CHARTER HALL GROUP

Appendix 4E Preliminary Financial Report

APPENDIX 4E

Preliminary Financial Report for the year ended 30 June 2012

Name of Entity:

Charter Hall Group (CHC) comprising the stapling of ordinary shares in Charter Hall Limited (CHL) (ACN 113 531 150) and units in Charter Hall Property Trust (CHPT) (ARSN: 113 339 147)

The Appendix 4E should be read in conjunction with the preliminary financial report of the Charter Hall Group for the year ended 30 June 2012.

Results for announcement to the market

	Year ended 30 June 2012 Year ended 30 June 2011 Variance $m $m (%)
Revenue(1)	123.6 109.6 12.8

Profit after tax attributable to stapled securityholders of Charter Hall Group	16.7 52.3 (68.1)

Operating earnings before specific items attributable to stapled securityholders(3) Specificitems(2)	63.6 60.4 5.3 (8.75) - -
Operating earnings attributable to stapled securityholders(3)	54.8 60.4 (9.3)

(1) The composition of revenue from ordinary activities is detailed in Note 6 of the preliminary financial report.
(2) Specific items include $16.0m fee revenue related to sale of Charter Hall Office REIT (CQO) US assets net of $4.0m closure costs of the US office, $2.9m costs of retaining the management rights, $3.9m organisational restructure costs, $14.2m provision for Charter Hall Opportunity Fund 4 (CHOF4) performance fee clawback which is then reduced by $0.3m being the group’s 3% equity share of the clawback receivable in CHOF4 .
(3) Operating earnings is a financial measure which represents the profit/(loss) under Australian Accounting Standards adjusted for fair value adjustments, impairment of assets, gains or losses on sale of investments, acquisition costs, nonoperating movements in equity accounted investments, and non-cash items such as security-based benefits expense, amortisation and tax expense/(benefit). The inclusion of operating earnings as a measure of the Group’s profitability provides investors with the same basis that is used internally for evaluating operating segment performance. Operating earnings is used by the Board to make strategic decisions and as a guide to assessing an appropriate distribution to declare.

A reconciliation of the Group’s statutory profit to operating earnings is provided in Note 5 of the preliminary financial report.

	Year ended 30 June 2012 Year ended 30 June 2011 Variance cps cps (%)
Basic earnings per stapled security attributable to stapled securityholders	5.64 17.85 (68.4)
Diluted earnings per stapled security attributable to stapled securityholders	5.35 17.06 (68.6)
Operating earnings before specific items attributable to stapled securityholders Specific items	21.51 20.60 4.4 (2.96) - -
Operating earnings per security attributable to stapled securityholders	18.55 20.60 (10.0)

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Appendix 4E Preliminary Financial Report

Results for announcement to the market (continued)

Distributions	30 June 2012	30 June 2011
Final distribution in respect of a: CHPT unit CHL share Interim distribution in respect of a: CHPT unit CHL share Total	9.10¢ - 9.10¢ - 18.20¢	8.50¢ - 8.00¢ - 16.50¢
Record date for determining entitlements to the distribution Payment date
	29 June 2012
	28 August 2012

The Group has a Distribution Reinvestment Plan (DRP) under which unitholders may elect to have all or part of their distribution entitlements satisfied by the issue of new units rather than being paid in cash. In accordance with the DRP Rules, the directors have suspended the DRP until further notice.

The Group recorded a statutory profit after tax attributable to stapled securityholders for the financial year of $16.7 million compared to a profit of $52.3 million in 2011.

Operating earnings amounted to $54.8 million for the financial year compared to $60.4 million in 2011. Operating earnings before specific items related to the sale of Charter Hall Office REIT (CQO) US assets net of closure costs’ of the US office, costs of retaining the management rights, organisational restructure costs and provision for Charter Hall Opportunity Fund 4 performance fee clawback amounted to $63.6m, an increase of 5.3% over the prior period.

The operating earnings information included in the table below has not been subject to any specific audit procedures by our auditor but has been extracted from Note 5: Segment information of the accompanying preliminary financial report.

Reconciliation of operating earnings to statutory profit 2012 $’000	2011 $’000
Operating earnings before specific items 63,586 Specific items1 (8,741)	60,422 -
Operating earnings 54,845	60,422
Fair value adjustments on derivatives2 (9,933) Fair value adjustments on investments and property, including remeasurment gains2 (2,034) Inventory writedown2 (5,814) Transfer from reserves of cumulative FX losses on disposal of foreign investments2 (12,176) Impairment of management rights - Security-based benefits expense (2,338) Other2 (5,872)	2,141 14,239 (664) (871) (19,171) (4,090) 332
Statutory profit after tax attributable to stapled securityholders 16,678	52,338

Specific items include $16.0m fee revenue related to sale of Charter Hall Office REIT (CQO) US assets net of $4.0m closure costs of the US office, $2.9m costs of retaining the management rights, $3.9m organisational restructure costs and $14.2m provision for Charter Hall Opportunity Fund 4 (CHOF4) performance fee clawback which is then reduced by $0.3m being the group’s 3% equity share of the clawback receivable in CHOF4 .
These items include the Group’s share of non-operating movements in equity accounted investments.

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Appendix 4E Preliminary Financial Report

Review of operations

Charter Hall Group is a diversified property group with a fully integrated business model. The Group has three business activities that contribute to overall performance: property investment, property funds management and development investment.

The Group recorded a statutory profit after tax attributable to stapled securityholders for the financial year of $16.7 million compared to a profit of $52.3 million in 2011. Earnings per security for the year amounted to 5.64 cents compared to 17.85 cents for the prior year. Net tangible assets have declined 3.6% from $2.21 per security at 30 June 2011 to $2.13 at 30 June 2012.

The Group delivered $63.6 million of operating earnings before specific items compared to $60.4 million in 2011. Property investment contributing $31.2 million (FY11: $29.9 million), property funds management contributing $23.8 million (FY11: $20.4 million), development investment contributing $2.6 million (FY11: $3.8 million), and the Group’s interest in Charter Hall Direct Retail Fund (DRF) contributing $6.0 million (FY11: $6.3 million). The Group delivered $54.8 million of operating earnings after specific items compared to $60.4 million in 2011.

Property investment

The Group’s property investment activities are classified into the following categories reflecting different sources of external equity managed across the Group:

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direct property investment;
co-investment property interest in listed funds;
co-investment property interest in wholesale unlisted funds; and
co-investment property interest in retail investor funds.

A summary of the activities of each of the above categories is provided below.

i) Direct property investments

Following the sale of the Mentone Showrooms property during the period, all the Group’s direct property investments are within the Charter Hall Direct Retail Fund (DRF). DRF is consolidated by the Group due to its 66% interest (held by the stapled Group). DRF is actively marketing all of its investment properties for sale. Accordingly, all investment property, including investment properties held indirectly through a joint venture, have been reclassified to current assets. Consequently, all debt and derivatives relating to those properties have also been disclosed as current liabilities.

During the period, the Group sold its direct interest in the Mentone Showrooms in Melbourne, Victoria realising a gain on sale of $0.6 million, and its direct interest in Countdown in Auckland, New Zealand realising a loss on sale of $1.5 million.

Charter Hall Direct Retail Fund (DRF) - $0.2 billion FUM, CHPT interest 50% and CHL interest 16%

DRF is an unlisted property fund that invests directly in quality retail properties with a current portfolio of five retail shopping centres located in established markets in New South Wales, Victoria and Queensland. At 30 June 2012 this portfolio benefited from an occupancy rate of 99.6% and a weighted average lease expiry (WALE) of 5.5 years. The fund’s debt facility expires in November 2013.

As noted above, all of DRF’s investment properties are being actively marketed for sale.

ii) Listed funds

Charter Hall Retail REIT (CQR) - $2.0 billion FUM, CHPT interest 10% with an equity interest carrying value of $101.3 million

CQR’s investment strategy is to invest in neighbourhood and sub-regional shopping centres in Australia anchored by Coles and Woolworths. The REIT’s portfolio comprises assets across Australia with a reduced offshore exposure given the successful divestment program implemented in recent years. Asset revaluations of CQR’s portfolio for the year ended 30 June 2012 resulted in a valuation decrement of $21.1 million primarily due to devaluations for the REIT’s German and bulky retail assets. These valuation movements as well as interest rate derivative movements impacted the REIT’s NTA over the period. The occupancy of the CQR Australian portfolio at 30 June 2012 was 98.6%, with like for like property net operating income growth of 3.5%, reflecting the non-discretionary nature of income from the underlying assets. During the year the REIT acquired four Australian assets for $160 million (100% share), utilising proceeds from the sale of its US wholly-owned assets.

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Appendix 4E Preliminary Financial Report

Review of operations (continued)

iii) Wholesale unlisted funds

Core Plus Office Fund (CPOF) – $1.5 billion FUM, CHPT interest 13% and CHL interest 1% with a combined equity interest carrying value of $113.0 million

CPOF is an Australian unlisted wholesale office fund managed by the Group. CPOF has continued to focus on improving portfolio metrics, creating value via enhancements and acquisitions. With occupancy of 98% and a lease expiry profile of 5.5 years CPOF is well placed to benefit from improving market conditions. Following independent valuation of the entire portfolio across the June and December reporting periods of this financial year, CPOF maintains a gross asset value of $1.5 billion and a current weighted average capitalisation rate of 7.86%.

Charter Hall Office Trust (CHOT) (formerly Charter Hall Office REIT (CQO)) - $2.0 billion FUM, CHPT interest 15% with an equity interest carrying value of $145.7 million

At 30 June 2012, CHOT’s portfolio comprises 17 high grade office assets located in major business districts in Australia, and one premium office development under construction in the Melbourne CBD (171 Collins Street) with anticipated practical completion in May 2013.

On 1 May 2012, the Group confirmed implementation of the privatisation of CQO by a consortium of investors (the Consortium). The unlisted trust is known as Charter Hall Office Trust (CHOT). The Group has been appointed the investment, property and development manager for CHOT. It is expected that the net fee revenue that the Group will earn from managing CHOT will be generally consistent with the net revenue earned previously from managing the Australian assets of CQO. With implementation of the privatisation, CQO changed from a listed REIT to a wholesale unit trust with liquidity reviews every five years. Accordingly, the Group will amortise the management rights over a six year period, which includes an additional year to source liquidity were the trust to be wound up at that time. As a participant in the Consortium, the Group’s interest in CHOT has increased from 10% to 15%.

Asset revaluations of CHOT’s Australian portfolio at 30 June 2012 resulted in an increase of $22.7m (or $33.1m since June 2011). The occupancy of the CHOT portfolio increased 2% to 98% at 30 June 2012, with like for like property net operating income growth of 3.6%.

Core Plus Industrial Fund (CPIF) - $0.6 billion FUM, CHPT interest 8% and CHL interest 10% with a combined equity interest carrying value of $54.9 million

CPIF is an Australian unlisted wholesale industrial fund managed by the Group. CPIF has continued its focus on holding core logistics investments and executing accretive acquisitions. The portfolio’s current weighted average capitalisation rate is 8.21%, with a WALE of 11.5 years underpinned by strong tenant covenants such as Woolworths. CPIF has been actively leasing over the financial year, reaching an occupancy level of 98% with minimal forward looking vacancy out till 2017.

Other wholesale unlisted funds

The Group also originates and manages segregated mandate capital for direct property investments either in joint venture with funds such as CPOF or CQR or as 100% owned assets by our clients. There is a total portfolio value of $635 million within the segregated mandate business.

iv) Retail investor funds - This business manages equity raised from retail investors via advisers and through direct distribution channels, with combined FUM of $1.5 billion

Charter Hall Diversified Property Fund (DPF) - $0.1 billion FUM, CHPT equity interest of 25% representing a carrying value of $11.7 million

DPF is an unlisted property fund with rolling seven-year review events that primarily invests in a diversified portfolio of three office buildings and three industrial properties located in established markets throughout Sydney, Melbourne and Perth which benefited from an occupancy rate of 97% and a weighted average lease expiry of 6.2 years at 30 June 2012.

During the year asset sales totalling approximately $80 million were completed, with the net proceeds being used to reduce gearing and provide capital returns to investors ahead of the fund’s upcoming review event scheduled for October 2012. This review event is likely to lead to the sale of some or all of the fund’s remaining assets.

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Appendix 4E Preliminary Financial Report

Review of operations (continued)

Charter Hall Direct Property Fund (CHDPF) - $0.5 billion FUM, CHPT interest 4% representing a carrying value of $10.8 million

CHDPF is an unlisted property fund that primarily invests in a diversified portfolio of Australian direct properties anchored by eight office properties located in established markets throughout Sydney, Melbourne and Brisbane which benefited from an occupancy rate of 97% and a weighted average lease expiry of 4.3 years with leases to over 110 tenants at 30 June 2012. The weighted average cap rate was 8.35%.

The fund remains open for investor applications with the issue of a product disclosure statement in December 2010 and is continuing to provide limited liquidity through six-monthly withdrawal offers.

Charter Hall Umbrella Fund (CHUF) - $0.1 billion FUM, CHPT interest 27% representing a carrying value of $39.5 million

CHUF is an unlisted fund of funds with investments predominantly in Charter Hall Group managed funds, with no balance sheet gearing and exposure to a portfolio of more than 55 office, industrial and retail properties across Australia and New Zealand which benefited with a WALE of 7.6 years and a current occupancy of 98% at 30 June 2012.

During the year the fund commenced providing limited liquidity through six-monthly withdrawal offers.

Other managed funds

The Group also manages a series of pooled and single asset syndicates totalling $193 million in asset value, in which the Group has no equity interest.

Property funds management

The property funds management business provides investment management, asset management, property management, development management, leasing and transaction services to not only funds in which the Group has a co-invested stake, but also to funds established and managed by the Group. The Group also provides services via segregated mandates looking to capitalise on the Group’s expertise.

The Group’s managed funds have acquired approximately $439 million of property in Australia across Charter Hall Retail REIT ($176m), Charter Hall Core Plus Office Fund ($96m), Charter Hall Core Plus Industrial Fund ($85m) and Direct Industrial Fund ($82m). The Group’s managed funds have divested approximately $2.1bn of assets, of which approximately $1.7bn related to the divestment of CQO’s United States portfolio.

The integrated property services model provides transactional, leasing, investment management, asset management and property management profits within the Property Funds Management business, which substantially enhance the returns from the capital invested in property and development investments.

Development investment

The Group’s development investments comprise a 50% interest in Commercial and Industrial Property Pty Ltd (CIP), an industrial development business, a 50% interest in an office development project at 685 La Trobe Street, Melbourne, together with equity co-investment interests in Charter Hall Opportunity Fund 4 (CHOF4) and Charter Hall Opportunity Fund 5 (CHOF5). CIP contributed $1.5 million (FY11: $4.0 million) of operating earnings to the Group, CHOF4 and CHOF5 contributed $0.3 million (FY11: loss $0.2 million) for the period and the Group has earned a commitment fee of $0.1 million relating to the Workzone development being undertaken by CHOF5 resulting in a combined contribution to operating earnings before interest and tax of $1.9 million (FY11: $3.8 million). The development at 685 La Trobe Street is at an early stage in the development process and has not made a contribution to the current period result.

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Appendix 4E Preliminary Financial Report

Review of operations (continued)

Charter Hall Opportunity Fund 4 (CHOF4) - $0.1 billion FUM, CHL interest 3% with an equity interest carrying value of $1.1 million

CHOF4 is fully allocated with seven of eight projects completed and capital returned to investors. There is one remaining completed project in CHOF4, being Home HQ North Shore.

In prior financial years the Group has received performance fees in respect of CHOF4 amounting to $14.2 million. These fees were subject to clawback provisions in the event CHOF4 did not achieve a gross equity internal rate of return (“IRR”) of 13% over the life of the fund.

As a result of a reduction in the IRR performance in CHOF4, the Charter Hall Board has resolved to raise a provision for the maximum potential clawback, being $14.2 million. The clawback is payable on the earlier of 31 December 2012, unless extended, or the sale of Home HQ North Shore. As the Group has a 3% interest in CHOF4, 3% of any performance fee clawback received by CHOF4 will be taken up in the equity accounted results of the Group.

Charter Hall Opportunity Fund 5 (CHOF5) - $0.5 billion FUM, CHL interest 15% with an equity interest carrying value of $28.5 million

All of the vacant space within the development components of The Park Megacentre in Hastings, New Zealand has now been leased and sale of these tenanted units, and the remaining land, has commenced.

40 Creek Street, Brisbane is 100% leased, with all remaining Heads of Agreements converted into executed leases over the last quarter. Contracts for Sale have been exchanged for $84.5 million on 6 August 2012. Settlement is forecast for September 2012.

PDS Constructions is making good progress on Aquilo in Mentone, Victoria with the construction of all townhouses in Stages 1 complete, Stage 2 being progressively completed and Stage 3 underway. As at 30 June 2012, 110 unconditional contracts of sale have been exchanged (92%), with nine townhouses available for sale. Purchaser settlements have continued during the quarter, with a total of 36 townhouses settled as of 30 June 2012.

Progress at Workzone, Perth continues in line with programme. Broad Construction Services WA (Broad) is nine months into construction and anchor tenant Leighton Contractors Pty Ltd (Leighton) is well advanced with its fully integrated fit out design. The leasing campaign is underway for the balance of the available office and retail space with Savills and Lease Equity appointed respectively. Due to an acceptable offer to purchase not being received during the forward funded sale campaign, Management is now forecasting the sale of the development on completion in October 2013, however still remain confident that a sale may be secured prior to completion.

Construction of the Lacrosse Apartments in La Trobe Street, Melbourne reached Practical Completion on 25 June 2012 and 129 apartments were settled prior to 30 June 2012. Rectification of defect items is substantially complete and the building has been handed over to the building manager. Four apartments are available for sale from a total of 312. Contracts on four retail tenancies have been exchanged leaving 14 tenancies available for sale.

In respect of the Little Bay project, subsequent to year end, commercial negotiations are underway between the Development Alliance (DA) partners, being CHOF 5 and TA Global Development Pty Ltd (TAG). In accordance with the DA Umbrella Deed, a Notice of Mediation has been issued to TAG by Charter Hall Funds Management Limited (CHFML) (in its capacity as trustee of CHOF 5) in relation to a commercial dispute between the DA partners. The mediation notice has been rejected by TAG with a request for a clarification of the details of the alleged dispute between the parties. Ongoing commercial negotiations with TAG are being undertaken in an attempt to agree on the future direction of the project.

As at the date of signing the financial statements, Charter Hall Group is not able to determine whether any financial impact will occur as a result of these negotiations and any subsequent dispute or mediation process with respect to either Charter Hall directly or its 15% co-investment in CHOF 5.

Development of the Estate Works to create the individual housing and development superlots at the Little Bay project is currently underway, with completion scheduled for May 2013.

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Appendix 4E Preliminary Financial Report

Significant changes in the state of affairs

Significant matters of the Group during the year, in addition to the review of operations above, were as follows:

On 30 September 2011, the Group announced it had exchanged contracts and subsequently settled the sale of the Mentone Showrooms in Victoria.
On 30 September 2011, the Group announced it had completed the acquisition from Macquarie Group Limited of all shares in Charter Hall Retail Management Limited and Charter Hall Direct Property Management Limited under the Share Sale Agreement (dated 12 February 2010) following the satisfaction of conditions precedent for a sum of $14.3 million. This transaction completed the acquisition of the Macquarie real estate funds management platform.
On 21 October 2011, the Group increased its ownership in Charter Hall Retail REIT (CQR) to 10%, by exercising its first right of refusal to acquire a portion of Macquarie Bank Limited group’s holding in CQR. The Group acquired 1.7% of CQR units at a price of $3.20 per unit, a total acquisition price of $16.2 million. This acquisition was funded from the sale of the Mentone Showrooms.
On 24 November 2011, the Group confirmed its support for the governance changes implemented across its listed REITs, CQO and CQR. The corporate governance and fee reviews were undertaken by independent directors of CHOML and Charter Hall Retail Management Limited (CHRML), as responsible entities (RE) of CQO and CQR, with the support of Ernst & Young. Governance changes included the introduction of term limits for independent directors, unitholders to ratify the appointment of independent directors, formalising the maximum number of independent directors in the Board Charter, detailed disclosure of the basis for related party fees, introduction of an effective internal audit function, adoption and disclosure of a gender diversity policy, directors’ fees to be paid by the REIT rather than the Charter Hall Group to maximise independence and alignment, review of remuneration structure to align the interests of the Fund Manager of each REIT, and improvement to Key Management Personnel (KMP) remuneration disclosures. Fund management fee structures would remain unchanged. The REITs announced that whilst resetting performance fees may increase alignment, the resetting of performance fees would likely lead to increased costs for unitholders over time. Charter Hall has existing strong alignment to the performance of the REITs through its co-invested interest of 10% in CQR.
On 1 May 2012, the Group confirmed implementation of the privatisation of CQO by a consortium of investors, being Reco Ambrosia Pte Ltd (RAP) (an affiliate of the Government of Singapore Investment Corporation Pte Ltd), the Public Sector Pension Investment Board of Canada (PSP) and a member of the Charter Hall Group (ASX:CHC) (collectively known as the Consortium). The new unlisted trust is known as Charter Hall Office Trust (CHOT). The Group has been appointed the investment, property and development manager for CHOT. It is expected that the net fee revenue that the Group will earn from managing CHOT will be generally consistent with the net revenue earned previously from managing the Australian assets of CQO. With implementation of the privatisation, CQO changed from a listed REIT to a wholesale unit trust with liquidity reviews every five years. The Group will amortise the management rights over a six year period, which includes an additional year to source liquidity were the trust to be wound up at that time. As a participant in the Consortium, the Group’s interest in CHOT rises to 15%.
On 18 June 2012, the Group announced that it had implemented a $200 million capital reallocation from Charter Hall Property Trust (CHPT) to Charter Hall Limited (CHL), effective 30 June 2012. The capital reallocation aims to ensure a more appropriate allocation of capital between CHPT and CHL (which together trade on the Australian Securities Exchange as Charter Hall Group) which is more closely aligned with the Group’s long-term growth strategy. Under the capital reallocation proposal approved by securityholders at the Annual General Meeting on 24 November 2011, CHPT made capital payments of $200 million which were compulsorily applied as a capital contribution for existing shares of CHL.
On 18 June 2012, the Group advised it would take up a provision of $14.2 million in relation to the potential clawback of Charter Hall Opportunity Fund No. 4 (CHOF4) performance fees received in respect of the 2007, 2008, 2009 and 2010 financial years. The final amount of any clawback will not be known until the earlier of the termination date of 31 December 2012, unless extended, or the completion of the sale of all the assets of CHOF4.
On 28 June 2012, the Group announced it had entered into an Implementation Deed with various entities of Australian Property Growth Fund (APGF) for the retirement of APGF Management Limited (APGFM) (a wholly owned subsidiary of APGF) as responsible entity (RE) of PFA Diversified Property Trust (PFA) and the appointment of Charter Hall Direct Property Management Limited (CHDPML) (a wholly-owned subsidiary of Charter Hall). Subsequently, on 15 August 2012 PFA unitholders voted to approve the appointment of CHDPML as RE.

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On 28 June 2012 the Retail Partnership No. 2 Trust (RP2T) in which the Group has a 20% interest, contracted to acquire the Bay Village Shopping Centre in New South Wales for $164 million.

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Appendix 4E Preliminary Financial Report

Undistributed income

Refer attached preliminary financial report (Note 28: Reserves and accumulated losses).

Net Tangible Assets

	Current year	Previous corresponding year
Net tangible assets (NTA) per unit1	$2.13	$2.21

Under the listing rules NTA must be determined by deducting from total tangible assets all claims on those assets ranking ahead of the ordinary securities (ie: all liabilities, preference shares, outside equity interest etc).

The number of securities on issue is 296.8 million (2011: 306.3 million). For the calculation of NTA the number of securities is reduced to 296.2 million (2011: 293.8 million). The difference represents securities issued under the Charter Hall Executive Loan Security Plan (ELSP) which are not recognised for accounting purposes, including NTA calculation, under AASB2: Share Based Payments. The corresponding loan receivable and interest income are also not recognised.

