84,845 99,214 27,268 31,004 The above Cash Flow Statements should be read in conjunction with the accompanying notes. 32 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 Note 1. Summary of significant accounting policies (a) Basis of preparation In accordance with AASB Interpretation 1002: Post-Date-of-Transition Stapling Arrangements, the entities within DXS must be consolidated. The parent entity and deemed acquirer of DIT, DOT and DXO is DDF. The DDF consolidated column represents the consolidated result of DDF, which comprises DDF and its controlled entities, DIT and its controlled entities, DOT and its controlled entities, DXO and its controlled entities. Equity attributable to other trusts stapled to DDF is a form of minority interest in accordance with AASB 1002 and, in the DDF consolidated column, represents the equity of DIT, DOT and DXO. Other minority interests represent the equity attributable to parties external to the Trusts. DEXUS Property Group stapled securities are quoted on the Australian Stock Exchange under the code “DXS” and comprise one unit in each of DDF, DIT, DOT and DXO. Each entity forming part of DXS continues as a separate legal entity in its own right under the Corporations Act 2001 and is therefore required to comply with the reporting and disclosure requirements under the Corporations Act 2001 and Australian Accounting Standards. DEXUS Funds Management Limited (DXFM) as Responsible Entity for each of the Trusts may only unstaple the Trusts if approval is obtained by special resolution of the stapled security holders. This general purpose Financial Report for the year ended 30 June 2009 has been prepared in accordance with the requirements of the Trusts’ Constitutions, the Corporations Act 2001, Australian Equivalents to International Financial Reporting Standards (AIFRS) and Interpretations. Compliance with AIFRS ensures that the consolidated and parent Financial Statements and Notes comply with International Financial Reporting Standards (IFRS). This Financial Report is prepared on the going concern basis and in accordance with historical cost conventions and has not been adjusted to take account of either changes in the general purchasing power of the dollar or changes in the values of specific assets, except for the valuation of certain non-current assets and financial instruments (refer notes 1(e), 1(n), 1(p), and 1(v)). As at 30 June 2009, DXS had a current net asset deficiency of $607.9 million. This Financial Report is prepared on a going concern basis as DXS has sufficient working capital and cash flow due to the existence of unutilised facilities of $1,450.4 million as set out in note 21. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated. Critical accounting estimates The preparation of Financial Statements in conformity with AIFRS may require the use of certain critical accounting estimates and management to exercise its judgement in the process of applying the Trusts’ accounting policies. Other than the estimations described in notes 1(e), 1(n), 1(p), and 1(v), no key assumptions concerning the future or other estimation of uncertainty at the reporting date have a significant risk of causing material adjustments to the Financial Statements in the next annual reporting period. Uncertainty around property valuations The global market for many types of real estate has been severely affected by the recent volatility in global financial markets. The lower levels of liquidity and volatility in the banking sector have translated into a general weakening of market sentiment towards real estate and the number of real estate transactions has significantly reduced. 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 not a forced seller prepared to sell at any price. The best evidence of fair value is given by current prices in an active market for similar property in a comparable location and condition. The current lack of comparable market evidence relating to pricing assumptions and market drivers means that there is less certainty in regard to valuations and the assumptions applied to valuation inputs. The period of time needed to negotiate a sale in this environment may also be significantly prolonged. The fair value of investment property has been adjusted to reflect market conditions at the end of the reporting period. While this represents the best estimates of fair value as at the balance sheet date, the current market uncertainty means that if investment property is sold in future the price achieved may be higher or lower than the most recent valuation, or higher or lower than the fair value recorded in the Financial Statements. (b) Principles of consolidation (i) Controlled entities The Financial Statements have been prepared on a consolidated basis in recognition of the fact that while the securities issued by the Trusts are stapled into one trading security and cannot be traded separately, the Financial Statements must be presented on a consolidated basis. The parent entity and deemed acquirer of the Trusts is DDF. The accounting policies of the subsidiary trusts are consistent with those of the parent. The Financial Statements incorporate an elimination of inter-entity transactions and balances to present the Financial Statements on a consolidated basis. Net profit and equity in controlled entities, which is attributable to the unitholdings of minority interests, are shown separately in the Income Statements and Balance Sheets respectively. Where control of an entity is obtained during a financial year, its results are included in the Income Statements from the date on which control is gained. The Financial Statements incorporate all the assets, liabilities and results of the parent and its controlled entities. (ii) Partnerships and joint ventures Where assets are held in a partnership or joint venture with another entity directly, the Trusts’ share of the results and assets of this partnership or joint venture are consolidated into the Income Statements and Balance Sheets of the Trusts. Where assets are jointly controlled via ownership of units in single purpose unlisted unit trusts or shares in companies, the Trusts apply equity accounting to record the operations of these investments (refer note 1(s)). DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 33 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 1. Summary of significant accounting policies (continued) (c) Revenue recognition (i) rent Rental income is brought to account on a straight-line basis over the lease term for leases with fixed rent review clauses. In all other circumstances rental income is brought to account on an accruals basis. If not received at balance date, rental income is reflected in the Balance Sheets as a receivable. Recoverability of receivables is reviewed on an ongoing basis. Debts which are known to be not collectable are written off. (ii) Management fee revenue Management fees are brought to account on an accruals basis, and if not received at the balance date, are reflected in the Balance Sheets as a receivable. (iii) interest revenue Interest income is brought to account on an accruals basis using the effective interest rate method and, if not received at balance date, is reflected in the Balance Sheets as a receivable. (iv) Dividends and distribution revenue Income from dividends and distributions are recognised when declared. Amounts not received at balance date are included as a receivable in the Balance Sheets. (d) Expenses Expenses are brought to account on an accruals basis and, if not paid at balance date, are reflected in the Balance Sheets as a payable. (i) Property expenses Property expenses include rates, taxes and other property outgoings incurred in relation to investment properties and property, plant and equipment where such expenses are the responsibility of the Trusts. (ii) Borrowing costs Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation or ancillary costs incurred in connection with arrangement of borrowings and foreign exchange losses net of hedged amounts on borrowings, including trade creditors and lease finance charges. Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use or sale. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate. (e) Derivatives and other financial instruments (i) Derivatives The Trusts’ activities expose it to a variety of financial risks including foreign exchange risk and interest rate risk. Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps, cross currency swaps and foreign exchange contracts to manage its exposure to certain risks. Written policies and limits are approved by the Board of Directors of the Responsible Entity, in relation to the use of financial instruments to manage financial risks. 34 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 The Responsible Entity continually reviews the Trusts’ exposures and updates its treasury policies and procedures. The Trust does not trade in derivative instruments for speculative purposes. Even though derivative financial instruments are entered into for the purpose of providing the Trust with an economic hedge, the Trusts’ have elected not to apply hedge accounting under AASB 139: Financial Instruments: Recognition and Measurement for interest rate swaps and foreign exchange contracts. Accordingly, derivatives including interest rate swaps, interest rate component of cross currency swaps and foreign exchange contracts, are measured at fair value with any changes in fair value recognised in the Income Statements. (ii) Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in the Income Statements. (iii) Debt and equity instruments issued by the Trusts Financial instruments issued by the Trusts are classified as either liabilities or as equity in accordance with the substance of the contractual arrangements. Accordingly, ordinary units issued by DDF, DIT, DOT and DXO are classified as equity. Interest and distributions are classified as expenses or as distributions of profit consistent with the Balance Sheet classification of the related debt or equity instruments. Transaction costs arising on the issue of equity instruments are recognised directly in equity (net of tax) as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. (iv) financial guarantee contracts Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137: Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate. The fair value of financial guarantees is determined as the present value of the difference in the net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment. (v) Other financial assets Loans and other receivables are measured at amortised cost using the effective interest rate method less impairment. (f) goods and services tax/value added tax Revenues, expenses and capital assets are recognised net of any amount of Australian/New Zealand/Canadian Goods and Services Tax (GST) or French and German Value Added Tax (VAT), except where the amount of GST/VAT incurred is not recoverable. In these circumstances the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense. Cash flows are included in the Cash Flow Statements on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from or payable to the Australian Taxation Office is classified as operating cash flows. (g) Taxation Under current Australian income tax legislation DDF, DIT and DOT, are not liable for income tax provided they satisfy certain legislative requirements. These Trusts may be liable for income tax in jurisdictions where foreign property is held (i.e. United States, France, Germany, Canada, New Zealand). DXO is a trading trust and is subject to Australian income tax as follows: n n n n the income tax expense for the year is the tax payable on the current year’s taxable income based on a tax rate of 30% adjusted for changes in deferred tax assets and liabilities and unused tax losses; deferred tax assets and liabilities are recognised for temporary differences arising from differences between the carrying amount of assets and liabilities and the corresponding tax base of those items. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax assets or liabilities. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability (where they do not arise as a result of a business combination and did not affect either accounting profit/loss or taxable profit/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 assets and liabilities 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; and n current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Withholding tax payable on distributions received by the Trusts from DEXUS Industrial Properties Inc (US REIT) and DEXUS US Properties Inc (US REIT II) are recognised as an expense when tax is withheld. In addition, a deferred tax liability or asset and related deferred tax expense/benefit is recognised on differences between the tax cost base of US assets and liabilities in the Trusts (held by US REIT and US REIT II) and their accounting carrying values at balance date. Any deferred tax liability or asset is calculated using a blend of the current withholding tax rate applicable to income distributions and the applicable US federal and state taxes. Under current Australian income tax legislation, the security holders will generally be entitled to receive a foreign tax credit for US withholding tax deducted from distributions paid by the US REIT and US REIT II. DIT France Logistique SAS (DIT France), a wholly owned sub-trust of DIT, is liable for French corporation tax on its taxable income at the rate of 34.43%. In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the French real estate assets and their accounting carrying value at balance date. DEXUS GLOG Trust, a wholly owned Australian sub-trust of DIT, is liable for German income tax on its German taxable income at the rate of 15.82% from 1 January 2008 (this rate was 26.37% prior to 1 January 2008). In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the German real estate assets and their accounting carrying value at balance date. DOT NZ Sub-Trust No. 1, a wholly owned Australian sub-trust of DOT, is liable for New Zealand corporate tax on its New Zealand taxable income at the rate of 30%. In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the New Zealand real estate asset and the accounting carrying value at balance date. DEXUS Canada Trust, a wholly owned Australian sub-trust of DIT, is liable for Canadian income tax on its Canadian taxable income at the rate of 25%. In addition, a deferred tax liability or asset and its related deferred tax expense/benefit is recognised on differences between the tax cost base of the Canadian real estate asset and the accounting carrying value at balance date. Tax consolidation DXH is the head entity in the DXH tax consolidated group comprising DEXUS Funds Management Limited, DEXUS Property Services Pty Limited, DEXUS Financial Services Pty Limited and DEXUS Wholesale Property Limited. The implementation date for the tax consolidated group was 1 October 2004. During the year DEXUS CMBS Issuer Pty Limited was formed and joined the tax consolidated group. The entities within the DXH tax consolidated group entered into a Tax Sharing Deed and Tax Funding Deed on 29 June 2007 (effective 1 July 2006). During the year, newly incorporated entities, DEXUS Finance No.2 Pty Limited and DEXUS Finance No.3 Pty Limited together with DEXUS Finance Pty Limited (DXF) formed the DXF tax consolidated group on 18 December 2008. DXF is the head entity of this tax consolidated group. The entities in the DXF tax consolidated group entered into a Tax Sharing Deed and Tax Funding Deed on 29 June 2009 (effective 18 December 2008). In the opinion of the Directors, the Tax Sharing Deeds limit the joint and several liability of the wholly-owned entities in the case of a default by the head entity. For each of the consolidated tax groups, the head entity and the controlled entities continue to account for their own current and deferred tax amounts. These notional tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right pursuant to the Tax Funding Deed. Under the Tax Funding Deed, the wholly owned entities fully compensate the head entity for any current tax payable assumed and are compensated by the head entity for any current tax receivable. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ Financial Statements and are recognised as current intercompany receivables or payables. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 35 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 1. Summary of significant accounting policies (continued) (h) Distributions In accordance with the Trusts’ Constitutions, the Trusts distribute their distributable income to unitholders by cash or reinvestment. Distributions are provided for when they are approved by the Board of Directors and declared. (i) Repairs and maintenance Plant is required to be overhauled on a regular basis and is managed as part of an ongoing major cyclical maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of a component of an asset, in which case the replaced component will be derecognised and the replacement costs capitalised in accordance with note 1(p). Other routine operating maintenance, repair costs and minor renewals are also charged as expenses as incurred. (j) cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and 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. (k) Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, which is based on the invoiced amount less provision for doubtful debts. Trade receivables are required to be settled within 30 days and are assessed on an ongoing basis for impairment. Receivables which are known to be uncollectible are written off. A provision for doubtful debts is established when there is objective evidence that the Trusts will not be able to collect all amounts due according to the original terms of the receivables. (l) non-current assets (or disposal groups) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. 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, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement. (m) Other financial assets at fair value through profit and loss Interests held by the Trust in controlled entities and associates are measured at fair value through profit and loss to reduce a measurement or recognition inconsistency. (n) Property, plant and equipment Property under development is carried at historical cost until the development is complete. All costs of development are capitalised against the property and are not depreciated. Upon completion of development, the assets are classified as investment property. 36 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to its acquisition. 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 Trusts and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Income Statements during the financial period in which they are incurred. Property under development and all other property, plant and equipment are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts exceed their recoverable amounts (refer note 1 (u)). (o) Depreciation of property, plant and equipment Land is not depreciated. Depreciation on buildings (including fitout) is calculated on a straight-line basis so as to write off the net cost of each non-current asset over its expected useful life. Estimates for remaining useful lives are reviewed on a regular basis for all assets and are as follows: Buildings (including fitout) 5-50 years IT equipment 3-5 years (p) investment properties Investment properties consist of properties held for long-term rental yields, capital appreciation or both. Investment properties are initially recognised at cost including transaction costs. Investment properties are subsequently recognised at fair value in the Financial Statements. Each valuation firm and its signatory valuer are appointed on the basis that they are engaged for no more than three consecutive valuations. The basis of valuations of investment properties is fair value being the amounts for which the assets could be exchanged between knowledgeable willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases. In addition, an appropriate valuation method is used, which may include the discounted cash flow and the capitalisation method. Discount rates and capitalisation rates are determined based on industry expertise and knowledge, and where possible a direct comparison to third party rates for similar assets in a comparable location. Rental income from current leases and assumptions about future leases, as well as any expected operational cash outflows in relation to the property, are also reflected in fair value. External valuations of the individual investments are carried out in accordance with the Trusts’ Constitutions, or may be earlier where the Responsible Entity believes there is a potential for a material change in the fair value of the property. Changes in fair values are recorded in the Income Statements. The gain or loss on disposal of an investment property is calculated as the difference between the carrying amount of the asset at the date of disposal and the net proceeds from disposal and is included in the Income Statements in the year of disposal. Subsequent redevelopment and refurbishment costs (other than repairs and maintenance) are capitalised to the investment property where they result in an enhancement in the future economic benefits of the property. Repairs and maintenance are accounted for in accordance with 1(i). 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 at the entity’s incremental financing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparative terms and conditions. (u) impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested 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 other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. (v) intangible assets (i) Goodwill As part of a business combination, the identifiable net assets acquired are measured at fair value. The excess of the acquisition costs over the fair value of the identifiable net assets is brought to account as goodwill in the Balance Sheets. The carrying value of the goodwill is tested for impairment at each reporting date with any decrement in value taken to the Income Statements as an expense. (ii) Management rights Management rights represent the asset management rights owned by the Trust which entitle it to management fee revenue from both finite and indefinite life trusts. Those rights that are deemed to have a finite useful life, are measured at cost and amortised using the straight-line method over their estimated useful lives which vary from six to 22 years. (q) leasing fees Leasing fees incurred are capitalised and amortised over the lease periods to which they relate. (r) lease incentives Prospective lessees may be offered incentives as an inducement to enter into operating leases. These incentives may take various forms including cash payments, rent free periods, or a contribution to certain lessee costs such as fitout costs or relocation costs. The costs of incentives are recognised as a reduction of rental income on a straight-line basis from the earlier of the date which the tenant has effective use of the premises or the lease commencement date to the end of the lease term. The carrying amount of the lease incentives is reflected in the fair value of investment properties. (s) investments accounted for using the equity method Some property investments are held through the ownership of units in single purpose unlisted trusts or shares in unlisted companies where the Trusts exert significant influence but does not have a controlling interest. These investments are considered to be associates and the equity method of accounting is applied in the Consolidated Financial Statements. Under this method, the entity’s share of the post-acquisition profits of associates is recognised in the consolidated Income Statements. