2012 DEXUS ANNUAL rEport
DEXUS DIVERSIFIED TRUST
(ArSN 089 324 541)
lETTER FRom ThE ChaIR
FIVE YEaR FINaNCIal SUmmaRY
BoaRD oF DIRECToRS
CoRpoRaTE goVERNaNCE STaTEmENT
FINaNCIal REpoRT
DirEctorS’ rEport
AUDitor’S iNDEpENDENcE DEcLArAtioN
coNSoLiDAtED StAtEmENt of comprEhENSivE iNcomE
coNSoLiDAtED StAtEmENt of fiNANciAL poSitioN
coNSoLiDAtED StAtEmENt of chANgES iN EqUity
coNSoLiDAtED StAtEmENt of cASh fLowS
NotES to thE fiNANciAL StAtEmENtS
DirEctorS’ DEcLArAtioN
iNDEpENDENt AUDitor’S rEport
aDDITIoNal INFoRmaTIoN
INVESToR INFoRmaTIoN
DIRECToRY
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3
4
6
14
38
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2012 annual Reporting suite
DEXUS property group (DXS) presents our 2012 annual reporting suite and supporting material for the year ending 30 June 2012:
1. the 2012 DEXUS Annual review – an integrated report summarising our financial, operational and corporate responsibility and
Sustainability (cr&S) performance.
2. this 2012 DEXUS Annual report – DXS’s consolidated financial statements, corporate governance Statement and information about
our Board of Directors. this document should be read in conjunction with the 2012 DEXUS Annual review.
3. the 2012 DEXUS combined financial Statements – the financial Statements of DEXUS industrial trust, DEXUS office trust and
DEXUS operations trust. this document should be read in conjunction with the 2012 DEXUS Annual report and Annual review.
it is available in hard copy on request by email at ir@dexus.com, phone on 1800 819 675 or online in our annual reporting suite at
www.dexus.com/dxs/reports
4. the 2012 DEXUS performance pack – the data and information supporting the results outlined in the 2012 DEXUS Annual review
will be available in our online annual reporting suite from mid-october 2012. further cr&S information can be found on our website
at www.dexus.com/crs
through these reports we demonstrate how we manage our financial and non-financial performance in line with our corporate strategy.
we welcome your feedback, either via the feedback function in our online report at www.dexus.com/dxs/reports or by email at crs@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), collectively known as DXS or the group.
Under Australian Accounting Standards, 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 Statements and other information are available on our website: www.dexus.com
cover: 12 creek Street, Brisbane, qLD
lETTER FRom
ThE ChaIR
2012 was a year of transition and refocus for DEXUS
Property is a long term business. We are proud of the results we have
achieved through prudent risk management and sound governance.
We continue to manage operating cash flow carefully with the objective
that distributions are fully funded from free cash flow.
Operating cash flows have benefited from reduced capital expenditure
as a result of the US central portfolio sale and the completion of our
office portfolio’s nABERS Energy upgrade program in 2012.
DEXUS’s strong financial position has enabled us to improve
distributions to investors. Further:
n from 1 July 2012, a new distribution policy was introduced broadening
the distribution range to between 70% and 80% of FFO, in line with
free cash flow (we expect this to average 75% over the medium term)
n in April 2012, we commenced a $200 million strategic on‑market
securities buy‑back
Our investment philosophy, which seeks to maximise returns through
investment in superior quality properties in core markets, continues to
realise benefits for DEXUS investors.
A new executive remuneration framework
Following the 28.2% unfavourable response to our remuneration report
at last year’s AGM, we fully reviewed our remuneration framework.
I personally met with many of our major investors to get a better
understanding of their concerns and the Board has reflected on
that feedback in addition to advice from proxy advisors and
remuneration consultants.
The result is a proposed new remuneration framework subject
to investor approval at the AGM on 5 november 2012. The framework
focuses on equity interests for executives, applies a clearer balanced
scorecard approach to short term incentives (STI) with caps on STI
awards, introduces a long term incentive (lTI) grant as well as hurdles
that are appropriate for the long term nature of our business.
The full remuneration report starts on page 16 in this report.
Our new remuneration framework is aligned more closely to
conventional market practice and seeks to attract the best talent and
reward strong performance, as we firmly believe this will deliver better
results for our investors.
The last 12 months saw the appointment of a new CEO, a review of
our business and property portfolio and the development of a revised
strategy for DEXUS.
Uncertain market, but increasing opportunity
Operating conditions continue to be challenging as a result of ongoing
global economic uncertainty.
This has continued to impact business confidence in FY12, with
mixed indicators in the US and uncertainty about future growth in
the economies of Europe and China.
This uncertainty has contributed to subdued tenant demand.
We expect these conditions to continue into FY13 but longer term
market fundamentals remain sound.
The flight to quality continues and investment appetite for prime
properties in key locations – DEXUS’s speciality – remains robust.
We are cautiously optimistic about the prospects of our core markets,
particularly in the office sector.
Australia continues to be an attractive destination for investment by
foreign pension funds due to our growing economy, and the property
sector stands to benefit.
New cEo, new focus
In november 2011, the Board appointed Darren Steinberg, who
commenced on 1 March 2012 as the new Chief Executive Officer
and Executive Director of DEXUS Funds Management limited.
Darren brings a wealth of property sector experience to DEXUS with
a background in listed and unlisted property, asset management
and development.
Over the past six months, Darren has streamlined operations, improved
efficiencies and progressed strategic initiatives such as the sale of the
US central portfolio.
He has led the review and development of our revised strategy which
is designed to reinforce DEXUS’s position as Australia’s leading real
estate company.
Our objective of exiting non‑core markets and focusing on core CBD
office properties will enable us to enhance performance and ultimately
achieve our goal of being the leader in office property in Australia.
An active year for DEXUS
While DEXUS’s core business is property investment management,
we do not just own property. In 2012 we:
n completed the development of two major office towers valued
at over $1 billion
n re‑financed $850 million of debt
n raised over $420 million of equity in our wholesale fund
n sold US$770 million of industrial US property at book value
n substantially exited European markets through the sale of 71%
of our portfolio for €82 million
2012 DEXUS AnnUAl REPORT
1
lETTER FRom ThE ChaIR
good corporate citizenship
This year we have continued to build upon the significant successes
that we have achieved in CR&S.
We are incorporating the United nations’ Principles of Responsible
Investment as performance metrics for our investment decision making.
Our $31 million nABERS Energy upgrade program is now complete,
improving the value, performance and appeal of our office properties.
We have led by example, being the first Australian property trust with
our Sydney head office certified carbon neutral by low Carbon
Australia for the second successive year.
Our commitment is to maintain the highest standards of corporate
governance, ethics and environmental and social responsibility.
We do this in order to increase investor value, provide excellent service
to our tenants, support our people, partner with our suppliers, engage
with our communities and respect our environment.
A change to the Board of Directors
At the date of this report, the Board comprised nine Directors, eight of
whom are independent.
On 1 January 2012 we welcomed Richard Sheppard to the Board,
replacing Brian Scullin who left on 31 October 2011.
Richard is the former Managing Director and Chief Executive Officer
of Macquarie Bank limited and former Deputy Managing Director of
Macquarie Group limited, spending 36 years with the group. He brings
a range of financial and business skills to the DEXUS Board, including
valuable experience as a Director and Chairman of Macquarie Bank’s
listed and unlisted property trusts.
Darren Steinberg and Richard Sheppard have now joined the
Board and I welcome them and the skills and experience they bring
to the table.
Diversity target progress
DEXUS is committed to employee diversity as we believe it enables
organisations to make better informed decisions.
We set a target last year of 33% female participation at senior
management level by 2015 and I am pleased to report as at
30 June 2012 we are at 30%.
Looking forward
The Board of Directors of DEXUS Funds Management limited is
committed to developing a high performing organisation that creates
superior value for investors and stakeholders.
Our commitment to transparency and disclosure is fundamental to
our operations. Further information on our financial, operational and
Corporate Responsibility and Sustainability performance is provided in
our 2012 DEXUS Annual Review.
The financial year to 30 June 2012 has proven to be very successful
for the Group in a difficult market environment and FY13 shows
significant promise, with the launch of our revised strategy and early
achievement of a number of strategic objectives.
On behalf of the Board, I would like to thank you for your support
over the past year and look forward to reporting on the Group’s
continued success.
christopher t Beare
Chair
26 September 2011
2
2012 DEXUS AnnUAl REPORT
FIVE YEaR FINaNCIal
SUmmaRY
Consolidated Statement of Comprehensive Income
profit and loss
Property revenue
Management fees
Proceeds from sale of inventory
Property revaluations
Reversal of previous impairment
Contribution from equity accounted investments
Other income
Total income
Property expenses
Cost of sale of inventory
Finance costs
net gain/(loss) on sale of investment properties
Employee benefit expense
Impairments and property devaluations
Other expenses
Total expenses
Foreign currency translation reserve transfer
Profit/(loss) before tax
Income and withholding tax (expense)/benefit
Net profit/(loss)
Other non‑controlling interests (including REnTS)
Net profit/(loss) to stapled security holders
Operating EBIT
Funds from operations1 (cents per security)
Distributions2 (cents per security)
Consolidated Statement of Financial position
Cash and receivables
Property assets3
Other (including derivative financial instruments and intangibles)
Total assets
Payables and provisions
Interest bearing liabilities
Other (including financial instruments)
Total liabilities
net assets
Minority interest
Net assets (after non-controlling interest)
nTA per security ($)
Gearing ratio4 (%)
Consolidated Statement of Changes in Equity
Total equity at the beginning of the year
net profit/(loss)
Other comprehensive income/(loss)
Contributions of equity, net of transaction costs
Buy‑back of contributed equity, net of transaction costs
Acquisition of non‑controlling interest
Distributions provided for or paid
Other transactions with equity holders
Other non‑controlling interest movements during the year
Total equity at the end of the year
Consolidated Statement of Cash Flows
net cash inflow from operating activities
net cash inflow/(outflow) from investing activities
net cash (outflow)/inflow 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
Cash and cash equivalents at the end of the year
2008
$’000
2009
$’000
2010
$’000
2011
$’000
2012
$’000
664,831
26,760
–
184,444
–
2,467
12,829
891,331
(159,565)
–
(213,233)
2,297
(23,340)
(61)
(44,266)
(438,168)
–
453,163
(7,902)
445,261
(6,984)
438,277
485.9
11.90
11.90
135,671
8,731,773
481,543
9,348,987
322,528
3,006,919
184,487
3,513,934
5,835,053
205,998
5,629,055
1.77
33.2
5,704,943
445,261
77,929
243,524
–
–
(355,380)
402
(281,626)
5,835,053
374,445
11,065
(342,514)
42,996
59,603
(3,385)
99,214
708,506
63,663
–
–
–
31
5,739
777,939
(174,485)
–
(384,241)
(1,880)
(59,282)
(1,685,733)
(47,970)
(2,353,591)
–
(1,575,652)
120,236
(1,455,416)
(3,695)
(1,459,111)
514.5
10.43
7.30
120,661
7,735,859
494,590
8,351,110
289,561
2,509,012
406,320
3,204,893
5,146,217
206,772
4,939,445
1.01
31.2
5,835,053
(1,455,416)
(53,478)
1,129,971
–
–
(296,648)
–
(13,265)
5,146,217
359,577
(212,459)
(170,190)
(23,072)
99,214
8,703
84,845
663,068
51,588
–
–
13,307
(26,243)
10,144
711,864
(169,753)
–
(190,685)
(53,342)
(58,978)
(209,367)
(28,132)
(710,257)
–
1,607
29,983
31,590
(170)
31,420
461.3
7.30
5.10
89,429
7,306,585
475,014
7,871,028
281,230
2,240,082
343,269
2,864,581
5,006,447
205,275
4,801,172
0.95
29.8
5,146,217
31,590
(7,034)
90,360
–
–
(244,411)
–
(10,275)
5,006,447
340,174
90,592
(444,382)
(13,616)
84,845
(6,810)
64,419
629,072
50,655
3,359
148,433
–
34,053
5,486
871,058
(151,865)
(3,353)
(52,744)
7,052
(67,417)
–
(26,298)
(294,625)
–
576,433
(21,313)
555,120
(2,108)
553,012
437.2
7.40
5.18
109,921
7,487,082
390,641
7,987,644
274,346
2,215,056
191,401
2,680,803
5,306,841
204,028
5,102,813
1.01
28.4
5,006,447
555,120
(4,973)
14,528
–
–
(250,662)
–
(13,619)
5,306,841
239,342
(227,039)
4,949
17,252
64,419
(7,925)
73,746
653,582
50,712
49,847
75,227
–
13,784
3,933
847,085
(154,901)
(43,998)
(261,869)
(32,566)
(74,366)
(14,846)
(23,601)
(606,147)
(41,531)
199,407
(16,526)
182,881
(1,811)
181,070
467.9
7.65
5.35
90,035
6,922,722
351,350
7,364,107
276,970
1,940,762
139,049
2,356,781
5,007,326
–
5,007,326
1.00
27.2
5,306,841
182,881
41,864
–
(50,950)
(204,000)
(257,408)
113
(12,015)
5,007,326
348,391
659,567
(1,019,837)
(11,879)
73,746
(2,674)
59,193
1 Refer to page 33 for a definition of Funds From Operations (FFO).
2 70% of FFO.
3 Property assets include investment properties, non‑current assets held for sale, inventories and investment property accounted for using the equity method.
4 Includes cash.
2012 DEXUS AnnUAl REPORT
3
BoaRD oF
DIRECToRS
Chris Beare Chair and Independent Director
BSc, BE (Hons), MBA, PhD, FAICD
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, Remuneration & Governance
Committee (previously the Board nomination & 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 helped form Radiata – a technology start‑up in Sydney and
Silicon Valley – and as Chair and Chief Executive Officer, Chris steered it to a successful sale to Cisco Systems
in 2001 and continued part time 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.
Chris is currently Chair of Mnet Group, an ASX listed company.
Elizabeth alexander am Independent Director
BComm, FCA, FAICD, FCPA
Elizabeth Alexander is an Independent Director of DEXUS Funds Management limited (appointed 1 January 2005),
Chair of DEXUS Wholesale Property limited and a member of the Board Audit, Risk & Sustainability Committee
(previously the Board Audit Committee and Board Risk & Sustainability Committee).
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 Chairman
of CSl and on the Boards of Amcor and Boral.
Elizabeth is currently a Director of Medibank Private and the Chancellor of the University of Melbourne.
Barry Brownjohn Independent Director
BComm
Barry Brownjohn is an Independent Director of DEXUS Funds Management limited (appointed 1 January 2005)
and is Chair of the Board Audit, Risk & Sustainability Committee (previously the Board Audit Committee and Board
Risk & Sustainability Committee). During the year, Barry was also 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
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 and capital
raising strategies. 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 Australia Pty limited and a Director of Bakers Delight Holdings
Pty limited. He also serves as a member on the Board of Governors of the Heart Research Institute.
John Conde ao Independent Director
BSc, BE (Hons), MBA
John Conde is an Independent Director of DEXUS Funds Management limited (appointed 29 April 2009), is
the Chair of the Board nomination, Remuneration & Governance Committee (previously the Board nomination
& Remuneration Committee). During the year, John was also 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 Chairman of Ausgrid (formerly Energy Australia), 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 the Chairman of Bupa Australia Holdings Pty limited, Sydney Symphony limited and Destination nSW and
Deputy Chairman of Whitehaven Coal limited. John is President of the Commonwealth Remuneration Tribunal and
a Director of the McGrath Foundation limited. John is also Chairman of the Australian Olympic Committee (nSW)
Fundraising Committee.
4
2012 DEXUS AnnUAl REPORT
Tonianne Dwyer Independent Director
BJuris (Hons), LLB (Hons)
Tonianne Dwyer is an Independent Director of DEXUS Funds Management limited (appointed 24 August 2011) and
DEXUS Wholesale Property limited, and a member of the Board Compliance Committee.
Tonianne brings to the Board significant experience as a company director and executive working in listed property,
funds management and corporate strategy across a variety of international markets. Tonianne was a Director from
2006 until 2010 of Quintain Estates and Development – a listed United Kingdom property company comprising funds
management, investment and urban regeneration – and was previously Head of Funds Management from 2003. Prior
to joining Quintain, Tonianne was a Director of Investment Banking at Hambros Bank, SG Cowen and Société Générale
based in london.
Tonianne also held directorships on a number of boards associated with Quintain’s funds management business
including the Quercus, Quantum and iQ Property Partnerships and the Bristol & Bath Science Park Stakeholder
Board. She is currently a Director of Cardno limited.
Stewart Ewen oam Independent Director
Stewart Ewen is an Independent Director of DEXUS Funds Management limited (appointed 4 August 2004) and
a member of the Board nomination, Remuneration & Governance Committee (previously the Board nomination &
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 1990 he started navyB Pty ltd,
which has completed in excess of $600 million of 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 in Singapore 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.
Richard Sheppard Independent Director
BEc (Hons)
Richard Sheppard is an Independent Director of DEXUS Funds Management limited (appointed 1 January 2012) and
a member of the Board Audit, Risk & Sustainability Committee (previously the Board Audit Committee and Board Risk
& Sustainability Committee). From 1 July 2012, Richard is a member of the Board Finance Committee.
Richard brings to the Board extensive experience in banking and finance and as a Director and Chairman of listed
and unlisted property trusts. He was Managing Director and Chief Executive Officer of Macquarie Bank limited and
Deputy Managing Director of Macquarie Group limited from 2007 until late 2011. Following seven years at the
Reserve Bank of Australia, Richard joined Macquarie Group’s predecessor, Hill Samuel Australia in 1975, initially
working in Corporate Finance. He became Head of the Corporate Banking Group in 1988 and headed a number
of the Bank’s major operating Groups, including the Financial Services Group and the Corporate Affairs Group.
He was a member of the Group Executive Committee since 1986 and Deputy Managing Director since 1996.
Richard was Chairman of the Australian Government’s Financial Sector Advisory Council from 2009‑2011 and is
a Director of the Bradman Foundation and the Sydney Cricket Club. He is also the Chairman of Eraring Energy and
Chairman of the Macquarie Group Foundation.
Darren Steinberg Chief Executive Officer and Executive Director
BEc, FRICS, FAPI
Darren Steinberg is CEO and an Executive Director of DEXUS Funds Management limited (appointed 1 March 2012).
Darren has more than 20 years’ experience in the property industry. Prior to joining DEXUS in March 2012, Darren
was Managing Director Colonial First State Global Asset Management with responsibility for $18 billion of listed
property, unlisted property and asset management and development functions. Prior to that, Darren held a number
of senior property roles with Stockland, Westfield, lend lease and Jones lang Wootton. Darren has a Bachelor of
Economics from the University of Western Australia.
Darren is the current national President of the Property Council of Australia, a Fellow of the Royal Institution of Chartered
Surveyors and the Australian Property Institute and a member of the Australian Institute of Company Directors.
peter St george Independent Director
CA(SA), MBA
Peter is an Independent Director of DEXUS Funds Management limited (appointed 29 April 2009) and the Chair
of the Board Finance Committee. During the year, Peter was also a member of the Board Audit and Board Risk &
Sustainability 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,
its related companies and SFE Corporation limited.
Peter is currently a Director of First Quantum Minerals limited (listed on the Toronto Stock Exchange)
and Boart longyear limited.
2012 DEXUS AnnUAl REPORT
5
CoRpoRaTE goVERNaNCE
STaTEmENT
aSX Corporate governance principles and Recommendations
principle 1 – Lay solid foundations for management and oversight
1.1
Companies should establish and disclose the functions reserved for the board and those delegated to senior executives
1.2
Companies should disclose the process for evaluating the performance of senior executives
principle 2 – Structure of the board to add value
2.1
A majority of the board should be independent directors
2.2 The chair should be an independent director
2.3
The roles of chair and chief executive officer should not be exercised by the same individual
2.4 The board should establish a nomination committee
2.5
Companies should disclose the process for evaluating the performance of the board, its committees and individual directors
principle 3 – promote ethical and responsible decision making
3.1 Companies should establish and disclose a code of conduct or a summary of the code
DEXUS
Page 7
Pages 7‑9
Pages 9‑10
3.2
3.3
3.4
Companies should establish and disclose a policy concerning diversity or a summary of that policy. The policy should
include requirements for the board to establish measurable objectives for achieving gender diversity for the board to
assess annually both the objectives and progress in achieving them
Companies should disclose in each annual report the measurable objectives for achieving gender diversity in accordance
with the diversity policy and progress towards achieving them
Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in
senior executive positions and women on the board
principle 4 – Safeguard integrity in financial reporting
4.1 The board should establish an audit committee
4.2
The audit committee should be structured so that it consists only of non‑executive directors, with a majority of
independent directors, is chaired by an independent chair who is not chair of the board and has at least three members
4.3
The audit committee should have a formal charter
principle 5 – make timely and balanced disclosure
5.1
Companies should establish written policies designed to ensure compliance with ASX listing Rule disclosure requirements
and to ensure accountability at a senior executive level for compliance to and disclosure of those policies or a summary of
those policies
principle 6 – respect the rights of shareholders
6.1
Companies should design a communications policy for promoting effective communication with shareholders and
encouraging their participation at general meetings and disclose their policy or a summary of that policy
principle 7 – recognise and manage risk
7.1
7.2
7.3
Companies should establish policies for the oversight and management of material business risks and disclose a summary
of those policies
The board should require management to design and implement the risk management and internal control systems to manage
the company’s material business risks and report on whether those risks are being managed effectively. The board should
disclose that management has reported as to the effectiveness of the company’s management of its material business risks
The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief
financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is
founded on a sound system of risk management and internal control and that the system is operating effectively in all
material respects in relation to financial reporting risks
principle 8 – remunerate fairly and responsibly
8.1 The board should establish a remuneration committee
8.2
8.3
The remuneration committee should be structured so that it: consists of a majority of independent directors, is chaired by
an independent chair and has at least three members
Companies should clearly distinguish the structure of non‑executive directors’ remuneration from that of executive
directors and senior executives
6
2012 DEXUS AnnUAl REPORT
Pages 10‑11
Page 11
Page 12
Pages 12‑13
Page 13
DEXUS Funds Management limited (DXFM) is the Responsible Entity
of each of the four Trusts that comprise DEXUS Property Group (DXS).
DXFM is also responsible for management of the Group’s third party
funds and mandates.
The Board is also directly responsible for appointing and removing
the Chief Executive Officer, and Company Secretary, ratifying the
appointment of the Chief Financial Officer, and monitoring the
performance of the Group Management Committee.
The Board has implemented a corporate governance framework
which 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.
The framework meets the requirements of the ASX Corporate
Governance Principles and Recommendations with 2010 Amendments
(2nd edition), and addresses additional aspects of governance that the
Board considers important.
Effective 1 July, 2012, the Board increased the breadth of responsibility
of the Board nomination & Remuneration Committee to include
oversight of its corporate governance framework. As a result, the
Committee changed its name to the Board nomination, Remuneration
& Governance Committee. References to the Board nomination,
Remuneration & Governance Committee in this Report should be
assumed to also apply to the previously named Board nomination
& Remuneration Committee.
Further information relating to DEXUS’s corporate governance
framework, including committee structure, Terms of Reference, key
policies and procedures and a reconciliation of the ASX Principles
against DXFM’s governance framework is available at
www.dexus.com/corporategovernance
principle 1 – lay solid foundations for
management and oversight
roles and responsibilities
As DEXUS comprises four real estate investment trusts, its corporate
governance practices satisfy the requirements relevant to unit trusts.
The Board has determined that its governance framework will also
meet the highest standards of a publicly listed company. This includes
the conduct of an annual general meeting, the appointment of
Independent Directors by DEXUS security holders and additional
disclosure such as the remuneration report.
Board responsibilities
The framework ensures accountability and a balance of authority
by clearly defining the roles and responsibilities of the Board and
Executive Management. This enables the Board to provide strategic
guidance while exercising effective oversight of management.
The Board is responsible for:
n reviewing and approving DEXUS’s business objectives and strategies
to achieve them. These objectives are the performance targets for
the Chief Executive Officer and Group Management Committee.
Performance against these objectives is reviewed annually by the
Board nomination, Remuneration & Governance Committee and is
a primary input to the remuneration review of Group Management
Committee members
n approval of the annual business plan
n approval of acquisitions, divestments, and major developments
n ensuring that DEXUS’s fiduciary and statutory obligations to
stakeholders are met
During FY12 a new Chief Executive Officer was appointed by the
Board following an executive search, including internal and external
candidates, assisted by an external consultant.
group management committee responsibilities
The Board has appointed a Group Management Committee which
is responsible for achieving DEXUS’s goals and objectives, including
ensuring the prudent financial and risk management of the Group.
Throughout the year the Group Management Committee generally
met weekly.
Members of the Group Management Committee in FY12 were the
Chief Executive Officer, Chief Investment Officer, Chief Financial Officer,
Chief Operating Officer and General Counsel. From 1 July, 2012,
the Group Management Committee has been extended to include
Executive General Managers heading Human Resources, Investor
Relations and Communications, and Strategy and Research.
principle 2 – Structure the Board to add value
Board composition
The composition of the Board acknowledges the duties and
responsibilities it discharges and is determined by relevant experience
and general qualifications including:
n the ability and competence to make appropriate business decisions
n an entrepreneurial talent for contributing to the creation of investor value
n relevant experience in the property, investment and financial
services sectors
n high ethical standards
n exposure to emerging issues, and
n a commitment to the fiduciary and statutory obligations to further
the interests of all investors and achieve the Group’s objectives
The incumbent Directors bring a range of skills and experience to the
Board in the areas of strategy, property investment, funds management,
capital markets, corporate governance, financial and risk management.
Their expertise enables them to relate to the strategies of DEXUS and
to make a meaningful contribution to the Board’s deliberations.
Size
DEXUS has determined that the optimal size of the Board should be
small enough to be able to act decisively, but large enough to ensure
a diverse range of views is provided on any issue.
Throughout FY12, the Board comprised nine members, eight
Independent Directors plus the Chief Executive Officer. Although the
DXFM constitution allows for the appointment of up to 10 Directors,
the Board has determined that its long term target is eight members,
and will migrate to this target over time.
2012 DEXUS AnnUAl REPORT
7
CoRpoRaTE goVERNaNCE STaTEmENT
During the year, two Independent Directors were appointed to the Board and one resigned. Further, Victor Hoog Antink resigned as Chief Executive
Officer and Executive Director and Darren Steinberg was appointed Chief Executive Officer and Executive Director, commencing 1 March, 2012.
As a consequence of the transition to a new Chief Executive Officer, the Board identified a need for stability and continuity throughout 2012.
Therefore no further changes are planned at Board level for the remainder of this calendar year.
The tenure of Independent Directors at 30 June, 2012 was:
Name
Chris Beare (Chair)
Elizabeth Alexander AM
Barry Brownjohn
John Conde AO
Tonianne Dwyer
Stewart Ewen OAM
Richard Sheppard
Peter St George
0 to 3 years
3 to 6 years
10 months
6 months
3 years 2 months
3 years 2 months
6 to 9 years
7 years 10 months
7 years 6 months
7 years 6 months
7 years 10 months
Board independence
Independent Directors are independent of management and must be
free of any business or other relationship that could materially interfere
with the exercise of his or her unfettered and independent judgement.
To be independent, a Director must not have, in the previous three years:
1. been retained as a professional adviser to DEXUS either directly
or indirectly, or as determined by the Board
2. been a significant customer of DEXUS or supplier to DEXUS
(as determined by the Chair), or
3. held a significant financial interest in DEXUS either directly
or indirectly (as determined by the Chair), or
4. held a senior executive position at DEXUS
The Board regularly assesses the independence of its Directors,
in light of interests disclosed to it.
Stewart Ewen, an Independent Director, was paid a fixed fee of
$30,000 per annum for his attendance at property inspections,
reviewing property investment proposals and participating in informal
management meetings. The Board has considered this circumstance
and determined that it has not affected Stewart’s independence.
This arrangement ceased on 30 June, 2012.
While Directors of the Responsible Entity are not technically subject
to the approval of security holders, the Board has determined that all
Directors, other than the Chief Executive Officer, 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 Chief Executive Officer, will hold office
for three years following his or her first appointment (or, if appointed by
the Board between DXS Annual General Meetings, from the date of the
Annual General Meeting immediately succeeding the initial appointment).
Independent Directors are not expected to 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 who is responsible
for leadership of the Board, the efficient organisation and conduct of
the Board’s functions and briefing Directors on issues arising relevant
to the Board.
The Board has defined the responsibilities and performance
requirements of the Chief Executive Officer and the performance of the
Chief Executive Officer is monitored by the Chair. Biographies outlining
the skills and experience of each Director are set out on pages 4‑5 of
this Annual Report.
The procedure for selecting and appointing new Directors to the Board
can be found at www.dexus.com/corporategovernance
meetings
The Board generally meets monthly between February and november,
with additional ad hoc meetings held throughout the year as required.
Board meetings are normally held at the registered office of DEXUS,
although some meetings are held “offsite” to allow Directors to visit
DEXUS owned and managed properties. For example, in July 2011,
the Board met in newport Beach, California, at the offices of its
US west coast operations. To assist participation, video conferencing
facilities are utilised as required.
Directors are expected to attend at least 75% of meetings a year.
In FY12 there was 100% attendance at all Board meetings.
Agenda items for Board meetings are set by the Chair in conjunction
with the Chief Executive Officer and Company Secretary and include
(but are not limited to):
n Chief Executive Officer’s report
n Company Secretary’s report
n Minutes of Board Committee meetings
n Reports on asset acquisitions, disposals and developments
n Management presentations
n Other business, where directors can raise any
matters of concern
Each monthly Board meeting includes time for Independent Directors
to meet without the Chief Executive Officer or other executives present.
Board papers are provided to Directors no less than five business days
before the scheduled meeting. Senior management is made available to
provide clarification or answer any questions Directors may have prior
to the Board meeting, or to attend the Board meeting if requested by
the Directors.
8
2012 DEXUS AnnUAl REPORT
Some of the key decisions made by the Board during FY12
included the:
n selection and appointment of a new Chief Executive Officer
n selection and appointment of two new Independent Directors
n disposal of non‑core US properties
n design of a new remuneration framework
n commencement of a share buy‑back
n retirement of REnTS
n approval of a revised Board Committee structure
Access to training and information
To ensure that each new Director is able to meet his or her
responsibilities effectively, newly appointed Directors receive a
briefing by DEXUS management on business strategy and operations.
new Directors receive an information pack which addresses the
corporate governance framework, Committee structures and their
Terms of Reference, governing documents, and background reports.
All Directors undertake training, including regular presentations by
management and external advisers on sector, fund, and industry
specific trends, and property tours.
Directors are encouraged to:
n seek independent professional advice, at the Group’s expense and
independent of management
n seek additional information from management, and
n directly access senior DEXUS executives as required
performance
The Board nomination, Remuneration & Governance Committee
oversees a two‑year Board performance evaluation program in which
Board and Committee performance is evaluated in the first year and
individual Director performance in the next. The process is designed
to identify opportunities for performance improvement.
During FY12, the Chair conducted a series of interviews with new and
existing Independent Directors in order to ascertain their views
regarding Board and Committee performance. As a result of these
interviews, the Board implemented a number of improvements to
Committee structures and membership, which were effective from
1 July 2012. Chris Beare also met with key investors to obtain
feedback on the performance of DEXUS and its remuneration policy.
Board support
The Board has established a number of Committees to assist
it in the fulfilment of its responsibilities. Terms of Reference for
these are reviewed at least annually, and copies can be found at
www.dexus.com/corporategovernance.
Independent Directors have a standing invitation to attend any/all Board
Committee meetings, and agendas of Board Committee meetings are
provided to all Independent Directors in advance of each meeting.
Each Committee meeting has a standing agenda item to identify
improvements to reporting or processes that would benefit the
Committee, as well as any items that require immediate reference
to the Board or a regulator (where applicable).
principle 3 – promote ethical and responsible
decision making
codes of conduct
To meet statutory and fiduciary obligations to each investor group and
to maintain confidence in its integrity, the Board has implemented a
series of clearly articulated compliance policies and procedures to
which all employees must adhere:
n The Board considers it important that all employees meet the highest
ethical and professional standards and has consequently established
an Employee Code of Conduct and a Directors’ Code of Conduct,
both of which are approved by the Board Compliance Committee.
n DEXUS’s Anti‑Bribery Policy covers the acceptance and provision
of appropriate gifts and benefits and reinforces the Group’s
commitment not to make donations to political parties.
n The Group strongly supports the disclosure of corrupt conduct,
illegality, or substantial waste of company assets under its Good
Faith Reporting policy. Employees who make such disclosures
are protected from any detrimental action or reprisal, and an
independent external disclosure management service provider has
been appointed to ensure anonymity for those reporting incidents.
On an annual basis, all employees are required to confirm compliance
with key policies such as the Code of Conduct and Good Faith Reporting.
insider trading and trading in DEXUS securities
To minimise any potential conflicts of interest, the Board previously
determined that DEXUS Directors and Senior Executives would not
trade in any security managed by the Group.