Control gained or lost over entities during the year

The Group gained 100% control of the following entities during the year:

Charter Hall Mordialloc Pty Limited
Charter Hall La Trobe Pty Limited
CHPT RP2 Trust

The following trusts were dissolved on 31 May 2012.

Redcliffe Retail Property Trust
Belconnen Retail Warehouse Trust
Box Hill Retail Warehouse Trust
Nerang Retail Warehouse Trust
Nowra Retail Warehouse Trust
Penrith Retail Warehouse Trust
Rothwell Retail Property Trust

Details of Associates and Joint Venture entities

Refer attached preliminary financial report (Note 36: Investments in Associates and Note 37: Investments in Joint Ventures).

Other significant information

For additional information regarding the results of Charter Hall Group for the year ended 30 June 2012 please refer to the Full Year Results – ASX Media Announcement and the 2012 Full Year Results Presentation lodged with the ASX. Attached with this Appendix 4E is a copy of the unaudited Preliminary Financial Report for the year ended 30 June 2012.

Accounting standards used by foreign entities

International Financial Reporting Standards

Segment results:

Refer attached preliminary financial report (Note 5: Segment reporting).

Performance trends:

Refer to significant features of operating performance above.

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Appendix 4E Preliminary Financial Report

Other Factors:

Refer to Other significant information (above).

Audit

This report is based on accounts to which one of the following applies: (tick one)

	The accounts have been audited. (refer attached financial statements)		The accounts have been subject to review. (refer attached financial statements)
	The accounts are in the process of being audited orsubject toreview.		The accounts have not yet been audited or reviewed.

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Comprising the stapling of ordinary shares in Charter Hall Limited (ACN 113 531 150) and units in Charter Hall Property Trust (ARSN 113 339 147)

PRELIMINARY FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2012 (UNAUDITED)

Important notice

This financial report has been prepared and issued by Charter Hall Limited (ABN 57 113 531 150) and Charter Hall Funds Management Limited (ABN 31 082 991 786, AFSL 262861) (CHFML) as Responsible Entity of the Charter Hall Property Trust (together, the Charter Hall Group or Group). The information contained in this report has been compiled to comply with legal and regulatory requirements and to assist the recipient in assessing the performance of the Group independently and does not relate to, and is not relevant for, any other purpose.

This report is not intended to be and does not constitute an offer or a recommendation to acquire any securities in the Charter Hall Group. The receipt of this report by any person and any information contained herein or subsequently communicated to any person in connection with the Charter Hall Group is not to be taken as constituting the giving of investment, legal, or tax advice by the Charter Hall Group, their related bodies corporate, their directors or employees to any such person. Each recipient should consult their own counsel, accountant, and other advisers as to legal, tax, business, financial and other considerations in relation to the Charter Hall Group.

Neither the Charter Hall Group, their related bodies corporate, directors, employees nor any other person who may be taken to have been involved in the preparation of this financial report represents or warrants that the information contained in this report, provided either orally or in writing to a recipient in the course of its evaluation of the Charter Hall Group or the matters contained in this financial report, is accurate or complete.

Historical performance is not a reliable indicator of future performance. Due care and attention have 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 the Group. Actual results may vary from any forecasts, and any variation may be materially positive or negative.

CHFML does not receive fees in respect of the general financial product advice it may provide; however, entities within the Charter Hall Group receive fees for operating the Trust in accordance with its constitution. Entities within the Group may also receive fees for managing the assets of, and providing resources to the Trust. For more detail on fees, see this financial report.

Charter Hall Group and Charter Hall Property Trust Group

Preliminary financial report for the year ended 30 June 2012

Consolidated statements of comprehensive income ............................................................................................................................2	Consolidated statements of comprehensive income ............................................................................................................................2
Consolidated balance sheets ...............................................................................................................................................................3
Consolidated statement of changes in equity – Charter Hall Group .....................................................................................................4
Consolidated statement of changes in equity – Charter Hall Property Trust Group .............................................................................5
Consolidated cash flow statements ......................................................................................................................................................6
1	Summary of significant accounting policies .................................................................................................................................7
2	Financial risk management ........................................................................................................................................................ 20
3	Critical accounting estimates and judgements ........................................................................................................................... 26
4	Parent entity financial information .............................................................................................................................................. 27
5	Segment information .................................................................................................................................................................. 28
6	Revenue .................................................................................................................................................................................... 32
7	Expenses ................................................................................................................................................................................... 32
8	Fair value adjustments ............................................................................................................................................................... 33
9	Income tax benefit ..................................................................................................................................................................... 33
10	Distributions paid and payable ................................................................................................................................................... 34
11	Cash and cash equivalents ........................................................................................................................................................ 35
12	Trade and other receivables ...................................................................................................................................................... 35
13	Assets classified as held for sale ............................................................................................................................................... 39
14	Investments in associates at fair value through profit or loss ..................................................................................................... 39
15	Derivative financial instruments ................................................................................................................................................. 40
16	Inventories ................................................................................................................................................................................. 41
17	Investments accounted for using the equity method .................................................................................................................. 41
18	Intangible assets ........................................................................................................................................................................ 41
19	Property, plant and equipment ................................................................................................................................................... 42
20	Investment properties ................................................................................................................................................................ 43
21	Deferred tax assets .................................................................................................................................................................... 44
22	Trade and other payables .......................................................................................................................................................... 44
23	Provisions .................................................................................................................................................................................. 45
24	Borrowings ................................................................................................................................................................................. 46
25	Deferred tax liabilities................................................................................................................................................................. 52
26	Provisions – non-current ............................................................................................................................................................ 52
27	Contributed equity ...................................................................................................................................................................... 53
28	Reserves and accumulated losses ............................................................................................................................................ 54
29	Non-controlling interest .............................................................................................................................................................. 56
30	Key management personnel ...................................................................................................................................................... 57
31	Remuneration of auditors ........................................................................................................................................................... 58
32	Commitments ............................................................................................................................................................................. 59
33	Contingent liabilities ................................................................................................................................................................... 59
34	Related parties ........................................................................................................................................................................... 60
35	Controlled entities ...................................................................................................................................................................... 61
36	Investments in associates .......................................................................................................................................................... 64
37	Investments in joint ventures ..................................................................................................................................................... 70
38	Events occurring after the reporting date ................................................................................................................................... 73
39	Reconciliation of profit after tax to net cash inflow from operating activities .............................................................................. 73
40	Earnings per security ................................................................................................................................................................. 74
41	Security-based benefits ............................................................................................................................................................. 75
42	Deed of cross guarantee ............................................................................................................................................................ 77

Charter Hall Group and Charter Hall Property Trust Group

Preliminary financial report for the year ended 30 June 2012

Consolidated statements of comprehensive income

Directors’ report Consolidated statements of comprehensive income	Directors’ report Consolidated statements of comprehensive income	Directors’ report Consolidated statements of comprehensive income	Directors’ report Consolidated statements of comprehensive income
Charter Hall Group Charter Hall Property Trust Group
Note	2012	2011	2012 2011 $’000 $'000
	$'000	$‟000
Income Revenue 6 Share of net profit of associates accounted for using the equity method Net gain on remeasurement of equity interests 36(b) Fair value adjustment on contingent consideration Net gain on sale of investment properties and derivatives Foreignexchange gains			53,287 35,335 5,494 26,815 4,533 16,733 - - - 2,523 - 12
	123,630	109,594
	2,949	30,396
	4,645	16,726
	1,355	-
	-	3,350
	-	29
Total income	132,579	160,095	63,314 81,418
Expenses Investment property expenses Depreciation 7 Finance costs 7 Net loss on sale of investment properties and derivatives Net valuation losses on investment properties 8 Net unrealised loss from derivative financial instruments 8 Net loss on investment in associates at fair value 8 Foreign exchange losses Impairment of management rights Amortisation of management rights 7 Asset management fees Performance fee clawback provision Management, administrationand otherexpenses 7			(3,478) (4,839) - - (8,875) (7,196) (2,179) - (7,692) (128) (310) (387) (1,757) (319) (955) - - - - - (3,591) (5,726) - - (1,313) (1,899)

	(3,541)	(4,795)
	(725)	(1,545)
	(9,382)	(8,111)
	(1,627)	-
	(7,692)	(2,518)
	(310)	(386)
	(1,774)	(309)
	(943)	-
	-	(19,171)
	(1,307)	-
	-	-
	(14,239)	-
	(77,068)	(70,689)
Total expenses	(118,608)	(107,524)	(30,150) (20,494)
Profit before tax Income taxbenefit 9			33,164 60,924 - 323
	13,971	52,571

	432	2,666
Profit for theyear	14,403	55,237	33,164 61,247
Profit/(loss) for the year is attributable to: Equity holders of Charter Hall Limited Equityholders ofCharter Hall PropertyTrust (non-controllinginterest)			- - 36,087 57,831

	(19,409)	(5,493)
	36,087	57,831
Profit after tax attributable to stapled securityholders of Charter Hall Group Netprofit/(loss)attributable to other non-controllinginterests	16,678	52,338	36,087 57,831 (2,923) 3,416
	(2,275)	2,899
Profit for theyear	14,403	55,237	33,164 61,247
Profit for the year Other comprehensive income/(loss) for the year Exchange differences on translation of foreign operations Transfer of cumulative FX losses 28(a)			33,164 61,247 2,334 (19,024) 11,749 -
	14,403	55,237


	2,021	(19,677)
	11,749	-
Other comprehensive income/(loss) for the year, net of tax	13,770	(19,677)	14,083 (19,024)

Total comprehensive income for theyear	28,173	35,560	47,247 42,223
Total comprehensive income for the year is attributable to: Equity holders of Charter Hall Limited Equityholders ofCharter Hall PropertyTrust (non-controllinginterest)			- - 49,143 38,743

	(19,724)	(6,123)
	49,143	38,743
Total comprehensive income attributable to stapled securityholders
of Charter Hall Group Total comprehensive income/(loss) attributable to other non-controlling interests	29,419	32,620	49,143 38,743 (1,896) 3,480

	(1,246)	2,940
Total comprehensive income for theyear	28,173	35,560	47,247 42,223
Basic and diluted earnings per stapled security Basic earnings per stapled security (cents) attributable to securityholders 40 Diluted earnings per stapled security (cents) attributable to securityholders 40			12.21 19.72 11.49 18.13

	5.64	17.85

	5.35	17.06

The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.

Charter Hall Group and Charter Hall Property Trust Group

Preliminary financial report for the year ended 30 June 2012

Consolidated balance sheets

Consolidated balance sheets
	Charter Hall Group
Note	2012	2011	2012 2011 $’000 $'000
	$'000	$'000
Assets Current assets Cash and cash equivalents 11 Trade and other receivables 12 Assets classified as held for sale 13			21,674 4,841 17,601 13,788 136,390 -

	39,315	26,266
	32,110	43,438
	136,390	921
Total current assets	207,815	70,625	175,665 18,629
Non-current assets Trade and other receivables 12 Investment in associates at fair value through profit or loss 14 Inventories 16 Investments accounted for using the equity method 17 Property, plant and equipment 19 Investment properties 20 Intangible assets 18 Deferred tax assets 21 Other assets 24			163,542 355,874 62,180 78,014 - - 373,578 436,108 - - - 143,718 - - - - 564 -

	12,870	9,400
	62,638	78,445
	9,518	7,450
	472,159	517,707
	3,026	3,167
	-	159,518
	98,687	99,994
	10,507	11,255
	564	-
Total non-current assets	669,969	886,936	599,864 1,013,714
Total assets			775,529 1,032,343
	877,784	957,561
Liabilities Current liabilities Trade and other payables 22 Derivative financial instruments 15 Provisions 23 Borrowings 24			30,288 32,728 669 - - - 53,863 -


	50,788	58,061
	669	-
	14,895	834
	51,463	-
Total current liabilities	117,815	58,895	84,820 32,728
Non-current liabilities Trade and other payables 22 Borrowings 24 Deferred tax liabilities 25 Derivative financial instruments 15 Provisions 26			- - - 101,862 - - - 407 - -

	-	12,106
	-	101,862
	2,185	1,129
	-	407
	1,428	1,217
Total non-current liabilities	3,613	116,721	- 102,269
Total liabilities			84,820 134,997
	121,428	175,616
Net assets			690,709 897,346
	756,356	781,945
Equity Equity holders of Charter Hall Limited Contributed equity 27 Reserves 28(a) Accumulated losses 28(b)			- - - - - -


	209,550	9,503
	(49,055)	(47,547)
	(81,738)	(62,329)
Parent entityinterest	78,757	(100,373)	- -
Equity holders of Charter Hall Property Trust Contributed equity 27 Reserves 28(a) Accumulated losses 28(b)			739,175 934,458 (1,415) (9,747) (87,609) (74,520)

	739,175	934,458
	(1,415)	(9,747)
	(87,609)	(74,520)
Equity holders of Charter Hall Property Trust (non-controllinginterest)	650,151 850,191 650,151 850,191
Interest attributable to stapled securityholders of Charter Hall Group Non-controllinginterest in DRF 29			650,151 850,191 40,558 47,155
	728,908	749,818
	27,448	32,127
Total equity			690,709 897,346
	756,356	781,945

The above consolidated balance sheets should be read in conjunction with the accompanying notes.

Charter Hall Group and Charter Hall Property Trust Group

Preliminary financial report for the year ended 30 June 2012

Consolidated statement of changes in equity – Charter Hall Group

Attributable to the owners of Charter Hall Group

Contributed equity Reserves Accumulated losses Total $'000 $'000 $'000 $'000	Non- controlling interest Total equity $'000 $'000
Balance at 1 July 2010 936,445 (40,029) (136,055) 760,361	50,629 810,990
Profit/(loss) for the year - - 52,338 52,338 Other comprehensive income - (19,718) - (19,718)	2,899 55,237 41 (19,677)
Total comprehensive income/(loss) - (19,718) 52,338 32,620	2,940 35,560
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of issue costs 7,516 - - 7,516 Distribution provided for or paid - - (48,469) (48,469) Security-based payments - 4,090 - 4,090 Transactions with non-controlling interests - (6,300) - (6,300) Transfer from accumulated losses - 4,663 (4,663) -	- 7,516 (2,503) (50,972) - 4,090 (18,939) (25,239) - -
7,516 2,453 (53,132) (43,163)	(21,442) (64,605)
Balance at 1 July 2011 943,961 (57,294) (136,849) 749,818	32,127 781,945
Profit/(loss) for the year - - 16,678 16,678 Other comprehensive income - 12,741 - 12,741	(2,275) 14,403 1,029 13,770
Total comprehensive income/(loss) - 12,741 16,678 29,419	(1,246) 28,173
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of issue costs - - - - Performance rights and options exercised 4,764 (1,452) - 3,312 Distribution provided for or paid - - (53,839) (53,839) Security-based payments - 2,600 - 2,600 Transactions with non-controlling interests - (2,402) - (2,402) Transfer to accumulated losses - (4,663) 4,663 -	- - - 3,312 (2,667) (56,506) - 2,600 (766) (3,168) - -
4,764 (5,917) (49,176) (50,329)	(3,433) (53,762)
Balance at 30 June 2012 948,725 (50,470) (169,347) 728,908	27,448 756,356

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Charter Hall Group and Charter Hall Property Trust Group

Preliminary financial report for the year ended 30 June 2012

Consolidated statement of changes in equity – Charter Hall Property Trust Group

Attributable to the owners of Charter Hall Property Trust Group

Contributed equity Reserves Accumulated losses Total $'000 $'000 $'000 $'000	Non- controlling interest Total equity $'000 $'000
Balance at 1 July 2010 927,018 4,626 (79,219) 852,425	50,630 903,055
Profit/(loss) for the year - - 57,831 57,831 Other comprehensive income - (19,088) - (19,088)	3,416 61,247 64 (19,024)
Total comprehensive income/(loss) - (19,088) 57,831 38,743	3,480 42,223
Transactionswithequityholdersintheircapacity as equityholders:
Contributions of equity, net of issue costs 7,440 - - 7,440 Distribution provided for or paid - - (48,469) (48,469) Transactions with non-controlling interests - 52 - 52 Transfer from accumulated losses - 4,663 (4,663) -	- 7,440 (3,072) (51,541) (3,883) (3,831) - -
7,440 4,715 (53,132) (40,977)	(6,955) (47,932)
Balance at 1 July 2011 934,458 (9,747) (74,520) 850,191	47,155 897,346
Profit/(loss) for the year - - 36,087 36,087 Other comprehensive income - 13,056 - 13,056	(2,923) 33,164 1,027 14,083
Total comprehensive income/(loss) - 13,056 36,087 49,143	(1,896) 47,247
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of issue costs - - - - Performance rights and options exercised 4,717 - - 4,717 Reallocation to Charter Hall Limited (200,000) - - (200,000) Distribution provided for or paid - - (53,839) (53,839) Transactions with non-controlling interests - (61) - (61) Transfer to accumulated losses - (4,663) 4,663 -	- - - 4,717 - (200,000) (3,889) (57,728) (812) (873) - -
(195,283) (4,724) (49,176) (249,183)	(4,701) (253,884)
Balance at 30 June 2012 739,175 (1,415) (87,609) 650,151	40,558 690,709

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Charter Hall Group and Charter Hall Property Trust Group

Preliminary financial report

for the year ended 30 June 2012

Consolidated cash flow statements

Consolidated cash flow statements	Consolidated cash flow statements	Consolidated cash flow statements	Consolidated cash flow statements	Consolidated cash flow statements
Charter Hall Group Charter Hall Property Trust Group
Note	2012	2011	2012 $'000	2011 $'000
	$'000	$'000
Cash flows from operating activities Receipts from customers Payments to suppliers and employees			19,026 (14,150)	28,018 (8,180)
	146,830	107,836
	(93,503)	(72,932)
Interest received Interest paid Distributions and dividends from investments	53,327	34,904	4,876 869 (8,644) 27,765	19,838 1,554 (7,415) 26,230
	2,562	2,901
	(8,654)	(7,494)
	31,773	28,471
Net cash inflow from operating activities 39	79,008	58,782	24,866	40,207
Cash flows from investing activities Payments for property, plant and equipment Proceeds on disposal of investment property Payment for inventory Payments for investment properties Deferred payments for business combination Investments in associates and joint ventures Proceeds on disposal and return of capital from investments in associates Loans to associates and joint ventures Repayments from associates Repayments from key management personnel Transactions with non-controlling interests Payments for acquisition of non-controllinginterests			- 17,218 - (717) - (73,769) 130,086 (1,650) 26,527 - - -	- 115,461 - (14,030) - (67,230) 20,020 (96,868) 35,970 - (3,831) -

	(587)	(1,128)
	33,742	97,548
	(1,294)	(7,450)
	(717)	(14,778)
	(15,752)	(280)
	(68,522)	(75,670)
	95,129	439
	(6,120)	(1,250)
	-	-
	800	-
	-	-
	-	(30,076)
Net cash inflow/(outflow) from investing activities	36,679	(32,645)	97,695	(10,508)
Cash flows from financing activities Proceeds from issues of securities and other equity securities Payment on settlement of derivative financial instruments Proceeds from borrowings Repayment of borrowings Distributionspaid to securityholders			2,257 (183) 76,442 (128,728) (55,524)	- (4,388) 48,510 (37,658) (37,952)

	4,162	-
	(183)	(4,388)
	76,442	48,510
	(128,728)	(37,658)
	(54,379)	(35,030)
Net cash outflow from financing activities	(102,686)	(28,566)	(105,736)	(31,488)
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of exchange rate changes on cash and cash equivalents			16,825 4,841 8	(1,789) 6,638 (8)
	13,001	(2,429)
	26,266	28,380
	48	315
Cash and cash equivalents at the end of theyear 11	39,315	26,266	21,674	4,841

The above consolidated cash flow statements should be read in conjunction with the accompanying notes.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies

(a) Basis of preparation

The Charter Hall Group (the Group or CHC) is a „stapled‟ entity comprising Charter Hall Limited (the Company or CHL) and its controlled entities, and Charter Hall Property Trust (the Trust or CHPT) and its controlled entities. The shares in the Company are stapled to the units in the Trust. The stapled securities cannot be traded or dealt with separately. The stapled securities of the Group are listed on the Australian Securities Exchange.

The two Charter Hall entities comprising the stapled group remain separate legal entities in accordance with the Corporations Act 2001 , and are each required to comply with the reporting and disclosure requirements of Accounting Standards and the Corporations Act 2001 .

As permitted by Class Order 05/642, issued by the Australian Securities and Investments Commission, this financial report is a combined financial report that presents the financial statements and accompanying notes of both the Charter Hall Group and the Charter Hall Property Trust Group.

The financial report of the Charter Hall Group comprises Charter Hall Limited and its controlled entities including Charter Hall Funds Management Limited (Responsible Entity) as responsible entity for Charter Hall Property Trust. Charter Hall Limited has been identified as the parent entity in relation to the stapling. The results and equity, not directly owned by CHL, of CHPT have been treated and disclosed as a non-controlling interest. Whilst the results and equity of CHPT are disclosed as a non-controlling interest, the stapled securityholders of CHL are the same as the stapled securityholders of CHPT. The results and equity of the Charter Hall Direct Retail Fund (DRF) not directly owned by the Group have been treated and disclosed as a non-controlling interest.

The financial report of the Charter Hall Property Trust Group comprises the Trust and its controlled entities.

This general purpose financial report has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. The Charter Hall Group and Charter Hall Property Trust Group are for-profit entities for the purpose of preparing the financial statements.

The principal accounting policies adopted in the preparation of the consolidated financial statements for the year ended 30 June 2012 are set out below. These policies have been consistently applied to the years presented, unless otherwise stated.

On 6 June 2005, CHL acquired Charter Hall Holdings Pty Ltd (CHH). Under the terms of AASB 3 Business Combinations, CHH was deemed to be the accounting acquirer in this business combination. This transaction has therefore been accounted for as a reverse acquisition under AASB 3. Accordingly, the consolidated financial statements of the Group have been prepared as a continuation of the consolidated financial statements of CHH. CHH, as the deemed acquirer, has acquisition accounted for CHL as at 6 June 2005.

Compliance with IFRSs

Compliance with Australian Accounting Standards ensures that the financial statements comply with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB). Consequently, these financial statements have been prepared in accordance with and comply with IFRS as issued by the IASB.

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, financial assets and liabilities (including derivative financial instruments) held at fair value through profit or loss.

Critical accounting estimates

The preparation of the financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates and management to exercise its judgement in the process of applying the Group‟s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation

(i) Controlled entities

The consolidated financial statements of the Charter Hall Group and the Charter Hall Property Trust Group incorporate the assets and liabilities of all controlled entities as at 30 June 2012 and their results for the year then ended.

Controlled entities are all those entities over which the Company or the Trust 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 Company or the Trust controls another entity.

Controlled entities are fully consolidated from the date on which control is transferred. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for acquisition of controlled entities by the Company or Trust (refer to note 1(g)).

Intercompany transactions, balances and unrealised gains on transactions between controlled entities are eliminated. Unrealised losses are also eliminated unless the transaction involves impairment of the asset transferred. Accounting policies of controlled entities have been changed where necessary to ensure consistency with the policies adopted by the Company or the Trust.

Non-controlling interests in the results and equity of controlled entities are shown separately in the consolidated statement of comprehensive income, consolidated balance sheet and consolidated statement of changes in equity respectively.

(ii) Associates

Associates are entities over which Charter Hall has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights or where Charter Hall is the responsible entity. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting after initially being recognised at cost, or as financial assets at fair value through profit or loss.

Where the equity method of accounting is used, Charter Hall‟s share of its associates‟ post-acquisition profits or losses is recognised in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the consolidated financial statements as a reduction in the carrying amount of the investment.

When Charter Hall‟s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, Charter Hall does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between Charter Hall and its associates are eliminated to the extent of Charter Hall‟s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by Charter Hall.

For investments in associates accounted for as financial assets at fair value through profit or loss, investments are carried at fair value with gains or losses arising from changes in the fair value being presented in the statement of comprehensive income within „fair value adjustments‟ in the year in which they arise. Distribution income from investments in associates accounted at fair value through profit or loss is recognised in the statement of comprehensive income as part of revenue.

