CHARTER HALL GROUP — Interim / Quarterly Report 2011

Apr 7, 2011

==> picture [121 x 60] intentionally omitted <==

ASX CODE:CHC ARSN 113 339 147

Half Year Update 31 December 2010

Dear Investor

We are pleased to report solid performance by Charter Hall Group over the past six months. We are seeing clear evidence of improving property market conditions both in Australia and offshore with Charter Hall and its managed funds well positioned to benefit from this recovery.

The Group’s property investments are showing an upward trend in net operating income and occupancy and the funds are benefiting from falling debt margins, while the Group’s funds management income has been enhanced by the integration of last year’s business acquisition and flow through benefits of an improving property market.

Charter Hall is a fully integrated property group, with a refined business model enabling it to report through three key earnings categories, being:

Property investment

• Comprising the Group’s $581 million co-investment in its managed property funds and one directly held property.

Property funds management

• Comprising annuity style fee income from investment and property management services, as well as fee income from development management, transaction and leasing services.

Development investment

• Comprising its investments in Charter Hall’s opportunistic funds and its 50% ownership interest in CIP, a national industrial pre-lease developer.

Results as at 31 December 2010

Charter Hall Group delivered strong results for the six months to 31 December 2010.

The Group announced operating earnings of $30.8 million as at 31 December 2010, an increase of 118% over the prior corresponding period and in line with guidance provided for the financial year to 30 June 2011. Earnings per security (EPS) increased 30% on the prior corresponding period to 10.54 cents and distribution per security (DPS) increased 25% to 8.00 cents.

In addition, the Group’s managed funds continued to make good progress on implementing their respective strategic initiatives.

Property investment

The Group’s investment portfolio, which remains well diversified across the office, retail and industrial sectors, performed well during the period delivering total portfolio occupancy of 95% and a weighted average lease expiry (WALE) of 6.4 years.

We anticipate earnings and distributions from our co-investments to benefit from the improving property market as well as our focus on active asset management and other strategic initiatives being implemented to enhance earnings quality and continue to grow the net tangible asset value per unit across each fund.

In the year ahead, we will continue to recycle co-investment capital to fund new growth initiatives and to enhance the Group’s return on equity.

Property funds management

Property funds under management increased 2% to $10.4 billion at 31 December 2010 with negative foreign exchange movements (due to the strong appreciation of the Australian dollar over the period) and disposals being more than offset by total acquisitions of $605 million and upward revaluations of $302 million, driving an increase in funds management fee income.

The acquisition of the majority of the Macquarie real estate funds management platform in March last year has significantly increased the Group’s weighting to annuity style funds management income, which now represents almost 80%.

Unlisted wholesale funds

The successful equity raisings in our unlisted wholesale funds and third party mandates over the past year led to $501 million of acquisitions during the period.

Our Core Plus Office Fund (CPOF) acquired $227 million of A-grade CBD office assets in Melbourne and Brisbane and the Core Plus Industrial Fund (CPIF) purchased a $78 million industrial asset in Tasmania. CPOF also acquired the $300 million Brisbane Square in Brisbane with Telstra Super, increasing third party mandate funds under management to $433 million.

Unlisted retail funds

Our Direct Property business also strengthened its platform during the period with the launch of two new funds.

Direct Industrial Fund (DIF), launched in July 2010, raised $44 million as at 31 December 2010 and to date has acquired $70 million of new industrial assets 100% pre-leased for initial terms of between 13 to 15 years to Australia Post, Grace Worldwide and Toll Holdings.

Direct Retail Fund (DRF) was launched in December 2010 following the successful restructure of the wholesale Charter Hall Core Plus Retail Fund, providing retail investors with access to a $177 million portfolio of six retail shopping centres, with an average occupancy rate of 98.5%, WALE of 7.2 years and yield on current unit price of approximately 8% per annum.

Listed funds

Both listed REITs performed well, outperforming the broader A-REIT 200 Accumulation Index during the period.

Charter Hall Retail REIT made solid progress on reweighting its portfolio to Australia contracting to sell the majority of its United States portfolio and utilised its strong balance sheet position, surplus cash and undrawn facilities to acquire four retail centres in Australia for a total consideration of $131 million since 1 July 2010.

Charter Hall Office REIT has also made significant progress on its strategy over the past six months, continuing to strengthen and simplify its balance sheet with the repayment or refinancing of approximately $856 million of debt and has made solid progress towards exiting non-core markets.

Development management

During the period the Group commenced six development projects from its $1.29 billion active development pipeline, which have a forecast on completion value of $628 million.

==> picture [164 x 95] intentionally omitted <==

----- Start of picture text -----

Funds Management 33.0%
EBITDA $10.3m
Development Investment 7.0%
EBITDA $2.3m
Property Investment 60.0%
EBITDA $18.3m
----- End of picture text -----

Development investment

The Group has a $31.1 million co-investment in Charter Hall Opportunity Fund No.4 (CHOF4) and Charter Hall Opportunity Fund No.5 (CHOF5), diversified across seven projects. Given the opportunistic nature of these development portfolios, we expect the earnings contributions from these investments to emerge from financial year 2012 onwards.

Charter Hall’s 50% interest in CIP contributed $2.1 million of earnings to 31 December 2010, up almost 50% from $1.5 million over the previous corresponding period, and continues to provide the Group’s funds with access to a robust industrial pipeline of A-grade, long lease investment opportunities.

Capital management initiatives

The Group has no borrowings on balance sheet with the exception of the consolidation of its 66% investment in DRF. At 31 December 2010 the Group had a total $53 million of cash and undrawn debt facilities.