This position was reviewed by the Board in 2012 and, to better
enhance alignment of interests, the Board determined that it would
be appropriate for Directors to hold DEXUS securities in the future.
The Board has set a minimum holding of 50,000 securities to be
acquired by each Independent Director by 30 June 2015. newly
appointed Independent Directors will be required to purchase
50,000 securities within their first three year term.
The Group has implemented a securities trading policy that applies to
Directors and employees who wish to invest in DEXUS securities for
their personal account or on behalf of an associate.
The policy requires any Director who wishes to trade in DEXUS
securities to obtain written approval from the Chair and Company
Secretary. Employees wishing to trade in DEXUS securities must obtain
written approval from the Chief Executive Officer and General Manager,
Compliance, Risk & Governance, before entering into a trade. Effective
1 July, 2012, DEXUS Directors and employees will only be able to trade
DEXUS securities in defined trading windows.
In the event that the Chair or Chief Executive Officer considers
that there is the potential that inside information may be held or that
a significant conflict of interest may arise, trading will not be permitted,
even in defined trading windows.
Policies and procedures are available on our website at
www.dexus.com/corporategovernance
2012 DEXUS AnnUAl REPORT
9
CoRpoRaTE goVERNaNCE STaTEmENT
conflicts of interest and related party dealings
The Group has implemented policies covering the management of
conflicts of interest.
Business conflicts may arise:
n from allocating property transactions, where there may be conflicts
principle 4 – Safeguard integrity in financial reporting
Board Audit committee1
To ensure the factual presentation of each Trust’s financial position,
DXFM has put in place a structure of review and authorisation, which
includes the establishment of a Board Audit Committee to review:
between the interests of different DEXUS clients
n the Financial Statements of each entity
n when allocating a limited investment opportunity between a number
n the independence and competence of the external auditor, and
of clients
n from tenant conflicts, where a prospective tenant has two similar
properties to choose from, owned by different DEXUS clients, and
n from related party dealings involving more than one of
DEXUS’s clients
Where a conflict of interest has been identified, the Compliance,
Risk & Governance team liaises with the parties concerned to ensure
the effective and timely management of the conflict. Where information
barriers are put in place, the team monitors compliance with the
relevant policies.
On a monthly basis, the General Counsel reports to the Board on
related party transactions, while the General Manager, Compliance,
Risk & Governance reports related party transactions to the Board
Compliance Committee each quarter.
During FY12, DEXUS managed several related party transactions where
DEXUS Property Services Pty limited (a wholly owned property
management company) leased space to accommodate its onsite
managers from properties owned by STC and DEXUS Wholesale
Property Fund. In these cases, independent verification was sought
to ensure that rent reflected market rates.
responsible investment
DEXUS’s environmental management policy aims to minimise the overall
environmental impact of its operations, both in the development of new
properties and the management of existing properties. As a signatory
to the United nations Principles of Responsible Investment (UnPRI),
DEXUS incorporates these principles into its investment decisions.
Diversity
DEXUS comprises a socially and culturally diverse workplace and has
created a culture that is tolerant, flexible and adaptive to the changing
needs of our environment. We are committed to diversity and promote
an environment conducive to the merit‑based appointment of qualified
employees, senior management, and Directors. Where professional
intermediaries are used to identify or assess candidates, they are
made aware of our commitment to diversity.
DEXUS currently publishes annual statistics on the diversity profile of
its Board and senior management, including a breakdown of the type
and seniority of roles undertaken by women. DEXUS acknowledges
and fulfils its obligations under relevant employment legislation.
During FY12, all employees were required to undertake
training addressing equal employment, victimisation, harassment,
and bullying. To reinforce DEXUS’s zero tolerance approach to
discrimination we have appointed an independent external disclosure
management service provider to accept claims of inappropriate or
unethical behaviour.
n semi‑annual management representations to the Board Audit
Committee, affirming the veracity of each entity’s Financial
Statements
The Committee’s Terms of Reference require that all members are
Independent Directors with financial expertise and an understanding
of the industry in which the Group operates.
The Board Audit Committee:
n has access to management
n has unrestricted access to external auditors without
management present
n has the right and opportunity to seek explanations and additional
information as it sees fit, and
n 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, not less than four times a year, and the external auditor is
invited to attend all meetings.
During FY12, the members of the Board Audit Committee were:
Barry Brownjohn, Chair, Independent Director
Elizabeth Alexander AM, Independent Director
Peter St George, Independent Director
Richard Sheppard, Independent Director (appointed 1 February, 2012)
Consistent with the Group’s objective to maintain efficient operations,
effective 1 July, 2012, the Committee reverted to a membership of
three, with Peter St George standing down.
The following reports are made to the Board Audit Committee:
n The Chief Executive Officer and the Chief Financial Officer make
representations on a semi‑annual basis about the veracity of the
Financial Statements and financial risk management systems
n The Internal Risk Committee completes a Fraud Risk questionnaire
semi‑annually to identify any instances of actual or perceived fraud
during the period
n The Chief Executive Officer makes a representation at least quarterly
to the General Manager, Compliance, Risk & Governance, regarding
conformance with compliance policies and procedures, with any
significant exceptions reported to the Board Compliance Committee
n The Chief Financial Officer provides quarterly certification to the
Board Compliance Committee as to the continued adequacy of
financial risk management systems
PwC continues its appointment as statutory auditor of DXFM and its
related trusts and entities.
In order to ensure the independence of the statutory auditor, the Board
Audit Committee has responsibility for approving the engagement of the
auditor for any non‑audit service greater than $100,000. As at 30 June,
2012, fees paid to the external auditor for non‑audit services were 15%
of audit fees (27.6% at 30 June, 2011).
1 The Board Audit Committee and Board Risk & Sustainability Committee were amalgamated and became the Board Audit, Risk & Sustainability Committee on 8 August 2012.
10
2012 DEXUS AnnUAl REPORT
Board compliance committee
The Corporations Act 2001 does not require DXFM to maintain a Board
Compliance Committee as more than half its Directors are external
Directors, but the Board has determined that the Board Compliance
Committee provides additional control, oversight and independence
of the compliance function.
Consistent with the Group’s objective to maintain efficient operations,
effective 1 July, 2012, the Committee membership was reduced to
three, with John Conde and Tanya Cox standing down. The Committee
reports any breaches of the Corporations Act 2001 or of the provisions
contained in any Trust’s Constitution or Compliance Plans to the DXFM
Board, and reports to ASIC in accordance with legislative requirements.
In accordance with DEXUS’s Good Faith Reporting policy, employees
have access to Board Compliance Committee members to raise any
concerns regarding unethical business practices. To enable the
Board Compliance Committee to fulfil its obligations effectively, an
Internal Compliance Committee has been established to monitor the
effectiveness of the Group’s internal compliance and control systems.
principle 5 – make timely and balanced disclosure
continuous disclosure
DXFM has established a Continuous Disclosure Committee to ensure
timely and accurate continuous disclosure for all material matters that
impact the Group. Committee members comprise members of the
Group Management Committee, which meets weekly to consider the
activities of the Group and specifically considers whether any disclosure
obligation is likely to arise as a result.
The Continuous Disclosure Committee has been established to
ensure that:
n investors continue to have equal and timely access to material
information, including the financial status, performance, ownership
and governance of the Trusts; and
n announcements are factual and presented in a clear and balanced way
Management is required to provide a quarterly attestation to the
Compliance, Risk & Governance team that there have been no issues
within their area of responsibility that would be subject to continuous
disclosure requirements.
Following each DXFM Board meeting, Directors consider the issues
discussed during the meeting and determine whether any price
sensitive information has arisen that would require market disclosure.
Compliance with our Continuous Disclosure and Analyst Briefings
policy is subject to ongoing monitoring, the results of which are
reported to the Board Compliance Committee. For a copy of the Policy,
see www.dexus.com/corporategovernance.
The Board Compliance Committee reviews compliance matters and
monitors DXFM conformance with the requirements of its Australian
Financial Services licence and of the Corporations Act 2001 as it
relates to Managed Investment Schemes. The scope of the Committee
includes all Trusts and the Group’s investment mandates.
The Committee includes only members who are familiar with the
requirements of Managed Investment Schemes and have risk and
compliance experience. Committee members are encouraged to obtain
independent professional advice in the satisfaction of their duties at the
cost of the Group and independent of management, although during
FY12, no member of the Board Compliance Committee needed to seek
such independent professional advice.
As at 30 June, 2012, the Committee comprised five members, three
external members (who satisfy the requirements of Section 601JB(2)
of the Corporations Act 2001) and two executives of the Group.
The members of the Board Compliance Committee for FY12 were:
Andy Esteban, Chair, external member
John Conde AO, external member (and Independent Director)
Tonianne Dwyer, external member (and Independent Director)
(appointed 31 October, 2011)
Tanya Cox, executive member
John Easy, executive member
The Compliance Plan Auditor is invited to each Board Compliance
Committee meeting.
The skills, experience and qualifications of John Conde and Tonianne
Dwyer are detailed on pages 4 and 5 and details for Tanya Cox and
John Easy are on page 14 in this Annual Report.
Andy Esteban holds a Bachelor of Business majoring in Accounting.
He is a CPA and a member of the Australian Institute of Company
Directors. Andy has over 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,
specialising in implementing and monitoring risk management and
compliance frameworks in the financial services industry. He has
provided consulting services to organisations including UBS Global
Asset Management in Australia, Hong Kong, Singapore, Taiwan and
China. Andy is Chair of Certitude Global Investments ltd, a Director
of HFA Holdings ltd and Chair of their Audit and Risk Committee and
a member of their Remuneration and nomination Committee; Chair
of the Compliance Committees of Aberdeen Asset Management ltd,
Deutsche Asset Management Australia ltd, and Grant Samuel; and
an Independent Member of the of Australian Unity Funds Management
ltd, Celsius Investment Management limited, Schroder Investment
Management Australia ltd, Fidelity International Investment
Management limited and Alliance Bernstein Compliance Committees.
2012 DEXUS AnnUAl REPORT 11
CoRpoRaTE goVERNaNCE STaTEmENT
principle 6 – Respect the rights of shareholders
Annual general meeting
The Board has committed to the conduct of an Annual General Meeting
(AGM) to facilitate the effective exercise by DXS security holders of
their rights.
Each AGM is designed to:
n supplement effective communication with security holders
n provide them with ready access to balanced and
understandable information
n increase the opportunities for participation, and
n facilitate security holders’ rights to appoint Directors to the
Board of DXFM
The Group’s policy is that all Directors attend its AGM.
The external auditor of the Trusts also attends each AGM and is
available to answer investor questions about the conduct of the audits
both of the Trusts’ financial records and of their Compliance Plans, as
well as the preparation and content of the Auditor’s Report.
DEXUS engages an independent service provider, link Market
Services, to conduct any security holder vote required at the AGM.
To facilitate participation, the AGM can be accessed via webcast for
those security holders unable to attend the meeting.
Stakeholder communication
In addition to conducting an AGM, the Group has an investor relations
and communications strategy that promotes an informed market and
encourages participation with investors. This strategy includes use of
the Group’s website to enable access to DEXUS announcements, annual
and half‑year reports, presentations, and analyst support material.
The website also contains historical information on announcements,
distributions and other related information at www.dexus.com/dxs
Analyst briefings are undertaken on a regular basis and enquiries
received from investors are addressed in a timely manner in accordance
with DEXUS’s policy on the handling of enquiries and complaints.
principle 7 – Recognise and manage risk
Board risk & Sustainability committee2
To oversee risk management at DEXUS, the Board has established a
Board Risk & Sustainability Committee that is responsible for reviewing
the Group’s operational risk management, environmental management,
sustainability initiatives, internal audit practices, and handling any
incidents of fraud. The Committee also approves and oversees the
effectiveness of the Group’s Risk Management Framework.
The Board Risk & Sustainability Committee and Board Audit Committee
share common membership to ensure that a comprehensive
understanding of control systems is maintained by both Committees.
Members of the Board Risk & Sustainability Committee for FY12 were:
Barry Brownjohn, Chair, Independent Director
Elizabeth Alexander AM, Independent Director
Peter St George, Independent Director
Richard Sheppard, Independent Director (appointed 1 February, 2012)
Consistent with the Group’s objective to maintain efficient operations,
effective 1 July, 2012, the Committee reverted to a membership of
three, with Peter St George standing down.
During FY12, the Board Risk & Sustainability Committee focused on
strategic risk management, including DEXUS’s appetite for risk. While
some risks are identified, managed and monitored internally, DEXUS
has appointed independent experts to undertake monitoring of health
and safety, environmental risks, and other risks where expert
knowledge is essential to ensure DEXUS has in place best practice
processes and procedures.
The Board Risk & Sustainability Committee is empowered to engage
consultants, advisers, or other experts independently of management.
During FY12, an independent external expert was appointed to
undertake a detailed review of DEXUS’s Business Continuity Plan,
which resulted in improvements to existing procedures.
risk management
The management of risk is an important aspect of the DEXUS’s
activities, so the Group has created a segregated risk function reporting
to the General Counsel (previously the Chief Operating Officer) on a
day‑to‑day basis, as well as an Internal Risk Committee that has an
independent reporting line to the Board Risk & Sustainability Committee.
The General Manager, Compliance, Risk & Governance also has access
to the Chief Executive Officer and Independent Directors.
Risks to DEXUS come from numerous sources, driven by both internal
and external factors and include (in no particular order):
n Strategic risks
n Market risks
n Health and safety risks
n Operational risks
n Environmental risks
n Financial risks
n Regulatory risks
n Fraud risks
2 The Board Audit Committee and Board Risk & Sustainability Committee were amalgamated and became the Board Audit,
Risk & Sustainability Committee on 8 August 2012.
12
2012 DEXUS AnnUAl REPORT
The Compliance, Risk & Governance team’s responsibility is to promote
an effective risk and compliance culture by providing advice, drafting
and updating relevant risk and compliance policies and procedures,
conducting training, and monitoring and reporting adherence to key
policies and procedures. Frameworks have been developed and
implemented in accordance with ISO 31000:2009 (Risk Management)
and AS 3806:2006 (Compliance Programs).
The functions of the Compliance, Risk & Governance team include risk
and compliance management, corporate governance, and internal
audit. The ongoing effectiveness of the risk management and internal
control systems is reported by the General Manager, Compliance, Risk
& Governance to the Board Risk & Sustainability Committee and Board
Compliance Committee on a quarterly basis.
principle 8 – Remunerate fairly and responsibly
Board Nomination, remuneration & governance committee
A Board nomination, Remuneration & Governance Committee
oversees all aspects of:
n Director and Executive remuneration
n Board renewal
n Director, Chief Executive Officer, and management succession planning
n Board and Committee performance evaluation
n Director nominations
The Committee comprises three Independent Directors:
John Conde AO, Chair, Independent Director
DEXUS’s internal control procedures are also subject to annual
independent verification as part of the GS007 (Audit Implications of the
Use of Service Organisations for Investment Management Services) audit.
Chris Beare, Independent Director
Stewart Ewen OAM, Independent Director
internal audit
The internal audit program has a three year cycle, the results of which
are reported on a quarterly basis to the Internal Audit Committee and
to the Board Risk & Sustainability Committee. While internal audit is
resourced internally, DEXUS has 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. A partner from the internal audit co‑source service
provider is invited to each Board Risk & Sustainability Committee
meeting to keep Directors informed about these trends.
Board finance committee
The Group is subject to 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 specifically
to deal with them.
The Board Finance Committee’s role is to review and recommend
financial risk management policies, hedging and funding strategies,
forward looking financial management processes, and periodic market
guidance for consideration by the Board.
Members of the Board Finance Committee are:
Peter St George, Chair, Independent Director
Barry Brownjohn, Independent Director
Chris Beare, Independent Director
Consistent with the Group’s objective to maintain efficient operations
and refresh its expertise, effective 1 July, 2012, Barry Brownjohn stood
down and Richard Sheppard joined the Committee. To support this
Committee’s deliberations, a Capital Markets Committee has
been established.
The Chief Executive Officer and Executive General Manager, Human
Resources attend the Board nomination, Remuneration & Governance
Committee meeting by invitation.
It is the practice of the Board nomination, Remuneration & Governance
Committee to meet without executives as required, and non‑committee
members are not in attendance when their own performance or
remuneration is discussed. The Board nomination, Remuneration &
Governance Committee is empowered to engage external consultants
independently of management and in FY12, appointed Ernst & Young
and Egan Associates to provide it with independent remuneration
services.
To reflect the evolution of best practice remuneration policy, effective
1 July, 2012, the Board determined that 25% of all short term incentive
payments to Senior Executives will be deferred over 12 and 24 months,
and will be subject to clawback provisions.
In 2012 the Board also determined that DEXUS’s existing Deferred
Performance Payment Plan would be discontinued and that an lTI Plan
would be introduced, granting equity awards over 36 and 48 months to
Senior Executives, subject to performance hurdles. The lTI Plan is
subject to security holder approval at the Group’s Annual General
Meeting in november 2012.
Details of the Group’s remuneration framework for Executives,
Independent Directors and employees are set out in the Remuneration
Report that forms part of the Directors’ Report contained in this report
starting on page 14. There are no schemes for retirement benefits
(other than superannuation) for Independent Directors.
2012 DEXUS AnnUAl REPORT 13
Financial Report
DIRECToRS’ REpoRT
for the year ended 30 June 2012
The Directors of DEXUS Funds Management limited (DXFM) as
Responsible Entity of DEXUS Diversified Trust (DDF or the Trust)
present their Directors’ Report together with the consolidated Financial
Statements for the year ended 30 June 2012. The consolidated
Financial Statements represents DDF and its consolidated entities,
DEXUS Property Group (DXS or the Group).
The Trust together with DEXUS Industrial Trust (DIT), DEXUS Office
Trust (DOT) and DEXUS Operations Trust (DXO) form the DEXUS
Property Group stapled security.
1 Directors and Secretaries
1.1 Directors
The following persons were Directors of DXFM at all times during the
year and 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
Tonianne Dwyer
24 August 2011
Stewart F Ewen OAM
4 August 2004
Victor P Hoog Antink
1 October 2004
1 March 2012
Brian S Scullin
1 January 2005
31 October 2011
W Richard Sheppard
1 January 2012
Darren J Steinberg
1 March 2012
Peter B St George
29 April 2009
1.2 company Secretaries
The names and details of the Company Secretaries of DXFM as at
30 June 2012 are as follows:
Tanya l Cox
mBa, maICD, FCSa, FCIS
appointed: 1 october 2004
Tanya is the Executive General Manager Property Services and Chief
Operating Officer of DEXUS Property Group and is responsible for the
tenant and client service delivery model, corporate responsibility and
sustainability practices, information technology solutions and company
secretarial services across the Group.
Tanya has over 25 years’ experience in the finance industry. Prior to
joining DEXUS in July 2003, Tanya held various general management
positions over the previous 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 a Director of low Carbon Australia limited and
Member of the Property Council of Australia national Risk Committee.
Tanya is Chair of Australian Athletes With a Disability limited and is a
non‑executive director of a number of not‑for‑profit organisations.
Tanya is a member of the Australian Institute of Company Directors and
a fellow of the Institute of Chartered Secretaries of Australia.
Tanya has an MBA from the Australian Graduate School of
Management, a Diploma in Applied Corporate Governance and was a
finalist in the 2005 nSW Telstra Business Woman of the year awards.
John C Easy
B Comm, llB, aCSa, aCIS
appointed: 1 July 2005
John is the General Counsel and Company Secretary of DXFM and is
responsible for the legal function and compliance, risk and governance
systems and practices across the Group.
During his time with the Group, John has been involved in the
establishment and public listing of Deutsche Office Trust, the
acquisition of the Paladin and AXA property portfolios, and subsequent
stapling and creation of DEXUS Property Group.
Prior to joining DXS 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. John also is an
Associate of the Institute of Chartered Secretaries of Australia.
John is General Counsel and Company Secretary for all DEXUS Group
companies. He is also a member of the Board Compliance Committee
and Chair of the Continuous Disclosure Committee.
14
2012 DEXUS AnnUAl REPORT
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 13 times during the year. nine Board meetings were main meetings, four meetings were held to consider specific business.
While the Board continually considers strategy, following commencement of the new CEO the Group’s strategic plans were reviewed in detail,
culminating in a one day Board and senior executive workshop held in June 2012.
main meetings
held
main meetings
attended
Specific meetings
held
Specific meetings
attended
Christopher T Beare
Elizabeth A Alexander AM
Barry R Brownjohn
John C Conde AO
Tonianne Dwyer
Stewart F Ewen OAM
Victor P Hoog Antink
Brian E Scullin
W Richard Sheppard
Darren J Steinberg
Peter B St George
9
9
9
9
7
9
5
3
5
4
9
9
9
9
9
7
9
5
3
5
4
9
4
4
4
4
4
4
1
–
2
2
4
4
4
4
4
4
4
1
–
2
2
4
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.
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 Director’s attendance at those meetings.
Board audit
Committee
Board Risk &
Sustainability
Committee
Board Compliance
Committee
Board Nomination &
Remuneration
Committee
Board Finance
Committee
held
attended
held
attended
held
attended
held
attended
held
attended
Christopher T Beare
Elizabeth A Alexander AM
Barry R Brownjohn
John C Conde AO
Tonianne Dwyer
Stewart F Ewen OAM
Brian E Scullin
W Richard Sheppard
Peter B St George
–
4
4
–
–
–
–
2
4
–
4
4
–
–
–
–
2
4
–
4
4
–
–
–
–
2
4
–
4
4
–
–
–
–
2
4
–
–
–
4
3
–
1
–
–
–
–
–
4
3
–
1
–
–
11
–
–
11
–
11
–
–
–
11
–
–
11
–
11
–
–
–
4
–
4
–
–
–
–
–
4
4
–
4
–
–
–
–
–
4
2012 DEXUS AnnUAl REPORT 15
During the year an agreement was made to change our Chief Executive
Officer (CEO). Following an executive search process and effective
transition period, our new CEO commenced on 1 March 2012. We
have provided further detail below of the remuneration arrangements that
applied to our former CEO and the arrangements applying to our new CEO.
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 2012. The
information provided in this Report has been audited in accordance
with the provisions of section 308 (3C) of the Corporations Act 2001.
3.2 Key management personnel
In this report, Key Management Personnel (KMP) are those
individuals having the authority and responsibility for planning, directing
and controlling the activities of the DEXUS Property Group (Group),
either directly or indirectly. They comprise:
n non‑Executive Directors
n the Chief Executive Officer (CEO)
n Key Executives who are members of the Group Management
Committee (GMC)
Below are the individuals determined to be KMP of the Group,
classified between non‑Executive Director and key
Executive personnel.
Non-Executive Directors
During the year, the following relevant changes relating to the Board’s
composition occurred:
n Resignation of Mr Scullin as a non‑Executive Director
effective 31 October 2011
n Appointment of Ms Dwyer as a non‑Executive Director
effective 24 August 2011
n Appointment of Mr Sheppard as a non‑Executive Director
effective 1 January 2012
Non-Executive Director
Title
Kmp 2012
Kmp 2011
Christopher T Beare
Chair
Elizabeth A Alexander AM Director
Barry R Brownjohn
John C Conde AO
Tonianne Dwyer
Stewart F Ewen OAM
Brian E Scullin
W Richard Sheppard
Peter B St George
Director
Director
Director
Director
Director
Director
Director
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
DIRECToRS’ REpoRT
3 Remuneration Report
3.1 overview
The Remuneration Report has been prepared in accordance with the
Corporations Act and relevant accounting standards. Whilst DXS is not
required statutorily to prepare such a report, we continue to believe that
disclosure of the Group’s remuneration practices is in the best interests
of all security holders.
Following a vote against the adoption of the 2011 Remuneration Report,
we have made significant changes to the executive remuneration
arrangements to be effective from 1 July 2012. The changes to the
remuneration arrangements are subject to security holder approval
at the Annual General Meeting (AGM) in november 2012.
These changes resulted from extensive consultations with and
feedback obtained from security holders, proxy advisors and
remuneration advisors following last year’s AGM. The Chairman of the
Board met personally with 14 of our institutional security holders during
March and April of this year.
Whilst further detail is provided below, we have reviewed fixed
remuneration levels payable to key Executives (including the Chief
Executive Officer) and annual “at‑risk” incentive remuneration
opportunity (including the basis for and form of any such benefit),
and will introduce a transparent and targeted long term incentive
plan including a range of appropriate performance hurdles.
The changes are aimed at ensuring each component of the Group’s
overall remuneration framework reflects current market practice and
the Group’s contemporary business environment and profile,
specifically the A‑REIT sector.
We have undertaken a significant restructure of the executive incentive
plans so that they are more transparent, better understood and, most
importantly, offer closer alignment of reward outcomes to security holder
interests. This has involved the explicit inclusion of security holder return
performance hurdles within the executive incentive plans and requiring
relevant Executives to hold a significant proportion of their total
remuneration in DXS securities upon achievement of such hurdles.
The Board concluded that the DEXUS Deferred Performance Payment
(DDPP) was perceived to be a long term incentive arrangement and
assessed accordingly by external commentators – whereas, in reality,
the DDPP was a deferral, annually, of a portion of a short term
incentive award. The principal perceived problem of the DDPP was its
potential to increase the value of the deferred award at a rate in excess
of movement in security holder value. The DDPP will be replaced from
1 July 2012 and no new DDPP awards will be made with respect to
remuneration after that date. The Board has also foreshadowed that it
intends to exercise its discretion not to apply the DDPP outperformance
multiplier on awards already granted but not yet vested (for 2010, 2011
and 2012). The new CEO and his direct reports will receive their DDPP
awards for the 2012 financial year in the form of performance rights to
DXS securities under a transition arrangement.
The Board also concluded that the Remuneration Reports should provide
greater disclosure on comparator groups and performance outcomes for
Executives and that a more active security holder engagement strategy
should be adopted. Upon completion of the review the Board resolved
to introduce this new remuneration framework.
16
2012 DEXUS AnnUAl REPORT
Key Executives
During the year, the following executive changes occurred:
n Mr Hoog Antink agreed with the Board to a CEO leadership transition and the Board commenced a search for a new CEO
n Mr Steinberg was appointed CEO effective 1 March 2012
n In accordance with the transition agreement, Mr Hoog Antink was given notice by the Board that his services would be terminated on
31 March 2012 which triggered his contractual severance conditions
n Mr Say was advised that his position of Chief Investment Officer would become redundant, effective 1 July 2012, which triggered his
contractual severance conditions
Key Executive
position
Darren J Steinberg
Chief Executive Officer & Executive Director
Tanya l Cox
John C Easy
Chief Operating Officer
General Counsel
Craig D Mitchell
Chief Financial Officer
Victor P Hoog Antink
Former Executive – Chief Executive Officer
Paul D Say
Former Executive – Chief Investment Officer
Kmp 2012
Kmp 2011
3
3
3
3
3
3
3
3
3
3
3
3.3 Board Nomination, remuneration & governance committee
The objectives of the Committee are to assist the Board in fulfilling its responsibilities by overseeing all aspects of non‑Executive Director and
Executive remuneration, as well as Board nomination and performance evaluation. Primarily, the responsibilities of the Committee are:
n To review and recommend to the Board:
– Board and CEO succession plans
– performance evaluation procedures for the Board, its committees and individual Directors
– the nomination, appointment, re‑election and removal of Directors
– the approach to remuneration at DEXUS, including design and operation of employee incentive plans
– Executive performance and remuneration outcomes
– non‑Executive Directors’ fees
During the year ended 30 June 2012 Committee members were:
Non-Executive Director
Title
John C Conde AO
Committee Chair
Christopher T Beare
Committee Member
Stewart F Ewen OAM
Committee Member
2012
2011
3
3
3
3
3
3
Mr Conde continued in his role as Committee Chair, drawing upon his extensive experience from a diverse range of appointments, including his role
as President of the Commonwealth Remuneration Tribunal. The Committee’s experience is further enhanced through the membership of Mr Beare
and Mr Ewen, each of whom has significant management experience in the property and financial services sectors.
The Committee operates independently from management, and may at its discretion appoint external advisors or instruct management to compile
information for its consideration. During the year the Committee appointed Egan Associates and Ernst & Young to provide remuneration advisory
services. Such services were provided to the Committee free from any undue influence by management.
advisor
Description of Service
Egan Associates
Remuneration Advisory Services
Ernst & Young
Remuneration Advisory Services
Clayton Utz
Executive Contract Advice
Fee
$90,552
$116,884
$4,405
2012 DEXUS AnnUAl REPORT 17
DIRECToRS’ REpoRT
3 Remuneration Report (continued)
3.4 Executive remuneration
Context
The Board believes that key Executives should be rewarded at levels
consistent with the complexity and risks involved in their position.
Incentive awards should be scaled according to the relative
performance of the Group, as well as business unit performance
and individual effectiveness.
The Group’s remuneration principles can be summarised as follows:
For the 2012 financial year, participating Executives continued to
receive performance pay in accordance with the DEXUS Performance
Payment (DPP) and the DEXUS Deferred Performance Plan (DDPP).
The first grant under the new lTI plan will be made in August 2013.
Key Executives have agreed to accept their DDPP performance award
for the 2012 financial year in the form of performance rights to
DXS securities under a transition arrangement.
Commencing 1 July 2012, the following will apply in relation to the
remuneration of key Executives:
Key Executives
n no increase to fixed remuneration for the CEO and other
key Executives
Fair and
competitive
Aligned
to investor
interests
Link
between
performance
and reward
Attract,
motivate
and retain
talent
n Implementation of the new remuneration framework will be effective
FIXED
REMUNERATION
1 July 2012 (conditional on security holder approval at the
november 2012 AGM)
+
New STI plan
VARIABLE
AT-RISK
REMUNERATION
n Provide an annual performance‑based award assessment similar to
that under the existing DPP based on a balanced scorecard of key
performance indicators (KPIs) set at stretch
The Group requires, and needs to retain, a senior management team
with significant experience in:
n the office, industrial and retail property sectors
n property management, including securing new tenancies under
contemporary lease arrangements, asset valuation and related
financial structuring and property development in its widest context
n capital markets, funds management, fund raising, joint venture
negotiations and the provision of advice and support to independent
investment partners
n treasury, tax and compliance
In this context the Committee reviews trends in employee reward
structures and strategies embraced across these sectors, including:
However, unlike the DPP:
n Only 75% of any award will be immediately payable in cash.
The remaining 25% will be deferred into performance rights to
DXS securities
n The performance rights will vest in equal tranches 12 and 24 months
after they are awarded and be subject to clawback and service
conditions during the deferral periods
n Executives will be entitled to the benefit of any distributions paid on
the underlying DXS securities prior to vesting through the issue of
additional performance rights
New LTI plan (to apply from 1 July 2013)
n Performance‑based remuneration aligned better to security holder
interest through a grant of performance rights to DXS securities
n Subject to a performance assessment over three and four years
n comparable international funds and asset managers which have an
n Main features of the new lTI plan are:
– Performance rights will be granted in two equal tranches vesting
after 3 and 4 years subject to performance, clawback and service
conditions being satisfied over each period
– Performance hurdles will be based on relative total security holder
return (TSR), FFO and ROE measures
– no performance multiplier will apply for outperformance
– Executives will not be entitled to distributions paid on the
underlying DXS securities prior to the performance rights vesting
– There will be no retesting of performance
The tables and graphs on pages 19‑20 provide a summary of the
proposed evolution of the existing remuneration framework to the
new remuneration framework. They also illustrate the increased
proportion of total remuneration that is deferred and also the new
proportion held as performance rights to DXS securities. This
evolution further aligns the Group’s executive remuneration
structures with security holders’ interests.
active presence in Australia
n ASX listed entities
n boutique property asset managers and consultants
n private equity and hedge funds which have an increasing exposure
to the business interests of the Group
In establishing the new remuneration framework, the Board has been
assisted by feedback from remuneration advisers, proxy advisers and
institutional investors.
Given that the Group instigated an extensive executive search process
during 2011, the process provided invaluable input to the Group’s
deliberations about total remuneration quantum and structure
(fixed and variable) for the position of CEO of the Group. This process
addressed conclusively the issue of CEO remuneration for the Group.
Remuneration structure and key changes
The remuneration structure for key Executives will comprise fixed
remuneration, a short term incentive and a long term incentive.
As previously announced by the Group and also highlighted in the
overview section above, several key changes have been approved by
the Board in respect of executive incentive plans. A revised short term
incentive (STI) plan will be introduced for key Executives (CEO and his
direct reports) from 1 July 2012 (the 2013 financial year). A new long
term incentive (lTI) plan will also be introduced for key Executives to
commence 1 July 2013 (the 2014 financial year).