(iii) Joint ventures

Joint venture entities

Investment in joint venture entities over which Charter Hall exercises joint control are accounted for in the consolidated financial statements using the equity method after initially being recognised at cost. Under the equity method, Charter Hall‟s share of the profits or losses of each relevant joint venture entity is recognised in profit or loss, and the share of post-acquisition movements in reserves is recognised in other comprehensive income. Details relating to the joint venture entities are set out in note 37.

Profit and losses on transactions establishing the joint venture entity and transactions with the joint venture are eliminated to the extent of Charter Hall‟s ownership interest until such time as they are realised by the joint venture entity on consumption or sale. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of assets, or an impairment loss.

Jointly controlled assets

The proportionate interests in the assets, liabilities, income and expenses of a joint venture activity have been incorporated in the financial statements under the appropriate headings. Details of the joint venture activity are set out in note 37.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(c) Segment reporting

Segment information is presented on the same basis as that used for internal reporting purposes.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the Group operates (the functional currency). The financial statements are presented in Australian Dollars which is the Group‟s functional and presentation currency.

(ii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

==> picture [9 x 12] intentionally omitted <==

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates; and
all resulting exchange differences are recognised in other comprehensive income. If an entity is sold, the proportionate share of exchange differences would be transferred out of equity and recognised in the income statement.

Functional currencies and the relevant exchange rates are as follows:

2012	2011
Spot rate US Dollar 1.0238 NZ Dollar 1.2778 Euro 0.8084 British Pounds 0.6518 Average rate US Dollar 1.0312 NZ Dollar 1.2823 Euro 0.7695 British Pounds 0.6509	1.0713 1.2965 0.7401 0.6692 0.9856 1.3041 0.7242 0.6205

(e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for the major business activities as follows:

(i) Rental income

Rental income from operating leases represents income earned from the rental of properties (inclusive of outgoings recovered from tenants) and is recognised on a straight-line basis over the lease term. Rental income relating to straightlining is included as a component of the net gain from fair value adjustments on investment properties. The portion of operating lease income in a reporting period relating to fixed increases in operating lease rentals in future years is recognised as a separate component of investment properties.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(e) Revenue recognition (continued)

(ii) Management fees

Management fees are brought to account on an accruals basis and, if not received at the reporting date, are reflected in the balance sheet as a receivable.

Where management fees are derived in respect of an acquisition or disposal of property, the fees are recognised where it is probable that criteria for entitlement will be met, and services have been performed.

(iii) Performance fees

Performance fees are only recognised when it is probable that a fee will be received. Detailed calculations are completed and the risks associated with the fee are assessed when deciding when it is appropriate to recognise revenue. Further information is provided in the critical accounting estimates in Note 3.

(iv) Interest income

Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

(v) Dividends/distributions

Dividends/distributions are recognised as revenue when the right to receive payment is established.

(f) Income tax

The year‟s income tax expense or benefit is the tax payable on the current year‟s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company‟s controlled entities and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it related 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.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(g) Business combinations

The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by Charter Hall. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-byacquisition basis, Charter Hall recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree‟s net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of Charter Hall‟s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity‟s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

(h) Impairment of assets

Assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset‟s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset‟s fair value less costs to sell and value in use. In assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).

Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(i) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(j) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision for doubtful receivables is established when there is objective evidence that Charter Hall will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset‟s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(k) Investments and other financial assets

Classification

Charter Hall classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for long-term investment. Their treatment is discussed at note 1b(ii). Derivatives are also included unless they are designated as hedges.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when Charter Hall provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the reporting date, which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity.

(iv) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date.

Recognition and derecognition

Regular purchases and sales of investments are recognised at trade-date – the date on which Charter Hall commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and Charter Hall has transferred substantially all the risks and rewards of ownership.

Subsequent measurement

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss, excluding interest and dividend income, are presented in the statement of comprehensive income in the year in which they arise.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), Charter Hall establishes fair value by using valuation techniques. These include the use of recent arm‟s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. Further details on how the fair value of financial instruments is determined are disclosed in note 1(m) and note 2.

Impairment

Charter Hall assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the statement of comprehensive income – is removed from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income on equity instruments classified as available-for-sale are not reversed through the statement of comprehensive income.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(l) Derivatives

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:

(1) Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or

(2) Hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges).

The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 15.

(i) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the statement of comprehensive income and are included in fair value adjustment gains/(losses). The fair value previously recognised for hedges which are no longer effective are amortised over the remaining period of the hedge.

(m) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by Charter Hall is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. Charter Hall uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest-rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date.

The nominal value less estimated credit adjustments of trade receivables and payables approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to Charter Hall for similar financial instruments.

(n) Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(o) Plant and equipment

Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of plant and equipment.

Subsequent costs are included in the asset‟s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial year in which they are incurred.

Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

==> picture [9 x 12] intentionally omitted <==

Furniture, fittings and equipment
Fixtures
Software

3 - 8 years 6 - 8 years 3 - 5 years

The assets‟ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset‟s carrying amount is written down immediately to its recoverable amount if the asset‟s carrying amount is greater than its estimated recoverable amount (note 1(h)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income.

(p) Investment properties

Investment properties comprise investment interests in land and buildings (including integral plant and equipment) held for long-term rental yields and not occupied by Charter Hall. This includes properties that are under construction for future use as investment properties. Investment properties are carried at fair value, which is based on active market prices adjusted, if necessary, for any differences in the nature, location and condition of the specific asset. Charter Hall aims to have properties valued externally on a regular basis.

The carrying amount of investment properties recorded in the balance sheet includes components relating to lease incentives and assets relating to fixed increases in operating lease rentals in future years. Changes in fair values are recorded in the statement of comprehensive income as part of fair value adjustments.

(q) Intangibles

(i) Management rights – indefinite lived assets

Management rights in relation to entities with no fixed life are not amortised as they have an indefinite life. Management rights with an indefinite life are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses. Management rights are allocated to cashgenerating units for the purpose of impairment testing.

(ii) Management rights – finite lived assets

Management rights in relation to entities with a fixed life are amortised using the straight-line method over their useful life

(r) Trade and other payables

These amounts represent liabilities for goods and services provided to Charter Hall prior to the end of year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(s) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not incremental cost relating to the actual draw-down of the facility, are recognised as a reduction in the borrowings and amortised on a straight-line basis over the term of the facility.

Borrowings are classified as current liabilities unless Charter Hall has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(t) Borrowing costs

Borrowing costs associated with the construction of a qualifying asset, including interest expense, are capitalised as part of the cost of that asset during the year of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(u) Provisions

Provisions are recognised when Charter Hall has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

(v) Employee benefits

(i) Wages and salaries and annual leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees‟ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

Liabilities for other employee entitlements which are not expected to be paid or settled within 12 months of reporting date are accrued in respect of all employees at present values of future amounts expected to be paid, based on a projected weighted average increase in wage and salary rates. Expected future payments are discounted using interest rates on national government securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.

(iii) Retirement benefit obligations

Contributions to employee defined contribution superannuation funds are recognised as an expense as they become payable.

(iv) Security-based benefits

Security-based compensation benefits are provided to employees via the Charter Hall Performance Rights and Options Plan (PROP). Information relating to these schemes is set out in note 41.

For accounting purposes, the fair value at grant date is independently valued using a Monte Carlo simulation pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the security price at grant date and expected price volatility of the underlying security, the expected dividend yield and the risk-free interest rate for the term of the option.

For accounting purposes, the fair value of the securities granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of securities that are expected to vest. At each reporting date, the entity revises its estimate of the number of securities that are expected to vest. The employee benefit expense recognised each year takes into account the most recent estimate.

Upon the vesting of securities and repayment of the loan, the balance of the security-based benefits reserve relating to those securities is transferred to equity and the proceeds received, net of any directly attributable transaction costs, are credited to equity.

(v) Bonus plans

Charter Hall recognises a liability and an expense for amounts payable to employees. Charter Hall recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

(vi) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. Charter Hall recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the reporting date are discounted to present value.

(w) Contributed equity

Ordinary stapled securities are classified as equity. Incremental costs directly attributable to the issue of new securities or options are shown in equity as a deduction, net of tax, from the proceeds.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(x) Distributions

Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the year but not distributed at reporting date.

(y) Earnings per security

(i) Basic earnings per security

Basic earnings per security is calculated by dividing the profit attributable to equity holders of the Group, excluding any costs of servicing equity other than ordinary stapled securities, by the weighted average number of ordinary securities outstanding during the year, adjusted for bonus elements in ordinary stapled securities issued during the year.

(ii) Diluted earnings per security

Diluted earnings per security adjusts the figures used in the determination of basic earnings per stapled security to take into account the effect of interest and other financing costs after income tax associated with dilutive potential ordinary securities and the weighted average number of stapled securities assumed to have been issued in relation to dilutive potential stapled securities.

(z) Goods and Services Tax (GST)

Revenues, expenses and assets (with the exception of receivables) are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

(aa) Rounding of amounts

The Company and the Trust are of a kind referred to in Class Order 98/100 (as amended), issued by the Australian Securities and Investments Commission, relating to the „rounding off‟ of amounts in the financial statements. Amounts in the financial statements have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(ab) New accounting standards and interpretations

Certain new accounting standards and interpretations have been published that are not mandatory for year ended 30 June 2012 reporting periods. The impact of these new standards and interpretations (to the extent relevant to the Charter Hall Group or the Charter Hall Property Trust Group) is set out below.

(i) 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 (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in the statement of comprehensive income. Neither the Charter Hall Group nor the Charter Hall Property Trust Group has yet decided when to adopt AASB 9. However, management does not expect this will have a significant impact on either the Charter Hall Group or the Charter Hall Property Trust Group‟s consolidated financial statements as neither Group holds any available-for-sale investments.

In December 2011, the IASB delayed the application date of IFRS 9 to 1 January 2015. The AASB is expected to make an equivalent amendment to AASB 9 shortly.

(ii) AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012)

In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical 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 amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The Charter Hall Group and the Charter Hall Property Trust Group will apply the amendment from 1 July 2012. Management is currently evaluating the impact of the amendments.

(iii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective 1 January 2013)

In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures.

AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements , and Interpretation 12 Consolidation – Special Purpose Entities . The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, 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. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. Control exists when the investor can use its power to affect the amount of its returns. There is also new guidance on participating and protective rights and on agent/principal relationships. Management is currently evaluating the impact of the amendments.

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 a joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control.

As the Charter Hall Group and the Charter Hall Property Trust Group already apply the appropriate accounting treatment for their joint arrangements, no material impact is expected.

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 127 and AASB 128. Application of this standard by the Charter Hall Group and the Charter Hall Property Trust Group will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Charter Hall Group and the Charter Hall Property Trust Group‟s investments.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(ab) New accounting standards and interpretations (continued)

AASB 127 is renamed Separate Financial Statements and is now a standard dealing solely with separate financial statements. Application of this standard by the Charter Hall Group and the Charter Hall Property Trust Group will not affect any of the amounts recognised in the financial statements.

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 amendments also introduce a „partial disposal‟ concept. The Charter Hall Group and the Charter Hall Property Trust Group are assessing the impact of these amendments.

The Charter Hall Group and the Charter Hall Property Trust Group do not expect to adopt the new standards before their operative date. They would therefore be first applied in the financial statements for the reporting period commencing on 1 July 2013.

(iv) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. The Charter Hall Group and the Charter Hall Property Trust Group have yet to determine which, if any, of their current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. Neither the Charter Hall Group nor the Charter Hall Property Trust Group intends to adopt the new standard before its operative date, which means that it would be first applied for the reporting period commencing on 1 July 2013.

(v) AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income (effective 1 July 2012)

In September 2011, the AASB made an amendment to AASB 101 Presentation of Financial Statements which 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. This will not affect the measurement of any of the items recognised in the balance sheet or the profit or loss in the current period. Both the Charter Hall Group and the Charter Hall Property Trust Group intend to adopt the new standard from 1 July 2012.

(vi) Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) and Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) (effective 1 January 2014 and 1 January 2013 respectively)

In December 2011, the IASB made amendments to the application guidance in IAS 32 Financial Instruments: Presentation , to clarify some of the requirements for offsetting financial assets and financial liabilities in the balance sheet. These amendments are effective from 1 January 2014. They are unlikely to affect the accounting for any of the Charter Hall Group or the Charter Hall Property Trust Group's current offsetting arrangements. However, the IASB has also introduced more extensive disclosure requirements into IFRS 7 which will apply from 1 January 2013. The AASB is expected to make equivalent changes to IAS 32 and AASB 7 shortly. When they become applicable, the Charter Hall Group and the Charter Hall Property Trust Group will have to provide a number of additional disclosures in relation to its offsetting arrangements. Both the Charter Hall Group and the Charter Hall Property Trust Group intend to apply the new rules for the first time in the financial year commencing 1 July 2013.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

1 Summary of significant accounting policies (continued)

(ac) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 32). Payments made under operating leases are charged to the statement of comprehensive income on a straightline basis. Lease income from operating leases is recognised in income on a straight-line basis over the lease term.

(ad) 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. For an asset to be classified as held for sale, it must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. Assets classified as held for sale are measured at the lower of their carrying value and fair value less costs to sell.

(ae) Parent entity financial information

The financial information for the parent entity of the Charter Hall Group, Charter Hall Limited, and for the parent entity of the Charter Hall Property Trust Group, Charter Hall Property Trust, are disclosed in note 4, and have been prepared on the same basis as the consolidated financial statements, except as set out below.

(i) Investments in controlled entities, associates and joint venture entities

Investments in controlled entities, associates and joint venture entities are accounted for at cost in the financial statements of Charter Hall Limited and Charter Hall Property Trust. Dividends received from controlled entities, associates and joint venture entities are recognised in the parent entity‟s profit or loss, rather than deducted from the carrying amount of these investments.

(ii) Tax consolidation legislation

The head entity, Charter Hall Limited, and the controlled entities in the tax consolidated group, continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right.

In addition to its own current and deferred tax amounts, Charter Hall Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details about the tax funding agreement are disclosed in note 9.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

(iii) Receivables and payables

Trade amounts receivable from controlled entities in the normal course of business and other amounts advanced on commercial terms and conditions are included in receivables. Similarly, amounts payable to controlled entities are included in payables.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

2 Financial risk management

Both the Charter Hall Group and Charter Hall Property Trust Group activities expose it to a variety of financial risks; market risk (price risk, interest rate risk, and foreign exchange risk), credit risk and liquidity risk. The Group‟s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as interest rate swaps to hedge certain risk exposures.

Risk management is carried out by Group Treasurer, Chief Financial Officer and the Joint Managing Directors in consultation with senior management, the Audit, Risk and Compliance Committee and the Board of Directors. The Managing Directors identify, evaluate and hedge financial risks in close co-operation with the finance department. The Board provides guidance for overall risk management, as well as covering specific areas, such as mitigating price, interest rate and credit risks, the use of derivative financial instruments and investing excess liquidity.

(a) Market risk

(i) Unlisted units price risk

The Group is exposed to unlisted unit price risk. This arises from investments in unlisted property funds managed by the Group. These funds invest in direct property. Charter Hall manages all the funds that the Group invests in and its staff have a sound understanding of the underlying property values and trends that give rise to price risk. The carrying value of investments in associates at fair value through profit or loss is measured with reference to the funds‟ unit prices which are determined in accordance with the funds‟ respective constitutions. The key determinant of the unit price is the underlying property values which are approved by the Board and the Valuation sub-Committee of the Board.

The table below illustrates the potential impact a change in unlisted unit prices by +/-10% would have on the Charter Hall Group and Charter Hall Property Trust Group‟s profit and equity. The movement in the price variable has been determined based on management‟s best estimate, having regard to a number of factors, including historical levels of price movement, historical correlation of either Group‟s investments with the relevant benchmark and market volatility. However, actual movements in the price may be greater or less than anticipated due to a number of factors. As a result, historic price variations are not a definitive indicator of future price variations.

-10% +10%	-10% +10%
2012 Carrying amount Profit Equity Profit $’000 $’000 $’000 $’000	Equity $’000
*Assets – Charter Hall Group* Investment in associates at fair value through profit or loss 62,638 (6,264) (6,264) 6,264	6,264
*Assets – Charter Hall Property Trust Group* Investment in associates at fair value through profit or loss 62,180 (6,218) (6,218) 6,218	6,218
-10%	+10%
2011 Carrying amount Profit Equity Profit $‟000 $‟000 $‟000 $‟000	Equity $‟000
Assets – Charter Hall Group Investment in associates at fair value through profit or loss 78,445 (7,845) (7,845) 7,845	7,845
Assets – Charter Hall Property Trust Group Investment in associates at fair value through profit or loss 78,014 (7,801) (7,801) 7,801	7,801

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

2 Financial risk management (continued)

(a) Market risk (continued)

(ii) Cash flow and fair value interest rate risk

As both the Charter Hall Group and Charter Hall Property Trust Group have no significant long-term interest bearing assets, both Groups‟ income and operating cash receipts are not materially exposed to changes in market interest rates.

The Charter Hall Group and Charter Hall Property Trust Group‟s interest rate risk arises from borrowings of $51,462,849 (2011: $101,861,453). Borrowings drawn at variable rates expose both Groups to cash flow interest rate risk. Borrowings drawn at fixed rates expose both Groups to fair value interest rate risk. The Charter Hall Group and Charter Hall Property Trust Group‟s policy is to fix rates between 50-100% of core borrowings for the anticipated debt term. Core borrowings are defined as being the level of borrowings that are expected to be held for a period of more than two years. At year end 54% (2011: 49%) of total borrowings (including debt in the Charter Hall Retail Joint Venture Trust (RJVT) to which the Group is a party – refer note 24(b)) had fixed interest rates through the use of derivatives. Excluding RJVT, at year end 39% (2011: 38%) of total borrowings had fixed interest rates through the use of derivatives.

The Charter Hall Group and Charter Hall Property Trust Group both manage their cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Charter Hall Group and Charter Hall Property Trust Group raise long-term borrowings at floating rates and swap them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts. Refer to note 12(d) for interest rate sensitivity analysis on assets and note 24(c) for sensitivity analysis for liabilities.

(iii) Foreign exchange risk

Both the Charter Hall Group and Charter Hall Property Trust Group are exposed to foreign exchange risk arising principally from their equity accounted investment in the Charter Hall Retail REIT (CQR).

CQR‟s investments have offshore operations in the US, Europe and New Zealand and manage their foreign exchange exposures principally through the use of offsetting borrowings in related foreign currencies and through the use of derivative financial instruments. Any residual unhedged risk remains in the foreign currency translation reserve of these funds and the Charter Hall Group and Charter Hall Property Trust Group‟s equity accounted share of movements in these reserves are recognised in the foreign currency translation reserve of the Group.

The tables on the following page illustrate the potential impact a change in foreign exchange rates of +/-10% would have on the Charter Hall Group and Charter Hall Property Trust Group‟s profit and equity:

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

2 Financial risk management (continued)

(a) Market risk (continued)

(iii) Foreign exchange risk (continued)

Charter Hall Group 2012 2011	Charter Hall Group 2012 2011
Profit Equity Profit $'000 $'000 $'000	Equity $'000
US dollars + 10.0% 140 (392) 324 - 10.0% (170) 484 (394) Euros + 10.0% 40 (600) 58 - 10.0% (40) 740 (66) NZ dollars + 10.0% 18 (102) 26 - 10.0% (22) 122 (32)	(6,448) 6,554 (566) 699 (23) 26
Charter Hall Property Trust Group 2012 2011
Profit Equity Profit $'000 $'000 $'000	Equity $'000
US dollars + 10.0% 140 (520) 324 - 10.0% (170) 640 (394) Euros + 10.0% 40 (600) 58 - 10.0% (40) 740 (66) NZ dollars + 10.0% 27 (33) 20 - 10.0% (33) (2) (24)	(6,456) 6,563 (566) 699 (30) 34

(b) Credit risk

The Charter Hall Group and Charter Hall Property Trust Group have policies in place to ensure that sales of services are made to customers with an appropriate credit history.

Over half of the Charter Hall Group and Charter Hall Property Trust Group‟s income is derived from management fees and performance fees from related parties.

Approximately 13% (2011: 16%) of the Charter Hall Group‟s income is derived from rental properties, whilst approximately 29% (2011: 50%) of the Charter Hall Property Trust Group‟s income is derived from rental properties; all tenants are assessed for credit worthiness, taking into account their financial position, past experience and other factors.

Refer to note 12(e) for more information on credit risk.

Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Charter Hall Group and Charter Hall Property Trust Group have policies that limit the amount of credit exposure to any one financial institution.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

2 Financial risk management (continued)

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. Due to the dynamic nature of the underlying businesses, the Charter Hall Group and Charter Hall Property Trust Group aim at maintaining flexibility in funding by keeping committed credit lines available.

Maturities of financial liabilities

The following table provides the contractual maturity of Charter Hall Group and Charter Hall Property Trust Group‟s financial liabilities and derivatives. The amounts presented represent the future contractual undiscounted principal and interest cash flows and therefore do not equate to the value shown in the balance sheet. Repayments which are subject to notice are treated as if notice were given immediately.

Charter Hall Group Carrying Less than Between Between amount 1 year 1 and 2 years 2 and 5 years 2012 $’000 $’000 $’000 $’000	Total Over 5 years cash flows $’000 $’000
Trade and other payables 40,249 40,249 - - Contingent consideration payable 10,539 10,788 - - Borrowings 51,463 1,878 52,820 - Interest rate swaps 669 1,092 461 -	- 40,249 - 10,788 - 54,698 - 1,553
102,920 54,007 53,281 -	- 107,288
Charter Hall Group Carrying Less than Between Between amount 1 year 1 and 2 years 2 and 5 years 2011 $‟000 $‟000 $‟000 $‟000	Total Over 5 years cash flows $‟000 $‟000
Trade and other payables 58,061 58,061 - - Contingent consideration payable 12,106 - 13,841 - Borrowings 101,862 4,739 4,739 104,446 Interest rate swaps 407 - 224 183	- 58,061 - 13,841 - 113,924 - 407
172,436 62,800 18,804 104,629	- 186,233
Charter Hall Property Trust Group Carrying Less than Between Between amount 1 year 1 and 2 years 2 and 5 years 2012 $’000 $’000 $’000 $’000	Total Over 5 years cash flows $’000 $’000
Trade and other payables 30,288 30,288 - - Borrowings 53,863 4,281 52,820 - Interest rate swaps 669 1,092 461 -	- 30,288 - 57,101 - 1,553
84,820 35,661 53,281 -	- 88,942
Charter Hall Property Trust Group Carrying Less than Between Between amount 1 year 1 and 2 years 2 and 5 years 2011 $‟000 $‟000 $‟000 $‟000	Total Over 5 years cash flows $‟000 $‟000
Trade and other payables 32,728 32,728 - - Borrowings 101,862 4,739 4,739 104,446 Interest rate swaps 407 - 224 183	- 32,728 - 113,924 - 407
134,997 37,467 4,963 104,629	- 147,059

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

2 Financial risk management (continued)

(d) Fair value measurements

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(i) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
(ii) Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
(iii) Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following tables present the Charter Hall Group and Charter Hall Property Trust Group‟s financial assets and financial liabilities measured and recognised at fair value.

measured and recognised at fair value.
Charter Hall Group Level 1 Level 2 Level 3 2012 $’000 $’000 $’000	Total $’000
*Assets* Investment in associates at fair value through profit or loss - - 62,638	62,638
Total assets - - 62,638	62,638
*Liabilities* Derivative financial instruments - 669 - Contingent consideration payable - - 10,539	669 10,539
Total liabilities - 669 10,539	11,208
Charter Hall Group Level 1 Level 2 Level 3 2011 $‟000 $‟000 $‟000	Total $‟000
Assets Investment in associates at fair value through profit or loss - - 78,445	78,445
Total assets - - 78,445	78,445
Liabilities Derivative financial instruments - 407 - Contingent consideration payable - - 12,106	407 12,106
Total liabilities - 407 12,106	12,513
Charter Hall Property Trust Group Level 1 Level 2 Level 3 2012 $’000 $’000 $’000	Total $’000
*Assets* Investment in associates at fair value through profit or loss - - 62,180	62,180
Total assets - - 62,180	62,180
*Liabilities* Derivative financial instruments - 669 -	669
Total liabilities - 669 -	669

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

2 Financial risk management (continued)

2 Financial risk management (continued)
(d) Fair value measurements (continued) Charter Hall Property Trust Group Level 1 Level 2 Level 3 2011 $‟000 $‟000 $‟000	Total $‟000
Assets Investment in associates at fair value through profit or loss - - 78,014	78,014
Total assets - - 78,014	78,014
Liabilities Derivative financial instruments - 407 -	407

The following tables present the changes in level 3 instruments for the year:

2012	Charter Hall Group	Charter Hall Group	Charter Hall Group	Charter Hall Group

Opening balance Additions Disposals Payments made Increase/(decrease) recognised in profit and loss	78,445	12,106		- - - - -
	273	-
	(14,306)	-
	-	(1,452)
	(1,774)	(115)
Closing balance	62,638	10,539	62,180	-
2011	Charter Hall Group Charter Hall Property Trust Group Investment in associates at fair value through profit or loss Contingent consideration payable Investment in associates at fair value through profit or loss Contingent consideration payable $‟000 $‟000 $‟000 $‟000


Opening balance Additions Disposals Increase/(decrease) recognised in profit and loss	73,739	11,270		- - - -
	5,454	-
	(439)	-
	(309)	836
Closing balance	78,445	12,106	78,014	-

The carrying amounts of current trade receivables and payables approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Charter Hall Group and Charter Hall Property Trust Group for similar financial instruments. The fair value of current borrowings approximates the carrying amount, as the impact of discounting is not significant.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Charter Hall Group and Charter Hall Property Trust Group make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates or assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Carrying value of investments

Critical judgements are made by the Charter Hall Group and Charter Hall Property Trust Group in respect of the carrying value of investments in associates (notes 14 and 36) and investment properties (notes 13 and 20). These investments are reviewed regularly for impairment by reference to external independent property valuations and market conditions, using generally accepted market practices.