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends or distributions receivable from associates are recognised in the parent entity’s Income Statements, while in the Consolidated Financial Statements they reduce the carrying amount of the investment. When the Trusts’ share of losses in an associate equal or exceed its interest in the associate (including any unsecured receivables) the Trusts do not recognise any further losses unless it has incurred obligations or made payments on behalf of the associate. (t) Business combinations The purchase method of accounting is used for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date. The excess of the acquisition cost over the fair value of the Trusts’ share of identifiable net assets acquired is recorded as goodwill (refer note 1(v)). If the cost is less than the fair value of the Trusts’ share of the identifiable net assets acquired, the difference is recognised directly in the Income Statements. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 37 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 1. Summary of significant accounting policies (continued) (w) financial assets and liabilities (i) Classification DXS has classified its financial assets and liabilities as follows: financial Asset/Liability Classification valuation Basis Cash and cash equivalents Fair value through profit or loss Fair value Receivables Loans and receivables Other financial assets Loans and receivables Amortised cost Amortised cost Other financial assets Fair value through profit or loss Fair value Payables Financial liability at amortised cost Amortised cost Interest bearing liabilities Financial liability at amortised cost Amortised cost Derivatives Fair value through profit or loss Fair value reference Refer note 1(j) Refer note 1(k) Refer note 1(e) Refer note 1(m) Refer note 1(x) Refer note 1(y) Refer note 1(e) Financial assets and liabilities are classified in accordance with the purpose for which they were acquired. (z) Employee benefits (i) Wages, salaries and annual leave (ii) fair value estimation of financial assets and liabilities The fair value of financial assets and financial liabilities must be estimated for recognition and measurement and for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Trusts 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 (for example, over-the-counter derivatives) is determined using valuation techniques including dealer quotes for similar instruments and discounted cash flows. In particular, the fair value of interest rate swaps and cross currency swaps are calculated as the present value of the estimated future cash flows, the fair value of forward exchange rate contracts is determined using forward exchange market rates at the balance sheet date, and the fair value of interest rate option contracts are calculated as the present value of the estimated future cash flows taking into account the time value and implied volatility of the underlying instrument. (x) Payables These amounts represent liabilities for amounts owing at balance date. The amounts are unsecured and are usually paid within 30 days of recognition. (y) interest bearing liabilities Subsequent to initial recognition at fair value, net of transaction costs incurred, interest bearing liabilities are measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Income Statements over the period of the borrowings using the effective interest method. Interest bearing liabilities are classified as current liabilities unless the Trust has an unconditional right to defer the liability for at least 12 months after the reporting date. Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from employees’ services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the Trusts expect to pay at reporting date including related on-costs, such as workers compensation, insurance and payroll tax. (ii) Long service leave The provision for employee benefits for long service leave represents the present value of the estimated future cash outflows, to be made resulting from employees’ services provided to reporting date. The provision is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attaching to national government bonds at reporting date which most closely match the term of the maturity of the related liabilities. The unwinding of the discount is treated as long service leave expense. (aa) Earnings per unit Earnings per unit are determined by dividing the net profit attributable to equity holders of the parent entity by the weighted average number of ordinary units outstanding during the year, adjusted for bonus elements in units issued during the year. (ab) foreign currency Items included in the Financial Statements of the Trust 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 functional and presentation currency of the Trust. (i) foreign currency transactions 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 period end exchange rates of financial assets and liabilities denominated in foreign currencies are recognised in the Income Statements. 38 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 (ii) foreign operations Foreign operations are located in the United States, New Zealand, France, Germany and Canada. These operations have a functional currency of US Dollars, NZ Dollars, Euros and Canadian Dollars respectively, which are translated into the presentation currency. The assets and liabilities of the foreign operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the foreign operation. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at exchange rates prevailing at the reporting date. (ac) Segment reporting A business segment is a group of assets and operations engaged in providing services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing services within a particular geographic environment and is subject to risks and returns that are different from those of segments operating in other geographic environments. (ad) Rounding of amounts The Trusts are the kind referred to in Class Order 98/0100, issued by the Australian Securities & Investment Commission, relating to the rounding off of amounts in the Financial Report. Amounts in the Financial Reports have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. (ae) new accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2009 reporting period. Our assessment of the impact of these new standards and interpretations is set out below: (i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a “management approach” to reporting on financial performance. The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Trusts intend to apply the revised standard from 1 July 2009. Application of AASB 8 may result in different segments, segment results and different type of information being reported in the segment note of the financial report. However, it will not affect any of the amounts recognised in the Financial Statements. (ii) revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101. The revised AASB 101 that was issued in September 2007 is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the Statements of Changes in Equity but will not affect any of the amounts recognised in the Financial Statements. If an entity has made a prior period adjustment or a reclassification of items in the Financial Statements, it will also need to disclose a third balance sheet (Statement of Financial Position), this one being as at the beginning of the comparative period. The Trusts intend to apply the revised standard from 1 July 2009. (iii) revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]. The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and – when adopted – will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. There will be no impact on the Financial Reports of the Trusts, as the Trusts already capitalise borrowing costs relating to qualifying assets. (iv) revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127. Revised accounting standards for business combinations and Consolidated Financial Statements were issued in March 2008 and are operative for annual reporting periods beginning on or after 1 July 2009, but may apply earlier. The Trusts will apply the revised standards from 1 July 2009. However, the new rules generally apply only prospectively to transactions that occur after the application date of the standard. Their impact will therefore depend on whether the Trusts will enter into any business combinations or other transactions that affect the level of ownership held in the controlled entities in the year of initial application. The revised AASB 3 continues to apply the acquisition method to business combinations, but with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non- controlling interest in the acquiree either at fair value or at the non- controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs must be expensed. This is different to the Trusts’ current policy which is set out in note 1(t) above. For example, under the new rules: The revised AASB 127 requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in profit or loss. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 39 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 1. Summary of significant accounting policies (continued) (ae) new accounting standards and interpretations (continued) (v) AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 July 2009). In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards and AABS 127 Consolidated and Separate Financial Statements. The Trusts will apply the revised rules prospectively from 1 July 2009. After that date, all dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are paid out of pre-acquisition profits, but the investments may need to be tested for impairment as a result of the dividend payment. Under the entity’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a new intermediate parent entity is created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary rather than the subsidiary’s fair value. (vi) AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project . In July 2008, AASB 2008-5 was issued comprising amendments to various standards arising from the annual improvements project. The amendments are effective for reporting periods beginning on or after 1 January 2009. The following amendments are considered relevant to the Trusts: AASB 101 (Amendment) Presentation of Financial Statements. The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with AASB 139 Financial Instruments: Recognition and Measurement are examples of current assets and liabilities respectively. The Trusts will apply the AASB 139 (Amendment) from 1 July 2009. This clarification will enable the Trusts to distinguish between current and non-current derivative balances. n n AASB 119 (Amendment) Employee Benefits (effective from 1 January 2009). The amendments relevant to the Trusts includes: The distinction between short-term and long-term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered. Provisions, Contingent Liabilities and Contingent Assets AASB 137 requires contingent liabilities to be disclosed, not recognised. AASB 119 has been amended to be consistent. The Trusts will apply the AASB 119 (Amendment) from 1 July 2009. There will be no impact on the amounts recognised in the Financial Statements. AASB 123 (Amendment) Borrowing Costs. The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in AASB 139 Financial Instruments: Recognition and Measurement. This eliminates the inconsistency of terms between AASB 139 and AASB 123. The Trusts will apply the AASB 123 (Amendment) prospectively to the capitalisation of borrowing costs on qualifying 40 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 assets from 1 July 2009. This is not expected to have any impact on the amounts recognised in the entity’s Financial Statements. AASB 127 (Amendment) Consolidated and Separate Financial Statements (effective from 1 January 2009). Where an investment in a subsidiary that is accounted for under AASB 139 Financial Instruments: Recognition and Measurement is classified as held for sale under AASB 5 Non-current Assets Held for Sale and Discontinued Operations, AASB 139 would continue to be applied. The amendment will not have an impact on the Trusts’ operations because it is the Trusts’ policy for an investment in subsidiary to be recorded at fair value through profit or loss in the standalone accounts of each entity. AASB 128 (Amendment) Investments in Associates (and consequential amendments to AASB 132 Financial Instruments: Presentation and AASB 7 Financial Instruments: Disclosures) (effective from 1 January 2009). An investment in associate is treated as a single asset for the purposes of impairment testing and any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The Trusts will apply the AASB 128 (Amendment) to impairment tests related to investment in associates and any related impairment losses from 1 July 2009. Due to the prospective application this will not affect any of the amounts recognised at 30 June 2009. AASB 131 (Amendment) Interests in Joint Ventures (and consequential amendments to AASB 132 and AASB 7) (effective from 1 January 2009). Where an investment in a joint venture is accounted for in accordance with AASB 139, only certain, rather than all, disclosure requirements in AASB 131 need to be made in addition to disclosures required by AASB 132 and AASB 7. This amendment will not have an impact on the Trusts’ operations. AASB 136 (Amendment) Impairment of Assets. Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for a value- in-use calculation should be made. The Trusts will apply the AASB 136 (Amendment) and provide the required disclosure where applicable for impairment tests from 1 July 2009. This is not expected to have an impact on the amounts recognised in the Trusts’ Financial Statements. AASB 138 (Amendment) Intangible Assets (effective from 1 January 2009). A prepayment may only be recognised in the event that payment has been made in advance of obtaining a right of access to goods or a receipt of services. Therefore to the extent that the expenditure is incurred to provide future economic benefits to an entity, but no intangible asset or other asset is acquired or created that can be recognised, the entity recognises such expenditure as an expense when it has a right to access the goods or when it receives the services. The Trusts will apply the AASB 138 (Amendment) from 1 July 2009, however this is not expected to have an impact on the amounts recognised in the Trusts’ Financial Statements. AASB 140 (Amendment) Investment Property (and consequential amendments to AASB 116). Under this amendment, property that is under construction or development for future use as investment property falls within the scope of AASB 140. Where the fair value model is applied, such property is, therefore, measured at fair value. However, where fair value of investment property under construction is not reliably measurable, the property is measured at cost until the earlier of the date construction is completed and the date at which fair value becomes reliably measurable. The Trusts will apply the AASB 140 (Amendment) from 1 July 2009. AASB 2008-6 further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (effective 1 July 2009). The amendments to AASB 5 Discontinued Operations and AASB 1 First-Time Adoption of Australian-Equivalents to International Financial Reporting Standards are part of the IASB’s annual improvements project published in May 2008. They clarify that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosures should be made for this subsidiary if the definition of a discontinued operation is met. The Trusts will apply the amendments prospectively to all partial disposals of subsidiaries from 1 July 2009. (vii) AASB 2009-2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments (effective for annual periods beginning on or after 1 January 2009). In April 2009, the AASB published amendments to AASB 7 Financial Instruments: Disclosure to improve the information that entities report about their liquidity risk and the fair value of their financial instruments. The amendments require fair value measurement disclosures to be classified into a new three-level hierarchy and additional disclosures for items whose fair value is determined by valuation techniques rather than observable market values. The AASB also clarified and enhanced the existing requirements for the disclosure of liquidity risk of derivatives. The Trusts will apply the amendments from 1 January 2009. They will not affect any of the amounts recognised in the Financial Statements. (viii) AASB 2009-3 Amendments to Australian Accounting Standards – Embedded Derivatives (effective for annual periods ending on or after 30 June 2009). The amendments made by the AASB to Interpretation 9 and AASB 139 clarify that where a financial asset is reclassified out of the ‘at fair value through profit or loss’ category, all derivatives embedded in that asset have to be assessed and, if necessary, separately accounted for in financial statements. The Trusts will apply the amendments retrospectively for the financial half-year ending 31 December 2009. There will be no impact on the Trusts’ financial statements as at 31 December 2009 as it has not reclassified any financial assets out of the “at fair value through profit or loss” category. Note 2. Property revenue Rent and recoverable outgoings Incentive amortisation Other revenue Total property revenue Note 3. finance costs Interest paid/payable Interest (received)/paid to related parties Amount capitalised Other finance costs Net fair value loss of interest rate swaps Consolidated 2009 $’000 733,800 (47,242) 21,948 2008 $’000 682,038 (42,034) 24,827 Parent entity 2009 $’000 2008 $’000 143,019 146,070 (5,811) 2,298 (5,822) 1,942 708,506 664,831 139,506 142,190 Consolidated 2009 $’000 2008 $’000 164,053 183,164 – (35,050) 5,647 249,591 – (17,949) 3,281 44,737 Parent entity 2009 $’000 (9,224) (3,567) (8,020) 122 6,667 2008 $’000 – 10,429 (6,141) 237 19,035 23,560 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 41 Total finance costs 384,241 213,233 (14,022) The average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 6.60% (2008: 6.40%). fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 4. income tax (a) income tax expense/(benefit) Current tax Deferred tax income tax expense/(benefit) Deferred income tax expense included in income tax expense comprises: (Increase) in deferred tax assets Increase in deferred tax liabilities (b) Reconciliation of income tax expense/(benefit) to net (loss)/profit (Loss)/profit before tax Loss/(profit) not subject to income tax (note 1(g)) Prima facie tax benefit at the Australian tax rate of 30% (2008: 30%) Consolidated 2009 $’000 7,079 5,458 12,537 (298) 5,756 5,458 2008 $’000 4,256 (5,798) (1,542) (6,135) 337 (5,798) Consolidated 2009 $’000 2008 $’000 (1,575,652) 453,163 1,489,557 (492,953) (86,095) (25,829) (39,790) (11,937) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Depreciation and amortisation Impairment Share of net profits of associates Revaluation of investment properties Previously unrecognised tax losses now recognised Reversal of recognised tax loss Tax offsets from franked dividends Sundry items Over provision in prior year income tax expense/(benefit) (1,816) 22,371 – 16,125 (1,802) 3,470 – 18 38,366 – (1,640) – 700 13,445 (641) – (1,567) 25 10,322 73 12,537 (1,542) (c) withholding tax expense Withholding tax benefit of $132,773,000 (2008: $9,444,000 expense) includes $135,183,000 (2008: $7,236,000 expense) of deferred tax benefit which is recognised on differences between the tax cost base of the US assets and liabilities and their accounting carrying value at balance date. The majority of the deferred tax benefit arises due to the tax depreciation and revaluation of US investment properties as well as mark-to-market of derivatives. 42 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Note 5. Other expenses Audit and other fees Custodian fees Legal and other professional fees Registry costs and listing fees Occupancy expenses Administration expenses Other staff expenses RREEF management fees Other expenses Total other expenses Consolidated 2009 $’000 3,096 532 1,305 755 267 4,557 1,881 3,792 5,300 2008 $’000 3,232 489 1,295 511 463 1,716 1,015 2,828 4,343 21,485 15,892 Parent entity 2009 $’000 591 124 80 206 – – – – 621 1,622 2008 $’000 504 136 260 161 – – – – 152 1,213 Note 6. Audit and advisory fees During the year the auditor of the parent entity and its related practices and non-related audit firms earned the following remuneration: (a) Assurance services PwC audit and review of financial reports and other audit work under the Corporations Act 2001 PwC fees paid in relation to outgoings audit1 remuneration for audit services to PwC Fees paid to non-PwC audit firms Consolidated 2009 $ 2008 $ Parent entity 2009 $ 1,353,129 1,262,986 61,675 171,118 1,414,804 1,434,104 820,195 885,981 355,252 42,277 397,529 – 2008 $ 385,980 24,206 410,186 – Total remuneration for assurance services 2,234,999 2,320,085 397,529 410,186 (b) Taxation services Fees paid to PwC Australia Fees paid to PwC US remuneration for taxation services to PwC Fees paid to non-PwC taxation firms Total remuneration for taxation services2 Total audit and taxation fees1 (c) fees paid to Pwc for transaction services PwC assurance services in respect of capital raisings PwC taxation services PwC other transaction and advisory fees Total transaction service fees 376,970 330,022 706,992 216,113 518,070 269,105 787,175 295,648 923,105 1,082,823 3,158,104 3,402,908 575,000 195,990 262,100 1,033,090 – – – – Total audit, taxation and transaction service fees 4,191,194 3,402,908 185,900 117,359 – 185,900 50,613 236,513 634,042 211,916 74,840 57,071 343,827 977,869 – 117,359 370 117,729 527,915 – – – – 527,915 1 Fees paid in relation to outgoing audits are included in property expenses. Therefore total audit and taxation fees included in other expenses is $3,096,000. 2 These services include general compliance work, one off project work and advice with respect to the management of day to day tax affairs of the Trusts. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 43 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 7. Current assets – cash and cash equivalents Cash at bank Short-term deposits Total current assets – cash and cash equivalents Note 8. Current assets – receivables Rent receivable Less: provision for doubtful debts Total rental receivables Fee receivable Other receivables from related parties GST receivables Interest receivable Other receivables Total other receivables Total current assets – receivables Note 9. Non-current assets classified as held for sale Investment property held for sale Property, plant and equipment held for sale Total non-current assets classified as held for sale Consolidated Parent entity 2009 $’000 74,159 10,686 84,845 2008 $’000 88,516 10,698 99,214 2009 $’000 27,268 – 2008 $’000 31,004 – 27,268 31,004 Consolidated Parent entity 2009 $’000 20,815 (4,487) 16,328 8,324 – – 67 11,097 19,488 35,816 2008 $’000 12,254 (1,487) 10,767 11,907 – – 290 13,463 25,660 36,427 2009 $’000 2,232 (397) 1,835 – 13,107 1,229 – 1,581 15,917 17,752 Consolidated Parent entity 2009 $’000 43,054 55,000 98,054 2008 $’000 – – – 2009 $’000 20,800 – 20,800 2008 $’000 1,802 (377) 1,425 – 4,700 – – 2,294 6,994 8,419 2008 $’000 – – – As part of the asset sale program announced on 21 April 2009, certain assets have been classified as non-current assets held for sale and are carried at fair value less cost to sell. The investment properties classified as held for sale comprise 3-7 Bessemer Street, Blacktown, NSW ($9.1 million); 68 Hasler Road, Herdsman, WA ($11.3 million), Redwood Gardens Industrial Estate, Dingley, VIC ($20.8 million) and Nordstraße 1, Lobau ($1.9 million). The property, plant and equipment held for sale comprises of 343 George Street, Sydney ($55 million). Refer note 35 for further discussion regarding these forthcoming disposals. 44 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Note 10. Loans with related parties Non-current assets – loan with related parties Intercompany loans1 Intercompany loans with entities within DXS2 Total non-current assets – loan with related parties Current liabilities – loan with related parties Non-interest bearing loans with the Trusts3 Total current liabilities – loan with related parties Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 2008 $’000 – – – – – – – – – – 248,366 160,217 119,533 – 408,583 119,533 34,332 34,332 34,332 34,332 1 The intercompany loans represent interest-bearing loans with DEXUS Finance Pty Limited (DXF) to or from the Trusts. These loan balances eliminate on consolidation. 2 Interest bearing loan with entities within DXS. 3 Non-interest bearing loans with the Trusts were created to effect the stapling of the Trust, DIT, DOT and DXO. These loan balances eliminate on consolidation. Note 11. Derivative financial instruments Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 Current assets Interest rate swap contracts Cross currency swap contracts Forward foreign exchange contracts 122,293 138,359 79,786 3,412 42,141 10,662 Total current assets – derivative financial instruments 205,491 191,162 Current liabilities Interest rate swap contracts Cross currency swap contracts Forward foreign exchange contracts Total current liabilities – derivative financial instruments Net current derivative financial instruments 301,203 84,709 312 386,224 (180,733) 95,602 – 1,476 97,078 94,084 Refer note 30 for further discussion regarding derivative financial instruments. Note 12. Current assets – other 68,455 27,605 1,745 97,805 91,397 57,896 252 149,545 (51,740) 2008 $’000 34,470 30,567 5,022 70,059 42,539 – 890 43,429 26,630 Prepayments Total current assets – other Consolidated Parent entity 2009 $’000 13,618 13,618 2008 $’000 9,372 9,372 2009 $’000 2,731 2,731 2008 $’000 1,307 1,307 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 45 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 13. Non-current assets – investment properties (a) Properties Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 Held by parent entity Kings Park Industrial Estate, Bowmans Road, Marayong, NSW Target Distribution Centre, Lot 1, Tara Avenue, Altona North, VIC Axxess Corporate Park, 164-180 Forster Road, 11 & 21-45 Gilby Road, 307-355 Ferntree Gully Road, Mount Waverley, VIC Knoxfield Industrial Estate, 20 Henderson Road, Knoxfield, VIC 12 Frederick Street, St Leonards, NSW 40 Talavera Road, North Ryde, NSW 2 Alspec Place, Eastern Creek, NSW Redwood Gardens Industrial Estate Stages 3, 5, 6 & 7 and Lot 4, Dingley, Vic3 44 Market Street, Sydney, NSW 8 Nicholson Street, Melbourne, VIC 130 George Street, Parramatta, NSW Flinders Gate Complex, 172 Flinders Street & 189 Flinders Lane, Melbourne, VIC 383-395 Kent Street, Sydney, NSW 14 Moore Street, Canberra, ACT** Sydney CBD Floor Space1 Westfield Whitford City Shopping Centre Marmion & Whitfords Avenue, Hillarys, WA2 Westfield Whitfords Avenue Lot 6 Endeavour Road, Hillarys, WA2 34-60 Little Collins Street, Melbourne, VIC** 32-44 Flinders Street, Melbourne, VIC Flinders Gate Carpark, 172-189 Flinders Street, Melbourne, VIC 383-395 Kent Street, Sydney, NSW John Martin’s Carpark & Retail Plaza Joint Venture Total parent entity 1 This relates to heritage floor space retained following the disposal of 1 Chifley Square, Sydney. 2 The valuation reflects 50% of the independent valuation amount. 3 This asset has been transferred to non-current assets classified as held for sale (refer note 9) as its carrying amount will be recovered principally through an expected sale transaction rather than through continuing use. The title to all properties is freehold, with the exception of the properties marked ** which are leasehold. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 50% 100% 100% 100% 100% 1% May 1990 Oct 1995 Oct 1996 Aug 1996 Jul 2000 Oct 2002 Mar 2004 Dec 1994 Sep 1987 Nov 1993 May 1997 Mar 1999 Sep 1987 May 2002 Jul 2000 Oct 1984 Dec 1992 Nov 1984 Jun 1998 Mar 1999 Sep 1987 Sep 1994 46 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 81,060 25,555 158,320 31,081 25,710 33,112 23,634 21,177 181,679 70,347 81,921 16,413 106,282 38,277 215 132,180 5,506 16,845 21,773 47,741 30,745 – Jun 2008 Dec 2007 Jun 2008 Jun 2009 Jun 2009 Jun 2009 Dec 2008 Jun 2008 Jun 2008 Jun 2009 Dec 2008 Dec 2008 Jun 2008 Dec 2007 n/a Jun 2007 Jun 2007 Dec 2008 Dec 2008 Dec 2008 Jun 2008 n/a $’000 99,000 37,500 192,650 33,000 33,100 29,200 24,800 30,000 225,000 85,000 90,000 25,150 153,000 49,500 – 252,350 24,650 40,900 38,800 54,600 65,000 – (e) (a) (i) (a) (e) (f) (a) (e) (e) (i) (a) (i) (f) (a) – (f) (f) (i) (i) (i) (f) – 180,600 192,650 91,200 30,000 33,000 33,100 29,200 23,300 – 190,000 85,000 72,000 22,000 120,000 41,000 196 245,350 24,650 36,000 34,000 49,000 58,000 – 104,000 34,200 35,300 37,000 33,910 24,800 30,250 225,000 99,000 92,000 21,350 153,000 46,500 2,174 255,350 24,650 41,000 32,592 39,263 65,000 100 1,149,573 1,583,200 1,397,596 1,589,089 Note 13. Non-current assets – investment properties (a) Properties Held by parent entity Kings Park Industrial Estate, Bowmans Road, Marayong, NSW Target Distribution Centre, Lot 1, Tara Avenue, Altona North, VIC Axxess Corporate Park, 164-180 Forster Road, 11 & 21-45 Gilby Road, 307-355 Ferntree Gully Road, Mount Waverley, VIC Knoxfield Industrial Estate, 20 Henderson Road, Knoxfield, VIC 12 Frederick Street, St Leonards, NSW 40 Talavera Road, North Ryde, NSW 2 Alspec Place, Eastern Creek, NSW 44 Market Street, Sydney, NSW 8 Nicholson Street, Melbourne, VIC 130 George Street, Parramatta, NSW 383-395 Kent Street, Sydney, NSW 14 Moore Street, Canberra, ACT** Sydney CBD Floor Space1 Redwood Gardens Industrial Estate Stages 3, 5, 6 & 7 and Lot 4, Dingley, Vic3 Flinders Gate Complex, 172 Flinders Street & 189 Flinders Lane, Melbourne, VIC Westfield Whitford City Shopping Centre Marmion & Whitfords Avenue, Hillarys, WA2 Westfield Whitfords Avenue Lot 6 Endeavour Road, Hillarys, WA2 34-60 Little Collins Street, Melbourne, VIC** 32-44 Flinders Street, Melbourne, VIC Flinders Gate Carpark, 172-189 Flinders Street, Melbourne, VIC 383-395 Kent Street, Sydney, NSW John Martin’s Carpark & Retail Plaza Joint Venture Total parent entity 1 This relates to heritage floor space retained following the disposal of 1 Chifley Square, Sydney. 2 The valuation reflects 50% of the independent valuation amount. 3 This asset has been transferred to non-current assets classified as held for sale (refer note 9) as its carrying amount will be recovered principally through an expected sale transaction rather than through continuing use. The title to all properties is freehold, with the exception of the properties marked ** which are leasehold. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 50% 100% 100% 100% 100% 1% May 1990 Oct 1995 Oct 1996 Aug 1996 Jul 2000 Oct 2002 Mar 2004 Dec 1994 Sep 1987 Nov 1993 May 1997 Mar 1999 Sep 1987 May 2002 Jul 2000 Oct 1984 Dec 1992 Nov 1984 Jun 1998 Mar 1999 Sep 1987 Sep 1994 Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount $’000 independent valuer 81,060 25,555 158,320 31,081 25,710 33,112 23,634 21,177 181,679 70,347 81,921 16,413 106,282 38,277 215 132,180 5,506 16,845 21,773 47,741 30,745 – Jun 2008 Dec 2007 Jun 2008 Jun 2009 Jun 2009 Jun 2009 Dec 2008 Jun 2008 Jun 2008 Jun 2009 Dec 2008 Dec 2008 Jun 2008 Dec 2007 n/a Jun 2007 Jun 2007 Dec 2008 Dec 2008 Dec 2008 Jun 2008 n/a 99,000 37,500 192,650 33,000 33,100 29,200 24,800 30,000 225,000 85,000 90,000 25,150 153,000 49,500 – 252,350 24,650 40,900 38,800 54,600 65,000 – (e) (a) (i) (a) (e) (f) (a) (e) (e) (i) (a) (i) (f) (a) – (f) (f) (i) (i) (i) (f) – Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 91,200 30,000 104,000 34,200 180,600 192,650 33,000 33,100 29,200 23,300 – 190,000 85,000 72,000 22,000 120,000 41,000 196 245,350 24,650 36,000 34,000 49,000 58,000 – 35,300 37,000 33,910 24,800 30,250 225,000 99,000 92,000 21,350 153,000 46,500 2,174 255,350 24,650 41,000 32,592 39,263 65,000 100 1,149,573 1,583,200 1,397,596 1,589,089 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 47 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Held by other stapled entities 79-99 St Hilliers Road, Auburn, NSW 3 Brookhollow Avenue, Baulkham Hills, NSW 1 Garigal Road, Belrose, NSW 2 Minna Close, Belrose, NSW 114-120 Old Pittwater Road, Brookvale, NSW 145-151 Arthur Street, Flemington, NSW 436-484 Victoria Road, Gladesville, NSW 1 Foundation Place, Greystanes, NSW Ownership Acquisition date 100% 100% 100% 100% 100% 100% 100% 100% Sep 1997 Dec 2002 Dec 1998 Dec 1998 Sep 1997 Sep 1997 Sep 1997 Dec 2002 5-15 Rosebery Avenue & 25-55 Rothschild Avenue, Rosebery, NSW 100% Apr 1998 & Oct 2001 10-16 South Street, Rydalmere, NSW 19 Chifley Street, Smithfield, NSW Pound Road West, Dandenong, VIC 352 Macaulay Road, Kensington, VIC DEXUS Industrial Estate, Boundary Road, Laverton North, VIC 250 Forest Road, South Lara, VIC 15-23 Whicker Road, Gillman, SA 25 Donkin Street, Brisbane, QLD 52 Holbeche Road, Arndell Park, NSW 3-7 Bessemer Street, Blacktown, NSW1 30-32 Bessemer Street, Blacktown, NSW 27-29 Liberty Road, Huntingwood, NSW 154 O’Riordan Street, Mascot, NSW 11 Talavera Road, North Ryde, NSW DEXUS Industrial Estate, Egerton Street, Silverwater, NSW 239-251 Woodpark Road, Smithfield, NSW 40 Biloela Street, Villawood, NSW 114 Fairbank Road, Clayton, VIC 30 Bellrick Street, Acacia Ridge, QLD 68 Hasler Road, Herdsman, WA1 Zone Industrial Epone II, Epone 32 avenue de l’Oceanie, Villejust 21 rue du Chemin Blanc, Champlan 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Sep 1997 Dec 1998 Jan 2004 Oct 1998 Jul 2002 Dec 2002 Dec 2002 Dec 1998 Jul 1998 Jun 1997 May 1997 Jul 1998 Jun 1997 Jun 2002 May 1997 May 1997 Jul 1997 Jul 1997 Jun 1997 Jul 1998 Jul 2006 Jul 2006 Jul 2006 1 This asset has been transferred to non-current assets classified as held for sale (refer note 9) as its carrying amount will be recovered principally through an expected sale transaction rather than through continuing use. 48 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Cost including all additions $’000 independent valuation date independent valuation amount independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 40,659 36,739 23,693 36,316 34,995 25,146 28,778 39,287 74,996 37,311 12,277 73,847 7,696 37,816 20,283 19,567 11,392 11,208 12,479 8,112 11,202 103,063 136,004 37,517 – 6,889 15,878 13,291 9,743 12,893 20,535 24,320 Jun 2009 Jun 2008 Jun 2009 Jun 2009 Dec 2008 Jun 2009 Jun 2009 Jun 2008 Jun 2008 Dec 2008 Jun 2008 Dec 2007 Dec 2007 Jun 2009 Jun 2008 Dec 2008 Dec 2007 Jun 2008 Dec 2008 Dec 2008 Jun 2008 Dec 2008 Jun 2008 Dec 2007 Dec 2008 Dec 2008 Dec 2008 Jun 2008 Jun 2008 Jun 2009 Jun 2009 Jun 2009 $’000 40,000 44,800 24,000 27,600 48,000 30,750 46,000 48,000 102,700 44,000 18,350 81,550 10,000 102,400 44,750 26,800 35,600 13,500 9,850 16,300 9,650 15,000 160,000 50,000 6,200 7,000 15,600 22,700 17,500 5,990 9,598 8,851 (e) (f) (f) (f) (f) (g) (a) (a) (d) (e) (i) (g) (a) (g) (a) (e) (e) (f) (a) (e) (a) (i) (f) (i) (a) (d) (g) (e) (i) (i) (i) (i) 40,000 41,000 24,000 27,600 44,000 30,750 46,000 41,000 88,000 41,000 16,300 77,000 8,205 102,400 48,758 25,700 32,000 11,300 – 14,900 8,000 13,500 130,000 40,000 – 6,500 14,000 20,000 – 5,990 9,598 8,851 47,281 44,800 28,800 33,000 51,500 35,000 55,000 48,000 102,700 48,000 18,350 91,486 9,100 81,400 44,750 25,800 35,800 13,500 11,100 19,044 9,650 15,000 160,000 48,200 6,800 8,100 16,200 22,700 17,500 10,417 13,533 16,913 Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount $’000 independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 5-15 Rosebery Avenue & 25-55 Rothschild Avenue, Rosebery, NSW 100% Apr 1998 & Oct 2001 DEXUS Industrial Estate, Boundary Road, Laverton North, VIC Held by other stapled entities 79-99 St Hilliers Road, Auburn, NSW 3 Brookhollow Avenue, Baulkham Hills, NSW 1 Garigal Road, Belrose, NSW 2 Minna Close, Belrose, NSW 114-120 Old Pittwater Road, Brookvale, NSW 145-151 Arthur Street, Flemington, NSW 436-484 Victoria Road, Gladesville, NSW 1 Foundation Place, Greystanes, NSW 10-16 South Street, Rydalmere, NSW 19 Chifley Street, Smithfield, NSW Pound Road West, Dandenong, VIC 352 Macaulay Road, Kensington, VIC 250 Forest Road, South Lara, VIC 15-23 Whicker Road, Gillman, SA 25 Donkin Street, Brisbane, QLD 52 Holbeche Road, Arndell Park, NSW 3-7 Bessemer Street, Blacktown, NSW1 30-32 Bessemer Street, Blacktown, NSW 27-29 Liberty Road, Huntingwood, NSW 154 O’Riordan Street, Mascot, NSW 11 Talavera Road, North Ryde, NSW 40 Biloela Street, Villawood, NSW 114 Fairbank Road, Clayton, VIC 30 Bellrick Street, Acacia Ridge, QLD 68 Hasler Road, Herdsman, WA1 Zone Industrial Epone II, Epone 32 avenue de l’Oceanie, Villejust 21 rue du Chemin Blanc, Champlan DEXUS Industrial Estate, Egerton Street, Silverwater, NSW 239-251 Woodpark Road, Smithfield, NSW 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% Sep 1997 Dec 2002 Dec 1998 Dec 1998 Sep 1997 Sep 1997 Sep 1997 Dec 2002 Sep 1997 Dec 1998 Jan 2004 Oct 1998 Jul 2002 Dec 2002 Dec 2002 Dec 1998 Jul 1998 Jun 1997 May 1997 Jul 1998 Jun 1997 Jun 2002 May 1997 May 1997 Jul 1997 Jul 1997 Jun 1997 Jul 1998 Jul 2006 Jul 2006 Jul 2006 1 This asset has been transferred to non-current assets classified as held for sale (refer note 9) as its carrying amount will be recovered principally through an expected sale transaction rather than through continuing use. 40,659 36,739 23,693 36,316 34,995 25,146 28,778 39,287 74,996 37,311 12,277 73,847 7,696 103,063 37,816 20,283 19,567 11,392 11,208 12,479 8,112 11,202 136,004 37,517 – 6,889 15,878 13,291 9,743 12,893 20,535 24,320 Jun 2009 Jun 2008 Jun 2009 Jun 2009 Dec 2008 Jun 2009 Jun 2009 Jun 2008 Jun 2008 Dec 2008 Jun 2008 Dec 2007 Dec 2007 Jun 2009 Jun 2008 Dec 2008 Dec 2007 Jun 2008 Dec 2008 Dec 2008 Jun 2008 Dec 2008 Jun 2008 Dec 2007 Dec 2008 Dec 2008 Dec 2008 Jun 2008 Jun 2008 Jun 2009 Jun 2009 Jun 2009 40,000 44,800 24,000 27,600 48,000 30,750 46,000 48,000 102,700 44,000 18,350 81,550 10,000 102,400 44,750 26,800 35,600 13,500 9,850 16,300 9,650 15,000 160,000 50,000 6,200 7,000 15,600 22,700 17,500 5,990 9,598 8,851 (e) (f) (f) (f) (f) (g) (a) (a) (d) (e) (i) (g) (a) (g) (a) (e) (e) (f) (a) (e) (a) (i) (f) (i) (a) (d) (g) (e) (i) (i) (i) (i) 40,000 41,000 24,000 27,600 44,000 30,750 46,000 41,000 88,000 41,000 16,300 77,000 8,205 102,400 48,758 25,700 32,000 11,300 – 14,900 8,000 13,500 130,000 40,000 – 6,500 14,000 20,000 – 5,990 9,598 8,851 47,281 44,800 28,800 33,000 51,500 35,000 55,000 48,000 102,700 48,000 18,350 91,486 9,100 81,400 44,750 25,800 35,800 13,500 11,100 19,044 9,650 15,000 160,000 48,200 6,800 8,100 16,200 22,700 17,500 10,417 13,533 16,913 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 49 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Held by other stapled entities (continued) 19 rue de Bretagne, Saint-Quentin Fallavier RN 19 ZAC de L’Ormes Road, Servon 1 RN 19 ZAC de L’Ormes Road, Servon 2 Im Holderbusch 3, Industriestraße, Sulmstraße, Ellhofen – Weinsberg Schillerstraße 51 Ellhofen Schillerstraße 42, 42a, Bahnhofstraße 44, 50 Ellhofen Im Gewerbegebiet 18 Friedewald Im Steinbruch 4, 6, Knetzgau Carl-Leverkus-Straße 3-5, Winkelsweg 182-184, Langenfeld Schneiderstraße 82, Langenfeld Über der Dingelstelle, Langenweddingen Nordstraße 1, Lobau Former Straße 6, Unna Niedesheimer Straße 24, Worms Liverpooler-/ Kopenhagener-/ Osloer Straße, Duisburg TheodorStraße, Düsseldorf Bremer Ring, Hansestraße, Berlin-Wustermark 13201 South Orange Avenue, Orlando 8574 Boston Church Road, Milton, Ontario, Canada Governor Phillip Tower & Governor Macquarie Tower, 1 Farrer Place, Sydney, NSW1 45 Clarence Street, Sydney, NSW 309-321 Kent Street, Sydney, NSW1 1 Margaret Street, Sydney, NSW Victoria Cross 60 Miller Street, North Sydney, NSW The Zenith, 821-843 Pacific Highway, Chatswood, NSW1 Woodside Plaza, 240 St Georges Terrace, Perth, WA 30 The Bond, 30-34 Hickson Road, Sydney, NSW Southgate Complex, 3 Southgate Avenue, Southgate, VIC 201-217 Elizabeth Street, Sydney, NSW1 1 The valuation reflects 50% of the independent valuation amount. 50 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 100% 50% 100% 100% 50% 100% 100% 100% 50% Jul 2006 Jul 2006 Jul 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Jun 2007 Dec 2007 Dec 1998 Dec 1998 Dec 1998 Dec 1998 Dec 1998 Dec 1998 Jan 2001 May 2002 Aug 2000 Aug 2000 24,308 31,821 10,872 25,319 20,972 13,168 8,606 16,752 16,774 9,634 12,144 2,045 27,708 6,644 32,840 27,152 17,747 23,635 75,962 493,817 222,062 171,222 144,899 111,984 110,436 240,094 117,986 368,453 120,259 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Dec 2008 Jun 2009 Dec 2008 Dec 2007 Dec 2008 Jun 2007 Jun 2008 Dec 2008 Jun 2009 Jun 2009 $’000 9,755 15,528 5,286 21,753 16,554 9,120 5,869 13,737 12,285 8,016 7,833 1,904 22,953 6,129 25,535 20,544 13,893 30,441 55,017 680,000 250,000 199,250 200,000 124,800 130,000 446,500 170,000 340,000 140,000 (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (a) (d) (d) (a) (f) (a) (i) (f) (i) (f) 9,755 15,528 5,286 21,753 16,554 9,120 5,869 13,737 12,285 8,016 7,833 – 22,953 6,129 25,535 20,544 13,893 30,441 55,017 615,000 250,000 177,000 170,000 120,000 110,000 400,000 150,000 340,000 140,000 18,389 21,867 7,923 23,376 19,537 12,156 6,611 17,520 15,059 8,809 10,728 1,427 27,297 6,578 33,153 25,509 17,142 30,646 70,304 744,993 290,163 210,483 194,000 110,068 130,000 446,500 179,036 370,000 164,130 Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Held by other stapled entities (continued) 19 rue de Bretagne, Saint-Quentin Fallavier RN 19 ZAC de L’Ormes Road, Servon 1 RN 19 ZAC de L’Ormes Road, Servon 2 Im Holderbusch 3, Industriestraße, Sulmstraße, Ellhofen – Weinsberg Schillerstraße 51 Ellhofen Schillerstraße 42, 42a, Bahnhofstraße 44, 50 Ellhofen Im Gewerbegebiet 18 Friedewald Im Steinbruch 4, 6, Knetzgau Carl-Leverkus-Straße 3-5, Winkelsweg 182-184, Langenfeld Schneiderstraße 82, Langenfeld Über der Dingelstelle, Langenweddingen Nordstraße 1, Lobau Former Straße 6, Unna Niedesheimer Straße 24, Worms Liverpooler-/ Kopenhagener-/ Osloer Straße, Duisburg TheodorStraße, Düsseldorf Bremer Ring, Hansestraße, Berlin-Wustermark 13201 South Orange Avenue, Orlando 8574 Boston Church Road, Milton, Ontario, Canada 45 Clarence Street, Sydney, NSW 309-321 Kent Street, Sydney, NSW1 1 Margaret Street, Sydney, NSW Victoria Cross 60 Miller Street, North Sydney, NSW The Zenith, 821-843 Pacific Highway, Chatswood, NSW1 Woodside Plaza, 240 St Georges Terrace, Perth, WA 30 The Bond, 30-34 Hickson Road, Sydney, NSW Southgate Complex, 3 Southgate Avenue, Southgate, VIC 201-217 Elizabeth Street, Sydney, NSW1 1 The valuation reflects 50% of the independent valuation amount. Governor Phillip Tower & Governor Macquarie Tower, 1 Farrer Place, Sydney, NSW1 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 100% 50% 100% 100% 50% 100% 100% 100% 50% Jul 2006 Jul 2006 Jul 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Dec 2006 Jun 2007 Dec 2007 Dec 1998 Dec 1998 Dec 1998 Dec 1998 Dec 1998 Dec 1998 Jan 2001 May 2002 Aug 2000 Aug 2000 Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount $’000 independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 24,308 31,821 10,872 25,319 20,972 13,168 8,606 16,752 16,774 9,634 12,144 2,045 27,708 6,644 32,840 27,152 17,747 23,635 75,962 493,817 222,062 171,222 144,899 111,984 110,436 240,094 117,986 368,453 120,259 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Dec 2008 Jun 2009 Dec 2008 Dec 2007 Dec 2008 Jun 2007 Jun 2008 Dec 2008 Jun 2009 Jun 2009 9,755 15,528 5,286 21,753 16,554 9,120 5,869 13,737 12,285 8,016 7,833 1,904 22,953 6,129 25,535 20,544 13,893 30,441 55,017 680,000 250,000 199,250 200,000 124,800 130,000 446,500 170,000 340,000 140,000 (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (a) (d) (d) (a) (f) (a) (i) (f) (i) (f) 9,755 15,528 5,286 21,753 16,554 9,120 5,869 13,737 12,285 8,016 7,833 – 22,953 6,129 25,535 20,544 13,893 30,441 55,017 615,000 250,000 177,000 170,000 120,000 110,000 400,000 150,000 340,000 140,000 18,389 21,867 7,923 23,376 19,537 12,156 6,611 17,520 15,059 8,809 10,728 1,427 27,297 6,578 33,153 25,509 17,142 30,646 70,304 744,993 290,163 210,483 194,000 110,068 130,000 446,500 179,036 370,000 164,130 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 51 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Held by other stapled entities (continued) Garema Court, 140-180 City Walk, Civic, ACT** Australia Square Complex, 264-278 George Street, Sydney, NSW1 Lumley Centre, 88 Shortland Street, Auckland, New Zealand2 3765 Atlanta Industrial Drive, Atlanta 7100 Highlands Parkway, Atlanta Town Park Drive, Atlanta Williams Drive, Atlanta Stone Mountain, Atlanta MD Food Park, Baltimore West Nursery, Baltimore Cabot Techs, Baltimore 9112 Guildford Road, Baltimore 8155 Stayton Drive, Baltimore Patuxent Range Road, Baltimore Bristol Court, Baltimore NE Baltimore, Baltimore 1181 Portal, 1831 Portal and 6615 Tributary, Baltimore 10 Kenwood Circle, Boston Commerce Park, Charlotte 9900 Brookford Street, Charlotte Westinghouse, Charlotte Airport Exchange, Cincinnati Empire Drive, Cincinnati International Way, Cincinnati Kentucky Drive, Cincinnati Spiral Drive, Cincinnati Turfway Road, Cincinnati 124 Commerce, Cincinnati Kenwood Road, Cincinnati 1 The valuation reflects 50% of the independent valuation amount. 