18
2012 DEXUS AnnUAl REPORT
Existing framework
component
fixed remuneration
f
i
X
E
D
DEXUS
performance
payment (Dpp)
A
t
r
i
S
K
DEXUS Deferred
performance
payment (DDpp)
Long term
incentive (Lti)
New framework
component
fixed remuneration
Sti (immediate)
Sti (deferred)
f
i
X
E
D
A
t
r
i
S
K
Long term
incentive (Lti)
% of fixed
remuneration
100%
Target
85% (CEO)
75% (CFO & CIO)
50% (other key Execs)
Target
100% (CEO)
75% (CFO & CIO)
50% (other key Execs)
% of fixed
remuneration
100%
Target
100% (CEO & CFO)
70% (other key Execs)
Outperformance up to
125% (CEO & CFO)
up to 87.5% (other
key Execs
performance
measure
Market review
Annual
performance
against pre‑agreed
weighted financial
and non‑financial
KPIs
(i.e. balanced
scorecard)
performance range
Delivery mechanism
Actual payments reflect individual
expertise & market conditions
Cash, superannuation
& packaged benefits
0 to 100% of target remuneration
structure
Cash
0 to 100% of target
remuneration structure
and
1.1 to 1.5 times award
for outperformance of 3 year
benchmark investment returns
Phantom composite equity
(DXS and Unlisted), vesting
over 3 years
Outperformance multiplier
incentive available
not available
performance
measure
Market review
performance range
Delivery mechanism
Actual payments reflect individual
expertise & market conditions
Cash, superannuation
& packaged benefits
75% paid in cash
25% deferred into
DXS performance
rights, vesting in equal tranches
12 and 24 months after award
and subject to service and
clawback provisions
Failure to meet threshold
performance will result in zero
payment for that performance
component
To achieve target STI, Executives
must meet pre‑agreed business
and individual KPIs set
at stretch
To achieve maximum
STI, Executives must achieve
exceptional business and
Individual performance outcomes
Grant based on a
pre‑determined % of
fixed remuneration
Annual
performance
against pre‑agreed
weighted financial
and non‑financial
KPIs
(i.e. balanced
scorecard)
Vesting conditional
on future
performance
hurdles (Relative
TSR and earnings
measures)
DXS performance
rights, vesting in two
equal tranches 3 and 4 years
after grant and subject to
service and clawback provisions
Maximum Opportunity
at grant:
85% (CEO)
50% (CFO)
30% (other key Execs)
2012 DEXUS AnnUAl REPORT 19
DIRECToRS’ REpoRT
3 Remuneration Report (continued)
3.4 Executive remuneration (continued)
Key Executives (continued)
Target remuneration mix for key Executives (expressed as a percentage of fixed remuneration) is shown below:
target remuneration structure
LTI
Deferred STI
STI
Fixed
K
S
I
R
T
A
D
E
X
I
F
85%
25%
75%
85%
31%
94%
50%
25%
75%
50%
31%
94%
30%
18%
53%
30%
22%
66%
100%
100%
100%
100%
100%
100%
Target
Outperformance
Target
Outperformance
Target
Outperformance
CEO
CFO
Other key Executives
Evolution of cEo remuneration
NEW
LTI
STI
Fixed
K
S
I
R
T
A
D
E
X
I
F
DDPP
50% Vesting – performance period (performance rights)
50% Vesting – performance period (performance rights)
Performance period
12.5% Vesting
12.5% Vesting
Deferral period (performance rights)
75% Vesting (cash payment)
100% Vesting – deferral period (phantom equity)
EXISTING
DPP
Performance period
100% Vesting (cash payment)
Fixed
July
June
August
Year 2
Year 3
Year 4
Year 5
The illustration below highlights the maximum remuneration opportunity for the CEO under the new framework incorporating a traditional lTI with
performance hurdles, compared to the current remuneration framework incorporating the established DPP and DDPP, the latter which embraced
a performance multiplier at vesting. The illustration reflects an uplift in security price over the 4 year lTI vesting period and the impact of the
multiplier (incorporating security price growth and distributions) under the current DDPP. The new framework also incorporates a deferral element
under the annual incentive award in the form of DXS securities and, whilst revealing a reduction in key Executive potential reward, better aligns
remuneration opportunity to security holder interests.
Capital growth
Capital growth (reflective of 2009 DDPP and includes distributions)
NEW
EXISTING
100%
Fixed
100%
Fixed
94%
STI cash
31%
STI deferred
85%
LTI
15%
85%
DPP
100%
DDPP
40%
55%
DDPP Multiplier
100%
200%
300%
400%
20
2012 DEXUS AnnUAl REPORT
Frequently asked questions
New remuneration structure
Sti plan
What is the STI Plan?
What is the new remuneration structure?
The remuneration structure for Executives at Target is as follows:
n CEO – 35% fixed, 65% at‑risk
n CFO – 40% fixed, 60% at‑risk
n Other key Executives – 50% fixed, 50% at‑risk
The “at‑risk” amount consists of STI and lTI components which,
if certain Group and Individual performance conditions are not met,
can be significantly reduced (in the case of the STI) or forfeited entirely
(in the case of the lTI).
Why does the Board consider this structure appropriate?
The Board considers the remuneration structure to be appropriate as it:
CEO
CFO
n reflects market practice
n links individual performance to STI outcomes
n is closely aligned to security holder interests through lTI
performance hurdles
n through equity exposure and outperformance potential, the structure
offers attractive incentives for highly effective Executives
total remuneration
How does the Board determine total remuneration?
The Committee reviews a considerable amount of information from a
variety of sources to ensure an appropriate outcome reflecting market
practice (incorporating various benchmarks) is achieved. These
sources include:
n Publicly available remuneration reports of A‑REIT competitors
n Publicly available remuneration reports from ASX listed companies
with similar market capitalisation and complexity
n Advice on remuneration levels of privately held property, funds
management, and private equity owned companies
n Salary survey data from Hart Consulting, Avdiev, Aon Hewitt, FIRG
and others as appropriate
n Advice from external advisors appointed by the Committee,
Egan Associates and Ernst & Young
The comparator group considered as part of the above process is
significantly larger than the comparator group adopted for assessment
of the Group’s relative TSR performance under the new lTI plan
(refer below). Executives are recruited from the former group though
DXS performance will subsequently be assessed appropriately with
respect to the latter.
fixed remuneration
What is fixed remuneration?
Fixed remuneration is the regular pay (base salary and statutory
superannuation contributions) an Executive receives in relation to
his/her role. It reflects the complexity of the role, as well as the skills
and competencies required to fulfil it, and is determined having regard
to a variety of information sources to ensure the quantum is fair
and competitive.
How is fixed remuneration determined?
The Committee sets fixed remuneration around the median level of
comparable companies after making adjustments for the different risk
profiles of those companies (refer to Total Remuneration above).
The STI Plan provides the Executive with an opportunity to achieve
an annual remuneration outcome in addition to fixed remuneration,
subject to the achievement of pre‑agreed Group, divisional and
individual performance objectives which are set out in a personalised
balanced scorecard.
How much can be earned under the STI Plan?
Expressed as a percentage of fixed remuneration, Executives can earn
the following incentive payments under the STI Plan:
Target
outperformance
100%
100%
70%
125%
125%
87.5%
Other key Executives
Aggregate performance below predetermined thresholds would result
in no award being made under the STI Plan.
The amount each Executive can earn is dependent on how he/she
performs against a balanced scorecard of KPIs that is set at the
beginning of each year. The balanced scorecard is arranged in
categories and each category is weighted differently depending on the
specific accountabilities of each Executive. If an Executive does not
meet threshold performance in a category, the score for that category
will be zero.
The combination of KPIs in each category is set at stretch levels
such that it would be very difficult for any Executive to score 100%
in any category. Target is this combination of KPIs and is therefore
a stretch goal.
Typically the balanced scorecard in the old plan has delivered 85%
to 90% of target for fully effective performance. We expect the new
plan to operate in a similar fashion. With the introduction of thresholds,
failure to achieve a KPI threshold will result in no payment for that KPI
and potentially, in aggregate, for the total STI assessment. Furthermore,
outperformance would only be recognised if an Executive outperformed
the balanced scorecard KPIs by exceptional achievements.
How does the deferral component operate?
25% of any award under the STI Plan will be deferred and awarded
in the form of performance rights to DXS securities.
The rights will vest in two equal tranches, 12 and 24 months after
being awarded subject to clawback and continued employment
based on a deferral period commencing 1 July after the relevant
performance period.
How is the STI Plan aligned to security holder interests?
The STI Plan is aligned to security holder interests in the
following ways:
n as an immediate reward opportunity to attract, motivate and retain
talented Executives who can influence the future performance of
the Group
n through a 25% mandatory STI deferral for Executives
– ensuring that Executives have a continuing interest in the
outperformance of DXS securities
– allowing for future clawback of STI awards in the event of
a material misstatement of the Group’s financial position
When is the STI paid?
Paid to Executives in August of the financial year immediately following
the performance period, following the sign‑off of statutory accounts
and announcement of Group’s annual results.
2012 DEXUS AnnUAl REPORT 21
DIRECToRS’ REpoRT
3 Remuneration Report (continued)
3.4 Executive remuneration (continued)
Frequently asked questions (continued)
How are the performance hurdles measured?
Relative TSR
n 50% vesting for performance at the median of comparator group;
n Straight‑line vesting for performance between the 50th and 75th
How is the allocation of deferred STI determined?
percentile; and
The number of performance rights awarded is based on 25% of the
STI value awarded to the Executive divided by the volume weighted
average price (VWAP) of securities 10 trading days either side of the
first trading day of the new financial year.
n 100% vesting for performance at or above the 75th percentile.
n Proposed comparator group:
– listed: CPA, IOF, GPT, CFX, WRT, DXS
– Unlisted: AMP Office, GWOF, APPF, Investa, ISPT (Diversified)
How are distributions treated during the deferral period?
Executives will be entitled to the benefit of distributions paid on
the underlying DXS securities prior to vesting through the issue
of additional performance rights.
Lti plan
What is the LTI Plan?
The lTI is an incentive grant which rewards Executives for sustained
earnings and security holder returns and is delivered in the form of
performance rights to DXS securities.
How are grants under the LTI Plan determined?
Executives receive a grant of performance rights to DXS securities
(dependent on their role and responsibilities) under the lTI Plan
equivalent to the following percentage of Fixed Remuneration:
CEO
CFO
Other Key Executives
How does the LTI Plan work?
lTI grant (% of Fixed
Remuneration)
85%
50%
30%
Performance rights are converted into DXS securities upon achievement
of performance conditions set by the Board. Performance against the
selected hurdles will be assessed in two equal tranches over two
periods, 3 and 4 years after the grant date. If the performance
conditions are not met over either period, then the respective
performance rights will be forfeited. There is no re‑testing of
forfeited rights.
What are the performance hurdles?
n 50% measured on the basis of the Group’s performance
against relative total security holder return (Relative TSR)
performance hurdle.
TSR represents an investor’s return, calculated as the percentage
difference between the initial amount invested and the final value
of the DXS securities at the end of the relevant period, assuming
distributions were reinvested.
n 25% measured on the basis of the Group’s performance against
a predetermined Funds From Operations (FFO) per security
hurdle rate.
FFO is defined as profit/loss after tax adjusted for property
revaluations, impairments, derivative and FX mark to market
impacts, amortisation of certain tenant incentives, straight line
rent adjustments, deferred tax expense/benefit and any capital
distributions received.
n 25% measured on the basis of predetermined Return on Equity
performance hurdles.
Vesting under the Relative TSR measure will be on a sliding scale and
reflect the degree of outperformance relative to a comparator group
of companies. The comparator group will comprise both listed and
unlisted entities.
22
2012 DEXUS AnnUAl REPORT
FFO per security and Return on Equity
n 50% vesting for Target performance;
n Straight line vesting for performance between Target and Stretch;
and
n 100% vesting for Stretch performance.
How is the LTI Plan aligned to security holder interests?
Aligned to long term security holder interests in the following ways:
n as a reward to Executives when the Group’s overall performance
exceeds specific predetermined earnings and security holder
return benchmarks
n as a reward mechanism which encourages Executive retention and
at the same time allows for future clawback of lTI grants for financial
underperformance, deliberate misrepresentation or fraud
n aligning the financial interests of security holders with Executives
through exposure to DXS securities and the Group’s performance
n encouraging and incentivising Executives to make sustainable
business decisions within the Board‑approved risk appetite and
strategy of the Group
What policies and procedures exist to support the integrity of
the LTI Plan?
The administration of the lTI Plan is supported by Plan Guidelines
which provide Executives with the rules of the Plan and guidance
as to how it is to be administered.
Executives are prevented from hedging their exposure to unvested
DXS securities or trading in DXS securities or related products.
The Group also has Conflict of Interest and Insider Trading policies in
place to support the integrity of the lTI Plan, which extend to family
members and associates of the Executive.
How is the allocation of performance rights determined?
The number of performance rights granted is based on the grant
value to the Executive (% of fixed remuneration) divided by the volume
weighted average price (VWAP) of securities 10 trading days either side
of the first trading day of the new financial year.
How are distributions treated prior to vesting?
Executives will not be entitled to distributions paid on the underlying
DXS securities prior to the performance rights vesting.
Under both the STI and lTI plans, if an Executive voluntarily resigns,
or is terminated by the Group for cause prior to vesting, all unvested
performance rights are forfeited. If an Executive’s employment is
terminated for reasons such as retirement, redundancy, reorganisation,
change in control or other unforeseen circumstances, the Committee will
recommend whether “good leaver” provisions apply, for decision by the
Board. The operation of all incentive plans is at the discretion of the
Board which retains the right to discontinue, suspend or amend the
operation of such plans.
For both the STI and lTI plans, where entitlements involve DXS
securities, it is the Board’s intention, subject to legal and tax advice,
that DXS securities be acquired on‑market and not through the issue
of new securities.
at-risk remuneration arrangements for 2012
n At the conclusion of the three year vesting period, if the “Composite
Executives were awarded at‑risk cash remuneration under the DPP
for the 2012 financial year. The awards were based on a Balanced
Scorecard assessment of performance for the financial year. Key
Executives, agreed to accept their DDPP award as performance rights
under a transition arrangement in respect of the 2012 financial year.
Awards were made under the DDPP to all participating Executives
including eligible former Executives.
DEXUS performance payment (Dpp) award
The DPP, which previously rewarded annual performance, will be
retired in favour of the new STI plan (discussed above), effective
1 July 2012. There are no legacy payments required to be made under
the DPP once the cash payments for year ending 30 June 2012 are
made in August 2012.
DEXUS Deferred performance payment (DDpp) award
The DDPP, which offered deferred cash incentives and was the
primary mechanism to promote retention of Executives, will be
retired effective 1 July 2012 (subject to security holder approval at the
november 2012 AGM). DDPP awards from years 2010, 2011 and 2012
(where applicable) will continue to vest in accordance with the plan
guidelines. During 2012 the Board foreshadowed that it intends to
exercise its discretion not to apply the outperformance multiplier with
respect to the 2010, 2011 and 2012 awards.
Former Executives Mr Hoog Antink and Mr Say will receive a final
award under the DDPP (with respect to their performance for the 2012
financial year), which will vest in July 2015. The Committee determined
that Mr Hoog Antink and Mr Say were “good leavers” under the DDPP
and that their DDPP awards will continue to vest according to the
vesting schedule. Along with other DDPP participants, the Board
has foreshadowed that Mr Hoog Antink and Mr Say will not receive
a multiplier on their awards for years 2010, 2011, and 2012.
The DDPP Plan operates as follows:
n DDPP is subject to a three year vesting period from the
allocation date
n The DDPP allocation value is notionally invested during the
vesting period in DXS securities (50%) and Unlisted Funds
and Mandates (50%)
n During the vesting period, DDPP values fluctuate in line with
changes in the “Composite Total Return” (simulating notional
investment exposure), comprising 50% the total return of DXS
securities and 50% of the combined asset weighted total return
of the Group’s Unlisted Funds and Mandates
Total Return” meets or exceeds the “Composite Performance
Benchmark”, the Board may approve the application of an
outperformance multiplier to the final DDPP payment value:
1. The “Composite Performance Benchmark” comprises 50%
of the S&P/ASX 200 Property Accumulation Index and 50%
of the Mercer Unlisted Property Fund Index over the 3‑year
vesting period
2. For performance up to 100% of the “Composite Performance
Benchmark”, Executives receive a final DDPP payment by
reference to the “Composite Total Return” of the preceding
3‑year vesting period
3. For the 2009 performance between 100% and 130% of the
“Composite Performance Benchmark” an outperformance
multiplier may be applied by the Board, ranging from 1.1 to
a maximum of 1.5 times the final DDPP payment value
Note: For the 2010, 2011 and 2012 DDPP awards, the Board has
foreshadowed that it intends to exercise its discretion not to apply
the outperformance multiplier.
transition award
Key Executives agreed to accept their DDPP award in the form of
performance rights to DXS securities under a transition arrangement
in respect of the 2012 financial year.
Subject to security holder approval in november 2012, Executives will
be awarded performance rights to DXS securities vesting in July 2015
(with a similar vesting period to the DDPP), subject to future clawback
and service conditions. The award allocation will be determined based
on the value awarded to the Executive divided by the volume weighted
average price (VWAP) of securities 10 trading days either side of the
first trading day of the new financial year.
Executives will be entitled to any distributions paid on the underlying
DXS securities prior to the rights vesting (consistent with the basis
for performance assessment under the DDPP) through the issue of
additional performance rights each period equivalent to the distribution
value entitlement. Unlike the DDPP, there will be no multiplier in
respect of these performance rights.
These equity awards are a one‑off arrangement as part of the Group’s
transition to its new remuneration framework, effective 1 July 2012.
If security holder approval is not obtained at the november 2012 AGM,
relevant Executives will receive an award under the DDPP.
2012 DEXUS AnnUAl REPORT 23
DIRECToRS’ REpoRT
3 Remuneration Report (continued)
3.5 Service agreements
The employment arrangements for Executives at the time of their appointment are set out below.
CEo – Darren J Steinberg
On 1 March 2012, the Group appointed Mr Steinberg as CEO under the following contract terms; as announced to the market on
28 november 2011:
Employment agreement
Employment is under a rolling service agreement
Terms
Fixed remuneration
$1,400,000 per annum (inclusive of compulsory superannuation, packaged benefits and fringe benefits tax)
Short‑term incentive
Pro rata participation in the DPP (30% of Total Remuneration) and DDPP (35% of Total Remuneration) for the
year ended 30 June 2012
Sign‑on award
$1,500,000 upon commencement as part compensation for foregone remuneration from his previous employer
and to secure his services. An additional $500,000 for the year ending 30 June 2013 subject to achievement of
specific Key Performance Indicators under the DPP
By Mr Steinberg with 6 months’ notice or by the Group with 12 months’ notice (or payment in lieu)
Termination
no entitlement to severance payment
By the Group without notice if serious misconduct has occurred
Former CEo – Victor p hoog antink
The former CEO’s employment contract commenced on 1 October 2004. The principal terms of the employment arrangement were as follows:
Employment agreement
Employment is under a rolling service agreement
Terms
Fixed remuneration
$1,550,000 per annum (inclusive of compulsory superannuation, packaged benefits and fringe benefits tax)
Short term incentive
Termination
Participation in the DPP (30% of Total Remuneration) and DDPP (35% of Total Remuneration) for the year
ended 30 June 2012
By Mr Hoog Antink with 6 months’ notice or by the Group with 6 months’ notice (or payment in lieu)
Entitlement to severance payment of 100% of Fixed Remuneration
By the Group without notice if serious misconduct has occurred
By mutual agreement between Mr Hoog Antink and the Board, a 4 months’ notice period applied on his departure. Mr Hoog Antink was entitled
to a pro rata DPP and DDPP entitlement for the 2012 year with vesting in accordance with the vesting schedule of the DDPP Plan.
CFo and other key Executives
The following contract terms were in place for Mr Mitchell, Mr Say, Ms Cox and Mr Easy, being key Executives of DEXUS for the year ending
30 June 2012:
Employment agreement
Employment is under a rolling service agreement
Terms
Fixed remuneration
$450,000‑$750,000 per annum (inclusive of compulsory superannuation, packaged benefits and fringe
benefits tax)
Short term incentive
Participation in the DPP (25%‑30% of Total Remuneration) and DDPP (25%‑35% of Total Remuneration)
Termination
By Executive with 3 months’ notice or by the Group with 3 months’ notice (or payment in lieu)
Entitlement to severance payment of 75% of Fixed Remuneration
By the Group without notice if serious misconduct has occurred
The Group may terminate the Executive’s employment by providing three months written notice, or payment in lieu of notice, based on Fixed Remuneration.
In addition, the Group may provide a DPP payment and/or a DDPP award to the Executive for the period from the last review date (being 1 July).
On termination by the Group, any DDPP awards will vest in accordance with the vesting schedule of the DDPP. In the case of termination by the
Group for serious misconduct, the Executive is entitled only to the fixed portion of his or her remuneration, and only up to the date of termination.
Any unvested DDPP awards will be forfeited.
Aspects of these employment arrangements will be updated to reflect their participation in the new remuneration framework over the balance of the
current calendar year.
24
2012 DEXUS AnnUAl REPORT
3.6 performance pay
(linking Group Performance to Performance Pay for 2012 financial year)
group performance
group highlights
property portfolio
Capital management
Funds management
3.4%
FFO per security growth
1 million square metres
of space in total leased
$10 million
in cost savings secured
5.4%
Office like‑for‑like
nOI growth
total return analysis
$1.6 billion
Total transactions across
the Group
27.2%
Gearing at 30 June 2012
Top quartile investment
performance for DWPF
and STC
US$770 million
US central portfolio sold
70‑80%
FFO payout ratio from FY13
$420 million+
Equity raised for DWPF
The table below sets out DXS’s total security holder return since inception, relative to the S&P/ASX200 Property Accumulation Index. It also sets
out DXS’s Composite Total Return since inception, relative to the Composite Performance Benchmark. The DEXUS Composite Total Return is 50%
of the total return of DXS 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/ASX200 Property Accumulation Index and 50% of Mercers’ Unlisted Property Fund Index.
Year ended 30 June 2012
DEXUS Property Group
S&P/ASX200 Property Accumulation Index
DEXUS Composite Total Return
Composite Performance Benchmark
1 Year
(% per annum)
2 Years
(% per annum)
3 Years
(% per annum)
Since 1 october 2004
(% per annum)
12.20
11.00
11.00
10.20
16.80
8.40
13.70
9.20
14.30
12.30
11.80
9.90
3.70
(2.10)
6.70
4.30
In determining the construction of the Composite Total Return and in particular the relative weighting between the returns of DEXUS Property
Group and its unlisted funds and mandates, the Board considered the following factors:
n the desire of DEXUS Property Group to attract and retain third party funds and mandates based on the assurance that incentives are in place
to ensure their equitable treatment
n the economic contribution to DEXUS Property Group of management fees arising from third party funds under management
n the increased investment in its management team and infrastructure, enabled by third party funds management fees, including in‑house
research, valuations and sustainability teams, the cost of which is defrayed by those fees
n the greater market presence and relevance the third party business brings to DEXUS Property Group
The Board previously considered whether the construction of the Composite Total Return should reflect the actual value of the unlisted funds
and mandates ($5.6 billion as at 30 June 2012), and DEXUS Property Group’s own funds under management ($6.9 billion as at 30 June 2012).
Cognisant of all the above factors, the Board determined that a 50/50 allocation, rather than an allocation varying according to asset weighting,
most fairly reflects the value contribution of third party funds to DEXUS Property Group and provides the greatest assurance that all investors are
treated equitably.
2012 DEXUS AnnUAl REPORT 25
DIRECToRS’ REpoRT
3 Remuneration Report (continued)
3.6 performance pay (continued)
group performance (continued)
total return of DXS securities
S&P/ASX200 Property Accumulation Index
DXS
220
200
180
160
140
120
100
80
60
40
20
0
Oct 04*
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
Sep 09
Dec 09
Mar 10
Jun 10
Sep 10
Dec 10
Mar 11
Jun 11
Sep 11
Dec 11
Mar 12
Jun 12
* 31 October 2004 to 30 June 2012. Source: UBS Securities Australia ltd.
The chart below illustrates the DXS’s performance relative to A‑REITs above $2 billion market capitalisation over the past three financial years.
40%
35%
30%
25%
20%
15%
10%
5%
0
GMG
GPT
DXS
CPA
CFX
MGR
XPJAI
WDC
SGP
Source: UBS Securities Australia ltd.
The chart below illustrates DXS’s performance against the broader property sector over the past three years.
40%
35%
30%
25%
20%
15%
10%
5%
0
GMG
IOF
GPT
CDI
CQR
APZ
DXS
CPA
CFX
BWP MGR
XPJAI
ALZ
CHC
ABP WDC
SGP
AJA
Source: UBS Securities Australia ltd.
DXS continues to outperform the S&P/ASX200 Property Accumulation Index and has exceeded this benchmark on a rolling three year basis
each period since inception in October 2004. In addition, the DXS Composite Total Return has also outperformed the Composite Performance
Benchmark on a rolling three year basis since inception.
Whilst the Directors recognise that improvement is always possible, they consider that the Group’s business model, which aims to deliver consistent
returns with relatively moderate risk, has been central to DXS’s relative outperformance, and that its approach to executive remuneration, with a
focus on consistent outperformance of objectives, is aligned with and supports the superior execution of the Group’s strategic plans.
26
2012 DEXUS AnnUAl REPORT
individual performance assessment – Balanced Scorecard
Prior to the commencement of each financial year, the Board approves DEXUS’s strategic and operational objectives which are then translated into
a series of weighted financial and non‑financial Key Performance Indicators (KPIs) for management. KPIs are assembled to form each Executive’s
Balanced Scorecard.
The Balanced Scorecard is divided into four components – financial performance, business development, management and strategy, stakeholder
engagement, and leadership. These components are weighted differently for each Executive. For each of the components the Executive has
objectives, measures and specific initiatives set for that year. These scorecards are agreed with the Executive at the beginning of the year,
reviewed at half year and assessed for performance awards at the end of the year.
The KPIs are clear, tailored to each Executive’s role, measurable and specific. It would be very difficult for an Executive to achieve all of the KPIs.
Most Executives would have 3 to 8 measures and often up to 10 particular initiatives in each component of the scorecard. These measures can
be very specific – sell certain assets, recruit new Executives, improve tenant satisfaction by x%, implement certain projects by x date, etc.
Without specifically identifying an Executive or all the measures and initiatives, we have illustrated below in abbreviated form an indicative
balanced scorecard that applied last year.
Theme
Weight objective
measure
Initiative
Financial
performance
40%
n Financial outperformance
n Deliver financial targets in
n Secure at least $4m
relative to peers
Business Plan
of trading profits
n net operating income
n Re‑finance $800m of debt
(pre‑asset sales) > $490m
n FFO > $370.2m
n Increase debt duration
to > 4.0 years
n Capital expenditure = $60m
n Reduce cost of funds
n Group FFO per security 7.65 cents
n lease 123 Albert Street to 100%
n non‑core assets sales
by 31 December 2011
n lease 1 Bligh Street to 80%
by 30 June 2012
n [US central initiative]1
n [US West coast initiative]1
Business
development,
management
and strategy
30%
n Enhance performance
n CR&S Report
n [Office sector initiative]1
management
n Delivery of divisional
n [Industrial sector value‑add
n Maintain leadership in CR&S
Business Plans
initiative]1
n [Retail sector initiative]1
n [3rd party FUM initiative]1
n [International initiative]1
Stakeholder
engagement
10%
n Improve Investor Relations
n Investor surveys
n Proactive media coverage
n Analyst feedback
n Develop Investor Relations plan
n [Brand and external marketing]1
n Tenant satisfaction survey
n Implement Top Client contact plan
improved from previous year
leadership
20%
n Develop executive management
n Teamwork and trust review via
n Mentor & promote team members
n Implement change management
one‑on‑one interviews
n Build corporate branding
n Embed DEXUS values
n Staff engagement survey results
n Succession planning
n Staff turnover measures
n [Specific personal actions]1
n [Specific external actions]1
n leadership programs
1 Specific initiatives viewed as commercial in confidence and therefore not disclosed.
Additional Kpis
Additional KPIs for the Group, set following the commencement of the new CEO, for the year ended 30 June 2012 can be summarised as follows:
Financial objectives
performance as at 30 June 2012
n Reduce business expenses and create operational efficiencies
n Implemented business restructure and management changes
n Progress recycling of non‑core properties and exiting offshore markets
n Settlement of US central portfolio and German portfolio sales
n Reduce the cost and improve the access to capital
n Revised payout ratio
n Commenced on‑market buy‑back
2012 DEXUS AnnUAl REPORT 27
DIRECToRS’ REpoRT
3 Remuneration Report (continued)
3.6 performance pay (continued)
group performance (continued)
performance pay outcomes
Following an assessment of Executive’s Balanced Scorecards, the Board has determined that the following remuneration outcomes are appropriate
with respect to each Executive’s performance during the year ending 30 June 2012. Awards were rounded by the Board following their assessment
of the criticality and weighting of group, divisional and individual performance, which is reflected in the table below:
Key Executive
position
Darren J Steinberg
Chief Executive Officer
Craig D Mitchell
Chief Financial Officer
Tanya l Cox
John C Easy
Chief Operating Officer
General Counsel
former Executives
Victor P Hoog Antink
Chief Executive Officer
Paul D Say
Chief Investment Officer
Balanced
Scorecard
result
Dpp award
90%
87%
93%
90%
83%
82%
360,000
500,000
200,000
200,000
825,000
350,000
Transition
performance
rights1
420,000
500,000
200,000
200,000
DDpp award
–
–
–
–
–
–
975,000
350,000
1 Refer to notes 1 and 38 of the Financial Statements for details on this award.
Unvested and vesting DDpp awards
The table below shows the value of unvested and vested DDPP awards as at 30 June 2012. For awards made in 2009, a performance factor
has been approved by the Board under the DDPP Plan rules which reflects the Group’s strong relative performance over a three year period.
The table also shows the value of awards made under the DDPP Plan for former Executives Mr Hoog Antink and Mr Say. Following these final
awards, the DDPP Plan will be closed and will continue to operate only as a legacy plan to administer prior year awards.
participant
award
date
DDpp
allocation
value
movement
in DDpp
value since
award date
Closing
DDpp
value as at
30 June 2012
movement
due to
performance
factor
Vesting
DDpp
value as at
30 June 2012
Vest date
Victor P Hoog Antink
1 Jul 2012
975,000
–
975,000
1 Jul 2011
1,300,000
143,650
1,443,650
1 Jul 2010
1,200,000
352,200
1,552,200
–
–
–
–
–
–
1 Jul 2015
1 Jul 2014
1 Jul 2013
1 Jul 2009
915,000
364,536
1,279,536
511,814
1,791,350
1 Jul 2012
Craig D Mitchell
1 Jul 2012
1 Jul 2011
1 Jul 2010
1 Jul 2009
–
450,000
400,000
325,000
–
49,725
117,400
129,480
–
499,725
517,400
454,480
Paul G Say
1 Jul 2012
350,000
–
350,000
Tanya l Cox
John C Easy
1 Jul 2011
1 Jul 2010
1 Jul 2009
1 Jul 2012
1 Jul 2011
1 Jul 2010
1 Jul 2009
1 Jul 2012
1 Jul 2011
1 Jul 2010
1 Jul 2009
400,000
250,000
200,000
–
190,000
180,000
150,000
–
185,000
188,000
162,000
44,200
73,375
79,680
–
20,995
52,830
59,760
–
20,443
55,178
64,541
444,200
323,375
279,680
–
210,995
232,830
209,760
–
205,443
243,178
226,541
–
–
–
–
–
–
1 Jul 2015
1 Jul 2014
1 Jul 2013
181,792
636,272
1 Jul 2012
–
–
–
–
–
–
1 Jul 2015
1 Jul 2014
1 Jul 2013
111,872
391,552
1 Jul 2012
–
–
–
–
–
–
1 Jul 2015
1 Jul 2014
1 Jul 2013
83,904
293,664
1 Jul 2012
–
–
–
–
–
–
1 Jul 2015
1 Jul 2014
1 Jul 2013
90,616
317,157
1 Jul 2012
28
2012 DEXUS AnnUAl REPORT
3.7 Actual performance pay received
Executive remuneration actual cash received
In line with best‑practice recommendations, the amounts shown in the table below provide a summary of actual remuneration received during the
year ended 30 June 2012. The DPP and DDPP cash payments were received for performance in the 2011 and 2008 financial years respectively.
Key Executive
Darren J Steinberg
Craig D Mitchell
Tanya l Cox
John C Easy
Former Executives
Victor P Hoog Antink
Paul G Say
Cash
salary
pension &
super benefits1
461,409
734,225
434,225
427,225
1,145,191
734,225
5,258
15,775
15,775
22,775
15,775
15,775
other
short term
benefits2
1,500,000
–
–
–
Earned in prior FY
Term
benefits3
Dpp cash
payments4
DDpp cash
payment5
Total
–
–
–
–
–
450,000
195,000
190,000
–
1,966,667
353,950
1,553,950
247,765
169,896
892,765
809,896
815,978
1,550,000
1,100,000
1,274,220
5,901,164
107,856
750,000
400,000
353,950
2,361,806
1 Includes employer contributions to superannuation under the superannuation guarantee legislation and salary sacrifice amounts.
2 Mr Steinberg received a one‑off sign on payment, Mr Hoog Antink and Mr Say received payment for accrued but unused leave entitlements upon termination.