The reported fair values of investment properties reflect market conditions at the end of the reporting period. While this represents best estimates as at the reporting date, actual sales prices may be higher or lower than the most recent valuations. This is particularly relevant in periods of market illiquidity or uncertainty.

(ii) Estimated performance fees

Critical judgements are made by the Charter Hall Group in respect of recognising performance fee revenue. Performance fees are only recognised when services have been performed and it is probable that a fee will be received. Detailed calculations are completed and the risks associated with the fee are assessed when deciding when it is appropriate to recognise revenue.

(iii) Estimated performance fee clawback

The Charter Hall Group has raised a provision to refund performance fees previously earned with respect to the Charter Hall Opportunity Fund 4 (CHOF4). Contractual arrangements allow a clawback of performance fees on termination of CHOF4 (currently scheduled for December 2012) to the extent necessary to allow CHOF4 to achieve a gross equity IRR equal to 13%. The gross equity IRR is calculated prior to the deduction of performance fees, fund management fees, fund costs and income tax.

Critical judgements have been made in determining the amount of any clawback which will not be known until all assets of CHOF4 are realised. To date, the Group has received a total of $14.2 million in performance fees over the life of this fund in respect of the 2007, 2008, 2009 and 2010 financial years. There have been no performance fees recognised in the current period or in the prior year ended 30 June 2011.

Having regard to this and current market conditions, the Charter Hall Board has resolved to raise a provision for the maximum potential liability, being $14.2 million (included in current liabilities in this financial report). The clawback is payable on the earlier of the termination date of 31 December 2012, unless extended, or the completion of the sale of all the assets of CHOF4.

No other performance fees received by the Group from other Charter Hall managed funds in prior periods or the current year are subject to clawback arrangements.

(iv) Charter Hall Opportunity Fund 5 (CHOF5) – Little Bay development

Critical judgement has been made in the assessment of commercial negotiations with TA Global Developments Pty Limited (TAG) over the Little Bay development project. Refer to note 38: Events occurring after the reporting date.

(v) Tax losses

The Charter Hall Group has not recognised tax losses from previous years as recovery against future taxable income of the tax consolidated group is not expected in the medium term.

(vi) Impairment testing of management rights

Critical judgements are made by the Charter Hall Group in assessing the carrying value of management rights acquired, where the funds to which those management rights relate have an indefinite life. Management rights are considered to having an indefinite useful life if there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.

(vii) Classification of investments in associates

The Charter Hall Group and Charter Hall Property Trust Group have determined that it is appropriate for investments in wholesale and listed funds to be equity accounted and investments in unlisted retail funds to be recognised at fair value through profit or loss.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

4 Parent entity financial information

(a) Summary financial information

The individual financial statements for the parent entity of the Charter Hall Group, being Charter Hall Limited, and the Charter Hall Property Trust Group, being Charter Hall Property Trust, show the following aggregate amounts:

	Charter Hall Limited	Charter Hall Limited	Charter Hall Limited


Balance sheet Current assets Total assets Current liabilities Total liabilities Shareholders' equity Issued capital1 Reserves Security-based benefits reserve Foreign currency translation reserve Accumulated losses
	1,310	780

	326,892	324,494

	45	-

	163,638	355,874


	209,550	9,503

	1,717	1,717
	-	18
	(48,013)	(42,618)
	163,254	(31,380)	679,627 771,224
Profit/(loss) for the year	(5,395) (19,778) 103,686 (29,494)
Total comprehensive profit/(loss)	(5,395) (19,778) 103,686 (29,494)

(1) On 18 June 2012, the Group announced implementation of the $200 million capital reallocation from Charter Hall Property Trust (CHPT) to Charter Hall Limited (CHL), effective 30 June 2012. The capital reallocation aims to ensure a more appropriate allocation of capital between CHPT and CHL (which together trade on the Australian Securities Exchange as Charter Hall Group) which is more closely aligned with the Group‟s long-term growth strategy. Under the capital reallocation proposal approved by securityholders at the Annual General Meeting on 24 November 2011, CHPT made capital payments of $200 million which were compulsorily applied as a capital contribution for existing shares of CHL.

(b) Contingent liabilities of the parent entity

Charter Hall Limited and Charter Hall Property Trust had no contingent liabilities (2011: $nil).

(c) Contractual commitments

As at 30 June 2012, both Charter Hall Limited and Charter Hall Property Trust had no contractual commitments other than that disclosed below (2011: $nil).

Charter Hall Opportunity Fund No. 5 (CHOF5) Workzone (Workzone)

On 21 December 2011, Charter Hall Limited and Charter Hall Funds Management Limited as trustee for CHOF5 entered into a Preferred Equity Deed (deed) committing $9 million to fund development of the Workzone project. At 30 June 2012 $4.5 million of this facility had been drawn down and is included in receivables in this financial report. A further $1 million was drawn down in July 2012 leaving an undrawn commitment of $3.5 million at the date of this report.

(d) Deed of cross guarantee

CHL and Charter Hall Holdings Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts for the other. A consolidated income statement, statement of comprehensive income and balance sheet are disclosed in note 42.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

5 Segment information

(a) Description of segments

Charter Hall Group

Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board is responsible for allocating resources and assessing performance of the operating segments, and therefore has been identified as the chief operating decision maker.

The Board has identified the following three reportable segments, the performance of which it monitors separately.

Property investment

This segment comprises interests in investment properties and listed/unlisted property funds. The property investment division has the profit result of the DRF investment identified separately for management purposes.

Property funds management

This segment comprises funds management services, development management services and other property services.

Development investment

This segment comprises development investment activities of the Group.

Charter Hall Property Trust Group

The Charter Hall Property Trust Group‟s only business is investing in direct property and listed and unlisted property funds. Consequently the Charter Hall Property Trust Group comprises a single reportable segment.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

5 Segment information (continued)

(b) Segment information provided to the Board

Charter Hall Group

The operating segments provided to the Board for the reportable segments for the year ended 30 June 2012 are as follows:

Property Property funds Development investment management investment DRF 30 June 2012 $’000 $’000 $’000 $’000	Combined Group $’000
Total net rental income 305 - - 13,946 Total investment income 34,011 - - -	14,251 34,011
Total rental and property income 34,316 - - 13,946 Net development income - - 1,943 - Total property funds management income - 73,355 - -	48,262 1,943 73,355
Total income 34,316 73,355 1,943 13,946	123,560
Operating expenses (423) (62,436) - (566) Less: recovery of expenses - 12,396 - -	(63,425) 12,396
Net operating expenses (423) (50,040) - (566)	(51,029)
Operating earnings before interest, tax, depreciation and amortisation (EBITDA) 33,893 23,315 1,943 13,380 Depreciation - (725) - -	72,531 (725)
Operating earnings before interest and tax (EBIT) 33,893 22,590 1,943 13,380 Interest income 211 1,208 615 - Interest expense (2,921) - - (4,789)	71,806 2,034 (7,710)
Operating earnings (including DRF) 31,183 23,798 2,558 8,591 Non-controlling interest - - - (2,544)	66,130 (2,544)
Operating earnings before specific items 31,183 23,798 2,558 6,047 Specific items(1) - (9,038) 297 -	63,586 (8,741)
Operating earnings attributable to stapled securityholders 31,183 14,760 2,855 6,047	54,845
Weighted average number of securities (000) Operating earnings per security before specific items Operating earnings per security (EPS)	295,625 21.51cps 18.55cps
Number of securities for dividend per security (DPS) (000) DPS	296,168 18.20cps

(1) Specific items include $16.0m fee revenue related to sale of Charter Hall Office REIT (CQO) US assets net of $4.0m closure costs of the US office, $2.9m costs of retaining the management rights, $3.9m organisational restructure costs and $14.2m provision for Charter Hall Opportunity Fund 4 (CHOF4) performance fee clawback which is then reduced by $0.3m being the group‟s 3% equity share of the clawback receivable in CHOF4.

Geographical segments are immaterial as the vast majority of the Group‟s income is from Australian sources.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

5 Segment information (continued)

(b) Segment information provided to the Board (continued)

The reportable segments for the year ended 30 June 2011 are as follows:

Property Property funds Development investment management investment DRF 30 June 2011 $‟000 $‟000 $‟000 $‟000	Combined Group $‟000
Total net rental income - - - 15,052 Total investment income 31,599 - - -	15,052 31,599
Total rental and property income 31,599 - - 15,052 Net development income - - 3,769 - Total property funds management income - 75,257 - -	46,651 3,769 75,257
Total income 31,599 75,257 3,769 15,052	125,677
Operating expenses (472) (64,806) - (796) Less: recovery of expenses - 10,240 - -	(66,074) 10,240
Net operating expenses (472) (54,566) - (796)	(55,834)
EBITDA 31,127 20,691 3,769 14,256 Depreciation - (1,545) - -	69,843 (1,545)
EBIT 31,127 19,146 3,769 14,256 Interest income 192 1,339 - 996 Interest expense (1,450) - - (6,665)	68,298 2,527 (8,115)
Operating earnings (including DRF) 29,869 20,485 3,769 8,587 Non-controlling interest - - - (2,288)	62,710 (2,288)
Operating earnings before specific items 29,869 20,485 3,769 6,299 Specific items - - - -	60,422 -
Operating earnings attributable to stapled securityholders 29,869 20,485 3,769 6,299	60,422
Number of securities (000) Operating EPS	293,254 20.60cps
Number of securities for DPS (000) DPS	293,756 16.50cps

The reconciliation of income per the segment notes for 2012 and 2011 to the statement of comprehensive income is below:

2012 $’000	2011 $‟000
Total income per segment note 123,560 Add: recovery of expenses 12,396 Add specific item: fees related to the sale of the Charter Hall Office REIT US assets 16,044 Add specific item: 3% equity accounted share of CHOF4 performance fee 297	125,677 10,240 - -
152,297 Add: investment property expenses 2,985 Add: interest income 2,176 Less: equity accounted profit in property investment segment (29,981) Less: equity accounted (loss)/profit in funds management and corporate segment (68) Less: equity accounted profit in development investment segment (2,104) Less: equity accounted profit in DRF (1,675) Add: other -	135,917 4,084 1,675 (26,869) 6 (3,769) (1,485) 35
Revenue per income statement 123,630	109,594
	30

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

5 Segment information (continued)

(b) Segment information provided to the Board (continued)

The reconciliation of net interest expense per the segment notes for 2012 and 2011 to the statement of comprehensive income is below:

is below:
2012 $’000	2011 $‟000
Net operating interest per segment note (5,676) Less: unwind of discount on contingent consideration (1,240) Less: early payout of derivative financial instrument (265) Add: bridging equity interest reclassified to investment income 480	(5,588) (836) - 1,175
Net interest expense (6,701)	(5,249)

Operating earnings is a financial measure which represents the profit/(loss) under Australian Accounting Standards adjusted for fair value adjustments, impairment of assets, gains or losses on sale of investments, acquisition costs, non-operating movements in equity accounted investments, and non-cash items such as security-based benefits expense, amortisation, and tax expense/(benefit).

The inclusion of operating earnings as a measure of the Group‟s profitability provides investors with the same basis that is used internally for evaluating operating segment performance. Operating earnings is used by the Board to make strategic decisions and as a guide to assessing an appropriate distribution to declare.

The calculation of operating earnings by adjusting for amounts in the Statement of Comprehensive Income excluding the noncontrolling interest in DRF is shown below:

Excluding non- controlling interest	Excluding non- controllinginterest
2012 $’000	2011 $‟000
Operating earnings before specific items 63,586 Specific items1 (8,741)	60,422 -
Operating earnings 54,845	60,422
Fair value adjustments on derivatives2 (9,933) Fair value adjustments on investments and property, including remeasurement gains2 (2,034) Inventory writedown2 (5,814) Transfer from reserves of cumulative FX losses on disposal of foreign investments2 (12,176) Impairment of management rights - Security-based benefits expense (2,338) Other2 (5,872)	2,141 14,239 (664) (871) (19,171) (4,090) 332
Statutory profit after tax attributable to stapled securityholders 16,678	52,338

Specific items include $16.0m fee revenue related to sale of Charter Hall Office REIT (CQO) US assets net of $4.0m closure costs of the US office, $2.9m costs of retaining the management rights, $3.9m organisational restructure costs and $14.2m provision for Charter Hall Opportunity Fund 4 (CHOF4) performance fee clawback which is then reduced by $0.3m being the group‟s 3% equity share of the clawback receivable in CHOF4.
These items include the Group‟s share of non-operating movements in equity accounted investments.

Basic weighted average number of securities per note 40	295,624,609	293,253,621
Operating earnings before specific items per stapled security (excl. non-controlling interest)	21.51 cents	20.60 cents
Specificitems	2.96 cents	-
Operatingearningsper stapled security (excludingnon-controllinginterest)	18.55 cents	20.60 cents

Assets and liabilities have not been reported on a separate basis as the Board is provided with consolidated information.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

6 Revenue

	Charter Hall Group	Charter Hall Group	Charter Hall Group
Sales revenue Gross rental income Management and performance fees
	15,561	17,716
	101,863	85,491
	117,424	103,207	15,532 17,723
Other revenue

Interest Distributions/dividends*	2,681	2,862
	3,525	3,525
	6,206	6,387	37,755 17,612
Total revenue			53,287 35,335
	123,630	109,594

The Group and Trust Group own 25.2% (2011: 36.4%) of Charter Hall Diversified Property Fund, 26.6% (2011: 24.9%) of Charter Hall Umbrella Fund and 3.8% (2011: 3.5%) of Charter Hall Direct Property Fund, which are all accounted for at fair value. This represents the distribution of income from these funds.

7 Expenses

Note	Charter Hall Group	Charter Hall Group	Charter Hall Group

Profit before income tax includes the following specific expenses: Depreciation

Plant and equipment	725	1,545	- -
Amortisation Of leasing and other incentives Of management rights

	1,031	1,183
	1,307	-
Finance costs Interest and finance charges paid/payable Finance costs due to unwinding of discount on contingent consideration

	8,142	7,275
	1,240	836
	9,382	8,111	8,875 7,196
Impairment of management rights 18
	-

Management, administration and other expenses
Employee benefits expense Security-based payments expense Superannuation expense Legal and consulting costs Rent expense – minimum lease payments on operating leases Other occupancy costs Other expenses	57,461	51,480
	2,338	4,090
	3,153	2,023
	4,233	1,864
	1,541	1,483
	906	1,008
	7,436	8,741
	77,068	70,689	1,313 1,899

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

8 Fair value adjustments

Charter Hall Group 2012 2011 Note $'000 $'000	Charter Hall Group	Charter Hall Group	Charter Hall Property Trust Group 2012 2011 $'000 $'000
	2012	2011
	$'000	$'000



Included in total income: Contingent consideration payable 22			- -
	1,355	-
Included in total expenses: Investment properties 20 (7,692) (2,518) Investment in associates at fair value through profit or loss 14, 36(b) (1,774) (309) Derivative financial instruments 15 (310) (386)			(7,692) (128) (1,757) (319) (310) (387)

	(7,692)	(2,518)
	(1,774)	(309)
	(310)	(386)
	(9,776)	(3,213)	(9,759) (834)

9 Income tax benefit

Charter Hall Group 2012 2011 Note $’000 $‟000	Charter Hall Group	Charter Hall Group	Charter Hall Property Trust Group 2012 2011 $’000 $‟000
	2012	2011
	$’000	$‟000

(a) Income tax benefit

Current tax expense Deferred income tax benefit Over provided in prior years	-	218	- - - (323) - -
	(482)	(3,341)
	50	457
	(432)	(2,666)	- (323)
Deferred income tax benefit comprises: (Increase)/decrease in deferred tax assets 21 (1,538) (3,231) Increase/(decrease) in deferred tax liabilities 25 1,056 (110)			- 321 - (644)

	(1,538)	(3,231)
	1,056	(110)
	(482)	(3,341)	- (323)
(b) Numerical reconciliation of income tax benefit to prima facie tax payable
Profit/(loss) before income tax expense	13,971	52,571	33,164 60,924

Prima facie tax expense/(benefit) at the Australian tax rate of 30% Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:	4,191	15,771	9,949 18,277



Charter Hall Property Trust income Non-assessable income Non-allowable expenses Share-based payments expense Losses not recognised Sundry items Tax on LTI interest Non-taxable dividends, net of equity accounted profit Over provided in prior years Difference in overseas tax rates	(10,442)	(18,932)	(10,442) (18,932) - - - - - - - - 493 655 - - - - - - - -
	-	(3,968)
	549	267
	43	1,227
	4,096	2,437
	348	-
	37	623
	732	(485)
	50	457
	(36)	(63)
Income tax benefit	(432)	(2,666)	- -

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

9 Income tax benefit (continued)

(c) Tax consolidation legislation

Charter Hall Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation with effect from 1 July 2003. The accounting policy in relation to this legislation is set out in note 1(f).

On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, Charter Hall Limited.

The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Charter Hall Limited for any current tax payable assumed and are compensated by Charter Hall Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Charter Hall Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities‟ financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables.

(d) Tax losses – Charter Hall Group 2012 $’000	2011 $‟000
Unused tax losses for which no deferred tax asset has been recognised 14,018 Potential tax benefit @ 30% 4,205	12,071 3,621

Based upon the completion of the June 2011 income tax return, the actual carried forward tax losses (unbooked) was calculated to be $2,575,000. This was a reduction of $1,046,000 on the previously disclosed carried forward losses (unbooked) in the 30 June 2011 financial statements of $3,621,000.

10 Distributions paid and payable

10 Distributions paid and payable
	Charter Hall Group
(a) Ordinary securities
Interim ordinary distribution for the six months ended 31 December 2011 of 9.10 cents per security paid on 23 February 2012 Final ordinary distribution for the six months ended 30 June 2012 of 9.10 cents per security expected to be paid on 28 August 2012 Interim ordinary distribution for the six months ended 31 December 2010 of 8.00 cents per security paid on 28 February 2011 Final ordinary distribution for the six months ended 30 June 2011 of 8.50 cents per security paid on 25 August 2011	26,950 - 26,950 - 27,013 - 27,013 - - 24,507 - 24,507 - 26,039 - 26,039
Total distributions paid and payable Less: distributions paid to holders of LTI securities	53,963	50,546
	(124)	(2,077)
	53,839	48,469	53,839 48,469

Paid in cash Satisfied by issue of securities	53,963 50,546 53,963 50,546 - - - -

Franking credits available in the parent entity (Charter Hall Limited) for subsequent financial years based on a tax rate of 30% (2011: 30%) are $3,336,951 (2011: $3,336,951).

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

11 Cash and cash equivalents

11 Cash and cash equivalents
	Charter Hall Group
Cash at bank and on hand
	39,315	26,266

(a) Cash at bank and on hand

These amounts earn floating interest rates of between nil and 3.4% (2011: 4.7%).

12 Trade and other receivables

Charter Hall Group 2012 2011 Note $'000 $'000	Charter Hall Group	Charter Hall Group	Charter Hall Property Trust Group 2012 2011 $'000 $'000
	2012	2011
	$'000	$'000

Current Trade receivables Loans to key management personnel Loans to joint ventures 34(e) Distributions receivable Other receivables Prepayments			481 1,037 - - 1,650 9,703 11,289 5,573 1,367 194 95
	9,535	22,035
	955	706
	1,650	-
	10,441	11,556
	8,821	7,922
	708	1,219
	32,110	43,438	17,601 13,788
Non-current Loans to key management personnel Loans to joint ventures 34(e) Loans to associates 34(e) Loan receivable from Charter Hall Limited			- - - - - - 163,542 355,874
	3,400	4,400
	5,000	5,000
	4,470	-
Loan receivable from Charter Hall Limited	-	-
	12,870	9,400	163,542 355,874

Further information relating to loans to key management personnel is set out in note 30.

(a) Bad and doubtful trade receivables

In the year, the Charter Hall Group and Charter Hall Property Trust Group incurred nil expense/benefit (2011: $nil) in respect of provisioning for bad and doubtful trade receivables.

(b) Fair values

The receivables are carried at amounts that approximate their fair value.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

12 Trade and other receivables (continued)

(c) Interest rate risk

The Charter Hall Group and Charter Hall Property Trust Group‟s exposure to interest rate risk and the effective weighted average interest rate by maturity period is set out in the following tables:

Charter Hall Group Fixed interest maturing in: Floating Over Over Over Over interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 rate or less years years years years 2012 $'000 $'000 $'000 $'000 $'000 $'000	Fixed interest maturing in:	Non- Over interest 5 years bearing Total $'000 $'000 $'000
Cash and cash equivalents 39,315 - - - - - Trade receivables - - - - - - Loans to key management personnel - 955 1,000 2,400 - - Loans to joint ventures - - 5,000 - - - Loans to associates - - 4,470 - - - Distributions receivable - - - - - - Other receivables - - - - - -		- - 39,315 - 9,535 9,535 - - 4,355 - 1,650 6,650 - - 4,470 - 10,441 10,441 - 8,821 8,821
39,315 955 10,470 2,400 - -		- 30,447 83,587
Weighted average interest rate 3.35% 10.50% 10.79% 10.50%

Charter Hall Group Fixed interest maturing in: Floating Over Over Over Over interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 rate or less years years years years 2011 $'000 $'000 $'000 $'000 $'000 $'000	Fixed interest maturing in:	Non- Over interest 5 years bearing Total $'000 $'000 $'000
Cash and cash equivalents 26,266 - - - - - Trade receivables - - - - - - Loans to key management personnel - 706 1,000 1,000 2,400 - Loans to joint ventures - - - 5,000 - - Distributions receivable - - - - - - Other receivables - - - - - -		- - 26,266 - 22,035 22,035 - - 5,106 - - 5,000 - 11,556 11,556 - 7,922 7,922
26,266 706 1,000 6,000 2,400 -		- 41,513 77,885
Weighted average interest rate 3.36% 12.50% 10.50% 11.75% 10.50%

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

12 Trade and other receivables (continued)

(c) Interest rate risk (continued)

Charter Hall Property Trust Group Floating interest rate 2012 $'000	Fixed interest maturing in:	Non- Over interest 5 years bearing Total $'000 $'000 $'000
	Over Over Over Over 1 year 1 to 2 2 to 3 3 to 4 4 to 5 or less years years years years $'000 $'000 $'000 $'000 $'000
Cash and cash equivalents 21,674 Trade receivables - Loans to joint ventures - Distributions receivable - Other receivables - Loan receivable from Charter Hall Limited 163,542	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	- - 21,674 - 481 481 - 1,650 1,650 - 9,703 9,703 - 5,573 5,573 - - 163,542
185,216	- - - - -	- 17,407 202,623
Weighted average interest rate 9.09%
Charter Hall Property Trust Group Fixed interest maturing in: Floating Over Over Over Over interest 1 year 1 to 2 2 to 3 3 to 4 4 to 5 rate or less years years years years 2011 $'000 $'000 $'000 $'000 $'000 $'000	Fixed interest maturing in:	Non- Over interest 5 years bearing Total $'000 $'000 $'000
Cash and cash equivalents 4,841 - - - - - Trade receivables - - - - - - Distributions receivable - - - - - - Other receivables - - - - - - Loan receivable from Charter Hall Limited 355,874 - - - - -		- - 4,841 - 1,037 1,037 - 11,289 11,289 - 1,367 1,367 - - 355,874
360,715 - - - - -		- 13,693 374,408
Weighted average interest rate 8.04%

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

12 Trade and other receivables (continued)

(d) Interest rate sensitivity analysis

The following tables illustrate the potential impact a change in interest rates of +/-1% would have on the Charter Hall Group and Charter Hall Property Trust Group‟s profit after tax and equity.

