CHARTER HALL GROUP — Interim / Quarterly Report 2015

Mar 18, 2015

Period ending 31 December 2014

Key Achievements 1HY15 Results Summary 1

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OEPS growth 10.6%
DPS growth 10.0% on pcp
on pcp
$2.0bn in transactions
Total Securityholder Return
2 $1.4bn of acquisitions
of 30%
$0.6bn of divestments
Australian FUM up 10.4% $944m gross equity inflows
to $12.7bn $741m net equity inflows
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• 1 Figures and statistics on this page are for 1HY15 being the 6 months to 31 December 2014 with the prior corresponding period (‘pcp’) being the 6 months to 31 December 2013

2 Total securityholder return is based on the 12 months to 31 December 2014. Source: UBS and S&P/ASX

Case Study Industrial Platform continues to grow

We have continued to actively grow our Industrial platform, achieving 18% growth over the half year to total FUM of $2.5 billion.

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The portfolio is very well positioned, with occupancy at close to 100% and a weighted average lease expiry profile of over 10 years. We remain focused on acquiring well located, high quality industrial assets, with long leases to strong covenant tenants.

We completed a further 13 acquisitions during the half year, bringing our total number of industrial assets under management to 71, with the weighted average cap rate of the portfolio at 7.6%, compressing by 26 basis points during the half year.

Key Financial Metrics Financial Performance

Key Financial MetricsFinanc	ial Performan	ce
Group	1HY15	1HY14	Change
Statutory proft after tax	$39.9m	$28.6m	39.6%
Operating earnings1	$48.4m	$38.1m	27.1%
Operating earnings per security (OEPS)1	13.74cps	12.42cps	10.6%
Distributions per security (DPS)	12.1cps	11.0cps	10.0%
Return on Equity2(NTA basis)	11.5%	11.6%	(0.1%)
Balance Sheet	At 31 Dec 2014	At 30 Jun 2014	Change
Funds under management – Australia	$12.7bn	$11.5bn	10.4%
Total Group assets	$993m	$986m	0.7%
Net tangible assets	$845m	$829m	1.9%
NTA per security	$2.38	$2.38	0.0%
Balance sheet gearing3	0.0%	0.0%	0.0%
Look through gearing	37.2%	31.0%	6.2%

• 1 Operating earnings includes security based benefits expense

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.

• 2 Return on equity calculated as operating earnings divided by opening NTA plus contributed equity during the year

• 3 Debt net of cash / Gross assets less cash

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

Disclaimer of Liability

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

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.

Complaints Handling

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

Charter Hall Group’s ongoing commitment to your privacy We understand the importance you place on your privacy and are committed to protecting and maintaining the confidentiality of the personal information you provide to us. CHFML has adopted a privacy policy.

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

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.

Environmentally Friendly

This document is printed on Revive, an Australian made 100% recycled uncoated paper. FSC Certified and certified carbon neutral, the Revive family of products also supports Landcare Australia and the restoration and replanting of landfill sites throughout Australia.

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Charter Hall Group

Half Year Update

Period ending 31 December 2014

136 Horrie Miller Drive, Perth WA

Charter Hall Group / Half Year Update

Period ending 31 December 2014

Dear Investor

We are pleased to have delivered a positive result for our securityholders over the past six months. With a focus on enhancing the quality of the portfolio, we have achieved solid organic growth across our Australian platform, delivering a 10.6% increase in operating earnings per security and 10.4% growth in our Australian portfolio, which now totals $12.7 billion.

Half Year Financial Results Summary

The Group’s balance sheet investments total $795 million, up $75 million, with occupancy of 97.6% and a WALE of 9.5 years.

Charter Hall delivered statutory profit after tax of $39.9 million; operating earnings of $48.4 million[1] or 13.74 cents per security, up 10.6% over the prior corresponding period (pcp); and a distribution of 12.1 cents per security up 10.0% over the pcp.

Well Diversified Funds Management Portfolio Our focus on diversification and portfolio enhancement has driven a 10.4% increase in the Group’s FUM taking the total portfolio $12.7 billion. Across Australia we now manage 270 properties and service 2,264 tenants.

Both the Property Investment and the Property Funds Management segments of our business positively contributed to this result, with Property Investment operating earnings increasing 22.8% to $28.4 million and Property Funds Management operating earnings increasing 27.4% to $21.3 million.