2 The property was externally valued at NZ$155 million at 30 June 2008. The independent valuation amount of the property as at 30 June 2009 has been translated at the period end spot rate. The title to all properties is freehold, with the exception of the properties marked ** which are leasehold 52 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 100% 50% 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% Aug 2000 Aug 2000 Sep 2005 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Jun 2005 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 44,095 211,049 91,155 – 15,300 6,848 10,445 7,601 20,569 8,308 21,769 8,502 7,282 12,477 11,345 7,786 11,016 11,156 7,892 4,266 21,668 4,569 6,573 10,846 11,749 6,294 5,614 2,454 19,844 Mar 2009 Dec 2007 Jun 2008 Jun 2008 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 $’000 50,600 312,500 124,718 4,571 13,680 8,257 8,874 6,778 23,170 8,997 30,811 9,860 9,613 14,050 12,817 8,874 13,064 10,352 8,011 4,190 22,184 3,328 6,902 12,571 18,487 5,792 4,930 2,588 21,044 (i) (e) (i) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) 48,000 267,000 104,603 – 13,680 8,257 8,874 6,778 23,170 8,997 30,811 9,860 9,613 14,050 12,817 8,874 13,064 10,352 8,011 4,190 22,184 3,328 6,902 12,571 18,487 5,792 4,930 2,588 21,044 60,000 303,000 122,928 4,571 13,401 8,934 10,285 6,233 24,102 9,038 30,646 9,557 9,038 13,609 12,466 9,038 12,258 10,596 9,246 4,571 25,660 3,532 6,960 12,258 15,791 6,233 5,298 2,597 21,816 Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Held by other stapled entities (continued) Garema Court, 140-180 City Walk, Civic, ACT** Australia Square Complex, 264-278 George Street, Sydney, NSW1 Lumley Centre, 88 Shortland Street, Auckland, New Zealand2 3765 Atlanta Industrial Drive, Atlanta 7100 Highlands Parkway, Atlanta 1181 Portal, 1831 Portal and 6615 Tributary, Baltimore Town Park Drive, Atlanta Williams Drive, Atlanta Stone Mountain, Atlanta MD Food Park, Baltimore West Nursery, Baltimore Cabot Techs, Baltimore 9112 Guildford Road, Baltimore 8155 Stayton Drive, Baltimore Patuxent Range Road, Baltimore Bristol Court, Baltimore NE Baltimore, Baltimore 10 Kenwood Circle, Boston Commerce Park, Charlotte 9900 Brookford Street, Charlotte Westinghouse, Charlotte Airport Exchange, Cincinnati Empire Drive, Cincinnati International Way, Cincinnati Kentucky Drive, Cincinnati Spiral Drive, Cincinnati Turfway Road, Cincinnati 124 Commerce, Cincinnati Kenwood Road, Cincinnati 1 The valuation reflects 50% of the independent valuation amount. 2 The property was externally valued at NZ$155 million at 30 June 2008. The independent valuation amount of the property as at 30 June 2009 has been translated at the period end spot rate. The title to all properties is freehold, with the exception of the properties marked ** which are leasehold 100% 50% 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% Aug 2000 Aug 2000 Sep 2005 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Jun 2005 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount $’000 independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 44,095 211,049 91,155 – 15,300 6,848 10,445 7,601 20,569 8,308 21,769 8,502 7,282 12,477 11,345 7,786 11,016 11,156 7,892 4,266 21,668 4,569 6,573 10,846 11,749 6,294 5,614 2,454 19,844 Mar 2009 Dec 2007 Jun 2008 Jun 2008 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 50,600 312,500 124,718 4,571 13,680 8,257 8,874 6,778 23,170 8,997 30,811 9,860 9,613 14,050 12,817 8,874 13,064 10,352 8,011 4,190 22,184 3,328 6,902 12,571 18,487 5,792 4,930 2,588 21,044 (i) (e) (i) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) 48,000 267,000 104,603 – 13,680 8,257 8,874 6,778 23,170 8,997 30,811 9,860 9,613 14,050 12,817 8,874 13,064 10,352 8,011 4,190 22,184 3,328 6,902 12,571 18,487 5,792 4,930 2,588 21,044 60,000 303,000 122,928 4,571 13,401 8,934 10,285 6,233 24,102 9,038 30,646 9,557 9,038 13,609 12,466 9,038 12,258 10,596 9,246 4,571 25,660 3,532 6,960 12,258 15,791 6,233 5,298 2,597 21,816 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 53 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Held by other stapled entities (continued) Lake Forest Drive, Cincinnati World Park, Cincinnati Equity/Westbelt/Dividend, Columbus 2700 International Street, Columbus 3800 Twin Creeks Drive, Columbus SE Columbus, Columbus Arlington, Dallas 1900 Diplomat Drive, Dallas 2055 Diplomat Drive, Dallas 1413 Bradley Lane, Dallas North Lake, Dallas 555 Airline Drive, Dallas 455 Airline Drive, Dallas Hillguard, Dallas 11011 Regency Crest Drive, Dallas East Collins, Dallas 3601 East Plano/1000 Shiloh, Dallas East Plano Parkway, Dallas 820-860 Avenue F, Dallas 10th Street, Dallas Capital Avenue Dallas CTC @ Valwood, Dallas Brackbill, Harrisburg Mechanicsburg, Harrisburg 181 Fulling Mill Road, Harrisburg Glendale, Los Angeles 14489 Industry Circle, Los Angeles 14555 Alondra/6530 Altura, Los Angeles San Fernando Valley, Los Angeles Memphis Industrial, Memphis 2950 Lexington Avenue S, Minneapolis Mounds View, Minneapolis 6105 Trenton Lane, Minneapolis 8575 Monticello Lane, Minneapolis 7401 Cahill Road, Minneapolis CTC @ Dulles, Northern Virginia 54 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 100% 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% Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 12,700 13,232 39,542 4,762 4,917 14,270 9,096 4,778 3,820 3,216 10,129 6,743 3,241 9,125 7,498 3,707 13,593 22,146 7,240 10,141 6,532 3,557 23,240 18,896 9,414 53,509 7,514 18,171 15,168 9,741 9,386 23,135 8,153 1,823 3,562 25,554 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 $’000 12,848 10,722 36,973 4,314 5,792 11,708 8,504 3,697 2,650 2,526 10,476 6,285 3,451 9,736 7,271 2,835 11,585 23,663 5,854 10,722 5,916 3,821 16,039 21,937 10,969 63,717 9,490 20,705 24,156 6,409 8,689 19,534 8,504 2,095 2,896 29,579 (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) 12,848 10,722 36,973 4,314 5,792 11,708 8,504 3,697 2,650 2,526 10,476 6,285 3,451 9,736 7,271 2,835 11,585 23,663 5,854 10,722 5,916 3,821 16,039 21,937 10,969 63,717 9,490 20,705 24,156 6,409 8,689 19,534 8,504 2,095 2,896 29,579 14,648 13,245 41,554 5,194 5,714 12,155 9,350 4,259 3,013 2,805 12,466 6,649 3,532 10,077 8,207 3,740 18,439 25,452 6,233 11,116 6,545 4,155 21,623 19,946 10,103 73,759 12,523 24,413 25,971 6,441 9,360 22,024 8,207 2,182 3,272 30,646 Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount $’000 independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 Held by other stapled entities (continued) Lake Forest Drive, Cincinnati World Park, Cincinnati Equity/Westbelt/Dividend, Columbus 2700 International Street, Columbus 3800 Twin Creeks Drive, Columbus SE Columbus, Columbus Arlington, Dallas 1900 Diplomat Drive, Dallas 2055 Diplomat Drive, Dallas 1413 Bradley Lane, Dallas North Lake, Dallas 555 Airline Drive, Dallas 455 Airline Drive, Dallas Hillguard, Dallas 11011 Regency Crest Drive, Dallas East Collins, Dallas 3601 East Plano/1000 Shiloh, Dallas East Plano Parkway, Dallas 820-860 Avenue F, Dallas 10th Street, Dallas Capital Avenue Dallas CTC @ Valwood, Dallas Brackbill, Harrisburg Mechanicsburg, Harrisburg 181 Fulling Mill Road, Harrisburg Glendale, Los Angeles 14489 Industry Circle, Los Angeles 14555 Alondra/6530 Altura, Los Angeles San Fernando Valley, Los Angeles Memphis Industrial, Memphis 2950 Lexington Avenue S, Minneapolis Mounds View, Minneapolis 6105 Trenton Lane, Minneapolis 8575 Monticello Lane, Minneapolis 7401 Cahill Road, Minneapolis CTC @ Dulles, Northern Virginia 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% Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 12,700 13,232 39,542 4,762 4,917 14,270 9,096 4,778 3,820 3,216 10,129 6,743 3,241 9,125 7,498 3,707 13,593 22,146 7,240 10,141 6,532 3,557 23,240 18,896 9,414 53,509 7,514 18,171 15,168 9,741 9,386 23,135 8,153 1,823 3,562 25,554 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 12,848 10,722 36,973 4,314 5,792 11,708 8,504 3,697 2,650 2,526 10,476 6,285 3,451 9,736 7,271 2,835 11,585 23,663 5,854 10,722 5,916 3,821 16,039 21,937 10,969 63,717 9,490 20,705 24,156 6,409 8,689 19,534 8,504 2,095 2,896 29,579 (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) 12,848 10,722 36,973 4,314 5,792 11,708 8,504 3,697 2,650 2,526 10,476 6,285 3,451 9,736 7,271 2,835 11,585 23,663 5,854 10,722 5,916 3,821 16,039 21,937 10,969 63,717 9,490 20,705 24,156 6,409 8,689 19,534 8,504 2,095 2,896 29,579 14,648 13,245 41,554 5,194 5,714 12,155 9,350 4,259 3,013 2,805 12,466 6,649 3,532 10,077 8,207 3,740 18,439 25,452 6,233 11,116 6,545 4,155 21,623 19,946 10,103 73,759 12,523 24,413 25,971 6,441 9,360 22,024 8,207 2,182 3,272 30,646 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 55 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Held by other stapled entities (continued) Alexandria, Northern Virginia Nokes Boulevard, Northern Virginia Guildford, Northern Virginia Beaumeade Telecom, Northern Virginia Orlando Central Park, Orlando 7500 Exchange Drive, Orlando 105-107 South 41st Avenue, Phoenix 1429-1439 South 40th Avenue, Phoenix 10397 West Van Buren Street, Phoenix 844 44th Avenue, Phoenix 220 South 9th Street, Phoenix 431 North 47th Avenue, Phoenix 601 South 55th Avenue, Phoenix 1000 South Priest Drive, Phoenix 1120-1150 W. Alameda Drive, Phoenix 1858 East Encanto Drive, Phoenix 3802-3922 East University Drive, Phoenix Chino, Riverside Mira Loma, Riverside Ontario, Riverside 4190 East Santa Ana Street, Riverside Rancho Cucamonga, Riverside 12000 Jersey Court, Riverside Airway Road, San Diego 5823 Newton Drive, San Diego 2210 Oak Ridge Way, San Diego Kent West, Seattle 26507 79th Avenue South, Seattle 8005 South 266th Street, Seattle West Palm Beach, South Florida Calvert/Murray’s, Northern Virginia Turnpike Distribution Center 7700 68th Avenue, Brooklyn Park 7500 West 78th Street, Bloomington 1285 & 1301 Corporate Center Drive, 1230 & 1270 Eagan Industrial Road, Eagan 850 E Devon Avenue, 1260 N Ellis Street, 371 Meyer Road Bensenville, Chicago (O’Hare) 56 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 100% 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% Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Nov 2005 Nov 2005 Nov 2005 Dec 2007 47,388 22,143 18,218 33,682 63,461 5,669 14,559 10,346 8,853 6,623 7,338 6,255 4,781 5,174 8,234 4,481 10,550 6,563 10,843 30,046 5,053 22,442 4,345 9,686 17,065 5,185 29,789 2,745 7,243 22,049 5,494 22,840 5,791 5,477 19,720 31,864 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 $’000 48,522 52,379 13,680 43,135 67,802 5,916 19,596 14,296 13,557 8,504 10,254 9,182 7,025 4,215 9,243 6,162 9,453 8,011 16,145 35,741 6,778 27,730 5,792 9,860 18,487 6,902 29,579 3,389 8,011 15,282 4,794 23,786 3,574 5,299 16,391 22,184 (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) 48,522 52,379 13,680 43,135 67,802 5,916 19,596 14,296 13,557 8,504 10,254 9,182 7,025 4,215 9,243 6,162 9,453 8,011 16,145 35,741 6,778 27,730 5,792 9,860 18,487 6,902 29,579 3,389 8,011 15,282 4,794 23,786 3,574 5,299 16,391 22,184 54,153 48,203 22,231 45,710 76,252 7,376 22,173 15,063 15,375 8,415 10,492 9,246 5,921 6,233 10,389 6,649 11,947 9,661 20,777 50,384 9,350 37,918 7,688 10,389 23,998 6,732 36,360 3,740 9,038 21,296 5,090 29,919 4,467 5,402 16,102 30,646 Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Ownership Acquisition date Cost including all additions $’000 independent valuation date independent valuation amount $’000 independent valuer Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 Held by other stapled entities (continued) Alexandria, Northern Virginia Nokes Boulevard, Northern Virginia Guildford, Northern Virginia Beaumeade Telecom, Northern Virginia Orlando Central Park, Orlando 7500 Exchange Drive, Orlando 105-107 South 41st Avenue, Phoenix 1429-1439 South 40th Avenue, Phoenix 10397 West Van Buren Street, Phoenix 844 44th Avenue, Phoenix 220 South 9th Street, Phoenix 431 North 47th Avenue, Phoenix 601 South 55th Avenue, Phoenix 1000 South Priest Drive, Phoenix 1120-1150 W. Alameda Drive, Phoenix 1858 East Encanto Drive, Phoenix 3802-3922 East University Drive, Phoenix Chino, Riverside Mira Loma, Riverside Ontario, Riverside 4190 East Santa Ana Street, Riverside Rancho Cucamonga, Riverside 12000 Jersey Court, Riverside Airway Road, San Diego 5823 Newton Drive, San Diego 2210 Oak Ridge Way, San Diego Kent West, Seattle 26507 79th Avenue South, Seattle 8005 South 266th Street, Seattle West Palm Beach, South Florida Calvert/Murray’s, Northern Virginia Turnpike Distribution Center 7700 68th Avenue, Brooklyn Park 7500 West 78th Street, Bloomington 1285 & 1301 Corporate Center Drive, 1230 & 1270 Eagan Industrial Road, Eagan 850 E Devon Avenue, 1260 N Ellis Street, 371 Meyer Road Bensenville, Chicago (O’Hare) 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% Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Sep 2004 Nov 2005 Nov 2005 Nov 2005 Dec 2007 47,388 22,143 18,218 33,682 63,461 5,669 14,559 10,346 8,853 6,623 7,338 6,255 4,781 5,174 8,234 4,481 10,550 6,563 10,843 30,046 5,053 22,442 4,345 9,686 17,065 5,185 29,789 2,745 7,243 22,049 5,494 22,840 5,791 5,477 19,720 31,864 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 48,522 52,379 13,680 43,135 67,802 5,916 19,596 14,296 13,557 8,504 10,254 9,182 7,025 4,215 9,243 6,162 9,453 8,011 16,145 35,741 6,778 27,730 5,792 9,860 18,487 6,902 29,579 3,389 8,011 15,282 4,794 23,786 3,574 5,299 16,391 22,184 (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) 48,522 52,379 13,680 43,135 67,802 5,916 19,596 14,296 13,557 8,504 10,254 9,182 7,025 4,215 9,243 6,162 9,453 8,011 16,145 35,741 6,778 27,730 5,792 9,860 18,487 6,902 29,579 3,389 8,011 15,282 4,794 23,786 3,574 5,299 16,391 22,184 54,153 48,203 22,231 45,710 76,252 7,376 22,173 15,063 15,375 8,415 10,492 9,246 5,921 6,233 10,389 6,649 11,947 9,661 20,777 50,384 9,350 37,918 7,688 10,389 23,998 6,732 36,360 3,740 9,038 21,296 5,090 29,919 4,467 5,402 16,102 30,646 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 57 $’000 134,836 16,857 14,420 17,775 11,191 5,276,044 6,425,617 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 $’000 108,578 14,788 14,787 20,950 9,860 6,133,041 7,716,241 Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 108,578 131,934 14,788 14,787 20,950 9,860 16,102 13,920 19,842 11,115 5,723,114 6,593,206 7,120,710 8,182,295 (c) (c) (c) (c) (c) fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Ownership Acquisition date Cost including all additions independent valuation date independent valuation amount independent valuer Held by other stapled entities (continued) 3722 Redlands Avenue, Perris, Riverside County 8151 & 8161 Interchange Parkway, San Antonio Cornerstone I and II, 5411 Interstate 10 East and 1228 Cornerway Boulevarde, San Antonio 302 and 402 Tayman Road, Port of San Antonio 1803 Grandstand Avenue, Alamo Downs, San Antonio Total other stapled entities investment properties 100% 100% 100% 100% 100% Jan 2008 Jul 2007 Aug 2007 Oct 2007 Aug 2007 Total investment properties (a) Colliers International (b) Landmark White (c) Cushman & Wakefield (d) Jones Lang LaSalle (e) Knight Frank Valuations (f) FPD Savills (g) M3 Property (h) Weiser Realty Advisors (USA) (i) CB Richard Ellis valuation basis The basis of valuation of investment properties is fair value, being the amounts for which the assets could be exchanged between knowledgeable willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases. Properties independently valued in the last 12 months were based on independent assessments by a member of the Australian Property Institute, the New Zealand Institute of Valuers, the Appraisal Institute in the United States of America, the French Real Estate Valuation Institution, the Society of Property Researchers, Germany or the Appraisal Institute in Canada. Key valuation assumptions The below table illustrates the key valuation assumptions used in the determination of the investment properties fair value. 2009 Weighted average capitalisation rate (%) Weighted average lease expiry by income (years) Vacancy by income (%) 2008 Weighted average capitalisation rate (%) Weighted average lease expiry by income (Years) Vacancy by income (%) Australian office Australian industrial Australian retail North America industrial Europe industrial 7.7 5.4 2.4 6.4 5.7 2.1 8.8 4.3 3.6 7.5 4.4 1.5 6.8 4.5 0.7 5.8 4.5 0.4 8.2 4.3 13.3 6.9 3.9 10.5 8.1 3.1 9.7 6.4 3.6 11.3 Together with taking active market evidence into account, ten year discounted cash flows and capitalisation valuation methods are used. In addition to the key assumptions set out in the table above, assumed portfolio downtime ranges from six to twelve months and tenant retention ranges from 50% to 75%. 58 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Note 13. Non-current assets – investment properties (continued) (a) Properties (continued) Ownership Acquisition date Cost including all additions independent valuation date independent valuation amount independent valuer Cornerstone I and II, 5411 Interstate 10 East and 1228 Cornerway Boulevarde, San Antonio Held by other stapled entities (continued) 3722 Redlands Avenue, Perris, Riverside County 8151 & 8161 Interchange Parkway, San Antonio 302 and 402 Tayman Road, Port of San Antonio 1803 Grandstand Avenue, Alamo Downs, San Antonio Total other stapled entities investment properties Total investment properties 100% 100% 100% 100% 100% Jan 2008 Jul 2007 Aug 2007 Oct 2007 Aug 2007 $’000 134,836 16,857 14,420 17,775 11,191 5,276,044 6,425,617 Jun 2009 Jun 2009 Jun 2009 Jun 2009 Jun 2009 $’000 108,578 14,788 14,787 20,950 9,860 6,133,041 7,716,241 (c) (c) (c) (c) (c) Consolidated book value 30 Jun 2009 $’000 Consolidated book value 30 Jun 2008 $’000 108,578 131,934 14,788 14,787 20,950 9,860 16,102 13,920 19,842 11,115 5,723,114 6,593,206 7,120,710 8,182,295 Disposals 3765 Atlanta Industrial Drive, Atlanta On 30 October 2008, the Atlanta Industrial property located on 3765 Atlanta Industrial Drive, Atlanta, GA was disposed of for $6.8 million (US$4.7 million). Redwood Gardens (two lots), Dingley, VIC Two strata lots within the Redwood Gardens Estate were disposed of on 29 June 2009; 358-360 Boundary Road for $2.8 million and 43 Garden Boulevard for $3.4 million. Woodpark Road, Smithfield, NSW On 26 June 2009, 239-251 Woodpark Road, Smithfield was disposed of for $5.6 million. Developments 60 Miller Street, North Sydney, NSW The development of a new 4,532 square metres annex building at 60 Miller Street, North Sydney achieved practical completion on 31 March 2009, with 100% pre-committed office area. Total construction costs are approximately $26.1 million. (b) Reconciliation Notes Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 2008 $’000 Opening balance as at 1 July 2008 8,182,295 8,585,703 1,589,089 1,987,034 Additions Acquisitions Transfer from/(to) property, plant and equipment 14 Lease incentives Amortisation of lease incentives Rent straightlining Disposals Transfer to non-current assets classified as held for sale 9 Transfer to equity accounted investment1 65,623 – 23,118 50,822 (47,242) 3,668 (20,740) (43,054) – Net (loss)/gain from fair value adjustments (1,517,564) 112,923 317,765 (2,376) 49,962 (42,034) 3,536 (737,457) – (54,478) 184,444 15,040 – (10,000) 3,487 (5,811) – (8,870) (20,800) 44,594 2,800 (44,416) 4,023 (5,822) – (429,857) – – (164,539) 30,733 Foreign exchange differences on foreign currency translation 423,784 (235,693) – – Carrying amount as at 30 June 2009 7,120,710 8,182,295 1,397,596 1,589,089 1 On 15 October 2007, the Bent Street Trust was transferred to equity accounted investments due to the sale of 31.8% to DEXUS Wholesale Property Fund (DWPF). DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 59 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 14. Non-current assets – property, plant and equipment (a) Property, plant and equipment 30 June 2009 Consolidated Parent entity Construction in progress $’000 Land and freehold buildings $’000 iT and office Total Construction in progress $’000 $’000 $’000 Land and freehold buildings $’000 iT and office Total $’000 $’000 Opening balance as at 1 July 2008 220,062 217,470 6,101 443,633 21,344 41,300 Additions 148,386 29,616 1,459 179,461 57,074 Foreign exchange differences on foreign currency translation Depreciation charge Impairment Transfer to non-current assets classified as held for sale Transfer to IT and office 24,709 – – 24,709 – (2,375) (1,801) (4,176) (111,215) (15,674) – (126,889) – – (55,000) – (55,000) (970) 970 – Transfer (to)/from investment properties (33,118) 10,000 – (23,118) – – – – – – – – – – – – 10,000 – – – – – – – – 62,644 57,074 – – – – – 10,000 Closing balance as at 30 June 2009 248,824 183,067 6,729 438,620 78,418 51,300 – 129,718 Cost 360,039 206,838 9,115 575,992 78,418 51,300 – 129,718 Accumulated depreciation and impairment – (8,097) (2,386) (10,483) Impairment (111,215) (15,674) – (126,889) – – – – – – – – Net book value as at 30 June 2009 248,824 183,067 6,729 438,620 78,418 51,300 – 129,718 30 June 2008 Consolidated Parent entity Construction in progress $’000 Land and freehold buildings $’000 iT and office Total Construction in progress $’000 $’000 $’000 Land and freehold buildings $’000 iT and office Total $’000 $’000 Opening balance as at 1 July 2007 181,919 132,102 – 314,021 – Additions 141,436 43,177 6,686 191,299 18,228 Foreign exchange differences on foreign currency translation Depreciation charge Disposal of interest (9,227) – – (9,227) – (2,211) (585) (2,796) (49,222) (2,818) (52,040) – – – – – Transfer (to)/from investment properties (44,844) 47,220 2,376 3,116 41,300 Closing balance as at 30 June 2008 220,062 217,470 6,101 443,633 21,344 41,300 – 62,644 Cost 220,062 223,192 6,686 449,940 21,344 41,300 Accumulated depreciation – (5,722) (585) (6,307) – – – – 62,644 – Net book value as at 30 June 2008 220,062 217,470 6,101 443,633 21,344 41,300 – 62,644 (b) non-current assets pledged as security Refer to note 21 for information on non-current assets pledged as security by the parent entity and its controlled entities. 