Charter Hall Group -1%	+1%
Carrying amount Profit Equity Profit $’000 $’000 $’000 $’000	Equity $’000
2012 *Assets* Cash and cash equivalents 39,315 (393) (393) 393	393
Total (decrease)/increase (393) (393) 393	393
2011 Assets Cash and cash equivalents 26,266 (263) (263) 263	263
Total (decrease)/increase (263) (263) 263	263
Charter Hall Property Trust Group -1%	+1%
Carrying amount Profit Equity Profit $’000 $’000 $’000 $’000	Equity $’000
2012 *Assets* Cash and cash equivalents 21,674 (217) (217) 217 Loan receivable from Charter Hall Limited 163,542 (1,635) (1,635) 1,635	217 1,635
Total (decrease)/increase (1,852) (1,852) 1,852	1,852
2011 Assets Cash and cash equivalents 4,841 (48) (48) 48 Loan receivable from Charter Hall Limited 355,874 (3,559) (3,559) 3,559	48 3,559
Total (decrease)/increase (3,607) (3,607) 3,607	3,607

(e) Credit risk

There is a limited concentration of credit risk with respect to current and non-current receivables, as the Charter Hall Group and Charter Hall Property Trust Group have a large number of customers. Refer to note 2 for more information on the risk management policy of the Charter Hall Group and Charter Hall Property Trust Group.

The ageing of trade receivables at the reporting date was as follows:

	Charter Hall Group	Charter Hall Group	Charter Hall Group	Charter Hall Group
	2012	2011
	$’000	$‟000
1 to 3 months 3 to 6 months More than 6 months				752 65 220
	8,068	19,856
	416	348
	1,051	1,831
	9,535	22,035	481	1,037

The receivables are considered past due but not impaired.

The carrying value approximates fair value.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

13 Assets classified as held for sale

13 Assets classified as held for sale
	Charter Hall Group

Mentone residential properties Bunnings Stafford, Stafford Road, Stafford Home HQ, Ipswich Menai Central, Menai Home HQ, Nunawading 33 Windorah St, Stafford Charter Hall Retail Joint Venture Trust	-	921
	19,000	-
	24,500	-
	35,000	-
	27,500	-
	11,704	-
	18,686	-
	136,390 921 136,390 -

The Mentone residential properties held for sale at 30 June 2011 were sold in July 2011 at book value.

These assets are held for sale as it is considered highly probable that they will be sold in the next 12 months. All assets are investment properties except for the Charter Hall Retail Joint Venture Trust in which the Group holds a 50% interest.

The fair value represents the amount at which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable seller in an arm‟s length transaction at the date of the valuation, in accordance with Australian Valuation Standards.

14 Investments in associates at fair value through profit or loss

Charter Hall Group Charter Hall Property Trust Group Note 2012 2011 2012 2011 $’000 $‟000 $’000 $‟000	Charter Hall Group Charter Hall Property Trust Group Note 2012 2011 2012 2011 $’000 $‟000 $’000 $‟000	Charter Hall Group Charter Hall Property Trust Group Note 2012 2011 2012 2011 $’000 $‟000 $’000 $‟000	Charter Hall Group Charter Hall Property Trust Group Note 2012 2011 2012 2011 $’000 $‟000 $’000 $‟000

Investments in associates 36(b)(i) 62,638 78,445 62,180 78,014	62,638	78,445

Changes in fair values of investments in associates at fair value through profit or loss are recorded in fair value adjustments in the statement of comprehensive income.

These investments comprise units in certain unlisted Charter Hall managed funds which have been designated at fair value through profit or loss.

Information about the Charter Hall Group and Charter Hall Property Trust Group‟s material exposure to share and unit price risk is provided in note 2(a)(i).

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

15 Derivative financial instruments

	Charter Hall Group	Charter Hall Group	Charter Hall Property Trust Group 2012 2011 $’000 $‟000	Charter Hall Property Trust Group 2012 2011 $’000 $‟000

	2012	2011
	$’000	$‟000

Current liabilities
Interest rate swap contracts	669	-	669	-
	669	-	669	-
Non-current liabilities
Interest rate swap contracts	-	407	-	407
	-	407	-	407

(a) Instruments used by the Group

The Charter Hall Group and Charter Hall Property Trust Group utilise derivative financial instruments to hedge exposure to fluctuations in interest rates in accordance with the Charter Hall Group and Charter Hall Property Trust Group‟s financial risk management policies (refer to note 2).

Interest rate swap contracts

The Charter Hall Group and Charter Hall Property Trust Group‟s policy is to fix rates for between 50-100% of core borrowings for the anticipated debt term (refer note 2(a)(ii)). Accordingly, the Charter Hall Group and Charter Hall Property Trust Group have previously entered into interest rate swap contracts under which they are obliged to receive interest at variable rates and to pay interest at fixed rates. All swaps have been entered into by DRF, which is consolidated.

Swaps currently in place cover 39% (2011: 38%) of the loan principal outstanding. The fixed interest rates in 2012 ranged between 5.05% and 5.46% (2011: between 6.84% and 7.48%) for AUD swaps (including margin and line fees). There was a NZD swap that was paid out during the year.

The interest rate swap is shown as current despite an expiry date of 2 December 2013 as it is expected to be closed out in the next 12 months.

At reporting date, the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:

At reporting date, the notional principal amounts and periods of expiry of the interest rate swap contracts	are as follows:
	2012 2011 $’000 $‟000
1 - 2 years 2 - 3 years 3 + years	20,000 18,203 - 20,000 - - 20,000 38,203

The contracts require settlement of net interest receivable or payable every 90 days. The settlement dates coincide with the dates on which interest is payable on the underlying debt. The contracts are settled on a net basis.

The amount of fair value adjustments on hedges recorded directly in the income statement was a loss of $310,069 (2011: loss of $386,000).

(b) Credit risk exposures

Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. This arises with amounts receivable from unrealised gains on derivative financial instruments.

The Charter Hall Group and Charter Hall Property Trust Group undertake their transactions in interest rate contracts only with investment grade financial institutions.

(c) Interest rate risk exposures

Refer to note 2(c) for the Charter Hall Group and Charter Hall Property Trust Group‟s exposure to interest rate risk on interest rate swaps.

Interest rate swaps with a notional principal amount of NZ$23.6 million (2011: $40.2 million) were terminated during the year, resulting in a realised loss of $134,000 (2011: gain of $345,323).

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

16 Inventories

	Charter Hall Group	Charter Hall Group	Charter Hall Group
Non-current 685 La Trobe property development

	9,518	7,450
	9,518	7,450	- -

17 Investments accounted for using the equity method

Note	Charter Hall Group	Charter Hall Group	Charter Hall Group
Investments in associates 36			373,578 417,408
	444,515	470,083
Investments in joint venture entities 37 27,644 47,624 - 18,700	27,644	47,624
	472,159	517,707	373,578 436,108

(a) Investments in associates

These investments represent units in listed and unlisted Charter Hall managed funds which are accounted for in the consolidated financial statements using the equity method of accounting.

(b) Investments in joint venture entities

These investments represent joint venture interests in Australian and overseas joint ventures which are accounted for in the consolidated financial statements using the equity method of accounting.

18 Intangible assets

In March 2010, the Charter Hall Group completed a transaction to acquire the majority of Macquarie Group‟s core real estate management platform. This transaction was structured to secure the management rights (i.e. future management fee revenue) of Macquarie Office Trust (renamed Charter Hall Office REIT), Macquarie CountryWide Trust (renamed Charter Hall Retail REIT) and Macquarie Direct Property Fund (renamed Charter Hall Direct Property Fund).

The excess of consideration paid over net tangible assets acquired represents the value of these management rights. With the exception of management rights held over the Charter Hall Office Trust (CHOT), management considers that the management rights have an indefinite life as there are no finite terms in the underlying agreements and the Charter Hall Group has no intention to cease managing these Funds. The carrying value of management rights with an indefinite life (i.e. excluding CHOT) is $52.961 million.

On 1 May 2012, Charter Hall Office REIT (CQO) was privatised and renamed CHOT. With implementation of the privatisation, CQO changed from a listed REIT to a wholesale unit trust with liquidity reviews every five years. It is expected that the net fee revenue that the Group will earn from managing CHOT will be generally consistent with the net revenue earned previously from managing the Australian assets of CQO. As the management rights of CHOT are subject to a liquidity event, the Group will amortise the management rights over a six year period commencing from 1 May 2012 (includes an additional year to source liquidity were the trust to be wound up in five years as a result of the liquidity review). Only the management rights held over the Charter Hall Office Trust are being amortised.

	Charter Hall Group	Charter Hall Group	Charter Hall Group


Opening balance Impairment charge Amortisation charge	99,994	119,165
	-	(19,171)
	(1,307)	-
Closing balance	98,687	99,994	- -

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

18 Intangible assets (continued)

All management rights recognised on the balance sheet were independently valued as at 30 April 2012 by KPMG Corporate Finance. The valuation supports the carrying values and the methodology applied was an assessment of fair value (less costs to sell) based on discounted cash flows.

Key assumptions used for the indefinite life intangibles valuation calculations are as follows:

==> picture [9 x 12] intentionally omitted <==

cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates appropriate for the business;
discount rate range of 14%-17% (2011: 13-18%) which is in excess of the Charter Hall Group‟s weighted average cost of capital as a result of the management platform carrying more risk than the return on property investment cash flows;
growth over the next five years of 3% (2011: 3%) per annum; and
terminal value multiple of 4.9-7.0 times earnings (2011: 7.0 times).

Impairment is tested at the cash-generating unit (CGU) level for each CGU. Each individual CGU is considered to be a fund which generates management fee income.

19 Property, plant and equipment

Charter Hall Group Furniture, fittings and equipment Fixtures Software $'000 $'000 $'000	Total $'000
Year ended 30 June 2011 Opening net book amount 1,217 768 1,607 Additions 662 - 473 Disposals (15) - - Depreciation charge (367) (52) (1,126)	3,592 1,135 (15) (1,545)
Closing net book amount 1,497 716 954	3,167
At 30 June 2011 Cost 2,993 1,073 2,300 Accumulated depreciation (1,496) (357) (1,346)	6,366 (3,199)
Net book amount 1,497 716 954	3,167
Year ended 30 June 2012 Opening net book amount 1,497 716 954 Additions 109 3 472 Disposals - - - Depreciation charge (325) (70) (330)	3,167 584 - (725)
Closing net book amount 1,281 649 1,096	3,026
At 30 June 2012 Cost 3,102 1,076 2,772 Accumulated depreciation (1,821) (427) (1,676)	6,950 (3,924)
Net book amount 1,281 649 1,096	3,026

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

20 Investment properties

20 Investment properties
Property Type	Independent Book valuation value % amount 2012 owned $'000 $'000	Book value 2011 $'000
Charter Hall Property Trust Group DRF properties Home HQ, Nunawading Bulky retail Bunnings, Stafford Bulky retail Home HQ, Ipswich Bulky retail Menai Central, Menai Bulky retail	50 Carried as held for sale - - 100 Carried as held for sale - - 100 Carried as held for sale - - 100 Carried as held for sale - -	31,000 18,750 27,065 37,000
33 Windorah St, Stafford Bulky retail	100 Carried as held for sale - -	11,700
Countdown, Auckland, NZ1 Retail	- Sold during the year - -	18,203
	- -	143,718
Charter Hall Group Mentone Showrooms, Mentone2 Bulky retail	- Sold during the year - -	15,800
	- -	159,518

(1) Countdown, Auckland, New Zealand was sold on 29 June 2012 for NZ$22 million.

(2) Mentone Showrooms, Mentone was sold on 28 October 2011 for $17.7 million.

Refer to note 13 for details of the carrying values of properties classified as held for sale at 30 June 2012.

A reconciliation of the carrying amount at the beginning and end of the current and previous years is set out below:

Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 Note $’000 $’000 $’000 $’000	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 Note $’000 $’000 $’000 $’000	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 Note $’000 $’000 $’000 $’000	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 Note $’000 $’000 $’000 $’000
At fair value

Opening balance Acquisitions and additions Lease incentives paid Lease incentives amortised Disposals Transferred to held for sale Net loss from fair value adjustment 8 Foreign currency exchange gain/(loss)	159,518	202,118
	503	15,610
	80	34
	(546)	(682)
	(34,427)	(53,205)
	(117,704)	(921)
	(7,692)	(2,518)
	268	(918)
Closing balance	-	159,518	- 143,718

(a) Amounts recognised in the statement of comprehensive income for investment properties

	Charter Hall Group	Charter Hall Group
Rental income Direct operating expenses from property that generated rental income
	15,561	17,716
	(3,541)	(4,795)
	12,020 12,921 12,054 12,884

This table includes the comprehensive income of all investment properties held during the year, regardless of whether they have been sold or reclassified as held for sale. The income is up to the date of sale or 30 June respectively.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

20 Investment properties (continued)

(b) Valuation basis

As at 30 June 2012 all investment properties have been classified as held for sale. They are carried at fair value, representing the amount at which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable seller in an arm‟s length transaction at the date of valuation, in accordance with Australian Valuation Standards.

Investment properties not independently valued are carried at Directors‟ valuation, which are based on detailed internal calculations. The Directors‟ valuations are approved by a Valuation Committee consisting of four members. The Chair of the Committee is Colin McGowan and the committee has another independent member in Rick Higgins (an independent non-executive director of Charter Hall Direct Property Management Pty Limited (a subsidiary of Charter Hall Limited)). The other two members are executive directors. The valuations at 30 June 2011 had a weighted average capitalisation rate of 8.46% and a weighted average vacancy rate of 1.5%. All investment property has been reclassified to assets held for sale at 30 June 2012.

21 Deferred tax assets

Charter Hall Group Charter Hall Property Trust Group	Charter Hall Group Charter Hall Property Trust Group	Charter Hall Group Charter Hall Property Trust Group	Charter Hall Group Charter Hall Property Trust Group
Note	2012	2011	2012 2011 $’000 $‟000
	$’000	$‟000
Deferred tax assets comprises temporary differences attributable to: Employee benefits Investments in associates Management rights Provisions Other			- - - - - - - - - -

	2,052	3,256
	4,089	4,221
	-	2,842
	4,272	-
	94	936
	10,507	11,255	- -
A reconciliation of the carrying amount of deferred tax assets at the beginning and end of the current and previous years is set out below:
Opening balance Charged to income statement 9 Charged to other comprehensive income Charged directlyto equityreserves	11,255	5,721	- 321 - (321) - - - -
	1,538	3,231
	9	8
	(2,295)	2,295
Closingbalance	10,507	11,255	- -
Deferred tax assets expected to reverse within 12 months Deferred tax assets expected to reverse after more than 12 months			- - - -
	6,418	4,192
	4,089	7,063
	10,507	11,255	- -

22 Trade and other payables

	Charter Hall Group	Charter Hall Group	Charter Hall Property Trust Group 2012 2011 $’000 $‟000

	2012	2011
	$’000	$‟000

Current liabilities

Trade payables Accruals Distribution payable GST payable Annual leave payable Deferred consideration payable for business combination Contingent consideration payable Employee benefits payable Other payables	712	1,926	359 4,702 1,814 2,070 27,888 25,683 219 265 - - - - - - - - 8 8
	3,424	4,337
	27,585	25,458
	1,755	1,681
	2,193	2,209
	-	14,300
	10,539	-
	3,927	7,345
	653	805
	50,788	58,061	30,288 32,728

All current liabilities are expected to be settled within 12 months.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

22 Trade and other payables (continued)

22 Trade and other payables (continued)
	Charter Hall Group

Non-current liabilities Contingent consideration payable
	-	12,106

(i) Contingent consideration payable

On 1 March 2010, the Charter Hall Group completed a transaction to acquire the majority of Macquarie Group‟s core real estate management platform comprising the management of two listed and three unlisted real estate funds and co-investments in Macquarie Office Trust (renamed Charter Hall Office REIT), Macquarie Countrywide Trust (renamed Charter Hall Retail REIT) and Macquarie Direct Property Fund (renamed Charter Hall Direct Property Fund).

In the event that certain cumulative revenue targets are achieved by the offshore platform (being the people, entities and businesses that generate revenue outside of Australia, New Zealand and Japan) between 1 March 2010 and 28 February 2013, additional purchase consideration of up to $15,000,000 may be payable in cash.

The potential undiscounted amount payable under the agreement is between $0 (for cumulative revenues below $21,425,000), and $15,000,000 (for cumulative revenues above $42,850,000). On 9 March 2012, an instalment of $1,451,664 was paid.

The fair value of the contingent consideration at 30 June 2012 of $10,539,093 (2011: $12,105,593) was estimated by applying a 13% discount rate to expected payments of $10,788,460 (2011: $13,840,189) from July 2012 onwards.

(ii) Deferred consideration payable for business combination - prior year

The sale to Charter Hall by Macquarie Group of all shares in Macquarie Countrywide Management Limited (renamed Charter Hall Retail Management Limited) and Macquarie Direct Property Management Limited (renamed Charter Hall Direct Property Management Limited) completed on 30 September 2011.

23 Provisions

23 Provisions
	Charter Hall Group

Employee benefits – long service leave Performance fee clawback	656	834
	14,239	-
	14,895	834	- -

The Group is entitled to performance fees in respect of CHOF4, calculated at 33.34% of the excess return above a gross equity internal rate of return (“IRR”) of 13% on the paid up capital allocated to a project. To date, the Group has received a total of $14.2 million in performance fees over the life of this fund. There have been no performance fees recognised in the current period or in the prior year ended 30 June 2011. Contractual arrangements allow a clawback of performance fees on termination of CHOF4 (on the earlier of the termination date of 31 December 2012, unless extended, or the completion of the sale of all the assets of CHOF4) to the extent necessary to allow CHOF4 to achieve a gross equity IRR equal to 13%. The gross equity IRR is calculated prior to the deduction of performance fees, fund management fees, fund costs and income tax.

In the 31 December 2011 Interim Financial Report, the Group reported a contingent liability of up to $14.2 million may be incurred in relation to the potential CHOF4 clawback of performance fees received in respect of the 2007, 2008, 2009 and 2010 financial years.

Having regard to this and current market conditions, the Charter Hall Board has resolved to raise a provision for the maximum potential liability, being $14.2 million. The clawback is payable on the earlier of the termination date of 31 December 2012, unless extended, or the completion of the sale of all the assets of CHOF4.

(a) Movements in provisions

Refer to note 26 for the movement in provisions and split between current and non-current.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

24 Borrowings

24 Borrowings
	Charter Hall Group

Unsecured
Loan from Charter Hall Holdings Pty Ltd Secured Bank loans drawn DRF Unamortised borrowing costs	-	-


	51,750	-
	(287)	-
Total current borrowings	51,463	-	53,863 -

Secured Bank loans drawn DRF Charter Hall Property Trust Unamortised borrowing costs1	- 69,953 - 69,953 - 33,010 - 33,010 - (1,101) - (1,101)
Total non-current borrowings	-	101,862	- 101,862

(1) Disclosed on the balance sheet as Other Assets are unamortised borrowing costs of $564,287 (2011: $582,044) relating to the Charter Hall Property Trust Westpac facility. Since there is no debt drawn at 30 June 2012 on this facility the unamortised borrowing costs have been disclosed on the balance sheet as Other Assets for the current year. The prior year amount continues to be disclosed above, aggregated with unamortised borrowing costs incurred on the DRF facility. Current year unamortised borrowing costs of $287,151 relate to the DRF facility.

The DRF loan comprises a $40.0 million National Australia Bank (NAB) facility and a $15.5 million share of a $64.0 million joint venture Westpac facility. Amounts drawn under the NAB facility are potentially repayable if the Fund defaults on payments of interest or principal or allows:

==> picture [9 x 12] intentionally omitted <==

the ratio of total liabilities to total assets to exceed 55% or the ratio of debt to secured property values to exceed 50%; or
the ratio of EBIT to interest expense to fall below 1.75 times or the ratio of net rental income to interest to fall below 1.65 times.

Amounts drawn under the DRF JV Westpac facility are potentially repayable if the Fund defaults on payments of interest or principal or allows:

==> picture [9 x 13] intentionally omitted <==

the ratio of debt to secured property assets to exceed 60%; or

==> picture [9 x 12] intentionally omitted <==

the ratio of net rental income to interest to fall below 1.6 times.

Amounts drawn under the $75.0 million Charter Hall Property Trust loan are potentially repayable if the Trust defaults on payments of interest or principal or allows:

==> picture [9 x 12] intentionally omitted <==

the ratio of debt to total tangible assets to exceed 35%;
the ratio of debt to EBITDA to exceed 4 times; or
the ratio of EBIT to gross interest to fall below 3 times.

Subsequent to 30 June 2012 the interest cover covenant was amended as follows:

==> picture [9 x 12] intentionally omitted <==

the ratio of „net cash inflow‟ to gross interest to be a minimum of 4.25 times, replacing the ratio of EBIT to gross interest not being less than 3 times.

During the year, DRF entered into an agreement with Charter Hall Holdings Pty Ltd to borrow $2.4 million which was fully drawn and is repayable on demand. The interest rate is BBSY +3%.

The DRF loan facility is contractually not repayable until November 2013, but has been disclosed as current due to assets held for sale and an expectation that the borrowings will therefore be repaid within the next twelve months.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

24 Borrowings (continued)

The DRF bank loan is secured by a floating charge over all the assets of DRF and by a mortgage over the investment properties held by DRF. The Charter Hall Property Trust loan is secured over the Trust‟s investment in listed and unlisted funds, excluding 22,500,000 units of the Trust‟s investment in Charter Hall Core Plus Office Fund.

The carrying amounts of assets pledged as security for borrowings are:

	Charter Hall Group	Charter Hall Group	Charter Hall Group

Current Floating charge

Cash and cash equivalents Receivables First mortgage Investment property classified as held for sale Investment in jointly controlled entity classified as held for sale	1,265	2,324
	1,307	1,831


	117,704	-
	18,686	-
Total current assets pledged as security	138,962	4,155	138,962 4,155
Non-current First mortgage Investment properties Investment in associates Investment in jointly controlled entities


	-	143,718
	414,777	478,412
	-	18,700
Total non-current assets pledged as security	414,777	640,830	414,777 640,830
Total assets pledged as security	553,739	644,985	553,739 644,985

(a) Financing arrangements

The Charter Hall Group and Charter Hall Property Trust Group had unrestricted access at reporting date to the following lines of credit:

	Charter Hall Group	Charter Hall Group	Charter Hall Group
Total facilities Used at reporting date	130,500	170,500
	51,750	102,963
Unused at reporting date	78,750	67,537	78,750 67,537

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

24 Borrowings (continued)

(a) Financing arrangements (continued)

The Charter Hall Group and Charter Hall Property Trust Group‟s $100 million WBC debt facility was reduced to $75 million in April 2012. This facility expires in May 2014.