3 notice and severance payments made under contractual terms to former Executives Mr Hoog Antink and Mr Say.
4 Cash payment made in August 2011 with respect to the 2011 DPP (i.e. annual performance payment for the prior year).
5 Cash payment made in August 2011 with respect to the 2008 DDPP award that vested on 30 June 2011 (i.e. realisation of three year deferred performance payment).
Executive remuneration statutory accounting method
The amounts shown in this table are prepared in accordance with AASB 124 Related Party Disclosures and do not represent actual cash payments
received by Executives for the year ended 30 June 2012. Amounts shown under long Term Benefits reflect the accounting expenses recorded
during the year with respect to prior year deferred remuneration and awards that have or are yet to vest. For performance payments and awards
made with respect to the year ended 30 June 2012, refer to the Performance Pay Outcomes section of this report.
Short term benefits
post-employment
benefits
Security-based
benefits
long term benefits
Key Executive
Year
Cash
salary
Dpp
awards
$
$
other
short term
benefits
$
pension
& super
benefits
$
Darren J Steinberg
2012
461,409 360,000 1,500,000
5,258
2011
–
–
Craig D Mitchell
2012
734,225 500,000
2011
684,801
450,000
Tanya l Cox
2012 434,225 200,000
2011
375,001
195,000
John C Easy
2012
427,225 200,000
2011
401,801
190,000
–
–
– 15,775
–
15,199
– 15,775
–
49,999
– 22,775
–
23,199
Sub‑Total
2012 2,057,084 1,260,000 1,500,000 59,583
2011 1,461,603
835,000
– 88,397
Former Executives
Termination
benefits
$
–
–
–
–
–
–
–
–
–
–
Transition
performance
rights
$
105,000
–
125,000
DDpp
awards
$
–
–
–
Change in
prior DDpp
awards
$
Total
$
–
–
2,431,667
–
328,664 1,703,664
–
450,000
273,781
1,873,781
50,000
–
149,140
849,140
–
190,000
161,359
971,359
50,000
–
158,013
858,013
–
185,000
131,830
931,830
330,000
–
635,817 5,842,484
–
825,000
566,970
3,776,970
Victor P Hoog Antink 2012 1,145,191 825,000 815,978 15,775 1,550,000
2011 1,502,801 1,100,000
–
47,199
–
Paul G Say
2012
734,225 350,000
107,856 15,775
750,000
2011
649,801
400,000
–
50,199
400,000
–
–
–
–
975,000
938,512 6,265,456
1,300,000
900,583
4,850,583
350,000
216,352 2,524,208
400,000
226,785
1,726,785
Total
2012 3,936,500 2,435,000 2,423,834 91,133 2,300,000
330,000 1,325,000 1,790,681 14,632,148
2011 3,614,205 2,335,000
– 185,795
–
– 2,525,000 1,694,338 10,354,338
1 Annual cash performance payment made in August 2012.
2 Mr Steinberg received a one‑off sign‑on payment, Mr Hoog Antink and Mr Say received payment for accrued but unused leave entitlements upon termination.
3 Includes employer contributions to superannuation under the superannuation guarantee legislation and salary sacrifice amounts.
4 notice and severance payments made under contractual terms to former Executives Mr Hoog Antink and Mr Say.
5 Reflects the accounting expense accrued during the financial year for transition three year performance rights vesting in July 2015. This does not represent an actual payment
or potential value.
6 DDPP legacy Plan only applicable to former Executives Mr Hoog Antink and Mr Say and vesting after three years in July 2015.
7 Indicates the movement in value during the financial year of unvested and vesting DDPP grants. This does not represent an actual payment or potential value.
2012 DEXUS AnnUAl REPORT 29
DIRECToRS’ REpoRT
3 Remuneration Report (continued)
3.8 Non-Executive Directors
non‑Executive Directors’ fees are reviewed annually by the Committee
to ensure they reflect the responsibilities of directors and are market
competitive. The Committee reviews information from a variety of
sources to inform their recommendation regarding non‑Executive
Directors fees to the Board. Information considered included:
n Publicly available remuneration reports from ASX listed companies
with similar market capitalisation and complexity
n Publicly available remuneration reports from A‑REIT competitors
The table below outlines the Board fee structure (inclusive of statutory
superannuation contributions) for the year ended 30 June 2012:
Committee
Chair
member
Director’s Base Fee (DXFM)
$350,0001
$150,000
Board Risk & Sustainability
Board Audit
Board Compliance
Board Finance
$15,000
$15,000
$15,000
$15,000
$15,000
$7,500
$7,500
$7,500
$7,500
$7,500
n Information supplied by external remuneration advisors, including
Board nomination & Remuneration
Egan Associates and Ernst & Young
Total fees paid to non‑Executive Directors remain within the aggregate
fee pool of $1,750,000 per annum approved by DEXUS security
holders at the AGM in October 2008.
In 2012, the Board determined that it would be appropriate for
non‑Executive Directors (existing and new) to hold DEXUS securities.
A minimum target of 50,000 securities is to be acquired in each
Director’s first three year term (effective from 1 July 2012).
Such securities would be subject to the Group’s existing trading
and insider information policies.
Other than the Chair who receives a single fee, non‑Executive
Directors receive a base fee plus additional fees for membership
of Board Committees.
Breakdown of Non-Executive Director’s fee composition
DWPl Board
$30,000
$15,000
1 The Chairman receives a single fee for his entire engagement, including service on
Committees of the Board.
From 1 July 2012:
n The nomination & Remuneration Committee has broadened
its mandate to include oversight of DEXUS corporate governance
practices and is now named the nomination, Remuneration &
Governance Committee. To reflect the increased workload and
responsibilities of this Committee, fees were increased to $15,000
for Members and $30,000 for the Chair from 1 July 2012
n no other fee increases will be applicable to non‑Executive Directors
Base fee
Committee fees
Non-Executive Director Year
DXFm
Risk &
Sustainability
audit Compliance
Finance Nomination
and
Remuneration
DWpl
Total
Christopher T Beare
2012
2011
Elizabeth A Alexander AM 2012
Barry R Brownjohn
John C Conde AO
Tonianne Dwyer1
Stewart F Ewen OAM
Brian E Scullin2
W Richard Sheppard3
Peter B St George
Total
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
350,000
350,000
150,000
150,000
150,000
150,000
150,000
150,000
129,125
–
150,000
150,000
50,000
150,000
75,000
–
150,000
150,000
1,354,125
1,250,000
–
–
–
–
7,500
7,500
7,500
7,500
15,000
15,000
15,000
15,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,125
3,125
–
7,500
7,500
–
7,500
7,500
–
–
–
–
–
–
7,500
7,500
5,000
–
–
–
5,000
15,000
–
–
–
–
33,125
33,125
30,000
30,000
17,500
22,500
–
–
–
–
7,500
7,500
–
–
–
–
–
–
–
–
–
–
15,000
15,000
22,500
22,500
–
–
–
–
–
–
15,000
15,000
–
–
7,500
7,500
–
–
–
–
–
–
–
–
350,000
350,000
30,000
195,000
30,000
195,000
–
–
–
–
187,500
187,500
172,500
172,500
10,000
144,125
–
–
–
–
157,500
157,500
5,000
60,000
15,000
180,000
–
–
–
–
81,250
–
180,000
180,000
22,500
45,000
1,527,875
22,500
45,000
1,422,500
1 Ms Dwyer was appointed on 24 August 2011.
2 Mr Scullin resigned effective 31 October 2011.
3 Mr Sheppard was appointed 1 January 2012.
In addition to the non‑Executive Directors’ fee structure outlined above, Mr Ewen’s company was paid a fixed fee of $30,000 per annum for his
attendance at property inspections, for reviewing property investment proposals and participating in informal management meetings. This fee has
been discontinued effective 1 July 2012.
30
2012 DEXUS AnnUAl REPORT
Non-Executive Director’s statutory accounting table
The amounts shown in this table are prepared in accordance with AASB 124 Related Party Disclosures. The table is a summary of the actual
cash and benefits received by each non‑Executive Director for the year ended 30 June 2012.
Non-Executive Director
Year
Short term benefits
$
post-employment benefits
$
other long term benefits
$
Christopher T Beare
Elizabeth A Alexander AM
Barry R Brownjohn
John C Conde AO
Tonianne Dwyer1
Stewart F Ewen OAM
Brian E Scullin2
W Richard Sheppard3
Peter B St George
Total
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
1 Ms Dwyer was appointed on 24 August 2011.
2 Mr Scullin resigned effective 31 October 2011.
3 Mr Sheppard was appointed 1 January 2012.
334,225
334,801
170,539
179,801
172,018
172,301
158,257
158,257
132,225
–
109,052
109,052
55,046
165,138
74,541
–
165,138
165,138
1,371,041
1,284,488
15,775
15,199
24,461
15,199
15,482
15,199
14,243
14,243
11,900
–
48,448
48,448
4,954
14,862
6,709
–
14,862
14,862
156,834
138,012
Total
$
350,000
350,000
195,000
195,000
187,500
187,500
172,500
172,500
144,125
–
157,500
157,500
60,000
180,000
81,250
–
180,000
180,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,527,875
1,422,500
2012 DEXUS AnnUAl REPORT 31
DIRECToRS’ REpoRT
4 Directors’ interests
The Board’s policy on insider trading and trading in DXS securities, or securities in any of the funds managed by the Group, by any Director
or employee is outlined in the Corporate Governance Statement.
Following a review of the policy by the Board in 2012, and to further enhance alignment of interests, the Board determined that it would be
appropriate for Directors to hold DXS securities in the future. The Board has set a minimum holding of 50,000 securities to be acquired by
each Independent Director by 30 June 2015. newly appointed Independent Directors will be required to purchase 50,000 securities within
their first three year term.
As at the date of this Directors’ Report no 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 the 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:
Director
Company
Date appointed
Christopher T Beare
Mnet Group limited
6 november 2009
Elizabeth A Alexander AM CSl limited
John C Conde AO
Whitehaven Coal limited
Tonianne Dwyer
Cardno limited
12 July 1991
3 May 2007
25 June 2012
Date resigned or ceased being a
Director of a listed entity
19 October 2011
W Richard Sheppard
Macquarie Office Management limited1
Macquarie Countrywide Management limited2
Macquarie DDR Management limited3
28 May 2009
31 March 2007
8 October 2003
1 March 2010
1 March 2010
18 June 2010
Peter B St George
Boart longyear limited
First Quantum Minerals limited4
21 February 2007
20 October 2003
1 Responsible entity for Macquarie Office Trust (ASX: MOF).
2 Responsible entity for Macquarie Countrywide Trust (ASX: MCW).
3 Responsible entity for Macquarie DDR Trust (ASX: MDT).
4 listed for trading on the Toronto Stock Exchange in Canada and the london Stock Exchange in the United Kingdom.
6 principal activities
During the year the principal activity of the Group was to own, manage and develop 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 the Group’s activities during the year.
7 Total value of Trust assets
The total value of the assets of the Group as at 30 June 2012 was $7,364.1 million (2011: $7,987.6 million). Details of the basis of this valuation
are outlined in note 1 of the notes to the Financial Statements and form part of this Directors’ Report.
32
2012 DEXUS AnnUAl REPORT
8 Review of results and operations
financial results
DEXUS Property Group’s financial performance for the year ended 30 June 2012 is summarised below. To fully understand our results, please
refer to the full Financial Statements included in this Financial Report.
In accordance with Australian Accounting Standards, net profit includes a number of non‑cash adjustments including fair value movements in asset
and liability values. Funds from Operations1 (FFO) is a global financial measure of real estate operating performance after finance costs and taxes,
and is adjusted for certain non‑cash items.
The Directors consider FFO to be a measure that reflects the underlying performance of the Group. The following table reconciles between profit
attributable to stapled security holders, FFO and distributions paid to stapled security holders.
net profit for the year attributable to stapled security holders
net fair value gain of investment properties2
Impairment of inventories
net fair value loss/(gain) of derivatives
net loss/(gain) on sale of investment properties3
Foreign currency translation reserve transfer on partial disposal of foreign operations
Incentive amortisation and rent straight‑line2,4
REnTS capital distribution
Deferred tax and other
Funds From operations (FFo)
Retained earnings5
Distributions
FFO per security (cents)
Distribution per security (cents)
net tangible asset backing per security ($)
30 June 2012
$m
30 June 2011
$m
181.1
(82.7)
14.8
102.1
72.8
41.5
31.7
(10.2)
16.7
367.8
(110.4)
257.4
7.65
5.35
1.00
553.0
(182.0)
–
(44.2)
(7.1)
–
28.6
(10.4)
20.1
358.0
(107.3)
250.7
7.40
5.18
1.01
1 DEXUS’s FFO comprises net profit/loss after tax attributable to stapled security holders calculated in accordance with Australian Accounting Standards and adjusted for:
property revaluations, impairments, derivative and FX mark‑to‑market impacts, amortisation of certain tenant incentives, gain/loss on sale of certain assets, straight‑line rent
adjustments, deferred tax expense/benefit and DEXUS REnTS Trust capital distribution.
2 Including DXS’s share of equity accounted investments.
3 Including tax and finance cost impacts of the US central portfolio sale.
4 Including cash and fit‑out incentives amortisation.
5 Based on the distribution policy for the financial year ended 30 June 2012 of 70% of FFO.
net profit attributable to stapled security holders is $181.1 million or 3.75 cents per security, a decrease of $371.9 million from the prior year
(2011: $553.0 million) predominantly due to the movement in non‑cash items and the impact of selling the US central portfolio.
The key drivers are:
n net fair value loss on derivatives of $102.1 million (2011: gain of $44.2 million) which includes unrealised, non‑cash losses resulting from the
restating of derivatives to account for lower market interest rates
n net revaluation gains from investment properties and inventories of $67.9 million, representing an average increase of 1.0% across the portfolio
(2011: $182.0 million). This gain is underpinned by a $93.5 million or 2.0% revaluation increase in the office portfolio
n net loss on sale of investment properties of $72.8 million, primarily relating to the divestment of the US central portfolio on 21 June 2012 for
US$770 million and the divestment of 12 European industrial properties for €82.0 million
Operationally, FFO increased 2.7% to $367.8 million (2011: $358.0 million) underpinned by strong performance from the office portfolio and a
reduced cost of funds. FFO per security increased 3.4% to 7.65 cents (2011: 7.40 cents).
Based on the current distribution policy of 70% of FFO, the distribution paid for the year to 30 June 2012 increased 3.3% to 5.35 cents
per security (2011: 5.18 cents per security).
2012 DEXUS AnnUAl REPORT 33
DIRECToRS’ REpoRT
8 Review of results and operations (continued)
operations
portfolio composition
The total value of investment property at 30 June 2012 was
$6.9 billion. The office portfolio represented 67% of total investments
while the Australian industrial portfolio represented 24%. Following the
sale of the US central portfolio on 21 June 2012, the industrial US
portfolio now represents 8% of total investments.
$6.9bn
Office 67%
Industrial 24%
Industrial US 8%
Other 1%
Key portfolio metrics
30 June 2012
office Industrial
Industrial US1 Total
Occupancy (% by area)
Occupancy (% by income)
Tenant retention (%)
WAlE (years)
like‑for‑like nOI growth (%)
Weighted average
cap rate (%)
Total return – 1 year (%)
97.1
96.8
66
4.9
5.4
7.30
9.5
1 Industrial US west coast portfolio only.
91.7
92.8
59
4.4
(1.6)
8.59
8.0
97.1 93.4
98.2 95.8
66
4.4
3.8
–
4.7
3.3
6.32 7.51
10.0
–
office portfolio
n Portfolio value $4.7 billion (2011: $4.5 billion)
n like‑for‑like net operating income (nOI) growth 5.4% (2011: 3.3%)
n Occupancy (by area/income) 97.1%/96.8% (2011: 96.2%/95.3%)
n Weighted average lease expiry (by income) 4.9 years (2011: 5.3 years)
net operating income increased by $34.6 million (13.6%) to
$289.8 million (2011: $255.2 million) driven by strong like‑for‑like
nOI growth of 5.4% and the completion of the Bligh and Albert Street
developments. new leases completed during the year achieved average
rental increases of 4.6%.
Occupancy for the office portfolio was strong at 97.1% (2011: 96.2%),
up 0.9% and 4.4% higher than the national average of 92.2%.
Developments at 1 Bligh Street, Sydney and 123 Albert Street,
Brisbane, which were completed in July 2011, are 90% and 99%
committed respectively.
During the year over 75,600 square metres of space was leased which
includes securing heads of agreement over 19,000 square metres.
The stand‑out success was securing of a new Government tenant, with
no downtime, at Garema Court in Canberra. Subdued tenant demand
in the Sydney and Melbourne office markets and global economic
uncertainty have seen tenants tending to remain in existing premises
and, in some cases, downsize their office space requirements.
While this has led to some upward pressure on incentives, our
proactive approach to leasing has seen only a slight increase in
incentives (excluding development leasing) to 17.3%, for leases
executed during the year (2011: 16.0%).
34
2012 DEXUS AnnUAl REPORT
The office portfolio capital value increased 3.7% or $168.7 million to
$4.7 billion for the year (2011: $4.5 billion) and the weighted average
capitalisation rate for the portfolio tightened 7 basis points to 7.30%
at 30 June 2012.
Industrial portfolio
n Portfolio value $1.7 billion (2011: $1.6 billion)
n like‑for‑like nOI change ‑1.6% (2011: 1.1%)
n Occupancy (by area/income) 91.7%/92.8% (2011: 96.2%/95.1%)
n Weighted average lease expiry (by income) 4.4 years (2011: 4.7 years)
net operating income increased by $3.6 million (3.1%) to $120.0 million
(2011: $116.4 million) primarily as a result of the completion of eight
developments during the year, with a combined cost of $144.1 million.
like‑for‑like nOI was down 1.6% primarily due to the vacancy of
Garigal Road, Belrose which had been identified for sale but has not
yet been sold.
In an active year for the Australian industrial portfolio over 300,000
square metres of industrial space was leased including over 195,000
square metres within the stable portfolio (representing 17% of total
portfolio area) and over 105,000 square metres in developments.
Occupancy by area fell to 91.7% (2011: 96.2%) with the departure of
Elders at Gillman on 30 June 2012 (6% of portfolio nlA) however, post
30 June 2012, 57% of this space has been leased or is secured under
heads of agreement, at rents averaging 34% higher than prior rents.
The Australian industrial portfolio capital value remained relatively
stable for the year with the weighted average capitalisation rate
tightening by 5 basis points to 8.59% at 30 June 2012.
Industrial US portfolio
n Portfolio value US$549.5 million or A$539.2 million
(2011: US$490.8 million or $A457.0 million)1
n like‑for‑like nOI growth 3.8% (2011: 3.3%)1
n Occupancy (by area/income) 97.1%/98.2% (2011: 97.7%/97.4%)1
n Weighted average lease expiry (by income) 4.4 years (2011: 4.5 years)1
On a constant currency basis, net operating income declined
$1.4 million to $74.7 million (2011: $76.1 million) due to property
transactions including the sale of the central portfolio which settled
on 21 June 2012. like‑for‑like nOI growth for the remaining core
west coast portfolio was strong at 3.8% (2011: ‑4.5%).
During the year a total of 184 leases were executed, totalling over
5.4 million square feet, or 23% of total lettable area. Following the
internalisation of leasing management of the central portfolio in June
2011, occupancy for the central portfolio improved by 10.3% to 89.7%
prior to its sale 12 months later. Occupancy for the industrial US
portfolio at 30 June 2012 was 97.1%, broadly in line with the prior year
occupancy of 97.7% for the core west coast portfolio.
As a consequence of the sale of the US central portfolio, the Group
now owns and manages 24 industrial properties over 6.8 million square
feet in the west coast industrial markets and three land parcels in
Texas. The industrial US portfolio now represents 8% of the investment
portfolio and is considered non‑core. The Group expects to exit the US
within 12 to 24 months.
1 Industrial US west coast portfolio only.
capital management
Financing costs and treasury
Highlights for the year ended 30 June 2012 include:
n Debt facilities totalling $850 million were refinanced in the domestic
bank, US bond and US mortgage markets at margins below 2%
n Following the sale of the US central portfolio for US$770 million, a
restructure of US debt facilities was undertaken, including prepaying
certain debt obligations and unwinding various interest rate swaps
associated with the US funding
n The $204 million in Real‑estate perpetual Exchanngeable sTep‑up
Securities (REnTS) were repurchased on 29 June 2012, prior to the
step up date, resulting in the wind up of the DEXUS REnTS Trust
n The weighted average cost of funds has reduced by 50 basis points
from 6.6% to 6.1% and the average debt duration was maintained at
4.2 years as at 30 June 2012
n Gearing (including cash) at 30 June 2012 was 27.2%, well below the
Group’s target of less than 40%
n The Group is comfortably within all covenant limits and the Group’s
credit ratings of Baa1 and BBB+, both with stable outlooks, were
reaffirmed during the year
Securities buy-back
An on‑market securities buy‑back commenced in April 2012 for up to
$200 million of securities, representing approximately 5% of securities
on issue. As at 30 June 2012 a total of 55.2 million securities had been
bought back for a total cost of $51.0 million, at an average price of
$0.923 per security. During July 2012 a further 21.3 million securities
were bought back for a total cost of $19.7 million. Cumulatively, 35.3%
of the total $200 million commitment has now been fulfilled.
Distribution policy
The distribution payout policy for the financial year ended 30 June
2012 is 70% of FFO. On 16 April 2012 the Group announced a change
to the distribution policy effective from FY13. Under the new policy the
Group will distribute between 70% and 80% of FFO, in line with free
cash flows, with the expectation that over time the average payout ratio
will be around 75% of FFO.
Third party funds management
The DEXUS Wholesale Property Fund (DWPF) was again a top quartile
performer, delivering a 9.7% total return in the 12 months to 30 June
2012. DWPF has outperformed the Mercer IPD index on a three year
rolling basis by 1.7% per annum. The fund also raised over $420
million of equity during the year and has now raised $1.4 billion since
early 2010.
The Group’s Australian mandate (STC) also outperformed its
benchmarks on a one and three year basis. During the year,
STC sold its half share of QV1 in Perth for $310 million.
Management business EBIT increased $1.2 million driven by
$5.8 million of industrial trading profits and increased third party
revenue, offset by $6.5 million in one off costs relating to CEO
transition costs and redundancies. The management expense ratio
for the year ended 30 June 2012 excluding these one off costs was
30 basis points. The funds management business unit delivered a
54% margin and the property management business unit delivered
a 10% margin.
Interest expense
Following the completion of two premium grade office buildings at
1 Bligh Street in Sydney and 123 Albert Street in Brisbane in July 2011,
interest is no longer being capitalised on these developments. This was
the principal driver of the $27.5 million increase in financing costs,
which was offset by additional rental income from the two properties.
Overall cost of funds reduced 50 basis points to 6.1% for the year
ended 30 June 2012 (2011: 6.6%).
Transactions and developments
DEXUS completed $1.6 billion in transactions over the course of the
year including:
n The single largest transaction was the US$770 million sale of
the US central portfolio, comprising 65 industrial properties.
The transaction settled on 21 June 2012
n The Group also sold 71% of the European portfolio during the year,
comprising lower quality industrial assets with large capital
expenditure requirements and short lease terms, resulting in seven
properties remaining including one in Germany and six in France.
The proceeds for the 12 properties sold was $107.5 million
n On behalf of third party funds the Group sold a 50% interest in
QV1 Building in Perth for $310 million (for STC) and acquired three
properties (for DWPF) including 452 Flinders Street in Melbourne
for $201.5 million and two industrial properties for $96.5 million;
the Sir Joseph Banks Corporate Park in Botany, nSW and
34 Manton Street in Morningside, Queensland
During the year the Group completed eight industrial developments
delivering over 120,000 square metres with a total cost of
$144.1 million and a yield on cost of 9.2%. Developments leased
to loscam at laverton and DB Schenker at Erskine Park were sold,
delivering $5.8 million in trading profits for the year.
2012 DEXUS AnnUAl REPORT 35
DIRECToRS’ REpoRT
8 Review of results and operations (continued)
Strategy
Management has undertaken a strategic review of the overall Group,
since the commencement of the new CEO on 1 March 2012.
The outcomes of the review have resulted in capitalising on the Group’s
key competitive strengths and taking advantage of opportunities both
within the Australian real estate sector and internal to the Group.
The Group’s revised strategy is focused on the delivery of superior
risk‑adjusted returns for investors, through investment in high quality
Australian real estate, primarily comprising CBD office properties.
The Group will achieve this by:
n Being the leading owner and manager of Australian office
n Having the best people, strongest tenant relationships, and most
efficient systems
n Being the wholesale partner of choice in Australian office, industrial
and retail
n Actively managing capital and risk in a prudent and disciplined manner
The Group will continue to have an office and industrial oriented
platform and will grow primarily through its third party funds
management platform and an increased office exposure.
The strategic review identified that the Group’s offshore exposure is
considered non‑core and Management will concentrate on the core
Australian office and industrial markets. An offshore exit strategy will
be progressed that is focused on maximising returns for investors
over the next 12 to 24 months.
The first phase of execution involves re‑focusing the business and
strengthening the platform for growth and performance. During the
year ended 30 June 2012 and as a part of the strategic review
process several strategic initiatives were executed including the:
n Sale of the US central portfolio
n Commencement of an on‑market securities buy‑back
n Announcement of the revised distribution payout policy
n Implementation of a business restructure and associated
management changes
9 likely developments and expected results
of operations
In the opinion of the Directors, disclosure of any further information
regarding business strategies and future developments or results of
the 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 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 Group, the results of those operations, or the
state of the Group’s affairs in future financial years.
11 matters subsequent to the end of the
financial year
Since the end of the financial year 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 Group, the results of those
operations, or the state of the Group’s affairs in future financial years.
12 Distributions
Distributions paid or payable by the Group for the year ended 30 June
2012 were 5.35 cents per security (2011: 5.18 cents per security) as
outlined in note 27 of the notes to the Financial Statements.
13 DXFm’s fees and associate interests
Details of fees paid or payable by the Group to DXFM for the year
ended 30 June 2012 are outlined in note 32 of the notes to the
Financial Statements and form part of this Directors’ Report.
The number of interests in the Group held by DXFM or its associates
as at the end of the financial year were nil (2011: nil).
14 Interests in DXS securities
The movement in securities on issue in the Group during the year and
the number of securities on issue as at 30 June 2012 are detailed in
note 24 of the notes to the Financial Statements and form part of this
Directors’ Report.
With the exception of performance rights which are discussed in detail
in the Remuneration Report, the Group did not have any options on
issue as at 30 June 2012 (2011: nil).
15 Environmental regulation
The Group’s senior management, through its Board Risk and
Sustainability 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 material breaches of these 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.
PricewaterhouseCoopers (PwC or the Auditor), is indemnified out of the
assets of the Group pursuant to the DEXUS Specific Terms of Business
agreed for all engagements with PwC, to the extent that the Group
inappropriately uses or discloses a report prepared by PwC. The
Auditor, PwC, is not indemnified for the provision of services where
such an indemnification is prohibited by the Corporations Act 2001.
17 audit
17.1 Auditor
PricewaterhouseCoopers continues in office in accordance with section
327 of the Corporations Act 2001.
17.2 Non-audit services
The Group may decide to employ the Auditor on assignments, in
addition to their statutory audit duties, where the Auditor’s expertise
and experience with the Group are important.
Details of the amounts paid or payable to the Auditor, 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.
36
2012 DEXUS AnnUAl REPORT
The reasons for the Directors being satisfied are:
n a Charter of Audit Independence was adopted in 2010 that
provides guidelines under which the Auditor may be engaged to
provide non‑audit services without impairing the Auditor’s objectivity
or independence.
n the Charter states that the Auditor will not provide services where the
Auditor may be required to review or audit its own work, including:
– the preparation of tax provisions, accounting records and financial
statements;
20 management representation
The Chief Executive Officer and Chief Financial Officer have reviewed
the Group’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 Group’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.
21 Directors’ authorisation
The Directors’ Report is made in accordance with a resolution of the
Directors. The Financial Statements were authorised for issue by the
Directors on 15 August 2012. The Directors have the power to amend
and reissue the Financial Statements.
christopher t Beare
Chair
15 August 2012
Darren J Steinberg
Chief Executive Officer
15 August 2012
– the design, implementation and operation of information
technology systems;
– the design and implementation of internal accounting and risk
management controls;
– conducting valuation, actuarial or legal services;
– consultancy services that include direct involvement in
management decision making functions;
– investment banking, borrowing, dealing or advisory services;
– acting as trustee, executor or administrator of trust or estate;
– prospectus independent expert reports and being a member
of the due diligence committee; and
– providing internal audit services.
n the 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 on page 38 and
forms part of this Directors’ Report.
18 Corporate governance
DXFM’s Corporate Governance Statement is set out in a separate
section of the DEXUS Property Group Annual Report and forms part
of this Directors’ Report.
19 Rounding of amounts and currency
The 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 the 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.