60 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 – – – – – – – – – – – – 18,228 – – – 44,416 The site includes 19.3 hectare of serviced land, 24.5 hectare of unserviced land with conditional subdivision approval and 48.6 hectare of “englobo” land undergoing rezoning from rural to industrial use. Norwest Estate, Baulkham Hills, NSW On 13 March 2009, subdivision approval was received for 2.1 hectare of vacant land accommodating 23,083 square metres of lettable area. No decision has been made to proceed with the development at this stage. Southern Employment Lands, Greystanes, NSW The Greystanes site has a gross land area of 47.62 hectares acquired from Boral in 4 stages. Acquisition of Stage 2 and 3 occurred during the year with a total cost of $27.2 million. The final stage is expected to be acquired in financial year 2010. Total development costs excluding land acquisition to 30 June 2009 are $81.1 million. Summit Oaks, Valencia, California The development of this land consists of a five-story office building comprising 146,385 square feet in Santa Clarita, California. The total budgeted cost for the project is estimated to be US$44.6 million (A$55.0 million). In June 2009, a 10-year lease with a two 5-year extension options at fair market value was signed for the entire building. The tenant will occupy the building in two phases. The tenant will occupy one-third of the building in October 2009 and the other two-thirds of the building will be occupied in October 2010. Atlantic Corporate Park, Virginia The development of this land parcel consists of two four-story office buildings comprising 220,000 square feet in Virginia. The total budgeted cost for the project is US$47.6 million (A$58.7 million), including the initial cost of the land. This project shell was considered substantially completed on 31 July 2008. San Antonio, Texas The development of the San Antonio properties acquired in the initial phase consisted of eight warehouse and office buildings comprising 660,875 square feet in San Antonio, Texas. Total budgeted cost for this project is US$44.7 million (A$55.1 million). The project shell was considered substantially completed on 10 July 2008 for Tri County 5 (35,700 square feet) and Tri County 6 (57,800 square feet) properties and on 19 January 2009 for Interchange North (88,875 square feet) property. Shell construction is nearing completion for Port of San Antonio III (275,000 square feet) property with the rail installation remaining to be completed. Currently, development on Interchange 8171, Interchange 8181, Interchange 8191 and Tri County 2 properties (203,500 square feet) is on hold and it will not commence until majority of the space on the other completed buildings is leased. (c) impairment During the period, DXS carried out a review of the recoverable amount of its development properties resulting in the recognition of an impairment loss of $126.9 million that has been recognised in the Income Statements. The value in use has been determined using management forecasts in a 10 year discounted cash flow model. Forecasts were based on projected returns of the project in light of current market conditions which include estimates of operating cash flows, sales values and total project costs. Year 10 earnings have been used to determine terminal value. The cash flows have been discounted at the cost of capital for each project. The total impairment comprises $15.3 million for Wicks Road; $33.5 million for Greystanes; $0.4 million for 343 George Street, $31.7 million for Atlantic Corporate Park; $35.3 million for Summit Oaks; $6.4 million for the San Antonio development properties and $4.3 million in relation to other US developments. (d) Acquisitions and developments Development 123 Albert Street, Brisbane, QLD On 11 February 2008 demolition of the asset previously known as the Albert and Charlotte Streets Carpark commenced. Laing O’Rourke Constructions were the appointed contractor and completion is expected in December 2010. Rio Tinto have pre-committed to approximately 64% of the 38,245 square metres of commercial office area. Marketing of the balance of the office space plus the 320 square metres of retail space continues. Total development costs including land are estimated to be $350.0 million. Total amount paid to date is $119.4 million. 105 Phillip Street, Parramatta, NSW Development approval has been received to construct a 13 level office tower with approximately 20,380 square metres of floor space at 105 Phillip Street Parramatta, a site at the rear of the existing building at 130 George Street Parramatta. No decision has been made to proceed with the development at this stage. This asset has been transferred from investment properties in June 2009. 144 Wicks Road, North Ryde, NSW In November 2006, DOT (through its sub-trust Wicks Road Trust), acquired a 50% ownership interest in 144 Wicks Road, North Ryde, NSW for a consideration of $25.9 million. The DA for stage 1 (estimated 26,000 square metres net lettable area) is expected to be approved by October 2009. Demolition of the former high school building was completed by December 2008. Boundary Road, Laverton North, VIC In October 2007, DIT entered into an agreement to lease and build an office warehouse facility for Best Bar (VIC) Pty Ltd. This project was completed in August 2008. The total costs for the project is $11.9 million. In August 2006, DIT entered into an agreement to lease and build a distribution centre for Fosters Limited. Practical completion was achieved on 6 July 2007 with a development cost of $33.1 million. This property was transferred to investment properties at 31 December 2008. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 61 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 15. Non-current assets – other financial assets at fair value through profit or loss Investments are adjusted to their fair value through the Income Statements. Name of entity Principal activity Ownership interest Parent entity Controlled Entities DEXUS Industrial Trust1 Industrial property investment DEXUS Office Trust1 Commercial property investment DEXUS Operations Trust1 DEXUS Finance Pty Limited Financial services Financial services Total non-current assets – other financial assets at fair value through profit or loss 2009 % 100.0 100.0 100.0 25.0 2008 % 100.0 100.0 100.0 25.0 2009 $’000 2008 $’000 – – – – – – – – – – 1 In accordance with AASB Interpretation 1002, DDF is the deemed acquirer of DIT, DOT and DXO and therefore they are reflected in the Financial Statements as controlled entities of DDF. reconciliation Opening balance as at 1 July 2008 Acquisitions Fair value loss Disposal Closing balance as at 30 June 2009 Parent entity 2009 $’000 2008 $’000 – – – – – 294,901 96 (6,596) (288,401) – All controlled entities are wholly owned by the Trust with the exception of DEXUS Finance Pty Limited. Both the parent entity and the controlled entities were formed in Australia. Note 16. Non-current assets – investments accounted for using the equity method Investments are accounted for in the Consolidated Financial Statements using the equity method of accounting (refer note 1). Information relating to these entities is set out below. Name of entity Principal activity Ownership interest Consolidated Parent entity Held by parent entity DEXUS Industrial Properties, Inc.1 Held by controlled entities Industrial property investment 2009 % 2008 % 2009 $’000 2008 $’000 2009 $’000 2008 $’000 50.0 50.0 – – 138,276 314,989 Bent Street Trust2 Commercial property investment 34.9 68.2 84,165 111,946 – – Total non-current assets – investments accounted for using the equity method 84,165 111,946 138,276 314,989 These entities were formed in Australia with the exception of DEXUS Industrial Properties, Inc. which was formed in the United States. 1 The remaining 50% of this entity is owned by DIT. As a result, this entity is classed as controlled on a DDF consolidated basis. 2 On 15 October 2007, the Bent Street Trust was transferred from investment properties due to the sale of 31.8% to DWPF. On 5 February 2009, a further 33.3% of the Bent Street Trust was sold to CBUS Property. 62 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Movements in carrying amounts of investments accounted for using the equity method Consolidated Opening balance as at 1 July 2008 Interest acquired and additions Transfer from investment properties Share of net profits after tax Distributions/dividends received Transfer to other financial assets Disposal of investment Wind up of investment Closing balance as at 30 June 2009 results attributable to associates Operating profits before income tax Income tax expense Operating profits after income tax Less: Distributions/dividends received Undistributed income attributable to associates as at 1 July 2008 Undistributed income attributable to associates as at 30 June 2009 2009 $’000 111,946 32,916 – 31 (16) – 2008 $’000 270,155 67,070 54,478 2,467 (12,587) (18,054) (60,712) (210,768) – (40,815) 84,165 111,946 31 – 31 (16) 15 (6,367) (6,352) 3,744 (1,277) 2,467 (12,587) (10,120) 3,129 (6,367) Summary of the performance and financial position of investments accounted for using the equity method The Trusts’ share of aggregate profits, assets and liabilities of investments accounted for using the equity method are: Profits from ordinary activities after income tax expense Assets Liabilities Share of associates’ expenditure commitments Consolidated 2009 $’000 31 86,075 1,910 2008 $’000 2,467 117,024 9,296 Capital commitments 96,318 191,742 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 63 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 17. Non-current assets – deferred tax assets The balance comprises temporary differences attributable to: Investment property Derivative financial instruments Tax losses Employee provision Other Consolidated 2009 $’000 24,462 10,759 4,494 8,390 1,031 2008 $’000 – 4,103 2,552 6,849 1,378 Total non-current assets – deferred tax assets 49,136 14,882 Movements Opening balance at 1 July 2008 Acquisition Credited to the Income Statements Closing balance at 30 June 2009 Note 18. intangible assets Management rights Opening balance as at 1 July 2008 Additions Amortisation charge Impairment Closing balance as at 30 June 2009 Cost Accumulated amortisation Impairment Total management rights 14,882 – 34,254 49,136 3,921 4,811 6,150 14,882 Consolidated 2009 $’000 252,176 – (566) (41,110) 210,500 252,382 (772) (41,110) 2008 $’000 – 252,382 (206) – 252,176 252,382 (206) – 210,500 252,176 Parent entity 2009 $’000 2008 $’000 – – – – – – – – – – – – – – – – – – – – Parent entity 2009 $’000 2008 $’000 – – – – – – – – – – – – – – – – – – Management rights represent the asset management rights owned by DXH which entitle it to management fee revenue from both finite life trusts ($9,223,164) and indefinite life trusts ($201,276,836). Those rights that are deemed to have a finite useful life are measured at cost and amortised using the straight-line method over their estimated useful lives which vary from six to 22 years. impairment of management Rights During the period, DXS carried out a review of the recoverable amount of its intangible assets resulting in the recognition through the Income Statements of an impairment loss of $41.1 million in relation to management rights. The value in use has been determined using management forecasts in a 5 year discounted cash flow model. Forecasts were based on projected returns of the business in light of current market conditions. The performance in year 5 has been used as a terminal value. The cash flows have been discounted at 8.2%. 64 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Goodwill Opening balance as at 1 July 2008 Additions Impairment Closing balance as at 30 June 2009 Cost Accumulated impairment Total goodwill Total intangibles Note 19. Non-current assets – other Tenant and other bonds Other Total non-current assets – other Note 20. Current liabilities – payables Trade creditors Accruals Amount payable to other minority interest Accrued capital expenditure Prepaid income Responsible Entity fee payable GST payable Accrued interest Total current liabilities – payables Parent entity 2009 $’000 2008 $’000 Consolidated 2009 $’000 2,937 – (170) 2,767 2,998 (231) 2,767 2008 $’000 – 2,998 (61) 2,937 2,998 (61) 2,937 213,267 255,113 – – – – – – – – Consolidated Parent entity 2009 $’000 883 5,082 5,965 2008 $’000 1,240 3,549 4,789 2009 $’000 481 414 895 Consolidated Parent entity 2009 $’000 41,576 8,609 2,244 8,764 11,153 – 766 25,298 98,410 2008 $’000 51,383 8,052 4,631 13,419 7,218 – 1,554 32,139 2009 $’000 12,539 2,053 – 1,673 2,717 521 – – 118,396 19,503 – – – – – – – – 2008 $’000 566 – 566 2008 $’000 7,015 1,840 – 500 2,118 505 158 1,832 13,968 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 65 Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 2008 $’000 – 724 724 500,000 79,208 579,208 250,000 131,161 381,161 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 21. interest bearing liabilities Current Secured Commercial mortgage backed securities Bank loans Total secured Unsecured Medium-term notes Bank loans Total unsecured Notes (a) (d) (c) Deferred borrowing costs (212) (1,428) Total current liabilities – interest bearing liabilities 381,673 577,780 Non-current Secured Bank loans Total secured Unsecured US senior notes Bank loans Medium-term notes Preference shares Total unsecured Deferred borrowing costs Total non-current liabilities – interest bearing liabilities Total interest bearing liabilities (d), (e), (f) 639,897 639,897 235,725 235,725 (b), (c) (g) 492,976 798,102 206,436 114 415,541 1,328,060 455,425 96 1,497,628 2,199,122 (10,186) (5,708) 2,127,339 2,429,139 2,509,012 3,006,919 66 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 financing arrangements Type of facility US senior notes Medium-term notes Medium-term notes Consolidated 2009 $’000 2009 $’000 Notes Currency Security Maturity Date Utilised facility Limit US$ Unsecured Feb 11 to Mar 17 A$ Unsecured Feb 10 to Feb 11 US$ Unsecured Sep 10 492,976 450,000 6,436 492,976 450,000 6,436 Multi-option revolving credit facilities (b) Multi Currency Unsecured Dec 10 to Dec 13 539,290 1,330,393 Syndicated revolving credit facility (c) Multi Currency Unsecured Mar 10 to Sep 10 Bank debt – secured Bank debt – secured Bank debt – secured Total Bank guarantee utilised Unused at balance date (d) (e) (f) US$ US$ A$ Secured Oct 11 to Jan 15 Secured Sep 11 Secured Jul 11 to Dec 12 389,973 113,323 277,298 250,000 558,812 113,323 277,298 750,000 2,519,296 3,979,238 9,545 1,450,397 Each of the Trusts’ unsecured borrowing facilities are supported by the Trusts’ guarantee arrangements, and have negative pledge provisions which limit the amount and type of encumbrances that the Trusts can have over their assets and ensures that all senior unsecured debt ranks pari passu. The current debt facilities will be refinanced as at/or prior to their maturity. (a) commercial mortgage backed securities and commercial paper During the period, $500.0 million of commercial mortgage backed securities (CMBS) were repaid and associated mortgages discharged. (b) multi-option revolving credit facilities This includes 12 facilities maturing between December 2010 and December 2013 with a weighted average maturity of July 2012. The total facility limit comprises US$120.0 million (A$147.9 million) and A$1,182.5 million of the total facility limit, A$6.3 million and US$2.6 million (A$3.2 million) are utilised as bank guarantees for developments. (c) Syndicated revolving credit facility Consists of a A$300 million facility and a US$210 million (A$258.8 million) facility, maturing in March 2010 and September 2010 respectively. (d) Bank loans – secured This includes a total of US$92.0 million (A$113.4 million) of secured bank debt facilities that amortise through monthly principal and interest payments with a weighted average maturity date of January 2014. The facilities are secured by mortgages over investment properties totalling US$157.1 million (A$193.6 million) as at 30 June 2009. (e) Bank loans – secured A US$225.0 million (A$277.3 million) secured interest only bank loan maturing in September 2011. This facility is secured by mortgages over investment properties totalling US$425.5 million (A$524.4 million) as at 30 June 2009. (f) Bank loans – secured This includes three facilities of A$250 million each comprising a: (i) A$250.0 million secured bank loan maturing in October 2011. This loan is secured by mortgages over one DDF investment property and two DOT investment properties totalling A$825.0 million as at 30 June 2009. (ii) A$250.0 million secured facility maturing in July 2011. When utilised, the facility will be secured over investment properties to the value no more than A$625 million, to be finalised prior to first utilisation. The facility ceases to be available if it is not drawn by February 2010. (iii) A$250.0 million secured facility maturing in December 2012. When utilised, the facility will be secured over investment properties, to be finalised prior to first utilisation. This facility ceases to be available if it is not drawn by December 2009. (g) Preferred shares US REIT has issued US$92,550 (A$114,062) of preferred shares as part of the requirement to be classified as a Real Estate Investment Trust (REIT) under US tax legislation. These preferred shares will remain on issue until such time that the Board decides that it is no longer in DXS’s interest to qualify as a REIT. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 67 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 22. Provisions Current Provision for distribution Provision for employee benefits Total current liabilities – provisions Consolidated 2009 $’000 164,529 13,089 177,618 2008 $’000 182,388 11,926 194,314 Parent entity 2009 $’000 2008 $’000 90,389 102,300 – – 90,389 102,300 Movements in each class of provision during the financial year, other than employee benefits, are set out below: Provision for distribution Opening balance as at 1 July 2008 Additional provisions Payments and reinvestment of distributions Closing balance as at 30 June 2009 Consolidated Parent entity 2009 $’000 182,388 296,648 (314,507) 164,529 2008 $’000 164,992 355,380 (337,984) 182,388 2009 $’000 102,300 138,238 2008 $’000 68,470 219,175 (150,149) (185,345) 90,389 102,300 Provision for distribution Provision is made for distributions to be paid for the period ended 30 June 2009 payable on 28 August 2009. Non-current Provision for employee benefits Total non-current liabilities – provisions Note 23. Current liabilities – other Other borrowing costs Total current liabilities – other Consolidated Parent entity 2009 $’000 13,533 13,533 2008 $’000 9,818 9,818 2009 $’000 – – Consolidated Parent entity 2009 $’000 281 281 2008 $’000 1,799 1,799 2009 $’000 – – 2008 $’000 – – 2008 $’000 – – 68 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Note 24. Non-current liabilities – deferred tax liabilities The balance comprises temporary differences attributable to: Derivative financial instruments Goodwill Investment properties Property, plant and equipment Other Total non-current liabilities – deferred tax liabilities Movements Opening balance at 1 July 2008 Acquisition (Debited)/credited to Income Statements Closing balance at 30 June 2009 Note 25. Non-current liabilities – other Tenant bonds Other borrowing costs Other Total non-current liabilities – other Note 26. Contributed equity (a) contributed equity of equity holders of the parent entity Consolidated 2009 $’000 3,615 2,767 – 2,670 923 9,975 76,543 – (66,568) 9,975 2008 $’000 352 2,937 72,326 – 928 76,543 73,809 3,390 (656) 76,543 Parent entity 2009 $’000 2008 $’000 – – – – – – – – – – – – – – – – – – – Consolidated Parent entity 2009 $’000 8,471 242 76 8,789 2008 $’000 7,543 441 64 8,048 2009 $’000 877 – – 877 2008 $’000 959 – – 959 Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 2008 $’000 Opening balance as at 1 July 2008 1,297,831 1,151,526 1,297,831 1,151,526 Issue of units Distributions reinvested Cost of issuing equity 406,496 47,912 (11,028) – 406,496 146,305 – 47,912 (11,028) – 146,305 – Closing balance as at 30 June 2009 1,741,211 1,297,831 1,741,211 1,297,831 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 69 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 26. Contributed equity (continued) (b) contributed equity of equity holders of other stapled entities Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 2008 $’000 Opening balance as at 1 July 2008 2,280,052 2,182,833 Issue of units Distributions reinvested Cost of issuing units 655,732 52,508 (21,649) – 97,373 (154) Closing balance as at 30 June 2009 2,966,643 2,280,052 – – – – – – – – – – (c) number of securities on issue Consolidated Parent entity 2009 No. of securities 2008 No. of securities 2009 No. of units 2008 No. of units Opening balance as at 1 July 2008 3,040,019,487 2,894,600,006 3,040,019,487 2,894,600,006 Issue of units Distributions reinvested 1,560,453,600 – 1,560,453,600 – 100,368,579 145,419,481 100,368,579 145,419,481 Closing balance as at 30 June 2009 4,700,841,666 3,040,019,487 4,700,841,666 3,040,019,487 Terms and conditions Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Trust. Each stapled security entitles the holder to one vote, either in person or by proxy, at a meeting of each of the Trusts. (d) issue of securities During the current year DXS carried out two separate security issue programs issuing a total of 1,560.5 million securities to raise $1,062.2 million excluding equity raising costs of $32.7 million. This comprised of the following: December 2008 institutional placement and share purchase plan On 10 December 2008 pursuant to an institutional placement 391.7 million securities were issued at a price of 77.0 cents per security. On 6 February 2009 pursuant to a security purchase plan 16.4 million securities were issued at a price of 70.7 cents per security. May 2009 institutional placement, institutional entitlement offer and the retail entitlement offer On 6 May 2009 pursuant to an institutional placement, institutional entitlement offer and the retail entitlement offer for which valid applications were received, a total of 1025.1 million securities were issued at a price of 65.0 cents per security. On 28 May 2009 pursuant to a retail entitlement offer 127.2 million securities were issued at a price of 65.0 cents per security. (e) Distribution reinvestment plan Under the distribution reinvestment plan (DRP), stapled security holders may elect to have all or part of their distribution entitlements satisfied by the issue of new stapled securities, rather than being paid in cash. On 29 August 2008, 45,087,887 units were issued at a unit price of 128.8 cents in relation to the June 2008 distribution period. On 27 February 2009, 55,280,692 units were issued at a unit price of 76.6 cents in relation to the December 2008 distribution period. Approval of issues of Stapled Securities to an underwriter in connection with issues under a Distribution reinvestment Plan At the Extraordinary General Meeting held on 6 February 2009 by DXFM, as Responsible Entity for DDF, DIT, DOT and DXO, security holders resolved to authorise DXFM, as Responsible Entity, to issue stapled securities, each comprising a unit in each of the above mentioned trusts (Stapled Securities), to an underwriter or persons procured by an underwriter within a period of 24 months from the date of the meeting in connection with any issue of Stapled Securities under the DXS distribution reinvestment plan. Such an issue will not be counted for the purposes of the calculation of the Trusts’ annual placement limit of 15% under the ASX Listing Rules. 