DRF‟s existing $55 million facility was reduced to $40 million on 29 June 2012. The expiry date remains at 30 November 2013. Whilst the DRF loan facility is contractually not repayable until November 2013, borrowings have been disclosed as current due to assets held for sale and an expectation that the borrowings will therefore be repaid within the next twelve months.

DRF is party to a second WBC debt facility, totalling $64 million, with the Charter Hall Retail Joint Venture Trust (RJVT), Charter Hall Lake Macquarie Trust (LMT), Charter Hall Mount Hutton Trust (MHT) and CQR Nunawading Trust (CQRNT). RJVT is an equity accounted investment which in turn owns 100% of LMT and MHT. CQRNT is a wholly-owned entity of the Charter Hall Retail REIT (CQR) which is also an equity accounted investment. Accordingly, only $15.5 million of the $64 million facility, representing DRF‟s share of debt relating to its 50% interest in the Nunawading shopping centre, is recorded on balance sheet with the remaining $48.5 million drawn by associates RJVT and CQRNT. DRF is joint and severally liable alongside RJVT, LMT, MHT and CQRNT for the amount of the facility, which is cross collateralised across three joint venture held mortgaged assets being shopping centres at Lake Macquarie (held by LMT), Mount Hutton (held by MHT) and Nunawading (50% held by CQRNT).

(b) Interest rate risk exposures

The following tables set out the Charter Hall Group and Charter Hall Property Trust Group‟s exposure to interest rate risk, including the contractual repricing dates and the effective weighted average interest rate by maturity period.

Exposures arise predominantly from liabilities bearing variable interest rates as the Charter Hall Group and Charter Hall Property Trust Group intend to hold fixed rate liabilities to maturity.

Charter Hall Group Floating interest rate 2012 $'000	Fixed interest maturing in: Over Over Over Over 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over or less years years years years 5 years $'000 $'000 $'000 $'000 $'000 $'000	Fixed interest maturing in: Over Over Over Over 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over or less years years years years 5 years $'000 $'000 $'000 $'000 $'000 $'000	Non- interest bearing Total $'000 $'000
Trade and other payables - - - - - - Contingent consideration payable - - - - - - Borrowings 51,750 - - - - - Interest rate swaps (20,000) - 20,000 - - -		- - - -	40,249 40,249 10,539 10,539 - 51,750 - -
31,750	- 20,000 - - -	-	50,788 102,538
Weighted average interest rate 3.63%	5.46%
Charter Hall Group Floating interest rate 2011 $'000	Fixed interest maturing in:		Non- interest bearing Total $'000 $'000
Trade and other payables - - - - - - - Contingent consideration payable - - - - - - - Borrowings 101,862 - - - - - - Interest rate swaps (38,203) - 18,203 20,000 - - -			58,061 58,061 12,106 12,106 - 101,862 - -
63,659 - 18,203 20,000 - - -			70,167 172,029
Weighted average interest rate 4.63% 4.71% 4.71%

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

24 Borrowings (continued)

(b) Interest rate risk exposures (continued)

Charter Hall Property Trust Group Floating interest rate 2012 $'000	Fixed interest maturing in: Over Over Over Over 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over or less years years years years 5 years $'000 $'000 $'000 $'000 $'000 $'000	Fixed interest maturing in: Over Over Over Over 1 year 1 to 2 2 to 3 3 to 4 4 to 5 Over or less years years years years 5 years $'000 $'000 $'000 $'000 $'000 $'000	Non- interest bearing Total $'000 $'000
Trade and other payables - - - - - - Borrowings 54,150 - - - - - Interest rate swaps (20,000) - 20,000 - - -		- - -	30,288 30,288 - 54,150 - -
34,150	- 20,000 - - -	-	30,288 84,438
Weighted average interest rate 3.75%	5.46%
Charter Hall Property Trust Group Floating interest rate 2011 $'000	Fixed interest maturing in:		Non- interest bearing Total $'000 $'000
Trade and other payables - - - - - - - Borrowings 101,862 - - - - - - Interest rate swaps (38,203) - 18,203 20,000 - - -			32,728 32,728 - 101,862 - -
63,659 - 18,203 20,000 - - -			32,728 134,590
Weighted average interest rate 4.63% 4.71% 4.71%

(c) Interest rate sensitivity analysis

The following table illustrates the potential impact a change in interest rates of +/-1% would have on the Charter Hall Group and Charter Hall Property Trust Group‟s profit after tax and equity.

Charter Hall Group -1%	+1%
Carrying amount Profit Equity Profit $’000 $’000 $’000 $’000	Equity $’000
2012 *Liabilities* Borrowings 51,463 518 518 (518) Derivative financial instruments 669 (450) (450) 445	(518) 445
Total (decrease)/increase 68 68 (73)	(73)
Charter Hall Group -1%	+1%
Carrying amount Profit Equity Profit $‟000 $‟000 $‟000 $‟000	Equity $‟000
2011 Liabilities Borrowings 101,862 1,019 1,019 (1,019) Derivative financial instruments 407 (1,771) (1,771) 469	(1,019) 469
Total (decrease)/increase (752) (752) (550)	(550)

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

24 Borrowings (continued)

(c) Interest rate sensitivity analysis (continued)

Charter Hall Property Trust Group -1%	+1%
Carrying amount Profit Equity Profit $’000 $’000 $’000 $’000	Equity $’000
2012 *Liabilities* Borrowings 53,863 542 542 (542) Derivative financial instruments 669 (450) (450) 445	(542) 445
Total (decrease)/increase 92 92 (97)	(97)
Charter Hall Property Trust Group -1%	+1%
Carrying amount Profit Equity Profit $‟000 $‟000 $‟000 $‟000	Equity $‟000
2011 Liabilities Borrowings 101,862 1,019 1,019 (1,019) Derivative financial instruments 407 (1,771) (1,771) 469	(1,019) 469
Total (decrease)/increase (752) (752) (550)	(550)

(d) Fair value

Charter Hall Group

The carrying amounts and fair values of borrowings at reporting date are:

2012 2011	2012 2011
Carrying Carrying amount Fair value amount $’000 $’000 $‟000	Fair value $‟000
On-balance sheet Non-traded financial liabilities Bank loans 51,463 51,750 101,862	102,963

The fair value of borrowings is inclusive of costs which would be incurred on settlement of a liability, and is based upon market prices, where a market exists, or by discounting the expected future cash flows by the current interest rates for liabilities with similar risk profiles.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

24 Borrowings (continued)

(d) Fair value (continued)

Charter Hall Property Trust Group

The carrying amounts and fair values of borrowings at reporting date are:

The carrying amounts and fair values of borrowings at reporting date are:	The carrying amounts and fair values of borrowings at reporting date are:
2012 2011
Carrying Carrying amount Fair value amount $’000 $’000 $‟000	Fair value $‟000
On-balance sheet Non-traded financial liabilities Bank loans 53,863 54,150 101,862	102,963

(e) Capital risk management

Gearing is a measure used to monitor levels of debt capital used by the business to fund its operations. This ratio is calculated as interest bearing debt divided by tangible assets with both net of cash and cash equivalents.

The gearing ratio of the Charter Hall Group at 30 June 2012 was 1.45% (2011: 8.12%), and of the Charter Hall Property Trust Group was 4.3% (2011: 9.4%). Debt covenants are monitored regularly to ensure compliance and reported to the debt provider on a six monthly basis. The Group Treasurer is responsible for negotiating new debt facilities and compliance with covenants.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

25 Deferred tax liabilities

25 Deferred tax liabilities
Charter Hall Group Note 2012 2011 $’000 $‟000	Charter Hall Group			Charter Hall Property Trust Group 2012 2011 $’000 $‟000
	2012		2011
	$’000		$‟000

Deferred tax liabilities comprises temporary differences attributable to: Accrued revenue Contingent consideration payable Investment in associates Other				- - - - - - - -

	84		4
	903		868
	1,078		198
	120		59

	2,185		1,129	- -
A reconcilation of the carrying amount of deferred tax liabilities at the beginning and end of the current and previous years is set out below: Opening balance Deferred tax benefit Charged to income statement 9 Charged to other comprehensive income				- 661 - (644) - - - (17)
	1,129	1,273
	-	-
	1,056	(110)
	-	(34)

Closing balance	2,185	1,129		- -

Deferred tax liabilities expected to reverse within 12 months Deferred tax liabilities expected to reverse after more than 12 months	1,107	931		- - - -
	1,078	198

	2,185	1,129		- -
26 Provisions – non-current				Charter Hall Property Trust Group 2012 2011 $’000 $‟000
	Charter Hall Group

	2012	2011
	$’000	$‟000



Employee benefits – long service leave	1,428	1,217		- -

(a) Movements in provisions

Movements in employee benefits provisions are set out below:

	Charter Hall Group	Charter Hall Group	Charter Hall Group
Long service leave Opening balance Additional provisions recognised

	2,051	1,628
	33	423
Closing balance	2,084	2,051	- -

Current Non-current	656	834
	1,428	1,217
Total	2,084	2,051	- -

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

26 Provisions (continued)

(a) Movements in provisions (continued)

Movements in performance fee clawback provision is set out below:

	Charter Hall Group	Charter Hall Group	Charter Hall Group
Opening balance			- -
	-	-
Provision recognised during the year	14,239	-
Closing balance	14,239	-	- -

Current Non-current	14,239	-
	-	-
Total	14,239	-	- -

27 Contributed equity

2012 2011 Note Securities Securities	2012 2011 $'000 $'000
(a) Security capital1 Ordinary securities - fully paid (b),(c),(e) 296,168,170 293,755,894	948,725 943,961
296,168,170 293,755,894	948,725 943,961
(b) Movements in ordinary security capital Number of Issue Details Notes securities1 price3	2012 2011 $'000 $'000
Opening balance 1,162,380,237 Add back LTI securities reversed in prior year2 50,343,595 Distribution Re-investment plan issue August 2010 (d) 12,641,256 $0.5	936,445 73,179 9 7,516
Balance before consolidation 1,225,365,088 Consolidation at one for four (e) (919,023,274)	1,017,140 -
Balance at 30 June 2011 306,341,814 Less: LTI securities reversed2 (12,585,920)	1,017,140 (73,179)
Balance per accounts at 30 June 2011 293,755,894 Add back LTI securities reversed last year2 12,585,920 Performance rights and options exercised 2,412,255 $1.9 Cancellation of forfeited LTI securities off market (11,907,844)	943,961 943,961 73,179 4 4,764 (65,692)
Balance at 30 June 2012 296,846,225 Less: LTI securities reversed2 (678,055)	956,212 (7,487)
Balance per accounts at 30 June 2012 296,168,170	948,725 943,961
Charter Hall Limited4 Charter Hall Property Trust4	209,550 9,503 739,175 934,458
	948,725 943,961

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

27 Contributed equity (continued)

(1) This includes shares of Charter Hall Limited and units in Charter Hall Property Trust, which are stapled. Refer to note 1 for details of the accounting for this stapling arrangement.
(2) Securities issued under the Charter Hall Limited Executive Loan Security Plan (ELSP) have been issued in trust and have a corresponding loan given to the employee. Under AASB 2: Share-based Payment , the loan, interest received on the loan, securities and the distribution paid and payable are derecognised for the preparation of the financial statements.
(3) Security issue prices for transactions occurring pre October 2010 are stated on a pre security consolidation basis.
(4) On 18 June 2012, the Group announced implementation of the $200 million capital reallocation from Charter Hall Property Trust (CHPT) to Charter Hall Limited (CHL), effective 30 June 2012. The capital reallocation aims to ensure a more appropriate allocation of capital between CHPT and CHL (which together trade on the Australian Securities Exchange as Charter Hall Group) which is more closely aligned with the Group‟s long-term growth strategy. Under the capital reallocation proposal approved by securityholders at the Annual General Meeting on 24 November 2011, CHPT made capital payments of $200 million which were compulsorily applied as a capital contribution for existing shares of CHL.

(c) Ordinary securities

Ordinary securities entitle the holder to participate in distributions/dividends and the proceeds on winding up of the Trust/Company in proportion to the number of and amounts paid on the securities held.

On a show of hands, every holder of ordinary securities present at a meeting in person or by proxy is entitled to one vote, and upon a poll each security is entitled to one vote.

(d) Distribution Re-investment Plan

The Company has established a Distribution Re-investment Plan (DRP) under which holders of ordinary securities may elect to have all or part of their distribution satisfied by the issue of new ordinary securities rather than by being paid in cash. Securities are issued under the plan at a discount to the market price. The DRP has been inactive since the 30 June 2010 distribution.

(e) Consolidation

In October 2010, the Group completed a consolidation of its securities on the basis of one new security for every four preconsolidation securities. Where the consolidation of a holding resulted in a fractional security, that fraction was rounded up to the next whole security. The consolidation of securities resulted in the Group reducing its total securities on issue from 1,225,365,088 to 306,341,814 units.

28 Reserves and accumulated losses

(a) Reserves	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 $’000 $‟000 $’000 $‟000	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 $’000 $‟000 $’000 $‟000	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 $’000 $‟000 $’000 $‟000
Business combination reserve Security-based benefits reserve Transactions with non-controlling interests Foreign currency reserve
	(52,000)	(52,000)
	12,605	11,457
	(8,702)	(6,300)
	(2,373)	(10,451)
	(50,470)	(57,294)	(1,415) (9,747)
Charter Hall Limited and controlled entities Charter Hall Property Trust
	(49,055)	(47,547)
	(1,415)	(9,747)
	(50,470)	(57,294)	(1,415) (9,747)

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

28 Reserves and accumulated losses (continued)

(a) Reserves (continued)

Movements:	Charter Hall Group	Charter Hall Group	Charter Hall Group
Business combination reserve

Opening and closing balance	(52,000)	(52,000)
Security-based benefits reserve

Opening balance Expense relating to LTI scheme Expense relating to deferred STI transferred to security-based payment reserve	11,457	7,367
	2,338	4,090
Transferred to equity on options and performance rights exercised	(1,452)	-	- -
Closing balance	12,605	11,457	- -
Transactions with non-controlling interests

Opening balance DRF acquisition premium	(6,300)	-
	(2,295)	(6,300)
Acquisitions/redemptions above net tangible assets	(107)	-	(61) -
Closing balance	(8,702)	(6,300)	(9) 52

Foreign currency reserve Opening balance Exchange differences on translation of foreign operations Transfer of cumulative FX losses to profit/(loss) Transfer to accumulated losses
	(10,451)	4,604
	992	(19,718)
	11,749	-
	(4,663)	4,663
Closing balance	(2,373)	(10,451)	(1,406) (9,799)

(i) Business combination reserve

This reserve relates to the reverse acquisition at the initial public offering (IPO) in 2005. This is the amount that relates to the investment in CHH that is not eliminated by paid in capital. No goodwill is recognised as this transaction is the result of a reverse acquisition.

(ii) Security-based payments reserve

The security-based payments reserve is used to recognise the fair value of securities issued under the ELSP and rights and options issued under the PROP.

(iii) Transactions with non-controlling interests

Transactions with non-controlling interests that do not result in loss of control are treated as transactions with equity owners of the Charter Hall Group and Charter Hall Property Trust Group.

A change in ownership interest results in an adjustment between the carrying amounts of controlling and non-controlling interests to reflect their relative interests in the controlled entity. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised within this reserve.

(iv) Foreign currency reserve

Exchange differences arising on translation of foreign controlled entities and the Charter Hall Group and Charter Hall Property Trust Group‟s share of foreign exchange differences arising from their equity accounted investments are recognised in other comprehensive income as described in note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

28 Reserves and accumulated losses (continued)

(b) Accumulated losses

Movements in accumulated losses were as follows:

	Charter Hall Group Charter Hall Property Trust Group	Charter Hall Group Charter Hall Property Trust Group	Charter Hall Group Charter Hall Property Trust Group
	2012	2011
	$’000	$‟000


Opening balance Net profit for the year Distributions Transfer from foreign currency reserve	(136,849)	(136,055)
	16,678	52,338
	(53,839)	(48,469)
	4,663	(4,663)
Closing balance	(169,347)	(136,849)	(87,609) (74,520)
Charter Hall Limited and controlled entities Charter Hall Property Trust
	(81,738)	(62,329)
	(87,609)	(74,520)
	(169,347)	(136,849)	(87,609) (74,520)

29 Non-controlling interest

The financial statements of the Charter Hall Group include the financial statements for the consolidated entity consisting of Charter Hall Limited and its controlled entities including Charter Hall Property Trust (CHPT). Charter Hall Limited has been identified as the parent entity in relation to the stapling. The results and equity, not directly owned by CHL, of CHPT have been treated and disclosed as a non-controlling interest. Whilst the results and equity of CHPT are disclosed as non-controlling interest, the stapled securityholders of CHL are the same as the stapled securityholders of CHPT.

Note	Charter Hall Group	Charter Hall Group
	2012	2011
	$’000	$‟000

Interest in:

Contributed equity 27(b) Reserves 28(a) Accumulated losses 28(b)	739,175	934,458
	(1,415)	(9,747)
	(87,609)	(74,520)
Equity holders of CHPT (non-controlling interest)	650,151	850,191

The Charter Hall Group and Charter Hall Trust Group have each consolidated 100% of the net assets and results of DRF. However, with regard to the Charter Hall Group 34.09% (2011: 34.63%) of DRF is owned by non-controlling unitholders, and with regard to the Charter Hall Property Trust Group 50.37% (2011: 50.78%) of DRF is owned by non-controlling unitholders. Their non-controlling interest (NCI) in the total equity of DRF is as follows:

	Charter Hall Group	Charter Hall Group	Charter Hall Group
	2012	2011
	$’000	$‟000
	34.09%	34.63%
	NCI	NCI
Interest in:

Contributed equity Reserves Accumulated losses	67,348	68,056
	-	(330)
	(39,900)	(35,599)
Other non-controlling interest in DRF	27,448	32,127	40,558 47,155

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

30 Key management personnel

(a) Directors

The following persons were Directors of Charter Hall Limited and Charter Hall Funds Management Limited during the year:

==> picture [9 x 12] intentionally omitted <==

==> picture [9 x 13] intentionally omitted <==

==> picture [9 x 12] intentionally omitted <==

==> picture [9 x 13] intentionally omitted <==

==> picture [9 x 12] intentionally omitted <==

Kerry Roxburgh - Chairman and Non-Executive Independent Director
Roy Woodhouse - Deputy Chairman and Non-Executive Independent Director
Anne Brennan - Non-Executive Independent Director
David Deverall - Non-Executive Independent Director (appointed 7 May 2012)
Glenn Fraser - Non-Executive Independent Director (resigned 15 August 2012)
Cedric Fuchs - Executive Director (resigned 24 November 2011)
David Harrison - Joint Managing Director
Peter Kahan - Non-Executive Director
Colin McGowan - Non-Executive Independent Director
David Southon - Joint Managing Director

(b) Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the Charter Hall Group and Charter Hall Property Trust Group, directly or indirectly, during the year. The number of other key management personnel in the year ended 30 June 2012 was seven (2011: seven).

Name Position Employer P Altschwager Group Chief Financial Officer Charter Hall Holdings Pty Ltd N Devlin Head of People Charter Hall Holdings Pty Ltd S Dundas Fund Manager - Charter Hall Retail REIT Charter Hall Holdings Pty Ltd A Glass Head of Wholesale Pooled Funds Charter Hall Holdings Pty Ltd N Kelly Head of Investor Relations Charter Hall Holdings Pty Ltd R Stacker Head of Direct – Charter Hall Direct Property Charter Hall Holdings Pty Ltd A Taylor Head of Wholesale Partnerships – Charter Hall Office Trust Charter Hall Holdings Pty Ltd

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

31 Remuneration of auditors

During the year, the following fees were paid or payable for services provided by the auditor of the Charter Hall Group and Charter Hall Property Trust Group, their related practices and non-related audit firms:

	Charter Hall Group	Charter Hall Group	Charter Hall Group
(a) Audit services PricewaterhouseCoopers Australian firm Audit and review of financial reports Independent Review of the Charter Hall anti-money laundering program Non-PricewaterhouseCoopers audit firms for audit services W F White & Co


	347,597	387,791
	55,000	-

Total remuneration for audit services	402,597	389,731	32,184 47,388
(b) Taxation services

PricewaterhouseCoopers Australian firm Tax compliance services, including review of company income tax returns
	60,976	55,050
Total remuneration for taxation services	60,976	55,050	10,000 29,720
(c) Advisory services

PricewaterhouseCoopers Australian firm
Long-term incentive plan structure Accounting advice	10,000	53,525
	25,500	-
Total remuneration for advisory services	35,500	53,525	- -

The Charter Hall Group and Charter Hall Property Trust Group‟s policy is to employ PricewaterhouseCoopers (PwC) on assignments additional to statutory audit duties where PwC‟s expertise and experience with the Charter Hall Group and Charter Hall Property Trust Group are important. These assignments are principally tax advice and investigating accountant‟s reports, reporting on acquisitions, or where PwC is awarded assignments on a competitive basis. It is the Charter Hall Group and Charter Hall Property Trust Group‟s policy to seek competitive tenders for all major consulting projects.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

32 Commitments

(a) Lease commitments: Group as lessee

Commitments payable in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:

	Charter Hall Group	Charter Hall Group	Charter Hall Group
Within one year			- -
	1,549	1,476
Later than one year but not later than five years	5,808	8,088
Commitment fees from associates	7,357	9,564 - -

(b) Capital commitments

As at 30 June 2012 there were no contractual capital commitments (2011: $nil).

(c) Commitments: Other

Charter Hall Direct 144 Stirling Street Trust (144SST)

On 15 May 2012, Charter Hall Direct Property Management Limited issued a Product Disclosure Statement (PDS) seeking investors for an unlisted property syndicate to invest in a trust to acquire a building at 144 Stirling Street, Perth. If an amount equal to or greater than $16 million but less than $32 million was raised by 31 December 2012, the Group (as underwriter) had agreed to underwrite the balance of units available under the offer.

Subsequent to 30 June 2012, CHDPML was successful in raising the $32 million in equity sought in the PDS. Accordingly the Group will not be required to underwrite any part of the equity-raising for 144SST.

Charter Hall Opportunity Fund No. 5 (CHOF5) Workzone (Workzone)

CHPT RP2 Trust – Bay Village acquisition

CHPT RP2 Trust was established on 29 May 2012 to acquire a 20% interest in the Retail Partnership No. 2 Trust (RP2T). RP2T entered into a contract on 28 June 2012 to acquire the Bay Village Shopping Centre at Bateau Bay in New South Wales for $164 million. The purchase of the centre was completed on 15 August 2012. The Group‟s equity commitment to fund the acquisition is $19.5 million which was paid on 15 August 2012.

33 Contingent liabilities

There were no contingent liabilities as at 30 June 2012.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

34 Related parties

(a) Parent entity

The parent entity of the Charter Hall Group is Charter Hall Limited. The parent entity of the Charter Hall Property Trust Group is the Charter Hall Property Trust.

(b) Controlled entities

Interests in controlled entities are set out in note 35.

(c) Key management personnel

Disclosures relating to key management personnel are set out in note 30.

(d) Transactions with related parties

The following income was earned from related parties during the year:

	Charter Hall Group	Charter Hall Group
	2012	2011
	$	$

Accounting fees Marketing fees Management and performance fees from associates Transaction fees from associates Commitment fees from associates Property management fees from associates	4,174,581	4,155,000
	86,930	113
	37,756,063	39,208,306
	28,622,218	17,389,370
	135,000	-

Transactions with associates and joint ventures are disclosed in note 36 and note 37 respectively.

(e) Loans to/from related parties

	Charter Hall Group	Charter Hall Group	Charter Hall Group	Charter Hall Group
	2012	2011
	$	$	$	$

Loans to joint ventures and associates
Opening balance Loans advanced Interest charged Interest received	5,000,000	3,750,000		- - - -
	6,120,000	1,250,000
	601,644	594,658
	(601,644)	(594,658)
Closing balance	11,120,000	5,000,000	-	-

Loans to Charter Hall Limited
Opening balance Loans advanced Loan repayments received Capital reallocation Interest charged	-	-		282,424,290 96,868,199 (35,970,548) - 12,552,387
	-	-
	-	-
	-	-
	-	-
Closing balance	-	-	163,541,643	355,874,328

No provisions for doubtful debts have been raised in relation to any outstanding balances and no expense has been recognised in respect of bad or doubtful debts due from related parties.