2012 DEXUS AnnUAl REPORT 37
Financial Report
aUDIToR’S INDEpENDENCE DEClaRaTIoN
for the year ended 30 June 2012
38
2012 DEXUS AnnUAl REPORT
Financial Statements
CoNSolIDaTED STaTEmENT oF CompREhENSIVE INComE
for the year ended 30 June 2012
Revenue from ordinary activities
Property revenue
Proceeds from sale of inventory
Interest revenue
Management fee revenue
Total revenue from ordinary activities
net fair value gain of investment properties
Share of net profit of associates accounted for using the equity method
net foreign exchange gain
Other income
Total income
Expenses
Property expenses
Cost of sale of inventory
Finance costs
net (loss)/gain on sale of investment properties
net fair value (loss)/gain of derivatives
Depreciation and amortisation
Impairment of inventories
Impairment of goodwill
Employee benefits expense
Other expenses
Total expenses
Foreign currency translation reserve transfer on partial disposal of foreign operations
profit before tax
Tax benefit/(expense)
Income tax benefit
Withholding tax expense
Total tax expense
profit after tax
other comprehensive income/(loss):
Exchange differences on translating foreign operations
Foreign currency translation reserve transfer on partial disposal of foreign operations
Total comprehensive income for the year
profit for the year attributable to:
Unitholders of the parent entity
Unitholders of other stapled entities (non‑controlling interests)
Stapled security holders
Other non‑controlling interest
Total profit for the year
Total comprehensive income for the year attributable to:
Unitholders of the parent entity
Unitholders of other stapled entities (non‑controlling interests)
Stapled security holders
Other non‑controlling interest
Total comprehensive income for the year
Earnings per unit
Basic earnings per unit on profit attributable to unitholders of the parent entity
Diluted earnings per unit on profit attributable to unitholders of the parent entity
Earnings per stapled security
Basic earnings per unit on profit attributable to stapled security holders
Diluted earnings per unit on profit attributable to stapled security holders
Note
2
15
3
5
4(a)
4(c)
25(a)
25(a)
37
37
37
37
2012
$’000
2011
$’000
653,582
49,847
1,743
50,712
755,884
75,227
13,784
2,170
20
847,085
(154,901)
(43,998)
(261,869)
(32,566)
(1,564)
(2,805)
(14,846)
(625)
(74,366)
(18,607)
(606,147)
(41,531)
199,407
20,131
(36,657)
(16,526)
182,881
333
41,531
224,745
81,475
99,595
181,070
1,811
182,881
139,145
83,789
222,934
1,811
224,745
Cents
1.69
1.69
3.75
3.75
629,072
3,359
1,565
50,655
684,651
148,433
34,053
574
742
868,453
(151,865)
(3,353)
(52,744)
7,052
2,605
(3,811)
–
(194)
(67,417)
(22,293)
(292,020)
–
576,433
4,851
(26,164)
(21,313)
555,120
(4,973)
–
550,147
182,368
370,644
553,012
2,108
555,120
153,280
394,856
548,136
2,011
550,147
Cents
3.77
3.77
11.44
11.44
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
2012 DEXUS AnnUAl REPORT 39
Financial Statements
CoNSolIDaTED STaTEmENT oF FINaNCIal poSITIoN
As at 30 June 2012
Current assets
Cash and cash equivalents
Receivables
non‑current assets classified as held for sale
Inventories
Derivative financial instruments
Current tax assets
Other
Total current assets
Non-current assets
Investment properties
Plant and equipment
Inventories
Investments accounted for using the equity method
Derivative financial instruments
Deferred tax assets
Intangible assets
Other
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Derivative financial instruments
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Derivative financial instruments
Deferred tax liabilities
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity attributable to unitholders of the parent entity
Contributed equity
Reserves
Retained profits
parent entity unitholders’ interest
Equity attributable to unitholders of other stapled entities (non-controlling interests)
Contributed equity
Reserves
Retained profits
other stapled unitholders’ interest
Stapled security holders’ interest
Other non‑controlling interest
Total equity
Note
2012
$’000
2011
$’000
7
8
9
10
11
12
13
14
10
15
11
16
17
18
19
20
21
11
20
11
22
21
23
24
25
25
24
25
25
26
59,193
30,842
212,264
26,841
3,617
198
10,646
73,746
36,175
59,260
7,991
23,112
1,247
11,396
343,601
212,927
6,391,457
4,682
70,990
217,043
74,655
36,729
223,641
1,309
7,105,914
3,926
104,247
200,356
77,108
55,577
224,684
2,905
7,020,506
7,774,717
7,364,107
7,987,644
108,484
–
2,087
151,969
8,243
108,916
315,777
7,014
147,806
5,000
270,783
584,513
1,940,762
112,659
12,391
16,517
3,669
1,899,279
155,085
18,151
17,624
6,151
2,085,998
2,096,290
2,356,781
2,680,803
5,007,326
5,306,841
1,605,014
(46,053)
197,380
1,798,077
(103,670)
222,638
1,756,341
1,917,045
3,156,465
53,239
41,281
3,014,665
68,566
102,537
3,250,985
3,185,768
5,007,326
–
5,102,813
204,028
5,007,326
5,306,841
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
40
2012 DEXUS AnnUAl REPORT
Financial Statements
CoNSolIDaTED STaTEmENT oF ChaNgES IN EqUITY
for the year ended 30 June 2012
Note
Stapled security holders’ equity
Contributed
equity
Retained
profits
$’000
$’000
Foreign
currency
translation
reserve
$’000
asset
revaluation
reserve
$’000
Security-
based
payments
reserve
$’000
Stapled
security-
holders’
equity
$’000
other non-
controlling
interest
Total
equity
$’000
$’000
4,798,214
33,186
(72,967)
42,739
– 4,801,172
205,275 5,006,447
Closing balance as at 30 June 2011
4,812,742
325,175
(77,843)
42,739
– 5,102,813
204,028 5,306,841
4,812,742
325,175
(77,843)
42,739
– 5,102,813
204,028 5,306,841
opening balance as at 1 July 2010
Profit for the year attributable to:
Unitholders of the parent entity
Other stapled entities
(non‑controlling interests)
Other non‑controlling interest
profit for the year
other comprehensive (loss)/income
for the year attributable to:
Unitholders of the parent entity
Other stapled entities
(non‑controlling interests)
Total other comprehensive loss for
the year
–
182,368
370,644
–
553,012
–
–
–
–
–
(29,088)
–
24,212
–
(4,876)
–
–
–
–
–
–
Transactions with owners in their capacity as owners
Contributions of equity, net of
transaction costs
Distributions paid or provided for
Total transactions with owners in
their capacity as owners
Transfer (from)/to retained profits
14,528
–
–
(250,662)
27
14,528 (250,662)
(10,361)
–
–
–
–
–
opening balance as at 1 July 2011
Profit for the year attributable to:
Unitholders of the parent entity
Other stapled entities
(non‑controlling interests)
Other non‑controlling interest
profit for the year
–
81,475
–
–
–
99,595
–
181,070
–
–
–
–
other comprehensive income/(loss) for the year attributable to:
Unitholders of the parent entity
Other stapled entities
(non‑controlling interests)
Total other comprehensive income for the year
Transactions with owners in their capacity as owners
–
–
–
–
57,670
–
–
(15,806)
41,864
Buy‑back of contributed equity,
net of transaction costs
Capital payments and capital
contributions, net of transaction costs
Acquisition of non‑controlling interest
Security‑based payments expense
Distributions paid or provided for
38
27
Total transactions with owners in
their capacity as owners
Transfer (from)/to retained profits
(50,950)
–
(313)
–
–
–
–
–
–
(257,408)
(51,263) (257,408)
(10,176)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
182,368
–
182,368
370,644
–
–
2,011
370,644
2,011
553,012
2,011
555,023
(29,088)
–
(29,088)
24,212
–
24,212
(4,876)
–
(4,876)
14,528
(250,662)
(991)
13,537
(12,628) (263,290)
– (236,134)
(10,361)
–
(13,619) (249,753)
–
10,361
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81,475
–
81,475
–
–
–
99,595
–
–
1,811
99,595
1,811
181,070
1,811
182,881
–
57,670
–
57,670
–
–
(15,806)
41,864
–
–
(15,806)
41,864
–
(50,950)
–
(50,950)
–
–
426
–
(313)
–
426
(257,408)
–
(313)
(204,000) (204,000)
426
(269,423)
–
(12,015)
426 (308,245) (216,015) (524,260)
–
(10,176)
10,176
–
Closing balance as at 30 June 2012
4,761,479
238,661
(35,979)
42,739
426 5,007,326
– 5,007,326
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
2012 DEXUS AnnUAl REPORT 41
Financial Statements
CoNSolIDaTED STaTEmENT oF CaSh FloWS
for the year ended 30 June 2012
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)
Payments in the course of operations (inclusive of GST)
Interest received
Finance costs paid to financial institutions
Distributions received from associates accounted for using the equity method
Income and withholding taxes (paid)/received
Proceeds from sale of property classified as inventory
Payments for property classified as inventory
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from sale of investment properties
Note
2012
$’000
2011
$’000
854,518
797,297
(365,050)
(332,682)
1,931
1,539
(157,719)
(169,484)
7,539
(1,109)
53,206
–
118
–
(44,925)
(57,446)
35(a)
348,391
239,342
883,604
170,547
Payments for capital expenditure on investment properties
35(b)
(177,600)
(291,917)
Payments for acquisition of investment properties
Payments for acquisition of investments net of cash
Payments for investments accounted for using the equity method
Payments for property, plant and equipment
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payments for buy‑back of contributed equity
Capital contribution and capital payment transaction costs
Acquisition of non‑controlling interest
Distributions paid to security holders
Distributions paid to other non‑controlling interests
Net cash (outflow)/inflow 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
(34,730)
(41,083)
–
(872)
(8,565)
(61,726)
(3,142)
(1,988)
659,567
(227,039)
2,628,212
2,245,856
(3,123,096)
(1,999,591)
(50,950)
(313)
(204,000)
–
–
–
(254,533)
(228,913)
(15,157)
(12,403)
(1,019,837)
4,949
(11,879)
17,252
73,746
(2,674)
64,419
(7,925)
Cash and cash equivalents at the end of the year
7
59,193
73,746
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
42
2012 DEXUS AnnUAl REPORT
Financial Statements
NoTES To ThE FINaNCIal STaTEmENTS
for the year ended 30 June 2012
Note 1 Summary of significant accounting policies
(a) Basis of preparation
In accordance with Australian Accounting Standards, the entities
within the Group must be consolidated. The parent entity and deemed
acquirer of DIT, DOT and DXO is DDF. These Financial Statements
represent the consolidated results of DDF, which comprises DDF
and its controlled entities, DIT and its controlled entities, DOT and
its controlled entities, and DXO and its controlled entities. Equity
attributable to other trusts stapled to DDF is a form of non‑controlling
interest and represents the equity of DIT, DOT and DXO. Other
non‑controlling interests represent the equity attributable to parties
external to the Group.
DEXUS Property Group stapled securities are quoted on the Australian
Securities Exchange under the “DXS” code and comprise one unit in
each of DDF, DIT, DOT and DXO. Each entity forming part of the
Group 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
DDF, DIT, DOT and DXO may only unstaple the Group if approval is
obtained by a special resolution of the stapled security holders.
These general purpose Financial Statements for the year ended
30 June 2012 have been prepared in accordance with the
requirements of the Constitution of the entities within the Group,
the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards
Board and interpretations. Compliance with Australian Accounting
Standards ensures that the Financial Statements and notes also
comply with International Financial Reporting Standards (IFRS).
These Financial Statements are prepared on a going concern basis
and in accordance with historical cost conventions and have 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(l), 1(o), 1(q), 1(v), 1(w), and 1(aa)).
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 requires the use of certain
critical accounting estimates and management to exercise its
judgement in the process of applying the Group’s accounting policies.
Other than the estimations described in notes 1(e), 1(l), 1(o), 1(q),
1(v), 1(w) and 1(aa), no key assumptions concerning the future or
other estimation of uncertainty at the end of each reporting period
have a significant risk of causing material adjustments to the Financial
Statements in the next annual reporting period.
(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 Group
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 Group is DDF. The
accounting policies of the subsidiaries are consistent with those of
the parent.
Subsidiaries are all entities (including special purpose entities) over
which the Group has the power to govern the financial and operating
policies, generally accompanying a shareholding of more than one‑half
of the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity.
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 non‑controlling interests, are shown
separately in the Statement of Comprehensive Income and Statement
of Financial Position respectively. Where control of an entity is obtained
during a financial year, its results are included in the Statement of
Comprehensive Income from the date on which control is gained.
They are deconsolidated from the date that control ceases.
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 Group’s share of the results and assets of this partnership or
joint venture are consolidated into the Statement of Comprehensive Income
and Statement of Financial Position of the Group. Where assets are
jointly controlled via ownership of units in single purpose unlisted unit
trusts or shares in companies, the Group applies equity accounting to
record the operations of these investments (refer note 1(t)).
(c) revenue recognition
(i) Rent
Rental revenue 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 revenue is brought to account on an accruals
basis. If not received at the end of the reporting period, rental revenue
is reflected in the Statement of Financial Position 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 end of the reporting period, are reflected in the
Statement of Financial Position as a receivable.
Uncertainty around property valuations
(iii) Interest revenue
The fair value of our investment properties in the United States and
Europe have 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 end of the reporting period, the current uncertainty in
these markets means that if investment property is sold in the 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.
Interest revenue is brought to account on an accruals basis using the
effective interest rate method and, if not received at the end of the
reporting period, is reflected in the Statement of Financial Position
as a receivable.
(iv) Dividends and distribution revenue
Revenue from dividends and distributions are recognised when
declared. Amounts not received at the end of the reporting period
are included as a receivable in the Statement of Financial Position.
2012 DEXUS AnnUAl REPORT 43
NoTES To ThE FINaNCIal STaTEmENTS
Note 1 Summary of significant accounting policies
(continued)
(d) Expenses
Expenses are brought to account on an accruals basis and, if not paid
at the end of the reporting period, are reflected in the Statement of
Financial Position as a payable.
(iii) 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.
(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 Group.
(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 Group’s activities expose it to a variety of financial risks including
foreign exchange risk and interest rate risk. Accordingly, the Group
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. The
Responsible Entity continually reviews the Group’s exposures and
updates its treasury policies and procedures. The Group does not
trade in derivative instruments for speculative purposes. Even though
derivative financial instruments are entered into for the purpose of
providing the Group with an economic hedge, the Group has 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 Statement of Comprehensive Income.
(ii) Debt and equity instruments issued by the group
Financial instruments issued by the Group 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 Statement of Financial Position 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.
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.
(iv) 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 and new Zealand 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 Statement of Cash Flows on a gross
basis. The GST component of cash flows arising from investing and
financing activities that is recoverable from or payable to the Australian
Taxation Office is classified as cash flows from operating activities.
(g) taxation
Under current Australian income tax legislation, DDF, DIT and DOT
are not liable for income tax provided they satisfy certain legislative
requirements. The Group may be liable for income tax in jurisdictions
where foreign property is held (i.e. United States, France, Germany,
and new Zealand).
DXO is subject to Australian income tax as follows:
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
by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses;
n 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);
n 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;
n 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 is recognised in profit or loss, except to
the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised
in other comprehensive income or directly in equity, respectively.
44
2012 DEXUS AnnUAl REPORT
Withholding tax payable on distributions received by the Group from
DEXUS Industrial Properties Inc. (US REIT) and DEXUS US Properties
Inc. (US W REIT) are recognised as an expense when tax is withheld.
Deferred tax assets or liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are
enacted or substantively enacted for each jurisdiction. The relevant tax
rates are applied to the cumulative amounts of deductible and taxable
temporary differences to measure the deferred tax asset or liability.
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 W REIT.
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 33.33%. 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 end of the reporting period, where required.
DEXUS GlOG Trust, a wholly owned Australian sub‑trust of DIT, is
liable for German corporate income tax on its German taxable income
at the rate of 15.82%. 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 end of the reporting period, where required.
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 end of the reporting period,
where required.
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 42.92%.
DXO and its wholly owned controlled entities have formed a tax
consolidated group. As a consequence, these entities are taxed
as a single entity.
(h) Distributions
In accordance with the Trust’s Constitution, the Group distributes
its 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(o). 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 uncollectable are written‑off by reducing the carrying
amount directly. A provision for doubtful debts is established when
there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of the receivables.
The provision for doubtful debts is the difference between the asset’s
carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. Cash flows relating to
short term receivables are not discounted as the effect of discounting
is immaterial.
(l) inventories
land and properties held for resale
land and properties held for resale are stated at the lower of cost and
the net realisable value. Cost is assigned by specific identification and
includes the cost of acquisition, and development and holding costs
such as borrowing costs, rates and taxes. Holding costs incurred after
completion of development are expensed.
Net realisable value
net realisable value is determined using the estimated selling price
in the ordinary course of business. Costs to bring inventories to their
finished condition, including marketing and selling expenses, are
estimated and deducted to establish net realisable value.
(m) Non-current assets held for sale
non‑current assets are classified as held for sale if their carrying
amount will be recovered principally through a sale transaction rather
than through continuing use, and a sale is considered highly probable.
They are measured at the lower of their carrying amount and fair
value less costs to sell, except for assets such as deferred tax assets,
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.
(n) other financial assets at fair value through profit and loss
Interests held by the Group in controlled entities and associates are
measured at fair value through profit and loss to reduce a measurement
or recognition inconsistency.
(o) property, plant and equipment
Property, plant and equipment is stated at historical cost less
depreciation and accumulated impairment. 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 Group and
the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the Statement of Comprehensive Income
during the reporting period in which they are incurred.
Property, plant and equipment is tested for impairment whenever
events or changes in circumstances indicate that the carrying amounts
exceed their recoverable amounts (refer note 1(u)).
2012 DEXUS AnnUAl REPORT 45
NoTES To ThE FINaNCIal STaTEmENTS
Note 1 Summary of significant accounting policies
(continued)
(p) Depreciation of property, plant and equipment
land is not depreciated. Depreciation on buildings (including fit‑out)
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 fit‑out)
IT and office equipment
5‑40 years
3‑5 years
(q) investment properties
The Group’s investment properties consist of properties held for
long term rental yields and/or capital appreciation and property that is
being constructed or developed for future use as investment property.
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 revenue 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. In relation to development properties under construction
for future use as investment property, where reliably measurable, fair
value is determined based on the market value of the property on the
assumption it had already been completed at the valuation date less
costs still required to complete the project, including an appropriate
adjustment for profit and risk.
External valuations of the individual investment properties are carried
out in accordance with the Constitutions for each trust forming the
Group 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 Statement of Comprehensive
Income. 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 Statement of Comprehensive Income 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.
(r) Leasing fees
leasing fees incurred are capitalised and amortised over the lease
periods to which they relate.
(s) 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 fit‑out costs or relocation costs.
46
2012 DEXUS AnnUAl REPORT
The costs of incentives are recognised as a reduction of rental revenue
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.
(t) 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 Group exerts 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 Financial Statements.
Under this method, the entity’s share of the post‑acquisition profits of
associates is recognised in the Statement of Comprehensive Income.
The cumulative post‑acquisition movements are adjusted against the
carrying amount of the investment. Dividends or distributions receivable
from associates are recognised as a reduction in the carrying amount
of the investment.
When the Group’s share of losses in an associate equal or exceed
its interest in the associate (including any unsecured receivables) the
Group does not recognise any further losses unless it has incurred
obligations or made payments on behalf of the associate.
(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
Goodwill is recognised as at the acquisition date and is measured
as the excess of the aggregate of the fair value of consideration
transferred and the non‑controlling interest’s proportionate share
of the acquiree’s identifiable net assets over the fair value of the
identifiable net assets acquired.
The carrying value of the goodwill is tested for impairment at the
end of each reporting period with any decrement in value taken
to the Statement of Comprehensive Income as an expense.
(ii) management rights
Management rights represent the asset management rights owned by
the Group 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 remaining useful lives of 20 years.
Management rights with indefinite useful lives are not subject to
amortisation and are tested for impairment annually.
(w) financial assets and liabilities
(i) Classification
The Group has classified its financial assets and liabilities as follows:
Financial asset/liability
Classification
Valuation basis
Reference
Receivables
Other financial assets
Payables
loans and receivables
loans and receivables
Amortised cost
Refer note 1(k)
Amortised cost
Refer note 1(e)
Financial liability at amortised cost
Amortised cost
Refer note 1(x)
Interest bearing liabilities
Financial liability at amortised cost
Amortised cost
Refer note 1(y)
Derivatives
Fair value through profit or loss
Fair value
Refer note 1(e)
Financial assets and liabilities are classified in accordance with the purpose for which they were acquired.
(ii) Fair value estimation of financial assets and liabilities
(i) Foreign currency transactions
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
end of the reporting period. The quoted market price used for financial
assets held by the Group is the current bid price. The appropriate
quoted market price for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active
market (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
end of the reporting period, and the fair value of interest rate option
contracts is 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 end of the
reporting period. 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 Statement of Comprehensive
Income over the period of the borrowings using the effective interest
method. Interest bearing liabilities are classified as current liabilities
unless the Group has an unconditional right to defer the liability for
at least 12 months after the reporting date.
(z) foreign currency
Items included in the Financial Statements of the Group 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 Group.
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 Statement of Comprehensive Income.
(ii) Foreign operations
Foreign operations are located in the United States, new Zealand,
France and Germany. These operations have a functional currency
of US dollars, nZ dollars and Euros respectively, which are translated
into the presentation currency.
The assets and liabilities of the foreign operations are translated at
exchange rates prevailing at the end of each reporting period. 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
or partial 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 end of
each reporting period.
(aa) Employee benefits
(i) Wages, salaries and annual leave
liabilities for employee benefits for wages, salaries and annual leave
represent present obligations resulting from employees’ services
provided to the end of the reporting period, calculated at undiscounted
amounts based on remuneration wage and salary rates that the Group
expects to pay at the end of the reporting period 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 the end of the
reporting period.
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 the end of the reporting
period that most closely matches the term of the maturity of the
related liabilities. The unwinding of the discount is treated as long
service leave expense.
2012 DEXUS AnnUAl REPORT 47
NoTES To ThE FINaNCIal STaTEmENTS
Note 1 Summary of significant accounting policies
(continued)
(aa) Employee benefits (continued)
(iii) Security-based payments
Security‑based employee benefits will be provided to eligible
participants via the DEXUS Transitional Performance Rights Plan
(“the Plan”). Information relating to this Plan is set out in note 38.
Under the Plan, participating employees will be granted a certain
number of performance rights which will vest into DXS stapled
securities at no cost, if certain vesting conditions are satisfied.
The fair value of performance rights granted is recognised as an
employee benefit expense with a corresponding increase in the
security‑based payments reserve in equity. The total amount to be
expensed is determined by reference to the fair value of the
performance rights granted. Fair value is determined independently
using Black‑Scholes and Binomial pricing models with reference to the
expected life of the rights, security price at grant date, expected price
volatility of the underlying security, expected distribution yield and the
risk free interest rate for the term of the rights.
non‑market vesting conditions are included in assumptions about
the number of performance rights that are expected to vest. The total
expense is recognised over the vesting period, which is the period over
which all of the specified vesting conditions are to be satisfied. At the
end of each period, the Group revises its estimates of the number of
performance rights that are expected to vest based on the non‑market
vesting conditions. The impact of the revised estimates, if any, is
recognised in profit or loss with a corresponding adjustment to equity.
When performance rights vest, the Group will arrange for the delivery
or allocation of the appropriate number of securities to the participant.
(ab) Earnings per unit
Basic earnings per unit are determined by dividing the net profit
attributable to unitholders of the parent entity by the weighted average
number of ordinary units outstanding during the year.
Diluted earnings per unit are adjusted from the basic earnings per unit
by taking into account the impact of dilutive potential units. The Group
did not have such dilutive potential units during the year.
(ac) operating segments
Operating segments are reported in a manner that is consistent with
the internal reporting provided to the Chief Operating Decision Maker
(CODM). The CODM has been identified as the Board of Directors as
they are responsible for the strategic decision making within the Group.
(ad) rounding of amounts
The Group is the kind referred to in Class Order 98/0100, issued by
the Australian Securities & Investments Commission, relating to the
rounding off of amounts in the Financial Statements. Amounts in the
Financial Statements have been rounded off in accordance with that
Class Order to the nearest thousand dollars, or in certain cases, the
nearest dollar.
(ae) parent entity financial information
The financial information for the parent entity, DEXUS Diversified Trust,
disclosed in note 28, has been prepared on the same basis as the
consolidated Financial Statements except as set out below:
(i) Investment in subsidiaries, associates and joint venture entities
Distributions received from associates are recognised in the parent
entity’s Statement of Comprehensive Income, rather than being
deducted from the carrying amount of these investments.
48
2012 DEXUS AnnUAl REPORT
(af) New accounting standards and interpretations
Certain new accounting standards and interpretations have been
published that are not mandatory for the 30 June 2012 reporting
period. Our assessment of the impact of these new standards and
interpretations is set out below:
aaSB 2012-3 Amendments to Australian Accounting Standard –
Offsetting Financial Assets and Financial Liabilities and aaSB
2012-2 Disclosures – Offsetting Financial Assets and Financial
Liabilities (effective 1 July 2014 and 1 July 2013 respectively).
In June 2012, the AASB approved amendments to the application
guidance in AASB 132 Financial Instruments: Presentation, to clarify
some of the requirements for offsetting financial assets and financial
liabilities in the Financial Statements. These amendments are effective
from 1 July 2014. They are unlikely to affect the accounting for any of
the Group’s current offsetting arrangements. The AASB has also
introduced more extensive disclosure requirements into AASB 7 which
will apply from 1 July 2013. The Group intends to apply the new rules
from 1 July 2013 and does not expect any significant impacts.
aaSB 2012-5 Amendments to Australian Accounting Standard
arising from Annual Improvements 2009-2011 cycle (effective
1 July 2013).
In June 2012, the AASB approved a number of amendments to
Australian Accounting Standards as a result of the 2009‑2011 annual
improvements project. The Group will apply the amendments from
1 July 2013 and does not expect any significant impacts.
aaSB 9 Financial Instruments and aaSB 2009-11 Amendments
to Australian Accounting Standards arising from AASB 9 and
aaSB 2010-7 Amendments to Australian Accounting Standards
arising from AASB 9 (December 2010) (effective 1 January 2013).
AASB 9 Financial Instruments addresses the classification, measurement
and derecognition of financial assets and financial liabilities. The standard
simplifies the classifications of financial assets into those to be carried
at amortised cost and those to be carried at fair value. The Group
intends to apply the standards from 1 July 2013 and does not expect
any significant impacts.
aaSB 2010-8 Amendments to Australian Accounting
Standards – Deferred Tax: Recovery of Underlying Assets
(effective 1 January 2012).
In December 2010, the AASB amended AASB 112 Income Taxes to
provide an amended approach for measuring deferred tax liabilities and
deferred tax assets when investment property is measured using the
fair value model. AASB 112 requires the measurement of deferred tax
assets or liabilities to reflect the tax consequences that would follow
from the way management expects to recover or settle the carrying
amount of the relevant assets or liabilities, that is through use or through
sale. The Group intends to apply the standard from 1 July 2012 and
does not expect any significant impacts.
aaSB 2011-4 Amendments to Australian Accounting Standards
to Remove Individual Key Management Personnel Disclosure
Requirements (effective 1 July 2013).
In July 2011 the AASB decided to remove the individual KMP
disclosure requirements from AASB 124 Related Party Disclosures,
to achieve consistency with the international equivalent standard and
remove a duplication of the requirements with the Corporations Act
2001. While this will reduce the disclosures that are currently required
in the notes to the Financial Statements, it will not affect any of the
amounts recognised in the Financial Statements. The amendments
apply from 1 July 2013 and cannot be adopted early.
Note 2 property revenue
2012
$’000
2011
$’000
Rent and recoverable outgoings
681,166
648,421
Incentive amortisation
(63,003)
(58,732)
Other revenue
35,419
39,383
Total property revenue
653,582
629,072
Note 3 Finance costs
Interest paid/payable
Amount capitalised
Other finance costs
net fair value loss/(gain) of interest
rate swaps
Finance costs attributable to
US sales transaction1
2012
$’000
2011
$’000
135,297
124,427
(22,458)
(60,955)
5,169
4,444
99,561
(15,172)
217,569
52,744
44,300
–
Total finance costs
261,869
52,744
1 As a result of the US sales transaction on 21 June 2012, debt was repaid and
associated finance costs, that are incremental to the costs that would ordinarily be
incurred by the Group, were recognised in the Statement of Comprehensive Income.
These costs include the cost of early repayment of debt, restructure of derivatives
and accelerated deferred borrowing costs.
The average capitalisation rate used to determine the amount of
borrowing costs eligible for capitalisation is 7.70% (2011: 7.74%).
aaSB 10 Consolidated financial statements
(effective 1 January 2013).
AASB 10 replaces all of the guidance on control and consolidation in
AASB 127 Consolidated and separate financial statements, and SIC‑12
Consolidation – special purpose entities. The standard introduces a
single definition of control that applies to all entities. It focuses on the
need to have both power and rights or exposure to variable returns
before control is present. The Group intends to apply the standard from
1 July 2013 and does not expect any significant impacts.
aaSB 11 Joint Arrangements (effective 1 January 2013).
AASB 11 introduces a principles based approach to accounting for joint
arrangements. The focus is no longer on the legal structure of joint
arrangements, but rather on how rights and obligations are shared by
the parties to the joint arrangement. Based on the assessment of rights
and obligations, a joint arrangement will be classified as either a joint
operation or joint venture. Joint ventures are accounted for using the
equity method, and the choice to proportionately consolidate will no
longer be permitted. The Group intends to apply the standard from
1 July 2013 and does not expect any significant impacts.
aaSB 12 Disclosure of interests in other entities
(effective 1 January 2013).
AASB 12 sets out the required disclosures for entities reporting under
the two new standards, AASB 10 and AASB 11, and replaces the
disclosure requirements currently found in AASB 128. Application
of this standard will not affect any of the amounts recognised in the
Financial Statements, but may impact some of the Group’s current
disclosures. The Group intends to apply the standard from 1 July 2013.
aaSB 128 Investments in associates and joint ventures
(effective 1 January 2013).
Amendments to AASB 128 provide clarification that an entity continues
to apply the equity method and does not remeasure its retained interest
as part of ownership changes where a joint venture becomes an
associate, and vice versa. The Group intends to apply the standard
from 1 July 2013 and does not expect any significant impacts.
aaSB 13 Fair value measurement (effective 1 January 2013).
AASB 13 explains how to measure fair value and aims to enhance fair
value disclosures. Application of this standard will not affect any of the
amounts recognised in the Financial Statements, but may impact some
of the Group’s current disclosures. The Group intends to apply the
standard from 1 July 2013.
Revised aaSB 101 Presentation of Financial Statements
(effective 1 July 2012).
The amendment requires entities to separate items presented in other
comprehensive income into two groups, based on whether they may be
recycled to profit or loss in the future. It will not affect the measurement
of any of the items recognised in the balance sheet or the profit or loss
in the current period. The Group intends to adopt the new standard
from 1 July 2012.
2012 DEXUS AnnUAl REPORT 49
NoTES To ThE FINaNCIal STaTEmENTS
Note 4 Income tax
(a) income tax benefit
Current tax benefit/(expense)
Deferred tax benefit
Total income tax benefit
Deferred income tax benefit included in income tax benefit comprises:
Increase in deferred tax assets
Decrease/(increase) in deferred tax liabilities
Total deferred tax benefit
(b) reconciliation of income tax expense to net profit
Profit before tax
less amounts not subject to income tax (note 1(g))
prima facie tax benefit at the australian tax rate of 30% (2011: 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Depreciation and amortisation
Movements in the carrying value and tax cost base of properties
net (loss)/gain on sale of investment properties
Sundry items
Income tax benefit
Note
16
22
2012
$’000
1,065
19,066
20,131
8,677
10,389
19,066
2011
$’000
(97)
4,948
4,851
11,803
(6,855)
4,948
2012
$’000
2011
$’000
199,407
576,433
(261,463)
(614,379)
(62,056)
(37,946)
18,617
11,384
905
5,101
(4,606)
114
1,342
(7,886)
26
(15)
1,514
(6,533)
20,131
4,851
(c) withholding tax expense
Withholding tax expense of $36,657,000 (2011: $26,164,000) comprises deferred tax expense of $34,164,000 (2011: $23,592,000) and
current tax expense of $2,493,000 (2011: $2,572,000). The deferred tax expense is recognised on differences between the tax cost base of the
US assets and liabilities and their accounting carrying value at the end of the reporting period. The majority of the deferred tax expense arises due
to the tax depreciation and revaluation of US investment properties, the reversal of deferred tax assets associated with the US asset sale, and the
mark‑to‑market of derivatives.
Note 5 other expenses
Audit and taxation fees
Custodian fees
legal and other professional fees
Registry costs and listing fees
Occupancy expenses
Administration expenses
Other staff expenses
External management fees
Other expenses
Total other expenses
50
2012 DEXUS AnnUAl REPORT
Note
6
2012
$’000
2,036
411
1,917
705
3,054
3,830
1,990
–
4,664
2011
$’000
2,264
474
1,542
651
2,881
4,101
2,528
2,799
5,053
18,607
22,293
Note 6 audit, taxation and transaction services fees
During the year, the Auditor and its related practices, and non‑related audit firms earned the following remuneration:
audit fees
PwC Australia – audit and review of Financial Statements
PwC US – audit and review of Financial Statements1
PwC fees paid in relation to outgoings audits2
PwC Australia – regulatory audit and compliance services
PwC Australia – audit and review of US asset disposals3
audit fees paid to pwC
Fees paid to non‑PwC audit firms
Total audit fees
Taxation fees
Fees paid to PwC Australia
Fees paid to PwC nZ
Fees paid to PwC US
Fees paid to PwC Australia in respect of US asset disposals3
Taxation fees paid to pwC
Fees paid to non‑PwC audit firms
Total taxation fees4
Total audit and taxation fees5
Transaction services fees
Fees paid to PwC Australia
Transaction services fees paid to pwC
Fees paid to non‑PwC audit firms
Total transaction services fees4
Total audit, taxation and transaction services fees
2012
$
2011
$
1,220,819
1,068,066
–
278,057
102,793
107,361
176,925
170,816
115,000
–
1,615,537
1,624,300
52,691
57,874
1,668,228
1,682,174
69,560
188,539
17,068
12,670
–
3,103
45,000
–
131,628
204,312
498,635
484,384
630,263
688,696
2,298,491
2,370,870
110,000
243,557
110,000
243,557
–
52,432
110,000
295,989
2,408,491
2,666,859
1 PwC Australia were engaged for the audit and review of the US entities for the year ended 30 June 2012.
2 Fees paid in relation to outgoing audits are included in property expenses in the Statement of Comprehensive Income.
3 Fees paid in relation to US asset disposals are included in loss on sale of investment properties in the Statement of Comprehensive Income.
4 These services include general compliance work, one‑off project work and advice.
5 After allowing for the impact of footnotes 2 and 3 above, total audit and taxation fees included in other expenses is $2,035,698 (2011: $2,263,509).
Note 7 Current assets – cash and cash equivalents
Cash at bank
Short term deposits1
Total current assets – cash and cash equivalents
2012
$’000
20,752
38,441
2011
$’000
28,039
45,707
59,193
73,746
1 As at 30 June 2012, the Group held US$25.2 million (A$24.7 million) in escrow in relation to the US asset disposals in June 2012.
As at 30 June 2011, the Group held C$34.7 million (A$33.4 million) in escrow in relation to the sale of its Canadian asset in June 2011. These funds were released during
the year ended 30 June 2012.
2012 DEXUS AnnUAl REPORT 51
NoTES To ThE FINaNCIal STaTEmENTS
Note 8 Current assets – receivables
Rent receivable
less: provision for doubtful debts
Total rental receivables
Fees receivable
Interest receivable
Other receivables
Total other receivables
Total current assets – receivables
Note 9 Non-current assets classified as held for sale
(a) Non-current assets held for sale
Investment properties held for sale
Total non-current assets classified as held for sale
(b) reconciliation
Opening balance at the beginning of the year
Disposals
Transfer from investment properties1
Foreign exchange differences on foreign currency translation
net fair value gain of investment properties held for sale
Additions, amortisation and other
Closing balance at the end of the year
2012
$’000
7,469
(901)
6,568
9,873
94
2011
$’000
9,203
(3,112)
6,091
9,354
282
14,307
20,448
24,274
30,084
30,842
36,175
2012
$’000
2011
$’000
212,264
59,260
212,264
59,260
Note
2012
$’000
2011
$’000
59,260
18,068
(34,938)
(15,674)
13
187,375
(2,015)
1,550
1,032
59,260
(2,445)
–
51
212,264
59,260
1 On 30 June 2012, 114‑120 Old Pittwater Road, Brookvale, nSW was transferred from investment properties to non‑current assets held for sale with an intention to sell.
On 30 June 2012, 50% of an industrial portfolio consisting of assets at DEXUS Industrial Estate laverton north, VIC, Altona north, VIC and Quarry at Greystanes, nSW
was transferred from investment properties to non‑current assets held for sale with an intention to sell.