70 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Note 27. reserves and undistributed income (a) Reserves Foreign currency translation reserve Asset revaluation reserve Total reserves Movements: foreign currency translation reserve Opening balance as at 1 July 2008 Exchange difference arising from the translation of the financial statements of foreign operations Total movement in foreign currency translation reserve Closing balance as at 30 June 2009 Asset revaluation reserve Opening balance as at 1 July 2008 Transfer to undistributed income Revaluation increment on investment Total movement in asset revaluation reserve Closing balance as at 30 June 2009 (b) nature and purpose of reserves foreign currency translation reserve Consolidated 2009 $’000 (66,171) 42,739 (23,432) 2008 $’000 (12,357) 63,294 50,937 (12,357) 2,129 (53,814) (53,814) (66,171) 63,294 (20,555) – (20,555) 42,739 (14,486) (14,486) (12,357) – – 63,294 63,294 63,294 The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of foreign operations. Asset revaluation reserve The asset revaluation reserve is used to record the fair value adjustment arising on a business combination (refer note 34) (c) undistributed income Undistributed income as at 1 July 2008 2,000,235 1,930,282 704,791 Net profit attributable to security holders (1,459,111) 438,277 (360,986) Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 Transfer from revaluation reserves Transfer of capital reserve of minority interest Acquisition of investment Distributions provided for or paid 20,555 (10,008) – – (13,346) 402 – – – (296,648) (355,380) (138,238) (219,175) Undistributed income as at 30 June 2009 255,023 2,000,235 205,567 704,791 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 71 Parent entity 2009 $’000 2008 $’000 – – – – – – – – – – – – – – – – – – – – – – – – 2008 $’000 838,162 85,804 – – – fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 28. Other minority interests interest in Contributed equity Reserves Undistributed income Consolidated 2009 $’000 200,503 51,696 (45,427) 2008 $’000 200,019 41,352 (35,373) Total other minority interests 206,772 205,998 Parent entity 2009 $’000 2008 $’000 – – – – – – – – Note 29. Distributions paid and payable (a) Distribution to security holders 31 December (paid 27 February 2009) 30 June (payable 28 August 2009) (b) Distribution to other minority interests DEXUS Industrial Holdings, LLC (paid) DEXUS RENTS Trust (paid 16 October 2008) DEXUS RENTS Trust (paid 16 January 2009) DEXUS RENTS Trust (paid 17 April 2009) DEXUS RENTS Trust (payable 15 July 2009) Consolidated Parent entity 2009 $’000 132,119 164,529 2008 $’000 172,992 182,388 2009 $’000 47,849 90,389 296,648 355,380 138,238 2008 $’000 116,875 102,300 219,175 – 4,651 4,243 2,611 2,244 421 3,978 4,202 4,304 4,631 13,749 17,536 – – – – – – – – – – – – Total distributions 310,397 372,916 138,238 219,175 (c) Distribution rate 31 December (paid 27 February 2009) 30 June (payable 28 August 2009) Total distributions Consolidated Parent entity 2009 Cents per security 2008 Cents per security 2009 Cents per unit 2008 Cents per unit 3.80 3.50 7.30 5.90 6.00 11.90 1.38 1.92 3.30 3.99 3.37 7.36 72 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 (d) franked dividends The franked portions of the final dividends recommended after 30 June 2009 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ended 30 June 2009. Consolidated Parent entity franking credits Opening balance as at 1 July 2008 Franking credits arising during the year on payment of tax at 30% Franking debits arising from payment of interim dividend Franking credits arising on receipt of dividend Franking credits on acquisition Closing balance as at 30 June 2009 2009 $’000 14,139 7,240 – – – 21,379 2008 $’000 3,512 4,694 (5,296) 5,024 6,205 14,139 2009 $’000 2008 $’000 – – – – – – – – – – – – Note 30. financial risk Management To ensure the effective and prudent management of the Trusts’ capital and financial risks, DXS has a well established framework consisting of a Board Finance Committee and a Capital Markets Committee. The Board Finance Committee is accountable to and primarily acts as an advisory body to the DXFM Board and includes three Directors of the DXFM Board. Its responsibilities include reviewing and recommending financial risk management polices and funding strategies for approval. The Capital Markets Committee is a management committee that is accountable to both the Board Finance Committee and the Executive Committee. It convenes at least quarterly and conducts a review of financial risk management exposures including liquidity, funding strategies and hedging. It is also responsible for the development of financial risk management policies and funding strategies for recommendation to the Board Finance Committee, and the approval of treasury transactions within delegated limits and powers. Further information on the Trusts’ governance structure, including terms of reference, is available at www.dexus.com (1) capital risk management The Trust manages its capital to ensure that entities within the Trust will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Trust consists of debt (see note 21), cash and cash equivalents, and equity attributable to security holders (including hybrid securities). The capital structure is monitored and managed in consideration of a range of factors including: n the cost of capital and the financial risks associated with each class of capital; n gearing levels and other covenants; n potential impacts on net tangible assets and security holder’s equity; n potential impacts on the Trust’s credit rating; and n other market factors and circumstances. To minimise the potential impacts of foreign exchange risk on the Trust’s capital structure, the Trust’s policy is to hedge the majority of its foreign asset and liability exposures. Consequently the size of the assets and liabilities on the Balance Sheets (translated into Australian Dollars) and gearing ratios will rise and fall as exchange rates fluctuate. This policy ensures that net tangible assets are not materially affected by currency movements (refer foreign exchange risk on page 77). The Trust has a stated target gearing level of below 40% (2008: stated target gearing range was 40% to 45%). The gearing ratio calculated in accordance with our covenant requirements at 30 June 2009 was 32.0% (as detailed below). Gearing ratio Consolidated 2009 $’000 2008 $’000 Total interest bearing liabilities1 2,519,410 3,014,055 Parent entity 2009 $’000 – 2008 $’000 – Total tangible assets2 Gearing ratio 7,881,793 8,887,706 2,143,619 2,127,551 32.0% 33.9% 0.0% 0.0% 1 Total interest bearing liabilities excludes deferred borrowing costs as reported internally to management. 2 Total tangible assets comprise total tangible assets less derivatives and deferred and current tax balances as reported internally to management. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 73 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 30. financial risk Management (continued) (a) Liquidity risk Liquidity risk is the risk that the Trust will not have sufficient available funds to meet financial obligations in an orderly manner when they fall due or at an acceptable cost. The Trust identifies and manages liquidity risk across short, medium and long-term categories: n short-term liquidity management includes continuously monitoring forecast and actual cash flows; n medium-term liquidity management includes maintaining a level of committed borrowing facilities above the forecast committed debt requirements (liquidity headroom buffer). Committed debt includes future expenditure that has been approved by the Board or Investment Committee (as required within delegated limits), and may also include projects that have a very high probability of proceeding, taking into consideration risk factors such as the level of regulatory approval, tenant pre-commitments and portfolio considerations; and n long-term liquidity risk is managed through ensuring an adequate spread of maturities of borrowing facilities so that refinancing risk is not concentrated, and ensuring an adequate diversification of funding sources where possible subject to market conditions. Refinancing risk A key liquidity risk is the Trust’s ability to refinance its current debt facilities. As the Trust’s debt facilities mature, they are usually required to be refinanced by extending the facility or replacing the facility with an alternative form of capital. The refinancing of existing facilities may also result in margin price risk, whereby market conditions may result in an unfavourable change in credit margins on the refinanced facilities. The Trust’s key risk management strategy for margin price risk on refinancing is to spread the maturities of debt facilities over different time periods to reduce the volume of facilities to be refinanced and the exposure to market conditions in any one period. An analysis of the contractual maturities of the Trust’s interest bearing liabilities and derivative financial instruments are shown in the table below. The amounts in the table represent undiscounted cash flows. (1) capital risk management (continued) The Trust is rated BBB+ by Standard and Poor’s (affirmed in April 2009). The Trust considers potential impacts upon the rating when assessing the strategy and activities of the Trust and regards those impacts as an important consideration in its management of the Trust’s capital structure. DXFM is the Responsible Entity for the managed investment schemes that are stapled to form DXS. DXFM has been issued with an Australian Financial Services Licence (AFSL). The licence is subject to certain capital requirements including the requirement to hold minimum net tangible assets (of $5 million), and maintaining a minimum level of surplus liquid funds. Furthermore, the Responsible Entity maintains trigger points in accordance with the requirements of the licence. These trigger points maintain a headroom value above the AFSL requirements and the entity has in place a number of processes and procedures should a trigger point be reached. DWPL, a wholly owned entity, has also been issued with an AFSL as it is the Responsible Entity for DEXUS Wholesale Property Fund. It is subject to the same requirements. During the period, both the Responsible Entities complied with the AFSL requirements. (2) financial risk management The Trust’s activities expose it to a variety of financial risks: credit risk, market risk (including currency risk, interest rate risk and price risk), and liquidity risk. The Trust’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 Trust. Accordingly, the Trust enters into various derivative financial instruments such as interest rate swaps, cross currency interest rate swaps, and foreign exchange contracts to manage its exposure to certain risks. The Trust does not trade in derivative instruments for speculative purposes. The Trust uses different methods to measure the different types of risks to which it is exposed, including monitoring the current and forecast levels of exposure, and conducting sensitivity analyses. Risk management is implemented by a centralised treasury department (Group Treasury) whose members act under written policies that are endorsed by the Board Finance Committee and approved by the Board of Directors of the Responsible Entity. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Trust’s business units. The treasury policies approved by the Board of Directors cover overall treasury risk management, as well as policies and limits covering specific areas such as liquidity risk, interest rate risk, foreign exchange risk, credit risk and the use of derivatives and other financial instruments. In conjunction with its advisers, the Responsible Entity continually reviews the Trust’s exposures and (at least annually) updates its treasury policies and procedures. 74 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Consolidated 30 June 2009 Consolidated 30 June 2008 Expiring within one year $’000 35,816 98,410 (62,594) Expiring between one and two years $’000 Expiring between two and five years $’000 Expiring after five years Expiring within one year $’000 $’000 Expiring between one and two years $’000 Expiring between two and five years $’000 Expiring after five years $’000 – – – – – – – – – 36,457 118,396 (81,939) – – – – – – – – – Receivables Payables interest bearing liabilities Fixed interest rate liabilities 250,724 336,517 496,351 225,629 234,208 250,000 650,215 190,893 Floating interest bearing liabilities 131,161 481,214 597,699 – 345,000 251,497 776,874 315,272 Total interest bearing liabilities1 381,885 817,731 1,094,051 225,629 579,208 501,497 1,427,089 506,165 Derivative financial instruments Derivative assets Derivative liabilities 739,625 456,059 559,433 31,656 606,517 96,307 126,715 22,976 767,637 543,917 804,598 225,981 557,309 84,510 75,801 11,178 Total net derivative financial instruments2 (28,012) (87,858) (245,165) (194,325) 49,208 11,797 50,914 11,798 1 Refer to note 21 (interest bearing liabilities). Excludes deferred borrowing costs and preference shares. 2 The notional maturities on derivatives is only shown for cross currency interest rate swaps (refer foreign exchange rate risk) and forward foreign exchange contracts as they are the only instruments where a principal amount is exchanged. For interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating rate interest cash flows, future cash flows have been calculated using static interest rates prevailing at 30 June 2009. Refer to note 11 Derivative Financial Instruments for fair value of derivatives. Parent entity 30 June 2009 Parent entity 30 June 2008 Expiring within one year $’000 17,752 19,503 (1,751) – Expiring between one and two years $’000 Expiring between two and five years $’000 – – – – – – – – Expiring after five years Expiring within one year $’000 – – – $’000 8,419 13,968 (5,549) 408,583 – Expiring between one and two years $’000 Expiring between two and five years $’000 Expiring after five years $’000 – – – – – – – – – – – 119,533 400,156 282,016 295,380 18,072 520,595 16,914 38,978 4,313 385,775 282,679 311,257 43,402 478,687 20,101 40,186 4,567 Receivables Payables Loans with related parties Derivative financial instruments Derivative assets Derivative liabilities Total net derivative financial instruments1 14,381 (663) (15,877) (25,330) 41,908 (3,187) (1,208) (254) 1 The notional maturities on derivatives is only shown for cross currency interest rate swaps (refer foreign exchange rate risk) and forward foreign exchange contracts as they are the only instruments where a principal amount is exchanged For interest rate swaps, only the net interest cash flows (not the notional principal) are included. For derivative assets and liabilities that have floating rate interest cash flows, future cash flows have been calculated using static interest rates prevailing at 30 June 2009. Refer to note 11 Derivative Financial Instruments for fair value of derivatives. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 75 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 30. financial risk Management (continued) (2) financial risk management (continued) (b) Market risk Market risk is the risk that the fair value or future cash flows of the Trust’s financial instruments will fluctuate because of changes in market prices. The market risks that the Trust is exposed to are detailed further below. (i) Interest rate risk Interest rate risk is the risk that fluctuating interest rates will cause an adverse impact on interest payable (or receivable), or an adverse change on the capital value (present market value) of long-term fixed rate instruments. Interest rate risk for the Trust arises from interest bearing financial assets and liabilities that the Trust holds. Borrowings issued at variable rates expose the Trust to cash flow interest rate risk. Borrowings issued at fixed rates expose the Trust to fair value interest rate risk. The primary objective of the Trust’s risk management policy for interest rate risk is to minimise the effects of interest rate movements on the Trust’s portfolio of financial assets and liabilities and financial performance. The policy sets out the minimum and maximum hedging amounts for the Trust which is managed on a portfolio basis. Cash flow interest rate risk on borrowings is managed through the use of interest rate swaps, whereby a floating interest rate exposure is converted to a fixed interest rate exposure. Fair value interest rate risk on borrowings is also managed through the use of interest rate swaps, whereby a fixed interest exposure is converted to a floating interest rate exposure. The mix of fixed and floating rate exposures is monitored regularly to ensure that the interest rate exposure on the Trust’s cash flows is managed within the parameters defined by the Group Treasury Policy. As at 30 June 2009, 92% (2008: 85%) of the financial assets and liabilities (including DEXUS RENTS Trust) of the Trust have an effective fixed interest rate. The Trust holds borrowings in multiple currencies with both fixed and floating rate exposures and is exposed to interest rate risk related to each particular currency. The net notional amount of fixed rate debt and interest rate swaps in place in each year and the weighted average effective hedge rate per currency is set out in the next table. Consolidated 30 June 2009 June 2010 $’000 June 2011 $’000 June 2012 $’000 June 2013 $’000 June 2014 $’000 > June 2015 $’000 fixed rate debt A$ fixed rate debt1 US$ fixed rate debt1 interest rate swaps A$ hedged1 A$ hedge rate (%)2 US$ hedged1 US$ hedge rate (%)2 ¤ hedged1 ¤ hedge rate (%)2 C$ hedged1 C$ hedge rate (%)2 345,833 116,667 – – – – 475,654 372,205 271,870 246,219 219,508 119,260 429,967 674,467 643,200 499,167 485,000 230,667 5.02% 5.32% 4.97% 5.25% 5.74% 6.19% 693,700 710,533 775,867 884,033 835,700 427,622 5.91% 5.95% 6.16% 5.74% 5.64% 140,000 137,500 127,500 105,000 70,000 5.20% 5.16% 5.24% 5.54% 6.27% 4.71% 27,667 5.21% 70,000 70,000 70,000 70,000 70,000 47,833 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% Combined fixed debt and swaps (A$ equivalent) 2,535,026 2,439,264 2,230,805 2,149,345 1,981,831 1,003,773 Hedge rate (%) 5.53% 5.63% 5.68% 5.58% 5.67% 5.67% 1 Average amounts for the period. Hedged amounts above do not include potential hedges that are cancellable at the counterparty’s option. 2 The above hedge rates do not include margins payable on borrowings. 76 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Sensitivity on interest expense The table below shows the impact on unhedged net interest expense (excluding non-cash items) of a 50 basis points increase or decrease in short-term and long-term market interest rates. The sensitivity on cash flow arises due to the impact that a change in interest rates will have on the Trust’s floating rate debt and derivative cash flows. Net interest expense is only sensitive to movements in markets rates to the extent that floating rate debt is not hedged. +/– 0.50% (50 basis points) +/– 0.50% (50 basis points) +/– 0.50% (50 basis points) +/– 0.50% (50 basis points) Total A$ equivalent A$ US$ ¤ C$ Consolidated Parent entity 2009 (+/–) $’000 2008 (+/–) $’000 2009 (+/–) $’000 2008 (+/–) $’000 613 180 13 – 856 474 804 52 – 1,395 1,567 (1,146) – – 154 510 (616) – – (132) The increase or decrease in interest expense is proportional to the increase or decrease in interest rates. Sensitivity on fair value of interest rate swaps The table below shows the impact on the Income Statements for changes in the fair value of interest rate swaps for a 50 basis points increase and decrease in short-term and long-term market interest rates. The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark-to-market valuation of the interest rate swaps. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows on the instruments. Cash flows are discounted using the forward price curve of interest rates at the end of the reporting period. Although interest rate swaps are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its interest rate derivatives. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements. +/– 0.50% (50 basis points) +/– 0.50% (50 basis points) +/– 0.50% (50 basis points) +/– 0.50% (50 basis points) Total A$ equivalent (ii) Foreign exchange risk A$ US$ ¤ C$ Consolidated Parent entity 2009 (+/–) $’000 2008 (+/–) $’000 2009 (+/–) $’000 2008 (+/–) $’000 15,026 27,651 2,651 2,714 56,607 8,306 32,896 4,594 2,704 52,798 (8,665) 5,082 – – (9,010) 8,430 – – (2,402) (252) Foreign exchange risk is the risk that movements in exchange rates used to convert foreign currency revenues, expenses, assets, or liabilities to the Trust’s functional currency will have an adverse effect on the Trust. The Trust operates internationally with investments in the United States, New Zealand, France, Germany and Canada. As a result of these activities, the Trust has foreign exchange risk, arising primarily from: n translation of investments in foreign operations; n borrowings and cross currency swaps denominated in foreign currencies; and n earnings distributions and other transactions denominated in foreign currencies. The objective of the Trust’s foreign exchange risk management policy is to ensure that movements in exchange rates have minimal adverse impact on the Trust’s foreign currency assets and liabilities, and net foreign currency cash flows as outlined below. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 77 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 30. financial risk Management (continued) (2) financial risk management (continued) (b) Market risk (continued) (ii) Foreign exchange risk (continued) Foreign currency assets and liabilities Exposure to foreign exchange risk is minimised by predominantly matching the currency of the Trust’s debt with the currency of its investment to form a natural hedge against movements in exchange rates. This policy reduces the risk that movements in foreign exchange rates will have an adverse impact on security holder’s equity and net tangible assets. Where Australian dollar borrowings are used to fund the foreign currency investment, the Trust may transact cross currency swaps for the purpose of providing an alternate source of foreign currency funding whilst maintaining the natural hedge. In these instances the Trust has committed foreign currency borrowing capacity in place that can replace the foreign currency amounts that are due under the cross currency swaps. The Trust’s net foreign currency exposures for net investments in foreign operations and hedging instruments are as follows: US$ assets1 US$ net borrowings2 US$ cross currency swaps3 US$ denominated net investment % hedged ¤ assets1 ¤ net borrowings2 ¤ cross currency swaps3 ¤ denominated net investment % hedged C$ assets1 C$ net borrowings2 C$ cross currency swaps3 C$ denominated net investment % hedged NZ$ assets1 NZ$ net borrowings2 NZ$ cross currency swaps3 NZ$ denominated net investment % hedged Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 1,311,445 1,765,567 374,110 (966,477) (1,293,606) – 2008 $’000 312,905 86,926 (251,700) (420,000) (221,700) (420,000) 93,268 51,961 152,410 (20,169) 93% 138,675 (39,305) (100,000) (630) 100% 51,600 – (70,000) (18,400) 136% 97% 198,400 (200,500) – (2,100) 101% 68,300 – (70,000) (1,700) 102% 130,000 157,509 – – – – 130,000 157,509 0% 0% 59% 103% – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Total foreign net investment (A$ equivalent) 198,835 173,702 187,839 (20,953) Total % hedged 90% 93% 59% 103% 1 Assets exclude working capital and cash as reported internally to management. 2 Net borrowings is equal to interest bearing liabilities less cash. Where there are no interest bearing liabilities, cash is excluded. 3 Cross currency swap amounts comprise the foreign currency denominated leg of the cross currency swaps. 