We continued to work with new and existing investors to secure $944 million of gross equity across our managed funds and invested $1.4 billion in new retail, industrial, office and hospitality properties.

Enhanced Portfolio Quality

With a focus on enhancing the quality of the portfolio, we have actively diversified our Property Investments towards long weighted average lease expiry (WALE[2] ) industrial and retail assets while also investing in hospitality, a new sector for the Group, through the Long WALE Investment Partnership.

In December we launched our third Direct Industrial Fund (DIF3), in response to the continued investor interest in this strong performing sector. DIF3, which is currently open for investment with a target total size of $250 million, was seeded with interests in two Coles Distribution assets in Perth and Adelaide.

Our exposure to long WALE industrial, retail and hospitality now represents 63% of total Property Investments with the balance being invested across a diverse office portfolio. Our top 10 tenants by income include Federal and State governments and leading Australian companies, such as Woolworths, Wesfarmers, Telstra and Macquarie Group.

These acquisitions, and the $75 million across our other managed funds, saw the Group’s total Industrial FUM increase by 18% to $2.5 billion during the half. We will continue to look at opportunities to secure external capital partner support for strategic, long lease industrial, office, retail and hospitality properties in the year ahead.

• 1 Operating earnings of $48.4 million include, non-cash security based benefit expense of $1.3m (1HY14: $1.8m) which is not allocated to the PFM or PI segments

• 2 WALE is the Weighted Average Lease Expiry for the property investments portfolio which is measured by all tenants remaining leases in years, weighted by each tenant’s gross income as a proportion of the total potential gross income for the portfolio

The active management of all portfolios is a key component of Charter Hall’s strategy and our property team completed 283 leasing transactions across the entire portfolio. This included a number of major leasing renewals within the office portfolio including a 20 year lease agreement with Westpac at Core Plus Office Fund’s Kogarah property, a 10 year lease extension with the WA government at Cannington (owned by PFA) and a 13,000sqm renewal to Macquarie Group at No.1 Martin Place Sydney (owned by Charter Hall Office Trust).

We also aim to further enhance both income yield and total returns of the portfolios through strategic and value add redevelopments, with $1.6 billion of development projects underway across our managed funds.

Strategy and Outlook

We believe Charter Hall’s model of accessing, deploying, managing and investing capital across our core property sectors will continue to create value and provide sustainable income and capital returns for securityholders.

Looking ahead we will remain focused on:

• Continuing to deliver strong fund performance for investors through the active management of our property portfolio

• Securing quality assets within the core property sectors and investing alongside capital partners

• Enhancing return on equity and continuing to improve the quality of earnings for securityholders through:

• Focusing on growing high quality earnings streams

• Maintaining growth in FUM across all equity sources

• Improving the efficiency and scalability of the platform.

As we continue to operate in a low interest rate and low inflationary environment, we expect quality Australian property with secure cash flow will remain highly attractive to both institutional and retail investors and believe Charter Hall is well placed to capture these inflows and acquire off market property.

Barring unexpected events, our FY15 guidance is unchanged at 7-9% growth on FY14 operating earnings per security. The distribution payout ratio is expected to be between 85% and 95% of operating earnings per security.

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David Southon

David Harrison

Joint Managing Joint Managing Director Director

Charter Hall delivered total securityholder return for the one year to 31 December 2014 of 30.3%. Over three years, we were the best performing A-REIT in the A-REIT 200 index delivering a return of 39.5%[3] .

Total performance over 1, 3 and 5 years (% pa) to 31 Dec 2014[[4]]

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(% pa) to 31 Dec 2014 [[4]]
Mercer/IPD Wholesale
Pooled Property Funds Index
ASX 200 Property
Accumulation Index
Charter Hall Group
securityholders
3 Source: IPD, UBS and S&P/ASX
4 Operating earnings per security prior to and
including 1HY13 restated to include non-cash
security based benefits expense
Enhanced Portfolio Quality
We have continued to focus on
reweighting our Property Investments
towards a more diversified portfolio.
Office
14 [%]
Retail 25 [%]
Industrial 42 [%] 37 [%]
Hospitality 30 Jun 2014 22 [%] 31 Dec 2014
33 [%]
27 [%]
39.5%
30.3%
27.0%
21.9%
18.2%
12.2%
9.2% 8.6% 8.9%
1 Year 1 Year 1 Year 3 Years 3 Years 3 Years 5 Years 5 Years 5 Years
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