On 30 June 2012, a parcel of land at Quarry at Greystanes, nSW was transferred from investment properties to non‑current assets held for sale with an intention to sell.
Disposals
n On 16 September 2011, Schillerstraße 51, Ellhofen was disposed of for gross proceeds of €6.8 million (A$9.4 million).
n On 16 September 2011, Schillerstraße 42, 42a & Bahnhofstraße 44, 50, Ellhofen was disposed of for gross proceeds of €4.0 million (A$5.5 million).
n On 16 September 2011, Sulmstraße, Ellhofen‑Weinsberg was disposed of for gross proceeds of €9.8 million (A$13.6 million).
n On 30 December 2011, niedesheimerstraße 24, Worms was disposed of for gross proceeds of €2.5 million (A$3.1 million).
n On 26 June 2012, Über der Dingelstelle, langenweddingen was disposed of for gross proceeds of €2.9 million (A$3.6 million).
Note 10 Inventories
(a) Land and properties held for resale
Current assets
land and properties held for resale
Total current assets – inventories
Non-current assets
land and properties held for resale
Total non-current assets – inventories
Total assets – inventories
52
2012 DEXUS AnnUAl REPORT
2012
$’000
2011
$’000
26,841
26,841
7,991
7,991
70,990
104,247
70,990
104,247
97,831
112,238
(b) reconciliation
Opening balance at the beginning of the year
Transfer (to)/from investment properties1
Disposals
Impairment
Acquisitions, additions and other
Closing balance at the end of the year
Note
13
2012
$’000
112,238
(7,035)
(43,998)
(14,846)
2011
$’000
45,470
6,448
(3,353)
–
51,472
63,673
97,831
112,238
1 On 30 June 2012, 50% of Boundary Road laverton VIC – Fastline, was transferred from inventories to investment properties with an intention to hold.
Acquisitions
n On 29 november 2011, undeveloped land was acquired at 3676 Ipswich Road, Wacol, QlD.
n On 29 June 2012, undeveloped land was acquired at 57‑75 Templar Road, Erskine Park, nSW.
Disposals
n On 21 July 2011, two lots located at Templar Road, Erskine Park, nSW were disposed of for gross proceeds of $10.1 million.
n On 27 October 2011, a 6,534 square metre development for loscam at Foundation Drive, laverton, VIC was disposed of for gross proceeds
of $11.7 million.
n On 15 June 2012, 94‑106 lenore Drive, Erskine Park, nSW was disposed of for gross proceeds of $28.0 million.
Note 11 Derivative financial instruments
Current assets
Interest rate swap contracts
Cross currency swap contracts
Forward foreign exchange contracts
Total current assets – derivative financial instruments
Non-current assets
Interest rate swap contracts
Cross currency swap contracts
Forward foreign exchange contracts
Total non-current assets – derivative financial instruments
Current liabilities
Interest rate swap contracts
Forward foreign exchange contracts
Total current liabilities – derivative financial instruments
Non-current liabilities
Interest rate swap contracts
Cross currency swap contracts
Total non-current liabilities – derivative financial instruments
Net derivative financial instruments
Refer note 29 for further discussion regarding derivative financial instruments.
Note 12 Current assets – other
Prepayments
Total current assets – other
2012
$’000
2011
$’000
1,284
–
2,333
3,617
3,336
17,583
2,193
23,112
74,655
71,765
–
–
3,198
2,145
74,655
77,108
8,155
88
8,243
4,675
325
5,000
112,544
154,677
115
408
112,659
155,085
(42,630)
(59,865)
2012
$’000
2011
$’000
10,646
11,396
10,646
11,396
2012 DEXUS AnnUAl REPORT 53
NoTES To ThE FINaNCIal STaTEmENTS
Note 13 Non-current assets – investment properties
(a) properties
Kings Park Industrial Estate, Vardys Road, Marayong, nSW
Target Distribution Centre, Taras Road, Altona north, VIC1, 2
Axxess Corporate Park, Corner Ferntree Gully & Gilby Roads, Mount Waverley, VIC
Knoxfield Industrial Estate, Henderson Road, Knoxfield, VIC
12 Frederick Street, St leonards, nSW
2 Alspec Place, Eastern Creek, nSW
Centrewest Industrial Estate, 108‑120 Silverwater Road, Silverwater, nSW
40‑50 Talavera Road, Macquarie Park, nSW
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 Space (1 Chifley Square, Sydney), nSW3
34‑60 little Collins Street, Melbourne, VIC**
32‑44 Flinders Street, Melbourne, VIC
Flinders Gate Complex, 172 Flinders Street, Melbourne, VIC
383‑395 Kent Street Car Park, Sydney, nSW
123 Albert Street, Brisbane, QlD4
2‑4 Military Road, Matraville, nSW
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, nSW5
145‑151 Arthur Street, Flemington, nSW
436‑484 Victoria Road, Gladesville, nSW
1 Foundation Place, Greystanes, nSW
5‑15 Rosebery Avenue & 25‑55 Rothschild Avenue, Rosebery, nSW
10‑16 South Street, Rydalmere, nSW
DEXUS Industrial Estate, Pound Road West, Dandenong South, VIC
DEXUS Industrial Estate, Boundary Road (including 440 Doherty’s Road), laverton north, VIC1, 2
12‑18 Distribution Drive, laverton north, VIC
250 Forest Road South, lara, VIC
15‑23 Whicker Road, Gillman, SA
25 Donkin Street, West End, Brisbane, QlD
52 Holbeche Road, Arndell Park, nSW
30‑32 Bessemer Street, Blacktown, nSW
27‑29 liberty Road, Huntingwood, nSW
154 O’Riordan Street, Mascot, nSW
1 50% classified as investment property held for sale at 30 June 2012.
2 The valuation reflects 50% of the independent valuation amount.
3 Heritage floor space retained following the disposal of 1 Chifley Square, Sydney, nSW.
4 Classified as development property held as investment property at 30 June 2011.
5 Classified as investment property held for sale at 30 June 2012.
The title to all properties is freehold, with the exception of the properties marked ** which are leasehold.
54
2012 DEXUS AnnUAl REPORT
ownership
acquisition
date
Independent
valuation date
Independent
Independent
valuation amount
valuer
Book value
Book value
30 Jun 2012
30 Jun 2011
%
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
50
100
100
100
100
100
100
100
May 1990
Oct 1995
Oct 1996
Aug 1996
Jul 2000
Mar 2004
May 2010
Oct 2002
Sep 1987
nov 1993
May 1997
Mar 1999
Sep 1987
May 2002
Jul 2000
nov 1984
Jun 1998
Mar 1999
Sep 1987
Oct 1984
Dec 2009
Sep 1997
Dec 2002
Dec 1998
Dec 1998
Sep 1997
Sep 1997
Sep 1997
Feb 2003
Apr 1998
Sep 1997
Jan 2004
Jul 2002
Jul 2002
Dec 2002
Dec 2002
Dec 1998
Jul 1998
May 1997
Jul 1998
Jun 1997
Dec 2009
Jun 2011
Jun 2010
Jun 2011
Jun 2011
Dec 2011
n/a
Dec 2011
Jun 2010
Jun 2012
Dec 2010
Jun 2011
Dec 2011
Jun 2010
Dec 2011
Jun 2011
Jun 2011
Jun 2011
Dec 2011
Jun 2012
Jun 2012
Dec 2011
Jun 2012
Jun 2012
Jun 2012
Dec 2011
Jun 2011
Dec 2011
Jun 2010
Dec 2010
Jun 2011
Jun 2012
Jun 2012
Jun 2010
Jun 2012
Dec 2010
Dec 2010
Jun 2012
Jun 2011
Dec 2010
Jun 2011
$’000
88,000
16,250
179,400
37,600
33,500
24,900
n/a
31,500
192,700
93,500
77,000
28,500
133,000
37,000
129
39,200
29,500
54,000
64,000
375,500
52,900
37,500
42,000
16,300
24,000
45,500
28,000
41,500
41,500
89,000
39,250
72,000
36,200
48,000
52,300
25,500
27,000
12,500
16,250
8,000
13,750
(i)
(i)
(g)
(g)
(a)
(d)
n/a
(g)
(d)
(a)
(f)
(e)
(a)
(i)
(a)
(i)
(e)
(e)
(a)
(d)
(i)
(g)
(f)
(a)
(a)
(a)
(f)
(e)
(f)
(f)
(g)
(f)
(i)
(g)
(e)
(a)
(f)
(f)
(e)
(i)
(e)
182,838
181,249
217,692
207,000
133,964
127,225
27,600
33,000
$’000
89,009
16,300
37,704
33,873
24,900
24,300
29,000
93,500
77,200
28,100
129
39,259
29,932
54,000
64,000
375,500
52,900
37,522
42,000
16,300
24,000
–
28,472
41,676
43,255
90,840
40,701
74,454
36,875
50,437
52,300
27,300
29,400
12,500
15,606
8,026
14,334
$’000
88,660
32,500
37,600
33,500
24,328
25,931
27,981
80,162
79,460
28,500
129
39,200
29,500
54,000
60,000
–
48,902
37,400
40,112
20,500
27,312
44,128
28,000
43,500
43,000
89,756
39,250
75,300
73,200
50,193
50,000
28,800
26,200
12,500
16,250
8,000
13,750
Note 13 Non-current assets – investment properties
(a) properties
Kings Park Industrial Estate, Vardys Road, Marayong, nSW
Target Distribution Centre, Taras Road, Altona north, VIC1, 2
Axxess Corporate Park, Corner Ferntree Gully & Gilby Roads, Mount Waverley, VIC
Knoxfield Industrial Estate, Henderson Road, Knoxfield, VIC
Centrewest Industrial Estate, 108‑120 Silverwater Road, Silverwater, nSW
12 Frederick Street, St leonards, nSW
2 Alspec Place, Eastern Creek, nSW
40‑50 Talavera Road, Macquarie Park, nSW
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 Space (1 Chifley Square, Sydney), nSW3
34‑60 little Collins Street, Melbourne, VIC**
32‑44 Flinders Street, Melbourne, VIC
Flinders Gate Complex, 172 Flinders Street, Melbourne, VIC
383‑395 Kent Street Car Park, Sydney, nSW
123 Albert Street, Brisbane, QlD4
2‑4 Military Road, Matraville, nSW
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, nSW5
145‑151 Arthur Street, Flemington, nSW
436‑484 Victoria Road, Gladesville, nSW
1 Foundation Place, Greystanes, nSW
12‑18 Distribution Drive, laverton north, VIC
250 Forest Road South, lara, VIC
15‑23 Whicker Road, Gillman, SA
25 Donkin Street, West End, Brisbane, QlD
52 Holbeche Road, Arndell Park, nSW
30‑32 Bessemer Street, Blacktown, nSW
27‑29 liberty Road, Huntingwood, nSW
154 O’Riordan Street, Mascot, nSW
5‑15 Rosebery Avenue & 25‑55 Rothschild Avenue, Rosebery, nSW
10‑16 South Street, Rydalmere, nSW
DEXUS Industrial Estate, Pound Road West, Dandenong South, VIC
DEXUS Industrial Estate, Boundary Road (including 440 Doherty’s Road), laverton north, VIC1, 2
ownership
%
acquisition
date
Independent
valuation date
Independent
valuation amount
$’000
Independent
valuer
Book value
30 Jun 2012
$’000
Book value
30 Jun 2011
$’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
50
100
100
100
100
100
100
100
May 1990
Oct 1995
Oct 1996
Aug 1996
Jul 2000
Mar 2004
May 2010
Oct 2002
Sep 1987
nov 1993
May 1997
Mar 1999
Sep 1987
May 2002
Jul 2000
nov 1984
Jun 1998
Mar 1999
Sep 1987
Oct 1984
Dec 2009
Sep 1997
Dec 2002
Dec 1998
Dec 1998
Sep 1997
Sep 1997
Sep 1997
Feb 2003
Apr 1998
Sep 1997
Jan 2004
Jul 2002
Jul 2002
Dec 2002
Dec 2002
Dec 1998
Jul 1998
May 1997
Jul 1998
Jun 1997
Dec 2009
Jun 2011
Jun 2010
Jun 2011
Jun 2011
Dec 2011
n/a
Dec 2011
Jun 2010
Jun 2012
Dec 2010
Jun 2011
Dec 2011
Jun 2010
Dec 2011
Jun 2011
Jun 2011
Jun 2011
Dec 2011
Jun 2012
Jun 2012
Dec 2011
Jun 2012
Jun 2012
Jun 2012
Dec 2011
Jun 2011
Dec 2011
Jun 2010
Dec 2010
Jun 2011
Jun 2012
Jun 2012
Jun 2010
Jun 2012
Dec 2010
Dec 2010
Jun 2012
Jun 2011
Dec 2010
Jun 2011
88,000
16,250
179,400
37,600
33,500
24,900
n/a
31,500
192,700
93,500
77,000
28,500
133,000
37,000
129
39,200
29,500
54,000
64,000
375,500
52,900
37,500
42,000
16,300
24,000
45,500
28,000
41,500
41,500
89,000
39,250
72,000
36,200
48,000
52,300
25,500
27,000
12,500
16,250
8,000
13,750
(i)
(i)
(g)
(g)
(a)
(d)
n/a
(g)
(d)
(a)
(f)
(e)
(a)
(i)
(a)
(i)
(e)
(e)
(a)
(d)
(i)
(g)
(f)
(a)
(a)
(a)
(f)
(e)
(f)
(f)
(g)
(f)
(i)
(g)
(e)
(a)
(f)
(f)
(e)
(i)
(e)
89,009
16,300
88,660
32,500
182,838
181,249
37,704
33,873
24,900
24,300
29,000
37,600
33,500
24,328
25,931
27,981
217,692
207,000
93,500
77,200
28,100
80,162
79,460
28,500
133,964
127,225
27,600
33,000
129
39,259
29,932
54,000
64,000
375,500
52,900
37,522
42,000
16,300
24,000
–
28,472
41,676
43,255
90,840
40,701
74,454
36,875
50,437
52,300
27,300
29,400
12,500
15,606
8,026
14,334
129
39,200
29,500
54,000
60,000
–
48,902
37,400
40,112
20,500
27,312
44,128
28,000
43,500
43,000
89,756
39,250
75,300
73,200
50,193
50,000
28,800
26,200
12,500
16,250
8,000
13,750
2012 DEXUS AnnUAl REPORT 55
NoTES To ThE FINaNCIal STaTEmENTS
Note 13 Non-current assets – investment properties (continued)
(a) properties (continued)
11 Talavera Road, Macquarie Park, nSW
DEXUS Industrial Estate, Egerton Street, Silverwater, nSW
89 Egerton Street, Silverwater, nSW
114 Fairbank Road, Clayton, VIC
30 Bellrick Street, Acacia Ridge, QlD
Quarry Industrial Estate, 8 Basalt Road, Greystanes, nSW – Solaris1, 2
Quarry Industrial Estate, 5 Bellevue Circuit, Greystanes, nSW – Symbion1, 2
Quarry Industrial Estate, 6 Bellevue Circuit, Greystanes, nSW – Fujitsu1, 4
Quarry Industrial Estate, 2‑6 Basalt Road, Greystanes, nSW – Camerons Transport1, 4
2‑10 Distribution Drive, laverton north, VIC – Fastline1, 4
27 Distribution Drive, laverton north, VIC – Toll1, 4
25 Distribution Drive, laverton north, VIC – ACFS1, 4
45 Clarence Street, Sydney, nSW
Governor Phillip & Macquarie Tower Complex, 1 Farrer Place, Sydney, nSW2
309‑321 Kent Street, Sydney, nSW2
One Margaret Street, Sydney, nSW
Victoria Cross 60 Miller Street, north Sydney, nSW
The Zenith, 821 Pacific Highway, Chatswood, nSW2
Woodside Plaza, 240 St Georges Terrace, Perth, WA
30 The Bond, 30‑34 Hickson Road, Sydney, nSW
Southgate Complex, 3 Southgate Avenue, Southbank, VIC
201‑217 Elizabeth Street, Sydney, nSW2
Garema Court, 140‑180 City Walk, Canberra, ACT**
Australia Square Complex, 264‑278 George Street, Sydney, nSW2
non‑core international properties6
Total investment properties excluding development properties
Total development properties held as investment property
Total investment properties
1 50% classified as investment property held for sale at 30 June 2012.
2 The valuation reflects 50% of the independent valuation amount.
3 Heritage floor space retained following the disposal of 1 Chifley Square, Sydney.
4 Classified as development property held as investment property at 30 June 2011.
5 Classified as investment property held for sale at 30 June 2012.
6 Includes new Zealand, United States and European properties.
The title to all properties is freehold, with the exception of the properties marked ** which are leasehold.
(a) Colliers International
(b) landmark White
(c) Cushman & Wakefield
(d) Jones lang laSalle
(e) Knight Frank
(f) FPD Savills
(g) m3property
(h) Weiser Realty Advisors (USA)
(i) CB Richard Ellis
56
2012 DEXUS AnnUAl REPORT
ownership
acquisition
date
Independent
valuation date
Independent
Independent
valuation amount
valuer
%
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
100
50
100
100
100
50
100
50
n/a
Jun 2002
May 1997
May 1997
Jul 1997
Jun 1997
Dec 2007
Dec 2007
Dec 2007
Dec 2007
Jun 2010
Jun 2010
Jun 2010
Dec 1998
Dec 1998
Dec 1998
Dec 1998
Dec 1998
Dec 1998
Jan 2001
May 2002
Aug 2000
Aug 2000
Aug 2000
Aug 2000
n/a
Jun 2010
Jun 2012
Jun 2012
Dec 2010
Jun 2010
Dec 2011
Jun 2012
n/a
n/a
n/a
n/a
n/a
Jun 2011
Dec 2010
Jun 2012
Dec 2011
Jun 2011
Jun 2010
Jun 2012
Dec 2010
Jun 2012
Jun 2011
Dec 2011
Dec 2011
n/a
$’000
127,000
35,000
4,000
14,900
19,600
12,625
16,050
n/a
n/a
n/a
n/a
n/a
247,500
643,000
191,000
173,500
135,000
107,500
460,000
145,000
418,350
144,000
29,500
278,750
(g)
(g)
(g)
(f)
(d)
(e)
(d)
n/a
n/a
n/a
n/a
n/a
(f)
(d)
(d)
(d)
(a)
(e)
(f)
(a)
(i)
(d)
(a)
(f)
Book value
Book value
30 Jun 2012
30 Jun 2011
$’000
$’000
147,856
141,000
35,000
33,300
4,000
15,208
20,335
12,625
16,050
20,000
14,900
7,035
5,379
5,870
6,900
15,090
20,300
24,502
30,411
–
–
–
–
–
250,301
247,500
651,086
645,443
191,000
184,308
175,326
170,863
141,135
135,000
117,266
112,953
460,000
441,000
146,509
145,455
418,350
385,000
148,080
144,000
48,800
31,000
271,500
271,463
6,297,441
6,572,265
94,016
533,649
6,391,457
7,105,914
n/a
n/a
656,132
1,380,799
11 Talavera Road, Macquarie Park, nSW
DEXUS Industrial Estate, Egerton Street, Silverwater, nSW
89 Egerton Street, Silverwater, nSW
114 Fairbank Road, Clayton, VIC
30 Bellrick Street, Acacia Ridge, QlD
Quarry Industrial Estate, 8 Basalt Road, Greystanes, nSW – Solaris1, 2
Quarry Industrial Estate, 5 Bellevue Circuit, Greystanes, nSW – Symbion1, 2
Quarry Industrial Estate, 6 Bellevue Circuit, Greystanes, nSW – Fujitsu1, 4
Quarry Industrial Estate, 2‑6 Basalt Road, Greystanes, nSW – Camerons Transport1, 4
Governor Phillip & Macquarie Tower Complex, 1 Farrer Place, Sydney, nSW2
2‑10 Distribution Drive, laverton north, VIC – Fastline1, 4
27 Distribution Drive, laverton north, VIC – Toll1, 4
25 Distribution Drive, laverton north, VIC – ACFS1, 4
45 Clarence Street, Sydney, nSW
309‑321 Kent Street, Sydney, nSW2
One Margaret Street, Sydney, nSW
Victoria Cross 60 Miller Street, north Sydney, nSW
The Zenith, 821 Pacific Highway, Chatswood, nSW2
Woodside Plaza, 240 St Georges Terrace, Perth, WA
30 The Bond, 30‑34 Hickson Road, Sydney, nSW
Southgate Complex, 3 Southgate Avenue, Southbank, VIC
201‑217 Elizabeth Street, Sydney, nSW2
Garema Court, 140‑180 City Walk, Canberra, ACT**
Australia Square Complex, 264‑278 George Street, Sydney, nSW2
non‑core international properties6
Total investment properties excluding development properties
Total development properties held as investment property
Total investment properties
ownership
%
acquisition
date
Independent
valuation date
Independent
valuation amount
$’000
Independent
valuer
Book value
30 Jun 2012
$’000
Book value
30 Jun 2011
$’000
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
100
50
100
100
100
50
100
50
n/a
Jun 2002
May 1997
May 1997
Jul 1997
Jun 1997
Dec 2007
Dec 2007
Dec 2007
Dec 2007
Jun 2010
Jun 2010
Jun 2010
Dec 1998
Dec 1998
Dec 1998
Dec 1998
Dec 1998
Dec 1998
Jan 2001
May 2002
Aug 2000
Aug 2000
Aug 2000
Aug 2000
n/a
Jun 2010
Jun 2012
Jun 2012
Dec 2010
Jun 2010
Dec 2011
Jun 2012
n/a
n/a
n/a
n/a
n/a
Jun 2011
Dec 2010
Jun 2012
Dec 2011
Jun 2011
Jun 2010
Jun 2012
Dec 2010
Jun 2012
Jun 2011
Dec 2011
Dec 2011
n/a
127,000
35,000
4,000
14,900
19,600
12,625
16,050
n/a
n/a
n/a
n/a
n/a
247,500
643,000
191,000
173,500
135,000
107,500
460,000
145,000
418,350
144,000
29,500
278,750
(g)
(g)
(g)
(f)
(d)
(e)
(d)
n/a
n/a
n/a
n/a
n/a
(f)
(d)
(d)
(d)
(a)
(e)
(f)
(a)
(i)
(d)
(a)
(f)
147,856
141,000
35,000
33,300
4,000
15,208
20,335
12,625
16,050
20,000
14,900
7,035
5,379
5,870
6,900
15,090
20,300
24,502
30,411
–
–
–
–
–
250,301
247,500
651,086
645,443
191,000
184,308
175,326
170,863
141,135
135,000
117,266
112,953
460,000
441,000
146,509
145,455
418,350
385,000
148,080
144,000
48,800
31,000
271,500
271,463
n/a
n/a
656,132
1,380,799
6,297,441
6,572,265
94,016
533,649
6,391,457
7,105,914
2012 DEXUS AnnUAl REPORT 57
NoTES To ThE FINaNCIal STaTEmENTS
Note 13 Non-current assets – investment properties (continued)
(a) properties (continued)
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. In relation to development properties under construction for future use as investment property, fair value is
determined based on the market value of the property on the assumption it had already been completed at the valuation date less costs still
required to complete the project, including an appropriate adjustment for profit and risk. 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 or the Society of Property Researchers, Germany.
Key valuation assumptions
The below table illustrates the key valuation assumptions used in the determination of the investment properties fair value.
2012
Weighted average capitalisation rate (%)
Weighted average lease expiry by income (years)
Occupancy by income (%)
2011
Weighted average capitalisation rate (%)
Weighted average lease expiry by income (years)
Occupancy by income (%)
australian
office
australian
industrial
US
industrial
7.3
4.9
96.8
7.4
5.3
95.3
8.6
4.4
92.8
8.6
4.7
95.1
6.3
4.4
98.2
7.6
3.9
87.9
Ten year discounted cash flows and capitalisation valuation methods are used together with active market evidence. In addition to the key
assumptions set out in the table above, assumed portfolio downtime ranges from six to 12 months and tenant retention ranges from 50% to 75%.
acquisitions
n On 6 July 2011, 6711 Valley View Street, la Palma, California was acquired for US$18.3 million (A$17.1 million), excluding acquisition costs.
n On 27 October 2011, 2250 Riverside Avenue, Colton, California was acquired for US$18.4 million (A$17.5 million), excluding acquisition costs.
Disposals
n On 14 September 2011, Tri‑County 5, Tri‑County Parkway, Schertz, San Antonio, Texas was disposed of for gross proceeds of US$1.8 million
(A$1.8 million).
n On 16 September 2011, 2700 International Street, Columbus, Ohio was disposed of for gross proceeds of US$3.1 million (A$3.0 million).
n On 26 September 2011, 44633‑44645 Guilford Road & 21641 Beaumeade Circle, Ashburn, Virginia was disposed of for gross proceeds
of US$22.2 million (A$22.9 million).
n On 30 november 2011, Kopenhagenerstraße, Duisburg was disposed of for gross proceeds of €18.9 million (A$25.1 million).
n On 30 november 2011, Theodorstraße, Düsseldorf was disposed of for gross proceeds of €14.5 million (A$19.3 million).
n On 23 December 2011, 9842 International Boulevard, Cincinnati, Ohio was disposed of for gross proceeds of US$4.5 million (A$4.4 million).
n On 17 February 2012, 7700 68th Avenue, Brooklyn Park was disposed of for gross proceeds of US$3.0 million (A$2.8 million).
n On 21 June 2012, 65 properties in the United States were disposed of for gross proceeds of US$770.0 million (A$771.1 million).
n On 26 June 2012, Im Gewerbegebiet 18, Friedewald was disposed of for gross proceeds of €2.4 million (A$3.0 million).
n On 26 June 2012, Im Steinbruch 4, 6, Knetzgau was disposed of for gross proceeds of €4.8 million (A$5.9 million).
n On 26 June 2012, Carl‑leverkus‑Straße 3‑5 & Winkelsweg 182‑184, langenfeld was disposed of for gross proceeds of €4.9 million (A$6.0 million).
n On 26 June 2012, Schneiderstraße 82, langenfeld 3 was disposed of for gross proceeds of €2.9 million (A$3.6 million).
n On 26 June 2012, Former Straße 6, Unna was disposed of for gross proceeds of €7.6 million (A$9.4 million).
58
2012 DEXUS AnnUAl REPORT
(b) reconciliation
Opening balance at the beginning of the year
Additions
Acquisitions
lease incentives
Amortisation of lease incentives
Rent straight‑lining
Disposals
Transfer to non‑current assets classified as held for sale1
Transfer from/(to) inventories2
net fair value gain of investment properties
Foreign exchange differences on foreign currency translation
Closing balance at the end of the year
Note
9
10
2012
$’000
2011
$’000
7,105,914
7,146,397
160,725
267,455
35,175
62,732
41,205
85,439
(62,672)
(58,732)
4,434
(2,119)
(881,109)
(141,674)
(187,375)
(59,260)
7,035
(6,448)
73,677
148,433
72,921
(314,782)
6,391,457
7,105,914
1 On 30 June 2012, 114‑120 Old Pittwater Road, Brookvale nSW was transferred from investment properties to non‑current assets held for sale with an intention to sell.
On 30 June 2012, 50% of an industrial portfolio consisting of assets at DEXUS Industrial Estate laverton north, VIC, Altona north, VIC and Quarry at Greystanes, nSW
was transferred from investment properties to non‑current assets held for sale with an intention to sell.
On 30 June 2012, a parcel of land at Quarry at Greystanes, nSW was transferred from investment properties to non‑current assets held for sale with an intention to sell.
2 On 30 June 2012, 50% of Boundary Road, laverton, VIC – Fastline, was transferred from inventories to investment properties with an intention to hold.
(c) investment properties pledged as security
Refer to note 20 for information on investment properties pledged as security.
Note 14 Non-current assets – plant and equipment
Opening balance at the beginning of the year
Additions
Depreciation charge
Disposals – cost
Disposals – accumulated depreciation
Closing balance at the end of the year
Cost
Accumulated depreciation
Net book value as at the end of the year
Plant and equipment comprises IT and office equipment.
2012
$’000
3,926
3,142
(2,386)
–
–
4,682
14,811
(10,129)
4,682
2011
$’000
5,264
1,988
(3,326)
(1,400)
1,400
3,926
11,669
(7,743)
3,926
2012 DEXUS AnnUAl REPORT 59
NoTES To ThE FINaNCIal STaTEmENTS
Note 15 Non-current assets – investments accounted for using the equity method
Investments are accounted for in the Financial Statements using the equity method of accounting (refer note 1).
Information relating to this entity is set out below:
Name of entity
principal activity
ownership interest
Bent Street Trust
Office property investment
Total non-current assets – investments accounted for using the equity method
The Bent Street Trust was formed in Australia.
2012
%
33.3
2011
%
33.3
2012
$’000
2011
$’000
217,043
200,356
217,043
200,356
movements in carrying amounts of investments accounted for using the equity method
Opening balance at the beginning of the year
Units issued during the year
Interest acquired during the year
Share of net profit after tax1
Distributions received/receivable
Closing balance at the end of the year
Results attributable to investments accounted for using the equity method
Operating profit before income tax
operating profit after income tax
less: Distributions received/receivable
Retained profits/(accumulated losses) at the beginning of the year
Retained profits at the end of the year
2012
$’000
2011
$’000
200,356
93,344
8,565
1,264
13,784
(6,926)
61,726
11,832
34,053
(599)
217,043
200,356
13,784
34,053
13,784
34,053
(6,926)
(599)
6,858
33,454
844
(32,610)
7,702
844
1 Share of net profit after tax includes a fair value gain of $7.5 million (2011: $33.6 million) in relation to the Group’s share of the Bligh Street investment property.
Summary of the performance and financial position of investments accounted for using the equity method
The Group’s share of aggregate profit, assets and liabilities of investments accounted for using the equity method are:
Profit from ordinary activities after income tax expense
Assets
liabilities
Share of expenditure commitments
Capital commitments
2012
$’000
2011
$’000
13,784
34,053
221,170
212,252
4,127
11,896
12,447
646
60
2012 DEXUS AnnUAl REPORT
Note 16 Non-current assets – deferred tax assets
The balance comprises temporary differences attributable to:
Investment properties
Derivative financial instruments
Tax losses
Employee provisions
Other
Total non-current assets – deferred tax assets
movements
Opening balance at the beginning of the year
Reversal of previous tax losses
Recognition of tax losses
Temporary differences
Credited to the Statement of Comprehensive Income
movements in deferred withholding tax arising from:
Temporary differences
Foreign currency translation
Charged to the Statement of Comprehensive Income
Closing balance at the end of the year
Note 17 Non-current assets – intangible assets
management rights
Opening balance at the beginning of the year
Amortisation charge
Closing balance at the end of the year
Cost
Accumulated amortisation
Accumulated impairment
Total management rights
goodwill
Opening balance at the beginning of the year
Impairment
Closing balance at the end of the year
Cost
Accumulated impairment
Total goodwill
2012
$’000
2011
$’000
–
23,753
1,048
22,264
12,229
1,188
4,719
13,865
12,229
1,011
36,729
55,577
55,577
–
79,927
(3,033)
8,399
13,865
278
971
8,677
11,803
(28,648)
(23,592)
1,123
(12,561)
(27,525)
(36,153)
36,729
55,577
2012
$’000
2011
$’000
222,353
223,000
(418)
(647)
221,935
222,353
252,382
252,382
(2,644)
(2,226)
(27,803)
(27,803)
221,935
222,353
2,331
(625)
1,706
2,998
(1,292)
1,706
2,525
(194)
2,331
2,998
(667)
2,331
Total non-current assets – intangible assets
223,641
224,684
Management rights represent the asset management rights owned by DEXUS Holdings Pty limited, a wholly owned subsidiary of DXO, which entitle
it to management fee revenue from both finite life trusts and indefinite life trusts. Those rights that are deemed to have a finite useful life (held at a
value of $5,686,657 (2011: $7,769,204)) are measured at cost and amortised using the straight‑line method over their estimated remaining useful
lives of 20 years. Management rights that are deemed to have an indefinite life are held at a value of $216,248,492 (2011: $214,584,150).
2012 DEXUS AnnUAl REPORT 61
NoTES To ThE FINaNCIal STaTEmENTS
Note 17 Non-current assets – intangible assets (continued)
impairment of management rights
During the current year, management carried out a review of the recoverable amount of its management rights. The review did not identify any
events or circumstances that would indicate an impairment of management rights associated with indefinite life trusts.
The value in use has been determined using Board approved long term forecasts in a five year discounted cash flow model. Forecasts were based
on projected returns of the business in light of current market conditions. The performance in year five has been used as a terminal value.
Key assumptions:
n A terminal capitalisation rate of 12.5% (2011: 12.5%) was used incorporating an appropriate risk premium for a management business.
n The cash flows have been discounted at 9.3% (2011: 9.3%) based on externally published weighted average cost of capital for an appropriate
peer group plus an appropriate premium for risk. A 0.25% (2011: 0.25%) decrease in the discount rate would increase the valuation by
$2.4 million (2011: $2.3 million).
