CHARTER HALL GROUP

Charter Hall Group

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Half Year Update Period ending 31 December 2013

Charter Hall Half Year Update

Dear investor

We have had a positive start to the 2014 financial year, delivering a 10% increase in operating earnings per security over the previous corresponding period (pcp) to 12.42 cents per security; a distribution of 11.0 cents per security, representing 12.2% growth; and 6% growth in Australian property funds under management to $10.5 billion.

In line with our strategy of accessing, deploying, managing and investing equity alongside our capital partners, over the six months to 31 December 2013 we have secured $702 million of gross equity commitments, acquired $1.0 billion of office, retail and industrial assets and continued our capital partnering model with a further $99 million of co-investments.

The Group generated statutory profit after tax of $28.6 million, down 4.3% on the prior period, which was impacted by non-cash items, however importantly operating earnings grew to $38.1 million, up 13.1% on the prior period.

As a fully integrated property group, our business is focused on two key earnings streams, being property investment income generated from co-investing alongside our capital partners and secondly, the property funds management earnings generated from the fund and property services provided to our managed portfolios by our in-house, specialist property and support services teams.

Property investments - operating earnings of $23.2 million, up 7.6%

Charter Hall’s property investments total $622 million at 31 December 2013, up from $603 million at 30 June 2013. Charter Hall’s investment portfolio annualised earnings yield has remained stable at 7.6%.

Charter Hall has co-invested an additional $99 million across its managed funds during the period including investments in the unlisted Core Logistics Partnership, listed Charter Hall Retail REIT and unlisted Charter Hall Office Trust.

Over the past two and a half years, Charter Hall has realised $187 million of capital from its non core co-investments and reinvested $216 million into higher yielding longer term core investments. Extending the WALE and quality of earnings from the Group’s property investments continues to be a key focus area.

Property funds management - operating earnings of $16.7 million, up 23.3%

The Group’s Australian property funds under management (FUM) increased 6% over the half year to $10.5 billion, with the Group’s offshore portfolio now representing less than 1% of total FUM following the sale of Charter Hall Retail REIT’s Polish assets.

The Group has actively raised equity across a number of its wholesale, listed and retail investor funds, securing $702 million of gross new equity during the half, with an additional $213 million post balance date. This included the launch of the successful $125 million Charter Hall Direct WorkZone Trust, which raised $72 million of equity over December 2013 and January 2014, closing oversubscribed and well ahead of schedule.

This equity has been invested across a number of high quality Australian office, retail and industrial assets. Within the office sector, Charter Hall Office Trust acquired the remaining 50% interest in the landmark No.1 Martin Place Sydney, taking its ownership to 100%.

We have continued to reweight our portfolio to the non-discretionary retail and industrial sectors. Charter Hall Retail REIT acquired three non-discretionary shopping centres - Rosebud Plaza, Southgate Plaza and Secret Harbour Shopping Centre for $193 million and reflecting an average initial yield of 7.7%. Our Charter Hall managed Core Plus Industrial Fund, Direct Industrial Fund No.2 and Core Logistics Partnership also collectively acquired 10 industrial assets to take our total industrial portfolio to $1.6 billion.

$140 million Institutional Placement

To continue to drive the Group’s partnering business model and to provide growth capital following an active three years of recycling, Charter Hall undertook a fully underwritten $140 million Institutional Placement in February.

The Placement was well supported by both existing and new institutional investors, with approximately 36.8 million new ordinary units issued at a fixed price of $3.80 per security, representing a discount of 3.6% to the closing price on 24 February 2014 of $3.94.

This Placement was used to repay drawn debt used for recent investments and will be used to fund identified investments and to provide capital for growth initiatives planned.

Strategy and outlook

Our strategy is to use our specialist property expertise to access, deploy, manage and invest equity alongside our partners to create value and provide sustainable income and capital returns for our investment partners and Charter Hall securityholders. Charter Hall is focused on:

We were pleased to upgrade Charter Hall’s earnings guidance and, barring unexpected events, have articulated to the market estimated FY14 Operating Earnings per security growth of 7-9% on the expanded total capital base, and a distribution payout ratio to continue at between 85% and 95% of Operating Earnings per security.