78 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Sensitivity on equity (foreign currency translation reserve) The table below shows the impact on the foreign currency translation reserve for changes in the translated value of foreign currency assets and liabilities for an increase and decrease in foreign exchange rates per currency. The increase and decrease in cents per currency has been based on the historical movements of the Australian dollar relative to each currency1. The cents per currency has been applied to the spot rates prevailing at 30 June 2009 (see footnote below). The impact on the foreign currency translation reserve arises as the translation of the Trust’s foreign currency assets and liabilities are recorded (in Australian Dollars) directly in the foreign currency translation reserve. + 15.7 cents (19%) (2008: 9.6 cents) US$ (A$ equivalent) – 15.7 cents (19%) (2008: 9.6 cents) US$ (A$ equivalent) + 6.4 cents (11%) (2008: 6.1 cents) ¤ (A$ equivalent) – 6.4 cents (11%) (2008: 6.1 cents) ¤ (A$ equivalent) + 10.0 cents (8%) (2008: 12.6 cents) NZ$ (A$ equivalent) – 10.0 cents (8%) (2008: 12.6 cents) NZ$ (A$ equivalent) + 7.3 cents (8%) (2008: 12.6 cents) C$ (A$ equivalent) – 7.3 cents (8%) (2008: 12.6 cents) C$ (A$ equivalent) Consolidated 2009 $’000 18,636 (27,577) (110) 137 7,615 (8,931) (1,417) 1,656 2008 $’000 4,895 (5,980) (313) 383 11,349 (13,869) (159) 194 Parent entity 2009 $’000 2008 $’000 – – – – – – – – – – – – – – – – 1 The sensitivity on market rates has been based on the standard deviation of the annual change in the Australian dollar exchange rate per currency since 1984 or commencement. 2 Exchange rates at 30 June 2009: A$/US$ 0.8114 (2008: 0.9626), A$/¤ 0.5751 (2008: 0.6096), A$/NZ$ 1.2428 (2008: 1.2609), A$/C$ 0.9379 (2008: 0.9715) Sensitivity on fair value of cross currency swaps The table below shows the impact on the Income Statements for changes in the fair value of cross currency swaps for a 50 basis point increase and decrease in market rates. The sensitivity on the fair value arises from the impact that changes in short-term and long-term market rates will have on the interest rate mark-to-market valuation of the cross currency swaps.1 The Trust has elected not to apply hedge accounting to its cross currency swaps. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements. +/– 0.50% (50 basis points) US$ (A$ equivalent) +/– 0.50% (50 basis points) ¤ (A$ equivalent) +/– 0.50% (50 basis points) C$ (A$ equivalent) Total A$ equivalent Consolidated Parent entity 2009 (+/–) $’000 2008 (+/–) $’000 2009 (+/–) $’000 2008 (+/–) $’000 45 2 91 138 98 – 87 184 42 – – 42 98 – – 98 1 Note the above sensitivity is reflective of how changes in interest rates will affect the valuation of the cross currency swaps. The effect of movements in foreign exchange rates on the valuation of cross currency swaps is reflected in the foreign currency translation reserve sensitivity (above). DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 79 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 30. financial risk Management (continued) (2) financial risk management (continued) (b) Market risk (continued) (ii) Foreign exchange risk (continued) Net foreign currency denominated cash flows Foreign exchange risk exists in relation to net cash flows and transactions with foreign operations that are denominated in foreign currencies. This risk is managed through the use of forward foreign exchange contracts (after taking into account the natural hedging through foreign denominated interest expense). Forward foreign exchange contracts outstanding at 30 June 2009 are as follows: 1 year or less Over 1 and less than 2 years More than 2 years 2009 2009 2009 2008 2008 2008 To pay US$ million To receive A$ million Weighted average exchange rate To pay US$ million To receive A$ million Weighted average exchange rate 7.3 5.6 9.6 10.6 7.9 13.9 0.6848 0.7084 0.6892 9.5 5.2 17.2 13.9 7.7 25.0 0.6844 0.6725 0.6868 2009 2009 2009 2008 2008 2008 To pay NZ$ million To receive A$ million Weighted average exchange rate To pay NZ$ million To receive A$ million Weighted average exchange rate 1 year or less Over 1 and less than 2 years More than 2 years 4.0 2.0 – 3.4 1.7 – 1.1780 1.1847 – 7.5 4.0 2.0 6.6 3.4 1.7 1.1311 1.1780 1.1847 Sensitivity on fair value of foreign exchange contracts The table below shows the impact on the Income Statements for changes in the fair value of forward foreign exchange contracts for an increase and decrease in market rates. The increase and decrease in cents per currency has been based on the historical movements of the Australian dollar relative to each currency1. The cents per currency has been applied to the spot rates prevailing at 30 June 2009 (see foot note below). The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark-to-market valuation of the forward foreign exchange contracts. Although forward foreign exchange contracts are transacted for the purpose of providing the Trust with an economic hedge, the Trust has elected not to apply hedge accounting to its forward foreign exchange contracts. Accordingly, gains or losses arising from changes in the fair value are reflected in the Income Statements. + 15.7 cents (19%) (2008:9.6 cents) US$ (A$ Equivalent) – 15.7 cents (19%) (2008:9.6 cents) US$ (A$ Equivalent) + 10.0 cents (8%) (2008:12.6 cents) NZ$ (A$ Equivalent) – 10.0 cents (8%) (2008:12.6 cents) NZ$ (A$ Equivalent) Consolidated Parent entity 2009 $’000 4,277 (6,329) 347 (408) 2008 $’000 2,720 (3,327) (883) (1,080) 2009 $’000 2,100 (3,108) – – 2008 $’000 1,333 (1,630) – – 1 The sensitivity on market rates has been based on the standard deviation of the annual change in the Australian dollar exchange rate per currency since 1984 or commencement. 2 Exchange rates at 30 June 2009: A$/US$ 0.8114 (2008: 0.9626), A$/¤ 0.5751 (2008: 0.6096), A$/NZ$ 1.2428 (2008: 1.2609), A$/C$ 0.9379 (2008: 0.9715). (iii) Price risk The Trust is exposed to equity securities price risk from equity securities and derivative financial instruments that the Trust transacts. Equity securities price risk is subject to a number of risks. The key risk variable is the quoted market price of equity securities which are affected by a number of factors largely out of the control of the Trust. The Trust does not use financial instruments to hedge the price risk. As at 30 June 2009, the Trust does not have a material exposure to price risk. 80 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 (c) Credit risk Credit risk is the risk of loss to the Trust in the event of non-performance by the Trust’s financial instrument counterparties. Credit risk arises from cash and cash equivalents, loans and receivables, and derivative financial instruments. The Trust and parent entity have exposure to credit risk on all financial assets. The Trust manages this risk by: n n adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty’s rating; regularly monitoring counterparty exposure within approved credit limits that are based on the lower of a S&P, Moody’s and Fitch credit rating. The exposure includes the current market value of in-the- money contracts as well as potential exposure, which is measured with reference to credit conversion factors as per APRA guidelines; n entering into ISDA Master Agreements once a financial institution counterparty is approved; n ensuring tenants, together with approved credit limits, are approved and ensuring that leases are undertaken with a large number of tenants; n for some trade receivables, obtaining collateral where necessary in the form of bank guarantees and tenant bonds; and n regularly monitoring loans and receivables on an ongoing basis. A minimum S&P rating of A– (or Moody’s or Fitch equivalent) is required to become or remain an approved counterparty. As at 30 June 2009, the lowest rating of counterparties the Trust is exposed to was A (S&P). Financial instrument transactions are spread among a number of approved financial institutions within specified credit limits to minimise the Trust’s exposure to any one counterparty. As a result, there is no significant concentration of credit risk for financial instruments. The maximum exposure to credit risk at 30 June 2009 is the carrying amount of financial assets recognised on the Balance Sheets of the Trust and parent entity. As at 30 June 2009, the Trust and the parent entity have no significant concentrations of credit risk for trade receivables. Trade receivable balances and the credit quality of trade debtors are consistently monitored on an ongoing basis. As a result, the Trust and parent entity’s exposure to bad debts is not significant. For the Consolidated Entity, the ageing analysis of loans and receivables net of provisions at 30 June 2009 is ($’000): 31,479.1 (0-30 days), 1,897.2 (31-60 days), 979.5 (61-90 days), 1,460.4 (91+ days). The ageing analysis of loans and receivables net of provisions at 30 June 2008 is ($’000): 32,014.9 (0-30 days), 1,313.1 (31-60 days), 702.6 (61-90 days), 2,456.4 (91+ days)). Amounts over 31 days are past due, however, no receivables are impaired. For the parent entity, the ageing analysis for loans and receivables net of provisions at 30 June 2009 is ($’000): 17,343.9 (0-30 days), 39.2 (31-60 days), 25.1 (61-90 days), 344.0 (91+ days). The ageing analysis of loans and receivables net of provisions for the parent entity at 30 June 2008 is ($’000): 8,124.3 (0-30 days), 123.7 (31-60 days), 37.6 (61-90 days), 133.4 (91+ days). Amounts over 31 days are past due, however, no receivables are impaired. The credit quality of financial assets that are neither past due nor impaired is consistently monitored to ensure that there are no adverse changes in credit quality. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 81 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 30. financial risk Management (continued) (2) financial risk management (continued) (d) fair value of financial instruments Fair value interest rate risk is the risk of an adverse change in the net fair (or market) value of an asset or liability due to movements in interest rates. At 30 June 2009, the carrying amounts and fair value of financial assets and liabilities are shown as follows: financial assets Cash and cash equivalents Loans and receivables (current) Derivative assets Total financial assets financial liabilities Trade payables Derivative liabilities interest bearing liabilities Multi-option facilities Multi-option syndicated facilities Secured term facilities US senior notes Commercial mortgage backed securities Medium-term notes Other Preference shares Total financial liabilities Consolidated Consolidated 2009 2009 2008 2008 Carrying amount1 $’000 fair value2 $’000 Carrying amount1 $’000 fair value2 $’000 84,845 35,816 205,491 326,152 98,410 386,224 539,290 389,973 250,000 492,975 – 456,436 390,622 114 84,845 35,816 205,491 326,152 98,410 386,224 539,290 389,973 250,000 530,175 – 482,797 411,735 114 99,214 36,457 191,162 99,214 36,457 191,162 326,833 326,833 118,396 97,078 861,521 466,539 – 415,542 500,000 455,425 314,933 96 118,396 97,078 861,521 466,539 – 438,050 494,108 445,510 318,913 96 3,004,044 3,088,718 3,229,530 3,240,211 82 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Parent entity Parent entity 2009 2009 2008 2008 Carrying amount1 $’000 fair value2 $’000 Carrying amount1 $’000 fair value2 $’000 financial assets Cash and cash equivalents Loans and receivables (current) Derivative assets Intercompany loans Total financial assets financial liabilities Trade payables Derivative liabilities Intercompany loans 27,268 17,752 97,805 408,583 551,408 19,503 149,545 – 27,268 17,752 97,805 408,583 551,408 19,503 149,545 – Total financial liabilities 169,048 169,048 31,004 8,419 70,059 119,533 229,015 13,968 43,429 34,332 91,729 31,004 8,419 70,059 119,533 229,015 13,968 43,429 34,332 91,729 1 Carrying value is equal to the value of the financial instruments on the Balance Sheets. 2 Fair value is the amount for which the financial instrument could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction, however, not recognised on the Balance Sheets. The fair value of fixed rate interest bearing liabilities have been determined by discounting the expected future cash flows by the relevant market rates. The discount rates applied range from 0.60% to 4.71% for US$ and 3.08% to 4.78% for A$. Refer note 1(w) for fair value methodology for financial assets and liabilities. Note 31. Contingent liabilities Details and estimates of maximum amounts of contingent liabilities are as follows: Bank guarantees by the Trusts in respect of variations and other financial risks associated with the development of: 60 Miller Street, North Sydney, NSW Atlantic Corporate Park, Sterling, Virginia, USA San Antonio properties Bligh Street, Sydney, NSW1 Albert Street, Brisbane, QLD Beaumeade, Ashburn, Norther Virginia, USA Total contingent liabilities Consolidated Parent entity 2009 $’000 2008 $’000 2009 $’000 2008 $’000 497 1,359 841 3,820 2,000 1,028 9,545 496 1,596 709 3,820 – – 6,621 – – – – 2,000 – 2,000 – – – – – – – 1 Bank guarantee held in relation to an equity accounted investment (refer note 16). The Trust together with DIT, DOT and DXO is also a guarantor of a A$300.0 million and US$210.0 million syndicated bank debt facility and a total of A$1,182.5 million and US$120.0 million (A$147.9 million) of bank bi-lateral facilities, a total of A$450.0 million of medium-term notes and a total of US$400.0 million (A$493.0 million) of privately placed notes, which have all been negotiated to finance the Trust and other entities within DXS. The guarantees have been given in support of debt outstanding and drawn against these facilities. The guarantees are issued in respect of the Trust and do not constitute an additional liability to those already existing in interest bearing liabilities on the Balance Sheets. The Directors of the Responsible Entity are not aware of any other contingent liabilities in relation to the Trust, other than those disclosed in the Financial Statements, which should be brought to the attention of security holders as at the date of completion of this report. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 83 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 32. Commitments (a) capital commitments The following amounts represent capital expenditure on investment properties contracted at the reporting date but not recognised as liabilities payable: Capital expenditure commitments in relation to development works: Consolidated Parent entity Not longer than one year 3 Brookhollow Avenue, Baulkham Hills, NSW 10-16 South Street, Rydalmere, NSW 5-13 Rosebery Avenue, Rosebery, NSW Egerton Street, Silverwater, NSW Boundary Road, Laverton North, VIC Pound Road West, Dandenong, VIC Governor Phillip Tower & Governor Macquarie Tower 1 Farrer Place, Sydney, NSW 309-321 Kent Street, Sydney, NSW Southgate Complex, 3 Southgate Avenue, Southgate, VIC Westinghouse Boulevard, Charlotte O’Hare, Chicago Kenwood Road, Cincinnati Turfway Road, Cincinnati SE, Columbus Capital Avenue, Dallas Regency Crest Drive, Dallas Summit Avenue, Dallas 10th Street, Dallas Avenue F, Dallas CTC @ Valwood, Dallas Glendale, Los Angeles Lexington Avenue, Minneapolis Mounds View, Minneapolis Trenton Lane, Minneapolis Braemar Ridge, Minneapolis Eagandale Business Campus, Minneapolis Alexandria, North Virginia Nokes Boulevard, Northern Virginia West Alameda Drive, Phoenix 44th Avenue, Phoenix South Priest Drive, Phoenix East University, Phoenix South 41st Avenue, Phoenix South 40th Avenue, Phoenix South 55th Avenue, Phoenix South 9th Street, Phoenix Chino, Riverside Interchange South, San Antonio 84 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 2009 $’000 421 – – – – – 3,310 – 74 – – 276 – – 193 – 100 63 – 26 – 28 12 25 – 179 – 1,232 59 – – 308 211 – 468 136 48 128 2008 $’000 227 189 200 475 6,890 1,257 39 163 203 87 347 203 141 460 31 26 – – 222 – 264 126 856 557 17 114 838 – 96 73 105 348 205 208 – – – – 2009 $’000 2008 $’000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Capital expenditure commitments in relation to development works: Consolidated Parent entity Not longer than one year 5823 Newton Drive, San Diego Kent West, Seattle 2009 $’000 338 – 2008 $’000 – 277 Southern Employment Lands, Greystanes 27,174 63,848 Australia Square Complex, 264-278 George Street, Sydney, NSW 180 Flinders Lane, Melbourne, VIC 189 Flinders Lane, Melbourne, VIC 8 Nicholson Street, Melbourne, VIC The Zenith, 821-843 Pacific Highway, Chatswood, NSW 60 Miller Street, North Sydney, NSW 144 Wicks Road, North Ryde, NSW 14 Moore Street, Canberra, ACT 44 Market Street, Sydney, NSW 123 Albert Street, Brisbane QLD Later than one year but no later than five years Governor Phillip Tower & Governor Macquarie Tower 1 Farrer Place, Sydney, NSW Southgate Complex, 3 Southgate Avenue, Southgate, VIC Southern Employment Lands, Greystanes 44 Market Street, Sydney, NSW 123 Albert Street, Brisbane, QLD Total capital commitments (b) lease payable commitments 68 752 169 – 197 195 – 441 830 122,565 160,026 1,532 1,066 – 1,160 50,657 54,415 214,441 – – 340 255 1,191 10,921 325 – – 57,293 149,417 7,664 – 27,174 – 148,767 183,605 333,023 2009 $’000 2008 $’000 – – – – 752 169 – – – – 441 830 – – – – – 340 255 – – – – – 108,110 110,302 57,293 57,888 – – – 1,160 65,112 66,272 176,574 – – – – 148,767 148,767 206,655 2008 $’000 290 1,162 6,970 8,422 Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities payable: Consolidated Parent entity Within one year Later than one year but not later than five years Later than five years Total lease payable commitments 2009 $’000 290 1,162 6,680 8,132 2008 $’000 290 1,162 6,970 8,422 2009 $’000 290 1,162 6,680 8,132 Payments made under operating leases are expensed on a straight line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property. The Trust has a commitment for ground rent payable in respect of a leasehold property included in property investments. An amount of $290,356 was paid in respect of the year ended 30 June 2009 (2008: $290,356). This commitment was reviewed in 2003 and annual lease payments were increased by a CPI factor as per the lease agreement. This commitment is next subject for review in 2012 and expires in 2037. No provisions have been recognised in respect of non-cancellable operating leases. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 85 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 32. Commitments (continued) (c) lease receivable commitments The future minimum lease payments receivable by the Trusts are: Within one year Consolidated Parent entity 2009 $’000 2008 $’000 526,791 457,594 2009 $’000 91,732 287,312 163,684 2008 $’000 90,728 291,568 187,665 Later than one year but not later than five years 1,725,306 1,447,477 Later than five years 794,480 666,413 Total lease receivable commitments 3,046,577 2,571,484 542,728 569,961 Note 33. related parties Responsible Entity DXFM is the Responsible Entity of the Trusts. DXFM is also the Responsible Entity of Abbotsford Property Trust, Abbotsford Property Investment Trust, Gordon Property Trust, Gordon Property Investment Trust, Northgate Property Trust and Northgate Property Investment Trust (collectively known as “the Syndicates”). On 29 June 2008, Abbotsford Property Trust and Abbotsford Property Investment Trust were wound up. DXH is the parent entity of DEXUS Wholesale Property Limited (DWPL), the Responsible Entity for DWPF. Responsible Entity fees Under the terms of the Trusts’ Constitutions, the Responsible Entity is entitled to receive fees in relation to the management of the Trusts. DXFM’s parent entity, DXH is entitled to be reimbursed for administration expenses incurred on behalf of the Trusts. DEXUS Property Services Pty Limited (DXPS), a wholly owned subsidiary of DXH is entitled to property management fees from the Trusts. investments On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP. Deutsche Bank and RREEF ceased to be a related party on this date. As a result amounts shown in the current period are nil and amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008. Related party transactions Prior to DXO’s acquisition of the remaining 50% interest in DXH on 21 February 2008, all related party transactions were conducted on normal commercial terms and conditions unless otherwise stated. Following the acquisition, Responsible Entity fees in relation to DXS assets moved to cost recovery as reflected in the parent entity’s transactions with DXFM. All agreements with third party funds remain unchanged. DEXuS funds management limited and its related entities On 21 February 2008 DXO purchased the remaining 50% interest in DXH (DXFM’s parent entity) from FAP. As a result DXH became a wholly owned entity of DXS with all inter company related party transactions being eliminated on consolidation in the current period. Amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008. Consolidated 2009 $ 2008 $ Parent entity 2009 $ 2008 $ – – – – – – – 21,869,324 6,358,061 9,397,076 3,693,880 – – 8,400,054 2,409,931 736,069 4,952,925 4,269,966 1,188,892 – – – 520,758 667,500 381,051 504,613 581,988 – Responsible Entity fees paid and payable Loan note interest earned from DXH Property management fees to DXPS Recovery of administration expenses paid to DXH Aggregate amounts payable to the Responsible Entity at reporting date Property management fees payable at reporting date Administration expenses payable at reporting date 86 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 DEXuS wholesale Property fund1 Responsible Entity fee income Property management fee income Recovery of administration expenses Consolidated 2009 $ 2008 $ 16,164,383 6,200,512 5,800,897 674,901 993,255 797,068 Aggregate amount receivable at reporting date 1,324,213 1,853,954 Property management fees receivable at reporting date Administration expenses receivable at reporting date 527,970 191,249 193,673 56,428 The Syndicates1 Responsible Entity fee income Property management fee income Recovery of administration expenses Aggregate amount receivable at reporting date Property management fees receivable at reporting date Administration expenses receivable at reporting date Bent Street Trust1 Property management fee income Recovery of administration expenses Aggregate amount receivable at reporting date Administration expenses receivable at reporting date Consolidated 2009 $ 1,722,262 1,830,192 196,541 609,967 91,106 58,371 2008 $ 742,994 235,080 300,100 329,230 98,885 – Consolidated 2009 $ 2008 $ 5,418,913 6,400,740 17,928 18,286 – – 3,446,957 16,685 1 Amounts in 2008 reflect transactions between 21 February 2008 and 30 June 2008. Parent entity 2009 $ 2008 $ – – – – – – – – – – – – Parent entity 2009 $ 2008 $ – – – – – – Parent entity 2009 $ – – – – – – – – – – 2008 $ – – – – DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 87 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 33. related parties (continued) RREEf On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP. RREEF (a subsidiary of Deutsche Bank and fund manager of DEXUS Industrial Properties, Inc.) ceased to be a related party on this date. As a result amounts shown in the current period are nil and amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008. Investment management fee Asset management fee Acquisition fee Property management fees Construction supervision fee Development fees Leasing commissions Performance fees Consolidated 2009 $ – – – – – – – – 2008 $ 2,174,822 229,230 3,245,899 3,081,512 622,598 1,444,421 1,772,242 64,411 Parent entity 