2012
$’000
913
396
2011
$’000
1,097
1,808
1,309
2,905
2012
$’000
38,985
17,452
–
20,508
16,215
885
2011
$’000
41,806
13,168
3,142
13,194
15,487
181
14,439
21,938
108,484
108,916
Note 18 Non-current assets – other
Tenant bonds
Other
Total non-current assets – other
Note 19 Current liabilities – payables
Trade creditors
Accruals
Amount payable to other non‑controlling interests
Accrued capital expenditure
Prepaid income
GST payable
Accrued interest
Total current liabilities – payables
62
2012 DEXUS AnnUAl REPORT
Note 20 Interest bearing liabilities
Current
Secured
Bank loans
Total secured
Unsecured
US senior notes
Total unsecured
Deferred borrowing costs
Total current liabilities – interest bearing liabilities
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
Notes
2012
$’000
2011
$’000
(d)
–
–
–
–
–
–
250,983
250,983
65,183
65,183
(389)
315,777
(b), (c)
75,459
153,218
75,459
153,218
(a)
(e)
493,674
720,967
1,046,660
701,573
340,000
340,000
91
86
1,880,425
1,762,626
(15,122)
(16,565)
1,940,762
1,899,279
1,940,762
2,215,056
2012 DEXUS AnnUAl REPORT 63
NoTES To ThE FINaNCIal STaTEmENTS
Note 20 Interest bearing liabilities (continued)
Financing arrangements
Type of facility
US senior notes (144A)
US senior notes (USPP)
Medium term notes
Multi‑option revolving credit facilities
Bank debt – secured
Total
Bank guarantee utilised
Unused at balance date
2012
$’000
2012
$’000
Note
Currency
Security
maturity date
Utilised
Facility limit
US$
US$
A$
Unsecured
Oct 14 to Mar 21
366,110
366,110
Unsecured
Dec 14 to Mar 17
127,564
127,564
Unsecured
Jul 14 to Apr 17
340,000
340,000
(a)
(c)
Multi Currency Unsecured
Sep 13 to Jul 17
1,046,660
1,620,623
US$
Secured
Jun 17 to Dec 17
75,459
75,459
1,955,793
2,529,756
1,148
572,815
Each of the Group’s unsecured borrowing facilities are supported by guarantee arrangements, and have negative pledge provisions which limit the
amount and type of encumbrances that the Group can have over their assets and ensures that all senior unsecured debt ranks pari passu.
(a) multi-option revolving credit facilities
This includes 18 facilities maturing between September 2013 and July 2017 with a weighted average maturity of September 2015. The total facility
limit comprises US$153.5 million (A$150.6 million) and A$1,470.0 million (refer additional information below). A$1.1 million is utilised as bank
guarantees for developments.
(b) Bank loans – secured
During the period, a total of US$80.9 million (A$82.6 million) was repaid and associated mortgages discharged.
(c) Bank loans – secured
This includes a total of US$76.9 million (A$75.5 million) of secured bank facilities with maturities of June 2017 and December 2017.
The facilities are secured by mortgages over investment properties totalling US$178.5 million (A$175.2 million) as at 30 June 2012.
(d) Bank loans – secured
During the period, a total of A$250.0 million was repaid and associated mortgages discharged.
(e) preferred shares
US REIT has issued US$92,550 (A$90,815) 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 the
Group’s interest to qualify as a REIT.
Additional information
The Group has forward start commitments of A$100 million, A$150 million and A$50 million to extend existing facilities from their current maturity
dates within the next 12 months to maturities of December 2015, December 2016 and July 2017, respectively.
64
2012 DEXUS AnnUAl REPORT
Note 21 provisions
Current
Provision for distribution
Provision for employee benefits
Total current liabilities – provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
provision for distribution
Opening balance at the beginning of the year
Additional provisions
Payments and reinvestment of distributions
Closing balance at the end of the year
2012
$’000
2011
$’000
128,206
125,331
23,763
22,475
151,969
147,806
2012
$’000
2011
$’000
125,331
118,110
257,408
250,662
(254,533)
(243,441)
128,206
125,331
A provision for distribution has been raised for the period ended 30 June 2012. This distribution is to be paid on 31 August 2012.
Non-current
Provision for employee benefits
Total non-current liabilities – provisions
Note 22 Non-current liabilities – deferred tax liabilities
The balance comprises temporary differences attributable to:
Derivative financial instruments
Goodwill
Investment properties
Other
Total non-current liabilities – deferred tax liabilities
movements
Opening balance at the beginning of the year
Temporary differences
(Credited)/charged to the Statement of Comprehensive Income
movements in deferred withholding tax arising from:
Temporary differences
Foreign currency translation
Charged to the Statement of Comprehensive Income
Closing balance at the end of the year
Note 23 Non-current liabilities – other
Tenant bonds
Total non-current liabilities – other
2012
$’000
2011
$’000
16,517
17,624
16,517
17,624
2012
$’000
2011
$’000
3,848
2,205
5,926
412
1,137
2,331
13,862
821
12,391
18,151
18,151
11,296
(10,389)
(10,389)
6,855
6,855
5,516
(887)
4,629
–
–
–
12,391
18,151
2012
$’000
3,669
3,669
2011
$’000
6,151
6,151
2012 DEXUS AnnUAl REPORT 65
NoTES To ThE FINaNCIal STaTEmENTS
Note 24 Contributed equity
(a) contributed equity of unitholders of the parent entity
Opening balance at the beginning of the year
Capital payments
Buy‑back of contributed equity
Distributions reinvested
Transaction costs
Closing balance at the end of the year
(b) contributed equity of unitholders of other stapled entities
Opening balance at the beginning of the year
Capital contributions
Buy‑back of contributed equity
Distributions reinvested
Transaction costs
Closing balance at the end of the year
Capital payments and capital contributions
2012
$’000
2011
$’000
1,798,077
1,789,973
(174,979)
(18,006)
–
(78)
–
–
8,104
–
1,605,014
1,798,077
2012
$’000
2011
$’000
3,014,665
3,008,241
174,979
(32,944)
–
–
–
6,424
(235)
–
3,156,465
3,014,665
In December 2011, DXS implemented the Capital Reallocation Proposal approved by security holders at the 2011 Annual General Meeting held on
31 October 2011. Under the Capital Reallocation Proposal, DOT and DDF made capital payments to security holders of 3.616 cents for each DOT
and DDF unit which was then compulsorily applied as a capital contribution to DIT and DXO units. Security holders did not receive any cash as
part of the Capital Reallocation Proposal.
In April 2012, DXS commenced a securities buy‑back of up to $200 million. As at 30 June 2012, DXS had purchased 55,206,519 stapled
securities at an average price of $0.92 per stapled security.
(c) Number of securities on issue
Opening balance at the beginning of the year
Buy‑back of contributed equity
Distributions reinvested
Closing balance at the end of the year
Terms and conditions
2012
No. of
securities
2011
No. of
securities
4,839,024,176
4,820,821,799
(55,206,519)
–
–
18,202,377
4,783,817,657 4,839,024,176
Each stapled security ranks equally with all other stapled securities for the purposes of distributions and on termination of the Group.
Each stapled security entitles the holder to vote in accordance with the provisions of the Constitutions and the Corporations Act 2001.
(d) 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 13 December 2010, the Group announced the suspension of the DRP until further notice.
66
2012 DEXUS AnnUAl REPORT
Note 25 Reserves and retained profits
(a) reserves
Foreign currency translation reserve
Asset revaluation reserve
Security‑based payments reserve
Total reserves
movements:
Foreign currency translation reserve
Opening balance at the beginning of the year
Exchange differences on translating foreign operations
Foreign currency translation reserve transfer on partial disposal of foreign operations
Closing balance at the end of the year
asset revaluation reserve
Opening balance at the beginning of the year
Closing balance at the end of the year
Security-based payments reserve
Opening balance at the beginning of the year
Security‑based payments expense
Closing balance at the end of the year
(b) Nature and purpose of reserves
Foreign currency translation reserve
2012
$’000
2011
$’000
(35,979)
(77,843)
42,739
42,739
426
–
7,186
(35,104)
(77,843)
(72,967)
333
(4,876)
41,531
–
(35,979)
(77,843)
42,739
42,739
42,739
42,739
–
426
426
–
–
–
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.
Security-based payments reserve
The security‑based payments reserve is used to recognise the fair value of performance rights to be issued under the DEXUS Transitional
Performance Rights Plan. Refer to note 38 for further details.
(c) retained profits
Opening balance at the beginning of the year
net profit attributable to security holders
Transfer of capital reserve of other non‑controlling interests
Distributions provided for or paid
Closing balance at the end of the year
2012
$’000
2011
$’000
325,175
33,186
181,070
553,012
(10,176)
(10,361)
(257,408)
(250,662)
238,661
325,175
2012 DEXUS AnnUAl REPORT 67
NoTES To ThE FINaNCIal STaTEmENTS
Note 26 other non-controlling interests
Interest in
Contributed equity
Reserves
Accumulated losses
Total other non-controlling interests
2012
$’000
2011
$’000
–
–
–
–
200,126
70,568
(66,666)
204,028
As announced to REnTS unitholders on 30 March 2012, all REnTS preference units were repurchased on 29 June 2012. In accordance with the terms
and conditions of the issue of the preference units, REnTS unitholders received the full face value of the preference units ($100 per unit) in addition to
the final distribution entitlement of $1.37 per unit. As a result of the repurchase, REnTS are no longer recognised as a non‑controlling interest.
Note 27 Distributions paid and payable
(a) Distribution to security holders
31 December (paid 29 February 2012)
30 June (payable 31 August 2012)
(b) Distribution to other non-controlling interests
DEXUS REnTS Trust (paid 18 October 2011)
DEXUS REnTS Trust (paid 17 January 2012)
DEXUS REnTS Trust (paid 18 April 2012)
DEXUS REnTS Trust (paid 29 June 2012)
Total distributions
(c) Distribution rate
31 December (paid 29 February 2012)
30 June (payable 31 August 2012)
Total distributions
2012
$’000
2011
$’000
129,202
125,331
128,206
125,331
257,408
250,662
2012
$’000
3,223
3,101
2,897
2,794
2011
$’000
3,162
3,182
3,142
3,142
12,015
12,628
269,423
263,290
2012
Cents per
security
2011
Cents per
security
2.67
2.68
5.35
2.59
2.59
5.18
(d) franked dividends
The franked portions of the final dividends recommended after 30 June 2012 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 2012.
Franking credits
Opening balance at the beginning of the year
Franking credits arising during the year on payment of tax at 30%
Franking debits arising during the year on receipt of tax refund at 30%
Closing balance at the end of the year
2012
$’000
2011
$’000
17,196
19,730
–
(1,015)
1,528
(4,062)
16,181
17,196
68
2012 DEXUS AnnUAl REPORT
Note 28 parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Retained profits
Total equity
net profit for the year
Total comprehensive income for the year
(b) guarantees entered into by the parent entity
Refer to note 30 for details of guarantees entered into by the parent entity.
(c) contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2012 (2011: nil).
2012
$’000
2011
$’000
220,722
162,887
2,255,845
2,567,774
116,125
114,676
499,028
650,730
1,605,014
1,798,077
151,803
118,967
1,756,817
1,917,044
139,091
155,671
139,091
155,671
(d) capital commitments
The following amounts represent capital expenditure of the parent entity on investment properties contracted at the end of the reporting period
but not recognised as liabilities payable:
Investment properties
Total capital commitments
2012
$’000
3,393
2011
$’000
11,817
3,393
11,817
2012 DEXUS AnnUAl REPORT 69
NoTES To ThE FINaNCIal STaTEmENTS
Note 29 Financial risk management
To ensure the effective and prudent management of the Group’s capital
and financial risks, the Group 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 policies and funding
strategies for approval.
The Group is rated BBB+ by Standard and Poor’s (S&P) and Baa1 by
Moody’s. The Group considers potential impacts upon the rating when
assessing the strategy and activities of the Group and regards those
impacts as an important consideration in its management of the
Group’s capital structure.
The Group is required to comply with certain financial covenants in
respect of its interest bearing liabilities. During the 2012 and 2011
reporting periods, the Group was in compliance with all of its
financial covenants.
The Capital Markets Committee is a management committee that is
accountable to both the Board Finance Committee and the Group
Management 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 Group’s governance structure, including
terms of reference, is available at www.dexus.com
(1) capital risk management
The Group manages its capital to ensure that entities within the Group
will be able to continue as a going concern while maximising the return
to owners through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt (see note 20),
cash and cash equivalents, and equity attributable to security holders.
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 holders’ equity;
n potential impacts on the Group’s credit rating; and
n other market factors and circumstances.
To minimise the potential impacts of foreign exchange risk on the
Group’s capital structure, the Group’s policy is to hedge the majority
of its foreign asset and liability exposures. Consequently the magnitude
of the assets and liabilities on the Statement of Financial Position
(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 below).
The Group has a stated target gearing level of below 40%. The gearing
ratio calculated in accordance with our covenant requirements at
30 June 2012 was 27.8% (as detailed below).
gearing ratio
2012
$’000
2011
$’000
Total interest bearing liabilities1
1,955,999
2,211,637
Total tangible assets2
7,025,465
7,607,163
Gearing ratio
27.8%
29.1%
1 Total interest bearing liabilities excludes deferred borrowing costs and includes the
fair value of cross currency swaps as reported internally to management.
2 Total tangible assets comprise total assets less intangible assets, derivatives and
deferred tax balances as reported internally to management.
DXFM is the Responsible Entity for the managed investment schemes
that are stapled to form the Group. 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 to maintain 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 (DWPF).
It is subject to the same requirements.
(2) financial risk management
The Group’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 Group’s overall risk management program
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of
the Group.
Accordingly, the Group 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 Group does not trade in derivative instruments
for speculative purposes. The Group 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 analysis.
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
Group’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 Group’s exposures and
(at least annually) updates its treasury policies and procedures.
70
2012 DEXUS AnnUAl REPORT
(a) liquidity risk
liquidity risk is the risk that the Group will not have sufficient available funds to meet financial obligations in an orderly manner when they fall due
or at an acceptable cost.
The Group identifies and manages liquidity risk across short term, medium term, 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 Group’s ability to refinance its current debt facilities. As the Group’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 Group’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 Group’s interest bearing liabilities and derivative financial instruments is shown in the table below.
The amounts in the table represent undiscounted cash flows.
2012
2011
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
–
–
–
–
–
–
–
–
–
36,175
108,916
(72,741)
–
–
–
–
–
–
–
–
–
Expiring
within
one year
$’000
30,842
108,484
(77,642)
Receivables
Payables
Interest bearing liabilities and interest
Fixed interest rate liabilities and interest
45,211
45,211
525,169
295,433
117,506
104,327
603,438
525,524
Floating interest rate liabilities and interest
71,210
163,776 1,142,431
151,860
326,254
105,971
899,860
73,380
Total interest bearing liabilities and interest1
116,421
208,987 1,667,600 447,293
443,760
210,298 1,503,298 598,904
Derivative financial instruments
Derivative assets
Derivative liabilities
35,184
22,541
18,557
‑
65,100
38,431
48,564
8,450
37,241
29,163
49,650
14,039
57,768
54,702
129,639
61,515
Total net derivative financial instruments2
(2,057)
(6,622)
(31,093)
(14,039)
7,332
(16,271)
(81,075)
(53,065)
1 Refer to note 20 (interest bearing liabilities). Excludes deferred borrowing costs and preference shares, but includes estimated fees and interest.
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 financial
assets and liabilities that have floating rate interest cash flows, future cash flows have been calculated using static interest and exchange rates prevailing at the end of each
reporting period. Refer to note 11 (derivative financial instruments) for fair value of derivatives. Refer note 30 (contingent liabilities) for financial guarantees.
2012 DEXUS AnnUAl REPORT 71
NoTES To ThE FINaNCIal STaTEmENTS
Note 29 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 Group’s financial instruments will fluctuate because of changes in market prices.
The market risks that the Group 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 Group arises from interest bearing financial assets and liabilities that the Group holds. Borrowings issued at variable rates
expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
The primary objective of the Group’s risk management policy for interest rate risk is to minimise the effects of interest rate movements on the
Group’s portfolio of financial assets and liabilities and financial performance. The policy sets out the minimum and maximum hedging amounts
for the Group, 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 Group’s cash flows is managed within the parameters defined by the Group Treasury Policy.
As at 30 June 2012, 67% (2011: 84%) of the financial assets and liabilities of the Group had an effective fixed interest rate.
The Group 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 below.
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
June 2013
$’000
June 2014
$’000
June 2015
$’000
June 2016
$’000
June 2017
$’000
> June 2018
$’000
75,000
75,000
75,000
75,000
56,250
–
250,093
250,093
250,093
250,093
250,093
229,259
957,500
814,167
640,000
538,333
430,000
90,208
4.26%
4.77%
5.23%
5.43%
5.48%
5.99%
135,000
120,000
83,333
82,917
60,000
17,500
2.79%
2.85%
3.48%
3.58%
3.70%
3.58%
Combined fixed debt and swaps (a$ equivalent)
1,410,354
1,264,326
1,055,889
953,797
803,284
342,491
hedge rate (%)
3.87%
4.20%
4.67%
4.77%
4.78%
4.19%
1 Average amounts for the period. Hedged amounts above do not include potential hedges that are cancellable at the counterparty’s option. Fixed rate debt is fixed coupon debt
less the amount converted to floating rate basis via coupon‑matched swaps.
2 The above hedge rates do not include margins payable on borrowings.
72
2012 DEXUS AnnUAl REPORT
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
Group’s floating rate debt and derivative cash flows. net interest expense is only sensitive to movements in market 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
2012
(+/–) $’000
2011
(+/–) $’000
A$
US$
€
C$
2,557
856
183
–
888
932
(25)
150
3,622
1,866
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 Statement of Comprehensive Income 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 Group with an economic hedge,
the Group 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 Statement of Comprehensive Income.
+/– 0.50% (50 basis points)
+/– 0.50% (50 basis points)
+/– 0.50% (50 basis points)
Total a$ equivalent
(ii) foreign exchange risk
A$
US$
€
2012
(+/–) $’000
2011
(+/–) $’000
13,991
13,060
640
–
8,934
2,714
14,619
25,044
Foreign exchange risk is the risk that movements in exchange rates used to convert foreign currency revenues, expenses, assets, or liabilities
to the Group’s functional currency will have an adverse effect on the Group.
The Group operates internationally with investments in north America, new Zealand, France and Germany. As a result of these activities,
the Group 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 Group’s foreign exchange risk management policy is to ensure that movements in exchange rates have minimal adverse impact
on the Group’s foreign currency assets and liabilities, and net foreign currency cash flows as outlined below.
2012 DEXUS AnnUAl REPORT 73
NoTES To ThE FINaNCIal STaTEmENTS
Note 29 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 Group’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 Group 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 Group has
committed foreign currency borrowing capacity in place that can replace the foreign currency amounts that are due under the cross currency
swaps. The Group’s net foreign currency exposures for net investments in foreign operations and hedging instruments are as follows:
US$ assets1
US$ net borrowings and cross currency swaps2
US$ denominated net investment
% hedged
€ assets1
€ net borrowings and cross currency swaps2
€ denominated net investment
% hedged
C$ assets
C$ net borrowings and cross currency swaps2
C$ denominated net investment
% hedged
nZ$ assets1
NZ$ denominated net investment
% hedged
Total foreign net investment (a$ equivalent)
Total % hedged
2012
$’000
2011
$’000
549,564
1,259,179
(523,710)
(1,246,552)
25,854
12,627
95%
99%
36,650
128,788
(32,613)
(129,803)
4,037
(1,015)
89%
101%
–
–
–
0%
35,573
(30,000)
5,573
84%
123,253
123,001
123,253
123,001
0%
0%
126,868
110,711
81%
92%
1 Assets exclude working capital and cash as reported internally to management.
2 net borrowings equals interest bearing liabilities less cash. Where there are no interest bearing liabilities, cash is excluded. Cross currency swap amounts comprise the foreign
currency denominated leg of the cross currency swaps.
74
2012 DEXUS AnnUAl REPORT
Sensitivity on equity (foreign currency translation reserve)
The table below shows the impact on the foreign currency translation reserve for changes in the translated value of foreign currency assets and
liabilities for an increase and decrease in foreign exchange rates per currency. The increase and decrease in cents per currency has been based
on the historical movements of the Australian dollar relative to each currency1. The cents per currency has been applied to the spot rates prevailing
at the end of each reporting period2. The impact on the foreign currency translation reserve arises as the translation of the Group’s foreign currency
assets and liabilities are recorded (in Australian dollars) directly in the foreign currency translation reserve.
+ 13.2 cents (13%) (2011: 14.2 cents)
– 13.2 cents (13%) (2011: 14.2 cents)
+ 10.3 cents (13%) (2011: 9.6 cents)
– 10.3 cents (13%) (2011: 9.6 cents)
+ 10.6 cents (8%) (2011: 10.9 cents)
– 10.6 cents (8%) (2011: 10.9 cents)
+ 8.6 cents (8%) (2011: 8.7 cents)
– 8.6 cents (8%) (2011: 8.7 cents)
US$ (A$ equivalent)
2012
$’000
2,912
2011
$’000
1,373
US$ (A$ equivalent)
(3,780)
(1,792)
€ (A$ equivalent)
€ (A$ equivalent)
nZ$ (A$ equivalent)
563
(727)
7,374
nZ$ (A$ equivalent)
(8,704)
C$ (A$ equivalent)
C$ (A$ equivalent)
–
–
(158)
205
7,375
(8,731)
413
(488)
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 2012: A$/US$ 1.0191 (2011: 1.0739), A$/€ 0.8092 (2011: 0.7405), A$/nZ$ 1.2771 (2011: 1.2953), A$/C$ 1.0454 (2011: 1.0389).
Sensitivity on fair value of cross currency swaps
The table below shows the impact on the Statement of Comprehensive Income for changes in the fair value of cross currency swaps for a
50 basis points 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 swaps1. The Group 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 Statement
of Comprehensive Income.
+/– 0.50% (50 basis points)
+/– 0.50% (50 basis points)
+/– 0.50% (50 basis points)
Total a$ equivalent
US$ (A$ equivalent)
€ (A$ equivalent)
C$ (A$ equivalent)
2012
(+/–) $’000
2011
(+/–) $’000
–
–
–
–
2
10
3
15
1 note the above sensitivity is reflective of how changes in interest rates will affect the valuation of the cross currency swaps. The effect of movements in foreign exchange rates
on the valuation of cross currency swaps is reflected in the foreign currency translation reserve sensitivity.
Net foreign currency denominated cash flows
Foreign exchange risk exists in relation to net cash flows and transactions with foreign operations that are denominated in foreign currencies.
This risk is managed through the use of forward foreign exchange contracts (after taking into account the natural hedging through foreign
denominated interest expense).
Forward foreign exchange contracts outstanding at 30 June 2012 and 30 June 2011 are as follows:
1 year or less
Over 1 and less than 2 years
More than 2 years
2012
2012
2012
2011
2011
2011
To pay
US$’000
To receive
a$’000
Weighted
average
exchange rate
To pay
US$’000
To receive
a$’000
Weighted
average
exchange rate
–
–
–
2,304
–
–
–
–
–
4,400
2,650
2,500
6,199
3,981
3,678
0.7098
0.6657
0.6798
2012 DEXUS AnnUAl REPORT 75
NoTES To ThE FINaNCIal STaTEmENTS
Note 29 Financial risk management (continued)
(2) financial risk management (continued)
(b) market risk (continued)
(ii) foreign exchange risk (continued)
Sensitivity on fair value of foreign exchange contracts
The table below shows the impact on the Statement of Comprehensive Income for changes in the fair value of forward foreign exchange contracts
for an increase and decrease in market rates. The increase and decrease in cents per currency has been based on the historical movements of the
Australian dollar relative to each currency1. The cents per currency has been applied to the spot rates prevailing at the end of each reporting period2.
The sensitivity on the fair value arises from the impact that changes in market rates will have on the mark‑to‑market valuation of the forward foreign
exchange contracts.
Although forward foreign exchange contracts are transacted for the purpose of providing the Group with an economic hedge, the Group has elected
not to apply hedge accounting to its forward foreign exchange contracts. Accordingly, gains or losses arising from changes in the fair value are
reflected in the Statement of Comprehensive Income.
+ 13.2 cents (13%) (2011: 14.2 cents)
– 13.2 cents (13%) (2011: 14.2 cents)
US$ (A$ equivalent)
US$ (A$ equivalent)
2012
$’000
–
–
2011
$’000
1,339
(1,026)
1 The sensitivity on market rates has been based on the standard deviation of the annual change in the Australian dollar exchange rate per currency since 1984 or commencement.
2 Exchange rates at 30 June 2012: A$/US$ 1.0191 (2011: 1.0739), A$/nZ$ 1.2771 (2011: 1.2953).
(c) Credit risk
Credit risk is the risk of loss to the Group in the event of non‑performance by the Group’s financial instrument counterparties. Credit risk arises from
cash and cash equivalents, loans and receivables, and derivative financial instruments. The Group has exposure to credit risk on all financial assets.
The Group manages this risk by:
n adopting a process for determining an approved counterparty, with consideration of qualitative factors as well as the counterparty’s rating;
n 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 2012,
the lowest rating of counterparties the Group is exposed to was A (S&P) (2011: A+ (S&P)).
Financial instrument transactions are spread among a number of approved financial institutions within specified credit limits to minimise the
Group’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 2012 and 30 June 2011 was the carrying amount of financial assets recognised on the
Statement of Financial Position.
As at 30 June 2012 and 30 June 2011, there were 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.
The ageing analysis of loans and receivables net of provisions at 30 June 2012 is ($’000): 29,213 (0‑30 days), 706 (31‑60 days), 207 (61‑90 days),
716 (91+ days). The ageing analysis of loans and receivables net of provisions at 30 June 2011 is ($’000): 34,336 (0‑30 days), 637 (31‑60 days),
530 (61‑90 days), 672 (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.
76
2012 DEXUS AnnUAl REPORT
(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.
As at 30 June 2012 and 30 June 2011, 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
Fixed interest bearing liabilities
Floating interest bearing liabilities
Preference shares
Total financial liabilities
2012
Carrying
amount1
$’000
59,193
30,842
78,272
2012
Fair
value2
$’000
2011
Carrying
amount1
$’000
2011
Fair
value2
$’000
59,193
30,842
73,746
36,175
73,746
36,175
78,272
100,220
100,220
168,307
168,307
210,141
210,141
108,484
108,484
108,916
108,916
120,902
120,902
160,085
160,085
673,674
743,217
1,011,864
1,065,852
1,282,119
1,282,119
1,220,060
1,220,060
91
91
86
86
2,185,270
2,254,813
2,501,011
2,554,999
1 Carrying value is equal to the value of the financial instruments on the Statement of Financial Position.
2 Fair value is the amount for which the financial instrument could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction,
however, not recognised on the Statement of Financial Position.
The fair value of interest bearing liabilities and derivative financial instruments has been determined by discounting the expected future cash flows
by the relevant market interest rates. The discount rates applied range from 0.25% to 5.66% for US$ and 2.97% to 6.75% for A$. Refer note 1(w)
for fair value methodology for financial assets and liabilities.
The Group uses methods in the determination and disclosure of the fair value of financial instruments. These methods comprise:
level 1: the fair value is calculated using quoted prices in active markets.
level 2: the fair value is determined using inputs other than quoted prices included in level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
level 3: the fair value is estimated using inputs for the asset or liability that are not based on observable data.
2012 DEXUS AnnUAl REPORT 77
NoTES To ThE FINaNCIal STaTEmENTS
Note 29 Financial risk management (continued)
(2) financial risk management (continued)
(d) Fair value of financial instruments (continued)
The following tables present the assets and liabilities measured and recognised as at fair value at 30 June 2012 and 30 June 2011.
30 June 2012
Financial assets
Derivative assets
Interest rate derivatives
Cross currency swaps
Forward exchange contracts
Financial liabilities
Interest bearing liabilities
Fixed interest bearing liabilities
Floating interest bearing liabilities
Derivative liabilities
Interest rate derivatives
Cross currency swaps
Forward exchange contracts
30 June 2011
Financial assets
Derivative assets
Interest rate derivatives
Cross currency swaps
Forward exchange contracts
Financial liabilities
Interest bearing liabilities
Fixed interest bearing liabilities
Floating interest bearing liabilities
Derivative liabilities
Interest rate derivatives
Cross currency swaps
Forward exchange contracts
level 1
$’000
level 2
$’000
level 3
$’000
2012
$’000
–
–
–
–
–
–
–
–
–
–
–
75,939
–
2,333
78,272
743,217
1,282,119
2,025,336
120,699
115
88
120,902
–
–
–
–
–
–
–
–
–
–
–
75,939
–
2,333
78,272
743,217
1,282,119
2,025,336
120,699
115
88
120,902
level 1
$’000
level 2
$’000
level 3
$’000
2011
$’000
–
–
–
–
–
–
–
–
–
–
–
75,101
20,781
4,338
100,220
1,065,852
1,220,060
2,285,912
159,352
408
325
160,085
–
–
–
–
–
–
–
–
–
–
–
75,101
20,781
4,338
100,220
1,065,852
1,220,060
2,285,912
159,352
408
325
160,085
During the year, there were no transfers between level 1, level 2 and level 3 fair value measurements.
78
2012 DEXUS AnnUAl REPORT
Note 30 Contingent liabilities
Details and estimates of maximum amounts of contingent liabilities are as follows:
Bank guarantees by the Group in respect of variations and other financial risks associated with the development of:
1 Bligh Street, Sydney, nSW1
Boundary Road, laverton, VIC – Stage 2
123 Albert Street, Brisbane, QlD
34‑60 little Collins Street, Melbourne, VIC
Contingent liabilities in respect of developments
2012
$’000
2011
$’000
250
368
500
30
5,650
–
5,682
30
1,148
11,362
1 Bank guarantee held in relation to an equity accounted investment (refer note 15).
DDF together with DIT, DOT and DXO is also a guarantor of a total of A$1,470.0 million and US$153.5 million (A$150.6 million) of bank bilateral facilities,
a total of A$340.0 million of medium term notes, a total of US$130.0 million (A$127.6 million) of privately placed notes, and a total of US$374.5 million
(A$367.4 million) public 144A senior notes, which have all been negotiated to finance the Group and other entities within DXS. The guarantees have
been given in support of debt outstanding and drawn against these facilities, and may be called upon in the event that a borrowing entity has not
complied with certain requirements such as failure to pay interest or repay a borrowing, whichever is earlier. During the period no guarantees were called.
The guarantees are issued in respect of the Group and do not constitute an additional liability to those already existing in interest bearing liabilities
on the Statement of Financial Position.
The Directors of the Responsible Entity are not aware of any other contingent liabilities in relation to the Group, 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.
Note 31 Commitments
(a) capital commitments
The following amounts represent capital expenditure on investment properties and inventories contracted at the end of each reporting period
but not recognised as liabilities payable:
Investment properties
Inventories
Total capital commitments
(b) Lease payable commitments
The future minimum lease payments payable by the Group are:
Within one year
later than one year but not later than five years
later than five years
Total lease payable commitments
2012
$’000
52,825
10,126
2011
$’000
37,425
13,253
62,951
50,678
2012
$’000
3,456
5,861
6,119
2011
$’000
3,200
7,726
6,098
15,436
17,024
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 Group has a commitment for ground rent payable in respect of a leasehold property included in investment properties, and commitments
for its Head Office premise at 343 George Street, Sydney and its US Office premise at newport, California.
no provisions have been recognised in respect of non‑cancellable operating leases.
2012 DEXUS AnnUAl REPORT 79
NoTES To ThE FINaNCIal STaTEmENTS
Note 31 Commitments (continued)
(c) Lease receivable commitments
The future minimum lease payments receivable by the Group are:
Within one year
later than one year but not later than five years
later than five years
Total lease receivable commitments
Note 32 Related parties
responsible Entity
DXFM is the Responsible Entity of DDF, DIT, DOT and DXO.
2012
$’000
2011
$’000
512,226
505,234
1,491,519
1,436,299
740,434
712,081
2,744,179
2,653,614
DXFM was also the Responsible Entity of Gordon Property Trust and Gordon Property Investment Trust (collectively known as “the Syndicate”).
On 30 April 2011, Gordon Property Trust and Gordon Property Investment Trust were wound up.
DXH is the parent entity of DWPl, the Responsible Entity for DWPF.
responsible Entity fees
Under the terms of the Constitutions of the entities within the Group, the Responsible Entity is entitled to receive fees in relation to the management
of the Group. DXFM’s parent entity, DXH, is entitled to be reimbursed for administration expenses incurred on behalf of the Group. DEXUS Property
Services Pty limited (DXPS), a wholly owned subsidiary of DXH, is entitled to property management fees from the Group.
related party transactions
Responsible Entity fees in relation to Group assets are on a cost recovery basis. All agreements with third party funds are conducted on normal
commercial terms and conditions.