The loans to Charter Hall Limited comprise two unsecured stapled loans maturing in July 2018 and July 2019 respectively. Interest is charged on an arm‟s length basis which, at 30 June 2012, amounted to a weighted average rate of 9.76% (June 2011: 8.04%).

(f) Fees paid to the Responsible Entity or its associates

Fees paid to the Responsible Entity of the Charter Hall Property Trust, and its associates, by the Charter Hall Property Trust Group amounted to $3,591,041 (2011: $5,725,675).

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

35 Controlled entities

The consolidated financial statements of the Charter Hall Group incorporate the assets, liabilities and results of the following controlled entities in accordance with the accounting policy described in note 1(b):

(a) Details of controlled entities of the Charter Hall Group

(a) Details of controlled entities of the Charter Hall Group
	Equity holding
Country of Class of 2012 Name of entity incorporation securities %	2011 %
Controlled entities of Charter Hall Limited Charter Hall Holdings Pty Limited Australia Ordinary 100 CHTOM Pty Limited (formerly Charter Hall CUB Pty Ltd) Australia Ordinary 100 Charter Hall Mordialloc Pty Limited Australia Ordinary 100 Charter Hall La Trobe Pty Limited Australia Ordinary 100 CH La Trobe Trust Australia Ordinary 100 Charter Hall Opportunity Fund No. 6 Australia Ordinary 100 CHOF6 123 Pty Limited Australia Ordinary 100 CHOF6 123 Trust Australia Ordinary 100 CHOF6 Terrace Pty Limited Australia Ordinary 100 Controlled entities of Charter Hall Holdings Pty Ltd Bieson Pty Limited Australia Ordinary 100 Bowvilla Pty Limited Australia Ordinary 100 CH Nominees Pty Limited (formerly Sandkilt (No 2) Pty Limited) Australia Ordinary 100 Charter Hall Asset Services Pty Limited (formerly Charter Hall Asset Services Limited) Australia Ordinary 100 Charter Hall Asset Services Europe Sp z.o.o Poland Ordinary 100 Charter Hall Direct Property Management Limited1 Australia Ordinary 100 Charter Hall Escrow Agent Pty Limited (formerly Charter Hall Holdings Real Estate (Vic) Pty Limited) Australia Ordinary 100 Charter Hall Funds Management Limited Australia Ordinary 100 Charter Hall Holdings Investment Trust Australia Ordinary 100 Charter Hall Holdings Real Estate Pty Limited Australia Ordinary 100 Charter Hall International Office Pty Limited Australia Ordinary 100 Charter Hall (NZ) Pty Limited Australia Ordinary 100 Charter Hall Office Collins Street Pty Limited Australia Ordinary 100 Charter Hall Office Investments Pty Limited Australia Ordinary 100 Charter Hall Office Management Limited Australia Ordinary 100 Charter Hall Real Estate Inc USA Ordinary 100 CHREI US Office LLC USA Ordinary 100 CHREI US Retail LLC USA Ordinary 100 Charter Hall Real Estate Europe Limited UK Ordinary 100 Charter Hall Real Estate Management Services Pty Limited Australia Ordinary 100 Charter Hall Real Estate Management Services (ACT) Pty Limited Australia Ordinary 100 Charter Hall Real Estate Management Services (NSW) Pty Limited Australia Ordinary 100 Charter Hall Real Estate Management Services (QLD) Pty Limited Australia Ordinary 100 Charter Hall Real Estate Management Services (SA) Pty Limited Australia Ordinary 100 Charter Hall Real Estate Management Services (TAS) Pty Limited Australia Ordinary 100 Charter Hall Real Estate Management Services (VIC) Pty Limited Australia Ordinary 100 Charter Hall Real Estate Management Services (WA) Pty Limited Australia Ordinary 100 Charter Hall Retail Management Limited1 Australia Ordinary 100	100 100 - - 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 -

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

35 Controlled entities (continued)

(a) Details of controlled entities of the Charter Hall Group (continued)

(a) Details of controlled entities of the Charter Hall Group (continued)
	Equity holding
Country of Class of 2012 Name of entity incorporation securities %	2011 %
Controlled entities of Charter Hall Holdings Pty Ltd (continued) Frolish Pty Limited Australia Ordinary 100 Real Estate Capital Investments Limited Australia Ordinary 100 Stelridge Pty Limited Australia Ordinary 100 Visokoi Pty Limited Australia Ordinary 100	100 100 100 100

(1) On 30 September 2011, the Charter Hall Group completed the acquisition from Macquarie Group Limited of all shares in Charter Hall Direct Property Management Pty Limited and Charter Hall Retail Management Pty Limited following the satisfaction of conditions precedent for a sum of $14.3 million. This transaction completed the acquisition of the Macquarie real estate funds management platform. Although Charter Hall did not previously own the shares of these entities, Charter Hall had economic control of these entities and hence they have been consolidated since March 2010.

since March 2010.
	Equity holding
Country of Class of 2012 Name of entity incorporation securities %	2011 %
Controlled entities of Charter Hall Property Trust Charter Hall Direct Retail Fund Australia Ordinary 66 Charter Hall Co-Investment Trust1 Australia Ordinary 100 Charter Hall Special Situations Office Fund2 Australia Ordinary 100 CHPT RP2 Trust3 Australia Ordinary 100	66 100 100 -

(1) Charter Hall Co-Investment Trust is an entity which was set up by Charter Hall Property Trust to hold its investments in Charter Hall Office Trust (CHOT), Charter Hall Retail REIT (CQR) and Charter Hall Direct Property Fund (CHDPF).

(2) Special Situations Office Fund is currently inactive, but will likely be used for Charter Hall‟s next unlisted fund.

(3) CHPT RP2 Trust was established on 29 May 2012 to acquire a 20% interest in the Retail Partnership No. 2 Trust (RP2T). RP2T entered into a contract on 28 June 2012 to acquire the Bay Village shopping centre at Bateau Bay in New South Wales.

a contract on 28 June 2012 to acquire the Bay Village shopping centre at Bateau Bay in New South Wales.
	Equity holding
Country of Class of 2012 Name of entity incorporation securities %	2011 %
Controlled entities of Charter Hall Direct Retail Fund Core Plus Retail Fund New Zealand Australia Ordinary 100 Redcliffe Retail Property Trust1 Australia Ordinary - Belconnen Retail Warehouse Trust1 Australia Ordinary - Box Hill Retail Warehouse Trust1 Australia Ordinary - Nerang Retail Warehouse Trust1 Australia Ordinary - Nowra Retail Warehouse Trust1 Australia Ordinary - Penrith Retail Warehouse Trust1 Australia Ordinary - Stafford Retail Warehouse Trust Australia Ordinary 100 Stafford Wiley Trust Australia Ordinary 100 Ipswich Retail Property Trust Australia Ordinary 100 Rothwell Retail Property Trust1 Australia Ordinary - Mentone Property Trust Australia Ordinary 100 Charter Hall MMN Property Trust Australia Ordinary 100 CPRF Gepps X Trust Australia Ordinary 100 CPRF Gepps 109 Trust Australia Ordinary 100 CPRF MSN Property Trust Australia Ordinary 100	100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

(1) On 31 May 2012, unitholders were advised that these trusts were dissolved on that date. Accordingly, the results of these entities are included in the statement of comprehensive income up until 31 May 2012.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

35 Controlled entities (continued)

(b) Details of controlled entities of the Charter Hall Property Trust Group

	Equity holding
Country of Class of 2012 Name of entity incorporation securities %	2011 %
Controlled entities of Charter Hall Property Trust Charter Hall Direct Retail Fund Australia Ordinary 49 Charter Hall Co-Investment Trust1 Australia Ordinary 100 Charter Hall Special Situations Office Fund2 Australia Ordinary 100 CHPT RP2 Trust3 Australia Ordinary 100	49 100 100 -

(2) Special Situations Office Fund is currently inactive, but will likely be used for Charter Hall‟s next unlisted fund.

Equity holding

Country of
Class of
2012
Name of entity
incorporation
securities
%

2011

%

Controlled entities of Charter Hall Direct Retail Fund
Core Plus Retail Fund New Zealand
Australia
Ordinary
100
Redcliffe Retail Property Trust1
Australia
Ordinary
-
Belconnen Retail Warehouse Trust1
Australia
Ordinary
-
Box Hill Retail Warehouse Trust1
Australia
Ordinary
-
Nerang Retail Warehouse Trust1
Australia
Ordinary
-
Nowra Retail Warehouse Trust1
Australia
Ordinary
-
Penrith Retail Warehouse Trust1
Australia
Ordinary
-
Stafford Retail Warehouse Trust
Australia
Ordinary
100
Stafford Wiley Trust
Australia
Ordinary
100
Ipswich Retail Property Trust
Australia
Ordinary
100
Rothwell Retail Property Trust1
Australia
Ordinary
-
Mentone Property Trust
Australia
Ordinary
100
Charter Hall MMN Property Trust
Australia
Ordinary
100
CPRF Gepps X Trust
Australia
Ordinary
100
CPRF Gepps 109 Trust
Australia
Ordinary
100
CPRF MSN Property Trust
Australia
Ordinary
100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

(1) On 31 May 2012, unitholders were advised that these trusts had been dissolved on that date. Accordingly, the results of these entities are included in the statement of comprehensive income up until 31 May 2012.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

36 Investments in associates

(a) Carrying amounts

Information relating to associates is set out below.

Charter Hall Group Ownership interest 2012 2011 2012 Name of entity Principal activity % % $'000	2011 $'000
Accounted for at fair value through profit or loss Unlisted Charter Hall Diversified Property Fund Property investment 25.2 36.4 11,713 Charter Hall Umbrella Fund Property investment 26.6 24.9 39,469 Charter Hall Direct Property Fund Property investment 3.8 3.5 10,770 Charter Hall Direct Industrial Fund Property investment 0.2 - 228 Charter Hall Property Securities Fund REIT securities investment 2.1 1.4 458	26,964 40,612 10,438 - 431
62,638	78,445
Equity accounted: Unlisted Charter Hall Opportunity Fund 4 Property development 3.0 3.0 1,128 Charter Hall Opportunity Fund 5 Property development 15.0 15.0 28,493 Charter Hall Core Plus Office Fund Property investment 13.9 16.2 112,951 Charter Hall Core Plus Industrial Fund Property investment 18.0 21.3 54,885 Charter Hall Office Trust1 Property investment 15.0 - 145,720 Retail Partnership No. 2 Trust2 Property investment 20.0 - - Listed Charter Hall Office REIT1 Property investment - 10.0 - Charter Hall Retail REIT Property investment 10.0 8.2 101,338	1,218 31,286 110,428 53,281 - - 185,681 88,189
444,515	470,083
Total investments in associates 507,153	548,528

(1) On 1 May 2012, the Charter Hall Office REIT was privatised. As a result the Charter Hall Office REIT changed from a listed REIT to a wholesale unit trust known as Charter Hall Office Trust.

(2) The 20% interest in the Retail Partnership No. 2 Trust (RP2T) was acquired on 29 May 2012 for $2. RP2T entered into a contract on 28 June 2012 to acquire the Bay Village shopping centre at Bateau Bay in New South Wales.

The above associates are incorporated in Australia.

The investments in Charter Hall Diversified Property Fund, Charter Hall Umbrella Fund, Charter Hall Direct Property Fund and Charter Hall Direct Industrial Fund are held by Charter Hall Property Trust (CHPT) and are accounted for at fair value through the profit or loss (note 14). The investment in Charter Hall Diversified Property Fund (DPF) consists of units which represent a 17.9% (2011: 19.6%) interest but also an additional investment in the form of bridging equity of $7.4 million (2011: $19.9 million), which is 7.3% (2011: 16.8%). CHPT has provided DPF with a bridging loan facility totalling $18 million, currently drawn to $7.4 million. This facility is available to DPF with an initial expiry date of 18 July 2018; however, there is a clause in the agreement which allows the borrower to provide written notice within 14 days prior to that date electing to extend the agreement in perpetuity.

The investment in Charter Hall Property Securities Fund is held by a controlled entity of Charter Hall Limited and is accounted for at fair value through the profit or loss (note 14).

The investments in Charter Hall Opportunity Funds 4 and 5 held by Charter Hall Limited are equity accounted in the consolidated financial statements (note 17). Both Charter Hall Limited and Charter Hall Property Trust have an investment in Charter Hall Core Plus Office Fund and Charter Hall Core Plus Industrial Fund, and are equity accounted.

Charter Hall Office Trust, Charter Hall Retail REIT and the Retail Partnership No. 2 Trust are held by Charter Hall Property Trust and are equity accounted (note 17). The carrying value of these investments is supported by value in use calculations.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

36 Investments in associates (continued)

36 Investments in associates (continued)
Charter Hall Property Trust Group Ownership interest 2012 2011 2012 Name of entity Principal activity % % $'000	2011 $'000
Accounted for at fair value through profit or loss Unlisted Charter Hall Diversified Property Fund Property investment 25.2 36.4 11,713 Charter Hall Umbrella Fund Property investment 26.6 24.9 39,469 Charter Hall Direct Property Fund Property investment 3.8 3.5 10,770 Charter Hall Direct Industrial Fund Property investment 0.2 - 228	26,964 40,612 10,438 -
62,180	78,014
Equity accounted: Unlisted Charter Hall Core Plus Office Fund Property investment 12.6 13.3 102,635 Charter Hall Core Plus Industrial Fund Property investment 7.8 21.3 23,885 Charter Hall Office Trust1 Property investment 15.0 - 145,720 Retail Partnership No. 2 Trust2 Property investment 20.0 - - Listed Charter Hall Office REIT1 Property investment - 10.0 - Charter Hall Retail REIT Property investment 10.0 8.2 101,338	90,257 53,281 - - 185,681 88,189
373,578	417,408
Total investments in associates 435,758	495,422

(1) On 1 May 2012, the Charter Hall Office REIT was privatised. As a result the Charter Hall Office REIT changed from a listed REIT to a wholesale unit trust known as Charter Hall Office Trust.

The above associates are incorporated in Australia.

The investments in Charter Hall Diversified Property Fund, Charter Hall Umbrella Fund, Charter Hall Direct Property Fund and Charter Hall Direct Industrial Fund are held by Charter Hall Property Trust (CHPT) and are accounted for at fair value through the profit or loss (note 14). The investment in Charter Hall Diversified Property Fund (DPF) consists of units which represent a 17.9% (2011: 19.6%) interest but also an additional investment in the form of bridging equity of $7.4 million (2011: $19.9 million), which is 7.3% (2011: 12.3%). CHPT has provided DPF with a bridging loan facility totalling $18 million, currently drawn to $7.4 million. This facility is available to DPF with an initial expiry date of 18 July 2018, however there is a clause in the agreement which allows the borrower to provide written notice within 14 days prior to that date electing to extend the agreement in perpetuity.

The investments in Charter Hall Core Plus Office Fund, Charter Hall Core Plus Industrial Fund, Charter Hall Office Trust, Charter Hall Retail REIT and the Retail Partnership No. 2 Trust are held by Charter Hall Property Trust and are equity accounted (note 17). The carrying value of these investments is supported by value in use calculations.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

36 Investments in associates (continued)

(b) Movements in carrying amounts

(i) Investments at fair value through profit or loss

	Charter Hall Group	Charter Hall Group	Charter Hall Group
	2012	2011	2012 2011 $'000 $'000
	$'000	$'000
Charter Hall Diversified Property Fund Opening balance Investment Redemptions and repayment of bridging equity Fair value adjustment			26,964 22,068 - 4,900 (14,306) - (945) (4)

	26,964	22,068
	-	4,900
	(14,306)	-
	(945)	(4)
Closingbalance	11,713	26,964	11,713 26,964
Charter Hall Umbrella Fund Opening balance Investment Fair value adjustment			40,612 41,578 - - (1,143) (966)

	40,612	41,578
	-	-
	(1,143)	(966)
Closingbalance	39,469	40,612	39,469 40,612
Charter Hall Direct Property Fund Opening balance Investment Fair value adjustment			10,438 9,787 - - 332 651

	10,438	9,787
	-	-
	332	651
Closingbalance	10,770	10,438	10,770 10,438
Macquarie Property Income Fund Opening balance Investment Fair value adjustment Disposal of units			- - - - - - - -

	-	306
	-	119
	-	14
	-	(439)
Closingbalance	-	-	- -
Charter Hall Direct Industrial Fund Opening balance Investment Fair value adjustment			- - 229 - (1) -

	-	-
	229	-
	(1)	-
Closingbalance	228	-	228 -
Charter Hall Property Securities Fund Opening balance Investment Fair value adjustment			- - - - - -

	431	-
	44	435
	(17)	(4)
Closingbalance	458	431	- -


Total investments at fair value through profit or loss Opening balance Investment Redemptions and repayment of bridging equity Fair value adjustment			78,014 73,433 229 4,900 (14,306) - (1,757) (319)
	78,445	73,739
	273	5,454
	(14,306)	(439)
	(1,774)	(309)
Closingbalance	62,638	78,445	62,180 78,014

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

36 Investments in associates (continued)

(b) Movements in carrying amounts (continued)
(ii) Equity accounted investments

(ii) Equity accounted investments
	Charter Hall Group
	2012	2011	2012 2011 $'000 $'000
	$'000	$'000
Charter Hall Opportunity Fund 4 Opening balance Investment Share of loss after income tax Distributions received/receivable			- - - - - - - -

	1,218	1,254
	-	-
	(90)	(26)
	-	(10)
Closingbalance	1,128	1,218	- -
Charter Hall Opportunity Fund 5 Opening balance Investment Share of loss after income tax Distributions received/receivable Reserves			- - - - - - - - - -

	31,286	24,670
	4,815	7,605
	(7,331)	(989)
	(259)	-
	(18)	-
Closingbalance	28,493	31,286	- -
Charter Hall Core Plus Office Fund Opening balance Investment Share of profit after income tax Distributions received/receivable Disposal of units Gain on remeasurement of equityinterest			90,257 104,314 10,086 - 7,690 10,787 (6,353) (5,058) - (20,008) 955 222

	110,428	104,314
	-	-
	8,460	11,415
	(6,992)	(5,516)
	-	-
	1,055	215
Closingbalance	112,951	110,428	102,635 90,257
Charter Hall Core Plus Industrial Fund Opening balance Share of profit after income tax Distributions received/receivable Disposal of units Gain on remeasurement of equityinterest			53,281 51,989 2,217 3,770 (1,724) (2,935) (30,094) - 205 457

	53,281	51,989
	4,711	3,770
	(3,324)	(2,935)
	-	-
	217	457
Closingbalance	54,885	53,281	23,885 53,281
Charter Hall Office Trust (formerly Charter Hall Office REIT) Opening balance Investment Share of profit/(loss) after income tax Distributions received/receivable Share of movement in reserves Gain on remeasurement of equityinterest			185,681 155,149 47,662 37,031 (8,161) 5,688 (93,735) (9,424) 12,961 (17,002) 1,312 14,239

	185,681	155,149
	47,662	37,031
	(8,161)	5,688
	(93,735)	(9,424)
	12,961	(17,002)
	1,312	14,239
Closingbalance	145,720	185,681	145,720 185,681
Retail Partnership No. 2 Trust Opening balance Investment*			- - - -

	-	-
	-	-
Closing balance	-	-	- -
* Investment of $2, which is $nil rounded to the nearest $1,000.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

36 Investments in associates (continued)

(b) Movements in carrying amounts (continued)

(ii) Equity accounted investments (continued)

	Charter Hall Group	Charter Hall Group	Charter Hall Group
	2012	2011	2012 2011 $'000 $'000
	$'000	$'000
Charter Hall Retail REIT Opening balance Investment Share of profit after income tax Distributions received/receivable Share of movement in reserves Gain on remeasurement of equityinterest			88,189 82,326 16,176 7,425 2,587 4,928 (7,820) (6,177) 145 (2,128) 2,061 1,815
	88,189	82,326
	16,176	7,425
	2,587	4,928
	(7,820)	(6,177)
	145	(2,128)
	2,061	1,815
Closingbalance	101,338	88,189	101,338 88,189

Total equity accounted investments Opening balance Investment Share of (loss)/profit after income tax Distributions received/receivable Reserves Disposal of units Gain on remeasurement of equityinterests
	470,083	419,702
	68,653	52,061
	176	24,786
	(112,130)	(24,062)
	13,088	(19,130)
	-	-
	4,645	16,726
Closingbalance	444,515	470,083	373,578 417,408

(c) Fair value of listed investments in associates

(c) Fair value of listed investments in associates
	Charter Hall Group

Charter Hall Office REIT1 Charter Hall Retail REIT	-	165,397

(1) Charter Hall Office REIT was delisted on 13 April 2012 and privatised on 1 May 2012.

Fair value represents market value of CQO and CQR units as at 30 June 2012 and 2011.

(d) Share of equity accounted associates’ profits or losses

(d) Share of equity accounted associates’ profits or losses
	Charter Hall Group


Profit before income tax Income tax expense	2,674	26,534
Profit after income tax	176 24,786 4,333 25,173

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

36 Investments in associates (continued)

(e) Contingent liabilities of associates

Subsequent to year end, following commercial negotiations between the Development Alliance (DA) partners in the Little Bay Cove project, being Charter Hall Opportunity Fund 5 (CHOF5) and TA Global Development Pty Limited (TAG), in accordance with the DA Umbrella Deed, a Notice of Mediation has been issued to TAG by CHFML (in its capacity as trustee of CHOF5) in relation to a commercial dispute between the DA partners. The mediation notice has been rejected by TAG with a request for a clarification of the details of the alleged dispute between the parties. Ongoing commercial negotiations with TAG are being undertaken in an attempt to agree on the future direction of the project.

As at the date of signing the financial statements, CHOF5 is not able to determine whether any financial impact will occur as a result of these negotiations and any subsequent dispute or mediation process.

Development of the Estate Works to create the individual housing and development superlots at the Little Bay project is currently underway, with completion scheduled for May 2013.

CHOF5 has been in negotiations with Westpac, who provide the Little Bay debt facility, about ongoing covenant compliance and extending the facility past the expiry of January 2013. As at 30 June 2012 all covenants were satisfied and complied with. CHOF5 has received a draft independent valuation prepared by Colliers International which would indicate that steps would need to be taken to continue to comply with the covenants assuming the bank accepted the valuation. Discussions around any adjustment to the loan to valuation (LVR), valuation, facility limit, the expiry and any payment required are still occurring.