2009 $ 2008 $ – – – – – – – – – – – – – – – – Deutsche Bank Ag Dealings with the bank include, not only transactions in its capacity as part owner of the Responsible Entity, but also in the provision of financial services. On 21 February 2008, DXO purchased the remaining 50% interest in DXH from FAP, a subsidiary of Deutsche Bank. Deutsche Bank ceased to be a related party on this date. As a result amounts shown in the current period are nil and amounts shown in the prior period reflect transactions from 1 July 2007 to 20 February 2008. Deutsche Bank AG in its capacity as a financier: Interest paid on swaps for whom the counterparty was Deutsche Bank AG Interest and financing fees on borrowings to Deutsche Bank AG Proceeds from Borrowings from Deutsche Bank AG Loan repayment to Deutsche Bank AG Interest received on swaps for whom the counterparty was Deutsche Bank AG Other transactions with Deutsche Bank AG: Interest paid and payable to FAP Purchase of DXH shares Redemption of loan notes Dividends paid Consolidated 2009 $ 2008 $ Parent entity 2009 $ 2008 $ – – – – – – – – – 9,955,000 431,000 7,033,000 10,650,755 10,315,000 814,000 79,829,700 51,936,300 5,974,000 – – – – – – – – – 226,271 – – – 870,762 – – – – 88 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 The following persons were Directors or Alternate Directors of DXFM during the whole of the financial year and up to the date of this report, unless otherwise stated: Directors C T Beare, BSc, BE (Hons), MBA, PhD, FAICD1,4,5 E A Alexander AM, BComm, FCA, FAICD, CPA1,2,6,8,9 B R Brownjohn, BComm1,2,5,6 S F Ewen OAM1,4 V P Hoog Antink, BComm, MBA, FCA, FAPI, FRICS, MAICD C B Leitner III, BA17 B E Scullin, BEc1,3,4,7,10 A J Fay, BAg.Ec (Hons), ASIA (Alternate to C B Leitner III)17 P B St George, CA(SA), MBA11,14,15,16 J C Conde AO, BSc, BE (Hons), MBA12,13,16 Independent Director 1 2 Audit Committee Member 3 Compliance Committee Member 4 Nomination and Remuneration Committee Member 5 Finance Committee Member 6 Risk Committee Member 7 Audit Committee Member from 1 July 2008 to 1 May 2009 8 Compliance Committee Member from 1 July 2008 to 1 May 2009 9 Finance Committee Member from 1 July 2008 to 1 May 2009 10 Risk Committee Member from 1 July 2008 to 1 May 2009 11 Audit Committee Member from 1 May 2009 to 30 June 2009 12 Compliance Committee Member from 1 May 2009 to 30 June 2009 13 Nomination and Remuneration Committee Member from 1 May 2009 to 30 June 2009 14 Finance Committee Member from 1 May 2009 to 30 June 2009 15 Risk Committee Member from 1 May 2009 to 30 June 2009 16 Appointed Independent Director 29 April 2009 17 Resigned 29 April 2009 No Directors held an interest in the Trust as at 30 June 2009 or at the date of this report. Other key management personnel In addition to the Directors listed above the following persons were deemed by the Board Nomination and Remuneration Committee to be key management personnel during all or part of the financial year and up to the date of this report: Name Position Victor P Hoog Antink Chief Executive Officer Qualification date of other key management personnel during the 12 months ended 30 June 2009 Tanya L Cox Patricia A Daniels John C Easy Jane LIoyd Louise J Martin Craig D Mitchell Paul G Say Mark F Turner Chief Operating Officer Head of Human Resources General Counsel Head of Retail Head of Office Chief Financial Officer Head of Corporate Development Head of Funds Management Appointed 14 July 2008 Andrew P Whiteside Head of Industrial No key management personnel or their related parties held an interest in the Trust for the years ended 30 June 2008 and 30 June 2009 or at the date of this report. There were no loans or other transactions with key management personnel or their related parties during the years ended 30 June 2008 and 30 June 2009 or at the date of this report. Compensation Short-term employee benefits Post-employment benefits Other long-term benefits 2009 $ 2008 $ 7,910,223 6,891,605 563,665 400,153 1,509,929 3,290,638 9,983,817 10,582,396 The Trust has shown the detailed remuneration disclosures in the Directors’ Report. The relevant information can be found in section 3 of the Directors’ Report on pages 12 to 24. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 89 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 34. Business Combinations (a) Summary of acquisition There were no transactions or events resulting in a business combination in the current period to 30 June 2009. During the prior period, on 21 February 2008, DXO acquired the remaining 50% interest in DXH. Prior to this acquisition DXO held a 50% share in DXH and accounted for DXH on an equity accounting basis. The acquisition of the remaining 50% has resulted in DXO effectively controlling DXH and thus this acquisition was accounted for as a ‘business combination achieved in stages’ as described in AASB 3 Business Combinations. The acquisition resulted in goodwill of $2.998 million. The acquired business contributed revenues of $37.428 million and net profit of $2.278 million to the Trusts for the period from 21 February 2008 to 30 June 2008. If the acquisition had occurred on 1 July 2007, consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been $943.197 million and $441.169 million respectively. These amounts have been calculated using the Trusts’ accounting policies. Purchase consideration (refer to (b) below): Cash paid1 Direct costs related to acquisition Total purchase price Fair value of net identifiable assets acquired (refer below) Goodwill 2008 $’000 79,830 768 80,598 77,600 2,998 1 Represents consideration for the remaining 50% of DXH shares. In addition to this $51,936,300 of loan notes were repaid resulting in total cash outlay of $131,766,000. (b) Purchase consideration Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration Less: Cash balances acquired Outflow of cash (c) Assets and liabilities acquired The assets and liabilities arising from the acquisition are as follows: Consolidated 2009 $’000 – – – 2008 $’000 79,830 12,486 67,344 Parent entity 2009 $’000 – – – 2008 $’000 – – – Property, plant and equipment Deferred tax assets Intangible assets – management rights Other non-current assets Cash and cash equivalents Receivables Other current assets Provisions Payables Interest bearing liabilities Net assets identifiable net assets acquired 90 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Acquiree’s carrying amount $’000 4,529 1,467 fair value $’000 4,529 1,467 125,796 252,382 40 12,486 22,688 877 (14,556) (13,360) (111,353) 28,614 40 12,486 22,688 877 (14,556) (13,360) (111,353) 155,200 77,600 Note 35. Events occurring after reporting date On 31 July 2009, DWPF purchased a further 1.53% of Bent Street Trust from DCT for $3.3 million. Subsequent to the reporting date, DXF issued $160.0 million of medium-term notes with a maturity of July 2014. Subsequent to the reporting date, DDF exchanged sales contracts on six separate lots at Redwood Gardens Industrial Estate, Dingley for total consideration of $6.6 million. The settlement of these property sales will occur between August and November 2009. On 8 July 2009, 68 Hasler Road, Herdsman was settled for consideration of $11.3 million. On 3 July 2009, DIT US Whirlpool Trust acquired 6241 Shook Road, Columbus, Ohio for a consideration of US$64.5 million (A$79.5 million). On 23 July 2009, 3-7 Bessemer Street, Blacktown was settled for consideration of $9.1 million. On 27 July 2009, DIT GLOG Trust disposed of Nordstrasse 102708, Löbau, Germany for a consideration of ¤1.0 million (A$1.7 million). In July 2009, DXO entered into an unconditional contract to sell 343 George Street, Sydney for $55.0 million. Settlement is to occur in October 2009. The property has been reclassified as held for sale at 30 June 2009. Since the end of the year, other than the matter discussed above, the Directors are not aware of any matter or circumstance not otherwise dealt with in their Directors’ Report or the Financial Statements that has significantly or may significantly affect the operations of the Trusts, the results of those operations, or state of the Trusts’ affairs in future financial periods. Note 36. Segment information Business segments The Trusts operate in the following segments: Retail – investment in the retail property sector; Office and car park – investment in the office and car park property sectors; and Industrial – investment in the industrial property sector. 2009 Property revenue Interest revenue Management fees Share of net profits of associates accounted for using the equity method Net foreign exchange gain Other income retail $’000 Office & Car Park $’000 industrial $’000 Eliminations/ unallocated $’000 Consolidated $’000 23,312 332,950 353,626 (1,382) 708,506 159 – 855 – 577 – 1,634 3,225 63,663 63,663 23,471 333,805 354,203 63,915 775,394 – – – 31 355 195 – 1,824 19 – – 121 31 2,179 335 Total segment revenue/income 23,471 334,386 356,046 64,036 777,939 Segment result Segment assets Segment liabilities Non-current assets classified as held for sale Investment accounted for using the equity method Additions to property, plant and equipment Net loss on sale of investment properties Net loss on sale of investment 4,962 (409,536) (772,545) (281,992) (1,459,111) 271,302 4,079,395 3,539,815 460,599 8,351,110 4,430 1,071,691 1,696,101 432,672 3,204,893 – – – – – 55,000 84,165 61,514 (541) (534) 41,150 – – – 96,150 84,165 116,487 1,460 179,461 (1,289) – (50) – (1,880) (534) Net fair value loss of investment properties (11,282) (588,649) (917,349) (284) (1,517,564) Impairment Net fair value loss of derivatives Incentive amortisation expense Other non-cash expenses – – 392 – (15,675) (111,214) (41,280) (168,169) – 30,529 (4,176) – (21,209) (21,209) 16,321 – – (566) 47,242 (4,742) DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 91 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 36. Segment information (continued) Business segments (continued) 2008 Property revenue Interest revenue Management fees retail $’000 Office & Car Park $’000 industrial $’000 Eliminations/ unallocated $’000 Consolidated $’000 35,673 323,501 306,304 (647) 664,831 136 – 1,034 4,634 – 2,330 26,760 8,134 26,760 2,893 2,467 – – Share of net profits/(losses) of associates accounted for using the equity method 3,629 (4,055) Net (loss)/gain on sale of investment properties Net fair value gain/(loss) of investment properties Net fair value loss of derivatives Net foreign exchange gain Other income 39,438 320,480 310,938 31,336 702,192 (3,114) 3,058 – – – (476) 5,887 – 2,297 268,356 (86,695) (275) 184,444 – – 4 – – 129 (3,503) (3,503) 3,442 1,120 3,442 1,253 Total segment revenue/income 39,382 588,364 230,259 32,120 890,125 Segment result Segment assets Segment liabilities Investment accounted for using the equity method Acquisition of investment properties Additions to property, plant and equipment Incentive amortisation expense Other non-cash expenses 24,013 509,152 46,933 (141,821) 438,277 281,958 4,736,899 4,096,314 233,816 9,348,987 2,295 1,249,601 2,424,004 (161,966) 3,513,934 – – – 952 – 111,946 – 2,800 314,965 22,368 29,404 2,796 162,245 11,678 – – – 111,946 317,765 6,686 191,299 – 267 42,034 3,063 geographical segments The Trusts’ investments are located in Australia, New Zealand, the United States, France, Germany and Canada. 2009 Australia $’000 New Zealand $’000 United States $’000 france Germany Canada Consolidated $’000 $’000 $’000 $’000 Rental and other property income 480,090 10,047 183,337 8,093 21,586 5,353 708,506 Segment assets 6,250,592 105,507 1,639,215 62,197 213,029 80,571 8,351,110 Additions to property, plant and equipment 151,153 – 28,308 – – – 179,461 2008 Australia $’000 New Zealand $’000 United States $’000 france Germany Canada Consolidated $’000 $’000 $’000 $’000 Rental and other property income 478,574 9,807 146,570 9,396 17,887 2,597 664,831 Segment assets 6,844,831 124,484 1,968,077 99,390 231,065 81,140 9,348,987 Acquisitions of investment properties – Additions to property, plant and equipment 120,813 – – 241,175 70,486 – – – – 76,590 317,765 – 191,299 92 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Note 37. reconciliation of net (loss)/profit to net cash inflow from operating activities (a) Reconciliation Net (loss)/profit Capitalised interest Depreciation and amortisation Impairment Net decrement/(increment) on revaluation of investment properties Share of net profits of associates accounted for using the equity method Net fair value loss of derivatives Net fair value loss of interest rate swaps Net loss/(gain) on sale of investment properties Net loss on sale of investment Net foreign exchange loss/(gain) Provision for doubtful debts Change in operating assets and liabilities Decrease/(increase) in receivables Decrease/(increase) in prepaid expenses Decrease/(increase) in other non-current assets – investments Decrease/(increase) in other current assets Decrease/(increase) in other non-current assets (Decrease)/increase in payables (Decrease)/increase in current liabilities (Decrease)/increase in other non-current liabilities (Decrease)/increase in deferred tax liabilities Net cash inflow from operating activities Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 (1,455,416) 445,261 (360,986) (35,050) 4,743 168,168 (17,949) 3,002 61 (8,020) – – 2008 $’000 85,804 (6,141) – – 1,517,564 (184,444) 341,251 65,784 (31) 21,209 222,468 1,880 534 (2,179) 3,000 (2,389) (4,246) 35,794 (5,631) (1,176) (12,944) (355) 4,456 (100,822) 359,577 (2,467) 3,503 69,561 (2,297) – 30,597 (290) 460 (3,554) 78,375 23,758 (85,989) 1,282 (21,785) 31,624 5,736 – 5,753 9,138 1,330 – 153,701 20 (9,353) (1,424) 4,509 9,650 (329) 4,362 – (82) – – 2,203 31,869 5,743 – (9,515) – 11,078 1,132 (45,562) – 237 2,544 (3,569) 8,775 – 374,445 149,520 150,382 (b) capital expenditure on investment properties Payments for capital expenditure on investment properties includes $86.9 million (2008: $90.8 million) of maintenance and incentive capital expenditure. DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 93 fiNANCiAL rEPOrTS NOTES TO THE fiNANCiAL STATEMENTS fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED Note 38. Non-cash financing and investing activities Distributions reinvested 26 100,420 243,678 2009 $’000 2008 $’000 2009 $’000 47,912 2008 $’000 146,305 Note Consolidated Parent entity Note 39. Earnings per unit Earnings per unit are determined by dividing the net profit attributable to equity holders by the weighted average number of ordinary units outstanding during the year. The weighted average number of units has been adjusted for the bonus elements in units issued during the year and comparatives have been appropriately restated. (a) Basic earnings per unit on (loss)/profit attributable to equity holders of the parent entity Consolidated Parent entity 2009 cents (8.11) 2008 restated cents 2.64 2009 cents (9.74) (b) Diluted earnings per unit on (loss)/profit attributable to equity holders of the parent entity Consolidated Parent entity 2009 cents (8.11) 2008 restated cents 2.64 2009 cents (9.74) 2008 restated cents 2.72 2008 restated cents 2.72 (c) Basic earnings per unit on (loss)/profit attributable to stapled security holders Consolidated 2009 cents (39.38) 2008 restated cents 13.88 (d) Diluted earnings per unit on (loss)/profit attributable to stapled security holders Consolidated 2009 cents (39.38) 2008 restated cents 13.88 94 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 (e) Reconciliation of earnings used in calculating earnings per unit Consolidated 2009 $’000 2008 $’000 Parent entity 2009 $’000 Net (loss)/profit (1,455,416) 445,261 (360,986) Net loss/(profit) attributable to equity holders of other stapled entities (minority interests) 1,158,625 (354,807) Net profit attributable to other minority interests (3,695) (6,984) – – 2008 $’000 85,804 – – Net (loss)/profit attributable to the unitholders of the Trust used in calculating basic and diluted earnings per unit (300,486) 83,470 (360,986) 85,804 (f) weighted average number of units used as a denominator Weighted average number of units outstanding used in calculation of basic and diluted earnings per unit 3,705,637,381 3,156,757,941 3,705,637,381 3,156,757,941 Consolidated 2009 securities 2008 restated securities Parent entity 2009 units 2008 restated units DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 95 fiNANCiAL rEPOrTS DirECTOrS’ DECLArATiON fOr THE YEAr ENDED 30 JUNE 2009 The Directors of DEXUS Funds Management Limited as Responsible Entity of DEXUS Diversified Trust (the Trust) declare that the Financial Statements and notes set out on pages 29 to 95: (i) comply with applicable Australian Equivalents to International Financial Reporting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) give a true and fair view of the consolidated entity’s financial position as at 30 June 2009 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date. In the Directors’ opinion: (a) the Financial Statements and notes are in accordance with the Corporations Act 2001; (b) there are reasonable grounds to believe that the Trust and its consolidated entities will be able to pay their debts as and when they become due and payable; and (c) the Trust has operated in accordance with the provisions of the Constitution dated 15 August 1984 (as amended) during the year ended 30 June 2009. The Directors have been given the declarations by the Chief Executive Officer 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. christopher T Beare Chair 17 August 2009 96 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 fiNANCiAL rEPOrTS iNDEPENDENT AUDiTOr’S rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 97 fiNANCiAL rEPOrTS iNDEPENDENT AUDiTOr’S rEPOrT fOr THE YEAr ENDED 30 JUNE 2009 CONTiNUED 98 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 Top 20 security holders as at 25 August 2009 rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 HSBC Custody Nominees (Australia) Limited National Nominees Limited J P Morgan Nominees Australia Limited Citicorp Nominees Pty Limited Cogent Nominees Pty Limited Citicorp Nominees Pty Limited RBC Dexia Investor Services Australia Nominees Pty Limited AMP Life Limited ANZ Nominees Limited Queensland Investment Corporation Cogent Nominees Pty Limited Questor Financial Services Limited Citicorp Nominees Pty Limited Bond Street Custodians Limited HSBC Custody Nominees (Australia) Limited – A/C 3 UBS Nominees Pty Ltd Bond Street Custodians Limited Citicorp Nominees Pty Limited Australian Reward Investment Alliance RBC Dexia Investor Services Australia Nominees Pty Ltd Total top 20 Balance of register Total securities ADDiTiONAL iNfOrMATiON Current balance % of issued capital 1,348,664,333 764,009,308 701,581,886 357,688,834 149,477,113 105,477,329 96,724,196 92,033,983 89,682,142 58,591,729 49,400,670 29,945,435 29,795,469 28,989,398 28,966,182 26,815,245 25,118,455 17,381,769 15,571,470 15,491,202 28.69 16.25 14.92 7.61 3.18 2.24 2.06 1.96 1.91 1.25 1.05 0.64 0.63 0.62 0.62 0.57 0.53 0.37 0.33 0.33 4,031,406,148 669,435,518 4,700,841,666 85.76 14.24 100.00 Substantial holders as at 9 September 2009 The names of substantial holders, who at 9 September 2009, have notified the Responsible Entity in accordance with Section 671B of the Corporations Act 2001 are: Date Name 22 Jun 09 Vangard Investments Australia Ltd 21 Aug 09 Commonwealth Bank of Australia 24 Dec 08 ING and related entities 06 Oct 08 Barclays Global Investors and related entities Number of stapled securities 235,372,669 365,689,410 300,730,999 211,785,846 % voting 5.01 7.78 8.72 7.20 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 99 ADDiTiONAL iNfOrMATiON CONTiNUED Class of securities DEXUS Property Group has one class of stapled security trading on the ASX with 23,050 security holders holding 4,700,841,666 stapled securities at 25 August 2009. Spread of securities at 25 August 2009 range 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 Securities % of issued Capital No of Holders 4,346,489,513 92.46 71,628,153 228,492,635 40,453,227 13,197,270 580,868 1.52 4.86 0.86 0.28 0.01 4,700,841,666 100.00 465 1,045 10,550 5,289 4,177 1,524 23,050 At 25 August 2009, the number of security investors holding less then a marketable parcel of 714 securities ($500) is 1,220 and they hold 306,382 securities. voting rights At meetings of the security holders of DEXUS Diversified Trust, DEXUS Industrial Trust, DEXUS Office Trust and DEXUS Operations Trust, being the Trusts that comprise DEXUS Property Group, on a show of hands, each security holder of each Trust has one vote. On a poll, each security holder of each Trust has one vote for each dollar of the value of the total interests they have in the Trust. Securities restricted or subject to voluntary escrow There are no stapled securities that are restricted or subject to voluntary escrow. On-market buy-back DEXUS Property Group has no on-market buy-back currently in place. 100 DEXUS PrOPErTY GrOUP ANNUAL REPORT 2009 DEXUS Diversified Trust ARSN 089 324 541 DEXUS Industrial Trust ARSN 090 879 137 DEXUS Office Trust ARSN 090 768 531 DEXUS Operations Trust ARSN 110 521 223 Responsible Entity DEXUS Funds Management Limited ABN 24 060 920 783 Registered office of Responsible Entity Level 9, 343 George Street Sydney NSW 2000 PO Box R1822 Royal Exchange Sydney NSW 1225 Phone: +61 2 9017 1100 Fax: +61 2 9017 1101 Email: ir@dexus.com Website: www.dexus.com Directors of the Responsible Entity Christopher T Beare, Chair Elizabeth A Alexander AM Barry R Brownjohn John C Conde AO Stewart F Ewen OAM Victor P Hoog Antink Brian E Scullin Peter B St George Secretaries of the Responsible Entity Tanya L Cox John C Easy Auditors PricewaterhouseCoopers Chartered Accountants 201 Sussex Street Sydney NSW 2000 DirECTOrY investor enquiries Infoline: 1800 819 675 or +61 2 8280 7126 Investor Relations: +61 2 9017 1330 Email: ir@dexus.com Website: www.dexus.com Security registry Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Locked Bag A14 Sydney South NSW 1235 Registry Infoline: 1800 819 675 or +61 2 8280 7126 Fax: +61 2 9287 0303 Email: registrars@linkmarketservices.com.au Website: www.linkmarketservices.com.au Monday to Friday between 8.30am and 5.30pm (Sydney time). For enquiries regarding your holding you can either contact the Security Registry, or access your holding details via the Investor Centre on our website www.dexus.com and look for the Login box. Australian Stock Exchange ASX Code: DXS Consistent with DEXUS’s commitment to sustainability, this report is printed on an FSC Mixed Sources Certified paper, which ensures that all virgin pulp is derived from well-managed forests and controlled sources. It contains elemental chlorine free (ECF) bleached pulp and is manufactured by an ISO 14001 certified mill. The mill operates a three step, waste water and recycling treatment system. These steps involve chemical treatment; micro-organism treatment; and penton treatment. The mill utilises steam for energy sourced from its own cogeneration plant and has recently concluded a Voluntary Agreement for energy conservation. The printer of this report has Forest Stewardship Council (FSC), Chain of Custody Certification. www.dexus.com 

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