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David Southon Joint Managing Director

David Harrison Joint Managing Director

Executing strategies to achieve the objectives of its investors
Enhancing return on equity and continuing to improve the quality of earnings for securityholders through:
Sourcing equity to invest into core real estate sectors targeting growth in the Group’s FUM platform of 6-10% per annum
Driving further growth in property investment portfolio earnings and capital value
Diversifying sources of debt funding for the managed funds platform
Continuing to capitalise on a scalable operating platform to service FUM growth
Reweighting the property investment portfolio by increasing the proportion of retail and industrial investments.

Looking ahead, we believe Charter Hall is well positioned to continue to capture the growing appetite for Australian property from both institutional and retail investors.

Period ending 31 December 2013

Earnings Drivers

Property Investment

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Coinvestment Yield (excl DRF) (RHS) Property Investments (excl DRF) (LHS)
700.0 9.0%
600.0
8.0%
500.0
7.0%
400.0
300.0
6.0%
200.0
5.0%
100.0
0.0 4.0%
Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13
Property Funds Management
PFM EBITDA Margin (RHS) Australian FUM (LHS)
12.0 40.0%
35.0%
10.0
30.0%
8.0
25.0%
6.0 20.0%
15.0%
4.0
10.0%
2.0
5.0%
0.0 0.0%
Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13
$m
Yield (%)
$bn
EBITDA Margin
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Front Cover: WorkZone 202 Pier Street, Perth WA

Since our launch in 1991, Charter Hall has grown to become one of Australia’s leading property groups managing over 190 office, retail and industrial properties on behalf of institutional, wholesale and retail investors.

9 Castlereagh Street, Sydney NSW

Results

Key financial results

Operating earnings per security (OEPS) of 12.42cps, up 10.0% on pcp

Distribution of 11.0 cents per security (cps), up 12.2% on pcp

Statutory profit after tax of $28.6 million, down 4.3% on pcp Operating earnings of $38.1 million, up 13.1% on pcp

Operational performance

6% growth in Australian property funds under management over the half year to $10.5 billion

Secured $702 million of gross equity inflows during the half, with $213 million raised since half year end

Completed $1.9 billion of property transactions during the half year

Property funds investment yield stable at 7.6%

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

Unit registry Link Market Services Limited Locked Bag A14 Sydney South NSW 1235

Telephone

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

Email

[email protected]

Website

www.linkmarketservices.com.au For other enquiries relating to your investment contact: Manager’s office (Please note change of details) Level 20, No.1 Martin Place Sydney NSW 2000 GPO Box 2704 Sydney NSW 2001

Telephone

1300 365 585 (within Australia) +61 2 8651 9000 (outside Australia)

Facsimile

(02) 9221 4655 (within Australia) +61 2 9221 4655 (outside Australia)

Email

[email protected]

Website

www.charterhall.com.au

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

Disclaimer of Liability

While every effort has been made to provide accurate and complete information, CHC does not warrant or represent that the information in this update is free from errors or omissions or is suitable for your intended use. This half year update is not an offer or invitation for subscription or purchase of, or recommendation of, securities. It does not take into account any potential investors’ personal objectives, financial situation or needs. Before investing, you should consider your own objectives, financial situation and needs or you should obtain financial, legal and/or taxation advice. Past performance is not a reliable indicator of future performance. Forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of CHC. Actual results may vary from any forecasts and any variation may be materially positive or negative.

Subject to any terms implied by law and which cannot be excluded, CHC does not accept any responsibility for loss, damage, cost or expense (whether direct or indirect) incurred by an investor as a result of any error, omission or misrepresentation in information in this half year update.

Charter Hall Funds Management Limited (CHFML), the responsible entity for the Charter Hall Property Trust, does not receive fees in respect of the general financial product advice it may provide, however it will receive fees for operating CHC which, in accordance with CHC’s constitution, are calculated by reference to the value of the assets and the performance of CHC. Other entities within the Charter Hall Group may also receive fees for managing the assets of, and providing resources to CHC. For more detail on fees, see CHC’s latest annual report.

To contact us, call 1300 365 585 (local call cost).

Complaints handling

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