The Group implemented a number of capital management initiatives across its managed funds that have continued to improve the balance sheet strength, liquidity positions and debt duration of these funds.

==> picture [193 x 153] intentionally omitted <==

----- Start of picture text -----

$18.3m
1HFY10
1HFY11
$10.8m
$10.3m
$2.8m
$2.3m
$1.0m
Property Investment Funds Management Development Investment
EBITDA EBITDA EBITDA
----- End of picture text -----

Results

Key financial results

Strategy and outlook

With a diversified portfolio we are well positioned to service the growth in superannuation flows in Australia, some of which will be invested across wholesale, retail and listed real estate markets and we are confident about the direction of the property cycle and the flow of equity into those markets.

We remain focused on improving the quality of earnings within our managed funds and continue to drive improvements in the Group’s margins in property funds management activities, while recycling our co-investments to enhance the return on equity of our balance sheet.

Operating earnings up 118% to $30.8 million, 10.54 cents per security

Half year distribution up 25% to $23.5 million, 8.00 cents per security

Net tangible assets of $2.21 per security, unchanged from 30 June 2010

Balance sheet gearing of 6.8% and look through gearing of 38.6%

Funds under management of $10.4 billion

Given the Group’s strong position and solid results for the first half, we are pleased to confirm earnings guidance of 20 cents per security for the financial year ended 30 June 2011, which represents growth of approximately 22% on the year to 30 June 2010. Based on this guidance, the Group expects to distribute 16 cents per security over the full year, representing growth of approximately 25% on that paid last financial year.

==> picture [78 x 41] intentionally omitted <==

David Southon Joint Managing Director

==> picture [100 x 38] intentionally omitted <==

David Harrison Joint Managing Director

The Group’s property investments are showing an upward trend in net operating income and occupancy and the funds are benefiting from falling debt margins.

Half Year Results

	1HFY11	1HFY103	Change
Operating earnings $30.8m $14.2m 118%
Operating earnings per security 10.54cps 8.10cps 30%
Distribution per security 8.00cps 6.40cps 25%
Statutory net proft after tax $46.8m ($57.8m) n/a
	As at Dec 2010	As at June 20103	Change
Funds under management $10.4bn $10.2bn 2%
Total Group assets $933m $976m (4%)
Total Group net assets1 $769m $760m 1%
Net tangible assetsper security $2.21 $2.21 0%
Gearing2 6.8% 7.6% (1%)
Look-through gearing 38.6% 37.1% 2%

Notes:

1. Total Group net assets excludes group non-controlling interest in DRF.

2. Calculated as total debt net of cash divided by total tangible assets net of cash.

3. Adjusted to account for 4:1 security consolidation effective 25 November 2010.

To access information on your holding or to update/change your details contact:

Charter Hall Group

This is the half year update for Charter Hall Group ARSN 113 339 147 (‘CHC’).

Disclaimer

Unit registry

Link Market Services Limited Locked Bag A14 Sydney South NSW 1235

Telephone 1300 303 063 (within Australia) +61 2 8280 7134 (outside Australia)

Email charterhall.reits@linkmarketservices.com.au

Website linkmarketservices.com.au

For other enquiries relating to your investment contact:

Manager’s office

Level 11, 333 George Street Sydney NSW 2000 GPO Box 2704 Sydney NSW 2001

Telephone 1300 365 585 (within Australia) +61 2 8280 4000 (outside Australia)

Facsimile (02) 8908 4040 (within Australia) +61 2 8280 4040 (outside Australia)

Email

reits@charterhall.com.au

Website

www.charterhall.com.au

Charter Hall Limited ABN 57 113 531 150; and Charter Hall Funds Management Limited (ABN 31 082 991 786 (AFSL 262861) (CHFML) is the responsible entity Charter Hall Property Trust.

Performance disclaimer

Past performance is not a reliable indicator of future performance. Due care and attention has been exercised in the preparation of forecast information, however, forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of CHFML. Actual results may vary from any forecasts and any variation may be materially positive or negative.

Advice warning

This half year update has been prepared for general information purposes only and is not an offer or invitation for subscription or purchase of, or recommendation of, securities. It does not take into account any potential investors’ personal objectives, financial situation or needs. Before investing, you should consider your own objectives, financial situation and needs or you should obtain financial, legal and/or taxation advice.

CHFML does not receive fees in respect of the general financial product advice it may provide, however it will receive fees for operating CHC which, in accordance with CHC’s constitution, are calculated by reference to the value of the assets and the performance of CHC. Entities within the Charter Hall Group may also receive fees for managing the assets of, and providing resources to CHC. For more detail on fees, see CHC’s latest annual report. To contact us, call 1300 365 585 (local call cost).

Complaints handling

A formal complaints handling procedure is in place for CHC. CHFML is a member of the Financial Ombudsman Service (‘FOS’). Complaints should in the first instance be directed to CHFML. If you have any enquiries or complaints, please contact the Complaints Officer on 1300 365 585 (local call cost), or email reits@charterhall.com.au

Charter Hall Group’s ongoing commitment to your privacy

We understand the importance you place on your privacy and are committed to protecting and maintaining the confidentiality of the personal information you provide to us. CHFML has adopted a privacy policy.

For further information, visit the CHC website at www.charterhall.com.au

Environmentally Friendly

==> picture [83 x 39] intentionally omitted <==

This document is printed on Monza Satin Recycled, an FSC credited paper, manufactured using Elemental Chlorine Free pulp that contains 55% Recycled fibre (25% Post Consumer fibre / 30% Preconsumer Fibre). The mill is certified under ISO 14001 and IPPC environmental management systems. FSC Chain of Custody (CoC) promotes responsible forest management.