(f) Summarised financial information of associates

(f) Summarised financial information of associates
Charter Hall Group Charter Hall Group’s share of:
Assets Liabilities Revenues $‟000 $‟000 $‟000	Profit/(loss) $‟000
2012 Charter Hall Diversified Property Fund 25,333 5,945 2,855 Charter Hall Umbrella Fund 37,417 586 2,355 Charter Hall Direct Property Fund 19,476 8,586 2,688 Charter Hall Direct Industrial Fund 317 103 20 Charter Hall Property Securities Fund 472 21 63 Charter Hall Opportunity Fund 4 3,556 2,428 818 Charter Hall Opportunity Fund 5 52,731 24,238 14,393 Charter Hall Core Plus Office Fund 207,275 94,324 18,550 Charter Hall Core Plus Industrial Fund 109,583 54,698 9,793 Charter Hall Office Trust (formerly Charter Hall Office REIT) 296,878 151,158 18,092 Retail Partnership No. 2 Trust - - - Charter Hall Retail REIT 194,458 93,120 18,606	(475) 1,892 1,099 7 29 (90) (7,331) 8,460 4,711 (8,161) - 2,587
947,496 435,207 88,233	2,728
2011 Charter Hall Diversified Property Fund 55,979 30,009 5,332 Charter Hall Umbrella Fund 37,957 648 1,982 Charter Hall Direct Property Fund 18,320 7,800 1,834 Charter Hall Opportunity Fund 4 3,756 2,538 201 Charter Hall Opportunity Fund 5 46,964 15,678 2,844 Charter Hall Core Plus Office Fund 220,889 110,461 15,739 Charter Hall Core Plus Industrial Fund 94,925 41,644 10,801 Charter Hall Office REIT 322,713 137,032 23,055 Charter Hall Retail REIT 157,069 68,880 17,388	1,979 2,226 1,344 (26) (989) 11,415 3,770 5,688 4,928
958,572 414,690 79,176	30,335

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

36 Investments in associates (continued)

(f) Summarised financial information of associates (continued)

(f) Summarised financial information of associates (continued)	(f) Summarised financial information of associates (continued)
Charter Hall Property Trust Group Charter Hall Property Trust Group’s share of:
Assets Liabilities Revenues $‟000 $‟000 $‟000	Profit/(loss) $‟000
2012 Charter Hall Diversified Property Fund 25,333 5,945 2,855 Charter Hall Umbrella Fund 37,417 586 2,355 Charter Hall Direct Property Fund 19,476 8,586 2,688 Charter Hall Direct Industrial Fund 317 103 20 Charter Hall Core Plus Office Fund 188,344 85,709 16,862 Charter Hall Core Plus Industrial Fund 47,689 23,804 4,610 Charter Hall Office Trust (formerly Charter Hall Office REIT) 296,878 151,158 18,092 Retail Partnership No. 2 Trust - - - Charter Hall Retail REIT 194,458 93,120 18,606	(475) 1,892 1,099 7 7,690 2,217 (8,161) - 2,587
809,912 369,011 66,088	6,856
2011 Charter Hall Diversified Property Fund 55,979 30,009 5,332 Charter Hall Umbrella Fund 37,957 648 1,982 Charter Hall Direct Property Fund 18,320 7,800 1,834 Charter Hall Core Plus Office Fund 180,541 90,284 15,739 Charter Hall Core Plus Industrial Fund 94,925 41,644 10,801 Charter Hall Office REIT (formerly Charter Hall Office REIT) 322,713 137,032 23,055 Charter Hall Retail REIT 157,069 68,880 17,388	1,979 2,226 1,344 10,787 3,770 5,688 4,928
867,504 376,297 76,131	30,722

37 Investments in joint ventures

(a) Carrying amounts

Information relating to joint ventures is set out below.

Charter Hall Group Ownership interest
2012 2011 Name of company Principal activity % %	2012 2011 $’000 $‟000
Unlisted Commercial and Industrial Property Pty Ltd Property development 50 50 Maguire Macquarie Management LLC Asset management 50 50 Macquarie-Regency Management LLC Asset management 50 50 Reliance Investment Management Pty Limited Investment management - 50 Charter Hall Retail JV Trust Property investment 50 50	27,598 28,843 - - 46 26 - 55 - 18,700
	27,644 47,624
Charter Hall Property Trust Group Ownership interest
2012 2011 Name of company Principal activity % %	2012 2011 $’000 $‟000
Unlisted Charter Hall Retail JV Trust Property investment 50 50	- 18,700

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

37 Investments in joint ventures (continued)

(b) Movements in carrying amounts

(b) Movements in carrying amounts
	Charter Hall Group

Commercial and Industrial Property Pty Limited
Opening balance Share of profit after income tax Dividends received/receivable	28,843	26,517
	1,544	3,984
	(2,789)	(1,658)
Closing balance	27,598	28,843	- -

Maguire Macquarie Management LLC
Opening balance	-	-	- -
Closing balance	-	-	- -

Macquarie-Regency Management LLC
Opening balance Share of profit after income tax Dividends received/receivable	26	117
	86	221
	(66)	(312)
Closing balance	46	26	- -

Reliance Investment Management Pty Limited
Opening balance Investment Share of profit after income tax Disposal	55	-
	93	281
	(18)	(226)
	(130)	-
Closing balance	-	55	- -

Charter Hall Retail JV Trust
Opening balance Investment Share of profit after income tax Distribution received/receivable Reclassified to assets held for sale	18,700	-
	-	18,534
	1,161	1,631
	(1,175)	(1,465)
	(18,686)	-
Closing balance	-	18,700	- 18,700
Total investments in joint ventures Opening balance Investment Share of profit after income tax Distributions/dividends received/receivable Disposal Reclassified to assets held for sale

	47,624	26,634
	93	18,815
	2,773	5,610
	(4,030)	(3,435)
	(130)	-
	(18,686)	-
Closing balance	27,644	47,624	- 18,700

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

37 Investments in joint ventures (continued)

(c) Carrying value of joint venture entity

(c) Carrying value of joint venture entity
	Charter Hall Group

Commercial and Industrial Property Pty Limited
	27,598	28,843

In accordance with our accounting policy (note 1(h)), consideration was given to the fair value less cost to sell (FVLCTS) method but management believes value in use (VIU) gives the most accurate recoverable amount and resulted in a higher recoverable amount.

The base case scenario for assessing value in use has been updated by management at 30 June 2012 and includes the Group‟s share of expected net profit after tax in line with forecast FY13 of $2.5 million with a growth factor of 5% and discount rate of 15% through to the end of the forecast period.

There has been no impairment or reversal of impairment in the year ended 30 June 2012 (2011: nil).

(d) Share of joint venture’s revenue, expenses and results

(d) Share of joint venture’s revenue, expenses and results
	Charter Hall Group


Revenues Expenses	64,524	83,055
Profit before income tax	3,235 7,323 1,161 1,631

(e) Share of joint venture’s assets and liabilities

(e) Share of joint venture’s assets and liabilities
	Charter Hall Group


Current assets Non-current assets	30,622	19,775
	1,133	35,809
Total assets	31,755	55,584	- 35,650
Current liabilities Non-current liabilities
	19,518	8,985
	5,198	21,726
Total liabilities	24,716	30,711	- 16,950
Net assets	7,039	24,873	- 18,700

At 30 June 2012 the investment in the Charter Hall Retail JV Trust has been reclassified to held for sale.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

38 Events occurring after the reporting date

Since 30 June 2012, the Group has completed the following:

==> picture [9 x 12] intentionally omitted <==

On 1 August 2012, the Group announced that a Charter Hall managed wholesale fund (the Retail Partnership No. 2 Trust (RP2T)) had entered into an unconditional contract to acquire Bay Village Shopping Centre in New South Wales for $164 million. The Group holds a 20% equity interest in RP2T. The purchase of the centre was completed on 15 August 2012. The Group‟s equity commitment to fund the acquisition is $19.5 million which was paid on 15 August 2012.
In June 2012, Charter Hall Direct Property Management Limited contracted to purchase the right to manage the PFA Diversified Property Trust (PFA) subject to approval by unitholders. With the unitholders approving the purchase of the management rights for $5 million cash on 15 August 2012 and Australian Securities and Investments Commission (ASIC) approval given shortly after, Charter Hall Direct Property Management Limited is now the responsible entity for PFA.
Subsequent to year end, following commercial negotiations between the Development Alliance (DA) partners in the Little Bay Cove project, being CHOF 5 and TA Global Development Pty Ltd (TAG), in accordance with the DA Umbrella Deed, a Notice of Mediation has been issued to TAG by CHFML (in its capacity as trustee of CHOF 5) in relation to a commercial dispute between the DA partners. The mediation notice has been rejected by TAG with a request for a clarification of the details of the alleged dispute between the parties. Ongoing commercial negotiations with TAG are being undertaken in an attempt to agree on the future direction of the project.

Development of the Estate Works to create the individual housing and development superlots at the Little Bay project is currently underway, with completion scheduled for May 2013. Refer to note 36(e).

Except for the matters discussed above, no other matter or circumstance has arisen since 30 June 2012 that has significantly affected, or may significantly affect:

(a) the Group's operations in future financial years; or

(b) the results of those operations in future financial years; or

39 Reconciliation of profit after tax to net cash inflow from operating activities

	Charter Hall Group	Charter Hall Group	Charter Hall Group
Profit after tax for the year			33,164 61,247
	14,403	55,237
Depreciation and amortisation 3,851 1,545 1,334 - Non-cash employee benefits expense - security-based benefits 2,338 4,090 - - Loss/(gain) on sale of investments, property and derivatives 1,627 (3,350) 2,179 (2,523) Net gain on remeasurement of equity interests (4,645) (16,726) (4,533) (16,733) Fair value adjustments 8,421 3,213 9,759 834 Impairment of management rights - 19,171 - - Change in operating assets and liabilities, net of effects from purchase of controlled entity Decrease/(increase) in trade debtors and other receivables 20,189 2,979 (29,013) 9,700 (Decrease)/increase in trade creditors and accruals (4,985) 82 (5,230) (8,548) Net income receivable from investment in associates and joint venture entities 24,185 (4,789) 17,206 (3,430) Increase/(decrease) in provisions 14,239 - - (340) Decrease in provision for deferred income tax (615) (2,670) - -	3,851	1,545
	2,338	4,090
	1,627	(3,350)
	(4,645)	(16,726)
	8,421	3,213
	-	19,171
Net cash inflow from operating activities	79,008	58,782	24,866 40,207

Dividend and interest income received on investments has been classified as cash flow from operating activities.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

40 Earnings per security	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 Cents Cents Cents Cents	Charter Hall Group Charter Hall Property Trust Group 2012 2011 2012 2011 Cents Cents Cents Cents
(a) Basic earnings per stapled security Basic earnings attributable to the stapled securityholders (b) Diluted earnings per security Diluted earnings attributable to the stapled securityholders

	5.64	17.85


	5.35	17.06

	2012	2011
	$’000	$‟000
(c) Reconciliations of earnings used in calculating earnings per security Profit attributable to the ordinary equity holders of the Group used in calculating basic earnings per security Interest received from LTI securities

Profit attributable to the ordinary equity holders of the Group used in calculating diluted earnings per security	16,801 54,415 36,087 57,831

(d) Weighted average number of securities used as the denominator

	Charter Hall Group	Charter Hall Group	Charter Hall Group

Weighted average number of ordinary securities used as the denominator in calculating basic earnings per security Adjustments for calculation of diluted earnings per security: Performance rights Service rights Options Securities issued under the Charter Hall Limited Executive Loan SecurityPlan(ELSP)	295,624,609	293,253,621	293,253,621 3,480,731 206,340 9,482,030 12,585,920
Weighted average number of ordinary securities and potential ordinary securities used as the denominator in calculating diluted earningsper security	313,982,470 319,008,642 313,982,470		319,008,642

(e) Information concerning the classification of securities

(i) Performance rights and options issued under the Charter Hall Performance Rights and Options Plan

The performance rights and options are unquoted securities and conversion to stapled securities, and vesting to executives, is subject to service and performance conditions.

(ii) Securities issued under the Charter Hall Limited Executive Loan Security Plan

Securities issued under the Charter Hall Limited Executive Loan Security Plan have been issued in trust and have corresponding loans granted to employees. Under AASB 2 Share-based Payment , the loan, interest received on the loan, securities and the distribution paid and payable are derecognised for the preparation of the financial statements but recognised for the calculation of diluted earnings per security.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

41 Security-based benefits

(a) Charter Hall - Executive Loan Security Plan (ELSP) (legacy plan)

The ELSP was suspended on 1 July 2009.

The establishment of the Charter Hall Limited Executive Loan Security Plan was approved by the Board in the process of the initial public offering. Staff who were eligible to participate in the plan were determined by the Joint Managing Directors in discussion with the Board.

Securities were granted under the plan at market value and were purchased with a loan to the employee. Recourse on the loan is limited to the value of the securities. The securities are intended to vest over a three-year period in equal portions subject to performance and service conditions. The amount of interest due on the loan is equivalent to the amount of the distribution receivable on the underlying securities.

Distributions on the loan securities are paid to Charter Hall Limited as interest receivable on the loan provided to employees.

As ELSP members do not hold securities in their own name, the plan manager seeks instructions from plan members on their voting intentions. The plan manager distributes a voting instruction form to collate responses and completes the ELSP‟s proxy form for lodgement with the share registry.

Set out below are summaries of securities granted under the plan:

Charter Hall Group and Charter Hall Property Trust Group 2012 Number	2011 Number
Opening balance (number of securities) 12,585,920 Impact of consolidation at one for four - Cancellation of forfeited LTI securities off market (11,907,844)	50,343,597 (37,757,677) -
678,055	12,585,920

During the year, nil (2011: nil) securities were forfeited by ELSP members but have been retained in the plan. The remaining ELSP securities were forfeited on 23 July 2012.

(b) Charter Hall - Performance Rights and Options Plan (PROP)

The performance rights and options are unquoted securities and conversion to stapled securities, and vesting to executives, is subject to service and performance conditions which are discussed in the Remuneration Report.

Charter Hall Group and Charter Hall Property Trust Group 2009 2010 2011 2012 Number Number Number Number	Total Number
Performance rights Rights issued on 22/12/08 407,242 - - - Rights issued on 13/11/09 - 1,562,250 - - Rights issued on 18/6/10 - 644,625 - - Rights issued on 6/9/10 - - 863,345 - Rights issued on 11/11/10 - - 465,388 - Rights issued on 17/1/12 - - - 3,905,231	407,242 1,562,250 644,625 863,345 465,388 3,905,231
Rights issued 407,242 2,206,875 1,328,733 3,905,231 Number rights forfeited/lapsed in prior years (27,094) (109,467) (7,693) - Number rights forfeited/lapsed in current year (380,148) (344,768) (427,538) (433,564) Number rights vested in prior year - - - - Number rights vested in current year - (704,912) - -	7,848,081 (144,254) (1,586,018) - (704,912)
Closing balance - 1,047,728 893,502 3,471,667	5,412,897

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

41 Security-based benefits (continued)

(b) Charter Hall - Performance Rights and Options Plan (PROP) (continued)

Charter Hall Group and Charter Hall Property	2009	2010	2011	2012	Total
Trust Group
	Number	Number	Number	Number	Number
Service rights
Rights issued on 6/9/10	-	-	316,377	-	316,377
Rights issued on 22/5/12	-	-	-	431,516	431,516
Rights issued	-	-	316,377	431,516	747,893
Number rights forfeited/lapsed in prior years	-	-	(51,096)	-	(51,096)
Number rights forfeited/lapsed in current year	-	-	(107,584)	-	(107,584)
Number rights vested in prior year	-	-	-	-	-
Number rights vested in current year	-	-	-	-	-
Closing balance	-	-	157,697	431,516	589,213
Options
Options issued on 4/11/09 at $1.94	-	4,088,078	-	-	4,088,078
Options issued on 13/11/09 at $1.94	-	1,497,036	-	-	1,497,036
Options issued on 18/6/10 at $2.80	-	1,611,656	-	-	1,611,656
Options issued on 6/9/10 at $2.44	-	-	2,035,649	-	2,035,649
Options issued on 11/11/10 at $2.44	-	-	1,163,464	-	1,163,464
Options issued on 19/1/11 at $2.35	-	-	123,397	-	123,397
Options issued	-	7,196,770	3,322,510	-	10,519,280
Number options forfeited/lapsed in prior years	-	(391,472)	(19,232)	-	(410,704)
Number options forfeited/lapsed in current year	-	(1,587,261)	(584,137)	-	(2,171,398)
Number options vested in prior year	-	-	-	-	-
Number options vested in current year	-	(1,707,343)	-	-	(1,707,343)
Closing balance	-	3,510,694	2,719,141	-	6,229,835

(c) Expenses arising from security-based benefits transactions

Total expenses arising from security-based benefits transactions recognised during the year as part of employee benefit expense were as follows:

were as follows:
	Charter Hall Group

Performance rights and options plan	2,338	4,090	-	-

The model inputs for the Black-Scholes method for assessing the fair value at loan date for the ELSP securities and PROP rights and options issued during the year ended 30 June 2012 include the following:

Grant date	07/08/08 10/10/08 19/11/08 22/12/08 13/11/09 18/06/10
Security price at grant date Loan value per security Expiry of loan Expected price volatility Risk-free interest rate	$3.46 $2.64 $1.64 $1.20 $2.40 $2.80 $4.16 $4.16 $4.16 $4.16 $1.94 $2.80 06/08/13 09/08/13 18/11/13 21/12/13 01/07/14 18/06/15 23.68% 22.75% 58.06% 59.49% 40.00% 40.00% 5.85% 4.28% 3.72% 3.19% 5.50% 5.50%

Security prices for prior years have been restated for the unit consolidation during 2011.

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

41 Security-based benefits (continued)

(c) Expenses arising from security-based benefits transactions (continued)

Grant date Security price at grant date Loan value per security Expiry of loan Expected price volatility Risk-free interest rate	06/09/10 11/11/10 11/01/11 17/01/12 27/02/12 18/05/12
	$2.44 $2.44 $2.35 $2.10 $2.08 $2.17 $2.44 $2.44 $2.35 N/A N/A N/A 06/09/15 06/09/15 06/09/16 N/A N/A N/A 40.00% 40.00% 40.00% 39.00% 35.00% 30.00% 5.50% 5.50% 5.50% 3.90% 4.30% 3.70%

Security prices for prior years have been restated for the unit consolidation during 2011.

42 Deed of cross guarantee

Charter Hall Group

Charter Hall Limited and Charter Hall Holdings Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the other. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and directors‟ reports under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.

(a) Consolidated statement of comprehensive income and summary of movements in consolidated accumulated losses

The above companies represent a „closed group‟ for the purposes of the Class Order and, as there are no other parties to the deed of cross guarantee that are controlled by Charter Hall Limited, they also represent the „extended closed group‟.

Set out below is a consolidated statement of comprehensive income and a summary of movements in consolidated accumulated losses for the year of the closed group consisting of Charter Hall Limited and Charter Hall Holdings Pty Ltd.

2012 $’000	2011 $‟000
Statement of comprehensive income Revenue 91,176 Fair value adjustment on contingent consideration 1,355 Depreciation (720) Finance costs (37,506) Foreign exchange loss (90) Share of net (loss)/gain of associates accounted for using the equity method (5,894) Gain on sale of investments, property and derivatives 479 Impairment of goodwill - Fair value adjustments (2,351) Amortisation of management rights (1,306) Performance fee clawback (14,239) Other expenses (56,267)	60,783 - (1,506) (16,565) (407) 2,742 793 (19,171) (10,742) - - (51,715)
Loss before income tax (25,363)	(35,788)
Income tax benefit 13,075	7,247
Loss for the year (12,288)	(28,541)
Other comprehensive income/(loss) for the year: Exchange differences on translation of foreign operations 18	(18)
Total comprehensive loss for the year (12,270)	(28,559)
Summary of movements in consolidated accumulated losses Accumulated losses at the beginning of the financial year (81,262) Loss for the year (12,288)	(52,721) (28,541)
Accumulated losses at the end of the financial year (93,550)	(81,262)
	77

Charter Hall Group and Charter Hall Property Trust Group

Notes to the consolidated preliminary financial report for the year ended 30 June 2012

42 Deed of cross guarantee (continued)

(b) Balance sheet

Set out below is a consolidated balance sheet of the closed group consisting of Charter Hall Limited and Charter Hall Holdings Pty Ltd.

2012 $’000	2011 $‟000
Assets Current assets Cash and cash equivalents 6,866 Trade and other receivables 31,142	12,501 39,011
Total current assets 38,008	51,512
Non-current assets Trade and other receivables 5,000 Investments accounted for using the equity method 57,219 Investment in associates at fair value through profit or loss 13,110 Investments in controlled entities 85,465 Property, plant and equipment 3,026 Investment property - Intangible assets 98,687 Deferred tax assets 12,513	5,000 61,402 15,461 75,455 3,159 15,800 99,994 10,767
Total non-current assets 275,020	287,038
Total assets 313,028	338,550
Liabilities Current liabilities Trade and other payables 45,267 Provisions 14,847	77,786 816
Total current liabilities 60,114	78,602
Non-current liabilities Trade and other payables 10,539 Loans from Charter Hall Property Trust 163,543 Deferred tax liabilities 990 Provisions 1,236	12,106 355,874 872 1,086
Total non-current liabilities 176,308	369,938
Total liabilities 236,422	448,540
Net assets/(liabilities) 76,606	(109,990)
Equity Contributed equity 209,551 Reserves (39,395) Accumulated losses (93,550)	9,503 (38,231) (81,262)
Total equity 76,606	(109,990)

On 18 June 2012, the Group announced implementation of the $200 million capital reallocation from Charter Hall Property Trust (CHPT) to Charter Hall Limited (CHL), effective 30 June 2012. The capital reallocation aims to ensure a more appropriate allocation of capital between CHPT and CHL (which together trade on the Australian Securities Exchange as Charter Hall Group) which is more closely aligned with the Group‟s long-term growth strategy. Under the capital reallocation proposal approved by securityholders at the Annual General Meeting on 24 November 2011, CHPT made capital payments of $200 million which were compulsorily applied as a capital contribution for existing shares of CHL.

AI assistant

CHARTER HALL GROUP — Interim / Quarterly Report 2012

64645_rns_2012-08-27_92b53dda-ed80-4896-a603-00f8a5779feb.pdf

APPENDIX 4E

Preliminary Financial Report for the year ended 30 June 2012

Name of Entity:

Results for announcement to the market

Results for announcement to the market (continued)

Review of operations

Property investment

i) Direct property investments

Charter Hall Direct Retail Fund (DRF) - $0.2 billion FUM, CHPT interest 50% and CHL interest 16%

ii) Listed funds

Charter Hall Retail REIT (CQR) - $2.0 billion FUM, CHPT interest 10% with an equity interest carrying value of $101.3 million

Review of operations (continued)

iii) Wholesale unlisted funds

Core Plus Office Fund (CPOF) – $1.5 billion FUM, CHPT interest 13% and CHL interest 1% with a combined equity interest carrying value of $113.0 million

Charter Hall Office Trust (CHOT) (formerly Charter Hall Office REIT (CQO)) - $2.0 billion FUM, CHPT interest 15% with an equity interest carrying value of $145.7 million

Core Plus Industrial Fund (CPIF) - $0.6 billion FUM, CHPT interest 8% and CHL interest 10% with a combined equity interest carrying value of $54.9 million

Other wholesale unlisted funds

iv) Retail investor funds - This business manages equity raised from retail investors via advisers and through direct distribution channels, with combined FUM of $1.5 billion

Charter Hall Diversified Property Fund (DPF) - $0.1 billion FUM, CHPT equity interest of 25% representing a carrying value of $11.7 million

Review of operations (continued)

Charter Hall Direct Property Fund (CHDPF) - $0.5 billion FUM, CHPT interest 4% representing a carrying value of $10.8 million

Charter Hall Umbrella Fund (CHUF) - $0.1 billion FUM, CHPT interest 27% representing a carrying value of $39.5 million

Other managed funds

Property funds management

Development investment

Review of operations (continued)

Charter Hall Opportunity Fund 4 (CHOF4) - $0.1 billion FUM, CHL interest 3% with an equity interest carrying value of $1.1 million

Charter Hall Opportunity Fund 5 (CHOF5) - $0.5 billion FUM, CHL interest 15% with an equity interest carrying value of $28.5 million

Significant changes in the state of affairs

Undistributed income

Net Tangible Assets

Control gained or lost over entities during the year

Details of Associates and Joint Venture entities

Other significant information

Accounting standards used by foreign entities

Segment results:

Performance trends:

Other Factors:

Audit

CHARTER HALL GROUP

Important notice

Preliminary financial report for the year ended 30 June 2012

Contents

Preliminary financial report for the year ended 30 June 2012

Consolidated statements of comprehensive income

Preliminary financial report for the year ended 30 June 2012

Consolidated balance sheets

Consolidated statement of changes in equity – Charter Hall Group

Attributable to the owners of Charter Hall Group

Consolidated statement of changes in equity – Charter Hall Property Trust Group

Preliminary financial report

Consolidated cash flow statements

1 Summary of significant accounting policies

(a) Basis of preparation

Compliance with IFRSs

Historical cost convention

Critical accounting estimates

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation

(i) Controlled entities

(ii) Associates

(iii) Joint ventures

Joint venture entities

Jointly controlled assets

1 Summary of significant accounting policies (continued)

(c) Segment reporting

(d) Foreign currency translation

(i) Functional and presentation currency

(ii) Group companies

(e) Revenue recognition

(i) Rental income

1 Summary of significant accounting policies (continued)

(e) Revenue recognition (continued)

(ii) Management fees

(iii) Performance fees

(iv) Interest income

(v) Dividends/distributions

CHARTER HALL GROUP Interim / Quarterly Report 2012