DEXUS wholesale property fund
Responsible Entity fee income
Property management fee income
Recovery of administration expenses
Aggregate amount receivable at the end of each reporting period (included above)
Property management fees receivable at the end of each reporting period (included above)
Administration expenses receivable at the end of each reporting period (included above)
the Syndicate
Responsible Entity fee income
Property management fee income
Performance fee
Recovery of administration expenses
Bent Street trust
Property management fee income
Recovery of administration expenses
Property management fees receivable at the end of each reporting period (included above)
Administration expenses receivable at the end of each reporting period (included above)
80
2012 DEXUS AnnUAl REPORT
2012
$
2011
$
19,003,659
16,483,106
7,435,393
6,185,789
3,141,448
2,122,590
1,666,675
1,432,482
710,019
1,076,948
142,607
30,298
2012
$
2011
$
–
–
–
–
439,709
499,173
1,669,625
102,585
2012
$
2011
$
704,044
1,403,196
265,379
67,692
43,180
2,889
–
–
transactions with master Development corporation (mDc)
The Group entered into a two year lease agreement with the two MDC
principals for the newport office which commenced on 1 June 2010
and expired on 31 May 2012 for which rental of US$165,000
(A$159,266) (2011:US$180,000 (A$167,613)) was payable. In
addition, on 1 February 2011 the Group entered into a one year
assignment of a sublease agreement from MDC for adjacent office
space which expired 31 January 2012 for which rental of US$26,628
(A$25,702) (2011:US$45,648 (A$42,507)) was payable.
The Group has earned management fee revenue for managing the
MDC property portfolio that the two MDC principals held interests in.
The management fees of US$397,322 (A$383,682) (2011: US$973,884
(A$959,787)) are consolidated in the Group.
Directors
The following persons were Directors of DXFM at all times during the
year and to the date of this report, unless otherwise stated:
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:
Name
Title
Darren J Steinberg1
Chief Executive Officer
Victor P Hoog Antink2
Chief Executive Officer
Tanya l Cox
John C Easy
Craig D Mitchell
Paul G Say3
1 Appointed 1 March 2012.
2 Resigned 1 March 2012.
3 Resigned 30 June 2012.
Chief Operating Officer
General Counsel
Chief Financial Officer
Chief Investment Officer
C T Beare, BSc, BE (Hons), MBA, PhD, FAICD1, 4, 5
E A Alexander AM, BComm, FCA, FAICD, FCPA1, 2, 6
B R Brownjohn, BComm1, 2, 5, 6
J C Conde AO, BSc, BE (Hons), MBA1, 4, 12
T Dwyer, BJuris (Hons), llB (Hons)7
S F Ewen OAM1, 4
no key management personnel or their related parties held an interest
in the Group for the years ended 30 June 2012 and 30 June 2011.
There were no loans or other transactions with key management
personnel or their related parties during the years ended 30 June 2012
and 30 June 2011.
2012
$
2011
$
V P Hoog Antink, BComm, MBA, FCA, FAPI, FRICS, FAICD8
Compensation
Short term employee benefits
10,166,375
8,266,683
Post employment benefits
247,967
912,706
Other long term benefits
3,115,681
4,794,526
Termination benefits
Security‑based payments
2,300,000
330,000
–
–
16,160,023
13,973,915
The Group has shown the detailed remuneration disclosures
in the Directors’ Report. The relevant information can be found in
section 3 of the Directors’ Report.
B E Scullin, BEc9
W R Sheppard, BEc (Hons)10
D J Steinberg, BEc, FRICS, FAPI11
P B St George, CA(SA), MBA1, 2, 5, 6
1 Independent Director.
2 Board Audit Committee Member.
3 Board Compliance Committee Member.
4 Board nomination and Remuneration Committee Member.
5 Board Finance Committee Member.
6 Board Risk & Sustainability Committee Member.
7 Appointed as Independent Director and Board Compliance Committee Member
on 24 August 2011.
8 Resigned as Director on 1 March 2012.
9 Resigned as Independent Director and Board Compliance Committee Member
on 31 October 2011.
10 Appointed as Independent Director, Board Audit Committee Member and
Board Risk & Sustainability Committee Member on 1 January 2012.
11 Appointed as Director on 1 March 2012.
12 Resigned as Board Compliance Committee Member on 1 July 2012.
no Directors held an interest in the Group for the years ended
30 June 2012 and 30 June 2011.
2012 DEXUS AnnUAl REPORT 81
NoTES To ThE FINaNCIal STaTEmENTS
Note 33 Events occurring after reporting date
Between 1 July 2012 and 15 August 2012, as part of the securities buy‑back announced in April 2012, 21.3 million stapled securities
were purchased for $19.7 million.
On 13 July 2012, 114‑120 Old Pittwater Road, Brookvale, nSW was disposed of for gross proceeds of $40.5 million.
On 14 August 2012, the Group exchanged contracts for the acquisition of an office tower at 50 Carrington Street, Sydney nSW for $58.5 million.
On 15 August 2012, the Group exchanged contracts for the acquisition of a 50% interest in an office tower at 12 Creek Street, Brisbane QlD for
$120.8 million (representing 50% of the total purchase price). This asset will be co‑owned with DWPF.
Since the end of the year, other than the matters disclosed 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 Group, the results
of those operations, or state of the Group’s affairs in future financial periods.
Note 34 operating segments
(a) Description of segments
The Chief Operating Decision Maker (CODM) has been identified as the Board of Directors as they are responsible for the strategic decision making
within the Group. DXS management has identified the Group’s operating segments based on the sectors analysed within the management reports
reviewed by the CODM in order to monitor performance across the Group and to appropriately allocate resources. Refer to the table below for a
brief description of the Group’s operating segments.
office – australia and New Zealand
This comprises office space with any associated retail space; as well as car parks and office
developments in Australia and new Zealand.
Industrial – australia
This comprises domestic industrial properties, industrial estates and industrial developments.
Industrial – United States
This comprises industrial properties, industrial estates and industrial developments in the United States.
management Business
Financial Services
all other segments
This comprises funds management of third party clients and owned assets, property management
services, development and other corporate costs associated with maintaining and operating the Group.
The treasury function of the Group is managed through a centralised treasury department. As a result,
all treasury related financial information relating to borrowings, finance costs as well as fair value
movements in derivatives, are prepared and monitored separately.
This comprises the European industrial portfolio. This operating segment does not meet the
quantitative thresholds set out in AASB 8 Operating Segments due to its relatively small scale.
As a result this non‑core operating segment has been included in “all other segments” in the operating
segment information.
82
2012 DEXUS AnnUAl REPORT
–
–
–
–
–
–
–
–
–
–
493,405
4,675
(261,869)
(74,366)
82,767
(14,846)
(32,566)
(1,564)
6,922,722
308,707
(b) Segment information provided to the coDm
The segment information provided to the CODM for the reportable segments for the year ended 30 June 2012 and 30 June 2011 includes
the following:
30 June 2012
office
australia &
New Zealand
$’000
Industrial
australia
$’000
Industrial
United
States
$’000
management
Business
Financial
Services
all other
segments
Eliminations
Total
$’000
$’000
$’000
$’000
$’000
Segment performance measures
Property revenue1
390,908
149,752
105,569
Proceeds from sale of inventory
Management fee revenue
Interest revenue
Inter‑segment revenue2
–
–
–
–
–
–
–
–
–
–
–
–
3,592
49,847
50,712
–
–
–
–
1,743
39,024
–
12,323
–
–
–
–
–
–
–
–
662,144
49,847
50,712
1,743
(39,024)
–
Total operating segment revenue
390,908
149,752
105,569
143,175
1,743
12,323
(39,024)
764,446
Net operating income (NoI)2
289,753
120,036
74,721
management business EBIT
Finance costs
Compensation related expenses
net fair value gain/(loss) of
investment property3
Impairment of inventories
net loss on sale of investment
property
net fair value loss on derivatives
Segment asset measures
–
–
–
–
–
–
–
–
–
93,519
(42,976)
36,475
–
–
–
–
–
–
–
–
(14,846)
(17,213)
–
–
–
–
4,675
–
–
–
(261,869)
(74,366)
8,895
–
–
–
(4,251)
–
(15,353)
–
–
–
–
(1,564)
–
Direct property portfolio
4,679,501
1,560,892
539,206
Additions to direct property portfolio
120,403
70,357
64,259
97,831
51,632
–
–
45,292
2,056
Segment liability measures
Interest bearing liabilities
–
–
–
–
1,940,762
–
–
1,940,762
1 Includes the Group’s share of property revenue of its investment accounted for using the equity method of $8.6 million.
2 Includes internal property management fees of $11.5 million included in operating segment revenue for the Management Business and in property expenses for Office Australia
and new Zealand nOI and Industrial Australia nOI but eliminated for statutory accounting purposes. These fees are recovered from tenants and included in property revenue.
3 Includes net fair value gain of investment property of $75.2 million and the Group’s share of the net fair value gain of its investment accounted for using the equity method
of $7.5 million.
2012 DEXUS AnnUAl REPORT 83
NoTES To ThE FINaNCIal STaTEmENTS
Note 34 operating segments (continued)
(b) Segment information provided to the coDm (continued)
30 June 2011
office
australia &
New Zealand
$’000
Industrial
australia
$’000
Industrial
United
States
$’000
management
Business
Financial
Services
all other
segments
Eliminations
Total
$’000
$’000
$’000
$’000
$’000
Segment performance measures
Property revenue
344,057
144,554
115,723
Proceeds from sale of inventory
Management fee revenue
Interest revenue
Inter‑segment revenue1
–
–
–
–
–
–
–
–
–
–
–
–
4,181
3,359
50,655
–
–
–
–
1,565
37,119
–
20,557
–
–
–
–
–
–
–
–
629,072
3,359
50,655
1,565
(37,119)
–
Total operating segment revenue
344,057
144,554
115,723
95,314
1,565
20,557
(37,119)
684,651
Net operating income (NoI)1
255,204
116,355
79,591
management business EBIT
Finance costs
Compensation related expenses
net fair value gain/(loss) of
investment property2
net gain/(loss) on sale of
investment property
net fair value gain on derivatives
Segment asset measures
–
–
–
–
–
–
–
–
–
122,686
(13,448)
81,130
–
–
(349)
7,313
–
–
–
3,453
–
–
–
(52,744)
(67,417)
–
218
–
–
–
–
2,605
16,037
–
–
–
(8,337)
(130)
–
Direct property portfolio
4,510,798
1,518,963
1,171,163
112,238
Additions to direct property portfolio
300,813
63,948
85,832
63,673
–
–
173,920
4,963
Segment liability measures
–
–
–
–
–
–
–
–
–
467,187
3,453
(52,744)
(67,417)
182,031
7,052
2,605
7,487,082
519,229
Interest bearing liabilities
–
–
–
–
2,215,056
–
–
2,215,056
1 Includes internal property management fees of $10.2 million included in operating segment revenue for the Management Business and in property expenses for Office Australia
and new Zealand nOI and Industrial Australia nOI but eliminated for statutory accounting purposes. These fees are recovered from tenants and included in property revenue.
2 Includes net fair value loss of investment property of $148.4 million and the Group’s share of the net fair value loss of its investments accounted for using the equity accounted
method of $33.6 million.
(c) other segment information
(i) Segment revenue
The revenue from external parties reported to the Board is measured in a manner consistent with that in the Statement of Comprehensive Income.
Revenue from external customers is derived predominantly through property revenue and management fee revenue. A breakdown of revenue by
operating segment is provided in the tables above. The Group internally manages many of its investment properties for which inter‑segment
management fees are received (refer to note 32 for information relating to inter‑company management fee income). Furthermore, inter‑segment
rental income is received from the funds management company. These amounts are eliminated on consolidation (refer to the reconciliation below).
Gross operating segment revenue
less: inter‑segment revenue eliminated on consolidation
Responsible Entity fee revenue
Other management fee revenue
Total inter-segment revenue
Total operating segment revenue
Share of property revenue from associates
Total revenue from ordinary activities
84
2012 DEXUS AnnUAl REPORT
2012
$’000
2011
$’000
803,470
721,770
(26,576)
(12,448)
(39,024)
(26,150)
(10,969)
(37,119)
764,446
684,651
(8,562)
–
755,884
684,651
The Group is domiciled in Australia. The result of its revenue from external customers in Australia is $602.3 million (2011: $548.4 million),
and the total revenue from external customers in other countries is $162.1 million (2011: $136.3 million). Revenue from external customers
includes $149.8 million (2011: $115.7 million) attributable to the United States portfolio. Segment revenues are allocated based on the country
in which the investment property is located.
There is no single external tenant responsible for greater than 10% of external revenue.
(ii) Net operating income (NoI) and operating earnings before interest and tax (operating EBIT)
The Board assesses the performance of each operating sector based on a measure of nOI, which is determined as property revenue less
attributable property expenses. The performance indicator predominantly used as a measure of the management business performance is the
Management Business EBIT, which comprises management fee revenue less compensation related expenses and other management operating
expenses. Both the property nOI and the management business’ EBIT exclude the effects of finance costs, taxation and non‑cash items, such
as unrealised fair value adjustments, which are monitored by management separately. The reconciliation below reconciles these profit measures
to the profit attributable to stapled security holders.
Reconciliation of net operating income and management business EBIT to Group net loss attributable to stapled security holders:
Property revenue per Statement of Comprehensive Income
Property expenses per Statement of Comprehensive Income
Intercompany property revenue and expenses1
Share of net operating income from associates
Net operating income (NoI)
Add: management business EBIT1
less: Internal management fees2
Other income and expense3
operating EBIT
Interest revenue
Finance costs
Share of net fair value gain from associates
net fair value gain of investment properties
net (loss)/gain on sale of investment properties
net fair value (loss)/gain of derivatives
Impairment and other4
Tax expense
Other non‑controlling interests
Foreign currency translation reserve transfer on partial disposal of foreign operations
2012
$’000
2011
$’000
653,582
629,072
(154,901)
(151,865)
(11,480)
(10,413)
6,204
393
493,405
467,187
4,675
3,453
(26,576)
(26,150)
(3,606)
(7,281)
467,898
437,209
1,743
1,565
(261,869)
(52,744)
7,540
75,227
(32,566)
(1,564)
(15,471)
(16,526)
(1,811)
(41,531)
33,598
148,433
7,052
2,605
(1,285)
(21,313)
(2,108)
–
Net profit attributable to stapled security holders
181,070
553,012
1 Includes internal property expenses of $11.5 million (2011: $10.2 million) included in nOI for management reporting purposes but eliminated for statutory accounting purposes.
The internal property management expenses comprise of property management fees included in the management business EBIT.
2 Elimination of internally generated Responsible Entity fees of $20.4 million (2011: $19.5 million) and $6.2 million (2011: $6.7 million) other internal management fees.
3 Other income and expenses comprise foreign exchange gains; depreciation, other income and expenses excluding amounts included in the management business’ EBIT.
4 Includes $1.1 million of non‑recurring depreciation in the year ended 30 June 2011.
2012 DEXUS AnnUAl REPORT 85
NoTES To ThE FINaNCIal STaTEmENTS
Note 34 operating segments (continued)
(c) other segment information (continued)
(iii) Segment assets
The amounts provided to the CODM as a measure of segment assets is the direct property portfolio. The direct property portfolio values are
allocated based on the physical location of the asset and are measured in a manner consistent with the Statement of Financial Position. The direct
property portfolio comprises investment properties, all development properties and the Group’s share of properties held through equity accounted
investments. The reconciliation below reconciles the total direct property portfolio balance to total assets in the Statement of Financial Position.
The Group is domiciled in Australia. Total non‑current assets other than financial instruments and deferred tax assets located in Australia is
$6,350.7 million (2011: $6,354.8 million), and the amount located in other countries is $559.6 million (2011: $1,287.2 million). This includes
$539.2 million (2011: $1,172.5 million) attributable to the United States portfolio.
Reconciliation of direct property portfolio to Group total assets in the Statement of Financial Position:
Investment properties
non‑current assets held for sale
Inventories
Investment property (accounted for using the equity method)1
Direct property portfolio
Cash and cash equivalents
Receivables
Intangible assets
Derivative financial instruments
Deferred tax assets
Current tax assets
Plant and equipment
Prepayments and other assets2
Total assets
2012
$’000
2011
$’000
6,391,457
7,105,914
212,264
97,831
221,170
59,260
112,238
209,670
6,922,722
7,487,082
59,193
30,842
223,641
78,272
36,729
198
4,682
7,828
73,746
36,175
224,684
100,220
55,577
1,247
3,926
4,987
7,364,107
7,987,644
1 This represents the Group’s portion of the investment property accounted for using the equity accounted method.
2 Other assets include the Group’s share of total net assets of its investments accounted for using the equity accounted method less the Group’s share of the investment property
value which is included in the direct property portfolio.
86
2012 DEXUS AnnUAl REPORT
Note 35 Reconciliation of net profit to net cash inflow from operating activities
(a) reconciliation
net profit for the year
Capitalised interest
Depreciation and amortisation
Impairment of inventories
Impairment of goodwill
net fair value gain of investment properties
Share of net profit of associates accounted for using the equity method
net fair value loss/(gain) of derivatives
net fair value (loss)/gain of interest rate swaps
net loss/(gain) on sale of investment properties
net foreign exchange gain
Transfer of foreign currency losses on partial disposal of foreign operations
Provision for doubtful debts
Change in operating assets and liabilities
Decrease/(increase) in receivables
Decrease in prepaid expenses
Decrease in other non‑current assets ‑ investments
Decrease/(increase) in inventories
(Increase)/decrease in other current assets
Decrease in other non‑current assets
Decrease in payables
Decrease in current liabilities
Increase/(decrease) in other non‑current liabilities
Decrease in deferred tax assets
Net cash inflow from operating activities
2012
$’000
2011
$’000
182,881
555,120
(22,458)
(60,955)
2,805
14,846
625
3,811
–
194
(75,227)
(148,433)
(13,784)
(34,053)
1,564
(2,605)
100,491
(41,599)
32,566
(2,170)
41,531
(2,211)
(7,052)
(574)
–
(5,516)
7,544
750
(5,649)
2,159
34,992
24,222
14,407
(66,768)
(4,313)
1,596
(7,746)
(6,528)
33,142
4,741
1,199
(3,770)
(6,177)
(158)
13,088
31,205
348,391
239,342
(b) capital expenditure on investment properties
Payments for capital expenditure on investment properties include $99.8 million (2011: $101.8 million) of maintenance and incentive
capital expenditure.
Note 36 Non-cash financing and investing activities
Distributions reinvested
Note
24
2012
$’000
2011
$’000
–
14,528
2012 DEXUS AnnUAl REPORT 87
NoTES To ThE FINaNCIal STaTEmENTS
Note 37 Earnings per unit
Earnings per unit are determined by dividing the net profit attributable to unitholders 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.
Basic earnings per unit on profit attributable to unitholders of the parent entity
Diluted earnings per unit on profit attributable to unitholders of the parent entity
Basic earnings per unit on profit attributable to stapled security holders
Diluted earnings per unit on profit attributable to stapled security holders
(a) reconciliation of earnings used in calculating earnings per unit
net profit for the year
net profit attributable to unitholders of other stapled entities (non‑controlling interests)
net profit attributable to other non‑controlling interests
2012
cents
1.69
1.69
3.75
3.75
2011
cents
3.77
3.77
11.44
11.44
2012
$’000
2011
$’000
182,881
555,120
(99,595)
(370,644)
(1,811)
(2,108)
Net profit attributable to the unitholders of the Trust used in calculating basic and diluted earnings per unit
81,475
182,368
(b) weighted average number of units used as a denominator
2012
securities
2011
securities
Weighted average number of units outstanding used in calculation of basic and diluted earnings per unit
4,834,864,561 4,836,131,743
Note 38 Security-based payments
The DXFM Board has, subject to security holder approval at the november 2012 Annual General Meeting, approved a one‑off grant of performance
rights to DXS stapled securities to eligible participants. Awards under the 2012 Transitional Performance Rights Plan (“the Plan”) will be in the form
of performance rights awarded to eligible participants which convert to DXS stapled securities for nil consideration if specific service conditions for
a four year period are satisfied.
The DXFM Board approved the eligible participants nominated by nomination and Remuneration Committee. Each participant will be granted
performance rights, based on performance against agreed 2012 key performance indicators, as a percentage of their target remuneration mix.
The dollar value, once approved by the DXFM Board, will be converted into performance rights to DXS stapled securities using the average closing
price of DXS securities for the period of ten days either side of 30 June 2012. Participants must remain in employment for the four year period in
order for the performance rights to vest.
The fair value of the performance rights will be amortised over the four year period starting from 1 July 2011 to 30 June 2015. In accordance with
AASB2 Share‑based Payments, fair value has been independently determined using a Black‑Scholes and Binomial pricing models which take into
account the following inputs:
n Grant date
n Expected vesting date
n Security price at grant date
n Expected price volatility (based on historic DXS security price movements)
n Expected life
n Dividend yield
n Risk free interest rate
The number of performance rights granted was 1,840,656. The fair value of these performance rights is $0.9263 per performance right and the
total security‑based payment expense recognised during the year ended 30 June 2012 was $426,250.
88
2012 DEXUS AnnUAl REPORT
Financial Report
DIRECToRS’ DEClaRaTIoN
for the year ended 30 June 2012
The Directors of DEXUS Funds Management limited as Responsible Entity of DEXUS Diversified Trust declare that the Financial Statements and
notes set out on pages 39 to 88:
(i) comply with Australian Accounting Standards, the Corporations Act 2001 and other mandatory professional reporting requirements; and
(ii) give a true and fair view of the Group’s financial position as at 30 June 2012 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 Group and its consolidated entities will be able to pay their debts as and when they become
due and payable; and
(c) the Group has operated in accordance with the provisions of the Constitution dated 15 August 1984 (as amended) during the year ended
30 June 2012.
note 1(a) confirms that the Financial Statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The Directors have been given the declarations by the 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
15 August 2012
2012 DEXUS AnnUAl REPORT 89
Financial Report
INDEpENDENT aUDIToR’S REpoRT
for the year ended 30 June 2012
90
2012 DEXUS AnnUAl REPORT
2012 DEXUS AnnUAl REPORT 91
aDDITIoNal
INFoRmaTIoN
Top 20 security holders as at 31 august 2012
Rank Name
1
2
3
4
5
6
7
8
9
HSBC Custody nominees (Australia) limited
JP Morgan nominees Australia limited
national nominees limited
Citicorp nominees Pty limited
Citicorp nominees Pty limited
AMP life limited
BnP Paribas nominees Pty ltd
JP Morgan nominees Australia limited
BnP Paribas nominees Pty ltd
10 BnP Paribas nominees Pty ltd
11 RBC Investor Services Australia nominees Pty limited
12 Questor Financial Services limited
13
Equity Trustees limited
14 Bond Street Custodians limited
15 HSBC Custody nominees (Australia) limited
16
Share Direct nominees Pty ltd <10026 A/C>
17 Queensland Investment Corporation
18
Invia Custodian Pty limited
19 Bond Street Custodians limited
20
Suncorp Custodian Services Pty limited
Total
Balance of Register
grand Total
Number of
securities
% of issued
capital
1,748,881,339
882,660,661
776,983,696
265,577,746
124,635,062
106,064,042
86,806,820
66,667,886
40,567,677
40,042,934
34,774,331
23,545,205
23,047,075
20,361,945
12,727,054
10,568,607
10,244,528
9,888,555
7,909,264
7,373,602
36.75
18.55
16.33
5.58
2.62
2.23
1.82
1.40
0.85
0.84
0.73
0.49
0.48
0.43
0.27
0.22
0.22
0.21
0.17
0.15
4,299,327,129
459,126,353
4,758,453,482
90.35
9.65
100.00
Substantial holders at 31 august 2012
The names of substantial holders, who at 31 August 2012 have notified the Responsible Entity in accordance with Section 671B of the
Corporations Act 2001, are:
Date
Name
30 Aug 2012
CBRE Clarion Securities llC
28 Jan 2011
InG Group
1 May 2012
AMP lImited
28 Oct 2010
Vanguard Group
2 Dec 2009
BlackRock Investment Management
11 Jul 2012
Westpac Banking Corporation Group
Number of
stapled securities
% voting
440,873,263
388,416,634
293,093,543
291,637,480
275,099,167
244,213,504
8.11
8.03
6.06
6.03
5.77
5.05
92
2012 DEXUS AnnUAl REPORT
Class of securities
DEXUS Property Group has one class of stapled security trading on the ASX with security holders holding stapled securities at 31 August 2012.
Spread of securities at 31 august 2012
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
4,475,613,665
58,543,086
183,295,519
30,313,786
10,189,072
498,354
4,758,453,482
%
94.06
1.23
3.85
0.64
0.21
0.01
100.00
Number of holders
355
860
8,506
4,001
3,250
1,567
18,539
At 31 August 2012, the number of security holders holding less than a marketable parcel of 524 securities ($500) is 1,103 and they hold in
total 135,700 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 commenced an on‑market securities buy‑back on 16 April 2012. At 31 August 2012 DEXUS Property Group has
acquired 92,566,887 securities for $86.1 million on an average price of $0.9299.
Cost base apportionment
For capital gains tax purposes, the cost base apportionment details for DXS securities for the 12 months ended 30 June 2012 are:
Date
DEXUS Diversified Trust
DEXUS Industrial Trust
DEXUS office Trust
DEXUS operating Trust
1 Jul 2011 to 31 Dec 2011
1 Jan 2012 to 30 June 2012
37.88%
35.34%
11.27%
14.19%
50.85%
47.48%
0
2.99%
Historical cost base details are available at www.dexus.com/dxs/tax in the downloads section.
2012 DEXUS AnnUAl REPORT 93
INVESToR
INFoRmaTIoN
DEXUS Property Group is one of the largest real estate groups listed on the Australian
Securities Exchange (ASX) and is listed under the ASX code DXS. Over 18,000 investors
located in 15 countries around the world invest in DXS, highlighting the investors’
demand both domestically and abroad for our high quality property portfolio
investor relations
The Investor Relations team drives and facilitates communication with
existing and potential institutional investors, financial analysts and
retail investors.
The team, alongside DEXUS senior management, maintains strong
rapport with the investment community through proactive and regular
investor engagement initiatives. During FY12, we participated in
investor conferences and roadshows in Singapore, Hong Kong, and
the United States.
We are committed to ensuring all investors have equal access to
information about our investment activities. In line with our commitment
to the long term integration of sustainable business practices, we provide
investor communications via various electronic methods.
We provide a wide range of information including ASX announcements,
our annual reporting suite, presentations, corporate governance
policies, Board of Directors and Executive team information at
www.dexus.com
In addition, we have communication tools available on our website,
including:
n an online enquiry facility at www.dexus.com/contact and contact directory
n an investor login facility at www.dexus.com/dxs which allows
investors to choose the method of delivery for distributions,
distribution statements and investor reports
n a subscribe feature at www.dexus.com/media which enables
investors to receive ASX announcements as they are released
n a “create your property report” function at www.dexus.com/
properties which enables you to select and download individual
or group property information
Unclaimed distribution income
If you believe you have unpresented cheques or unclaimed distribution
income, please contact the DXS Infoline on 1800 819 675.
For monies outstanding more than seven years, please contact the
nSW Office of State Revenue on 1300 366 016, use their search
facility at www.osr.nsw.gov.au or email unclaimedmoney@osr.nsw.gov.au
Annual taxation statements
An annual taxation statement is sent to investors in August each year.
The statement summarises the distributions provide to you during the
2011‑2012 financial year and includes information required to complete
your tax return. Annual taxation statements are also available online at
www.dexus.com via our investor login facility.
Non-resident information
The notice required by non‑resident investors and custodians of
non‑resident investors for the purposes of Section 12‑400 of
Schedule 1 to the Tax Administration Act 1953 is available at
www.dexus.com/dxs/tax prior to the payment of each distribution.
complaints
Investors wishing to lodge a complaint should do so in writing and
forward it to DEXUS Funds Management limited at the address shown
in the Directory.
DEXUS Funds Management limited is a member of Financial
Ombudsman Service (FOS), an independent dispute resolution
scheme who may be contacted at:
Financial Ombudsman Service
GPO Box 3
Melbourne VIC 3001
Annual general meeting information
On Monday 5 november 2012 our Annual General Meeting (AGM)
will be held at ASX Exchange Square, 20 Bridge Street, Sydney
commencing at 2.00pm.
Phone: 1300 780 808
Fax: +61 3 9613 6399
Email: info@fos.org.au
Website: www.fos.org.au
We encourage investors to attend the AGM in person and to meet our
Board of Directors and Executive team. The AGM will be webcast at
www.dexus.com for those investors who are unable to attend in person.
The Chairman’s address and the meeting results will be announced to
the ASX and will be available at www.dexus.com/dxs
Distribution payments
DXS revised its distribution policy effective from 1 July 2012. The new
payout policy will be to distribute between 70% and 80% of Funds
From Operations (FFO), in line with free cash flow, with the expectation
that over time the average payout ratio will be around 75% of FFO.
Distributions are paid for the six months to 31 December and 30 June
each year. Distribution statements are available in print and electronic
formats and paid by direct credit into a nominated bank account or by
cheque. To change the method of receiving distributions or how they
are paid, please use our investor login facility at www.dexus.com/dxs
94
2012 DEXUS AnnUAl REPORT
2013 Distribution calendar
period end
31 Dec 2012
30 Jun 2013
aSX announcement
Ex-distribution date
18 Dec 2012
19 Jun 2013
21 Dec 2012
24 Jun 2013
Record date
31 Dec 2012
28 Jun 2013
payment date
28 Feb 2013
30 Aug 2013
anticipated date
5 november 2012
14 February 2013
15 August 2013
31 October 2013
2013 reporting calendar
Event
2012 Annual General Meeting
2013 Half year results
2013 Annual results
2013 Annual General Meeting
Please note that these dates are indicative and are subject to change without prior notice.
Key ASX announcements
27.08.12
24.08.12
16.08.12
Appendix 3Y (Peter St George) change in Director’s Interest
Appendix 3Y (Stewart Ewen) change in Director’s Interest
Appendix 3Y (Christopher Beare) change in Director’s Interest
Appendix 3Y (John Conde) change in Director’s Interest
DEXUS security trading policy
2012 Combined Financial Statements
2012 Property Synopsis & Portfolio Results
2012 Annual Results & Strategic Review presentation
2012 Annual Results & Strategic Review release
2012 Appendix IX 4E and DXS 2012 Financial Report
02.08.12
DEXUS announces new executive framework
03.07.12
22.06.12
DXS change in membership of Compliance Committee
DXS announces the completion of the sale of its US central portfolio
20.06.12
DEXUS 2012 June distribution details
18.06.12
DEXUS sells industrial development at Erskine Park
14.06.12
DEXUS 2012 Sydney industrial tour
08.05.12
DEXUS 2012 March portfolio update
07.05.12
16.04.12
04.04.12
DEXUS announces restructure and senior management changes
DEXUS announces sale of US central portfolio and capital management initiatives
DEXUS Property Group United States portfolio update – response to market speculation
30.03.12
DEXUS repurchase of REnTS
29.02.12
DEXUS 2012 half year report
15.02.12
21.12.11
16.12.11
07.12.11
28.11.11
08.11.11
31.10.11
DEXUS 2012 half year results
DEXUS 2012 half year results release and presentation
DEXUS provides a capital reallocation letter to security holders
DEXUS 2011 December distribution details
DEXUS implements the capital reallocation
DEXUS announces future retirement of Chief Executive Officer and appointment of successor
DEXUS announces Richard Sheppard appointed as new director
DEXUS 2011 September portfolio update
DEXUS 2011 Annual General Meeting address and presentation
DEXUS membership change in Compliance Committee
DEXUS 2011 Annual General Meeting results
DEXUS Supplemental Deed Polls DEXUS Consolidated Constitutions
11.10.11
DEXUS 2011 Sydney office tour
26.09.11
DEXUS 2011 notice of Annual General Meeting
DEXUS 2011 annual reporting suite
2012 DEXUS AnnUAl REPORT 95
DIRECToRY
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
Directors of the
responsible Entity
Christopher T Beare, Chair
Elizabeth A Alexander AM
Barry R Brownjohn
John C Conde AO
Tonianne Dwyer
Stewart F Ewen OAM
W Richard Sheppard
Darren J Steinberg, CEO
Peter B St George
Secretaries of the
responsible Entity
Tanya l Cox
John C Easy
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
www.dexus.com
DEXUS US office
Suite 110, 4000 Westerly Place
newport Beach CA 92660
Phone: +1 949 724 8886
Fax: +1 949 724 8887
Email: ir@dexus.com
www.dexus.com/us
Auditors
PricewaterhouseCoopers
Chartered Accountants
201 Sussex Street
Sydney nSW 2000
investor enquiries
Registry Infoline: 1800 819 675
or +61 2 8280 7126
Investor Relations: +61 2 9017 1330
Email: ir@dexus.com
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
Open Monday to Friday between 8.30am
and 5.30pm (Sydney time).
For enquiries regarding your holding you can
contact the security registry, or access your
holding details at www.dexus.com using the
Investor login link.
Australian Securities Exchange
ASX code: DXS
96
2012 DEXUS AnnUAl REPORT
2012 DEXUS ANNUAL rEport
www.dexus.com